Flaws and Uncertainties of the Rental Reform White Paper

For the last decade, successive Governments have promised a review of the rules around renting in the UK – in part driven by a growth in the number of people renting.

This has, at last, culminated in the delivery of the Fairer Private Rented Sector White Paper, and the Renters Reform Bill.

This paper outlines 12 key proposals that the Government believes will improve the letting of homes for both landlords and tenants.

And yet, while some hopes exist within the paper in regard to reforming the dispute process through greater efficiencies, a far greater fear is growing about the abolition of certain laws, which could, for many landlords, drive them out of the market entirely.

Although some would argue that only those in breach of these new laws have anything to fear, the reality is that they create such uncertainty for many landlords, particularly those with a single property or small portfolio, that the availability of private rented homes could shrink considerably.

Key to these new policy proposals are the changes to the rules surrounding Section 21 of the Housing Act 1988 and evictions.

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Abolition of Section 21

Section 21, more often referred to in the media as ‘no fault’ evictions, is the ‘poster boy’ of the bad press that landlords receive, and it has long been the target of housing pressure groups and many MPs.

While it has certainly had its fair share of bad examples, from the worst rogue landlords, such as its use in revenge evictions, it does serve an important purpose when it comes to the recovery of property.

The fear is that though there may be grounds for possession after the abolition of Section 21 that will allow premises to be repossessed, no real detail is yet available on what those grounds will be.

Though the paper suggests that there would be some grounds based on a genuine sale or re-use of the premises, many landlords may be concerned about letting their property at all, where they are not able to use the no-fault method if they need the property back.

It is important to recognise that the 1989 changes to the law around renting, which introduced Section 21, liberalised the market, making it easier for landlords to rent out properties and recover them under the right circumstances. Certain landlords will, therefore, be deterred to offer their property for rent due to the abolition of Section 21.

If there is one shining light from this section of the paper, it is the proposal to introduce new means of recovery where a tenant is in persistent arrears.

Although the details are fairly scant on how this will work, it will at least give landlords some means by which to recover their property effectively.

The pandemic has highlighted the pain that many landlords have faced. With many only now beginning to collect arrears or recover property from those that couldn’t pay.

These have only been made worse by the delays created by backlogs in the courts, which have left hundreds of landlords waiting for rents, months after they were due, and homes that still contain the same tenants that owe them thousands of pounds.

The introduction of specific grounds based on rent arrears, therefore, is welcome. However, its effectiveness will rely on having an efficient court system or a system of arbitration that has ‘the teeth’ necessary to enforce the actions required.

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Rent reviews

Alongside this new power to tackle arrears, the Government has counterbalanced the needs of tenants by calling for legislation so that rents only increase once per year and the end of rent review clauses.

This is also tied to a ‘new’ right top to challenge excessive rent increases through the First Tier Tribunal.

This certainly sounds great, but the reality is that such a right already exists for many tenancies under the Housing Act 1988, which deals with the determination of rents. This allows tenants to take a landlord to the Tribunal where they feel that their rent is excessive.

The problem with the paper

Rather than invest resources and create policies that target the worst offenders, this paper seems to an extent to tarnish all landlords with the same brush.

It assumes, to a certain degree, that all landlords abuse their position and do not act in the interests of tenants or common decency.

Whilst it is only right that the law pursues those acting outside of the law or walking a fine line along it, it is not fair that all landlords should be subject to such draconian rules.

I am sure that there are already many landlords out there who have been looking at this paper and growing increasingly uneasy about the security of their property and their ability to draw income from it.

This is may most hit those with smaller property portfolios who do not have the means or resources – or sometimes the will – to risk their investment in this way.

This is mainly those who have invested to support their own lives, during retirement or as a supplementary income to their work, or who may have inherited from a loved one.

Larger property investors and developers will probably find it easier to adapt to these new challenges.

Unfortunately, for many tenants, the abolition of Section 21 notices may also be counterproductive and result in greater insecurity, at least in the short term.

I suspect that many landlords, faced with concerns about their ability to recover their property may withdraw from the market entirely due to the risk.

This could result in less properties being available to rent resulting in higher prices and greater competition for the hundreds of thousands of people in the UK who rely on rented housing.

While hopes and fears exist around this White paper we must remember that it is just that, a paper. Despite what the Government may claim, these are currently just proposals.

Let’s hope that whatever emerges from the Fairer Private Rented Sector White Paper considers the needs of all stakeholders, including tenants, landlords, local authorities and the courts.

* Tony Kent is Head of Property Disputes at Mackrell Solicitors *

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