Introduction:
Landlords in Wales have faced numerous challenges since the implementation of the Renting Homes Wales Act 2016. While we don’t anticipate further legislative changes in this area, a recent consultation on fair rents has caught the attention of landlords. In this article, we will explore the latest developments affecting landlords in Wales and provide advice on how to navigate these challenges successfully.
Rising Possession Claims in Wales:
The combination of the Renting Homes (Wales) Act and recent interest rate hikes has prompted many landlords to reconsider their investments in the Private Rented Sector (PRS). Government statistics reveal a substantial increase in possession claims across Wales during the first quarter of 2023.
For the accelerated possession process, the following increases were observed:
- Possession claims surged by 236%
- Possession orders rose by 249%
- Warrants increased by 275%
In comparison, possession claims, orders, and warrants in England rose by 16%, 46%, and 95% respectively during the same period.
While possession claims in Wales currently remain relatively low (approximately one accelerated possession claim for every 100 PRS properties), these increases are likely to result in longer waits for bailiffs and court hearing dates in the coming months.
What’s Causing this Trend?
The government’s own statistics attribute this surge in possession claims to the introduction of the Renting Homes (Wales) Act, alongside rising interest rates and increased mortgage costs. Converting existing contracts, complying with the administrative requirements of the new act, the limited availability of alternative properties, and the short deadline for using existing Section 21 notices or shorter Section 173 notices have collectively contributed to this spike in claims.
Recommended Steps for Landlords:
The past six months have presented significant challenges for landlords, leading some to consider exiting the market. However, it’s important to note that demand for rental properties in Wales continues to surpass supply. Therefore, it may be wise to allow converted contracts to expire naturally whenever possible, providing landlords with ample time to assess their options.
If you choose to continue renting out your property, consider entering into a new contract with your tenants. Using a proper template, such as the NRLA template, can provide both parties with clarity on their respective obligations. This ensures that your contract is comprehensive and accurate, which may prove essential in court proceedings, if necessary.
In cases where possession becomes necessary, landlords should be aware of the lingering uncertainties surrounding converted contracts. To mitigate risks, it is highly advisable to engage a solicitor to handle the possession claim from start to finish.
Exploring the Long-Term Leasing Scheme:
For landlords seeking a more hands-off approach to property management, the Welsh Government offers a leasing scheme whereby landlords can lease their properties directly to local authorities in exchange for incentives. These incentives include a guaranteed rent at the Local Housing Allowance (LHA) rate and grants of up to £5,000 for property improvements or achieving an Energy Performance Certificate (EPC) rating of C. In the case of vacant properties, funding could reach up to £25,000.
However, it’s important to note that this scheme may not be attractive to many landlords due to the existing cost pressures they face. Additionally, LHA rates often remain below market rents in most areas. Furthermore, the leasing scheme entails long-term agreements ranging from 5 to 20 years, which can be daunting for landlords accustomed to shorter fixed-term leases.
Conclusion:
The implementation of the Renting Homes Wales Act and the recent increase in possession claims have presented challenges for landlords in Wales. However, landlords should be reassured by the sustained demand for rental properties in the market. By staying informed, utilizing proper templates, seeking legal advice when necessary, and considering the available leasing scheme, landlords can navigate these challenges and make informed decisions to protect their investments in the PRS.