The changing legal landscape for property owners – New demands on landlords

Property is facing an onslaught of problems, which can be seen in both the commercial and residential sectors. These are resulting in more lawsuits connected to contract challenges, deals falling through and matters such as tenant disputes and evictions.

Empty high street shops are a common sight across the UK, with rising levels of crime. Prestige office blocks no longer hold the same cachet of years gone by, with companies allowing more remote and hybrid working, which again affects local businesses such as shops, cafes and restaurants.

This is a time of flux. Although there’s some pushback against hybrid working, companies are realising it often leads to greater staff loyalty. Consequently, there’s more consolidation and a move towards shared workspaces. Landlords are having to deal with more defaults and requests to suit flexible requirements.

There can be issues around rent levels, and if there should be a change of use from commercial to residential, for example, including student accommodation and hotels. But this is far from risk free, and against the backdrop of an economic slump, it’s clear that commercial property owners have some difficult choices ahead.

Residential landlords have their own challenges. Economic problems mean tenants will struggle more to pay rent. Fewer students may choose university and instead choose an apprenticeship closer to home. There are also concerns about the upcoming Renters (Reform) Bill and whether this will result in a less favourable environment for landlords.

Impact of the Renters (Reform) Bill

The new law is aimed at raising standards in the private rented sector and should bring benefits, meaning better properties and greater security for tenants. It’ll introduce a ‘Decent Homes Standard’ and, ends Section 21 ‘no fault’ evictions. There’s also plans for a new property ombudsman, and to introduce longer notice periods for rent reviews.

It should provide more power for tenants and allow them to challenge poor practices. However, it must be remembered that landlords don’t always have it easy, there are plenty of occasions where rogue tenants can take many months to evict and who also cause costly damage.

The law will still allow evictions, but under Section 8, will take longer. The changes, which also include rolling tenancy agreements requiring two months’ notice and limiting rent increases to once a year, will take some time to bed in. There’s also no doubt that many property owners will be seeking guidance on the Renters (Reform) Bill and how it affects them.

Charlene Kerpner, senior legal advisor at Allianz says:

“Some landlords will be concerned, and it’s been reported, that more are selling up,21 which isn’t good news for tenants. This is more likely to be the case with smaller landlords, while larger property companies, should find it easier to stay in the sector for the long-term. There remains a severe housing shortage22 so there’s plenty of demand, but the need for careful management is more important than ever. With a new regime, landlords need access to sound advice.”

Risks affecting property owners

Even if a landlord has a large property portfolio, there can be no room for complacency as criminality remains a problem. In July 2023, it was reported that more than 1,000 cannabis farms had been raided by the police across the UK.

The illegal cultivation of cannabis can occur in privately rented properties, that look quite innocuous on the outside and be in built-up areas. James Barclay says “There’s a perception that this occurs in remote rural areas or in industrial buildings, but this isn’t the case. Landlords need to be aware of the problem or they could face prosecution, jail or having the property seized if tenants are found to be running a cannabis farm.”

He adds that one of the best mitigation strategies is to ensure that there’s rigorous referencing. “Too often, a tenant may appear legitimate, but they have provided false information relating to their employment and previous accommodation. Bank account details should also be verified. There needs to be proper validation and landlords should ensure there’s regular checks made internally and externally, at least every six months and these should be recorded.”

Checks should also be made that tenants aren’t sub-letting. This can be more challenging for the large landlord, but the problem is reportedly increasing because of the rising cost of living. It’s relatively easy to list a spare room, and a tenant may not gain permission from the landlord. This practice is likely to invalidate the landlord’s insurance and it might also result in a property being run as a house in multiple occupation (HMO), which must be licenced. This in turn could result in the landlord being prosecuted for health and safety breaches and being fined.

Authored by Allianz