The ever-increasing burden on residential landlords
Michael Ellis, partner in the property & commercial litigation team at Wilsons Solicitors LLP
Over the past 10 years residential landlords of assured shorthold tenancies have had to deal with ever-increasing legislative pressures and burdens. With further reforms on the way many landlords consider the future looks bleak. In this piece we look at those pressures and the impact of the latest changes on landlords.
But first, a brief history lesson. Before 2007, regulations affecting assured shorthold tenancies were few and far between. However, since 2007 landlords have been required to register deposits in a prescribed tenancy deposit scheme and are liable to compensate tenants in the sum of up to three times the deposit if they do not comply. In 2015 the Deregulation Act 2015 came into force, following which landlords under new tenancies are precluded from serving eviction notices on tenants unless they have given the tenant an energy performance certificate, a copy of the government’s “How to Rent Guide” and also ensured that the property complies with gas safety regulations.
Since 2018, landlords have been required to use a prescribed form of section 21 notice to bring the tenancy to an end, and since 2019 landlords have been prevented from charging tenants fees under the Tenant Fees Act 2019 save for a list of prescribed exclusions (e.g. rent). And in addition to the above, there is also a whole raft of additional legislation governing fitness for habitation.
While there are good reasons for these regulations (which have been welcomed by landlord and tenant groups alike) – because they drive an increase in the standard of homes and protect tenants – there has been a detrimental knock-on effect on many landlords. The impact has been compounded by the fact that the court system is marred by delays and inefficiencies, and cannot reasonably cope with the sheer volume of possession cases issued every day. Claims that previously took a few months to reach the point a possession order is made are now taking more than 6 months in some courts.
In one of our recent cases the tenant was served with a section 21 notice in October 2022. The landlord issued proceedings when the notice expired, two months later, using the ‘accelerated procedure’ (designed to streamline straightforward claims). The court, however, took until May 2023 to make a possession order and then could not offer an eviction date with the Court bailiff until December 2023. This is perhaps an extreme example, but nevertheless significant delays are not uncommon. Usually in these circumstances the tenant stops paying the rent leaving the landlord considerably out of pocket.
In addition, it is all too easy for landlords to make simple procedural mistakes when giving notice, and they are penalised heavily as a result. Failure to provide the tenant with an EPC or gas safety certificate prior to serving a section 21 notice will automatically render any subsequent proceedings based on that notice defective. The issue may not come to light until the case arrives before the judge six months later, and the landlord must then start the process again afresh. And in certain circumstances (particularly relating to the obtaining and provision of gas safety certificates), a failure to follow the correct procedure may bar the landlord from ever being able to serve a section 21 notice.
On top of all this, the government has now proposed further reforms under the Renters Reform Bill, which is currently making its way through Parliament. If the reforms under this Bill are implemented, section 21 will be abolished, making it impossible for landlords to obtain possession unless one of a limited handful of prescribed grounds for possession apply. Landlords can, however, take some comfort in the fact that the government has stated the abolition of section 21 will not happen until the court service has been reformed, and such reforms are unlikely to occur any time soon. Whether there will be a change of emphasis after a general election is however unclear.
What can landlords do to protect their position? The simple answer is to stay on top of the law. There are many good resources available online, but if landlords can afford it, they are recommended to take professional advice, whether from a property agent or a lawyer (the latter of which are compelled to maintain professional indemnity insurance).
Many landlords have exited the PRS because of the increasing regulatory burden, leaving fewer properties to rent, which has then led to rents increasing. It is the law of unintended consequences. But for those landlords who decide not to leave the PRS, and who stay on top of the law, they are likely to be rewarded as a result.