Q&A: Renters' Reform Bill update with Sean Hooker

Sean Hooker, Head of Redress at the Property Redress Scheme, and Goodlord's Oli Sherlock, Director of Insurance, cover what we know so far about the Renters' Reform Bill - now back on the agenda post-Queen's Speech 2022 - and give their predictions on what we can expect in the coming months and years in this Q&A.

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Renters' Reform Bill Q&A: What's covered?

The situation as it stands

• Where are we with the Renters' Reform Bill?
• Do you expect a more holistic bill that offers benefits to both tenants and landlords?
• What do you think will end up with at the end of this process?
• Will new tenancy agreements do away with periodic tenancies when Section 21 is gone?

Redress and a register

• Why is a new landlord Ombudsman being mooted when there are two perfectly capable redress schemes already?
• Can you just clarify what the suggestion is around the register process?
• If the new redress scheme is profitable, what happens with the profits as a result of these processes?

Industry sentiment

• What should letting agents be doing at this stage to give their landlords some comfort?
• What about a bad tenant register?
• What quick answer can we give landlords to ensure they don't feel this is a bad thing for them?
• How do you see this playing out over time for Shelter and similar organisations?
• Would you start using a checklist when viewing potential properties with potential landlords to safeguard the agent?

RoPA, Decent Homes Standard, and lifetime deposits

• Where are we with the Regulation of Property Agents (RoPA)? 
• What does the Decent Homes Standard mean?
• What if repairs needed to be made or changes had to be made in the property?
• Should we expect to hear any news about Lifetime deposits over the next few months?

The Bill's future and white paper timelines

• What work needs to be done if all these points are going to be covered by the spring white paper?
• When do we think this all gets delivered - do you think we're looking at 2024?
• Should we not take comfort from the Scotland changes a few years ago, which Westminster seems to be mirroring, and it all turned out to be fine in the end?

The Queen's speech brought the Renters' Reform Bill back into focus. What does it tell us? Where are we up to?

Sean: First of all, well done to the government for actually putting it into the Queen's speech, because there was talk that they were not going to include it as part of the announcement. The logic was that they'd already announced that they were committed to do it. Why did they need to reassert it?

I'm glad they did because we've learned a little bit, if you read between the lines. I particularly like the fact that they have said, as part of their preamble, they want to ensure a more effective legal framework and a stable rental market for landlords to invest in.

And that's maybe a slight change of tone from what people have been thinking the government has actually been saying, which is basically about tenant focus and tackling landlord rogues, et cetera, et cetera. This appears to be that they're looking for a longer-term solution that is going to encompass the whole of the sector and engage in it.

Do you expect now because of that slight tonal change to see a more holistic bill that actually offers benefits to both tenants and landlords?

Sean: Well, look, the political pressure to abolish Section 21 is ramping up. We're going to talk about that news a little bit later, but the reality is that you're going to have something that works. We know that there are 4.4 million households in the country that rely on the Private Rented Sector. We know the government - again due to other factors possibly - has woefully under delivered on their house building program. So we have a housing shortage. We have a standard of living crisis. We have energy issues, and price rises on that.

So the government is under an awful lot of pressure. It needs to deliver. It will be going to an election eventually, probably 2024. It has to have an agenda that's going to mean that they can keep that tenant vote, but they are not undermining the vital work that the private renter sector does in providing a housing solution in the country. So yes, let's hope it is a change of time.

What do you think will end up with at the end of this process?

Sean: Well, I think what it's going to deliver, it will get rid of Section 21 in name and in substance, I would say. The reality is that we know that the Section 21 processes have changed dramatically since they were introduced over 20 years ago. But, from the get go, they were always slightly flawed in the sense that it was a no-fault eviction, but people used it when they wanted to get a quicker result than pointing a finger.

And I think one of the things that's going to be a challenge is how do you change that to a new system of giving a reason - albeit that reason will include things like house moving or moving back into the property and education and student-type lets. How do you have that without it actually becoming cumbersome and a burden on the court system and on the time for both tenants and landlords?

So that's the first challenge. They definitely are looking at a register. They definitely are looking at a register. They don't want to call it a register. This is typical of politicians, they don't want to call things what they are. It's effectively going to be a register, but it's going to be based on the Decent Homes Standard.

These are the standards that have been in place since about 2006, I believe. They've applied it to the social sector, but they want to review it so that it applies more appropriately to the Private Rented Sector. So that's another big part of it.

And redress, alternative dispute resolution, whatever you want to call it, they want earlier intervention. They want things to be sorted out without going to the expense of court, or ultimately to enforcement, because those things cost an awful lot of money.

Alternative dispute resolution can effectively deliver a cost effective way of dealing with things that are much cheaper, much quicker than the court process or going through enforcement.

Will new tenancy agreements do away with periodic tenancies when Section 21 is gone?

Sean: I don't think this has gone entirely away. They are also committed to longer tenancies. They want to see a standard longer tenancy in place. And how then the rolling tenancy will pan out in that. There are attractions to both sides for a rolling tenancy. There are disadvantages for both sides of a rolling tenancy. So we will see.

Again, if you're getting rid of Section 21, [do they look at] what they're doing in Wales, look at the whole of the tenancy. They've done it in Wales, in Scotland. Do we go that far? Or do you just amend or tinker with what you've already got?

Why is a new landlord Ombudsman being mooted when there are two perfectly capable redress schemes already?

Sean: The reality is that the government has been influenced by a lot of work done by the academic ADR world in terms of research and other things. They believe that the consumer is confused if they have to make a choice over alternative dispute resolution. So this is what I call the one ring to rule them all kind of philosophy on ombudsman - there should be a single ombudsman that represents a single sector.

There's some compelling reasons why that is a good approach, but there are a lot of reasons why it's not. Why throw out the baby with the bath water? Why break something when it works? And that's why I think they've used the phrase "property portal". And I think they've used the word "gateway" in the language that they're using. They want a single entry point. They want a single focus. That doesn't necessarily mean what goes on behind the scenes means that there's going to be a single overarching or new body that's going to need to be set up.

Remember, the government doesn't like running things. It costs them money. So they tend to go out and they tender it. And we know that if you tender something out and you give it to a single supplier, there are drawbacks for that, inefficiencies and other things that are a single point of failure, I call it. So I'm working with them just to see if we can get the best of both worlds on that. I think it's important that we have and build on what we've got, but we do improve it. And the access to it is improved.

Can you just clarify what the suggestion is around the register process?

Sean: Well, it's evolved, because the government spent some money and got some consultants in, like they always do. Although I haven't actually seen what they concluded, when I've been speaking to the government, the emphasis has changed slightly from registering the individual or the person, namely the landlord, to looking at it being driven by the property and the property condition.

Now, there's a lot of advantages to that. Properties don't move. They stay where they are. They are what they are. So it doesn't matter if you change ownership or management of it, the property is still going to be there. And if you focus on a condition, and this is why they're pushing these decent home standards, the register will be on the property. And it will stay there regardless of whether the landlord is renting out or not.

The essence of what they're doing there, the wording they're using, is to allow the tenants to challenge a landlord over the condition of that property. So the register will be more than just a list.

If the new redress scheme is profitable, what happens with the profits as a result of these processes?

Sean: The reality is that whatever scheme I think will be run, it will be free. The Alternative Dispute Resolution (ADR) part of it will be free to use. Of course, nothing comes for nothing, and it's quite a skilled job to mediate or to arbitrate on these issues. We spend a lot of money on getting skilled and talented people that know what they're doing. We don't want this to be a tick box exercise. We don't want this to be a meaningless way of dealing with what are very important issues.

So yes, there is going to be a cost. Now, whether that cost comes through a registration fee or whether the industry pays for the individual complaints to be handled, all I can say is that we are looking at a very big sector. We are looking at two and a half million landlords out there, adding to the 30 or 40,000 agents that are already out in the market.

Spreading the costs over that sort of numbers, you can push the costs right down, because most people will not have complaints that will need to be referred up. They are relatively rare - around about 5% of our members actually have complaints on a... Well, not even on a regular basis. Two or three a year would be exceptional to come in front of my desk from any particular agent.

Again, it all depends on the size of the agent. If you spread those costs over, you can deliver a cost effective system. Now, if you think of that and compare what the cost of courts are, then we are talking a completely different league here. Of course, there will be a surplus. Schemes will need a surplus. You're going to run it for not-for-profit, but if you're going to run it effectively, if the surplus is there, it will be reinvested back into delivering better services.

Landlords are very concerned they won't be able to get tenants out. How do we convince new landlords to let their property and not sell? What should letting agents be doing at this stage to give their landlords some comfort?

Oli: I think on these points it's important to remember what the bill is representing at the moment. The bill is not saying "we're going to get more difficult to get your property back when you need to". That isn't what they're saying. Now, it might be how we feel it could go, but that isn't what they're saying.

I think the latest tonal change does support a more holistic view between landlords and tenants. But I understand this concern because landlords have been through a really tough time. And arguably, from a government's perspective during the pandemic, landlords were left to carry the can really, in a lot of respect. You've got to work with your tenants. You've got to do this. You've got to do that. And actually, they did. And the kind of sentiment towards landlords seems to not be improving.

And if you are a landlord sat there at a moment, with rising costs yourself - remember most landlords aren't billionaires driving around in Bentleys. They're single or two property owners looking to just make a return on their small investment. It's understandable that they feel pressure. Is it worth pointing out that actually the reform bill itself does note mention giving landlords more powers and quicker and more effective powers where there's a breach like arrears, for example?

Sean: Well, absolutely. I speak to Paul Shamplina on a regular basis. He points out that well, actually, it's always been framed as there's the landlord and the tenant, and the tenant is the victim and the landlord is the perpetrator. That's no way a reflection of the truth. Most landlords are small operators. They only own a couple of properties. Their margins are tight. They're doing it for reasons of pensions and a bit of extra income. So they're not the big corporations that you could sometimes imagine the government sees in the sector.

The reality is that a bad tenant can also affect good tenants. The number of properties are HMO, for example, and the number of stories that we see on a regular basis of one bad apple in an HMO upsetting their fellow housemates and causing absolute distress and inconvenience, those people should not be protected and kept in the property because it's the tenants that are actually suffering as well as the landlord. So it's a complex picture and we need to put that into perspective.

What about a bad tenant register?

Sean: So here's where you have to start to look cleverly. Actually, in effect, getting rid of a no-fault system and introducing a fault system could mean that, effectively, you look at getting some form of at least credit reference register against tenants.

The number of people that use Section 21 as a convenient way to get the property back when they're in arrears, they've looked at their tenant, the tenant hasn't got any money. So why go through the whole hassle or going to court and getting a money order and everything else there? Go to Section 21, get vacant possession, get the tenant out. And it's somebody else's problem.

Now, effectively now, you've got a fault-based system or a reason-based system. Let's call it a reason, not a fault. Then you will be putting down rent arrears. And there's two complications. If you do that, then you should then get a money order because that would at least put that tenant onto a bad footing on the credit referencing, and make it difficult for them to move on.
I know a lot of landlords are reluctant to give bad referencing to tenants.

Maybe they feel intimidated by the tenant. But if it's on a register or a credit register, then it's not easy for the tenant to escape that. And this is another big point as well, that I'm going to be very interested to see how they address it. At the moment, if you present yourself to a local authority after being served a Section 21 eviction notice, you are homeless and they have a legal right to try and house you. If you make yourself intentionally homeless, they have no legal obligation to do that.

So effectively, if you are evicted because you've been antisocial or you've not paid your rent, what obligations does the local authority have to house you?

Oli: What I'm hoping is the powers that are given to landlords as part of the Renters' Reform Bill, where they've noted that if in situations like arrears, for example, that you can get your property back quicker, I really hope they deliver that both in word, but also in process, because if they don't, I struggle to see how the court's going to keep up. We've not seen mass change in the courts for some time.

Sean: Well, that's where the joined up thinking needs to come in and the work that we've been doing for The Letting Industry Council with those papers. I'm really looking forward to seeing the whole of that. Because I worked on the redress part of it and the register and you've worked on other bits, and I know previews are going out there at the moment. So I've been looking forward to looking at that detail because it will probably be, knowing that the people on The Letting Industry Council, a holistic view. Whereas, this seems a little bit disjointed.

And the joined up thinking is that when it comes to things like arrears and possessions or arrears or any even repair issues - the earlier you intervene in these things, the better. So the redress schemes will be a vital link to this.

But it needs to start a lot earlier than the process is at the moment. So one of the things I really want to see is that there are a lot of directives to landlords in the early days to actually engage with their tenants and to engage with redress. Because if you get mediation or redress involved at that earlier stage, when the arrears are not so severe, when the problems are less protracted, then there is a higher, much higher prospect of getting a satisfactory result. So that needs to be hardwired into the process. I'm getting the feeling, that's the kind of thinking that they are looking at.

What quick answer can we give landlords to ensure they don't feel this is a bad thing for them?

Sean: Feelings are running high at the moment because of the uncertainty, and also, what's happened in the past because we know that the government listens to people like Shelter and Generation Rent. Why wouldn't they, when there are far more tenants out there than there are landlords? And politicians like votes. So there has been an agenda where the landlord has been seen, A) as the pariah, B) a cash cow, dare I say it. Certainly, when you look at the tax regime now, it is not as attractive from a tax point of view to go into property as it was.

What's compensated for that is we are looking at record high rents at the moment. We are looking at property prices increasing, demand far outstrips supply. So, at the moment, I would say a lot of landlords are enjoying good returns on their investments. I know costs are going up. And I know what the government is proposing on, say, things like energy efficiency, is going to put a lot of burden on landlords in the future, but it's still a very attractive industry to come into.

If you look at our annual report last year, we grew our membership of letting agents coming into the sector. Overall, if you look at the deposit schemes, some are different to the old school landlords. They're younger, have different ideas, different models to actually operate. So it's a constantly adapting and evolving industry.

Oli: I think the opportunity that these changes present, hopefully shines a light on the value that letting agents bring. Trying to turn this challenge into a positive thing centralises around education. We really need transparency in a lot of these moving points within the bill to be able to start to give some clarity and build businesses up from an education point of view.

How do you see this playing out over time for Shelter and similar organisations?

Sean: We all love our statistics in this business, and there are a lot of statistics. Whether they actually all make sense is another matter. And that's one of the things that is quite frustrating when you see the way that Shelter manipulates some of the statistics. Effectively, we know we're coming out of a pandemic. We know we had a moratorium and an eviction ban. We know that a lot of tenants that were not paying rent were allowed to stay in their properties.

The courts are now catching up. Of course, you're going to see increases in court activity in terms of evictions and possessions, but that will stabilise out. The reality is that most landlords kept their tenants in situ and protected them from the worst of the pandemic effects.

There was help and support from the government. Whether it was enough or not, I don't know. And we know that the current pressures of a cost of living and energy crisis are going to start to hit. However, I don't find it helpful that you have this "them and us" attitude. Most tenants want to rent and have a decent home and a place to call home. Most landlords want a nice, well-behaved tenant that pays their rent regularly. If you get that equation, with a good letting agent to manage it - the golden triangle as I call it - everybody is happy.

Yes, of course there is the vulnerable side of it. There are people that are living in poor quality accommodations. That needs to be dealt with. But most people have a good relationship.

Would you start using a checklist when viewing potential properties with potential landlords to safeguard the agent moving forward?

Oli: I see absolutely no reason why you wouldn't do that, and a good form of education as well. I think we've got to remember, this is the role that letting agents play. Most landlords will be oblivious to these changes. I wonder how many landlords are even aware of the Tenant Fee Act, which went ahead in June 2019. The role here is to educate and support, and it doesn't necessarily mean they like what they're going to hear, but indeed it does mean they're aware and they can make informed choices because this isn't something to be played out. And landlords are still going to fill the brunt of this if the legislation comes through in the manner it could, they're going to be as accountable as anybody else, if not more so.

I think certainly going around a property with a checklist, taking landlords through the potential changes and, to that point, your existing clientele - warming them up through these changes. When we get more detail coming down the tracks, messaging and communicating with your existing base of landlords [will be important] so this doesn't feel like a complete shock. Because we're hoping there are more powers involved in this that help landlords, but they're going to want to get educated on this.

Where are we with the Regulation of Property Agents (RoPA)? And what do you think is going to happen?

Sean: When I first saw the agenda that was coming out, in my mind I thought that, if you regulate the property agents, that's your starting point. Because then you know who they are. You have a set of criteria, a code that you would measure them by and you would expect them to have a certain level of qualifications or competence to actually do the job.

So I always thought that RoPA would be a priority rather than an afterthought. It appears to be now a bit of an afterthought. And there's a couple of reasons for that. One of them is not least the Grenfell and the leasehold side of it. The majority of property managers are in that sector, not in the Private Rented Sector. Property management is a skill, a hugely important skill for building maintenance and building safety.

Now that applies across both leasehold and the Private Rented Sector, but it's a lot more complex after the health and the fire safety stuff that we've actually had to deal with. And I think they're kind of parking that until they can get a solution on how to deal with the property management of buildings per se, which is why I think they're now looking at decent homes and other stuff rather than at the regulation of property agents.

Secondly, I think that they also want to buy themselves some time on this. So there's been two announcements I've heard. One was at the IRPM conference where Lord Greenhalgh, who is the Lord Spokesman, said that they are still considering RoPA and they will respond to RoPA. And also Eddie Hughes said it in a parliamentary question, but it's still on the agenda. They're not just setting a timeline on them.

Talk us through what the Decent Homes Standard means and what the effect at the moment is going to be for letting agents and landlords.

Sean: Effectively, what they want is some properties that comply with the legal minimum standards, which are kind of defined by the 29 hazards that are outlined in the housing health and safety rating system, which they have been reviewing and trying to simplify or trying to make a lot more user friendly.
It also is going to mean that a tenant has the right to the property to be kept in good repair. The tenant has the right for the property to be relatively modern, and with appropriate facilities. Funnily enough, that now will include things like wifi and other things there that are becoming more and more everyday life - not just the health and safety side of it. And of course, a commitment to a warm or temperature-controlled home.

So those are the sort of areas. So there's 29 hazards that an enforcement agency can currently enforce on. If you get [a score of] over a thousand, you're in big trouble. And orders can be done by local authorities to improvement orders and repair orders can be issued. But that's the framework.

In my mind, that's a good starting point, but we have a very diverse sector and it's going to be quite difficult in how you gauge a lot of these things there, especially for older properties and properties of non-standard build. So a lot of work has got to go into that so that you are enshrining those issues, but you are not prohibiting huge amounts of the property from actually going onto the market.

When Scotland looked at the EPC levels and they wanted to go straight to a C, they discovered that it would take out 60% of their private rented properties because of the construction of those buildings.

So that's where I see this going. To me, I think it needs to be tied in with the redress, because who's going to inspect all these properties? Who's going to enforce these? Tenants should have the right to raise these issues and have somebody arbitrate or mediate on them prior to it going to enforcement. Otherwise, you will just have the system clogged up.

 think in terms of inspections, the people who are best placed to do that in my view, inventory clerks. Why not make inventories mandatory? Why are inventories not mandatory? That's the question.

So if repairs needed to be made or changes had to be made in the property, who does that?

Sean: From the get go, when I started looking at this several years back, I was always going to say that the important thing was how this was going to meld in with the agency side, which - although RoPA's not here - is relatively controlled and regulated through things like the Property Redress Scheme and others. And it does have a high level of competence and expertise, especially when those agents have been through training.

So we know that agents are going to be key to this. We know that a lot of people go into the property world for investments. So they want to be hands off. They want to be absent landlords or accidental landlords. So of course, they rely on their agents.

And of course, the agent, if they are the upfront and the person that the tenant talks to, they're the ones that are going to be approached. Of course, if they're going to turn in and say, "Well, no. We don't have the power to do this because of X, Y, or Z", that's going to cause a big issue.

So I think it's going to be a big challenge, how you tie redress with the landlords and agents together, how you make sure the tenant is protected, especially on things like the right to repair and the decent home standard, where an agent could only be responsible for delivery of the service and not for the actual responsibilities.

Who pays for that? Will an agent have to go to their landlords and say, "Oh, well, under the Tenant's Fees Act, we can't charge the tenants anything at this stage. We have taken a deposit. We can't touch that until the end of the tenancy. But ongoing, we need to ensure that the standards are met, please, could you deposit X of thousands of pounds into our account so that we can get the repairs done for you without you worrying about it?"

It's going to be quite a lot of that thinking because an agent is certainly not going to take the rap for the landlord's responsibility, even if they are delegated to deal with their redress requirements.

Should we expect to hear any news about Lifetime deposits over the next few months, or do you think this is something that's being put on the curb because it's just too tricky to solve?

Sean: I think it's partly the latter. I think that it's a work in progress. I don't think they've 100% abandoned that and reform of the deposit process, but of course, they've now seen the reality. They've talked to the insurers, they've talked to the deposit schemes, they've talked to the people that actually know how this all works and it's not as simple as they think it is.

So what I envisage is that work will continue to go on with that. The tenants should still have access to a redress at the end of that process, which I think that landlord redress will be able to accommodate.

I think that certainly there will be innovations from various people that are partially a solution to this because we are looking at possibly loans. We are looking at possibly insurance on this. And these are not simple things to do. And whether you can get a universal process that protects everybody the same is the big challenge.

And if you would say, "Well, actually some of the schemes or ideas are applicable only to the people that don't need them in the first place, necessarily." How do you protect the more vulnerable tenant who may be struggling to find a temporary two deposit situation or needs a bit more help and support when they would be low down in an insurance or a loan scenario type product?

The white paper, you've said that we hope to see this by 21 June. Just talk through why you said June the 21st.

Sean: The civil service got a list of people, they rang around and they said, "Look, it's not going to come out in May," they said. Then I said, "Well, you did promise spring," and said, "Well, yeah, we've got until the 21st of June. That's when spring officially ends."

They've got a lot of work to do between now and 21 June, if all these points are going to be covered to a point that actually gives certainty, haven't they?

Sean: The reality is, a white paper itself is not a finished article. It's not an oven-ready bill. It is basically an outline of what they intend to include in this bill. And there will be a consultation process following that. Another consultation process, I know. But this means that when it goes into the formal adoption of the bill through parliament, there would be less contention. That's what they're hoping for. There could be more contention, of course.

But this is going to be a slowish kind of process now, even if it starts on the 21st of June. We are still not looking at legislation by the end of the year, I would say. Certain things may be able to be put into place. But have a look at what's been going on with the Fire Safety Bill. They haven't even got a final published version of that out yet. And they've got to rely on what's called statutory instruments. And the last time I heard, it was going to be over 125 statutory instruments just to implement what's in that bill.

This bill is not going to be as complex, but it will certainly need an awful lot of work. I expect a lot of delegated powers to be included. So I don't know if you remember the story on client money protection. After all the years of lobbying for that, we eventually got an amendment into law, which have empowered the Secretary of State to, at a further date, implement this, in terms of that where I think regulation will probably go and RoPA will go, and also the lifetime deposits, they will be put and suddenly ministers' empowered to look at it in a future date.

You have to remember that in 2009, when they brought out the Estate Agency Act, they put a provision in for regulation of estate agents, which has still not been looked at.

When do we think this all gets delivered - do you think we're looking at 2024?

Sean: I think the reality is that the government has to have been shown to deliver something before an election.

So that's why I think Section 21 will go, even if that is as simple as amending the current forms to include a reason. So that will, I definitely think, will be delivered before the election and possibly the register, and they will need to tender out the redress or set that up because that's not going to be a quick process.

All of these things, if they're going to go out into tender, have to go through their commercial department. And that is regulated by a whole host of regulations in terms of how the government can procure services. So there's no quick fix for that. So it's not a matter of just coming and saying, "Oh, fancy doing that next week and setting that up." So that's going to take some while.

A lot of it will probably have to go into the next manifesto, pledge for after the next election. But, definitely, I think they will be looking to deliver Section 21 before the election. That's my bet.

Should we not take comfort from the Scotland changes a few years ago, which Westminster seems to be mirroring, and it all turned out to be fine in the end?

Sean: Yes, and no. We should be optimistic because it's a good industry at the moment. And a lot of this will actually tidy up some of the anomalies that have been out there in the legislative framework and make it stronger for us.

The government at least has listened to the people that actually know what they're talking about in this case. They need to be commended for that. However, politics being politics, populism being populism - we have to keep their noses to the grindstone to deliver this in an effective way.

This Q&A has been edited for clarity.

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