Property Management Insight

Published 8 July 2020

The importance of hitting the ground running

Although the easing of Government restrictions from 13 May brought a sigh of relief for many businesses and the hope of a return to “normal” or the “new normal” whatever that is, the return brings with it pitfalls for property managers.

Inspections and Routine Maintenance

The Government has now advised that property managers and also tradesmen can attend properties (subject to social distancing). As a result, all of the non-essential work requested by tenants and any other planned, routine maintenance can take place. Property managers should, therefore, be reviewing every property they are responsible for to ensure that any required inspections that could not be carried out during the lockdown are addressed and the necessary steps taken as a priority.

For property managers this includes gas safety checks which, in accordance with The Gas Safety (Installation and Use) (Amendment) Regulations 2018, must be completed every twelve months. If a deadline has been missed as a result of not being able to get a Gas Engineer out to the property during lockdown, taking reasonable steps including keeping a record of what has or has not been done and informing the Landlord accordingly; which should be a reasonable defence to any claim for non-compliance.

However, now that restrictions have been lifted there will be no reasonable excuse for not ensuring compliance with the regulations, subject of course to the availability of engineers and gaining access. Therefore, our advice is to review all properties you manage, take the necessary steps without further delay and having good communications with landlords and tenants alike to manage expectations.

In reality, many staff remain on furlough and therefore, not all companies will have the resources to action all routine inspections and maintenance as a matter of urgency and this process may take a bit longer which could open property managers up to an increased risk of claims for failing to comply with regulations and/or protecting the property owner’s position. However, taking reasonable steps to ensure compliance, maintaining a record of those steps and informing the property owner should improve your chances of successfully defending any such claim.

Re-Possession Proceedings

In response to Covid-19, the Government put in place a package of measures encapsulated in the Coronavirus Act 2020 to protect tenants’ security. While lockdown is easing, the measures will remain in place until 30 September 2020, which means that no tenant in either social or private housing will be forced out of their home.

From 26 March 2020, landlords have to give all tenants 3 months’ notice if they intend to repossess a property by serving a written notice. Whilst offering greater comfort to the tenant, this will of course further delay the repossession process and increase any loss sustained by a landlord as a result of a non-compliant tenant. The Government protection applies to most tenants in the private and social rented sectors in England and Wales, and all grounds of evictions. This includes tenancies covered by the Rent Act 1977 and the 1985, 1996 and 1988 Housing Acts. A landlord can only start repossession proceedings after the expiry of the 3 month period. In addition, all possession proceedings including housing, land and buildings possession proceedings in the rented, leasehold, home ownership and agricultural tenancy sectors already on the system or about to go on the system on 27 March 2020 were also suspended for 90 days by the Courts.

Despite the restrictions on re-possession, tenants should of course have been continuing to pay rent and abide by all other terms of their tenancy agreement to the best of their ability as rent levels agreed in tenancy agreements remain legally due despite the pandemic. However, financial constraints including furlough will undoubtedly mean that many tenants don’t have the funds to maintain their rent.

Tenants and landlords have been encouraged by the Government to have open and frank discussions at the earliest opportunity and for landlords to be flexible should tenants become unable to pay rent. However, as night follows day, there will be an increase in claims relating to rental default, particularly in circumstances where tenants and landlords cannot agree any variation to rent payment terms and landlords are unable to take any steps to re-possess for 3 months or more.

Landlords may chance their arms against their property managers claiming losses are due to failings on their part where they are responsible for vetting the tenant and their ability to pay rent. However, provided property managers are able to evidence that reasonable steps to vet were taken, whilst still fact-specific they should have a good chance of staving off the claims in light of the unprecedented circumstances. The key, of course, is good communications and record retention.

All that said, once the eviction ‘stay’ lifts there could be a ‘whacky races’ style stampede to take prompt action where tenant default has not been remedied or an agreed plan put in place to recover the position over time. With potential resourcing issues, this potential overload heightens the risk of mistakes being made, particularly around timings, notices and procedural dates. It is therefore crucial that agents are alive to these issues now and use the lull wisely to put proper plans in place both internally and with their clients to minimise the risks that lie ahead.

For further insight on this topic we attach links to a couple of our recent commentary pieces:

Covid-19: Implications for the Residential Housing Sector 14 May

Covid-19 – Extended protection for business tenants 22 June

Is there light at the end of that dark tunnel?

It is good to see the Court of Appeal taking a common sense approach in a recent appeal by a landlord who had served a Section 8 notice on his tenant advising that possession proceedings would not begin until 26 November 2017 when he meant 26 November 2018. In Pease v Carter & Anor [2020], the Court of Appeal found that the notice was valid and a reasonable recipient would have concluded there had been a typo and the ‘7’ should have been an ‘8’. The Court also looked to the covering letter to help dispel any doubt. This may help head off claims against those property managers with the right intention but who lack attention to detail when preparing notices on behalf of their landlord clients.

Renters Reform Bill – Watch this space

The Government’s “revolutionary” Renters’ Reform Bill includes a set of reforms for the private rental sector, which were outlined in the briefing notes to the Queen’s Speech, delivered on 19 December 2019. That may seem a lifetime ago, but the proposed reforms, which the Government says “will restore fairness, honesty and transparency to the heart of the housing market”, no longer appear to sit as comfortably with some of the emergency provisions implemented on the back of the Covid-19 pandemic.

The reforms include:

• Ending “no fault’ evictions by removing Section 21 of the Housing Act 1988, and reforming the grounds for possession;
• Giving landlords more rights to regain possession of their property, as well as improving the court process for landlords to make it quicker and easier for them to get their property back;
• Introducing a new “lifetime deposit”, that moves with tenants from property to property, so that “tenants don’t need to save for a new deposit every time they move house”; and
• Widening the scope for entries on the rogue landlord and agent database, and providing tenants with access to this information.
• Provided common sense ultimately prevails, which would appear to have been one of the drivers behind the reforms, the main benefits of the Bill will be:
• Improved security for tenants in the rental sector by providing them with greater protection and empowering them to hold their landlords to account;
• Strengthening the rights of landlords who need to gain possession of their property when they have a valid reason to do so;
• Improving affordability for tenants when moving from one tenancy to the next; and
• Improving standards in rented accommodation, by driving out rogue agents and landlords and helping to professionalise the sector.

Anything that improves this sector by helping to stamp out rogue landlords/agents or levels their playing field with recurrent poorly performing tenants must be a good thing. However, it will remain to be seen whether, on the back of the more recent Covid-19 reforms, it actually becomes more difficult for genuine and sincere landlords to repossess their properties and it is in fact a tool of frustration that further arms poorly-performing tenants. Could it lead to more amateur landlords exiting the market or even an increase in vetting related claims against property managers? Watch this space – in any event, the legislation will only apply in England and it’s not yet clear when the changes are expected to come into effect.

Conclusion

The property management sector is going to experience a lot of change over the next 12-18 months. Unfortunately, the impact from Covid-19 will be felt for some time and for property managers, unscrupulous landlords may see them as a soft touch if faced with large rental losses on the back of the pandemic. If there is a spike in such claims, good old-fashioned risk management should prevail and proactive property managers, who have taken and importantly can evidence that they have taken the necessary steps to comply with the changing legislation should win out.

The key will be in proactive management, planning strategies and resourcing levels of implementation and good communications with all stakeholders.