Impact of the Levelling Up White Paper on the private rented market

Priya Sejpal, property litigation expert and senior associate at law firm BLM

On 2nd February 2022 the government unveiled its long-anticipated Levelling Up White Paper, an extensive document that sets out how it will complete a ‘system change’ of how the government works, in an effort to level up ‘forgotten’ communities across the UK.

Priay Sejpal

Led by Michael Gove, there are several proposed changes within the document aimed directly towards the private rental sector, with an intention to improve overall quality of housing in the UK by 2030 and reduce the strain on tenant-landlord relationships. More specifically, it sets out to address poor housing standards, more easily identify rogue landlords and, most controversially, remove Section 21 notices.

Decent Home Standard

Announced as part of its pledge to improve overall housing quality, the paper sets out that landlords in the private rental sector will have to adhere to the Decent House Standard as a minimum requirement. If delivered, this would mean increased regulation on landlords once their property is let. Residents would be given access to more performance information and therefore can hold landlords accountable for issues more easily.

That said, the mechanics around this still need to be established and we are yet to be provided with a clear definition of what constitutes a ‘decent home’. It is also unclear what the repercussions – namely bans or fines – will be for landlords, if they fail to adhere to new standards. In order for these new measures to work as the government intends, tenants will need to feel empowered to hold landlords to account.

Whilst these standards – and the scheme generally – requires finessing, they do fit in well with the New Homes Quality Code that was launched in December 2021, which aims to help buyers with any issues or snags they have with their new build properties after sale.

National Register for Landlords

In keeping with its promise to crackdown on ‘rogue landlords’, the government also announced it is exploring a new national register for landlords.

Made available to renters before they sign a tenancy agreement, this would allow tenants to check whether certain standards are being met by their prospective landlord. This would include a record of fines and bans struck against the landlord and make letting properties more challenging for repeat offenders. In the long term, the government hopes this would drive out landlords that consistently subject tenants to poor conditions.

It would be a radical step and there is something to be said on the irony of having such a public record for landlords operating in the private rental 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 as yet.

It seems to be the case that the effectiveness of having a national register will only be as good as the data provided. There is also the same question of repercussions and whether they are civil or criminal in nature, or both, and if they will be a good enough deterrent. Additionally, legislation – namely the Homes (Fitness for Human Habitation) Act 2018 – already exists to require landlords to meet certain standards, and tenants have significant powers in place to hold their landlords accountable. It begs the question as to what a national register would really achieve.

Removal of Section 21

Removal of Section 21 notices is the most contentious proposal. Currently, these are used to automatically begin the eviction process and are an effective legal instrument for landlords to repossess their property. Its removal would shake things up in the private rental sector and has many potential knock-on effects.

As a start, landlords would instead need to rely far more on Section 8 eviction notices. These trigger a more complex process and means that there will be scope for more litigation and costs, as not all grounds are mandatory. Tenants can more easily defend proceedings and will have an advantage in drawing out the litigation.

Equally, the landlord’s ability to sell their property or move into it using a Section 8 notice would be put in question. It’s been reported that these grounds cannot be used within the first two years of the tenancy and may come with a long notice period. It begs the question, how will landlords be able to show their intention to sell a property? Will they need to be at a certain point in the conveyancing process to be able to rely on this notice? It would make demonstrating a clear intention to sell or move tricky and highly subjective and this could also have the inadvertent effect of more properties being sold with tenants in situ and purchase prices plummeting.

Having said that, the court system 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. We may see accelerated possession proceedings that do not require a hearing woven into Section 8 later down the line, along with other amendments, such as repercussions for failing to comply. Over the years, the Section 21 notice process has generated a lot of legislation, with much of it centred around protecting deposits, providing tenants with certain information at the outset and more. The repercussions for not complying with some of these formalities means that in some cases, landlords cannot utilise the Section 21 procedure; will this be amalgamated into the section 8 procedure?

Given the routine criticism given to county court bailiffs for being slow once a possession order has been obtained, landlords that are applying for an enforcement would be well-advised to transfer their enforcement to the High Court for speed, for the time being.

Tenancy agreements will be another consideration for landlords. Typically, these include a clause expressly stating that a tenancy can be terminated using a Section 21 notice. Landlords may argue that any new legislation to be bought in cannot be applied retrospectively as it would breach Article 1 of the First Protocol to the European Convention on Human Rights – the right to peaceful enjoyment of one’s property. However, retrospective legislation has been introduced before by Parliament, so it is not guaranteed that these new rules will not impact existing tenancy agreements.

Ultimately, we may now see a wave of landlords serving Section 21 notices to avoid any issues with the Section 8 process later down the line. Or a wave of landlords trying 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.

Another human rights issue may also present itself in tenant selection. Landlords may feel pressured to become more selective over who they let their properties to. This “cherry pick” approach could well be viewed as discriminatory if landlords choose to let to more affluent tenants, due to a perceived lack of protection through the abolition of Section 21 notices.

The breadth of ambition set out towards the rental sector in the Levelling Up White Paper cannot be denied. The new proposals set out constructive ways for keeping better track of rogue landlords, however it will be difficult to enforce a new Decent Homes Standard and a national register without a rigorous legal framework in place.

The abolition of the Section 21 notice is undeniably the headline and would present the biggest challenges for the government going forward, as it will need to offer alternative repossession instruments for landlords without removing any rights from tenants.

Understandably, there remains plenty of speculation around how this will impact the property investment market. The rules are far-reaching and applicable to all types of landlords, from major property investors to first-time buy-to-let landlords, and all landlords should seek to educate themselves on what is a very active and evolving area of law.

Comments 3

  1. Quite a good article. …”This “cherry pick” approach could well be viewed as discriminatory if landlords choose to let to more affluent tenants, due to a perceived lack of protection through the abolition of Section 21 notices…..” This is not discrimination it is risk assessment and due diligence to protect your investment. Or is the anti landlord bashing government and Shelter who are discriminating against poor individuals who choose to invest in property? I guess it depends where you stand. I would suggest the latter. One thing for certain is the penny will drop at some point, probably when the irreparable harm is done as the landlord bashers will not be satisfied until the landlords are driven away. This happened previously due to the Rent Act in 1977 and took a generation to bring back a rented market. Society was the loser then as it stiffled movement of labour, limited peoples life chances, particularly those away from London. You could not readily rent until the late 1980’s early 1990’s when the new Housing Act allowed renting again in a sensible open market fashion. And in those days you had council housing which has largely been asset stripped and sold off or buy your home – no real rented option.

  2. Quite often landlords use section 21 notices rather than section 8 notices in cases of rent arrears, antisocial behaviour or property damage as there is no onus to supply proof and hopefully no need to go to Court. Landlords tend to swallow any rent arrears, not because they are rich and can afford it (as per the view of Shelter, Generation Rent and the Government) but because mostly they are just thankful to get their property back and know realistically rent arrears are very unlikely ever to be recovered.
    In the absence of Section 21 a mechanism must be put in place that allows Landlords to evict tenants (or kick them out as the Government puts it) before a property is offered for sale so its price can be maximised (especially if it needs redecorating after a tenancy). Most people who buy houses want to live in them themselves. Waiting for tenants to go will add another level of uncertainty to the already fraught house buying process. Mortgage lenders would surely insist on vacant possession before completion on ex-rental property to reduce their risk. The Mechanism must also work in the case of a Landlord wanting to move themselves or a relative into the property. Grounds for eviction surely will not be as easy as listing the house with an estate agent or writing a letter to the tenant stating your intention to move a relative in. I expect some form of tenant compensation will be involved as per Generation Rents thinking.
    Landlords will have to factor these potential costs into the rent along with the costs of licensing schemes and EPC improvements or just get out while they can. None of these courses of action will be good news for tenants especially those at the lower end of the market who will struggle with increasing levels of rent unless housing benefit increases. Concerning benefits, I notice my landlord insurance renewal still makes the assumption that my tenants are “professionals” but now adds “not in receipt of benefits”. This seems discriminatory but perhaps experience has shown insurance companies that tenants in receipt of benefits are more risky in terms of property damage?

  3. I guess your insurer might be prepared to cover tenants on benefits but at a much higher premium and guess where that will have to come from!! You’ve got it much higher rents. Us landlords live in the real world spending our own money and having to assess the risks whilst those in government, generation rant and shelter all spend other peoples money and have no responsibility for the consequences or their politically biased utopian decisions.

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