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Welsh Government Consult on Extending Minimum Notice Period for a No-Fault Eviction

Modern Apartments

Section 21 of the Housing Act 1988 currently gives landlords in England and Wales the right to serve a notice on their tenant giving them 2 months’ notice to leave the property. Tenants must have been in occupation for four months before a landlord can serve this notice on the tenant.

Section 173 of the Renting Homes (Wales) Act 2016 (“the Act”) (which only applies to Wales) will replace section 21 of the Housing Act 1988 and will apply to the new periodic standard occupation contracts which are to replace assured shorthold tenancies when the Act comes into force.

Additional provisions have been inserted at section 186 of the Act to further protect tenants. For example, a tenant cannot be required to give up possession before the fixed term has ended, or within six months of the date the tenant was entitled to occupy the property. Despite this further protection, the Welsh Government are nervous that a 2-month notice period does not do enough to give tenants security of tenure.

More and more people are going into rented property and the Welsh Government are trying to strike a balance between giving tenants greater security and protecting the rights of landlords to be able to regain their property should they need to do so.

The Welsh Government has launched a consultation and are seeking views on the following:

  • Extending the minimum notice period for a no-fault eviction notice from 2 months to 6 months; and
  • Increasing the period at the beginning of a contract during which a landlord cannot give notice from 4 months to 6 months.

The Welsh Government previously announced that they would launch a consultation to abolish no-fault eviction notices, but this latest consultation seems to suggest that they will not be pursuing this and so will carry on as they are until the Renting Homes (Wales) Act 2016 comes into force.

The consultation document can be found here.  Responses are welcome from letting agents, landlords and tenants (contract-holders).

The consultation closes on 05 September 2019. You can either respond online, by email, or by post.

Government Responds to Consultation on Leasehold Reform

New Houses

The Government issued a consultation in October 2018 to seek views on how it can implement changes in the leasehold sector in England to tackle exploitative practices.

The Government’s response to the consultation has now been published: ‘Implementing reforms to the leasehold system in England’ as has its response to the ‘Housing, Communities and Local Government Select Committee report on Leasehold Reform’.

Changes are being proposed to tackle unfair leasehold practices. Purchasers are being burdened with leasehold properties which are hard to sell and are controlled by freeholders and managing agents who do not respond within reasonable time frames, in some cases charging what they want for permission fees. The Government wants to make the system fairer and more transparent for leasehold owners and make it easier for them to extend their leases or buy their freehold under existing legislation. The current process is not cheap, nor is it risk free for tenants and can often result in litigation.

The proposed changes will make fundamental changes to the residential leasehold sector.  Investors and owners of commercial property should also be aware of the proposed changes especially if they own mixed-use properties.

These proposed changes will affect longer-term leases (not assured shorthold tenancies) in England only. Although the reforms will not immediately benefit existing leaseholders, the proposed changes to commonhold and leasehold enfranchisement may offer solutions and protection. Draft legislation will be produced once parliamentary time allows (it is not expected until 2020).

The headline reforms proposed are as follows:

Sale of New Leasehold Houses to be Banned

All new houses must be sold as freehold and not long leasehold. There will be limited exceptions for retirement properties.

Ground Rents in New Leases to be Set to a Peppercorn (Zero Financial Value)

Ground rents are often found in long leases and are annual payments a tenant must make to its landlord which gives the landlord an incentive to retain some interest in the property. Some leases contain mechanisms for ground rents to increase over decades which can make the payments quite substantial. This has become problematic for prospective purchasers who cannot get funding as banks are refusing to lend because of the increased liability of ground rents.

For new leases, the Government has proposed that ground rents will not have any monetary value.

Reform Commonhold

Commonhold is a form of land ownership which has been around for 15 years but there are few cases where land is held in this way. Under commonhold, each flat owner would own their flat and a share in a private company limited by guarantee which would be responsible for the maintenance and upkeep of the common parts.

Commonhold is an attractive model as it means no ground rents, no lease extensions, no risk of forfeiture, no landlord, and greater control for residents over service charges and major works.

There has been little uptake in commonhold as people are wary as to whether this system would work (there are presently few examples of commonhold). Lenders are wary that the private company could go insolvent and/or that inexperienced tenants will not contribute to or participate in the maintenance of the common parts of the building, making it risky for the bank to lend.

The Law Commission are to provide their responses and recommendations to the reform of commonhold, but the Government want existing leasehold flat ownership to be converted into commonhold.

Reform Enfranchisement

Enfranchisement is the process whereby a tenant can purchase the freehold or they can extend their lease. Enfranchisement is currently a costly and administratively burdensome process. The Government wish to make it cheaper, less cumbersome and more accessible.

The Law Commission are reviewing the process for enfranchisement and will report later this year, with their focus being on simplifying the law in this area and making it more favourable for residential tenants wishing to acquire the freehold interest.

Other Changes

The Government is also focusing on wider issues of reform:

  • The Government has asked the Law Commission to update their work regarding forfeiture;
  • Improving the leasehold sale process. Landlords and agents to produce replies to enquiries within a set time frame (15 working days) and the costs of doing so are to be capped;
  • Greater clarity and information regarding the lease should be provided at the outset for people buying leasehold;
  • Extend the right of first refusal to leasehold houses; and
  • Promoting more fairness in the way that maintenance charges are charged to freeholders and leaseholders.

The Government has also launched a consultation seeking views on a New Homes Ombudsman to provide better redress for purchasers of new build homes. Please click here to access the consultation document. The consultation closes at 11:45pm on 22 August 2019. Responses are welcome from anyone who has an interest in the design and delivery of the New Homes Ombudsman, its powers, remit, and how to fund it.

Supreme Court Ruling on Estate Agent’s Commission

Contract for Signing

Agent’s Commission Payable but Reduced for Not Complying with the Estate Agents Act

An important ruling was recently handed down by the Supreme Court in Wells v Devani [2019] UKSC 4, which concerned a dispute between an estate agent and seller which arose when the seller refused to pay the estate agent’s commission following completion of the sale of properties to a purchaser (whom the estate agent had found).

Mr Wells owned property which he wanted to sell, and he spoke with Mr Devani (an estate agent) over the telephone in 2008.  At trial, the contents of the call were disputed but the trial judge found that the parties had discussed that the agent would find a buyer for Mr Wells in return for a 2% commission plus VAT and therefore a verbal contract had been entered into.  There had been no discussion as to when the commission would be payable.  Mr Devani found a potential buyer for Mr Wells.  It was agreed that the flats would be sold for £2.1million.  Mr Devani then sent his terms of business to Mr Wells which confirmed that commission would be payable at 2% plus VAT of the sale price on exchange of contracts.  The properties were sold, and Mr Wells refused to pay the commission saying that the terms of the arrangement were too vague, and no binding contract had been made between them.

The trial judge had found that there was a contract and they implied a term into the contract to say that commission was payable on completion of the transaction (i.e. when the properties would be sold).

The Court of Appeal overturned this decision stating the court could not imply terms where there was an incomplete contract.

The Supreme Court judgment reversed the decision of the Court of Appeal. It unanimously decided that there had been a contract and that it was not necessary to imply a term into the contract as this was obvious and it “goes without saying” that an estate agent’s commission is due on completion of the sale.

The Supreme Court also confirmed that they would have implied this term into the contract if it was not so obvious to the reasonable person that this was the expectation of the parties.

Although the Supreme Court upheld the decision that a contract had been made and that commission was payable to the estate agent, it also ruled that there had been a breach of s18 of the Estate Agents Act 1979 and as a result the agent would only be entitled to a third of the commission due as a penalty for breach of these regulations.

Under the Estate Agents Act 1979, agents are required to provide the following information to a client before engaging in estate agency work:

1) The circumstances when the seller would be liable to pay the agent for carrying out estate agency work;
2) The amount payable to the agent to remunerate them for their work; and
3) Other payments which the seller is liable to pay, save for the estate agent’s commission.

Whilst this case proves that the courts are willing to uphold oral contracts and imply terms into oral contracts where necessary, in order to protect the agent and avoid financial penalties, all agents should ensure that the contract is in writing and that all communications (including verbal) should be put in writing and communicated to clients as soon as possible.

Court of Appeal Ruling on Enhanced Maternity Pay and Shared Parental Leave

New Parents and Baby

In May of this year, the Court of Appeal delivered an important decision for employers who enhance maternity pay but do not mirror that enhancement for employees taking shared parental leave.

The current legal position is that it is up to employers to decide whether or not to enhance contractual pay to employees on shared parental leave, when they pay enhanced maternity pay. In making such a decision, employers must take into account the need to avoid discrimination in that if they make enhanced payments to employees on maternity leave but not to employees on shared parental leave, there is a risk of sex discrimination claims from male employees who take shared parental leave and consider that they are being treated less favourably than female employees on maternity leave.

This latter point was tested out in Capita v Ali and Hextall v Chief Constable of Leicestershire [2019] EWCA Civ 900, where Mr Ali and Mr Hextall argued that the failure by their respective employers to mirror enhanced maternity pay amounted to direct and/or indirect sex discrimination. Mr Ali argued that it was direct sex discrimination by his employers to allow a new father on shared parental leave only 2 weeks’ leave on full pay when female staff were allowed 14 weeks’ maternity leave on full pay. Mr Hextall argued that it was indirectly discriminatory for him to receive only statutory pay during shared parental leave, whereas a woman on maternity leave was entitled to full pay for the first 18 weeks of her maternity leave.

In both cases, the Court of Appeal held that there was neither direct nor indirect discrimination. As regards direct discrimination, the court found that the correct comparator for a man on shared parental leave is a woman on shared parental leave, not a woman on maternity leave. The court said it was necessary to consider the purposes of maternity leave and pay, which include enabling the mother to recover from the effects of the pregnancy and childbirth.

Similarly, the Court rejected the argument that a policy of enhancing maternity pay but not shared parental pay amounted to indirect sex discrimination against men.  It held that Mr Hextall’s claim was actually an equal pay claim (which was not upheld) rather than indirect discrimination.

Although this decision gives employers a degree of clarity in respect of enhanced maternity pay and shared parental leave, the government has expressed concern about the low take-up of shared parental leave and so it may be that there is a review of statutory pay during shared parental leave in the future.

Renting Homes (Fees etc.) (Wales) Act 2019 Receives Royal Assent

The Renting Homes (Fees etc.) (Wales) Act 2019 (‘the Act’) received Royal Assent on 15 May 2019 and is due to come into force in Wales on the 01 September 2019.

The purpose of this Act is to make costs more transparent and to make the private rented housing market in Wales more accessible to tenants who often struggle to meet up front costs.

This Act is similar to the Tenant Fees Act 2019 (which affects landlords and letting agents in England) in that it bans letting agents and landlords in Wales charging anything other than ‘Permitted Payments’ (defined by the Act) in consideration of the grant, renewal or continuance of a ‘standard occupation contract’.

Standard occupation contracts are to be introduced by the Renting Homes (Wales) Act 2016 (when the relevant sections of the Renting Homes (Wales) Act 2016 come into force) and will replace assured shorthold tenancies.  The Act allows ministers to make regulations to apply the provisions of the Act to assured tenancies and assured shorthold tenancies if the Renting Homes (Wales) Act 2016 has not been commenced when the bill comes into force.

It is important to note that if a landlord or letting agent in Wales is in breach of any part of the Act, they will be guilty of a criminal offence (in England a criminal offence will only be committed for a second breach if it occurs within five years of the first). However, a local authority in Wales may impose a civil penalty of £1,000 as an alternative to prosecution.  Any prosecution or penalty will also be reported to Rent Smart Wales.  This may result in a landlord or agent losing their authorisation.

Consultation

There are provisions in the Act which empower ministers to make further regulations.

The Welsh Government has issued a consultation on two sets of further regulations: (1) Default fees (permitted amounts and when they can be charged); and (2) Prescribed Information to be provided to Tenants when taking a holding deposit.

The Welsh Government wish to achieve a list of default payments which are permitted to be charged so that tenants know what costs may be charged if they breach their tenancy agreement.  The consultation provides a list of categories the government consider to be relevant.

They also wish to ensure that a tenant is provided with all relevant information prior to entering into a tenancy agreement and before handing over a holding deposit.

The consultation seeks views from landlords, tenants and letting agents.  The consultation closes on the 19 July 2019.

You can respond online here.

Following the consultation further legislation will be issued and guidance on the regulations will be produced by the Welsh Assembly in due course.  In the interim landlords and letting agents in the private rented sector in Wales need to consider their current business models carefully and begin to prepare for these legislative changes.

Here at Simply-Docs we will be producing further guidance and updated documents on this Act which will be produced before it is due to come into force.

New Section 21 Notice (Form 6A) (England)

bad news

The Assured Tenancies and Agricultural Occupancies (Forms) (Amendment) Regulations 2019 were passed on 7 May 2019. These regulations amend the Section 21 Notice (prescribed Form 6A) for use in England, to evict tenants occupying a property under an Assured Shorthold Tenancy (‘AST’) on expiry of the fixed term of the tenancy. The new Section 21 Notice (Form 6A) must be used in England from 1 June 2019 onwards.

These regulations were introduced to coincide with the Tenant Fees Act 2019. The main change to the prescribed form is the addition of a new subparagraph which explains that you cannot serve a Section 21 Notice (Form 6A) on a tenant in England if you have charged a prohibited payment or have retained a holding deposit in breach of the Tenant Fees Act 2019.

Landlords in England and letting agents acting on their behalf must ensure that they are not in breach of the Tenant Fees Act 2019 prior to serving a section 21 Notice as any breach may invalidate the notice.

Although the Government announced plans on 15 April 2019 to abolish Section 21 Housing Act 1988 notices, no timetable has been set for when this consultation will be launched. Until new legislation is introduced, Section 21 Notices are required to be served using the new prescribed Form 6A from the 1 June 2019.

Here at Simply-Docs we will amend our template Section 21 Notice (Form 6A) (England) to reflect the changes to the form prescribed immediately prior to the 01 June 2019.

Tenant Fees Act 2019 – Greater Protection for Tenants in England in the Private Rented Sector

As part of the Government’s drive to make renting fairer and more affordable, and to improve transparency and affordability in England’s residential lettings market, the private rented sector in England faces further changes in the shape of the Tenant Fees Act 2019 (‘the Act’) which comes into force on 1 June 2019.

This Act prohibits landlords and letting agents in the private rented sector in England from charging certain fees to a tenant. Financial penalties apply for non-compliance and, for repeat offences, further fines and a possible criminal conviction. Landlords and letting agents will not be able to evict a tenant using the section 21 eviction procedure until they have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.

It is important that residential landlords and letting agents are prepared for these changes and should ensure that their business models, internal practices and procedures are compliant with the Act when it comes into force on 1 June.

Which Tenancies are Affected?

Assured shorthold tenancies, licences to occupy (excluding social housing), and student lettings in England granted on or after 1 June 2019 will be affected. If a tenancy was granted before 1 June 2019, payments which may be prohibited under the Act can still be charged but only until 31 May 2020.  From 1 June 2020, all tenancies and licences (previously referred to) will be caught by the Act.

What Payments are Permitted Under the Act?

A tenant can be charged:

  • Rent.
  • A refundable tenancy deposit (capped at five weeks’ rent if the yearly rent is less than £50,000, or six weeks’ rent if the yearly rent is £50,000 or more).
  • A refundable holding deposit (capped at no more than one week’s rent); strict time frames have been introduced for repayment.
  • Certain ‘default’ fees, which must be written into the tenancy agreement – payment for a lost key and interest for late payment of rent (if the rent is unpaid for more than 14 days). The rate of interest must not exceed the rate of 3% above the Bank of England base rate.
  • Utilities / Communication services / TV Licence / Council Tax (only the billed amount).
  • £50 fee for the landlord’s consent to vary a tenancy agreement as requested by the tenant.
  • An early termination fee (in the event the tenant wishes to terminate early, but not where the tenant is exercising a break clause).

What Payments are Prohibited?

Landlords, or letting agents on their behalf, are prohibited from charging tenants any fees which are not permitted payments (described above).

For example, letting fees (such as administration fees, obtaining references, preparation of inventories, credit checks) cannot be passed on to a tenant and must be fronted entirely by the landlord.

A common clause in a tenancy agreement requiring a tenant to pay for a professional clean at the end of the tenancy is now a prohibited payment. It is permissible to require a tenant to clean to a professional standard, but not to pay for a professional clean.

What are the Penalties and Consequences for Non-Compliance?

Landlords and letting agents can be subject to a fine of up to £5,000 for a first offence. If a further offence is made within five years of the first, this will be a criminal offence and a landlord or letting agent could be liable for an unlimited fine. Some local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.

To find out more about the Tenant Fees Act, why not take a look at our all new Guidance Note? This new document is available here.

As a result of the wide impact the Act will have on the private rented sector in England, several of our template documents on the Property portfolio are being updated, most notably the Assured Shorthold Tenancy (AST) Agreements. These updates will be published before the Act comes into force.

In related news, the Renting Homes (Fees etc.) (Wales) Bill, has passed through the Welsh Assembly and is awaiting Royal Assent. Similar provisions to the Tenant Fees Act 2019 are proposed under this Bill. We will produce further guidance and updated documents once this Bill has passed into law.

As a landlord or letting agent do you believe these legislative changes will necessitate an increase in rent (even if this is a negligible increase) and therefore preferable to a tenant being charged up-front fees? Is Buy-to-Let less attractive now? Your comments are, as ever, welcome!

Important Changes to IR35 Coming in 2020

HMRC Sign

Are you a freelancer who works through a Personal Services Company (“PSC”), or do you engage freelancers who do so? If so, you need to be aware that the tax position will be changing in April 2020.

Proposed Changes to Off-Payroll Working Rules (IR35)

The Government issued a Policy Paper and Consultation Document on 5 March 2019 (“Off-Payroll Working Rules From April 2020”). If you would like to read the paper in full, you can find it by clicking here. The consultation runs until 28 May 2019, but it is clear that the Government does not intend to make any significant changes to its proposals as a result of feedback it receives to this consultation.

A Finance Bill will be published in the summer and, once it is passed into law, it will implement changes to how the IR35 regime works. Although details of the proposed changes will not be known until the Bill is published, the points covered in the Government’s March 2019 consultation indicate the nature of the changes that will come into effect in April 2020. In this post, we consider some of the proposed April 2020 changes set out in the consultation.

Background to the Changes

Working via a PSC (or some other form of intermediary) is often referred to as “off-payroll working”, and the tax rules that apply to it are usually referred to collectively as “IR35”. IR35 does not alter or dictate the employment law position either as to workers’ rights or as to whether someone is employed as opposed to self-employed. Nor does IR35 alter the general tax law establishing the amount of tax liability.

As it currently operates, and as it will operate from April 2020, IR35 is only, in effect, a means to aid collection of the full and correct amount of tax and National Insurance (“NI”) to be paid in respect of certain payments where a freelancer works through a PSC. To find out more about IR35, check out our guidance notes IR35 as background to the latest changes to IR35 being proposed by HMG. You can find our guidance notes here and our information pages here.

Operation of IR35 from 2000, and Recent Developments

The operation of IR35 depends on identifying where a freelancer working for a client through a PSC is, in substance not form, an employee of that client. When IR35 was originally introduced, the rules required the PSC itself to identify whether use of the PSC to receive gross payments from a client in any instance was “disguised employment” by the client and to arrange payment of tax and NI under PAYE if that was the case.

Freelancers (and sometimes family members) are usually the only directors and/or shareholders of a PSC. Perhaps unsurprisingly, the Government found that PSCs could not be relied upon to implement the IR35 rules. PSCs commonly paid dividends to the freelancer (as a shareholder of the PSC) rather than a full (or any) salary to the freelancer. As a result, PSCs did not pay the tax or NI that would have been paid had they paid a salary derived from the gross payments made by clients.

Consequently, under a change in the law in 2017, the Government began to implement anti-avoidance measures. Since April 2017, where the client is a public sector entity, the burden of assessing the tax status of freelancers shifted on to the public body concerned, so that it, not the PSC, is responsible for identifying such “disguised employment” situations. Where the public sector body does so in any case, it must operate PAYE and make net payments to the PSC. Many, including IPSE (the Association of Independent Professionals and the Self Employed), think that these changes have had damaging effects on the public sector, and that any extension of these changes to the private sector will be also be damaging for all concerned.

The April 2020 Changes to IR35

Since late 2017, the Government has indicated its intention to extend similar changes to the private sector, although the April 2020 changes will differ in some respects from the measures that currently apply to the public sector. From April 2020, the private sector client will be responsible for determining whether the freelancer is a “disguised employee” and therefore to be treated as if an employee. If the entity in the labour supply chain which pays the fees to the PSC is not also the client of the PSC, then the fee payer will be responsible for operating PAYE. If the client determines that IR35 does not apply, then the client or the fee payer will pay the PSC gross.

However, these new rules will not apply to all private sector clients. The legislation will provide that clients which are “small” entities will not be involved in having to determine freelancers’ status and, whether or not the client is also the fee payer, the fee payer will not need to operate PAYE. For this purpose, “small” means that if the client is corporate, the rules will not apply to it if it falls within at least two of the following:

  • Its annual turnover does not exceed £10.2 million;
  • Its balance sheet total does not exceed £5.1 million;
  • The number of its employees does not exceed an average of 50 in the year.

If the client is non-corporate and it is “small”, the rules will similarly not apply to it. The criteria for “small” have not yet been made clear, but they will fairly closely follow the criteria for corporate entities.

This means that where a client in the private sector is “small”, the responsibility for determining the freelancer’s status will remain with the PSC as at present.

Before deciding whether IR35 rules apply, are they even relevant to you?

These 2017 and 2020 changes to how IR35 operates only impact on any case where IR35 is relevant, i.e. where a PSC is involved. If a freelancer does not work through a PSC but through some other type of entity (e.g. an agency or managed service company), then other rules will or might apply, so it is important to understand what amounts to a PSC for the purposes of IR35.

So, if you engage a freelancer working for you directly as opposed to working through a PSC, you will not be affected by IR35. However, as a consequence of normal tax law (not IR35 rules) applicable in these cases, you will still need to decide whether they are an employee rather than a sole trader or contractor. If they are an employee, you will have to operate PAYE.

Determination of a Freelancer’s Status

Although clients will need to apply the normal employment status tests (based on case law – see our helpful tips, here) to decide whether someone is a “disguised employee”, it can be difficult to do so, and that difficulty is aggravated by the fact that HMRC’s view of status in a case cannot necessarily be regarded as correct. Where HMRC has contested the status of contractors in tax tribunals, it has lost a large percentage of them.  HMRC provide a tool, the Check Employment Status Tool (“CEST”), which clients may (but do not have to) use to assess employment status. CEST’s reputation has unfortunately become somewhat sullied due to many public sector clients finding that it is biased towards finding that an individual is an employee. This has not inspired confidence amongst freelancers or their clients. HMRC has said that it will enhance CEST to make it more suited to the private sector.

New Information Requirements

Currently, where the client is in the public sector, it must tell the entity it contracts with of its determination of the freelancer’s status. From April 2020, the Government intends to introduce new IR35 rules that will require private sector and public sector clients to inform both the entity they contract with and the freelancer or PSC of their determination and, if requested, the client’s reasons for it.

HMRC also intends the rules to require all intermediary recipients of the determination (i.e. those in the chain other than the client and the freelancer or PSC) to pass it and, if requested, the reasons for it, to the person with whom they contract.

Status Determination Disputes and Anti-Avoidance Measures

The proposed new rules for the private sector are likely to include mechanisms for challenging decisions as to whether or not a freelancer is within IR35, and a means for resolving such disputes. Where a party is initially liable to determine status and does not do so, or does so without reasonable care, or if it does not fulfil any other IR35 obligation, it will be made liable for tax and NI even if it is not the fee payer. Where a party is liable for tax and NI but in the event it cannot be collected from that party, the rules are likely to have the effect of moving liability to the next entity in the labour supply chain.

Impact of Changes on Your Business and Action Needed Now

The changes might have an effect on you if you are a freelance business or your business engages freelancers. The effects might include an increase in the burden of administration work, the cost of that extra work, practical difficulties in operating within the changed rules, and the commercial and financial impact on your business.

With less than a year to go before new rules come into effect, it is very important that you start now to take steps to prepare for the new IR35 rules if you do engage any freelancers through intermediaries. There are numerous steps that should be considered. It is recommended that you begin by identifying those freelancers working for you through intermediaries and the labour supply chain in each case, and then implementing processes to determine freelancers’ status. Further steps are likely to be advisable, and we recommend that you seek advice or guidance on these from suitable advisers or sources.

As always, if you would like to share your thoughts as to whether and how you think these proposed changes will impact you or others with whom you deal, we would be glad to hear from you in the comments, below.

Proposed Mandatory Requirements for Landlords to be Members of a Redress Scheme

Houses with red doors

Earlier this year, the Government gave its response to the consultation on ‘Strengthening Consumer Redress in the Housing Market’.

This consultation ran for two months at the beginning of last year and considered the current procedure for addressing complaints and disputes in the housing market and whether the process could be improved.

The Government wants to focus on empowering tenants, ensuring that tenants in both the private rented sector and social housing have confidence in renting. Complaints and disputes should be dealt with fairly and in a timely manner, and tenants will be compensated where due. The current mechanism for resolving disputes is seen to be confusing, complicated, and cumbersome. The Government is also looking to move the resolution of disputes away from the courts and hopes that these measures will achieve this.

The Government has announced that they will be introducing legislation in England to address the following:

  • All private landlords, including private providers of purpose-built student housing and park home site operators must belong to a redress scheme. Failure to belong to a redress scheme will result in a financial penalty of up to £5,000. These measures reflect the requirements introduced in 2014 for all letting and managing agents in England to become a member of a redress scheme.
  • A ‘New Homes Ombudsman’ for developers of new-builds. It is proposed that developers of new-builds will need to be members of this Ombudsman by 2021 if they wish to participate in the Government’s landmark Help to Buy scheme.
  • Establish a working group (to be known as the Redress Reform Working Group) to develop a ‘Housing Complaints Resolution Service’. This resolution service is intended to be a one-stop-shop for housing complaints. It is intended to be used by tenants and leaseholders (social and private rented sector) as well as purchasers of new-build homes and users of all residential property agents.
  • The working group is also to review the current standards of resolving disputes with a view to creating a single ‘Code of Practice’ on complaint handling across all tenures, to ensure consistency and to raise the standard of service consumers should expect when they seek help.

No date has been set for the introduction of the new rules, but the Government has said that they will bring forward legislation at the earliest possible opportunity (once parliamentary time allows).

Government Plans to Abolish s21 Eviction Procedure

bad news

The Government has outlined plans to consult on new legislation to abolish Section 21 evictions in England. Similar plans have also been announced for Wales.

Under the current law in England, landlords can evict tenants (giving them eight weeks’ notice) at any time after the fixed-term contract has come to an end, without specifying a reason. This procedure is known as a s21 eviction procedure and is often referred to as a ‘no-fault eviction’.

If this procedure is abolished, landlords would need to rely on the Section 8 eviction procedure (under which landlords need a legitimate reason) to seek possession of a property. This is seen by many as being a costly and lengthy procedure which can take an average of 22 weeks to resolve.

Along with the abolishment of the Section 21 eviction procedure, the Government has announced an intention to amend the Section 8 eviction procedure to allow for a landlord to regain possession of a property where they wish to sell it or move into it.

The Government has also promised extra resources and changes to the court process to ensure that cases are expedited and run smoothly through the courts.

The Government’s aim is to protect tenants; the official press release stated that the Section 21 eviction procedure is one of the biggest causes of family homelessness. With more than four million people in private rented accommodation, the Government argue that more needs to be done to ensure that tenants have greater certainty and security in the housing market.

There is concern that the Government’s proposals will result in renting being more expensive as landlords face increasingly costly eviction procedures, or as a result of a decrease in supply if landlords cease renting out their properties altogether. There is also speculation that landlords may prefer to rent out their properties as holiday lets.

No dates have yet been announced for the consultation. In the meantime, the current Section 21 procedure can still be used.

As a landlord, what impact would the abolishment of the Section 21 eviction procedure have on your business? Your comments are, as ever, welcome!

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