Possession claims on the rise

 The Ministry of justice recently published the figures for property possessions across both mortgages and rentals, unsurprisingly possessions have increases across the board but thankfully timelines for possession are decreasing albeit slower than we would like.

Tax implication of S24 coupled with interest rates, the cost of living and increases in landlords overall costs as well as the threat of the Renters Reform Bill have created the perfect storm for many landlords who are now exiting the market as investing in property for some is no longer financially viable.

So lets’ look at the numbers which are compared to the same quarter April – June of 2022

Mortgage possession

Overall mortgage possession claims increased from 3,478 to 3,986 (15%)

Possession orders were up from 2,368 to 2,536 (7%)

Warrants for possession went up from 2,446 to 2,654 (9%)

However, repossessions by county court bailiffs decreased from 780 to 642 (18%).

Timelines

The median average time from claim to mortgage repossession has decreased from 108.4 weeks to just 48.7 weeks.

Mortgage possession claims fell from a peak of 26,419 in April to June 2009 (in the aftermath of the 2008 financial crash) before stabilising from April to June 2015 (4,849, see table 1). In the most recent quarter, April to June 2023, there were 3,986 claims for possession, up 15% from the same quarter in 2022.

Newham, in the London region, had the highest rate of mortgage possession claims at 206 per 100,000 households owned by mortgage or loan, followed by Tower Hamlets (London region) and Blackpool (North West region); with 163 and 148 claims per 100,000 respectively.

Landlord Possession

Overall landlord possession claims increased from 18,193 to 22,537 (24%),

Possession orders were up from 14,309 to 16,010 (12%),

Warrants for possession went up from 7,793 to 9,886 (27%) and repossessions rose from 4,951 to 5,868 (19%).

Landlords using the accelerated possession procedure has increased across the full process

Accelerated possession claims increased by (34%)

Possession orders were up (22%)

Warrants for possession went up (48%)

Repossessions rose (47%)

 

In Wales the Accelerated procedure for claims, orders, warrants and repossessions increased by 9%, 63% and 157% respectively. This large relative increase in Wales has coincided with the introduction of the Renting Homes (Wales) Act that was introduced on 1st December 2022.

Timelines

The median average time from claim to landlord repossession has decreased from 23.4 weeks to 22.1 weeks.

33% or 7,476 of all landlord possession claims were submitted by social landlord, with private landlords equating to 32% or 7,301

The highest private landlord possession claim rates were found in London, with 7 of the 10 highest rates occurring in this region. Barking and Dagenham had the highest rate for private landlord claims (609 per 100,000 households owned by a private landlord).

Regional Repossessions (by County Court Bailiffs

City of London had the highest overall rate of mortgage repossessions at 147 per 100,000 households owned by a mortgage or loan.

Private landlord repossessions were highest in Bexley with 185 per 100,000 households owned by a private landlord.

Social landlord repossessions were highest in Chorley with 151 per 100,000 households owned by a social landlord.

 

Trend in tracker tenancies on the rise as agents forced to increase rents at every BoE base rate change

 I saw a very intriguing article in i-news the other day and it got me thinking.

The article claims to have identified a new practice amongst London letting agents, driven directly by their landlords, which sees a property advertised at a specific monthly rent but with a tenancy clause that states if the Bank of England increase the base rate, the rent will increase accordingly each month.

Now, although I can totally understand why landlords would want this security, it does open a very large can of worms in my opinion.

Firstly, the Bank of England has increased rates 14 consecutive times since the end of 2021, and is expected to raise again on 21 September, to 5.5%.

So, before we open the proverbial can of worms let’s look at how that would directly effect a tenants rental payments

If the 12 months fixed term tenancy started on 1^st August 2022 at a monthly rent of £1000, the BoE increased its rates as follows during that 12 month period

1/10/22 2.25%
1/12/22 3%
1/1/23 3.5%
1/3/23 4%
1/4/23 4.25%
1/6/23 4.5%
1/7/23 5%

This would see the tenants rent increasing by just shy of 30% or £296.74 in 11 months, would an extra £300pm even be affordable to the tenant?

Now concentrate, it’s the science bit….

Under section 13 of the Housing act 1998 a fixed term tenancy cannot have its rent increased in less than 365 days, also a fixed term contract implies that the terms and conditions are fixed for the duration of the term specified.

Most tenancy agreements already have a rent increase clause which is linked to the Rental price index (RPI), would this new practice override this clause or could the tenants see a further increase annually in line with the RPI.

The key question here “is this practice legal and enforceable” I would argue it is not.

Yes, you can increase rent in a fixed term contract if the tenant agrees, and arguably signing an AST with clauses stating the increase, would indicate that the tenant has agreed, but as we do not know what each BoE increase will be can the tenants confidently agree to an increase, they do not know they can afford to maintain.

Is the clause enforceable, the argument that it breaches s13 is heavy and I would say on the balance of probability that a judge wouldn’t allow rent arrears to be accrued in such an untransparent way.

Does the clause breach the Tenant Fees Act 2019, which is clear that rent paid at the start of the tenancy cannot be higher than the rest of the tenancy, unlike Wales tenant fee ban act wording ' it cannot be higher or lower in consecutive payments.' in England it cannot be lower than the first payment, so we are confident it doesn’t breach the TFA.

But now we move onto Consumer protection, adverting standards and contract law, clauses that present undisclosed variable rental amounts would understandably be deemed as an unfair clause as it not only lacks transparency but also doesn’t allow the prospective tenant to make an informed decision about the rental.

Advertising a property for rent at one price but with the knowledge this will not be the continued price could fall under misleading advertising rules.

It could also affect a landlords rent guarantee insurance and any guarantor agreement that may be signed.

How would referencing of these tenants also be accurate, as referencing is carried out based on the tenants affordability of the monthly rent, but if this is to rise by an undisclosed amount what affordability do we asses on?

Equally, if the BoE base rate decreased, would the rent reduce accordingly.

It is also worth remembering that the tenant still has the option of submitting an appeal to the First tier tribunal in the first 6 months of any ast if they think the rent is too high

So inconclusion, its definitely unfair and coercive but maybe not directly illegal. It is however falling into the governments trap of bringing in rent controls   as they can now say ' look at what the greedy landlords are doing now - we must have rent control even though we didn't really want it!'

 

Source https://inews.co.uk/news/rent-tracker-contracts-landlords-forcing-tenants-deals-increase-interest-rate-rises-2587712