NLA in action

NLA in action

This month, Chris Norris, Director of Policy and Practice, outlines how the NLA will respond to the government’s consultation on longer tenancies.

 

  1. The issue: the government consultation on ‘overcoming the barriers to longer tenancies in the private rented sector’

Summary

On 2 July, the secretary of state for communities, James Brokenshire, published an eight-week consultation document outlining proposals to introduce a minimum three-year tenancy term, with a six-month break clause, “to help renters put down roots, and give landlords longer-term financial security” in England. You can find the consultation documents here.

NLA view

We have been working with the government for a number of years in the knowledge that there is a cross-party political desire to facilitate longer private tenancies, and will continue to robustly defend the flexibility that landlords need to offer tenancies. We believe that NLA members need the ability to offer a range of tenancies – including shorter terms.

We do, however, agree with the government that the private rented sector would benefit from some behavioural changes to allow it to function appropriately and allow landlords and tenants to negotiate more freely on the most appropriate tenancies for all parties. If this consultation leads to incentives for longer-term tenancies, that’s a positive.

But our line in the sand will be that we do not want to uproot Section 21 no-fault evictions. We do not think that a three-year tenancy is a ‘one size fits all’ solution for landlords and tenants alike.

Some members will recall that the NLA ran a series of working groups for the government last year to look at the issue of longer tenancies. And, based on the outcome of those research groups, our concern would be that, if the government does propose incentives such as tax breaks to encourage landlords to offer longer tenancies, those incentives will have to be proportional to the risk that landlords take on.

Our members polled in the focus groups last year categorically told the government that small tax incentives would not encourage them to offer longer tenancies. NLA members unequivocally sent policy makers the message that landlords who choose to let for three or five years take on a risk that could equate to thousands of pounds over the period of the tenancy. For any incentive to work, it has to be proportionate to the risk we are being asked to accept.

Currently the consultation offers no evidence as to what incentives, if any, there will be. We will certainly be working with the government to ensure that, if there are incentives, they will be meaningful.

Crucially, however, in all our discussions with the government over the issue of longer-term tenancies, we have always said that, if ministers want to encourage landlords to offer longer tenancies, then they have to show that it is safe to do so by fixing the court process – it can take up to a year to regain possession of a property via the Section 8 process.

The government has said it agrees that regaining possession is an issue that needs to be looked at but that it will review the court process later in the year.

But we would counsel ministers to either fix it earlier or look at it in parallel with the current consultation on longer tenancies. If landlords are to be encouraged to let for longer, they must have confidence that they can regain their property effectively.

We are prepared to work with the government to promote the use of longer tenancy agreements but only if the court service works better for landlords. We cannot in good conscience tell you to let your properties for longer if you do not have recourse to a well-functioning court service.

We would, however, like to encourage landlords to look at their businesses to see if longer tenancies can work for them and their tenants, and let us know their views. If you have feedback on the consultation, please contact us at contact@landlords.org.uk by Monday 13 August to allow us time to incorporate your comments into our response to the government.

 

  1. The issue: the Renting Homes (Fees etc.) (Wales) Bill

Summary

The Welsh Assembly introduced the Renting Homes (Fees etc.) (Wales) Bill into the National Assembly for Wales on 11 June 2018. The bill will prohibit certain payments in connection with the granting, renewal or continuance of standard occupation contracts. It will also make provision in respect of the treatment of holding deposits. Any person guilty of an offence under the bill will be liable on summary conviction to a fine.

NLA view

I gave evidence to the Welsh Assembly on 5 July on its Renting Home (Fees etc.) (Wales) Bill. Having given representatives of the various letting agent bodies a grilling over charges to tenants, the committee was keen to hear from the NLA about the impact its proposals are likely to have on landlords.

It was incredibly useful to be given the opportunity to dispel some of the myths, or misunderstandings, about what makes up ‘move-in monies’ with members of the committee, who were clearly uncertain about how security deposits, holding deposits and fees are all used for different purposes. Likewise we seized the opportunity to refute the assertion that landlords will simply be able to absorb more and more costs.

You can read more here: https://landlords.org.uk/news-campaigns/news/nla-gives-evidence-welsh-assembly-on-renting-homes-fees-etc-wales-bill.

 

  1. The issue: Social Security (Scotland) Act

Summary

After years of opposition to elements of the government’s austerity approach to welfare provision and reform, the Scottish government has made a firm claim for greater control over social security provision in the country. The Social Security (Scotland) Act 2018 received royal assent in June, and drives a wedge between the way in which benefits are delivered in Scotland and the rest of the UK.

NLA view

The Act has been described by Scottish ministers as the biggest transfer of powers from Westminster to Holyrood since the early days of devolution, and will see responsibility for 11 state benefits devolved, although, crucially, it will not see administration of Universal Credit moved north of the border.

The relevant benefits range from Personal Independence Payments and Carer’s Allowance to Cold Weather Payments and Severe Disablement Allowance, and, perhaps most importantly for those living and working in the private rented sector, Discretionary Housing Payments (DHPs).

It is envisioned that control of DHPs will remain the domain of local authorities rather than the Scottish government, but that may mean guidance and practice relating to how they are used will vary in future in line with national policy.

This cleavage in responsibility for benefits has been described as labyrinthine by Scottish Conservatives concerned about the potential for split control over individuals’ claims.

From a landlord’s perspective, it is hard to imagine any steps the Scottish government could take to make the various systems more complex to engage with but, if the direction of travel in this policy area is towards greater devolution of power, landlords may have even more uncertainty to come.

Do you need advice? The NLA’s Telephone Advice Line is staffed by our team of experienced landlords, who have a wealth of knowledge. The Advice Line (020 7840 8939) is free for members.

18 thoughts on “NLA in action

  1. In the past week we have taken on two new landlord clients who wish to rent out their properties for different reasons. The first acting on behalf of her mother who has gone into a care home and they need to rent her property to pay the fees. They may need to sell the property within 3 years depending on what happens to mother. The second is a young person who has been living here but commutes to London. The trains have been so bad and unreliable she needs to live in London. She wants to rent her flat for a year or two until her life improves and then she may move back.

    Neither of these landlords would rent their properties if there was a blanket 3 year tenancy imposed. The government is mad to think this is what is needed.

    With all the other changes going on – licencing, stamp duty, loss of wear and tear allowance, reduction in mortgage interest etc, many landlords are exiting the market. Having to agree 3 year tenancies will exacerbate the sale of rental properties in a market already dwindling.

    Banning agents fees also means that rents will rise. We have already talked to our Landlords about the inevitable rise in our fees as an agent so the only way for the landlords to recoup some of the cost is to raise rents which are already ludicrously high. What happens when interest rates go back to a norm of 5%?.

    We need to be encouraging landlords to rent their properties, not impeding them and creating a shortage.

  2. I totally agree to your points Mr Pemberton. also, landlords exiting the rental market will lead to an excess of for sale properties prices will drop in order to gain sales this in turn will lead to negative equity for some home owners. Dare I say here we go again…..

  3. Wales Bill: does this mean landlords cannot recover disbursements for credit checks and protecting deposits from a new tenant?

    3-year minimum: what a retrograde step! Let the market decide in individual cases: e.g. I prefer 12 month tenancies. I don’t want 3 year ones, with the possibility of someone moving after 6 months.

  4. I would not be forced in to renting my property for longer than the 6 month AST and then the periodic tenancy.
    I have no idea what my finances will be like in 1 year , let alone 3, and I am not prepared to lock my property and my investment down for this amount of time. IM OUT

  5. 3 year tenancies on top of all the other legislation that is being piled on us will force landlords to think again whether they want to continue. I agree this will lead to excess of properties for sale forcing prices to drop and badly affecting some home owners especially where there is a large proportion of private rents.

    1. Landlords leaving the market – isn’t that what the government want ?
      There seems to be some “magical thinking” that when a landlord leaves the market, that home will automatically go to one of those needy tenants who are so “screwed over” by us mean landlords. This needs pointing out time and time again – the tenants most in need of support are those least able to afford to buy a home. And if the effect is of any significance, then it will increase the average risk factors for those landlords left – who will seek higher yields in order to cover the extra risk.
      So the government aim (of forcing landlords to sell up) will quite foreseeably have the unintended consequence of making life harder (choice of fewer properties) and more expensive (see higher rents to cover higher risk above) for the most vulnerable tenants.

      That’s clearly well thought out logic – “we’re going to help you poor mistreated tenants by imposing changes that will give less choice of where to live and make what’s left be even less affordable for you”.

    2. Equally a collapse of prices in the resale market bought about by oversupply will enable many would be owners to purchase a property rather than rent, that would make any government rejoice. We are on a hiding to nothing.

      1. Given the pent up demand in the purchase market, I can’t see there being any significant drop in house prices as a result of landlords selling up. And it’s only going to be the moderately well off tenants being able to afford to buy – leaving the more vulnerable tenants still stuck renting, but now renting in a smaller pool of properties. Moreover, those most likely to sell are going to be those who give a damn about the quality of what they rent out – leaving a larger proportion of landlords (and properties) of the sort we’d rather have less of.
        So no, forcing landlords to sell up won’t help the vulnerable tenants – quite the opposite.

  6. Could the NLA PLEASE stress to HMGovernment ministers that London is NOT the UK.
    London is a different planet when it comes to rentals – us northerners from up past Watford Gap cannot even dream of the sort of rents that those who own properties in the capital can achieve; yet legislation is continually introduced based on the the behaviour of those down south.
    Let’s have some ministers leave their lair in cloud cuckoo land and come and talk to us for a change – we can tell them just what it’s like in the real world where tenants are not little angels..!!!

  7. We are almost certainly going to get longer tenancies forced on us one way or another, if only to act as whipping boys to distract the mob for the Brexit Fiasco. The six month break clause is good, but another at the half way point would be better, in view of the uncertainty over the next few years being just as much a threat to landlords as tenants. If we don’t offer some pro-active input we will just be steamrollered anyway, and lets face it: to the general public we are all such heartless, money-grabbers who will shed a tear anyhow? Better to have some song to sing than lowering silence, presumed as guilt! David Redfearn’McNab Wiltshire

  8. I am happy to provide 3 year tenancies, as a long term Landlord, my concern is eviction of tenants in default of rent and/ or nuisance tenants whereby a judge deems they have the right to remain until the end of the tenancy. As Landlords we know the eviction system sits in favour of tenants ( how many of us have been able to get arrears and costs from tenants?). All Landlords should have to register to adhere to a code of conduct run by the NLA ( NOT a government run organisation/Council ) and be unable to Let a property without registration. The register can be verified by either tenants or Agents. The cost of which needs to remain tax deductible!!

  9. Tenants have lives; properties are not going anywhere.
    I have no problem with 3 year terms provided that the court system is improved to evict problem tenants quickly (and a few additional S8 grounds added).
    Disrepair should not be a defence unless it was raised before the S8 notice was issued.

    Government needs to understand that there are different PRS environments that have different requirements, and should legislate for each.
    For example:
    – Property let to a single household (what the 3-year tenancy should be aimed at)
    – Student lets: fixed term; should be easy to get property back for next year’s students.
    -Registered HMOs where rooms are let separately: should be easy to evict someone who is making life a misery for other tenants.
    – HMOs let on single tenancy: maybe 3-year, but with ability to swap people in and out without resetting 3 years

  10. I’m sure I read a report (possibly by NLA) that the average time a person stays in a property is 4 years. That being the case there is no justification for altering the system. No landlord wants the hassle of having to find new tenants unnecessarily but they need to be able to regain their property if necessary. There must also be a robust system for regaining possession in the case of difficult/non-paying tenants. Speed of regaining possession is of the essence as the majority of non-paying tenants will never repay costs/arrears whatever the County Court orders.

  11. I am extremely disappointed that NLA does not see the new legislation favouring LLS who are mortgage-free. Again the rich are going to have it easy (they are already unaffected by S24). Lender generally do not allow for a tenancy longer than 12 months, then rolling to periodic tenancy. And NLA does nothing about it. I will seriously reconsider my membership when it comes to renewal.
    On the matter – lots of young professionals do not want to rent for 3 years – who would cater for them? You will probably say that they can break a tenancy any moment. But it means that only the LL is obliged to keep their side of the contract, tenants do not. How that can be legal? I really cannot believe what I am seeing now. And we, LLs do not have anybody who would support us in fight against government’s idiocy. I thought it was NLA’s job….

    1. We are in no way supporting any proposal for longer tenancies, we are simply reporting the publication of a consultation which may lead to a push for longer tenancies. As we point out we think the discussion about increased tenure ignores the many costs and risks encountered by private landlords. We will be robustly defending landlords’ ability to create short/ fixed term tenancies, and completely agree that only some tenants want longer tenancies. On the point of lender restrictions, you’re right in saying that there are a number of lenders that include significant limits in their t&cs – although almost all of the main lenders have increased the flexibility in their new lending over the last few years. This is following pressure by NLA and others wanting a level playing field between the geared and ungeared.

  12. Landlords are rightly wary of being forced to offer three year tenancies to all new tenants. In the social housing sector this problem is often addressed by offering probationary tenancies. A new government scheme to encourage longer tenancies could involve allowing landlords to grant a probationary tenancy on the understanding that it could be terminated after six months if the landlord believes the tenant has not behaved in a “tenant like” manner. Otherwise it could then be converted to a three year tenancy if the tenant so wished. This may be a workable middle way between what the government wants (3 year tenancies) and what landlords want (reducing the risk of bad tenants).

  13. What about those of us who rent to students?? Students certainly do not want to commit to more than 12 months,

Leave a Reply