Repossessing Shared Housing?

After our August meeting, many members are planning to shut down their HMOs and will need to regain possession of the property. This article outlines some of the implications and costs for all involved – imagine a blancmange hit by a cricket bat. Sadly, tenants form the blancmange...  And councillors and their staff are responsible for the mess.

Our August Meeting.. 

Members who attended our first ever August meeting will be all too aware of Additional Licensing, we have since spoken to many members now contemplating a change of usage from HMO to family let, or in some cases exiting the private rental sector all together.

Not only our first August meeting but our most attended ever, with 95 landlords in the room and a further 25 online, all to listen to Portsmouth City Councils plans for additional licensing for HMOs.

Council officers attended to explain the application process and reassure members but did not deny that the space requirements will be more onerous than any other authority in the country.

Sadly, the landlords present did not seem reassured. When we asked the question of attendees if any were likely to exit the HMO economy around 60 hands went up. It was a sobering sight.

One member spoke passionately about having helped some former homeless people into tenancies and who will now be required to give notice, because of the new space requirements. Those tenants, placed by PCCs housing options team to avoid homelessness, will be put in the same situation (and possibly worse) than they were before.

Several members have since asked for advice about using "section 21" possession procedures. It is worth considering how such a possession will run. 

Current State Of The Courts

By coincidence (or perhaps not) a possession claim came across my desk this week. Corresponding with the solicitor, someone who has long supported PDPLA members, I was informed that the section 21 claim that was the subject of our discussion was filed on 19 July. Having not heard from the Court for 4 weeks the solicitor telephoned the County Court Office at Portsmouth.

Our solicitor spoke with a Court Officer who advised that the Court has been inundated with claims for possession and that the claim in question was only processed on 11 August (having sat in an inbox for that period) and that the tenant would be considered served on 18 August, having until 01 September to respond.

At this point, and only at this point, the claimant PDPLA member can apply for a warrant of possession. If the claim is undefended, the warrant is likely to be issued only after at least 2-4 weeks in the backlog, possibly with another 2-6 weeks before possession is ordered. Early October is the most optimistic scenario with November being more likely (at best) if a bailiff warrant is required.

At the beginning of the year a section 21 claim, from service of notice to repossession was taking 5 months. On the current evidence it will be more like 6 or 7, and if, as we worry, claims escalate they will take longer.

It will not be lost on seasoned members or observers that court proceedings can only commence after a 2-month notice has been given if section 21 has been issued and relied upon. The delays are starting to make the fault route, section 8, look more attractive or at least less unattractive but many factors are at play and members will no doubt wish to take advice and keep their options open. 

The Cost Of Repossession 

For landlords there is an undeniable whiff of needless costs. Repossession costs, court fees and solicitors start at around £2,000 but rise to up to £5,000 if a claim is defended and goes all the way to bailiffs. If tenants give up the ghost and stop paying through indignation at losing their home- knowing that once section 21 is chosen they will be applicable for rehousing (because they are unlikely to be deemed intentionally homeless) the costs and lost income can be devastating. Multiply it by 3 or 4 in an HMO that has fallen into additional licensing and few landlords will survive the experience.

And all because somebody somewhere made an arbitrary decision on space standards oblivious of the fact that they are unachievable in many HMOs. Some were previously licensed but officers exercised more discretion than is now anticipated. 

Tenant Rents Rise

We will look at the reasons below, but first let's look at the impact on tenants. They are our customers after all. For landlords exiting the student market, the route out is easiest, pay a minimum licence (or apply late and seek a temporary exemption notice if all or some students might bail early). Then on to family let or sale, but remembering that once the decision is made there is unlikely to be any way back as you lose your C4 planning status.

So far, so relatively easy. Except that street accommodation with a private landlord is by far the best value for money and students from lower income families are potentially excluded by stealth. The potential indirectly discriminatory effect seems to have been missed on the impact assessment although we endeavoured to explain this impact in our response to the consultation – sadly, another missed opportunity.

More serious though are the smaller HMOs housing working age people, often in lower paid jobs or perhaps part time and part or all benefit dependent, including those on increasingly prevalent zero hours contracts. For them living in a smaller group home is often desired and, in some cases, tenants remain for a number of years or even decades.

Until the section 21 notice arrives that is. The landlord is selling up or no longer willing or able to run their home as a shared house. The tenants are to scatter like a blancmange hit with a cricket bat. Their next move, probably advised by their landlord, will be to seek advice perhaps from Housing Options (although we also strongly recommend that they contact their ward councillor) and Citizens Advice.

On current experience, it seems that Portsmouth City Council have reverted to the lamentable position of advising tenants to "wait for bailiffs" before being re-homed - This is certainly what tenants are saying they were told to do. Overworked officers may say they are simply making the tenant aware of tenant rights – but the outcome is the same, tenants believe their only option is to sit it out.

The Homelessness Reduction Act 2017 was supposed to restrain this sort of behaviour, although not all tenants qualify and in some cases the offer of help will amount to a deposit and a first month rent, where an obligation does exist.

But that only works if there is another room to go to, but the point of a virulently anti-share housing policy is to ensure that there is not. And that is clearly what is afoot, and it is tenants as well as, if not more than landlords, who will suffer.

In fairness to our friends in housing options, they cannot provide what is not available to them. We predicted last year that a tenant on a modest rent will find most of their options for moving on will face a price hike of up to 50%. The median rent in Portsmouth is now £572.00, up 16% on a year ago. Members we have spoken to have reported long term tenants on rents around £400 for a smaller room and these are the most likely to be impacted – hence the near 50% hike already (£400 rising to £572) and this is before the mass exodus from the sector really hits. 

The Bigger Impact For Tenants

But it is happening so let's look at how it will play out for our tenants. Those who can afford a greater rent (and can prove to a referencing agency that they have sufficient income) might see the writing on the wall and jump upon getting notice.

But what of those who are on variable income, unwilling or unable to secure more expensive accommodation (and remember there will be a shortage)? Worse, what of those who imbibe the "wait for bailiffs" snake oil, believing that they will in some way avoid repossession?

They will in so doing incur costs to the landlord. The court is likely to order costs, meaning that they will now have a country court judgement around their neck for those costs.

This will scare off most potential new/future landlords when they do their checks – making sure they will never get legitimate housing in the private sector.

Sadly section 21 cases going to bailiffs are not as uncommon as they used to be, but what happens next?

All too often their search for rehousing will be chaotic (and emergency accommodation or street homelessness expensive for the local authority whose actions put them in this position in the first place).

Our tenant will likely find that they will have to prove income, undergo credit check and be asked for a reference from a previous landlord. Landlords are under no legal or contractual obligation to provide a reference, but if we do provide one, we have a common law duty to the person seeking the reference (not the tenant) to provide an accurate one such that the prospective new landlord can rely upon it as an accurate reflection of the tenancy and its termination.

In short, if the landlord has incurred legal costs or lost income in ending the tenancy, we must say so in the reference. Snake oil always has a bitter after taste.

Given all the above, our advice to landlords is if you are put in the position where you must give notice to your tenants (because your property will not meet the space standards, for example), better to rip the plaster off and endure the pain sooner rather than later. Delay may not do the tenants any favours in the event of a shortage.

Why Councillor, Just Why? 

It is worth taking pause to wonder why this is happening (and if it will actually be as bad as we are predicting).

It is clear to even the most casual observer that there is a vociferous "anti-shared housing" contingent who regularly lobby councillors, concerned about parking, noise, household waste and a range of other issues. It is less clear that the issues relate solely to shared housing, but it is the prevailing rhetoric. In a democracy everyone should have a voice, neighbours but landlords and our tenants as well.

Councillors themselves have heard the calls and have joined the echo chamber. Their behaviour has all to often ranged from petty (space requirements) belligerent (refusing planning on spurious grounds) counterproductive (incurring legal costs for the City in so doing) to on at least one occasion resorting to downright abusive language in the chamber of the Guildhall itself. They are positioning along with the anti-shared housing voices.

Of course, they will defend their position by claiming that there is a housing shortage so the policy has no real impact, or that standards need to be improved in a minority of housing (also true, but they already have the tools to deal with those problems and have an appalling track record of so doing).

A shortage of shared housing might not happen, and if it does no doubt our politicians and others will be quick to blame wider issues. But there is no need to make things worse, which is what we fear.

Politicians, like other professionals should strive for high standards. It is not good enough to represent the voice they heard loudest and most recently. Leadership involves critical thinking about the unintended consequences of the policy they are pursuing and giving some consideration as to whom the policy may harm, if not landlords then shared housing tenants at the very least.

Political and council leaders will cling to the hope that the policy does not have the impact we fear, or that somehow shared housing can be cleared from the streets without making anybody homeless.

If there is an upturn, homelessness salvation may come in the form of a government initiative to help refugees, exemption from housing standards for select groups. Or simply because the application process is not yet ready (we have requested a delay) so one possibility would be to allow some form of exemption for people being rehoused as a result of the policy that purports to improve their lot. But why try to reconstruct the blancmange when there was no need to hit it in the first place?

Failing that, they could try replacing the voices of the echo chamber with leadership.