The Renters’ Rights Act gives advisers six reasons to talk to landlord clients

Originally published by The Intermediary

The Renters’ Rights Act (RRA) has already brought major change to the private rental sector (PRS), but for advisers its importance should extend beyond helping landlord clients understand what has happened and what they may need to consider next.

With further elements of the legislation still to come, this is not a subject which should generate one client conversation and then disappear from the agenda, because it provides advisers with regular reasons to reconnect with landlords, understand how they are responding and consider whether their borrowing, protection and wider portfolio plans remain right for them.

At Fleet, we have been considering the conversations advisers might want to have with landlord clients, and we’ve produced a document which covers a number of ‘conversation starters’ with landlord borrower clients. There are six questions which advisers can use as a useful starting point to deliver further value and support, and I’ll go through each one below.

How has the move to periodic tenancies affected your portfolio?

Firstly, the abolition of fixed-term assured shorthold tenancies has changed the way landlords can manage tenant relationships and property occupancy, while the removal of Section 21 means understanding the revised Section 8 possession grounds has become increasingly important.

Advisers are not there to provide legal advice, but they can ask whether clients have updated their tenancy and management processes and, importantly, whether these changes have altered their attitude towards individual properties or the portfolio as a whole.

That might reveal properties which no longer fit the landlord’s longer-term plans, potentially leading to discussions about selling, refinancing or directing investment elsewhere.

How resilient is your rental income?

With rent increases now subject to a statutory process and limited frequency, landlords need to have a firm grasp of portfolio cashflow and how resilient it might be if circumstances change.

That provides an opportunity to discuss current rental income, how the portfolio might cope with arrears, void periods or increased costs, and whether existing mortgage arrangements remain suitable.

These are particularly useful conversations because they move beyond what a portfolio produces today and consider what might happen if income falls or expenditure increases, while potentially identifying refinancing needs or areas where greater financial resilience could be useful.

What protection do you have in place?

The end of Section 21 means possession now relies on Section 8 grounds through the courts, which may take time, and this makes the potential impact of lost rental income worthy of discussion.

Advisers can ask how a portfolio would perform if a tenant fell into arrears, whether insurance arrangements have been reviewed recently and whether options such as rent guarantee insurance have been considered.

The important point is the landlord borrower relationship should not necessarily begin and end with the mortgage, particularly when regulatory change may alter the risks clients face.

Is your portfolio structured for the future?

Regulatory change also provides a good reason for landlords to consider whether their existing portfolio still reflects what they want to achieve over the coming years.

Are all properties delivering the expected returns, have investment objectives changed during the past year, and could restructuring or refinancing improve efficiency or borrowing capacity?

Professional landlords regularly make decisions about what they want to own, where they want to invest and how they fund those properties, and advisers can play an important role in those discussions.

Are your compliance standards up to date?

Property standards and record-keeping are receiving greater scrutiny, so advisers can also ask whether certificates are current, whether concerns around damp, mould or repairs have been addressed, and whether documentation is up to date.

Again, this is not about providing compliance or legal advice, but about raising the issue and encouraging landlords to seek appropriate professional support where necessary.

When did you last review your portfolio?

Perhaps this is the most important question of all, because landlords should not need a regulatory change or mortgage maturity to prompt a full assessment of their position.

An annual review can cover investment objectives, borrowing, rental income, costs, future purchases and whether individual properties continue to justify their place within the portfolio, while giving advisers a much fuller understanding of what their client wants to achieve.

The RRA provides a very good reason to start these conversations, but it should not be where they finish, particularly with further implementation still ahead and more opportunities for advisers to keep landlord clients informed and engaged.

Our document covering these questions, plus more information on the RRA and where it might lead next for both landlords and advisers, is available on the Fleet website.