If the Government’s proposals on renter’s reform were limited just to the removal of Section 21 notices and fixed term tenancies it would still probably be the biggest change in the PRS since 1988.
However, the White Paper doesn’t stop there, and proposes a number of other substantial changes to the way the PRS operates.
In particular, it commits to –
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Making it mandatory for landlords to belong to a new landlord ombudsman.
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Requiring landlords to register their properties on a new property portal.
The Government expects that these measures will free up time and resources in the courts and local authorities, allowing them to spend more time dealing with serious cases.
Ombudsman
Letting agents have been required to belong to one of two redress schemes (The Property Ombudsman or The Property Redress Scheme) for nearly a decade now.
Wherever a landlord or a tenant has an issue with their letting agent they must first exhaust the agency's complaints procedure before applying to the redress scheme to deal with their complaint.
Failure to belong to a redress scheme or advertising which scheme they belong to can lead to the local authority issuing fines.
While details are scarce on the new landlord redress scheme, it is likely that the landlord ombudsman will operate in a similar fashion to the existing agent schemes.
The White Paper does state that the new ombudsman will have a number of options to deal with tenant complaints such as issuing fines, compelling landlords to do something and ordering rent to be repaid in some circumstances.
The cost of the new ombudsman is likely to be a concern for landlords. Particularly if the price point is set too high.
Property Ombudsman membership for instance starts from £365 per branch per year while membership of the Property Redress Scheme starts from £162 per branch per year (with fees charged per complaint).
As a result, agents do have a bit of choice and flexibility when signing up to an ombudsman. If they are confident they won’t receive many complaint, then the Property Redress Scheme option is very attractive for instance.
With only one ombudsman proposed for landlords, there is a concern that the lack of competition will lead to an unreasonably high price point for those with smaller portfolios. If there is no incentive to offer a lower fee then less options are likely to be available to landlords.
Property portal
Registering property will be familiar to landlords who’ve invested in Wales. Currently all landlords in Wales are required to pay to register their properties with Rent Smart Wales.
The cost of registration with Rent Smart Wales, is relatively low with landlords applying online charged £46 for the initial five years and then £36 to renew for another five years.
However, landlords in Wales are not able to undertake property management work if they have only registered the property. Should they wish to manage the property in any way they will have to pay further fees to apply for a licence and undertake training.
This looks to be different in England, with a licensing requirement not included in the proposals. Instead, the property portal will aim to provide a ‘one stop shop’ providing guidance for landlords on their responsibilities and giving tenants information on their rights.
Compliance requirements and the portal
The White Paper suggests that landlords will be expected to show how the property complies with their various regulatory requirements on the property portal.
Currently landlords have to serve documents such as the gas safety certificate to their tenants and retain proof of service should they need to rely on it later. This can lead to problems later if the tenant contests service of these documents.
It is hoped that the property portal will replace the requirements around service of these documents rather than duplicating it. Otherwise, it is simply adding another administrative burden to landlords before they can let a property out.
Selective licensing and the portal
Many selective schemes are justified on the basis that the local authority needs information on its PRS so that it can enforce against rogue landlords.
Fees can be substantial for this, and good landlords often feel that they are paying for something that provides very little value. Particularly where the local authority does not appear to do much enforcement work to justify the existence of the scheme.
Given that the portal will be accessible by local authorities, the NRLA is calling on the Government to scrap selective licensing. With the details of all landlords and properties already available on a national database, we question what additional local registration schemes would achieve, apart from being an unnecessary duplication of effort and an excuse for income generation by local authorities.