Buy-to-let landlords face compulsory ombudsman scheme

In order to solve tenant disputes, landlords will soon be required to register with a redress scheme, helping to improve operating standards within the industry.

At the recent Conservative party conference, the scheme was announced alongside further plans to make checks into letting agents, as well as offering landlords incentives for providing longer term contracts with their tenants.

With the Budget speech set for November, it is thought that the proposals are to be outlined at that point.

Redress scheme requirement

Sajid Javid, the communities secretary, said that the government would “insist that all landlords are part of a redress scheme”, when speaking at the Conservative party conference last month.

Although the details of the scheme are yet to be released, this type of scheme usually consists of dispute resolution systems that are legally binding, and all members would have to follow a code of conduct.

It is believed that the introduction of this scheme will help renters and give them more power to challenge landlords on anything that they deem to be unreasonable.

In an explanation for the introduction of this scheme, Sajid Javid continued, saying: “For too long, tenants have felt unable to resolve the issues they’ve faced, be it insecure tenure, unfair letting agents’ fees or poor treatment by their landlord with little means of redress. We’re going to change that.”

Current redress schemes

It is not yet known whether or not the plans will be the launching of a new body, or if it will just be extended to an existing scheme. There aren’t yet any current ombudsman schemes that are functioning within the private landlords sector, but there are several voluntary organisations running.

National Landlords Association (NLA)

The NLA isn’t officially a redress scheme, but it does provide a code of practice for private landlords to follow, and they are expected to operate in a ‘fair, honest and respectable way’ throughout any dealings with their tenants.

Tenants can file complaints with the body if they have any ongoing issues with their landlord, and the issue will be resolved as soon as possible.

The membership of this association is voluntary and they aren’t a governing body with legally backed powers, but they do currently have 65,000 members.

The Property Ombudsman (TPO)

The Property Ombudsman (TPO) is specifically designed to handle complaints made by landlords and tenants against sales, and more typically against letting agents. TPO announced that in 2016, they oversaw 1997 disputes, with 56% related to the lettings sector and a total of £786,572 paid by letting agents as redress.

TPO also announced that 45% of the complaints were from landlords and 51% were from tenants, with some of the main areas of concern including communication, referencing, property management and complaints procedures.

The body said that it welcomes the introduction of a compulsory redress scheme for landlords, particularly because of a ‘redress gap’, of which they feel bans to letting fees may create.

The Property Redress Scheme (The PRS)

The Property Redress Scheme is a government authorised consumer redress scheme offering redress to consumers of property professionals. The main purposes of the Property Redress Scheme are to allow property professionals to comply with their legal requirement to be a member of a consumer redress scheme and to settle or resolve complaints made by consumers against their members.

The Property Redress Scheme are accepting landlord members and encouraging other landlords to get ahead of legislative requirements and voluntarily join their scheme. Joining the Property Redress Schemes as a landlord gives tenants peace of mind that if they do have a complaint it can be resolved by an independent third party who have experience in dealing with consumer complaints.

The Housing Ombudsman Service (HOS)

Almost all members of the HOS are social landlords, including housing associations, as they are required to join and follow the HOS code of conduct. Private landlords are also able to join if they so wish to, however there are currently less than 100 voluntary members, according to the HOS’s 2016/17 report. The HOS closed 15,877 cases during the 2016/17 year, with a large proportion of complaints from tenants about property repairs.

Regulatory changes

The changes are set to be introduced following the budget speech in November, so it is a good time to familiarise yourself with some other changes affecting the private rented sector:

Mortgage interest tax relief – Landlords will no longer be allowed to offset any of their mortgage costs against their rental income by April 2020, with the amount being reduced year on year until that point.

Wear and tear allowance – Landlords are now only able to claim tax relief on actual expenditure when replacing household items, rather than the previous 10% allowance.

But to let stamp duty – Investors and those who buy a second home are to pay a 3% surcharge, additional to standard stamp duty bands.

Proposed letting fees ban – The Government are to ban letting fees to tenants in England, meaning that credit, right to rent and referencing checks would need to be paid for by the landlord.

Portfolio landlord lending restrictions – Portfolio landlords are to face stricter criteria when looking to remortgage a property or invest in a new one.

Mark Burns is the managing director of property investment firm, Hopwood House.

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