Q&A: David Cox answers questions on legislation and the impact of coronavirus on the lettings industry
ARLA Propertymark CEO David Cox answers your questions on managing house moves, non-payment of rent, and the eviction process during lockdown; furlough; upcoming legislation changes including electrical safety standards, the abolition of Section 21 and Regulation of Property Agents, and more.
ARLA Propertymark CEO David Cox answered agents’ questions on everything from the impact of the lockdown on letting agents and legislation to the Regulation of Property Agents in a Goodlord webinar (watch the full recording here). Cox’s overriding advice for letting agents during the lockdown was that they should be “putting everything on pause”, rather than cancelling pending transactions. “The first Friday out of lockdown is probably going to be one of the biggest moving days in the lettings industry's history.”
Click on a question to jump to the answer:
- What moves are allowed to take place during lockdown?
- What about a non-essential worker, would they be allowed to move?
- If I have an essential move, how do I fulfil all the legal requirements, such as right to rent checks?
- Can check outs, conducted with health and safety in mind, go ahead?
- What do we do if we have tenants chasing their deposits after moving out because they're in financial difficulty, but we can't complete the check out?
- Are we allowed to go and take a video tour of a vacant property?
- What information may reasonably be requested of tenants to understand their circumstances and do a reasonable assessment of it?
- What should we do if a tenant is refusing to communicate with us or pay their rent during this time?
- What about a tenant who's already been in arrears?
- What happens when a landlord has already served notice but it will expire during the lockdown? If the lockdown is extended, does the notice need to be extended too?
- If employees use personal mobile devices or computers working from home, does that have any implications in terms of GDPR breaches?
- What exactly can staff do on furlough?
- Can staff be asked to do training while they’re on furlough?
- Are the planned new electrical regulations still due to start on 1 July?
- If you’ve got renewals signed and executed now but the tenancy doesn't start until after the first of July, will an Electrical Installation Condition Report still be required?
- What do I do if I have properties due for safety inspections, but the tenants are shielding or isolating and I’m not allowed to send anyone in?
- If you've served a Section 21 notice before the lockdown started, is it still valid?
- When do you think the abolition of Section 21 is going to happen?
- Is there an update on the Section 21 issue around if tenants refuse to renew but their landlords don't want to revert to a periodic contract?
- The Section 8 court process is very slow, with no guarantees of repayment of rent arrears. Is there any prospect of that being improved?
- What are the likely time frames in your opinion of bringing in the minimum qualifications recommended for the regulation of property agents (RoPA)? Do you think the pandemic is likely to have an impact on it?
- What do you think is going to be next? When we get through the Regulation of Property Agents and the abolition of Section 21, what’s next on the horizon?
- Do you have any advice for how agencies should prepare for the release of pent-up demand after lockdown?
What moves are allowed to take place during lockdown?
The government has made it very clear that estate agents and letting agents are not essential workers. A house move is not an essential move except in exceptional circumstances. Where people need to move, that is acceptable. Where people want to move, they've just got to put it on hold. That's where the "hit pause" message comes from.
There are times where people need to move. The government has outlined in the guidance quite a few specific examples and it is effectively, where there was a risk to life or limb. I would use that as your benchmark. If there was a risk to the life or limb of the inhabitant of that property, then they need to move. If they don't or if there isn't, they don't need to move right now. To give you a few examples - the roof caved in or the boiler has stopped working and you're not going to be able to get the boiler fixed. Effectively, if the property's unfit for human habitation. Another one is domestic violence - if there is a situation of domestic violence , then of course that is a need to move.
The final one is the essential workers. Essential workers are permitted to move for many reasons. One, is to be closer to work. The other is, particularly for NHS staff that are going into hospitals and exposing themselves to the virus every day, they may have family at home who need to shield. Therefore, key workers self-isolating from their family to protect them from the virus is also a perfectly acceptable reason to move.
What about a non-essential worker who, for example, got a new job in a different part of the country, would they be allowed to move?
That wouldn't be classed as an essential move. I would suggest putting it on hold for the time being. Plus, even if they were going to a new job across the country, they wouldn't necessarily be going into an office at the moment. Therefore, they would be home working in any event.
I think you've then got to look at the properties. If it involves somebody moving out that's not an essential worker, then again, that's when you should pause. If there are empty properties, and we are aware there are many empty properties around the country, it may be possible - whilst complying with the social distancing guidelines from the government - for somebody to rent an empty property.
If I do have an essential move, how do I fulfil all the legal requirements, such as right to rent checks?
Right to Rent checks have been relaxed during the lockdown. I would highlight very much, during the lockdown. Whilst we are in a period of lockdown, you can do them virtually. By seeing the person on a video whilst having a copy of their scanned documents. You still need all the documents, but they can be scanned and emailed to you rather than seeing them in person.
As long as you've got the scanned documents, you've then done a video call to see that the person that is on the video is the same person as in the document, you put a note on their file, you're good for the duration of the lockdown. The relaxation is very specific that it only applies during the lockdown. Once you come out of lockdown, you then have to go and do the physical check. If you don't do the physical check in a reasonable period of time, even if you've done it all right at this moment in time, you will still be liable to the penalty.
I would suggest keeping a log of all the ones that you've done virtually. Then when we come out of lockdown, get that log out and go and do the physical checks.
Some legal experts and advisors are saying that check outs, conducted with health and safety in mind, can go ahead. Do you agree?
No - check out is not an essential activity. Therefore, stay at home. On this one, the government's advice is clear.
Where I can see the possibility of doing a check out is where somebody has abandoned the property. They have moved out and you've now got an empty property that you want to try and re-let and you go and do the video to do virtual viewings. If you're going in to do the video viewing, I don't see why you couldn't do the check out at the same time. But making a special effort to go and do a check out is, I would say, very much a breach of government guidelines at the moment.
What do we do if we have tenants chasing their deposits after moving out because they're in financial difficulty, but we can't complete the check out?
The advice from the Tenancy Deposit Scheme seems to be - and I'm in complete agreement with it - if you as a tenant have moved out against government guidelines and has broken the law, because it is a breach of the Coronavirus Act to be doing that, you cannot then turn around to your landlord or your agent and say, "Well, I've broken the law. Therefore, I now want you to go and break the law and do my check out."
Are we allowed to go and take a video tour of a vacant property?
It's not technically essential, but if it's one person going to a property that's been empty for at least 72 hours and checking that the property is secure as well, I think that should be okay. I can't guarantee it. It is technically a breach of the Act because it's not essential. If you're going to put an essential worker in the property, maybe you could argue that it is essential. It’s one of those legal grey areas. I know how much pent up frustration there is in the market to move. You've got properties sitting empty, you want to get them at least so that they can be viewed virtually online. I could probably see an argument where that would be at least arguably acceptable even if not strictly in accordance with the government guidelines.
What information may reasonably be requested of tenants to understand their circumstances and do a reasonable assessment?
What we are hearing that the market is doing, and I think it seems quite sensible is redoing that affordability criteria - you will have gone through the vetting and the referencing, you'll have a lot of the information... Just redo it. You saw what their affordability was when they first moved in. You'll now see based on what they're now earning under COVID-19. at which point you can then make evidence-based decisions rather than saying, "Okay. Furlough scheme drops to 80%, therefore we're only going to charge 80%." Do a slightly more scientific calculation as you would have done when they first moved into the property.
What should we do if a tenant is refusing to communicate with us or pay their rent during this time?
There really is nothing you can do. The ban on evictions is a ban on evictions. No matter what was being said at the time that it's only technical. It's not. It was the legislative mechanism that the government used to ban evictions and it's worked.
There's a difference between the "can't pays" and the "won't pays." The "can't pays" certainly, something that we've been working on is our keep the rent flowing campaign. If there are people who are falling through the safety net, let us know. We have been taking those to the government.
You then have the "won't pays." The "won't pay," I think, do bear in mind, they're probably still paying their mobile phone contract, their broadband, their Skype. They just don't want to pay the rent. It's not that they can't pay, it's that they don't want to pay. What I would suggest is to remind them that you will pursue them through the courts, they will be building up a massive rent arrears debt. A county court judgment will make it more difficult for them to get credit cards, mobile phone contracts, any other sort of credit agreements, loans, car finance, and ultimately mortgage finance down the line.
We are very much in tune with government policy on this one and the government is very clear - the first line of their guidance to landlords and tenants is, "Pay the rent." It's not beneficial for a tenant to be building up loads of rent arrears.
What about a tenant who's already been in arrears?
If you've got a guarantor agreement, that is what they're there for, if the tenant falls into arrears. What to do with somebody that is already in arrears, I'm afraid I don't know. The only thing I could suggest is the Money Advice Service to get some sort of debt counselling for the tenant.
What happens when a landlord has already served notice but it will expire during the lockdown? If the lockdown is extended, does the notice need to be extended too?
What the Coronavirus Act says is that all notices are extended at this moment to three months, whether the original notice would have been for 14 days, two months, whatever. When the notice is expired, you begin the possession proceedings as normal through the courts. Now, a couple of points on this one. Number one is that the ministers could extend that three month notice. So, to answer the question... Possibly.
Simultaneously, all proceedings are suspended. From the 27th of March, there was a 90 day moratorium, which takes us to the 24th of June. I would suggest that when your notice expires, if you still do want to get the tenant out, you begin the court proceedings like you normally would for any other court process. You will lodge the case but what will happen is that it will immediately be suspended at that moment in time pending the Master of the Rolls withdrawing the practice direction that has suspended all court cases. What I would suggest is at the moment, "Do it as normal. It just means it's going to hit an absolute brick wall the moment you proceed at the court."
As I understand it, if you leave it, the standard four month notice period expires, so you only have four months from the expiry of the notice to bring the proceedings. Otherwise, you have to start the whole process again.
If employees use personal mobile devices or computers working from home, does that have any implications in terms of GDPR breaches?
If you're using cloud-based systems, it might look and feel like it's running on your computer, actually, you're using an internet site through your browser, then the data hasn't actually landed on your computer. The data's as secure as the cloud-based system is. You can use any machine, frankly, as long as it hasn't been hacked or compromised, as long as it isn't being viewed by cameras. Things like that that could be used to steal data.
What exactly can staff do on furlough?
The honest answer is, nothing apart from training. If they do any work, they're not on full furlough. They can do training. If you're doing your qualification at the moment in advance of RoPA, that's perfectly acceptable. Online courses, they’re still perfectly acceptable. You can do training, you can't do any actual work. Doing any work at all for the company will breach the furlough.
Can staff be asked to do training while they’re on furlough?
I think it would be perfectly acceptable to say with furloughing that you’re still being paid 80% of your wages, therefore, we expect you to do your training. I don't think there's anything wrong with expecting your staff to do their qualifications whilst they're on furlough.
Are the planned new electrical regulations still due to start on 1 July?
The government has made it very clear, legal responsibilities are legal responsibilities. You should continue doing them where you can. That includes the electrical safety regulations from 1 July. The electrical safety regulations say that, "From tenancy start date or tenancy renewal date, all new tenancies from the first of July need an Electrical Installation Condition Report." It's a little bit more detailed than that, but you do need to do it. The government guidance is clear. Whether it's electrical, gas, fire safety, testing smoke alarms on the first day of tenancy, MEES and EPCs, you still need to do those under lockdown.
If you’ve got renewals signed and executed now but the tenancy doesn't start until after the first of July, will an Electrical Installation Condition Report still be required?
Yes. It's about tenancy start dates. So, it doesn't matter when you've signed the tenancy, if the tenancy renewal date is the first of July, you need to comply with the EICR.
What do I do if I have properties due for safety inspections, but the tenants are shielding or isolating and I’m not allowed to send anyone in?
Where an agent or landlord has done everything that they can, they have an excuse against penalty. I saw some research from Generation Rent a couple of weeks ago that suggested over 60% of tenants are refusing entry to contractors, landlords, agents at the moment. I think it's also totally understandable. Would you want a stranger in your home at this moment in time? For most people, I would say the answer's probably going to be, "No," unless you've invited them in. Therefore, what the government has put in the guidance very clearly is, you need to do your legal obligations but if the tenant says, 'No,' then that is your excuse. Make sure you've got it documented as a file note on your system. When you come out the other end and we are in a post lockdown world, you've got a log of all the properties that need to be checked and get those done as a matter of priority.
What I would also say is, where you are sending people in, make sure that you are minimising virus transmission. Check with both parties that they're not experiencing symptoms. Then, when they get there, try and make sure that the tenants are in a different room from the contractor to minimise interaction and possible viral transmission and maintain the government's social distancing guidelines.
If you've served a Section 21 notice before the lockdown started, is it still valid?
It's still valid. It's just suspended under Practice Direction 27 from the Master of the Rolls. If it was served and expired, and court proceedings had already started when we hit lockdown under suspension on the 27th of March, it's just suspended. If you'd served it but it hadn't expired, it's still within the two months. So, you don't need to put that extra month on; but once it's expired, under the Deregulation Act, you only have four months to start proceedings. What I would suggest if you do still want to go forward with the eviction, begin the proceedings now. Even though once you've lodged the case at court, the court will just go, "We're suspending until at least the 24th of June." If you don't lodge the case, you're going to run out of time under the Deregulation Act and have to start the whole process again.
When do you think the abolition of Section 21 is going to happen?
At this moment in time, the government is really not thinking about anything other than coronavirus and the implications of coronavirus. The abolition of Section 21 and the Renters’ Reform Bill is a key piece of legislation that is a top priority for the government. However, the only priority for the government at the moment is tackling the coronavirus pandemic. The Regulation of Property Agents is pretty much put on hold at the moment. I'm sure it probably is still ticking along quietly in the background but it's not at the forefront of the minds of the senior civil servants that will be pushing things forward.
Is there an update on the Section 21 issue around if tenants refuse to renew but their landlords don't want to revert to a periodic contract?
In that situation, then you have to serve Section 21 at the moment, but you're not going to be able to get the tenant out. Therefore, you have a situation of having to pursue the tenants through the courts if they refuse to leave; but you're not actually going to be able to do that for several months. Once again, either the tenant will have to stay in the property and continue paying rent, or they'll start building up rent arrears and we go back to our earlier questions about how to tackle tenants that won't pay their rent.
The Section 8 court process is very slow, with no guarantees of repayment of rent arrears. Is there any prospect of that being improved?
One of the reasons that this is taking longer than the government probably wanted was because this is a cross departmental initiative. Housing law is governed by MHCLG, Ministry of Housing, Communities and Local Government, this is about changing court processes and court procedures. The government has been very clear that they are not planning on abolishing Section 21 until they have improved Section 8. That requires the Ministry of Justice to be heavily involved and Her Majesty's Courts & Tribunal Service. It is not something that MHCLG has the authority to just do on its own. It needs to work with other government departments.
What are the likely time frames in your opinion of bringing in the minimum qualifications recommended for the regulation of property agents (RoPA)? Do you think the pandemic is likely to have an impact on it?
I think the pandemic has had an impact for the time scales - we are probably about a year behind schedule at this point in time. We are still expecting that the recommendations will be taken forward pretty much as is. What I'm expecting is it will be a Level 3 for employees, it will probably be a Level 4 for employers. We've seen quite an uptake in people taking the qualifications to get ahead of RoPA. We know that it's going to have to be an Ofqual regulated qualification. There aren't that many Ofqual regulated qualifications in the market, but now is a great time to actually do the study.
What do you think is going to be next? When we get through the Regulation of Property Agents and the abolition of Section 21, what’s next on the horizon?
I think the impact of coronavirus on the way agents have been running their businesses under lockdown and some of the learnings that they are making is going to change the market quite significantly. On top of that, the government is sooner or later going to go back to its normal course of business - the regulation of property agents, abolition of Section 21.
Once we come out of those, I think they're going to be looking at regulation of landlords. The plan has always been to start with the property agents, then go on to the landlords. That deals with one side of the private rented sector, which is the management standards. The second side of that is the property standards. I do think we are going to go into a much tougher regime on property standards.
Do you have any advice for how agencies should prepare for the release of pent-up demand after lockdown?
Start planning for when it's going to be lifted. Look at your workloads at the moment. Are you expecting a lot of tenancies to move shortly after lockdown? If you are, you're going to need the staff to be able to do it. It's a logistical exercise more than anything. How are you going to manage the gas checks, the electrical checks, the testing of smoke alarms? How are you going to get all those done in a very short space of time? How are you going to get the inventories, the check ins, the checkouts, inventories and everything sorted? What about if you've got to do work and cleaning?
I would suggest that you take this time to plan a very detailed first seven days back. Once, as the business owner, you have planned what you've got to do you then know all the tasks that need to be done. Then you've got to work out the human resources required to undertake those tasks. Remember that when you furlough somebody, they've got to be furloughed for a minimum of three weeks.
This Q&A has been edited for length and clarity. Watch the whole Q&A with David Cox here.