Contribution
My Lords, I rather like the look of Amendments 26 and 27 from the noble Baroness, Lady Thornhill, and look forward to hearing her describe them. They also relate to my Amendment 142, which I will now speak to.
The Bill restricts a landlord to four instances where they can recover their property and require a tenant to leave. One of these is if the landlord is selling the property. The purpose of this amendment is to ensure that, where a landlord seeks to sell a property under the new ground 1A but fails to do so, the property is made available again on the rental market without unnecessary delay.
The Bill requires that the property is on the market for sale for at least 12 months before, if no sale is forthcoming, it can be re-let. Market statistics show that typically about 20% of rental properties taken off the rental market do not sell and come back to the rental market. Savills puts the figure higher, at 33%. According to Hamptons, on average properties come back as available to rent after about 90 days, or three months. Where properties do sell, Zoopla figures indicate that the period between first marketing and completion is typically six months. This amendment responds to these facts and reduces to six months the period when the property is required to be unavailable to rent.
I move from the market facts to the Government’s approach. I am very grateful to the Minister for the opportunity that we had to discuss this and the understanding I obtained of the Government’s thinking. I understand that the Government’s concern is that landlords seeking to increase the rent might claim the property is on the market as a means to obtain vacant possession, apparently expecting much higher rent thereafter. They would leave it standing empty for, say, six months with no rental income, and then re-let it not just at a higher rent but at one that would both recover the rent lost in that six-month period and obtain a higher ongoing rent. The assertion is that making the required period 12 months would make such assumed motivation and behaviour unworkable economically.
I have struggled without success to find a period as long as 12 months credible for this purpose. So I ask the Minister: if the current rent on a property is for some reason set below the market rate, would it not be possible for the landlord simply to seek an increase to the market level in the normal way, rather than going through the convoluted processes and expense involved in removing the tenant, putting the property on the market and then re-letting it? If the rent is close to the market rate, it is surely unrealistic to expect that a landlord would be able to leave the property empty for six months, with ongoing costs but full loss of income, and then rent it out again at an uncompetitive rate, well above the market rate, in order, as the Government’s thinking seems to be, to recover six months of losses and then settle at what would be, I repeat, by definition, an uncompetitively high rent. I just do not see how that would have a chance of working.
To give a quick numerical example, a landlord receiving £2,500 a month in rent who puts the property on the market and receives no rent for just six months would, after leaving aside any other costs incurred in departing the tenant and marketing the property, lose at least £15,000 of rental income. To recover this over the subsequent six months and raise a base rental amount to, say, £3,000 per month compared with the £2,500, which for our evil, rapacious landlord is a pretty modest increase of £500, would mean seeking to rent out the property at £5,500 a month—a 220% rent increase over just a six-month period. If Mr Rapacious wanted to recover his losses faster, say in one quarter—three months—the rent would have to go up to £8,000 a month, a 320% increase in rent over just six months.
I must therefore say to the Minister that just six months off the market is easily more than enough to make evicting a tenant simply to achieve a rent increase a highly implausible strategy. Requiring it to be off the market for a full 12 months is not only unnecessary but a distorted intervention that simply reduces the availability of rental accommodation.
Finally, I draw to noble Lords’ attention the two provisions included in the amendment. First, the property would have to have been demonstrably available to purchase on the open market at a fair market price with no suitable offers received and, importantly, the tenant and the courts could require evidence of these points and would be able to decide whether the landlord had made genuine attempts to sell. Amendments 26 and 27, which are coming up shortly, I believe, are also very helpful in this area.