I want to begin by asking you to please respond to this government consultation because it addresses a huge issue for many HMO landlords. Please do it now because it closes on 31st March 2023.
The Background to the HMO Council Tax Valuation of HMO Consultation
Around the country several local Valuation Offices have rebranded HMOs into a separate council tax bill for each room, this process of disaggregation means that the liability for the council tax bill passes from the landlord to the tenant of each HMO room. Tenants who choose to live in an HMO are unlikely to be able to afford upwards of £100 a month extra to cover council tax and often move out leaving the landlord with empty rooms and the council tax liability while they are empty. The total council tax bill for a property can be 5/6 times the original overall property bill, even when each room is banded A. The VOA can do this under Article 4 of the Council Tax (Chargeable Dwellings) Order 1992
This consultation is very good news for HMO landlords and those who are considering entering the HMO market and it’s very important that we all respond so that government are in no doubt that the providers of around 500,000 HMO rooms (According to the Local Authority Housing Survey from 2021-2022) want this changed so that all HMO properties have one council tax bill, as they did in the past, and the landlord is liable. PLEASE MAKE YOUR VOICE HEARD.
Private Rented Sector May Get Landlord Ombudsman
On 23rd February government published Private Rented Sector Landlord Ombudsman – Pre-Market Engagement to “Open early engagement – This means that a procurement idea is currently active, it is in the early stage of development and judging interest from potential suppliers.”
This is an invitation to organisations/suppliers to give information about how they would set up and administer a redress scheme which they are referring to as the Private Rented Sector (PRS) Landlord Ombudsman scheme:
- The Ombudsman scheme will be mandatory for all private landlords in England.
- It will provide redress and dispute resolution to all private rented sector tenants.
The pre-market engagement is to gather information:
- help define the service specification for the Ombudsman; help provide a better understanding of the feasibility of the requirement;
- understand the best approach to introduce and implement the Ombudsman;
- understand the capacity of the market to deliver and the possible risks involved;
- inform value for money considerations undertaken by the Authority;
- provide the market with an opportunity to ask questions, raise queries and any issues to be addressed at an early stage; inform potential delivery timescales of the Ombudsman;
- inform our decision on the route to market.
“The Government’s White Paper, ‘A fairer private rented sector’, is committed to introduce a new private rented sector Ombudsman which all PRS landlords who rent out property in England will be required to sign up to, giving PRS tenants full access to redress. This will ensure that when residents make a complaint, landlords take action to put things right.”
No doubt landlords will be paying a fee for this service and this may be based on the number of properties we own as with the scheme which covers letting agents. The White Paper was published on 16th June 2022 here.
The Goals of the Fairer Private Rented Sector Whitepaper
The stated aim of the White Paper was to “build on the vision of the Levelling Up White Paper and sets out our plans to fundamentally reform the Private Rented Sector and level up housing quality.” Specifically, these are the goals:
- All tenants should have access to a good quality, safe and secure home.
- All tenants should be able to treat their house as their home and be empowered to challenge poor practices.
- All landlords should have information on how to comply with their responsibilities and be able to repossess their properties when necessary.
- Landlords and tenants should be supported by a system that enables effective resolution of issues.
- Local councils should have strong and effective enforcement tools to crack down on poor practices.
The Issues the Fairer Private Rented Sector Whitepaper Aim to Address
The paper went on to describe some of the issues that government want to address:
- Poor-quality housing is holding people back and preventing neighbourhoods from thriving. Damp, and cold homes can make people ill, and cause respiratory conditions. Homes that overheat in hot summers similarly affect people’s health
- Too many tenants face a lack of security that hits aspirations and makes life harder for families. Private renters spend an average of 31% of their household income on rent, more than social renters who pay 27%.
- The existing system does not work for responsible landlords or communities either. We must support landlords to act efficiently to tackle antisocial behaviour or deliberate and persistent non-payment of rent, which can harm communities.
All of this translates into more regulation of Energy Performance levels, more secure tenancies, and (hopefully) quicker and easier eviction of tenants who don’t pay their rent or/and behave in ways which are damaging to sharers, neighbours, landlords and the wider community.
In the White Paper they list 12 points that they intended to act on.
The 12-point Plan of Action in the Fairer Private Rented Sector Whitepaper
While the government over recent years has driven improvements, we know there is more to be done. We are committed to robust and comprehensive changes to create a Private Rented Sector that meets the needs of the diverse tenants and landlords who live and work within it. We have a 12-point plan of action:
- To halve the number of non-decent rented homes by 2030 and require privately rented homes to meet the Decent Homes Standard for the first time.
- We will accelerate quality improvements in the areas that need it most.
- We will deliver our manifesto commitment to abolish Section 21 ‘no fault’ evictions and deliver a simpler, more secure tenancy structure. A tenancy will only end if the tenant ends it or if the landlord has a valid ground for possession, empowering tenants to challenge poor practices and reducing costs associated with unexpected moves.
The last is the one which has received the most publicity and which many landlords fear. I don’t fear it because I let properties long before the Housing Act 1988 where section 21 and section 8 were both introduced and in those days landlords had to run their businesses differently. A fear is that the lenders will lose their nerve because it was the changes in 1988 which brought about “buy to let” lending products. It’s not popular for a landlord to admit this but tenants do often tolerate poor conditions and when asked why they say they are afraid of eviction. The term “Section 21” is the bogeyman for many tenants who constantly fear eviction and even good tenants do not feel secure. My only surprise is that it has taken so long for the government to seek to remove these evictions.
- We will reform grounds for possession to make sure that landlords have effective means to gain possession of their properties when necessary. We will expedite landlords’ ability to evict those who disrupt neighbourhoods through antisocial behaviour and introduce new grounds for persistent arrears and sale of the property.
It’s important that when removing the tenant we are given a method of evicting, even good tenants when we are forced to do so, and that means changes to section 8, the government have committed here to make those changes but the devil will be in the detail.
Serious Anti-Social Behaviour is becoming a major threat to private landlords where we are not given the support that social landlords receive and are often left to deal with tenants who can become dangerous which is a big problem for landlords for those who share property and those who live nearby; We must be given a quick and easy method to evict anti-social tenants and the support we may need if the tenant becomes difficult to deal with.
- We will only allow increases to rent once per year, end the use of rent review clauses, and improve tenants’ ability to challenge excessive rent increases through the First Tier Tribunal.
This has not been thought through and hopefully will change following consultation with industry representatives. An annual rent increase is fair enough but it is important that tenants understand that the rent will be reviewed annually so that they can budget for increased costs as they do for other costs of living increases. Even a month’s notice of an increase can put pressure on their budget if it’s unexpected and a clause in the original tenancy agreement makes this clear from day one.
In my opinion, tenants will begin to challenge rent increases as they will begin to report serious disrepair to councils once the threat of Section 21 has gone. I can’t see any reason to change the current rent tribunal system, which in reality is seldom used because of fear of eviction rather than because it’s not a good system.
- We will strengthen tenants’ ability to hold their landlord to account and introduce a new single Ombudsman that all private landlords must join.
Hence the Pre-Market Engagement above. Local authorities, for whatever reason, have failed private tenants and its time those tenants had a chance to force bad landlords to carry out repairs – this will be really helpful to tenants once they haven’t got Section 21 to worry them, it’s also good news for good landlords who are tired of dealing with tenants who do not trust us because of previous bad experiences.
- We will work with the Ministry of Justice and HM Courts and Tribunal Service (HMCTS) to target the areas where there are unacceptable delays in court proceedings. We will also strengthen mediation and alternative dispute resolution to enable landlords and tenants to work together to reduce the risk of issues escalating.
Hurray! The cost of delays in taking legal action against delinquent tenants is enormous for private landlords and it is high time it ended. Most good landlords will have tried hard to work with tenants to avoid eviction and work out repayment plans to cover rent arrears and damages but so many tenants go silent and will not engage, leaving the landlord the additional cost and stress of a court case and often a Bailiff. Hopefully, those tenants who will not take part in mediation will give landlords a quick route to eviction.
- We will introduce a new Property Portal to make sure that tenants, landlords and local councils have the information they need. The portal will provide a single ‘front door’ for landlords to understand their responsibilities, tenants will be able to access information about their landlord’s compliance, and local councils will have access to better data to crack down on criminal landlords. Subject to consultation with the Information Commissioner’s Office (ICO), we also intend to incorporate some of the functionality of the Database of Rogue Landlords, mandating the entry of all eligible landlord offences and making them publicly visible.
Only landlords who are doing wrong need to fear this, for good landlords it’s an additional source of information/learning.
- We will strengthen local councils’ enforcement powers and ability to crack down on criminal landlords by seeking to increase investigative powers and strengthening the fine regime for serious offences. We are also exploring a requirement for local councils to report on their housing enforcement activity and want to recognise those local councils that are doing a good job.
I look forward to reading the stats on council enforcement activities and its time they were called to report on them. Where landlords are paying thousands of pounds in licensing fees it will be interesting to see the difference our money makes!
- We will legislate to make it illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.
- We will give tenants the right to request a pet in their property, which the landlord must consider and cannot unreasonably refuse. We will also amend the Tenant Fees Act 2019 so that landlords can request that their tenants buy pet insurance.
- We will work with industry experts to monitor the development of innovative market-led solutions to passport deposits. This will help tenants who struggle to raise a second deposit to move around the PRS more easily and support tenants to save for ownership.
At this time we are all waiting for the publication of the Renters Reform Bill which is excepted to include most of the target issues.
There Will be no Rent Controls for England
In the meantime the government have turned down pleas for a rent freeze The Housing Minister told MPs “ We do not support the introduction of rent controls in the private rented sector. Evidence suggests that they discourage investment leading to declining standards and may encourage illegal subletting that will help neither tenants nor landlords to deal with the cost of living crisis” – she is right of course.
New How to Rent Guide for Tenants
On 13th March the latest version of the government’s How to Rent Guide is published. We must by law give tenants the most recent version and therefore we should download a version on the day we are sending it to new tenants to ensure that we always use the most recent version. This is actually a really handy quick guide for landlords too, it covers the basics of renting in England and is updated constantly making it a very useful reminder for landlords and telling us what our tenants know.
I know that some landlords have hopes that government will reverse the tax changes which now prevent us from claiming relief on interest paid on our borrowing in the Spring Budget. I hope that their hopes are realised but personally, I doubt it. We will see.