Generation Rent warns that Ministry of Justice statistics indicate ‘no-fault’ Section 21 evictions will continue, despite ministers’ promise to prioritise only “the most egregious cases.”
The organisation believes that the Government is failing to protect tenants affected by the pandemic from eviction. It now calls for a suspension of Section 21 evictions to help prevent renters from becoming homeless during the pandemic. It also calls for the Government to set up a COVID Rent Debt Fund to clear arrears of people whose incomes have been hit since March 2020.
In a written ministerial statement on 10th September 2020, Robert Jenrick set out measures for courts to reopen for eviction cases later that month. He said: “Where cases do end up in court, these measures ensure court time is prioritised effectively, that the most egregious cases are dealt with as a priority and that court users – both tenants and landlords – have the additional support they may need.”
Alicia Kennedy, Director of Generation Rent, comments: “Renters facing a no-fault eviction could have got behind on rent or their landlord could be selling up to take advantage of the stamp duty holiday. These cases are the opposite of egregious – renters have done nothing wrong but the court is still telling them to move out. Even paying back arrears makes no difference.
“Being forced to move without a chance to appeal is barbaric in normal times, but with the eviction ban lifting on the 21st it means many of these renters will be made homeless while everyone else continues to be told to stay at home.
“We need a COVID Rent Debt Fund to clear the debts of renters whose incomes have been hit by the lockdown, but the government must also suspend Section 21 evictions so blameless renters don’t lose their homes while we’re still fighting the virus.”
The Government announced yesterday that the ban on evictions has been extended until the 31st March 2021.
Ben Beadle, Chief Executive of the National Residential Landlords Association (NRLA), comments: “(Yesterday’s) announcement does nothing to help over 800,000 private renters who have built rent arrears since lockdown measures started last year. It means debts will continue to mount to the point where they have no hope of paying them off. It will lead eventually to them having to leave their home and face serious damage to their credit scores.
“The Government needs to get a grip and do something about the debt crisis renters and landlords are now facing. A package of hardship loans and grants is needed as a matter of urgency. To expect landlords and tenants simply to muddle through without further support is a strategy that has passed its sell-by date.”
Alicia Kennedy, Director of Generation Rent, has commented: “It is right that the eviction ban is being renewed while the country remains in lockdown. It would be dangerous to allow people to be made homeless when everyone else is being told to stay at home.
“But courts are still approving eviction claims where the landlord doesn’t need a reason, despite the Government’s promise to prioritise only ‘the most egregious cases’. That means a cliff edge for renters who are facing eviction because their landlord is selling up or whose reduced income doesn’t cover the rent.
“We need a COVID Rent Debt Fund to clear the debts of renters whose incomes have been hit by the lockdown, but the Government must also suspend ‘no-fault’ Section 21 evictions so blameless renters don’t lose their homes as a result of the pandemic.”
UK rental guarantor service Housing Hand states that the Government’s eviction ban is creating an increasingly difficult situation for many landlords.
The legislation has been designed to protect tenants who have suffered financial loss as a result of the COVID pandemic. However, the guarantor service says some landlords are facing not just losing their investment properties but their homes as well.
Jeremy Robinson, Group Managing Director of Housing Hand, says: “The intentions of the eviction ban to protect individual tenants are excellent, but the situation unfortunately doesn’t take all those involved in the rental transaction into account. The financial impact of tenants who can’t afford to pay on landlords is devastating.”
The guarantor service highlights research by LSE London and Trust for London states the number of private tenants in rent arrears in England could become three times higher this year.
Housing Hand points out that letting agents are also suffering. They receive a percentage of a property’s rent as a management fee, which they are missing out on when rent payments are not being made. It says there is a limit to how long agents and landlords can continue to operate with a reduced income. Client Money Protect reported at the end of 2020 that lettings agencies were closing at a rate of ten per week. Housing Hand believes that around 4% of all letting agencies closed their doors for good during the year.
The eviction ban is currently due to run until 21st February but could be extended in line with continuing lockdown restrictions. If this does happen, landlords and the letting agents could continue to struggle financially. For those with mortgage payments to cover, the situation is increasingly unsustainable.
Terry Mason concludes: “The Government must stop using private landlords to house tenants who are unable or unwilling to pay their rent. These are difficult times for all concerned and a new solution is needed – one that supports all those involved in the rental sector.”
According to the Annual Review 2020 from The Dispute Service (TDS), cleaning is the most common reason for tenancy deposit dispute claims.
The report from TDS looked at claims from TDS Insured, TDS Custodial, TDS Northern Ireland, and SafeDeposits Scotland. The main reasons for disputes also included damage, redecoration, rent arrears, and gardening.
Cleaning resulted in 42% of TDS Insured’s claims, 53% of TDS Custodial’s, 45% of TDS Northern Ireland’s, and 69% of SafeDeposit Scotland’s.
The data in this review also reveals that the proportion of disputes raised by tenants is increasing. In the 2018-19 review, it was at 67%, whereas in this review of 2019-20 it has increased to 74%.
Paul Oxley, Managing Director of lettings management software company Decorus for Sage, comments: “According to the TDS, many tenants claim that the cleanliness of the property at the start of the tenancy was not clear, or that the tenancy agreement did not make clear what was expected of them.
“So, it is vital that landlords have a proper inventory prepared and do a thorough check-in and check-out, so they have the right proof of condition at the start and end of a new tenancy agreement.
“When landlords take the time to spell out tenants’ responsibilities in terms of cleaning and caring for the property, tenants are more likely to conduct their tenancy in a way that is respectful to the property and this minimises any potential damage.
“At the check-out stage, the tenant should be made aware of the areas requiring cleaning and the potential cost involved. It is important to remember that the tenant is only obliged to return the property in the same state of cleanliness as at the start of the tenancy, after allowing for fair wear and tear.
“Landlords should conduct thorough check-in and check-outs at the start and end of the tenancy, supported by a professional inventory. Clear communication on the tenant’s responsibilities when they move into the property will improve the chances of a trouble-free check-out.”
Cleaning remains the most common cause of tenancy deposit disputes
Decorus for Sage provides the following tips to reduce the risk of a deposit dispute:
Landlords make the mistake of thinking that inventories can be heavily comprised of photography and video. Completely photographic or filmed inventories without a complete written accompanying report are almost useless.
If photography or film has been used for recording the inventory, make sure it is detailed and dated. Include photographs of the garden, inside of the oven, the interior of the shed or garage, and keys handed over to tenants – these are the main areas of problems that occur and are often down to misinterpretation at the end of a tenancy.
There is no need to photograph every single corner of the property, as this is simply a waste of time – stick to the important things. Films and photographs alone will be of little use in a dispute when an adjudicator is trying to find hard evidence of a particular area.
Carry out a thorough and full check-in and check-out of the property at which the tenant was present. Landlords and agents who don’t have this available when they go to court have little chance of winning the case.
Document correspondence with the tenant and keep receipts for the deductions on the deposit e.g. cleaning and repairs.
Paul Oxley continues: “The common mistakes in landlord inventories are essentially lack of detail. Landlords often write just a brief shopping list and often do not have the appropriate photographs and videos, along with accompanying written descriptions to show the condition of the property and its contents.
“If the landlord finds the tenant fails to agree to the deposit deductions, they need to ensure they have the evidence such as a thorough and fully detailed inventory, copies of which are given to the tenant at check-in and check-out. It is imperative that tenants sign their acceptance of the contents of the check-in within seven days of the move in, and this signed copy should be retained by either the landlord.
“When landlords are managing multiple properties, it’s easy for documentation to go astray. Software developed specifically for the property industry uses advanced storage methods to combat this common issue. Decorus for Sage, for example, backs up system information on Microsoft Azure. If inventory information is lost or accidentally deleted, it can be easily restored. The software also runs on cloud servers so logged information can be accessed from any device with an internet connection.”
The NRLA warns that the Office for Tax Simplification’s proposed measures to equalise Capital Gains Tax with Income Tax rates would freeze the rental housing market.
The National Residential Landlords Association (NRLA) is highlighting research that found 72% of private landlords said that the tax was a major disincentive to sell property on the open market. It believes that increasing it would freeze the market, making it far less responsive to changing needs from renters. This includes the shift in demand out of city centres to properties in suburbs, towns and villages, as noted by Rightmove.
The NRLA points out that almost half of landlords having entered the market to contribute to their pension, so increasing CGT would negatively impact their retirement planning.
Rather than developing more tax hikes for the rental market, the NRLA is calling on the Chancellor to use the tax more smartly in the forthcoming Budget, to be published on 3rd March. It recommends that to support the Government’s ambitions for homeownership there should be a CGT exemption or reduction where landlords sell properties to sitting tenants. This is a policy that has previously been supported by the now Housing, Communities and Local Government Minister, Eddie Hughes MP.
Ben Beadle, Chief Executive of the National Residential Landlords Association, said: “Increasing Capital Gains Tax would reduce churn in the rental market undermining the flexibility it has always been good at providing.
“A tax hike would be a kick in the teeth for all those who have invested in property to provide security for the future for themselves and their families.
“The Chancellor needs to end the war on the rental market and recognise the importance of a healthy and vibrant rented housing sector. Tax should be used more smartly, not as a blunt attack on the market.”
The latest House Price Index from Halifax shows a slight decrease in house prices during January 2021.
The highlights from Halifax’s report include:
House prices in January were 0.3% lower than in December
House prices were 1.6% higher in the quarter of November to January than in the previous quarter of August to October
House prices were 5.4% higher than in January 2020
Russell Galley, Managing Director, Halifax, comments within the report: “The average UK house price slipped by -0.3% in January, the biggest monthly fall since April last year. Whilst this pushed the typical property value down to its lowest level since October, at just under £252,000, prices are around £13,000 higher than a year ago.
“There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August. Industry figures for agreed sales remain well above pre-pandemic levels but new instructions to sell have decreased noticeably, and total stock held by estate agents has risen to its highest level since before the EU referendum in 2016.
“The Stamp Duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.
“How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.
“That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.”
Halifax House Price Index shows house prices beginning to drop in January
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, comments: “The lockdown is playing its part in keeping prices as high as they are because it has reduced supply, fuelling greater competition among buyers for what is available.
“The Budget is only around the corner now and, while it remains to be seen whether the Chancellor will extend the stamp duty tax break, he has a big deficit and many other levers to pull that could affect the market in much more significant ways.
“Politicians are used to hearing people cry foul when handouts end. Treasury minister Jesse Norman told a Parliamentary debate earlier this week that the stamp duty holiday has done its job. Therefore the focus could quite quickly shift to other issues, such as capital gains tax.
“The stamp duty holiday has now faded as a force behind agreed sale prices, though some buyers with smaller chains are still hoping to complete before the deadline.”
Lucy Pendleton, property expert at independent estate agents James Pendleton, comments: “This is as muted a response to the faded hopes of a stamp duty tax break that sellers could hope to see.
“We were being led to believe we’d have to put our heads in our hands in January and brace for impact because of the end of the stamp duty relief but the market’s mechanics pointed to a different result all along.
“Rents have fallen, putting negative pressure on prices and first-time buyers won’t pay stamp duty on purchases up to £300,000 once the scheme ends anyway, just as they did before. For almost everyone else, apart from those at the top of the chain, the lost relief can be clawed back by renegotiating if necessary.
“It is sellers, not buyers, who are a little quieter at the moment. A lot of people with children have decided against listing their property for sale while they’re homeschooling and their home looks like a bomb has hit it. There are still plenty of first-time buyers looking and we’re just five weeks away from when people’s gardens start to look better and we always see a rush of activity after spring has sprung,
“The fact the Chancellor hasn’t ruled an extension to the stamp duty holiday either in or out is helping to create another wait-and-see period for both vendors and buyers. However, properties are still getting a very high level of engagement online. This is always good news and will manifest itself when we have a bit more clarity after the Budget. People are still dreaming of moving to larger properties, and one home we listed recently at nearly £4m received 8,000 views in 14 days. Most of these buyers would not be able to stretch that far but it tells us that the appetite is still there and will be reflected in activity over the summer.
“The bellwether London market has peaked for now and the shift in behaviour of landlords last month is evidence of that. Many landlords decided they would cash in on record prices late last year but were asking too much for homes that weren’t in great condition. Since mid-January, a significant number of them have now given up trying to sell and, having got tenants out, are now trying to let them again. Their gamble hasn’t paid off and this is weighing on supply even further.”
Adnan Shah, founder of ethical real estate investment manager Buraq London, comments: “The modest falls in prices we’re seeing can be blamed on the impending end of the stamp duty holiday, and the chances of an extension are dwindling by the day.
“There have been two significant jumps in residential prices since the general election. First the Boris bounce, and then a post-COVID rally caused by pent-up demand and people rethinking their living situations.
“This isn’t a market that needs puffing up any more. The threat of valuations becoming detached from reality should concern buyers, landlords and investors alike.
“However, the vaccine rollout is proceeding better than expected, and if the engines of the economy are firing on all cylinders by the summer, the benefits could keep the housing market purring in the coming months.”
Nationwide’s January House Price Index also reports a slowdown in house price growth.
