Novyy sees Renters (Reform) Bill as a positive for Investors and Landlords
“The Renters (Reform) Bill is a long overdue legislation which will consolidate the business of landlording and encourage serious investors to relook at their long-haul strategy which those who wanted to make a quick buck in property are likely to now shy away. The bill if and when enacted will help institutionalise the Private Rental Sector.” says Ashish Saraff, founder and CEO of Novyy.
It is still early days and industry bodies like NRLA (where we are a member) are engaging with the government to ensure that the final bill is considerate towards landlords as well. The government is looking to review comments from the industry and there is a possibility that some of the covenants will be revised in the final version. It is not yet clear when the Bill will be enacted but whenever that is, it will apply to new tenancies from then and is likely to allow existing tenancies for some amount of cool-off or compliance period.
The government has also committed to introducing the Decent Homes Standard to the private rented sector. However, it is not in this bill and will come separately ‘at the earliest available opportunity’.
The proposed legislation will introduce substantial rules for landlords and necessary modifications to rental housing policies for tenants. He further noted that, some of these changes may discourage individual landlords to exit the buy-to-let business.
Here are the key highlights:
Protecting Tenants’ Rights is a primary goal of this legislation aiming to regulate the rental market. Provisions to prevent unlawful evictions, cap rent increases, strengthen tenure security, and mandate minimum habitability and upkeep requirements are all possible. For example, one of the key highlights of this Bill is to do away with ASTs and Fixed Term tenancies. The Bill proposes that only Periodic Assured Tenancies can be offered by Landlords.
Evictions for Just Cause: The purpose of just cause eviction regulations is to ensure that no tenant is forced out of their home without a good reason. Common grounds for eviction listed in such rules include rent nonpayment, contract infractions, and the landlord’s intention to move in.
The Bill promises to abolish Section 21 notices and instead move to Section 8 notices where the Landlords must give a reason why they are seeking repossession. Section 8 will continue to ensure that Landlords can get a possession back in cases of (a) the landlord is seeking to sell the property, (b) the landlord or a relative will move in at the property, (c) the landlord has been served a notice by the local authorities and (d) the tenant has been in rent arrears for at least 3 times in 3 years.
Private Rented Sector Ombudsman: The Government will introduce a PRS Ombudsman along with this Bill which is likely to help landlords by providing quicker and cheaper resolutions to matters which otherwise courts would have to hear.
PRS Portal: The Government will introduce a property portal which it will make mandatory for all landlords thus helping them comply with their legal obligations as well as demonstrate compliance. The portal will also help tenants in making informed decisions as well as local councils to act where enforcement is needed.
Pets: The Bill proposes that tenants will have the right to request a pet in the property which a majority of the landlords simply refuse at the time of advertising or application. The bill suggests that landlords cannot unreasonably refuse such requests but can ask for pet insurance to cover for any damages caused to the property as a result of accepting such a request.
Further, the Government also plans to bring in legislations (not as a part of this Bill) which will make it illegal for landlords and agents to have “blanket bans on tenants in receipt of benefits or with children”.
In summary, Ashish Saraff believes that these legislations will ultimately help consolidate the PRS market in favours of well structured, institutionalised landlords who can provide good services to the tenant just like in any other sector rather than having a high-handed approach in renting.
Over the last 20 years, the private rental sector has become extremely fragmented with thousands of landlords owning as little as 1 property to rent which was largely driven by cheap credit and a rather lenient renting legislation. Given the interest rate scenario which is here to stay for a few years at the least, and new legislative actions like this Bill, individual landlords desiring to own 1 or 2 properties for renting out, will be discouraged as it is unlikely to be financially viable for them in their own capacities.
It is also likely that portfolio landlords will further consolidate their holdings to be able to manage logistics around tenant management. Platforms like Novyy will be more useful for smaller investors looking for passive income via property investing where all of the hassles are on us, rather than the investors. Furthermore, while the Bill presents a lot of challenges for landlords, platforms like us have significant advantages in terms of economies of scale.
Novyy is an investment platform designed to facilitate private market investing for individuals and family offices globally who wish to invest in the British Buy-To-Let market. The platform offers access to curated real estate opportunities with a focus on Co-Living segment via SFRs (Single Family Residences) and HMOs (Houses in Multiple Occupation / Multi Family Residences) by aggregating individual demand through a SPV (Special Purpose Vehicle) / feeder fund structure that invests directly into the underlying target assets.
Every asset is levered with lender finance as well. We also offer secondary market investment, portfolio-level reporting, simplified annual tax reports and proprietary research, thereby enabling individual investors to access private market real estate transactions with lower barriers to entry.
Twitter is apparently being sued by The Crown Estate over alleged unpaid rent for their London headquarters
According to John Wallace Managing Director of Ridgemont Law, a specialist real estate and construction law firm, Twitter is being sued by The Crown Estate in the High Court over alleged unpaid rent for their London headquarters.
‘The Crown Estate, responsible for land and holdings belonging to the monarch in the UK, has a large portfolio which includes prestigious parts of the West End, where Twitter’s office is situated. The amount of rent owed hasn’t been disclosed, and whilst we await the latest developments, it’s a good time to assess the likely next steps, what powers the Crown Estate has, and, whether we’ll see similar cases across the commercial real estate sector during this uncertain economic environment.
Assuming The Crown Estate make an application for Summary Judgment, a Judge will decide, whether Twitter has a real prospect of defending The Crown Estate’s claim for rent arrears. The burden of proof is on The Crown Estate to establish the same. They must show there is no real prospect of Twitter defending the claim and there is no “other compelling reason” why the case should be disposed of at a trial. Both parties will file witness statements, exhibiting documentary evidence. There needs to be sufficient evidence for the Judge to decide if the Defendant has a real prospect of defending the claim at trial.
Interestingly, the Court does not apply the usual test of “balance of probabilities” (that is, more likely than not). The test is whether the claim, as pleaded, has a “realistic prospect of success”. To defeat the application, Twitter would need to establish it has a realistic, as opposed to “fanciful”, prospect of success. It will not have to show that it will “probably” succeed. “Fanciful” means that its defence were entirely without substantive and that it was clear, beyond question, that its pleaded defence was contradicted by the evidence upon which it was based. “Realistic” means more than merely “arguable”.
If the Judge decides there are no reasonable grounds for a defence, then the Court will Order Twitter to pay the rent arrears, interest and The Crown Estate’s legal costs. If the Judge is not so convinced, then the Judge will hand down directions leading to a full trial of the dispute.
If the application is not successful, the process will have further delayed the payment of the rent arrears, as the substantive proceedings are effectively suspended behind the application. The Crown Estate will also have to pay Twitter’s legal costs, subject to an assessment if not agreed between the parties. However, the Court may Order Twitter to make a payment into Court in respect of the rent arrears, which may, in itself, be a “win” for The Crown Estate.
It is expected that the parties will be negotiating on a without prejudice basis, as the litigation unfolds. This is because a) any litigation carries with it “litigation risk” (the chance you may lose) and the obvious cost implications in an adverse costs environment, b) there may be still be appetite for the preservation of the landlord and tenant relationship and c) it will give a tenant experiencing financial difficulties time to pay, which may be preferable for a landlord than an insolvent tenant and a vacant property.
Any settlement agreement ought to be extremely carefully drafted. It should distinguish between the obligation to pay the arrears under the agreement and the on-going obligation under the lease to pay rent as it falls due. It should contain termination provisions and a right to demand payment in full if either party disposes of its interest in the lease or if there is default by the tenant in meeting payment instalments, importantly, such default should trigger a right to forfeit under the lease.
Landlords must ensure that they undertake detailed due diligence on lessees and continue to update that due diligence during the term of the lease. They should take legal expert advice on the drafting and interpretation of leases, to ensure that they are sufficiently protected when a tenant does not pay or becomes insolvent.
This year promises to be a perfect storm for landlords with the tightening of EPC regulations, increases in interest rates and insolvent commercial tenants. In a receding economy, forfeiting commercial leases and forcing tenants into insolvency is not an attractive proposition. But where an agreement cannot be reached, landlords’ hands will be forced and more such claims should be anticipated in 2023′.
Proptech and Property News in association with Estate Agent Networking.
Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.