Q&A with lettings regulation expert Andrew Culverwell

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We interview Andrew Culverwell, Lettings Technical Director at Countrywide, on lettings compliance and regulations.

Andrew reviews the current regulatory landscape for landlords and what they should look out for as we move into a new year. The Renters (Reform) Bill remains the key topic, certainly in England, but there are other impacts across Scotland, Wales and the UK as a whole.

If you would prefer to listen to the interview, our podcast version is available here.

Before we delve into the big story for England: the Renters (Reform) Bill, what news should landlords in England, Wales and Scotland be aware of?

The National Trading Standards (NTS) recently published guidance to help ensure letting agents provide material information in property listings. Their advice is designed to ensure that letting agents stay on the right side of the Consumer Protection Regulations.

Trading Standards released their first piece of guidance, Part A, back in May 2022, and recently published Parts B and C in November 2023.

Part A covers the basics such as rent, deposit, and council tax/rates, which should now be included in all listings. Parts B and C cover things like building safety, heating, mobile signal/coverage, broadband type (fibre, copper etc.), parking availability, as well as any restrictions relating to the property such as not parking commercial vehicles or caravans. It also includes rights of way across the property, and any risk of coastal erosion are also requirements. For a full list please visit the National Trading Standards website. The NTS advise that the information from Part B and C should be easy for prospective tenants to find, e.g. within a few clicks. This acknowledges both that space available on portal listings is limited, and that whilst the information needed from Part B and C is important, it does not require quite the same prominence as Part A.

A point worth noting is the importance of landlords ensuring that prospective tenants are made aware of planned works at a property which might affect their decision around viewing and ultimately renting.  A primary consideration here being those developments of flats where extensive remediation works are planned to resolve building safety issues post Grenfell.

What is the latest news on the Renters (Reform) Bill?

The Committee stage finished on November 28th 2023 and now heads back to the House of Commons. This process is fairly swift, typically completed over a few days, and can include the insertion of new clauses and the tabling of amendments. With a Commons Christmas recess until January 8th 2024 there was no further news at the time of writing.

What are some of the current key takeaways from the Committee stage?

To briefly recap, the Renters (Reform) Bill aims to address what are seen as fundamental issues in the private rented sector. For tenants, it aims to provide greater security around renting a home and to remove what is known as ‘no fault’ evictions. For landlords, it aims to strengthen legitimate grounds for possession and introduce new ones, allowing them to obtain consent when, for example, they wish to sell or move back into the property. The Government has signalled that removal of Section 21, which enables ‘no fault evictions’, will not be introduced until there have been improvements to the court system so as not to delay possession. A tranche of money has been made available to help digitise the possession process, but no indication has been made of the tests that need to be met before the Government is satisfied with the ban on Section 21s. This makes it difficult to predict when the ban will apply.

Turning to the recent Committee review stage, various industry voices, including Propertymark, were given the opportunity to raise concerns, suggest improvements and to call for clarification where it was felt necessary. As the UK's leading professional body for estate and letting agents, Propertymark advocates the retention of fixed term tenancies by not abolishing Section 21. In simple terms, they believe that fixed term tenancies offer mutual benefits for both tenants and landlords. The Bill's current push is towards ending fixed term contracts and transitioning to periodic tenancies with landlords having only able to seek possession for breach of contract and when, as we have already said, they wish to sell or move back into the property. Propertymark asserts that fixed term contracts provide tenants with security of tenure and landlords with a guarantee of rent payments. This is particularly beneficial for tenants with low income or a poor credit history, as it allows a guarantor to confidently commit to supporting them for a specified period. Looking at an example that Propertymark cited, a nurse or key worker seeking a rental property near their workplace for say two years, could post a ban on Section 21s potentially face having to leave before the end of their desired two years if the landlord decided to sell or to move back in. However, under the current regulatory framework, a two-year fixed term contract with no breaks provides them with the security they seek.     

It is a widely held understanding that certain elements of the Bill need much more detail. For example, the Decent Homes Standard is due to be implemented as part of the Bill, but currently, Jacob Young MP, Parliamentary Under Secretary of State (Department of Levelling Up, Housing and Communities) recently confirmed that he and his Department are currently working on a proposed standard with details to be set out in due course.

Further clarity is also needed in the Bill regarding the handling of Anti-Social Behaviour, particularly in multi-household or HMO properties. Courts will need to consider the actions tenants should take to resolve issues with co-tenants and establish clear principles for these situations. This is to ensure fair treatment for all household members, especially those who may not be at fault.

Another significant aspect of the Bill is its stance on discrimination, specifically concerning pets and benefit claimants. Landlords will no longer be able to impose blanket bans and will need valid reasons to refuse certain types of tenants. In looking to remove potential hurdles to landlord acceptance, the government is looking to abolish insurance and lender clauses that prevent tenants from keeping pets. Under the Bill, a tenant can keep a pet with the landlord's consent, unless the landlord has a reasonable objection. Landlords are required to provide written consent or refusal within 42 days of receiving a tenant's written request.

As a condition of giving consent for a pet, landlords will either be able to require tenants to have insurance covering the risk of pet damage, or for them to pay the landlord’s reasonable costs of maintaining pet damage insurance. At committee stage Propertymark called for an amendment allowing landlords to be able to request a security deposit above the current cap which is equivalent to 5 weeks' rent.

Other points discussed during the committee stage include: tenants' responsibility for Council Tax until the end of the tenancy as opposed to when they vacate; potential extension of the notice period for Section 13 rent increases, penalties for landlords and agents who misrepresent facts, and the possible increase in rent repayment orders from a maximum of 12 months to 24 months.

All these points highlight how much is involved in the Renters (Reform) Bill, and that there are a lot of strands still to be finalised into working legislation.     

Moving on to other Scotland news that was announced on 1st April 2023 and reinforced again on 1st June 2023. This was a change to the rent freeze in Scotland. What were these events and is there an impact into 2024?

Back in 2022, the Scottish Government decided to put a temporary hold on rent increases to help tenants cope with the cost-of-living crisis. This prevented landlords from increasing rents until the end of March 2023.

From April 1st 2023, a change was introduced by lifting the 0% rent cap, but with rules attached. Landlords are able to increase rents, but up to a maximum of 3%, and only if they haven’t increased the rent in the past year. Also, landlords are required to give tenants three months-notice of the increase. Conscious that landlords are not immune to the effects of rising costs, including rising mortgage costs, of course, provision was made for landlords to apply for a rent increase of up to 6% under exceptional circumstances.

The rent freeze was supposed to end in September 2023, but on June 1st 2023, it was extended for another six months until March 2024. What happens after that date is unknown, but the general feeling is that whilst this might be the last extension, some other form of rent increase limiting legislation might be enacted.

Wales hasn’t yet introduced rent control measures in a similar way, but certain proposals are being actively considered?

Yes, the Welsh government has been exploring rent control measures. They released a consultation paper called 'A Call for Evidence on securing a path towards Adequate Housing', which considers a few different options. These include options such as rent ceiling or freezing, limiting annual rent increases to a certain percentage, or only allowing rent increases when a new tenant moves in.

Another option involves restricting rent increases based on a formula that limits yield (profit) on a 'costs plus' model.

The consultation concluded on September 15th 2023, with feedback received now under review. We understand that process may now have been completed and that news of a report could be imminent. As to what might be implemented off the back of that report in the time remaining before an election… well….time will tell.  The National Residential Landlords Association (NRLA) is pushing for measures that would boost the supply of rental properties instead of rent control measures. It's still unknown in which direction the Welsh government will decide to go.

Find out how this may have changed the value of your property

*https://homelet.co.uk/homelet-rental-index [08]