Year: 2020

ARLA Propertymark has given a detailed response to a government consultation on how the pandemic has hit the private rental sector.

The formal and informal eviction bans are first and foremost in ARLA’s response.

Overall, the association warns that the sector could be impacted in four ways following the second wave of Coronavirus:
– Arrears are likely to rise;

– Landlords’ finances will be hit;

– Compliance will be increasingly difficult; and

– There will be a growing need for financial protection for the most affected.

ARLA says: “The government must recognise that the private rented sector has already been heavily impacted financially in recent years based on the phasing out of tax relief on mortgage interest for landlords, the additional Stamp Duty Land Tax surcharge on buy-to-let property and the Tenant Fees Act 2019. However, the ongoing repercussions of the pandemic mean that landlords’ costs have increased significantly, and many landlords can no longer make ends meet.”

It breaks the bulk of its response into four sections.

–

Evictions: “Our members report that a small number of tenants have taken the government’s decision to protect renters during the national restrictions and over Christmas with no bailiff enforcement action, as a green light to refuse to pay their rent.”

The association believes there is “no reasonable certainty” of how landlords can recover costs.

–

Financial Support: ARLA wants four actions by government:

1) Ring fenced funding delivered to local authorities and sent to tenants via the Discretionary Housing Payment;

2) A government-backed interest-free loan delivered to tenants who cannot access the Discretionary Housing Payment and paid directly to landlords;

3) Ensure Universal Credit is adequate and more effective;

4) The government should raise and restore the Local Housing Allowance to the 50th percentile to cover the average cost of rents in a local area.

Selective Licensing: ARLA wants the government to control councils pressing ahead with licensing scheme after scheme because these will hit tenants in three ways:

1) Tenants will likely see the cost of licensing passed on to them via rent increases;

2) If landlords who cannot afford the license fee decide not to pay and remove their property from the market, tenants will be forced to seek new homes;

3) With some agents furloughed or working from home they are unable to access relevant paperwork and documentation to complete licensing scheme applications and process fees.

The association warns: “Councils who are pursuing the implementation of licensing schemes are being socially irresponsible as it needlessly puts vulnerable people at risk of being infected.”

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Buy To Let: “Fundamentally, landlords cannot be expected to provide homes without being paid. In many instances, rent covers the landlord’s mortgage and maintenance costs, meaning that non-payment puts the tenant at risk of eviction and the landlord at risk of repossession. To reduce the impact of a second wave on the private rented sector the government must take a holistic approach that considers the financial implications of both the pandemic and existing costs that landlords face.”

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The government has thrown many obstacles in the way of landlords attempting to evict tenants since Covid struck but one of the most onerous is the recently-introduced Review Hearing.

It was introduced in September as part of the government’s attempt to prioritise the most urgent cases.

But they require such a huge effort to comply with that leading evictions specialist Landlord Action has now set up a dedicated team to help landlords complete the paperwork needed to get through the process, the first to do so.

The purpose of a Review Hearing, which is carried out over the phone, is to determine whether the landlord’s case should proceed to a full hearing.

Bundles of joy

But to determine this, landlords or their solicitors are required to provide a Review Bundle.

This includes the claims form, particulars of the claim, defence, rent statements for the last two years with a running total of arrears, daily rate of rent and interest, the tenancy agreement, statements setting out previous attempts to recover arrears and the effect of Covid on the landlord plus any information on the effect of Covid on the tenants.

The Review Bundle must be filed at court via email and a copy issued to the tenants 14 days prior to the Review Hearing. If the bundle is not filed, cases can be struck out.

Paul Shamplina (left), founder of Landlord Action says: “Whether a landlord’s case proceeds as priority to a Substantive Hearing will be determined by the evidence submitted prior to the hearing so there is no margin for error.”

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PRS licensing schemes are set to increase by a staggering 39% next year as councils prepare to collect an estimated £400 million in selective, additional licensing scheme fees and fines and £1.9 million in recovered unpaid taxes by landlords.

The astonishing figures have been published by tech platform Kamma, which specialises in compiling data on property licensing across the UK for landlords, letting agents and councils.

This includes the existing 386 mandatory and 124 discretionary schemes already in operation plus the 48 set to start and further schemes under consideration.

Funding gap

Kamma claims authorities are both planning many more licensing schemes and being keener about enforcement in part because it is one of the easier ways to plug the local authority funding gap that is set to widen next year to £3.2 billion.

It also claims that councils see property licensing as a chance to improve standards at a time when studies show that poorer quality housing correlates with the faster spread of Coronavirus.

As LandlordZONE has reported before, Newham in London is the UK’s most enthusiastic proponents of PRS licensing both in terms of extending selective and additional schemes, and enforcing them.

Kamma warns that many councils have been eyeing its successes and intend to follow suit next year.

Its CEO, Orla Shields, says: “Discretionary licensing has been a Local Authority prerogative since 2006 but, with budget gaps widening and the well-known successes of Newham council in generating additional tax revenues, we’re seeing more proposed schemes in consultation than ever before.”

The platform is backed by leading European venture capitalists Pi Labs, Triple Point and M7 Structura and recently raised £1.6 million to fund its products for letting agents and lenders.

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An overwhelming 98 per cent of agents who are members of The Property Ombudsman scheme pay compensation when an investigation is concluded in favour of the complainant.

In recent years significant publicity has been given to so-called rogue agents, many from the lettings side of the industry, who have had awards made against them and in favour of consumers, landlords or tenants. Some agents have gone out of business or refused to make compensation payments, typically prompting their expulsion from TPO.

However, this is very much the exception according to the new Ombudsman, Rebecca Marsh.
She has told Letting Agent Today: “In 2019, 98 per cent of awards made by the Ombudsman were paid by agents and it has been a similar figure down the years.”

She continues: “We often issue press releases when an agent has been expelled from the scheme, usually for not paying an award. Those press releases are sent to local media as well as Trading Standards to ensure that potential consumers and local enforcers are aware that there is an issue with an agent in their area. It also allows Trading Standards to follow up with enforcement action on the basis that an agent is no longer meeting the legal requirement to be registered with a redress scheme.

“It is also perhaps the nature of the job that we see the bad agents more often than the good. However, highlighting where agents have done a good job is an area I wish to focus more on going forwards, especially as this will play its part in the wider objective of helping to increase trust and confidence in the sector.”

Marsh has been in the post for only two months having previously been Chief Ombudsman at the Legal Ombudsman and previously the Deputy Ombudsman and Executive Director of Operations and Investigations at the Parliamentary and Health Service Ombudsman.

She says of her new workload: “TPO is involved in a significant number of initiatives within what is a complex sector and I am already on a steep learning curve. However, I am fortunate to be able to call upon my previous experience as an Ombudsman to have been able to hit the ground running on the core business of resolving complaints. In fact, given that the Legal Ombudsman’s biggest sector of work is in conveyancing complaints, there is a distinct cross over to the complaints TPO deals with.

“I have no doubt that the vast majority of agents provide an excellent service to their consumers. Yes, TPO is dealing with increased levels of enquiries and complaints, but when set against the number of transactions within the sector, the number of complaints is very small indeed.”

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The National Residential Landlords Association (NRLA) has criticised the Chancellor Rishi Sunak for cutting the amount those on Universal Credit will be able to claim to pay their rent, pushing millions of landlords and tenants into financial difficulties.

According to a report by the Office for Budget Responsibility (OBR) published at the same time as Rishi Sunak’s Spending Review presented today in parliament, the Local Housing Allowance will be ‘frozen in cash terms from next year onwards’.

This means that the rate will fall below the current level which is set to cover the lowest 30 per cent of rents in any given area.

The NRLA says the announcement is a ‘kick in the teeth’ for both renters and landlords struggling with the consequence of rent arrears through no fault of their own.

The current rate was set in April to help renters whose incomes had been affected by the pandemic to meet the cost of their rents.

A recent analysis by the Joseph Rowntree Foundation suggests that five per cent (200,000) households in the private rented sector are in arrears.

Also, 30 per cent of all private rented households are worried about paying their rent in the next three months, compared to 19 per cent immediately pre-COVID-19.

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “Many renters and landlords are struggling with the consequence of rent arrears through no fault of their own yet the Government is failing to take the action needed to address this.

“Whilst the Chancellor has spoken about the need to support those who find themselves homeless, it would be much better for all concerned to provide the funds needed to sustain tenancies in the first place.”

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The UK’s leading organisations representing landlords, lenders, letting agents and tenants have written to The Times to demand government action to support both renters and landlords, including interest free loans for tenant to clear their rent arrears.

Their comments follow Chancellor’s Rishi Sunak’s spending review yesterday, in which he warned that the economic impact of Covid was ‘only just beginning’.

The senior members of each organisation that have signed the letter include people who are at often at loggerheads over other issues such as evictions or rent caps. But the seriousness of the situation has drawn them together.

These are: Ben Beadle (pictured left, National Residential Landlords Association); Alistair Cromwell (Citizens Advice); Timothy Douglas (ARLA Propertymark); Joanna Elson OBE (Money Advice Trust); Lord Bird MBE, (pictured, below Big Issue); Phil Andrew (StepChange) and Paul Wootton (Nationwide Building Society).

The letters says: “Hundreds of thousands of people who rent their homes face an uncertain future due to the economic impact of coronavirus. “Many are worried about the risk of losing their homes because of rent arrears arising through no fault of their own.

“Whilst many private landlords and letting agents have done what they can to support affected tenants, the overwhelming majority of landlords are individuals – many renting out just one property, often as a pension – and are unable to continue to subsidise struggling tenants indefinitely.

“As the financial fallout continues, we need to sustain tenancies wherever possible.

“The best way to ensure this happens is to make sure that tenants are able to pay their rent, which is why the UK Government must now come forward with a package to provide financial support to reduce these arrears.

“This should include boosting emergency funding to councils for grants to support those in receipt of benefits, and interest-free, government-guaranteed hardship loans for tenants, similar to the schemes developed in Wales and Scotland.

“We call on Ministers to act swiftly to provide tenants and landlords with the security and stability they need during the current public health crisis.”

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The Lettings Industry Council has published a report titled ‘Beyond 21’outlining why Section 21 should not be scrapped, despite the government’s intentions to do so.

The report suggests that if the Section 21 notice is abolished there are the strong possibilities that as many as 20% private rented housing stock will disappear coupled with skyrocketing rents due to the shortage.

The industry council’s findings predicts that a sudden demise of Section 21 will cause the following repercussions that have not been taken into account:

• Landlords will have to make prospective tenants undergo a much more stringent screening process, which of course will affect the majority on housing benefits and low income families.

• A catastrophic reduction of 20% of BTL housing stock in England which will have the biggest impact on vulnerable tenants, as many landlords will sell up or consider short term lets.

• Due to the supply and demand imbalance rents the report predicts that around 6000,000 homes (approx: 13% of the sector) may have to face rent increases.

• The justice system could face an onslaught of a tripling of courts’ caseloads as there could suddenly be an additional 45,000 possession hearings to be heard.

Theresa Wallis, chair of the Lettings Industry Council, said: “It is vital to strike a balance between the needs of tenants for long-term security and legal certainty, restoring landlord confidence to ensure an adequate supply of private rented homes.

“The social cost of abolishing Section 21 lies in the economic effects it will release and how the market will react to it. That is why the government must not proceed with its proposal to do so without careful consideration of the impacts and implementation of measures to mitigate such negative consequences.”

Within the report the council makes the following suggestions for the government to consider which will counter balance the negative effects that the scrapping of Section 21 will have on both landlords and tenants:

1. Strengthening the grounds of section 8 for which it can be used and to allow an accelerated process;

2. The use of meaningful mediation to reduce the number of disputes resulting in court proceedings before they commence and save both sides substantial legal costs;

3. Court reform including a modernised, specialist housing court for all housing related hearings, ensuring timescales for repossession can be reduced and a viable route for tenant claims against landlords for disrepair, poor conditions and management; and

4. Bailiff reform because securing the services of county court bailiffs is one of the longest delays for landlords, following the grant of a warrant for possession.

An industry spokesperson applauds the suggested measures and said the introduction of these would not only prevent the negative effects of ending Section 21, but would almost certainly help build a stronger trust in the private rented sector.

The spokesperson said: “These four measures make sure that the tenants’ need for long-term security regarding their tenancies is met while at the same time respecting the landlords’ right to use their property economically and according to their needs.

“Some of the measures, such as the mediation process and the bailiff process reform can be introduced on relatively short-term planning. Whilst we acknowledge that court reform and a review of Section 8 requires longer-term preparation, if the government were to adopt the step-by-step implementation of measures outlined in this report, it would not only prevent a short peak increase in serving Section 21 notices, but also give all relevant parties enough time to adapt to the change in legislation.

“We are confident that with faster and easier access to justice, banning both criminal landlords and anti-social tenants from the PRS, as well as the improved communication between landlords and tenants through mediation, both parties trust in the PRS will increase.

“Providing greater legal certainty will lead to further growth within the PRS, as more private landlords will be willing to rent out their properties and tenants will be provided with a broader range of properties they can choose from.”

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Landlords could be slapped with immediate and unlimited fines and even face the prospect of a prison sentence if they rent their properties to tenants who do not have the right to rent in England.

The Ministry of Housing, Communities & Local Government has just updated its ‘right to rent’ rules alongside its ominous warning to all landlords.

It is mandatory for landlords to check the ‘right to rent’ status of any tenant 18 and over who pays rent for their ‘residence’.

This now applies even if the property has just been bought from another landlord with existing tenants in place.

There are punitive fines for landlords who rent their properties to tenants who they may have suspicions of not having the permission to enter and stay in the UK, whose papers are false or incorrect or their visa has expired.

There are far stricter rules on the actual evidence submitted as proof of a right to rent. However irrespective whether it can be determined that landlords would have had suspicions concerning their tenant’s status. Landlords can still be fined if they failed to carry out the necessary checks if it is found out that tenants do not have permission to stay in the UK.

Landlords are also reminded of the Coronavirus Crisis special rules that contains the temporary changes to the requirement of checks, which includes the use of video calls and allowance of digital documents.

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