Renters Rights Bill – Landlords who want to sell

The Renters’ Rights Bill, which is scheduled to move into Report Stage, in The House of Lords, from 1st to 15th July, is just one parliamentary vote away from becoming law.

 

We have been focussing on some of the individual clauses of the draft Bill over the past weeks and months, and, in this week’s blog article, we look at a clause designed to stop landlords who put their homes on the market for sale, from relisting properties as rentals, for up to a year, in the event that their sale falls through.

This is important to note, because Agents can vary wildly when it comes to valuing a property and some listings remain on the market for long periods, due to unrealistic valuations.

With as many as a third of house sales falling through, it could leave thousands of potential rental properties locked out of the market, resulting in costly void periods for landlords, less stock in the private rental sector and the potential for higher rents.

 

 

We spoke to Ben Nicholls, Director of KPA Property Management who commented: “I can see where the Government is coming from and what they are trying to prevent, but it is counterproductive to have homes standing empty for months on end. More than a third of property sales fall through before completion (46% from the period 1st Jan 2024), mostly as a result of problems faced by the buyer and poor valuations aimed at marketing and not realism. This is simply adding to the problem for landlords already stretched and leaving the sector and ultimately will be disastrous for tenants.”

Angie Nicholls, Director of KPA Property Management had this to say ”Given the scale of the housing crisis, it is ridiculous that homes will be left empty for many months, even when landlords are not to blame when a house sale fails to progress. This will mean empty properties, higher rents and I fail to see who this benefits, in an already pressurised situation, where supply is needed.”

New rules will mean that landlords must provide at least four months’ notice to a tenant should they need or wish to sell their property.

 

 

In addition, there will also be an initial 12 months ‘protected interval’ at the start of any tenancy where a landlord is prevented from evicting a tenant for the purpose of selling.

Further, should a landlord choose to sell, they will be restricted from re-letting that property for a period of 12 months after evicting the tenant, should the property not sell.

Landlords have repeatedly warned that the more stringent rules will push them out of the market, eat into margins and make letting out properties unprofitable. This will deplete stock and drive up rents, making the situation worse for tenants, the very people who this Bill is designed to assist.

In March, the number of UK properties available for rent hit an all-time low at 23% lower than during the pandemic, when the market dried up.

Tax credits on mortgage interest for landlords were gradually slashed between 2017 and 2020, down from 40% for higher-rate taxpayers to a flat rate of 20%.

Interest rates leapt, with buy-to-let mortgages at the sharper end of the increases – squeezing landlord profits even as rents rose.

In Rachel Reeves’s maiden Budget, an extra 5% stamp duty surcharge was introduced on additional property purchases.

Housing charities said that the delay of a year was necessary in order to stop the backdoor return of “no-fault” evictions.

 

 

Ben Twomey, chief executive of Generation Rent, said: “It’s right the Government will outlaw arbitrary Section 21 evictions through the Renters’ Rights Bill. This change can’t come soon enough. If landlords are concerned about a property sitting vacant, they are free to sell with sitting tenants.”

A Ministry of Housing, Communities and Local Government spokesman said: “Our landmark Renters’ Rights Bill will bring long overdue fairness to the market by making sure it is unprofitable for landlords to evict a tenant and deprive them of their home, just so they can rent to new tenants at a higher price.”

The divide between landlords and tenants has never felt wider and, as agents, we witness it firsthand – especially when we takeover properties and tenancies from other agencies. The reality is that both landlords and tenants are vital to each other in the lettings relationship. However, the involvement of third parties, with their own agendas has fuelled unnecessary and harmful tension between the two. We are not aware of any other sector where such polarisation exists.

It is undeniable that housing is a basic need and that a property represents so much more than just bricks and mortar to the tenants that call it home but, in our experience, good tenants are rarely evicted. Landlords are ultimately running businesses, with financial obligations like, mortgages, bills and maintenance costs. Unlike other essential sectors, they are being subjected to demands and pressures that are not seen elsewhere.

Currently the proposed legislation is still in draft form and it will be interesting to see what elements make it into the final Bill. What is already clear is that landlords will need to continue professionalising their operations and processes and, when selling, base their expectations on realistic, data driven valuations.

As we have done from the very beginning of this legislative journey – including the current draft Bill’s predecessor, the Renters’ Reform Bill, we are monitoring developments closely. Stay tuned for regular updates and don’t hesitate to reach out if we can support you in any way.

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