Following a comprehensive survey carried out by Raworths, the law firm is suggesting the rental sector is under attack from government proposals which are inherently flawed.
Earlier this year, the Government announced what it described as an intention to make a “generational change” to the law that governs much of the rental sector. At the heart of this is the abolition of Section 21 of the Housing Act 1988 which currently allows landlords to terminate a tenancy with two months’ notice without requiring a reason, (following the initial fixed term of not less than six months).
Without section 21, landlords will only be able to recover their property from their tenant in limited circumstances, for example, if the landlord wishes to redevelop the property or the tenant has substantial rent arrears.
Matthew Hill, a partner specialising in property litigation in Raworths’ Dispute Resolution Unit says: “The proposals as they stand represent a clear shift of additional rights for tenants and loss of control for landlords which is likely to be of concern to many existing and potential landlords.
“It is for these reasons that we felt we needed to carry out the survey to collate landlords’ opinions. In total we received 185 responses from landlords with over 1,000 rental properties between them.”
The move by the Government intends to tackle what it describes as the indiscriminate and arbitrary eviction of tenants by landlords, in particular, where landlords have attempted to regain possession of the property when the tenants have raised legitimate concerns. It also seeks to remedy the disruption suffered by tenants when landlords terminate tenancies too early.
The survey asked landlords for key information such as how often they terminate a tenancy against the wishes of the tenant, how often tenants complain about the condition of properties and whether these changes are more or less likely to encourage them to rent out their properties.
Raworths says that the survey shows that two of the fundamental reasons for reforming the sector by the government are over stated and the proposals more generally risk contracting the rental sector to the disadvantage of both tenants and landlords.
Primarily, the Government says that tenants are disadvantaged by not being able to agree a suitably long tenancy for their needs. However, 82% of Landlords said that the length of term they were prepared to offer a tenant when negotiating a new lease was never an issue and only 17% of Landlords said that it was occasionally an issue with the tenant. Further, the survey found that over 55% of Landlords said that the average term of any tenancy lasted for two years or more.
The Government also says that it means to prevent Landlords from forcing out tenants who make a point of complaining about the condition of their properties. Although Raworths concede that there may be some rogue Landlords who do act inappropriately in this way, the survey found this was very much the exception. In particular, 98% of Landlords said that their tenants either made no serious complaints or very infrequent complaints about the condition of their rented property. Further, when asked if their decision to terminate a tenancy had ever been based upon a tenant complaining about the condition of the property only 4% of Landlords said it had.
These results appear to be supported by Landlords indicating in the survey that in 96% of tenancies, it is the tenant that decides to serve notice to leave and not the Landlord asking the tenant to vacate.
The survey does support the Government’s intention to make it easier for Landlord’s to take action against difficult tenants. The survey results say that 18% of Landlords regularly encounter a problem with payment of rent at some point during a tenancy, 48% have experienced a difficulty in being able to repossess a property (with 53% of those landlords saying that the last time they attempted to repossess their property it took in excess of 4 months and 75% of Landlords incurred a loss of rent and other expenses in excess of £2,000 in the process).
Jonathan Mortimer, consultant partner in the Dispute Resolution Department at Raworths expressed his concerns about the potential effect these proposals could have on the rental market saying:
“According to recent Government figures, 19% of households constitute of rented property, however over recent years renting out a property has become less attractive for landlords with increased administration and the erosion of tax breaks. This proposal could be the final straw for many potential landlords who are not prepared to risk the loss of control of their property.
“Ironically, rather than these proposals assisting tenants in the rental sector, it could have exactly the opposite effect. In particular, a lack of supply of rental properties coupled with an increase in rents for tenants”.
Mr Mortimer says that this view is borne out by the results of the survey which indicates that out of the Landlords asked, 55% said that these proposals were likely to affect their decisions as to whether to rent out properties in the future. Further, 83% of landlords said that they believed that with all the additional changes in tax and regulatory requirements letting out a property is not now as worthwhile as it was 5 years ago.
The Government consultation has now ended and it has said that it remains flexible on a number of its ideas. For example, it could impose a longer minimum term of 12 months as opposed to six months as presently. Alternatively, it may relent on allowing landlords to regain possession of the property if they want to sell or allow a family member to live in it.
The survey was conducted by Raworths during the course of September and the results have been presented to the Government.
Raworths will make a donation to its Charity of the Year, The Harrogate Homeless Project for each survey completed.