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Government’s Section 21 replacement could be ‘easily exploited by bad landlords’, Committee says

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  • 09/02/2023
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Government’s Section 21 replacement could be ‘easily exploited by bad landlords’, Committee says
Abolishing fixed-term tenancies and repealing Section 21 would “undoubtedly give tenants greater security of tenure” but the proposed sales and possessions grounds could create a “backdoor to no-fault evictions”.

The Levelling Up, Housing and Communities Committee report examined the government’s proposed reforms to the rental sector and issued several recommendations. The government has two months to respond to the recommendations.

Regarding the headline reforms of getting rid of fixed-term tenancies and Section 21 “no fault evictions” it explained: “We recognise that the majority of private landlords are responsible and have no desire or financial incentive to evict tenants without good reason, and that for these landlords Section 21 feels like an indispensable means of evicting bad tenants, but the blight of unfair eviction and insecurity of tenure experienced by too many tenants today can only be remedied by its repeal.

“We remain concerned, however, that the proposed sales and occupation grounds, as currently designed, could be too easily exploited by bad landlords and become a backdoor to no-fault evictions.”

It said the period landlords could use sales and occupation grounds for eviction should be doubled to a year and the notice period served to tenants should rise from two to four months.

The period landlords cannot market or relet the property should rise from three months to six months after using the above ground and in the case of sales grounds encourage landlords to sell with sitting tenants.

It added that fixed-term tenancies should be retained for student housing and landlords in this space should sign up to government-approved codes of conduct.

In the longer term, the committee said that the various existing codes should be made into a “single national code”.

The government should also look at ways to prevent landlords from abusing the exemption, such as financial penalties.

It recommended that tenants should not be able to give two months’ notice until they have been in a property for at least four months. This will give the landlords “legal certainty” of six months rent at the start of a tenancy.

The report said that rent review clauses should not be abolished but there should be a requirement to outline how much rents will increase and include break periods where tenants can appeal to the First-tier property tribunal.

The tribunal deals with applications, appeals and references relating to disputes over property and land. This includes rent increases, leasehold issues and houses in multiple occupation licenses.

 

‘Government would like landlords with smaller portfolios to leave the sector’

The paper said that the “only certainty” was that the government does not know what is happening in the private rented sector and “has not said what role it wants it to play in the wider housing mix”.

“In particular, it is difficult not to suspect, given the changes to how the buy-to-let sector is taxed, that the government would like landlords with smaller portfolios to leave the sector,” it added.

The report said that there was no doubt that landlords with small portfolios are “currently critical” to the rental market and the impact of measures that would make it “less attractive” to such landlords would need to be “carefully thought through”.

It urged the government to review the impact of recent changes to taxation rules in the buy-to-let sector, with the aim to “make it more financially attractive to smaller landlords”.

“If the government does not want to do this then it needs to be clearer on what role it wants for the private rented sector and whether it values smaller landlord involvement,” it added.

 

Specialist housing court should be created

The report called for the establishment of a specialist housing court as the “surest way of unblocking the housing court process”.

It added that if this was not the case, then capacity to process possession claims would need to be significantly increased. Cases with rent arrears and anti-social behaviour should also be prioritised.

The report added that the government needed to set a target to benchmark how quickly such claims should be processed and meet this target before abolishing Section 21.

“We are concerned that the government does not fully appreciate the extent to which an unreformed court system could undermine its tenancy reforms,” it said.

The paper called for “more adjustments” to possession grounds for anti-social behaviour as the discretionary nature makes behaviour harder to prove and could dissuade tenants from giving evidence.

Regarding the proposed change to First-tier property tribunals to remove their ability to increase rents to give tenants more confidence would lead to a “heavier workload” for the tribunal.

It added the process was already “time-consuming and resource-intensive” as each property is physically inspected and both parties present evidence based on online listings.

“This is inefficient and results in uncertainty for both landlords and tenants around what a justified increase would be,” it added.

 

Create single ombudsman for private landlords and update How to Rent guide

The committee called for a single ombudsman to be created for all private landlords with “mediation…firmly embedded within its remit”.

The report added that the How to Rent Guide should include details of tenants’ and landlords’ rights and responsibilities, especially information on how tenants can seek redress. Foreign language versions of this guide should be made.

Landlords should provide tenants with a copy at the start of the tenancy and increase awareness of it. If it is not provided, tenants should be able to complain to the ombudsman and the ombudsman should have the ability to award compensation.

“More widely, the government should review the adequacy of advice and support services to tenants, particularly the most vulnerable, and report back to us on how it plans to make sure tenants have the knowledge and confidence to hold their landlord to account,” it added.

 

Further action needed on holiday let sector

The report said that it welcomed the tourist accommodation registration scheme and consultation on planning changes, but it worried that this was not sufficient to control the holiday let market.

It called for the scheme to be implemented as soon as possible once the Levelling Up and Regeneration Bill becomes law.

The report said that the government should also give an update on whether the register could and will be used by local authorities to “protect…communities from the holiday let market”, and what further action it may take.

 

Government should recommit to delivering affordable homes

The report said the government should recommit to delivering “affordable homes”, especially the 90,000 social rent homes that the committee has previously estimated are needed every year.

It said there should be changes to housing benefit to ensure it can cover housing costs, so it should be realigned to the 30th percentile in each broad rental market area. This should then be reviewed to see if this should be increased further.

The paper said that tenants and landlords should have better access to local market rents, so the government should assess whether data held by the Valuation Office Agency could be used to “determine justified rent increases”.

The government should also “explore alternative mechanisms” for establishing justified rent increases.

The report also criticised the government’s pledge to make it illegal for landlords to have “blanket bans” on benefit recipients in equal parts “unrealistic” and “unambitious”.

The paper said that the issues were not enough rental homes and local housing allowance rate not keeping pace with the market.

It called on the government to explain how it would prevent landlords not letting to benefit recipients and recommended an uprating of local housing allowance rates.

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