Initial thoughts on the Levelling Up White Paper from a private rented sector perspective

There are three main aspects to the government’s commitment. From a property litigation perspective they are:

  1. Levelling up for landlords – Decent Homes Standard
  2. Levelling up for landlords – National Register for Landlords
  3. Levelling up for landlords – Removal of Section 21

Decent Homes Standard

The government has pledged to improve the overall quality of housing in the UK by 2030.

Funds are to be invested into building more genuinely affordable social housing. Once a property is occupied, there will be increased regulation; residents will be given performance information so that they can hold their landlord accountable for any issues. The mechanics around this need to be established and clear definitions of decent homes to be provided. It is also not clear if the proposed repercussions, namely fines and bans, will be a sufficient deterrent.

It does seem, however, to fit in well with the New Homes Quality code that was launched in December 2021 which aims to help buyers with any issues/snags they have with their property after sale. It should be borne in mind that new builds/developments often have a portion of their plots allocated to social housing, which I have covered recently in this blog.

National Register for Landlords

A national register for landlords is being explored, although we are yet to see if this will come into fruition. A national register for landlords contains information about a property which is made available to renters before they sign a tenancy agreement; it essentially helps them check whether certain standards have been met and if not, it aims to drive out rouge landlords. There is something to be said about the irony of having a very public record for landlords operating in the private rented sector.

Presently in England we have a scheme where local authorities can licence landlords but this is not consistent across the board, nor has that scheme been nationalised.

It seems to be the case that the effectiveness of having a National Register will only be as good as the data captured within the register. There is also the same question of whether repercussions will be an effective deterrent.  Could such sanctions be criminal, civil or both?

Removal of Section 21

This is by far the most contentious proposed change and will really shake things up in the private rented sector. The removal of Section 21 will be part of the Renter’s Reform Bill of which another White Paper is expected this spring.

The abolishment of section 21 notices will mean more landlords will rely on the section 8 notice procedure for which there is scope for more litigation (and costs) as not all grounds are mandatory; the discretionary grounds will mean that tenants can defend proceedings. In my experience, tenants have often used this as a tactical advantage to draw out the litigation. As such, in the future, landlords will want to see clear and comprehensive grounds for possession in the forthcoming Renter’s Reform Bill, particularly for rental arrears.

A ground which has been somewhat of a focal point is the landlord’s ability to sell their property or move into the same using a section 8 notice; it has been reported that this ground cannot be used within the first two years of the tenancy and may come with a long notice period. There are some concerns with how landlords will be able to show their intention to sell the property; do they need to be at a certain point in the conveyancing process to be able to rely on this ground? Demonstrating a clear intention to sell or move in could be tricky and highly subjective and this could end up delaying or even frustrating possession proceedings. As a result, we may end up seeing a lot more properties being sold with tenants in situ, which ultimately is likely to affect purchase prices. As mentioned, the section 8 process is longer and it can be more drawn out. However it is set to have an overhaul, which could mean a specialist housing court with expert judges, making the process more consistent, fluid and less costly to landlords. Accelerated possession proceedings, which often do not require a hearing, can be utilised for section 21 claims. Therefore will something akin to this style be available for section 8 claims? If so, this will require the court staff to be fully trained and funded.

Once a possession order has been obtained, county court bailiffs are often criticised for being slow. Clients would be well-advised to ensure that they have applied for the enforcement to be transferred up to the High Court for speed (Section 42(2) of the County Courts Act 1984) or as proposed, the new system should have an automatic right to a High Court Enforcement Officer and/or privatised County Court Bailiffs.

Over the years, the section 21 notice process has created a lot of legislation around it (examples include the Deregulation Act 2015 and the Assured Shorthold Tenancy Notices and Prescribed Requirements (England) (Amendment) Regulations 2015), a lot of which centres around protecting deposits, providing tenants with certain information at the outset etc. The repercussions for not complying with some of these formalities means that in some cases, landlords cannot utilise the section 21 procedure. It will be interesting to see if some of these consequences will be woven into or amalgamated with the new section 8 process.

It will also be interesting to see what will happen to those tenancy agreements which include a clause which expressly provides that a tenancy can be bought to an end using a section 21 notice. We can see an argument here from landlords to say that any new legislation to be bought in is not to be applied retrospectively as this would breach Article 1 of the First Protocol to the European Convention on Human Rights, which is the right to peaceful enjoyment of one’s property. However, Parliament does have the power to introduce retrospective legislation which they have done countless times before.

Given the recent news, which contains a fair set of unknowns, we may now see a wave of landlords serving section 21 notices in order to avoid any issues with the section 8 process later down the line.

Some landlords may even try to increase rent to deliberately drive tenants out either by relying on contractual provisions or through the section 13 process, albeit, both methods can be challenged by tenants. Remember, an unfair term can be challenged under the Consumer Rights Act 2015 thereby making it unenforceable and an increase in rent through the section 13 process has to be fair/market rate.

Retouching on human rights, are we likely to see more landlords being selective about who they let their properties to now? The “cherry pick” approach that may be taken could be seen as discriminatory as landlords choose to let to more affluent tenants.

Is true ‘levelling up’ achievable?

It seems as though the government has its heart in the right place; the breadth of ambition as detailed in the white paper cannot be denied but could this also mean it will be difficult to retain focus.

How all of these changes will affect the property investment market is another unknown. That said, whether you’re an experienced property investor or first-time buy-to-let landlord, the rules are applicable to everyone and we would encourage that all landlords seek to educate themselves on what is a very active and evolving area of law.

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.

Who to contact

Priya
Sejpal

Associate , London

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