Will private landlords be forced to join a ‘redress scheme’?
In England property managers and letting agents are required to be a member of a ‘redress scheme’. A redress scheme is an independent body set up to resolve complaints made by consumers against a member of the scheme. Landlords and agents who have complained to an agent can escalate their complaint to the relevant redress scheme if they are not happy with the response. Schemes can order their members to pay compensation, with the threat of expulsion if the compensation is not paid.
The essential idea of consumer redress schemes is that they provide a cheaper and more user-friendly process for resolving disputes than going through the courts. Redress schemes can also impose a code of conduct on their members and investigate complaints which do not necessarily raise a legal dispute, such as poor customer service.
All agents and property managers across England must sign up to one of the two schemes: the Property Redress Scheme or the Property Ombudsman. The Housing Ombudsman Service deals with complaints about registered providers of social housing. Private landlords can join a redress scheme but there is no legal requirement to do so, and not many landlords have.
In January 2019 the Communities Secretary (then James Brokenshire) announced that all private landlords would be legally required to join a ‘housing redress scheme’ but since then there has been no sign of detailed proposals, let alone legislation. The delay can be attributed in part to the pandemic, but there was always a possibility that this policy would be quietly abandoned rather than implemented.
However, there have been some clues that requiring private landlords to join a redress scheme is still Government policy. In the background briefing notes to the Queens Speech in December 2019 it was said that one of the benefits of the Renters Reform Bill (the legislation which will abolish section 21 notices) would be: “helping to professionalise the sector, with all tenants having a right to redress if their rented properties are not safe and healthy”. In January 2020 the Government confirmed that leaseholders would be benefitting from a redress scheme, and as recently as March 2021 the current Housing Secretary Robert Jenrick stated in a speech to the National Housing Federation Summit that “tenants should be able to seek redress in reasonable time without an uphill struggle and know that they will be heard” (although this might have been a reference to tenants of social landlords rather than private landlords).
Ministers have also announced plans for a ‘New Homes’ ombudsman and a redress mechanism for leaseholders, so it fair to say that there is still enthusiasm for redress schemes in Government.
How would mandatory redress scheme membership for landlord change the Private Rented Sector?
Mandatory redress scheme membership is not going to end the housing crisis and sceptics will point out that social landlords already have a redress scheme, the Housing Ombudsman Scheme, and this does not prevent poor practice.
But in my opinion this misses two crucial points. Firstly, while the Government remains opposed to a national licensing or registration scheme for landlords, requiring private landlords to join a redress scheme would go part of the way towards national registration. Enforcement officers already use data from the deposit protection schemes to identify rented properties, but access to redress scheme data would provide a more comprehensive picture. Landlords would be required join a scheme and operate ‘in the open’ – and if landlords did not join, it would be clear to an informed tenant that their landlord was operating outside of the law. Redress scheme member is not going to do as much for tenant-safety as a well-run licensing scheme could, but some of the benefits are there.
Secondly, redress scheme membership for private landlords might give tenants a feasible way to claim modest amounts of compensation from their landlords. A member of the Property Ombudsman or Property Redress Scheme who fails to pay an award can be expelled, and after expulsion, they are not allowed to re-join either scheme until they have paid their award. Systems are in place to prevent businesses from re-joining after expulsion under a different name as a ‘phoenix company’. This could also give tenants of a corporate landlords an effective way to enforce compensation awards, as it might be difficult for companies to escape payment simply by dissolving the company if those involved in running it are intending to stay in the property sector – they would need to be readmitted to a scheme in order to trade lawfully.
Expulsion for Redress Schemes v Banning Orders & ‘Fit and Proper Person’ Test
The Housing and Planning Act 2016 introduced ‘banning orders’, which allow the First-tier Tribunal, on application from a local housing authority, to prohibit persons convicted of certain housing-related offences from letting or managing property.
Banning Orders are the most drastic option available to enforcement authorities – the Guardian recently reported that only 39 banning orders had been made in total across the whole of England. Under older powers under the Housing Act 2004, local authorities can refuse licences to landlords they consider to not be a ‘fit and proper person’, but that would not prevent a landlord from letting properties which do not require a licence.
Mandatory redress scheme membership will provide another route for landlords to be forced out of the sector – a landlord who has been expelled from a scheme would not be able to operate lawfully and would need to persuade the schemes to re-admit them before they can operate lawfully. A redress scheme could be quite flexible in how it applies its anti-avoidance rules against phoenix companies, and this could be more effective than existing powers.
The Renters Reform Bill
The Renters Reform Coalition has been formed to put pressure on the Government to honour the Conservative manifesto commitment to abolish section 21 notices, and that is the most-talked about aspect of the anticipated Renters Reform Bill. There’s no doubt that the end of section 21 will shake up the private rented sector – but other reforms also deserve attention, and in my opinion mandatory redress scheme membership for private landlords is an idea which is much bolder and important than many realise.
Please note that the views and opinions expressed in these blogs are those of the author and do not necessarily represent the views of London Property Licensing. These blogs are designed to stimulate discussion and debate within the property industry. This article does not represent legal advice and should not be treated as such.
For all the latest news and comment, you can sign up for the free London Property Licensing newsletter here.