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To say that the world has dramatically changed during this year would be the understatement of the decade. Just before last Christmas, I like many others in the property sector, made our usual predictions and speculated on what the next 12 months were likely to bring, we jazzed up our blogs and articles with titles like “Twenty Twenty Vision” and the predominant focus was on things like the new Government’s proposals for the scrapping of Section 21 no fault evictions and “life time deposits”, which we all thought would form part of a Renters’ Rights Bill, that would take up a good chunk of our focus. We were also looking forward to progressing towards a better regulated industry and to moving forward on the recommendations outlined in Lord Best’s report that had been completed but not formally released, due to the General Election.
Historians will be occupied for years reflecting on the events that unfolded in the aftermath of March 2020 when the severity of the pandemic became apparent. As we know, things will never be the same again.
In this article, I want to examine specifically the fall out of the pandemic on the property sector in terms of how property professionals will navigate the future of managing arrears, possessions and sadly but inevitably, evictions. We have seen the political but this about the practical.
From the get go, myself and many others have been stressing the importance of landlords and property agents acting in a calm and considered way; that times will be tough, but to survive we will need cool heads. Of course, the decisions made by government in terms of lockdown, the eviction moratorium and the push-me-pull-me yoyo of whether courts would or would not reopen, have made things particularly challenging, however it does look now that the landscape has stabilised and we can plan ahead in the new environment.
So where are we now? Well, courts are now in theory, in England and Wales, hearing possession cases; notice periods are now six months and a whole host of pre-court requirements are expected of landlords and their agents.
Various guides and instructions have been released by the Government and the courts have been issued, which I do not intend to go into in this piece; suffice to say, they are complex, not always clear or even correct and are constantly changing as circumstances, both actual and political shift.
What is clear though, is this is becoming a situation not for the amateur or uninitiated. You need help and you need to ask for it. As Albus Dumbledore said to Harry Potter, it “will always be given”. You just need to know who to ask.
For many landlords, this new regime will be daunting and whilst they may be tempted to hit Google, join a Facebook group forum or, in ‘Who wants to be a millionaire’ style “phone a friend”, this hit or miss method is very dangerous. Even if the advice is right, there is no comeback, legal or otherwise, if things go pear shaped.
The other port of call for a landlord would be their letting agent. Many agents are engaged on the basis of let and rent collect, they may or may not offer arrears chasing as part of their service.
If the property is fully managed, the agent is likely to have a day to day relationship with your tenants so may well be best placed to deal with them on your behalf. Check your management agreement as a lot of agents will place the responsibility to undertake legal action back to you. This could be because they do not carry the appropriate insurance to cover things when they go wrong.
Either way you should check that your agent’s professional indemnity cover is in place as, if things do go wrong, there is some comeback.
You may also have bought a Legal Expenses Rent Guarantee policy, which will give you some protection in terms of the costs of legal proceedings and some form of rent arrears cover. Again, check your policy wording carefully.
Finally, in terms of protection, your agent may employ a specialist, third party eviction lawyer or firm that can deal with the process on your behalf. Make sure you check out the credentials of these operators as not all of them have the same level of accountability or expertise needed. You should look to see if they are regulated by the Solicitors Regulation Authority and that this sort of work is what they specialise in. Most will charge fixed fees for standard work, although this will not cover court or bailiff costs and if the case becomes more complicated then additional costs can occur.
I will come back to these specialist firms a bit later, if you are undertaking legal action yourself.
If your agent is undertaking the arrears management themselves, you should check that they know what they are doing and that you give the appropriate authority to undertake any negotiations with the tenant themselves. In normal times, an agent who is a member of a trade body, such as Propertymark, would have gone through training and will have a good understanding of the legal requirements. However, as things have changed so much recently, it is prudent to check that they are up to speed with all the new requirements. Their trade body will have been providing them with updates and training so they are more likely to know exactly what they are doing, but do not leave it to chance. I heard a disturbing story about an agent recently who, when asked by a landlord why a Section 8 notice (which would have reduced the notice period significantly under the current COVID-19 rules), was not served on a tenant, given there was six months’ plus rent arrears, rather than a Section 21, responded that they never serve Section 8s as they don’t really understand them!
Your agent is acting on your behalf and therefore once you have done your due diligence, then you should trust them to act in your best interests. This does not mean let them get on with it. Make sure you keep closely in contact with them and ensure they communicate everything to you and seek your approval.
Now, what I am saying is that if they suggest offering a payment plan or can make a deal with your tenants, don’t dig your heels in out of principle and say no to everything other than payment in full right there and then.
Your agent knows that their best chance of getting paid by you, is to ensure that your losses are mitigated as best as possible. Of course, it’s important to choose your agent partner wisely in the first place, and you can find detailed guidance on how to do this in Hamilton Fraser’s guide to choosing a letting agent.
If you either do not use an agent and self-manage your own properties, or your agent is not contracted to deal with your arrears, or you do not have confidence in your agent, then you can try to handle the negotiations yourself. The objective is to try and get a payment plan in place and recover some of your losses or all of them over a period of time. For many landlords faced with the extended notices and court delays, a payment plan is probably the best and only route to pursue to try and resolve the arrears. But it does take patience, skill and nerve to undertake such discussions with your tenant and then there is no guarantee of success. There are a number of places where you can get help if this is the route you decide to take. If you are a member of a landlord trade body, most notably the NRLA, then they have produced a lot of guidance and you have access to a helpline and template documentation as part of your membership.
There are also some good sources of free templates and letters to help you set up a payment plan. Some of these, such as those provided by Goodlord, are free, others involve a small cost. The templates by Landlord Action, for example, are drawn up by experienced solicitors and are checked by a solicitor before you get the tenant to sign it. Do your homework before you download anything from the internet.
Another innovation worth exploring, if you are determined to go down the self-help route, is online negotiation platforms that allow two-way negotiations to occur between you and your tenant. They enable communication between both parties and everything is stored, recorded and documented electronically so can be used as evidence further down to line, to demonstrate that you have tried to negotiate or in the event that the agreement you reach is reneged on. A good example of this is run by Flatfair and is currently free. They are one of the services referred to by the Government’s own guidance, but you must remember this is only a tool and the success of your mediation depends on your abilities.
Finally, whilst negotiation is highly recommended, it does depend on a lot of factors, not least trust and being pragmatic. Often the parties are invested in their positions, relationships have deteriorated and there is no way forward. Even when the right protocols have been observed, there is a strong chance that the agreement might break down and you are back to square one.
By far the most productive solution to attempt to resolve matters without using the courts is mediation and its close cousin, facilitated negotiation. This is where you engage another person to come between the parties and help reach a settlement. There are various ways of doing this, from face to face to telephone or even online.
Given the current restrictions and the practicalities involved, opportunities for physical mediation are quite limited at the moment, although it is still possible. In my view, however, it is not always the most practical solution for tenancy disputes, as getting parties into the same location during normal times is difficult enough. It is interesting that the original suggestion by the Master of the Rolls for delivering mediation at Court, disappeared from the final draft of guidance that was issued when the courts reopened. Trying to organise mediations in an already restricted court setting is just not practical.
Instead, parties are recommended to use external mediation providers, who predominately will use telephone mediation. Of the current providers of these services, two join Flatfair in the current Government guidance as suggested services.
One is run by the Tenancy Deposit Scheme, who run one of the official deposit protection services. Whilst TDS Resolution itself is not authorised by the Government, it does employ the same sort of resolution as a deposit dispute, delivered by an established company.
It provides a relatively cheap track and trace service to try and contact the tenant and set up a negotiation; If the tenant does not play ball and cannot be reached, you get a certificate stating you tried, which will put you in good stead with the courts and the new protocols; If the tenant is contacted, then a three way telephone conference is set up between the landlord (or their agent) and the tenant, with a third party person appointed by TDS acting as a kind of referee between the parties whilst they try and reach a negotiated settlement over about an hour; The service then drafts the settlement agreement and gets both parties to sign it.
This form of facilitated negotiation can prove to be the catalyst to see a negotiation over the line, however unless the tenant refuses to speak directly to the landlord, when there is the option to speak through the TDS operative separately, the parties have to speak directly to each other. The danger of this is that the tenant may feel in a weaker position and unable to open up in a meaningful way. The presence of the intermediary helps, however on serious or complex cases, the limitations of time and confidentiality may be a barrier. That said, the service may be most successful if the landlord has already built up a partial relationship and just needs the last push.
The other player in the market as suggested in the Government advice; and here I have to declare an interest, as it our own tenancy mediation service, is also telephone based and that is the Property Redress Scheme mediation service.
The concept was being developed prior to COVID-19 in anticipation of the Government’s promise to scrap Section 21 and also indications that the pre-action protocols were going to be revised. But the pandemic made the need for such a service essential and urgent. We therefore went live in record time and now provide the first truly countrywide and affordable mediation facility dedicated to the property sector.
The Property Redress Scheme mediation service uses traditional mediation delivered by telephone, with a full mediation agreement and, where appropriate, a payment plan provided at the end of a successful outcome. We also provide a detailed report if the mediation fails or is only partially achieved and where the tenant fails to engage after a reasonable number of attempts. In addition, we provide a full witness statement in a format acceptable to a court, which evidences that the landlord, or their agent, have tried to resolve the situation through a third party.
The method of resolution we use is a formal style of mediation, which I like to call ping pong. The parties engage with the mediator separately and the mediator acts as the intermediary between the parties. Each side can share their concerns and needs, in confidence, and trust the mediator with information they may be reluctant to share with the other side, without the stress and intimidation that having the person they are in dispute with present can cause. This method has been proven to be the most effective way of getting a lasting result.
Early figures have indicated a success rate of over 50 per cent of cases resolved, however this is rising as the sector becomes more familiar and receptive to this form of resolution. The scheme is also working with a number of Legal Expenses and Rent Guarantee insurers to help resolve their cases and reduce the back log of cases waiting for court.
The Property Redress Scheme mediation service is named as one of the suggested services in the Government guidance and they are looking closely at the model in terms of how this and the other methods make a difference in reducing the number of cases needing to be resolved at court.
A recent development has been a joint arrangement with the Property Redress Scheme and sister company Landlord Action, where a landlord or agent can engage both services and start the court process simultaneously to commencing mediation, so that no extra time is lost in getting a case into the now extensive queue for a court hearing if the mediation is not a success.
This overall package makes both processes cost effective and efficient and the landlord is protected throughout. Every effort is made to obtain reconciliation and a workable solution with the tenant, but the landlord can rest assured that they can also have access to a specialist possession and debt recovery law firm if all else fails.
As mentioned in the agent section above, ultimately a landlord may be faced with no option but to go to court. Seriously, if this is the case, do not try and do this yourself! Ask for help and engage a professional.
Choose one who is SRA authorised and has the relevant expertise and insurances in place, such as Landlord Action. In the current climate, ignore this advice at your peril!
It is clear that the landlord now has a number of different solutions to choose from, depending on the needs of the case. There are also a number of individual mediators and you may prefer to use one of these. They do tend to work out more expensive than some of the other services outlined above and may be more suited to cases where large amounts of arrears have accrued. Their capacity may also be limited or access to face to face mediation restricted.
What is clear, however, is that doing nothing is not an option and landlords and agents need to ask for help and understand that investing a relatively small amount of money will save them far bigger losses in the future.
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Property Redress Scheme is approved by Government under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015