Lime Legal

Taking the strain

Published 01 January 2024

With buy-to-let landlords feeling the pinch of high mortgage rates, tenants are being left in an increasingly precarious position, reports Tony Marshall

Tenants in buy-to-let properties are increasingly subject to harassment, threats of eviction and their homes to neglect as small-scale amateur landlords, under pressure from high mortgage rates and with little grasp of tenants’ rights, cut losses any way they can.

‘It’s happening on a much larger scale than has been realised,’ said Andrew Greathead, private tenancy officer with Birmingham City Council and secretary of the Association of Tenancy Relations Officers. ‘Amateur landlords don’t seem to understand tenants’ rights. We see it every day – it’s either ignorance or people feigning ignorance, but the lack of knowledge is frightening With the collapse in the buy-to-let market we’re seeing a lot more cases.’

Landlords are cutting corners by ignoring complaints about repairs and taking harsh action over late rent – a situation largely overlooked by the press coverage, which has concentrated on the potential impact of a housing market downturn for those who bought homes as a rental investment, not for those who live in them.

‘What we see most is people threatened with eviction because of arrears or delays in benefit. But we’ve also seen a significant number because landlords have wanted to sell,’ said Greathead. ‘We have had plenty of problems with buy-to-let properties being repossessed and tenants being evicted and made homeless.

‘In the centre of Birmingham there’s been massive building of flats. A lot are smaller flats for single people. A rising number have been coming to the council saying they’ve been illegally evicted or threatened with eviction. And these are people who are more likely to move on without complaining. It is a problem.’

The problem is set to grow because of the sheer scale of buy-to-let housing, which has increased ten-fold in the past five years from fewer than 100,000 in 1999 to about one million houses and flats. Buy-to-let properties now account for more than 40 per cent of homes in the private retned sector – just as council housing has been eroded by right-to-buy and sales to privately run organisations. Homes rented from private landlords now outnumber council homes, which number fewer than two-and-a-quarter million as against two-and-a-half million homes in the private rented sector.

Cracks have been there in the buy-to-let market for some time. Kate Barker, a long-serving member of the Bank of England’s Monetary Policy Committee, which oversees interest rates, said the sector was a source of weakness that could affect the whole housing market. Buy to let is threatened by ‘higher interest rates, little change in rents and reduced expectations of price appreciation’, she said. Yet these mortgages accounted for 12 per cent of total mortgage lending in the first six months of this year, and with overall lending to the sector standing at more than £100 billion, the picture is bleak.

One of the most obvious signs of trouble is repossessions, which have risen steadily in the past few months and the British Bankers' Association forecast that they were likely to soar by up to 75 per cent this year – up from 17,000 to 30,000. More landlords are likely to get into difficulty because of mortgage rate rises.

Those affected are no longer the usual suspects – tenants in dilapidated houses and former council flats in the rundown centres of our major cities. Local government housing officers are braced for an influx of people from all sectors of the community, including some of the smartest areas and new developments aimed at mobile middle-class professionals.

Spreading problem

Tony Pye, Lancaster housing standards officer, said: ‘What we’ve found is that what was once deemed to be the lower end of the market’s problem is spreading. All of a sudden it’s properties right across the board – flats in the region of £200,000-£250,000, which are costly in my area – and not just the poorer end of the market that’s associated with harassment or threatened eviction.

‘Now we’ve got problems with people who have taken on a big mortgage. The fact that they are some of the best properties doesn’t stop people having financial problems, and landlords pressure tenants for higher rents. The tenants often don’t know when they’ve signed a tenancy agreement that it gives them protection. They think it’s just to get the property and don’t realise it’s for the full term, whether it’s six or 12 months or three years.

‘Some landlords are exploiting this ignorance. Tenants think because the landlord has presented them with an agreement that the landlord is in control. And that’s not the case. County court actions for repossession have reached a record. We’ve had several actions where the tenant knew nothing about the mortgage on the property until they were told to get out.’

The lack of professionalism in the private sector is worrying the Law Commission, which has called for stronger regulation to raise standards. Figures from 2013 showed that almost two-thirds of landlords in England owned only one property, according to the commission’s consultation paper on responsible letting.

About half of buy-to-let properties are placed in the hands of professional letting agents, according to the Association of Letting Agents. That leaves up to half a million landlords who are avoiding the additional cost of an agent – often because the financial squeeze is already tight – and managing the property themselves.

Paul Mishkin at Islington council’s environmental health department said the problems were not as severe in Islington as in less prosperous parts of London. Even so, mismanagement and retaliatory evictions were on the rise. The source of trouble wasn’t established landlords but the lack of professionalism of people who were new to such responsibilities. Some of the problems were linked to buy to let – and ‘the bubble is about to burst on the whole buy-to-let sector’, he warned, making the problem still worse.

Licensing powers

This is an issue of concern to the Association of Residential Letting Agents, which has welcomed the Law Commission’s proposal for a more stringent licensing system for landlords and letting agents. Spokesman Malcolm Harrison said: ‘There are irresponsible landlords and irresponsible letting agents. We have been calling for licensing for 15 years and it has fallen on deaf ears. Licensing would make it easier for everybody: landlords, agents and tenants.’

The buy-to-let explosion seems to have taken everyone by surprise – and the regulators have been slow to catch up. Many properties were bought with mortgages the buyer could ill afford, and relied on rents and steep house price rises to make the investment worthwhile. But as buy to let has spread from rundown inner city areas – where cheap private renting, in the absence of sufficient affordable housing, is the only option for people on low incomes – to posher areas, conflicts with landlords have followed in their wake. Harassment and threats, even being locked out on the street, can now happen almost anywhere.

Tony Pye says: ‘People looked on buy to let as a pension issue and thought it was a way to make money. But professionalism goes straight out the window. And enforcing the law has been made worse by reorganisation of local authority departments. In the past it was dealt with by tenancy officers, but with the change of direction in local government, it can now be the homelessness unit or environmental health. Some councils are getting rid of tenancy relations officers, which is not helpful either to tenants or landlords.

‘The result is a lot of distress for tenants. Our workload is increasing because we have had a big increase in tenanted properties. We are now looking at luxury flats and going into places we would never have dreamed of going into.

‘Some are fairly posh places bought off-plan as an investment – like the Riverside in Lancaster. If you look at prices in the newspaper you don’t associate them with rented property, but there’s a sizeable number and that’s surprised us. We have cases going to court.’

What rights?

Debbie Ricketts, Hammersmith environmental health officer, is also concerned about ignorance of tenants’ rights shown by smaller and first-time landlords, although they are not always the worst culprits.

The council’s landlord accreditation scheme was one way of addressing problems, she said – and council housing officers in other areas where similar schemes had been introduced agreed that they’d done a lot to improve how landlords dealt with their legal responsibilities.

‘We have done a lot of work with landlords through the London landlords accreditation scheme. But only 60 per cent of landlords are either accredited or a member of a landlords’ association and it’s not them we need to reach, it’s the 40 per cent of landlords we aren’t in contact with and don’t know the legislation.’

She believes an answer could be to get the mortgage lenders on board. ‘We have a big pool of landlords who are na ve – and mortgage lenders are more likely to come into contact with those people than we are.’

She also blames media coverage and press advertisements for enticing people into buy to let with false promises of the riches that would ensue from becoming a landlord. ‘They go on about fantastic investment opportunities – say things like “become a millionaire”. But it should come with a health warning, like cigarette advertising, pointing out that being a landlord comes with responsibilities.

‘We do have some dodgy landlords – every authority does – who have no intention of doing what they are supposed to. And most buy-to-let properties fall out of the licensing regime.

‘There is a whole wealth of properties out there that are well overcrowded. Some of them are buy-to-let, but people in them wouldn’t dream of coming to us because, for them, the threat of eviction is very real.’