Conservatives plan Landlord Redress Schemes

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Under pressure to do more for tenants, the Conservatives have said they will introduce redress schemes for landlords, similar to those introduced for letting agents.

The announcement was made at the Conservative Party Conference last week, alongside other plans to regulate letting agents and bring in incentives for landlords to offer their tenants longer term tenancies.

A compulsory scheme will mean that all buy-to-let (BTL) landlords will be forced to register with an ombudsman scheme which the Government claim will resolve tenancy disputes more effectively than relying totally on the present county courts based system.

The government is claiming that by having landlords compulsorily join an ombudsman scheme, tenants will be given more power to challenge what they consider to be unreasonable treatment from a landlord.

Speaking at the Conservative Party Conference last week, Communities Secretary Sajid Javid said Government would:

“insist that all landlords are part of a redress scheme… For too long, tenants have felt unable to resolve the issues they’ve faced, be it insecure tenure, unfair letting agents’ fees or poor treatment by their landlord with little means of redress. We’re going to change that”.

The announcement was short on detail, so at this stage it’s not clear whether the new scheme will simply extend the scope of existing ones for agents, or will involve the launch of a completely new one. Currently, there exists no ombudsman scheme for private landlords but there are a number of voluntary redress schemes, codes of conduct and dispute resolution systems available. More detail about the new landlords’ scheme is likely to be forthcoming in November’s Budget speech.

Private landlords can opt-in to the Housing Ombudsman Service (HOS) scheme, which is primarily for the social housing sector, though few currently do so. It has been reported that in the social sector last year the HOS closed 15,877 cases, the majority of which concerned assured tenants with concerns about repairs to their property – in fact it is on record that the social sector have a worse record on complains than does the private rented sector.

Currently, the Property Ombudsman (TPO) handles complaints by tenants and landlords against sales and lettings agents, where it has been reported that the TPO dealt with 1,997 disputes in 2016, 56% of which were lettings related – 45% of these from landlords and 51% from tenants – resulting in a total of £786,572 being paid out by agents as redress.

Both the National Landlords Association (NLA) and the Residential Landlords Association (RLA) operate voluntary redress schemes insisting members follow a code of conduct against which their performance is judged, though they cannot legally impose fines, only a ban on membership.

Though these new regulations will have to await the passing of new legislation, which could take a little while, it seems that with the growth of private renting landlords are coming in for a considerable amount of attention from government recently, with measures it would seem both to slow down the growth of buy-to-let and to regulate the sector more intensely:

• Buy-to-let landlords and anyone buying a second home (even if they buy a new home before they have sold their own) must pay a 3% surcharge on top of normal stamp duty bands.
• From April 2017 to 2020 mortgage interest relief will be removed altogether, replaced by a 20% tax credit on the interest amount.
• Wear and tear allowance will switch from an option to take a flat rate of 10% on annual rental income, to only the landlords’ actual expenditure when replacing household items.
• Portfolio landlords lending restrictions were introduced in September, so buy-to-let landlords with 4 or more mortgaged properties now face much tougher lending restrictions on new borrowing.
• New regulations concerning disrepair and section 21 evictions mean that landlords need to be much more diligent in the way they produce a serve documents on their tenants if they are to avoid problems later.
• The government is pressing on with its plans to ban letting agents charging fees to tenants in England. This means landlords will end up paying the agent more to cover the costs for agent administration, documents and referencing.

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