Date
Text
min read

Landlords: 7 things you must do to survive the Renters’ Rights Bill onslaught

Tom's Tips

Landlords: 7 things you must do to survive the Renters’ Rights Bill onslaught

Tom Entwistle gives his tips on surviving and thriving in the buy-to-let business after the new bill becomes law.

First the positives. Labour has promised not to introduce rent controls, interest rates are on the way down, and demand for renting has never been higher.

With the right approach, it’s perfectly possible to survive and thrive long-term in the private rented sector (PRS), but it calls for a degree of savvy and a lot of hard work. 

Landlords have had a challenging time under the Conservatives but under the new legislation proposed by Labour, it’s going to be something else. Tenants will have far more protections than they’ve had since the regulated tenancies of old. If you get a bad tenant, it’s going to be much harder to remove them, so avoiding them in the first place is key.

The coming changes

Labour’s potential hike in capital gains tax (CGT), its reinstating of the previously relaxed energy efficiency targets for buy-to-lets, and its Renters’ Rights Bill (RRB) will present you with challenging but not insurmountable hurdles.

The long-suffering buy-to-let landlord can be forgiven for contemplating the ultimate defeat, but throwing in the towel in the face of such adversity may not be the most profitable way to go long-term.  

The RRB represents the biggest change in renters' rights in a generation and is likely to relieve some of the pressure on local authorities’ emergency housing lists, at landlords expense, no doubt intentionally. Here is a useful guide to the Renters’ Rights Bill.

But tenants need housing and ultimately the government can’t afford to completely destroy the housing market. For those landlords who hang in there and stay the course, the rewards could ultimately come. Survival will involve a lot of hard work, keeping up a highly professional approach.

Here are my seven priorities for buy-to-let survival under the RRB:

  1. If they need it, upgrade your properties to meet the latest energy efficiency standard (EPC grade “C” by 2030 if not before) and make sure your rentals are warm, dry and safe enough to meet the Decent Homes Standard. Doing this may involve more investment, but you can’t expect to make money as a responsible landlord without putting something in. In some cases, there will be money available for upgrades.
  1. Be rigorous about the way you verify and select your tenants, taking credit checks and references (previous landlords and employers) and insist on guarantors or rent guarantee insurance policies. New policies "risk assessed" for RRB will be coming along soon. The last thing you want is a bad tenant under the new RRB regime - it would inevitably be an expensive, time-consuming and long-drawn-out eviction. If you take a guarantor, make sure you have a watertight guarantor agreement, otherwise you’re wasting your time, it may be useless. You may need legal advice. 
    It is important to be aware of the discrimination laws when selecting tenants, making sure every applicant goes through the same process. Crucially, you are allowed to discriminate on suitability for the accommodation and affordability. But the RRB introduced two important restrictions - not to discriminate against tenants on housing assistance or those with children.

  2. Use a good independent inventory company to produce comprehensive ingoing and outgoing inventory reports, complete with photographs. Doing this will provide you with all the evidence you need should you have to make a claim for damages. Make sure you have properly protected any deposit you take with one of the government approved agencies. Bear in mind, deposits are limited to 5 weeks' rent.
  3. Keep, and increase your rents to at or near market levels. Under the RRB, gone are the days when you can afford to allow rents to fall behind market levels year after year. Many landlords do this, especially if they have a good tenant in place and want to keep them, but bringing rents back in line with the market becomes too big a jump. Tenants can’t appreciate this or can’t afford it. You need to use Ground 13 to process annual rent increases. You can always offer a small discount for good long stay tenants. Bear in mind the tenant will have the right to apply (without a charge) to the First Tier Property Tribunal to have the rent assessed.
  4. If your tenants request a pet - remember under the RRB you cannot unreasonably refuse. You must carefully assess its suitability and do background checks before accepting a pet. You will have 28 days to do that. Make sure you have a comprehensive pet policy incorporated into your letting agreement. Also, insist on having comprehensive pet damage insurance - some new policies will be coming soon - you will be allowed to charge the cost to the tenant. If you refuse the pet, make sure you have enough documentary evidence to justify this refusal in case the tenant appeals to the Private Rented Sector Ombudsman.
  5. Do regular documented inspections with risk assessments after giving your tenants plenty of notice. Make sure you meet your legal obligations regarding gas safety and electrical safety checks. Also provide working smoke and carbon monoxide (CO) alarms. Be extra vigilant about condensation and mould.
  6. Always treat your tenants with respect as paying customers, and respond quickly to requests for repairs. Importantly, keep those rents up to market levels by reviewing these annually using the Section 13 procedure, as allowed under the RRB. 

The coming challenge

2025 will be a challenging year for landlords and agents when the new RRB becomes law. The Labour government doesn’t seem to have grasped the intricacies of running a buy-to-let operation from a landlord’s perspective and I wonder whether they have fully appreciated the full impact this bill will have? 

One interpretation is that it’s a rogue tenant’s - rent dodgers - charter that will allow them to run up long-term arrears. What’s more, the courts and civil justice system in England are in no state to deal with the onslaught that is going to result. 

In my view, private buy-to-let landlords - despite many housing tenants receiving benefit payments - are not social landlords and should not be seen as such. They should not be expected to underwrite those tenants who face economic difficulties, which is effectively what the RRB imposes.

Unprofitable lets

It may seem harsh, but if you have existing tenants who are struggling to pay a below market rent, are in arrears or you are not happy with their behaviour in some way, now is the time to consider a Section 21 eviction, while it’s still available to you. 

It’s also a time to consider the profitability of your individual properties. If you have any properties that for one reason or another don’t make money - perhaps they are badly located or of an unusual size or configuration - now is the time to consider culling them, leaving you with only the most profitable ones and the ones that let most easily.

For those tenants who are either in rent arrears or breaching the terms of their contract, for example refusing to allow access for inspections or for crucial safety checks, landlords will have these key grounds under the RRB to rely on:

Mandatory ground:

Ground 8 - Rent arrears.
The tenant has at least 3 months’ (or 13 weeks’ if rent is paid weekly or fortnightly) rent arrears both at the time notice is served and at the time of the possession hearing. 4 weeks' notice.

Discretionary grounds:

Ground 10 - Any rent arrears. The tenant is in any amount of arrears. 4 weeks' notice.

Ground 11 - Persistent arrears. The tenant has persistently delayed paying their rent. 4 weeks' notice.

Ground 12 - Breach of tenancy. The tenant is guilty of breaching one of the terms of their tenancy agreement (other than the paying of rent). 2 weeks' notice.

Ground 13 - Deterioration of property. The tenant has caused the condition of the property to deteriorate. 2 weeks' notice.

Ground 14 - Anti-social behaviour. The tenant or anyone living in or visiting the property has been guilty of behaviour causing, or likely to cause, nuisance or annoyance to the landlord, a person employed in connection with housing management functions, or anyone living in, visiting or in the locality of the property. Or the tenant or a person living or visiting the property has been convicted of using the premises for illegal/immoral purposes, or has been convicted of an indictable offence in the locality. Landlords can begin proceedings immediately.

A key phrase in the guidance to the RRB says: "Ultimately, we expect our rental reforms to reduce demand on the courts because only cases where there is a clear, well-evidenced ground for possession will be able to proceed." Be warned.

Run your letting operation as a business

Survival means running your rentals in a businesslike manner. It means running a fully compliant operation while ensuring you get a fair market level return – you are not a charity. However, when you know you have a good long-stay tenant, you might consider offering them a small discount to encourage them to stay.

Bear in mind that ALL assured and assured shorthold tenancies with be switched to periodic tenancies on the day the RRB becomes law, sometime next year - existing as well as new tenancies will switch. Any Section 21s applications in train will be processed but after the start date no new Section 21s will be possible

If you have mortgages, you should consider longer term (5 or 10 year) fixes as interest rates are coming down, giving you long-term certainty as to what your major outgoings will be. Use a good mortgage broker to hunt around for the best deals that are suited to you, and similarly with your landlords’ insurance policy. But remember, with insurance, it’s only when you have a claim that you find out how good your insurers really are, cheapest is not always best.

Remember also, fixtures and fittings and décor don’t last forever, so floor coverings, kitchens and appliances, as well as decorating, all need to be on a rolling programme for replacement if living standards are to be maintained. But if you have kept your rents in line with the market level, these maintenance items should be affordable, and you can still make a decent profit.

Registering

Finally, you will need to register with both the Private Rented Sector Landlord Ombudsman scheme and the Private Rented Sector Landlord Database as part of the Renters (Reform) Bill. If you don’t register you are subject to a fine if you market a property to let, and you won’t be able to use the Section 8 eviction process.

Property Ombudsman

All landlords will be required to join the Private Rented Sector Ombudsman scheme, which will be part of the new RRB Property Portal. Landlords will register online, by phone, or through an offline process. They will need to provide their name, contact information, address, and details of their private rented properties. 

Landlord database

All residential landlords will need to register for the Private Rented Sector Landlord Database and there will be a fee to pay. You will receive a unique identifier number for yourself and each property you register. Landlords cannot legally market a property as available for rent unless they are registered. 

The Property Portal and the Landlord Database will, according to the government, help to improve transparency and information for tenants. The database will also help HMRC identify cases for investigation, such as for tax, late payment interest, and tax-related penalties. 

Good luck with your lettings.

[Revised 27 September 2024] - Read the full guide to the RRB - it's being continually revised.

Tags:

renters rights bill

Author

Comments