RLA Reply to the Government’s response on the Rugg Review
The RLA has now sent in its Reply to the Government’s own Response to the Rugg Review of the Private Rented Sector.
Whilst welcoming many of the proposals the RLA is adamantly opposed to the national registration scheme in the form which is proposed. In particular we oppose any suggestion of properties to be listed out by landlords. We believe that any register should be confined to the landlords who actually manage properties; not all landlords. We are against annual registration.
We are urging the Government to look at a self regulation scheme for landlords non accreditation to take compliant responsible landlords outside local authority control. We have sent in the following, very detailed response.
RESIDENTIAL LANDLORDS ASSOCIATION LIMITED
REPLY TO THE GOVERNMENT’S RESPONSE TO THE RUGG REVIEW OF THE PRIVATE RENTED SECTOR
SUMMARY
1. The RLA believes that it is important to identify and comment on what we believe to be some of the key themes relating to the private rented sector (PRS).
2. We advocate the development of professionalism within the PRS.
3. Tenants should be treated as consumers.
4. The PRS is a vital component of the housing market.
5. We need to focus on management, on the people involved rather than the places which has been the traditional approach.
6. We should distinguish between active landlords (i.e. those who manage properties) and passive landlords and concentrate attention on these active landlords.
7. Much investment in the PRS is just that and is to be encouraged but unless landlords/investors are involved in management they do not need to be drawn in to the net of regulatory measures in the same as the property managers themselves.
8. There should be compulsory training with those involved in management, including landlords and agents.
9. The Government and the Rugg Report has failed to sufficiently pursue the concepts of accreditation. We need to develop accreditation in to a form of self regulation (based on the same legal standards) for the responsible compliant landlords, with pre-entry vetting. Such accredited landlords should be exempt from existing licensing schemes and statutory tenancy deposit with accreditation schemes providing appropriate financial bonding, as an alternative.
10. There are currently a very limited number of EHOs available for enforcement action throughout the country and the local authority resources need to be focused much more on non compliant landlords.
11. Although this is gradually changing there is a long legacy of mistrust between local authorities and landlords. This will very much influence landlord’s reactions to any new regulatory regime.
12. The PRS is an already heavily regulated sector. We must take account of the drip drip effect of any increase in regulation. Most landlords are small business people. We have concerns about continuous change which is affecting the PRS. We have issues about the every growing volume and range of legislation with which landlords in the PRS have to grapple.
13. A disproportionate number of properties in the PRS are older pre 1919 stock which are more difficult to deal with. The social rented sector has received a massive injection of public funds. The PRS is still, however, blamed for its stock condition but has not had this level of funding made available. On the contrary grants have been withdrawn.
14. The PRS raises very considerable challenges to upgrade its stock to meet energy efficiency requirements.
15. Section 21 is a cornerstone of the private rented sector, along with market rents. The RLA strongly opposes any suggestion that Section 21 should be whittled down e.g. in relation to retaliatory eviction.
16. The RLA believes that HMOs/Selective licensing and similar licensing are dead ends. We oppose any suggestion to extend the criteria for selective licensing.
17. We endorse the suggestion that letting and managing agents should be licensed through appropriate mandatory self regulatory schemes. We do have concerns regarding the overlap between landlords who self manage and letting/managing agents.
18. The fiscal tax regime is important. There should be Capital Gains Tax Rollover Relief; reduced VAT; capital allowances for improvements, major repairs etc; and extension of the availability of tax allowances for energy improvements.
19. There needs to be a national code of practice/management standard for the PRS.
20. The RLA is concerned at the current lack of available mortgage funding. We need look at a loan scheme for improvements in the stock condition of the sector including energy efficiency.
21. Local housing allowance is playing an increasingly major part in the operation of the PRS. It is vital that it is linked to market rents. The fundamental concern at the moment is the inability of tenants to request direct payments. This will lead to withdrawal of properties from this sector of the market, adversely affecting the most vulnerable in society. There are increasing concerns about delays in processing the claims for local housing allowance.
22. We need to develop industry based bodies to co-ordinate the development of the sector.
23. Looking at the Government’s response to the Rugg Review we welcome the clear statement of support from the PRS and urge the Government to live up to this.
24. We need to learn from the lessons of history and avoid excessive control such as that which applied under the Rent Acts.
25. Investment returns are very important. Landlords in the PRS have traditionally enjoyed a combined yield from both capital appreciation and rental returns but the capital appreciation is not currently available.
26. It is important to take account of the “cottage industry” nature of the sector and we have doubts about the success of any attempts to encourage institutional investment.
27. There are concerns about the uncertainty of risk based approaches to enforcement of standards. Landlords often prefer to be told what to do so long as it is reasonable and alternatives can be considered.
28. The intention not to introduce universal licensing is welcomed and supported.
29. The RLA supports the Government’s stance on the Law Commission’s proposals in relation to tenancy agreements and questions whether there will ever be a right time to introduce these.
30. The RLA has considerable doubts as to whether the current level of regulation is correct and, in any case, one needs to look at the type, quality and effectiveness of such regulation. You can achieve more by mass voluntary compliance and light touch regulation.
31. The RLA agrees with local authorities in their strategic housing roles. We do, however, have concerns about how easy it is to engage landlords in this process. Each local authority should be encouraged to have a standing consultative group to consult on local issues affecting landlords with representatives of landlords. There should also be a wider landlords’ forum in each area for all landlords to attend.
32. We agree with the Rugg directions of travel but have very considerable reservations about the proposals regarding the landlord registration scheme.
33. We welcome the idea of local authorities treating landlords as small businesses rather than just the subject of environmental health enforcement action. Any social lettings agency concept is supported but this should not take on a wider role.
34. There needs to be more involvement of other Government Departments in the process and we feel that one Local Government Department must take on the role of overseeing involvement of other departments in the PRS.
35. We have concerns about how effective programmes of engagement with the PRS will be in relation to energy improvement issues.
36. We acknowledge that landlord associations need to work together but this is a complex area because different associations have to operate at different levels. Not only do we need national landlord associations but we need local landlord associations alongside local authorities which are individually enforcement authorities. National landlord associations have a vital role to play in making representations to Government on behalf of their members.
37. As regards the proposed national register at the moment the RLA supports the principle of this so long as it is a straight forward statutory register of landlords. In particular details of property holdings should be excluded. It should be subject to renewal every five years; not annually. Only landlords who self manage properties should be included in the register. We need to look again at the definition of what constitutes management.
38. Access to any register should be limited to landlords themselves, tenants, prospective tenants (with prospective landlords’ consent), local authorities and approved self regulation schemes. Government Departments and similar bodies should not have access.
39. The register should be about improving the private rented sector; not tax collection. It does not need to replicate the existing land register.
40. There is considerable resistance by landlords to the proposed register. We have concerns about the complexity about compiling anything but a simple register and cost and IT implications of any such project. We do not believe that such a register is a magic bullet to improve enforcement anyway. We do not accept that such a register will be seen as supporting landlords; rather it will be perceived by landlords as a way of policing them. The register can, however, be used to disseminate information to the landlord community.
41. We are very concerned that the register may be expanded at a later date. Its contents should only be dealt with by primary legislation; not secondary legislation.
42. Landlords should have to use their registration number where they manage properties. Otherwise, the registration number that they use will be that of the licensed managing agent responsible for the property.
43. The register should not be used as making sales pitches at landlords nor as a landlord’s shop window. This would simply increase the cost and complexity of the register.
44. The register should be managed by an independent registration body.
45. EPC data should not be included in the register.
46. There should be a one off fee which should be kept to a minimum for a no frills register.
47. As regards the sanction for non registration this should not be criminal but could be based on a right to apply to the Residential Property Tribunal on the lines of a rent repayment order, coupled with non reliance on Section 21.
48. The Government must not underestimate the complete amount of evidence which would be required in bringing landlords on to the register. There needs to be extensive exemptions e.g. for owner occupiers who let their own property, holiday lets etc.
49. As regards removal from the register this should not be a points system. Rather, there should be a procedure for applying for a landlord banning order to the Residential Property Tribunal. Only local authorities and approved self regulation schemes could apply; not voluntary bodies.
50. Whilst we agree with the principle of written tenancy agreements only we do not believe that this is practicable. It could adversely affect landlords, and particularly tenants. Rather there should be a statutory default of terms which would apply to the extent that items were not covered by any written agreement that did exist or if the tenancy agreement was oral. We are particularly concerned that if an oral agreement was rendered invalid the tenants would, metaphorically, end up being evicted from the properties.
51. Licensing of letting agents/managing agents should be aimed at those who hold themselves out to the public in conducting such businesses.
52. The letting/managing agents businesses themselves would be licensed although there would need to be mechanisms to deal with individuals. Training should be a compulsory element, along with a code of practice, client money protection, complaints and redress.
53. There should be an oversight regulator but licensing should be conducted by a self regulatory body under a mandatory scheme overseen by the regulator. There is merit in a single ombudsman. Others managing another tenancy should be subject to the same requirements.
54. Voluntary Agencies often have a jaundiced view of the sector because they only see the complaints. Training in the management of the private rented sector should apply to their workers, as it should apply to local authority enforcers.
55. We disagree with any increase in the limit of £25,000 for assured tenancies but if it is increased it should be in line with inflation to around £50,000 or £60,000. Any existing tenancies, even if renewed, should be excluded.
56. We do not agree with the responses suggested that court possession processes are generally satisfactory, from a time perspective. Our view is that six weeks is too long for accelerated possession procedures and the target should be no more than 28 days for paper disposal. A landlord is in a unique position that he has no option but to take court proceedings and may well be providing free accommodation for a non paying tenant in the meantime. The 28 day period for possession hearings does not happen in practice. Landlords have concerns about the easy availability of legal aid to defend proceedings. Mandatory possession claims should initially be subject to paper procedures. We have concerns about the current reduction in resources available to the court system.
57. The RLA supports additional protection for tenants of landlords who default on their mortgages. The lender should be able to collect the rent more easily. The tenant should be able to remain in possession wherever possible until the end of their current tenancy.
58. Those in engaged in the PRS should do so on a professional basis. We fully agree that decisions should be made on the basis of sound evidence.
59. We agree that landlords associations have a vital role in assisting landlords and the RLA provides a wide range of support with further measures under development at the present time.
60. Accreditation schemes need to be subject to accreditation themselves. A national scheme is vital. Such schemes will help improve in professionalism in the market. They need to be based on volunteering to become accredited, self certification (subject to audit), compliance with the code of practice based on the national minimum standard and they should work towards providing the redress.
61. Whilst we agree that many of the Government’s proposed measures should work towards achieving the Government’s objectives of greater professionalism, better protection and improved stock condition we believe that some of the proposals, particularly the proposed national registration scheme in its current form, will severely and adversely impact on the PRS. We also believe that the Government fails in its response to address the various concerns which are currently influencing the development of the PRS.
RESIDENTIAL LANDLORDS ASSOCIATION
REPLY TO COMMUNITIES AND LOCAL GOVERNMENT RESPONSE TO THE RUGG REVIEW OF THE PRIVATE RENTED SECTOR
A. THE RESIDENTIAL LANDLORDS ASSOCIATION (RLA) AND ITS ROLE
1. The RLA is the voice of the residential landlord. We are one of the two national landlord associations operating in England and Wales. We now have over 7000 subscribers. This represents a considerably larger number of members since many subscribers are joint members or, in the case of our corporate members, there is an entitlement of up to 5 members per subscriber. We represent the owners of over 100,000 units of residential accommodation. We are a direct membership organisation. Our principal objective is to lobby Parliament and Central Government and we are very pleased to participate by replying to the Government’s response to the Rugg Review (the Response) , including involvement with task and finish groups.
2. We have a very wide range of members large and small, some with very extensive portfolios and others with just a few properties. Our members rent out properties in all of the sub-sectors identified by Julie Rugg in her report on the Private Rented Sector (Rugg). These include families, couples, single people, workers, those on benefits and so on, the whole range of rental accommodation. Although the primary requirement for membership of the RLA is to be a landlord in ones own right some of our members are also managing/letting agents. There is very considerable overlap as frequently the same people both let out their own properties and manage/let out properties belonging to others.
3. The RLA also works in conjunction with local landlord associations and other organisations representative of the Private Rented Sector (PRS), particularly the British Property Federation. For example the RLA is a member of the Leeds Residential Property Forum which jointly represents the vast majority of landlords and letting/managing agents in Leeds, which is, of course, the largest single HMO licensing authority in the country.
4. The RLA has recently appointed a very successful team of Local Government Consultants covering the whole country who provide training support and advice both to local housing authorities and landlords. We are currently involved in a very interesting project in Hull where the idea of self assessment of properties in particular areas as a part of a proactive enforcement initiative is underway. We have provided training for the Council and support for the local landlord association.
5. The RLA’s objective is to promote and assist professional landlords. At the same time it is important that we protect our members’ legitimate interests which includes ensuring that the law is properly interpreted and enforced both by Central Government and Local Authorities, as well as other public bodies. The rule of law is a paramount feature of the effective functioning of democracy.
6. The RLA is managed by elected directors who are themselves working landlords and in some cases managing agents. Through their day to day activities our directors are in touch with our members and landlords more generally. To gauge the views of our members we conduct regular questionnaires not just with our members but landlords more widely. We have a very extensive database of landlords. The RLA is a progressive web based organisation and uses the web to communicate with its membership, as well as the wider landlord community. For example we operate a very successful members’ forum which is regularly monitored. We are also in touch with our members and their particular problems through our very successful helpline. We have members meetings. We receive individual comment and feedback from members. These methods of communication, together with our regular contacts with local landlords associations, enable us to inform and formulate RLA policy so that it is in line with the general views of our members.
B. THE RLA INVOLVEMENT WITH THE RUGG REVIEW PROCESS
1. As a major national landlord association, the RLA has been very much involved with the Rugg Review process throughout. We made full detailed written submissions to Rugg and also had direct discussions particularly in relation to the detail of the proposed registration scheme.
2. Following the publication of the Rugg Report the RLA prepared its own Manifesto for the Private Rented Sector, including our response to Rugg. This is at Appendix 1. Our representatives have met with CLG to discuss various aspects of the Rugg Report. We believe that it is vital that Government pay full regard to the views of landlords including those expressed by the RLA on behalf of its members.
C. KEY THEMES FOR THE PRS
1. In the next section we will respond in detail to the Government’s Response and give our answers to the questions which the Response document poses. However we feel it is important, as part of the ongoing conversation with Government, that we identify and comment upon what the RLA believes to be some of the key themes relating to the PRS.
2. These are:-
(1) Developing a professional PRS
The RLA has long advocated the development of professionalism in the PRS, but in effecting these improvements we have to bear in mind that we are dealing with many different and varied landlords, the significant majority of whom are small business people. We all want to drive out the rogue landlords who do everyone, particularly tenants, a disservice.
(2) The tenant as a consumer
As we have pointed out in the past, the RLA considers that all tenants should be regarded as consumers or customers. Landlords provide residential accommodation as a service. If landlords treat their tenants and prospective tenants as consumers, regarding them as such, then the recognition of this concept would go a long way to help develop a professional PRS.
(3) The PRS as a vital component of the housing market
It is essential that the PRS is treated as a vital element of the overall housing market, alongside the owner/occupier sector and the social sector. Landlords in the PRS have an essential role to play and the ease of access to properties in the PRS is a key element in its effective functioning. It is arguable that traditionally too much emphasis has been placed on the owner/occupier sector to the detriment of the PRS, unlike the situation which applies in many countries in continental Europe. Nevertheless, the reality is at the moment that in the short to medium term we are likely to have a considerable number of “involuntary” landlords. These are people who are being forced to let out properties which they cannot sell. This situation applied in the early 1990s. The reality is that due to the cyclical nature of the housing market this will recur and serves to emphasise that the sector does comprise many many small landlords. The Government has to take this into account when it comes to regulation.
(4) Focus on Management - People v Places
The RLA has long argued that the emphasis should be put on the people in the PRS i.e. the landlords but especially the managers of properties; not so much on the places i.e. their properties. Traditionally the whole approach has been simply to concentrate on the properties and their condition. The reality however is that it is the landlords as people managing these properties who are important. We need to focus on management rather than ownership. If you get the management right then you will get the tenancy relations right and significantly you will also get the properties right.
(5) Active and Passive Landlords
We do have concerns as to whether passive landlords i.e. those who are not managing properties, because they let someone else such as managing agents manage the property for them, should necessarily be drawn into the net, particularly in relation to registration. Regulatory activity should essentially focus on management. This is a strong case for concentrating on property managers. We deal with this further below.
(6) Investment in the PRS
(a) Account must be taken of the very many different reasons why people become involved in the PRS as landlords. They may be professional landlords where the rent and their lettings may be their sole business activity. They may be part time. Very importantly, investment in the PRS is now seen as providing a pension on retirement. It is therefore a major factor in many peoples financial planning. Likewise, it may be seen as a preferable method of investment than say investment on the stock exchange.
(b) The traditional route to investing in pensions via insurance
companies has been called into question e.g. due to the problems surrounding Equitable Life. It is therefore very important that Government should encourage the use of investment in the PRS in this way either to provide pensions or long term savings. Our national savings ratio is already appallingly low. Take up of pensions is much lower than it should be. Everything possible therefore needs to be done to encourage this kind of investment in the PRS. We need to encourage this investment without throwing the whole weight of regulation at those landlords who are really investors and who do not manage properties.
(7) Training
(a) The best way to improve professionalism in the sector is to ensure that all landlords who are involved in managing properties (as well as managing and letting agents) are properly trained. We strongly advocate that compulsory training should be a condition of registration and the carrying on of business as a landlord either as a self manager or a managing agent. We would suggest initially a one day course, half of which would be devoted to starting managing and ending tenancies and the other half to the statutory regulation of PRS e.g. HHSRS fire safety etc. There are many such courses already in existence and landlords already avail themselves of training. Furthermore there needs to be periodic continuing professional development say every three years to keep landlords up to date. Only those who already undergo compulsory professional training or compulsory professional development should be exempt. Likewise, letting and managing agents should undergo appropriate training.
(b) It was the RLA who persuaded the Government to introduce provision allowing for training as a condition of HMO Licensing and also persuade Leeds City Council to make training a licence condition. At the levels of fees charged for courses currently, it is considered a reasonable requirement. Many of the problems encountered in practice are due to ignorance or misunderstanding. Training would help to significantly reduce these problems. E-learning at a distance is another option to face to face training..
(8) Accreditation/Self Regulation
(a) The RLA strongly believe that both Rugg and the Government response failed to sufficiently pursue accreditation and importantly its opportunity to develop accreditation into self regulation. This has already been the subject of a separate earlier submission to Government and this is attached at Appendix 2. We wish to reiterate that we are looking at the same laws and regulations applying to the accredited and the non-accredited landlord. The vital difference is the regulatory/enforcing body.
(b) We consider that it is essential that for membership of accreditation schemes pre entry vetting is needed coupled with probationary membership where there are reservations about full membership. Alongside this accreditation schemes themselves need to be approved or accredited. A national accreditation scheme for landlords is needed and the RLA has one in an advanced stage of development.
(c) There need to be incentives for landlords to become involved in accreditation:-
i. A marketing advantage
ii. Reassurance for the landlord member that he/she is up to date and is following best practice
iii. Very importantly, the carrot of being outside local authority regulation normally, and instead of being subject to the rules and requirements of the accreditation scheme.
iv. Accredited landlords should be exempt from HMO and Selective Licensing.
v. Accredited landlords should be exempt from existing statutory tenancy deposit protection. Deposits should be dealt with via the accreditation scheme with appropriate financial bonding in place.
On the other hand, landlords should not be forced into accreditation e.g. to join particular local schemes.
(d) As we mention below there is an historic distrust of local authorities and the opportunity to transfer out of local authority control would be a significant incentive to promote accreditation.
(e) Importantly, nationally there are only some 1600 environmental health officers (including technical officers who are not necessarily sufficiently qualified to inspect properties). Likely financial pressures as a result of cut backs in public finances resulting from the credit crunch will mean that their numbers either stay the same or potentially even contract. Due to lack of resources, the current regulatory regime is simply not effective. Rugg recognises this. Inevitably, local authorities whatever they may say concentrate on the better compliant landlord who comes forward licences his/her HMO or whatever. This is the effect of statutory regulatory schemes; the better end of the particular market which is being regulated, like cream, comes to the top. They have paid the fees and received the attention. Perversely the law then requires the regulator to concentrate on them particularly when resources are limited e.g. the obligations imposed by HMO licensing under the 2004 Act. The uninformed or worse rogue landlords by and large carry on regardless.
(f) What we need to do is to take a whole swathe of generally good compliant landlords out of the local authority net so that they can concentrate their efforts on the worst cases. This will result in significant financial savings. We believe that it is essential that Government acknowledges this and implements it if it is going to achieve its desired aims of excluding the bad landlords from the sector. Furthermore joining an accreditation scheme will in itself promote professionalism. Our scheme of self regulation would be far more cost effective and allow restricted resources to be concentrated where they are most needed. As part of accreditation landlords can self certify their properties and therefore, subject to there being appropriate audit provisions including inspections, this is a far more effective use of these scarce resources.
(9) Local Authority relations
(a) Unfortunately, although it is gradually changing, there is a long legacy of mistrust between local authorities particularly local authority environmental health inspectors and landlords. Many landlords speak of this to us. Much of it may well be a matter of perception but nevertheless it has a profound influence on an ongoing basis on landlord attitudes towards local authorities. Most but not all local authorities now recognise that they must engage with the private rented sector, particularly at a higher level within the authority. This view is not always shared by individual environmental health officers on the ground.
(b) These perceptions will very much colour the reaction of landlords to the Government’s proposals contained in their response to Rugg, particularly in relation to landlord registration. Both local authorities and landlord organisations need to work together constructively to remove these perceptions and in their case local authorities need to ensure that all environmental health officers and other officials involved are working in the same spirit. Landlord organisations for their part need to make their members aware of the changed attitudes that are now coming out of local authorities.
(10) Regulatory Burden
(a) Whatever some may claim, the private rented sector is already a heavily regulated sector. It is subject to 50 or 60 pieces of legislation; some of them very complex and lengthy. There is a whole raft of local authority regulatory powers including HHSRS and HMO licensing. There are then the other obligations which go alongside and to which landlords are subject such as gas safety inspections, energy performance certificates and furniture safety regulations. There are then contractual obligations e.g. section 11 of the Landlord and Tenant Act 1985 relating to repairs, together with unfair contract terms regulations. There are then the various safety regimes codes of practice etc. The list is endless.
(b) Each such regulation in itself may appear to be worthwhile but it is the overall burden, the drip/drip effect of the regulatory burden which is the problem. We would again remind Government that most landlords are only in business in a small way. Not only is there the volume but there is also the complexity of legislation and the attendant Codes of Practice guidance notes etc etc. All of this is one very good reason to support the Government view that full property licensing is entirely inappropriate. Rather than just pay lip service we do really have to make serious efforts to clarify and simplify the burden of regulation; not increase it.
(c) Another concern is how Government keeps proposing/initiating change (Mao’s concept of perpetual revolution seems to be alive and well in Whitehall). Not content with the huge changes introduced by HHSRS we are now talking of extending the Decent Homes Standard to the PRS and extending that concept itself.
(11) Investment Yields
The yield on investment from rental property is crucial. The sector has relied by and large on combined return from capital growth and rental yield. To make a profit, it may well be necessary to sell properties and realise the gain. This is impossible in the current economic climate. Whilst low interest rates may assist landlords who are on tracker mortgages again, inevitably, interest rates will rise in for a time to more normal levels. The Government Response recognises this issue. It does have the consequence of restricting money available for investment in measures such as improvement of conditions, eradication of hazards and improvement in energy efficiency.
(12) Property Condition
A disproportionate number of properties in the PRS are pre-1919 stock. For example they may not have cavity walls. This significantly increases the cost of improvement to promote energy efficiency. Unlike the social sector, the private rented sector is not subsidised by grants or the availability of cheap land. The social sector receives significant subsidies in funds and this has led to significant improvements over the last decade. Had there not been this infusion of funds the likelihood is that the stock condition in the private rented sector would have been at least as good as the historic state of the public sector or perhaps even better. The PRS is blamed for its stock condition but it has not had the millions thrown at it like the social sector.
(13) Energy Efficiency
The PRS faces very considerable challenges in upgrading its stock. These are challenges of the 21st Century so as to improve energy efficiency and reduce carbon emissions. The key issue is that the landlord has to pay but it is the tenant who benefits. As already pointed out, the PRS has disproportionately older stock which makes improvements more costly and more difficult to effect.
(14) Section 21 and market rents
Section 21 is a cornerstone of the PRS, along with market rents. The RLA is strongly opposed to any suggestion that Section 21 should be whittled down whether in relation to retaliatory eviction or disability discrimination. The untrammelled right to regain possession which has to date been accepted by all political parties, has been a major factor in the revival of the PRS. Any attempt to tamper with this would lead to an immediate loss of confidence and questioning by the landlord community as to the Government’s intentions.
(15) HMO and Selective Licensing
The RLA has long argued that licensing of this kind is a dead end. We elaborate on our reasons later on. We are strongly against any suggestion that the criteria for selective licensing should be expanded. We would argue that all of the licensing schemes introduced by the 2004 Act are scrapped.
(16) Letting and managing agents
The RLA endorses the suggestion that letting and managing agents should be regulated through appropriate mandatory self regulatory schemes. Landlords themselves are already subject to a significant level of regulation and the Government’s proposed registration scheme would provide for a form of control as from entry. In the same way, we acknowledge that both letting and managing agents should be subject to appropriate regulation to safeguard the interests of their landlord clients as well as tenants. Financial bonding is a key element in our view because agents frequently hold large sums of money for landlords. Separate client accounts are needed.
We do have concerns regarding the overlap between landlords who self manage but also manage properties for others on the one hand and professional managing agents on the other.
(17) Tax
As the response rightly points out the fiscal regime is extremely important. The furnished holiday lettings regime is unfortunately in the course of being abolished. The RLA has long argued that that regime should be applied to residential lettings generally. We have particular concerns namely:-
(i) Non- availability of capital gains tax roll over relief.
(ii) Vat is still charged at 15% (to rise to 17.5%) in respect of refurbishment repairs etc when under EU law it could be charged at 5%.
(iii) The need for a capital allowances scheme to cover improvements, refurbishments including major repairs. At present these can only be charged against Capital Gains Tax when the property is sold. Relief shall be available against income tax/corporation tax.
(iv) The need to extend the current availability of tax allowances in respect of energy efficiency improvements.
The RLA is disappointed that the Treasury has not been engaged in this process in an effective way. We come back to our concerns regarding taxation below.
(18) Code of Practice/Management Standard
The RLA has long argued that we cannot talk about improving professionalism within the sector without having a code of practice/management standard against which performance can be judged. Such a code is proposed for letting/managing agents in the Response. We would reiterate the concern that we have repeatedly expressed that a code of practice in relation to HMOs have never been implemented. We are at a loss to understand why. The RLA itself drafted up a code of practice. We feel that a general code of practice is needed for the PRS with specific sub-sections to deal with certain aspects e.g. HMO type properties. Such a code has worked well with leasehold management relating to the flat sector where the RICS Code of Practice has been well established, along with the similar code of practice for retirement homes. We simply cannot understand why such a code of practice cannot be introduced for the PRS. It would be a significant step towards professionalising the sector. There is already legislation in place enabling such a code of practice to be approved. A code of practice can set out in a simple way a landlord’s legal obligations as well as laying down good practice guidance.
(19) Finance
Mortgage funding is key element in the successful operation of the PRS especially for purchases and improvements. Although criticised by some Buy to Let Mortgages have been a huge success until latterly in expanding the PRS. The withdrawal of lenders from the Sector is of great concern. In the future, as with the whole economy, we must try to restrain asset bubbles, which inevitably burst. We need to look at developing loan schemes to provide finance e.g. for improvements and energy efficiency work.
(20) Local Housing Allowance
(a) Local housing allowance/housing benefits play a major part in the operation of the PRS. Currently, we are seeing more and more claimants who are people who have lost their jobs. It is vital that local housing allowance continues to be linked to open market rents, which are a corner stone of the operation of the private rented sector. We support the continuation of the current concept of broad market rental areas although we feel that in certain areas their boundaries need to be re-examined to look at local difficulties. Nevertheless, these should continue to be larger areas covering a broad range of localities.
(b) The fundamental concern currently in the operation of local housing allowance is the inability of tenants to request direct payments of benefit to the landlords. This is a key concern. The Government must realise that more and more landlords are abandoning this sector of the market. Payment of benefit to tenants is fostering more and more fraud. The benefit is paid for a specific purpose namely the rent but is being used for other things. Repeatedly landlords tell us of the various scams which they experience. We urge the Government to reinstate the original rules applicable to housing benefit so that on request benefit should be paid to landlords if the tenant so wishes. The current vulnerability policies are simply not working. Landlords are losing more and more income as a result. They are not going to continue to prop up this sector of the market and will vote with their feet.
(c) The RLA also has concerns at the increasing problems which are emerging with delays in payment of benefit due to increase in pressure resulting from the recession. Periods to process claims from the PRS are extending and greater resources need to be devoted to housing benefit claims. Otherwise, we will end up with more and more evictions which, in turn, will put more and more pressure on the homelessness sections of local authorities.
(21) Development of industry bodies
We need to develop new industry bodies to co-ordinate the development of the PRS with appropriate representation by all stakeholders.
The RLA believes that in formulating policies it is vital that these themes are taken into account to ensure a successful PRS going forward.
D. COMMENTS ON THE GOVERNMENT’S RESPONSE/ANSWERS TO QUESTIONS POSED
Introduction
1. In this section of our reply the RLA looks in detail at the Government’s Response to the Rugg Review, comments on proposals and answers questions which are put. These views are put forward against the background of the RLAs themes for the PRS outlined in the previous section.
2. In the Ministerial Foreword the Government’s objectives for the PRS are set out. We agree that it is vital that landlords generally perceive that the balance between the rights and responsibilities of landlords and tenants is the correct one. Landlords do not always believe that this is the case at the moment. Otherwise, over time landlords will disinvest.
3. The RLA is very pleased to note the clear statement of support from PRS in Section 2 Paragraph 2. This is something which we have called for and is a welcome development. It is important that this is fulfilled
History of the PRS
4. Looking first at Section 1 of the Government’s Response. Section 1 Part 1 of the Response refers to the history of PRS including the part played by the successive Rent Acts in the near terminal decline of the Sector. By imposing rent control and restricting the right to re-gain possession, great damage was inflicted on the sector with consequent damage to stock condition and to the wider housing market. We are still living with the consequences. It is imperative that we keep reminding ourselves of the lessons of history to prevent any repetition. In particular, the importance of the right to recover possession under Section 21 of the 1988 Act is a cornerstone for the PRS and any watering down of this right is wholly unacceptable to landlords. We welcome the changes to the PRS which have happened over the last 20 years as a result of the implementation of the 1988 Act.
Investment Returns
5. Paragraph 3 makes a very important point in that many landlords have relied on a combined yield from both capital appreciation and rental returns. Rental yield on its own is not sufficient. The work done by the Granger Trust in their report emphasises this point. This point is fundamental when we look at issues regarding stock condition and the improvement of energy efficiency in the PRS. At present due to the “credit crunch” the possibility of capital growth is virtually non existent and there is evidence around the country that rental levels are plateau-ing or even falling. This will clearly impact in the short to medium term on investment.
“Cottage Industry” nature of PRS
6. Paragraph 7 of the response refers to the “cottage industry” nature of the sector. This was identified by Rugg. In our view it is one of the great strengths of the sector. When it comes to regulation it is essential that we keep this as simple as possible with the lightest possible burdens imposed on landlords. We need to learn from the experience of HMO licensing and the difficulties in getting the message regarding the need to comply over to the landlord community. Frequently there is a lack of awareness among landlords. The vastness of the task which would be involved in bringing landlords on to a national register must not be underestimated in any way. This is why we believe in confining these measures to landlords who manage and excluding passive landlords/investors. Whatever the Government may try to do to involve institutional investors experience shows that on the whole they avoid the PRS. Organic growth is the preferable alternative, as Rugg points out.
Effects of Housing Act 2004
7. Reference is made in paragraph 9 of Section 1 of the Response to the effects of the Housing Act 2004, including tenancy deposit protection. We have considerable concerns about how these schemes are operating especially the unfairness of the penalty regime.
8. As regards HHSRS whilst it allows for flexibility based on risk it does create much uncertainty for landlords. Time and time again we hear views from our members that so long as requests are seen as reasonable many landlords much prefer a more prescriptive approach provided they can put forward alternatives which are then properly considered.
9. Another result of the 2004 Act has been the introduction of HMO and selective licensing. The RLA believes that licensing has been a disaster and that time will show that it is a dead end. HMO licensing itself was based on a fraudulent prospectus due to the grossly exaggerated claims of the risk of fire. Importantly the promise which was made at the time of the introduction of HMO Licensing of worst case first enforcement has not been fulfilled. As always it is those who join the club that are targeted. Licensing has been a bureaucratic and costly nightmare. The unscrupulous still continue to operate below the radar without any real and significant efforts to deal with them. We made trenchant criticism of the effects of licensing in our submissions to the Building Research Establishment and these are set out in Appendix 3.
10. The good news is that at least the Government is not now proposing the idea of universal licensing, so at least something worthwhile has come out of it. We applaud and support the Government’s rejection of across the board extension of licensing. Likewise, the Government is learning from Scottish experience where there has been widespread evasion of their licensing requirements.
Law Commission
11. The Response deals with the Law Commission’s recommendations in Renting Homes. The RLA endorses and supports the Government’s view that now is not the right time for the type of wholesale change to tenancy arrangements which the Law Commission proposes. Indeed, the question must be asked as to whether there ever would be a right time. This is because of the point we have already made about PRS being a “cottage industry”. You cannot in practice impose the kind of changes/burden which the Law Commission’s proposals entail on so many and varied small landlords. The landlord community is just not equipped to deal with this. Likewise, the tenants would be confused by any such major changes.
Decent Homes
12. Under the section dealing with the Rugg Review (paragraph 20), the comment is made about the PRS having the lowest level of decent homes. However, Rugg also comments on the high level of satisfaction. Compared with other Sectors the PRS may have less decent homes but there are very good reasons for this which cannot be laid at the door of the PRS –
(a) The huge amount of investment in the social rented sectors, “Council housing” and RSLs in the past decade or so.
(b) The ending to all intents and purposes of grant assistance for landlords in the PRS other than mandatory disabled grants.
(c) The 70 year legacy of the Rent Acts with low rents and consequent lack of investment.
(d) The very much older nature of the housing stock in the PRS (pre 1919).
(e) The historic low rental yields and dependence on capital return, which comes and goes.
(f) The stultifying nature of the Capital Gains Tax Regime. This inhibits sales of rental properties due to the non availability of Capital Gains Tax Rollover relief. A churn of properties is a strong driver for improvement because landlords tend to refurbish at the time of purchase.
(g) Other tax disincentives such as standard rate VAT on conversion and refurbishments and inability to claim capital allowances for these (they have to be claimed if and when the property is sold against Capital Gains Tax. Often it cannot be claimed e.g. because of death).
Appropriate level of regulation
13. The 2004 Act changes were significant and the question is posed as to whether “this is the right level of regulation”. We need to look at not just the level of regulation but also its type, quality and effectiveness. We believe that the current does not “pass muster” particularly because of our concerns about mandatory HMO additional and selective licensing. Furthermore, the use of HHSRS powers to require improvements to properties (over and above the general principle of building regulations only operate to require improvements if works actually take place) is a potential significant cost burden. These requirements go much beyond the scope of the 1985 fitness regime. Whilst this may be necessary e.g. to secure better protection from excess cold and fire safety in all properties (rather than just properties which were HMOs within the definition contained in the 1985 Act) these are yet another regulatory burden. At times they are unnecessarily burdensome. We comment on the effect of the regulatory and cost burden separately but this is one instance of it.
14. Our view of regulation is that you actually achieve much more in the long run if there is voluntary compliance by landlords “mass voluntary compliance”. This would only operate if landlords perceive the regulatory burden to be reasonable. A little can go along way. The general acceptance of gas safety checks and the introduction of fire resistant furniture and furnishings are examples of this, where there has been a broad measure of acceptance with the need for relatively little enforcement action. Likewise, it is a lot easier and more effective to spread of lighter touch requirements across the sector than those excessive requirements which, in reality, only benefit a few properties. Over zealous enforcement is counter productive as experience shows.
Strategic Housing issues
15. It is important that the local authorities incorporate the PRS in to their strategic housing roles. There has been historic antipathy to the Sector on the part of many local authorities. At long last this is receding but it is still a powerful perception among many landlords. A growing PRS is vital for all local authority strategic planning especially where there are barriers to owner/occupation as at the present time. The PRS caters for many different client groups (as Rugg correctly identifies) including those disadvantaged in society. For example, through its membership the Leeds Residential Property Forum the RLA has direct experience of drafting strategic policies for the PRS. It is easier said than done in practice. There are over 400 local authorities so it has to be done each time. Getting landlords with the necessary experience can be difficult as it is a very detailed time consuming exercise when it comes to formulating these plans it is not easy. Landlords who are small businesses do not always have the time and dealing with local government bureaucracy which can be a very stultifying experience. Some local authorities are being dragged to the table and are still just “ticking the box” rather than engaging in meaningful consultation.
16. Improving labour mobility is to be welcomed. However, to achieve generally mixed communities that enable social mobility to take place is an unrealistic expectation. The RLA has concerns about desirability, as well as the practicality of this kind of social engineering. Private landlords are housing providers at the end of the day. It is very difficult to work against market forces. It is surely better to deal with issues where there is a realistic prospect of making some difference, rather than trying to achieve idealised social goals.
Directions of travel
17. Paragraph 23 of the Response addresses the Rugg Directions of Travel. Broadly we very much support these. We endorse the need to proceed on the basis of sound evidence. The PRS is littered with examples of regulation based on spurious claims by interest groups, such as advice groups who are tenant orientated with a natural antipathy towards landlords in the PRS. Three examples of this come to mind:-
(1) The false statistics put forward by the bedsit lobby claiming the grossly exaggerated number of fires in HMOs. Commonsense should have shown that if they had have been correct the NHS would have had to provide a considerable number of extra specialist beds in burns units in hospitals.
(2) The CAB campaign regarding retaliatory eviction. In correspondence with the RLA they admit their flawed approach.
(3) MPs’ pressure to legislate on tenancy deposit schemes resulting in hastily cobbled together legislation which was rushed through Parliament without proper planning or consultation.
Lettings and Management Agents
18. In terms of housing management we endorse the licensing of letting and managing agents although we do have concerns about the overlap which will arise between this and landlords who self manage. We believe that this is a key issue that needs to be looked at. Experience shows that landlords both operate their own portfolio, including portfolios owned by family members, as well as operating/letting and managing agencies. We consider that the licensing scheme for letting/managing agents should be aimed at those who hold themselves out for carrying on business to the public at large as letting and/or managing agents. As always Government seems concerned about dragging everyone in to the net. Those who manage properties owned by family members (taking families as being widely not narrowly defined) should be excluded from the scope of such licensing. For example, many landlords being small family operators (e.g. husbands and wives) have arrangements with other landlords to look after their properties e.g. when they are away on holiday. This kind of arrangement should not be caught by licensing. Likewise, managing properties for friends. This is why we believe holding oneself out to the public as a letting/managing agent should be a key feature defining the scope of any licence scheme. People should not be caught up in such a scheme by chance arrangements. We are very concerned about this because there are many varied arrangements. We need to actually identify what is the mischief against which we are proposing to legislate.
Compulsory Training
19. Another key issue we need to look at is the reality that we cannot promote housing management and a more professional PRS without a move towards compulsory training. We deal with this in our theme on training in the previous section. Our view is that landlords should have to undergo a course if they are to be involved directly with property management as well as letting/managing agents.
Growing businesses
20. In principle, we support the idea of growing the business of letting. A professional PRS is a key factor in the broader housing market. However, we do have concerns that the small landlord should always be “active”. The great advantage of the Victorian concept of the joint stock company is the separation between ownership and management. There is nothing wrong for someone to be a passive landlord in the sense of investing in property (e.g. as a pension fund). Capital investment is to be welcomed and encouraged. What the Government should concentrate on is management of property in the PRS. As Rugg readily identifies many landlords are involved in “partnerships”. Usually one party only takes the lead in running the business and the management of various properties. Why bother with passive family members? Rather, concentrate resources on management. Likewise, if the landlord chooses to operate via a professional managing agent. We then need to concentrate on the agent; not the landlord.
21. One important issue which needs to be looked at is the influence that
managing and letting agents can bring to bear on landlords. If as a result of their codes of practice letting and managing agents are restrained from letting where there are major defects, e.g. category 1 hazards, then this in itself is a regulatory driver. This is a way of improving professionalism.
22. The idea of local authorities treating landlords as small businesses is very welcome. It would alter the traditional perception of treating landlords as people to be regulated by Environmental Health Officers which dominates current local authority thinking.
23. We welcome the idea of social lettings agents which concentrate on the functions referred to help bring the socially disadvantaged into the PRS. They should not, however, take on wider management roles.
24. The so called light touch licensing (or registration) scheme and the proposed redress arrangements are of the most concern to the RLA. Here in certain important respects we depart from this direction of travel as adopted by the Government and urge the Government to think long and hard before implementing some of the ideas referred to. We deal with this in more detail later.
Other Government Departments
25. Turning now to Section 2 of the Response, the RLA feels that it is vital that other Government Departments including H M Treasury are involved. Likewise, housing benefit is a vital component of the effective functioning of the PRS hence the need for involvement by the Department for Work and Pensions.
26. In terms of Government involvement with the PRS, we believe that there needs to be a lead Government Department which is automatically consulted and involved in relation to all matters affecting the PRS. This involvement should relate not only to proposals by other Departments but also those made by various other bodies operating nationally which can have a bearing on how the Sector is regulated and how it functions. We believe that at the moment Government thinking about the PRS across departments is not joined up. For example, at the present time there is a draft EU directive which could have profound effects in terms of alterations being required to properties in the PRS to meet the requirements of the disabled. The Government are taking the Equality Bill through Parliament which would make it difficult to regain possession e.g. due to rent arrears or other tenancy breaches by someone who is disabled because we have problems. The Walker Review of Water Charging could have a major impact with a requirement to notify change over of tenancies and to transfer over the responsibility of payment of water charges to landlords of HMOs. There are 3 significant examples. We have already made the point about increasing burdens on the sector due to regulatory creep so unless there is one Central Government Department who in some ways can act as a “Champion” for PRS landlords, especially the smaller landlords. Otherwise the sector can be overwhelmed resulting in disinvestment.
The regulatory process
27. The RLA agrees with the ideas set out in paragraph 4 Section 2. However, our view of what would constitute an “improvement” in the regulatory process as referred to in paragraph 5 differs from that set out in the Response. We feel strongly that accreditation for landlords through approved accreditation schemes providing self regulation should be a vital component in any new regulatory regime. Unless handled correctly the excess of registration will lead to widespread resistance by landlords and non compliance. These ideas of improvement put forward by Government will lead to considerable costs of implementation.
28. It may be right to pursue these issues notwithstanding the current financial climate but these must still be at the forefront of planning. It is vital that this impact is borne in mind particularly because of the very limited number of mortgage products now available to landlords in the PRS. Capital appreciation is a component in investment in the sector and is also of vital importance. We need to look at the long term issues quite rightly but the here and now is never far away from everyone’s mind. This is particularly so with regard to additional costs resulting from increased regulation.
29. The reasons why the PRS has problems with investment have already been explained. We can lump further regulation on existing regulation to try to solve the problems. This has been tried time and time again without success. Whilst regulatory action can enforce improvements individual properties, the lack of proper resources (which we have already highlighted) calls into question whether regulation in itself can bring about the desired improvements. Enforcement action can deal with the recalcitrant individual landlords but the resources for this approach are limited. We argue elsewhere that one way forward is to free up these limited local authority resources by moving good/compliant landlords into a different regulatory environment through self regulation. We would stress that the same standards would apply to them. There would also need to be pre-entry vetting to ensure that they are compliant.
Stock condition and energy efficiency
30. The question is posed as to how regulatory and incentive structure could work to bring about improvements in stock condition and energy performance for PRS properties.
31. So far as stock condition is concerned as always it is very much about the money available for investment. Declining property values, increasing mortgage re-possessions and reliance on insufficient rental income (due to a lack of capital appreciation) mean that the PRS faces considerable problems. In the meantime the social sector is significantly subsidised from public funds and the tax payer at large. One idea is that we need to look at a major loan scheme with loans being made for improvements, energy improvement etc.
32. We also need to look at those improvements that have been realistically achieved. As we have already pointed out a little spread over a lot of properties is much more beneficial overall than trying to improve what are a smaller number of properties to a high level.
33. The reality is that dealing with energy efficiency in the PRS is a very difficult issue and the Government are relying on the energy suppliers to target the PRS, but without any specific incentives. They will, therefore, continue to deal with the social sector which is more centralised and organised wherever possible.
34. When it comes to enforcement with 2.6 m PRS premises and only 1600 environmental health professionals it will take over 20 years to bring premises up to standard relying on enforcement. Enforcement should on focused on the worst landlords using accreditation to help separate good from non compliant landlords.
35. Energy suppliers should be required to deliver around 12% of their carbon emissions reduction (CERT) target within the private rented sector. If 12% of the over £3b available for CERT were targeted to the PRS it would make a significant improvement, but the Government is leaving it up to the energy suppliers who then target the social sector or simply send out low energy light bulbs. The Energy Savings Trust (EST) should be tasked with providing advice and financial assistance to the PRS as it is for all other sectors. This is currently excluded by the DEFRA funding agreement, although the EST is moving towards providing advice to PRS. The Government should ensure that the PRS is considered in all new initiatives aimed at dealing with energy efficiency as it is too often overlooked or ignored as it is seen as a difficult sector to deal with because of the multiplicity of landlords. There is a risk with the intended concentration on improving the energy efficiency of all dwellings that if the PRS is avoided by various initiatives that when action is taken the sector will further behind. We will end up with similar situation as with decent homes. No funding or assistance is provided to the PRS and then the Government use the resulting lower stock condition in the sector to claim poor standards in the PRS!
36. Market forces should be engaged – EEPH research showed that 58% of landlords are concerned about the energy efficiency of their premises (53% for tenants) – so this is a pool of willing landlords. Research showed that if the energy performance certificates (EPC) are explained to tenants and that they can compare the heating and running costs of potential rentals 25% will use them as the primarily deciding factor and 88% found them useful. 11% of tenants have moved rental premises due to the cost of heating or too cold. If tenants know about EPCs, as agents and landlords have to provide access to them, then market forces will help encourage landlords to improve energy efficiency.
37. 43% of PRS is pre-1919 and therefore will have solid walls a high percentage of sash windows etc. Until the Government. decides how it will deal with all solid wall and hard to treat properties the sector will tend to suffer from accusations of poor energy efficiency, much the same as for all similar premises..
38. The Landlord’s Energy Saving Allowance (LESA) needs to be retained indefinitely and expanded. You can improve effectiveness by:
• Extending it to heating systems and microgeneration installations
• Increasing the claim limit for solid wall insulation
• Promoting to landlords, agents and financial advisors via a co-ordinated sustained and integrated campaign.
• Increasing the limit per property.
Section 21
39. The RLA is adamantly opposed to any changes to Section 21 and disputes that the incident of so called “retaliatory eviction” is widespread. The right of a residential landlord to obtain possession automatically from an assured shorthold tenant under Section 21 is being called into question and this is of great concern to all landlords. Rugg is against changes in the law. Since the reforms which were carried out under the 1988 Housing Act a landlord who has followed the correct procedures can obtain possession as of right once the shorthold tenancy has ended. This has meant that an assured shorthold tenant has not enjoyed a statutory right to remain in occupation once the tenancy has been terminated but proper procedures have to be followed in order to evict the tenant. Any threat to Section 21 seriously jeopardizes the huge progress that has been made in revitalizing the private rented sector over the last 20 years or so.
40. Section 21 is currently threatened by the Citizens Advice Bureau’s campaign against so called “retaliatory eviction”. Hopefully the Government will accept the Rugg Review recommendation and reject any watering down of Section 21. The CAB campaign is a misguided high profile campaign to change the law so that a tenant alleging disrepair will be able to remain in possession. Unfortunately, much experience has shown that where possession is claimed on the grounds of rent arrears there is frequently a spurious or exaggerated claim by the tenant alleging disrepair. It is all too easy for the tenant to claim that the landlord has not carried out repairs. Frequently defences of this kind ultimately fail anyway but nevertheless they delay possession. In such cases arrears mount in the meantime. It is important to note that Section 21 is frequently used by landlords where the tenant has failed to pay the rent.
41. Uncertainty and delays obtaining possession will result if this proposed change is brought about will cause serious damage to confidence in the private rented sector. Landlords will question whether it is right to continue to invest. They will see this quite rightly as the first step in a downward spiral back to the bad old Rent Act days. The Rent Acts are now thoroughly discredited and we are still living with the damage which they inflicted. The CAB campaign will start the PRS on a slippery slope. Not only will landlords suffer but tenants also. More availability of property to rent and choice for tenants is the best way of helping tenants.
42. What the CAB fail to recognize is that, as the Rent Acts proved, restrictions on the landlords right to obtain possession leads inevitably to a shrinkage in the private rented sector. Landlords can then exploit this shortage as with any other shortage which works against tenants’ interests. More accommodation on the other hand means better choice and increasing standards of accommodation.
43. The Citizens Advice Bureau have given a number of examples of their allegations where they say that landlords have abused Section 21. However, they have failed to carry out proper research into their claims. This has been admitted to the Residential Landlords Association in correspondence. Rather the CAB have relied on a straw poll of Environmental Health Officers. They have not looked at their cases on their files in any depth. This is wholly unreliable research.
44. Let us learn from the mistakes of the past. Vigorous and careful research and analysis is needed followed by careful consideration of the consequences of proposed action. The RLA believe that any such problem has been magnified out of all proportion by the CAB. The way forward is to increase available accommodation; not introduce restrictive measures which will damage the market because potential investors, especially institutional investors, will be put off.
45. We are in the middle of a grave financial crisis coupled with a significant shortage of housing. The Residential Landlords Association cannot repeat too often how important it is to maintain the fundamental provision of the Housing Act 1988 which enables landlords to obtain possession following the notice only procedure laid down in Section 21. The CAB are attacking the foundations of the private rented sector and if this is allowed to happen in the long run, as with the Rent Acts, it will be the tenant who suffers just as much as the landlord. The Government should not tamper with Section 21.
Role of Landlords Associations
46. The Response then looks at the role of landlord associations. The RLA (along
with the NLA) are the 2 national associations. Both have direct membership in the main and have relationships at different levels with local landlord organisations. The British Property Federation also represents residential landlords but not through direct membership. It is important that landlords should have a choice of which landlord organisation they want to join. Some members are members of both the RLA and NLA.
47. It is also very important to understand the different functions of different
landlord organisations, both nationally and locally. Since local housing authorities are and will remain the local enforcement body then local landlord organisations will have to continue to operate alongside them. They may be spread over the whole of the area of a particular local authority or part only. They may represent different interests e.g. there may be a specific body for student landlords in a locality. There may be separate bodies which represent agents. Some landlord associations operate across a number of local authority areas. Again there should be choice as to whether landlords choose to join a national organisation or a local organisation or both.
48. These various landlord organisations do work together in different ways but
we believe that these individual organisations are a vital channel of communication between their landlord members and national and local Government.
49. All landlord associations very much rely on people who are willing to take
office and participate in association activities and affairs. Likewise with representative bodies of agents. The Government needs to appreciate that all landlord associations, particularly national associations, face a myriad of issues, often of a complex and technical nature. This reflects the modern regulatory burden faced by all businesses. They are not cheap organisations to run. As already pointed out, essentially they have to operate at two levels national and local because of the involvement of government both locally and nationally which leads to overlap and sometimes unavoidable duplication.
50. The ability of a national landlord organisation to deal with issues specific to a
particular locality is difficult. Landlord members in Plymouth do not necessarily want to fund problems experienced by landlords in Newcastle and vice versa. This is why a network of local landlord associations is needed. Government is arguing in its response to Rugg for greater involvement with the sector but Government does not necessarily recognise the difficulties attendant on organising and funding landlords associations particularly associations who are able to effectively engage with local authorities.
51. Part of the problem is the way in which change is brought about by
legislation. Using the introduction of HMO licensing as an example we had the complete nonsense involved both with HMO licensing application forms and HMO licensing conditions. Unfortunately the mantra of local delegation runs completely counter to efficient and economic organisation. Had there been a national HMO licence form consulted on with national landlord organisations and a set of national model licence conditions (as there are with planning conditions) much effort and time and money could have been avoided and the whole HMO licensing procedure would have been far more effective and efficient.
Levels of regulation
52. We are pleased to hear that the Government does not wish to go back to over regulation, but despite this claim, there are indications that this is what will happen in the future, particularly if the proposed National Register takes the form which the Government has indicated. The Government states that it does not wish to stigmatise the vast majority of good landlords. However, the kind of measures envisaged adversely and unnecessarily impact on them, as always. Being good landlords they comply, often grudgingly, and the bad landlords still get away with it. The reality is that ample powers already exist with extreme options such as compulsory purchase or management orders. Severe criminal penalties already exist e.g. £20,000 for not registering an HMO. The bad landlords still flout these because of limited enforcement resources. Public executions never stopped criminals committing crimes, even while the executions were in progress! This demonstrates the point that to heap further regulation on the sector and stiffer penalties does not work.
53. Hence the RLA’s concerns about regulation of the sector. Unfortunately and inevitably local authorities will encounter tricky landlords who do not co-operate. That is the reality of life is all aspects of society; not just the PRS. What is to say that these landlords will sign up to the new register? What is needed is a clear policy direction to deal with the minority at the bottom of the heap and for resources to be directed at these individuals by the local authorities. Local authorities need to be relieved of the responsible landlords by moving into the alternative regulatory regime which we have proposed. Someone is going to have to chase up those who do not register under the new National Register exactly in the same way as has happened with HMO licensing. Presumably this is going to be part of the role of local authorities. This is why we need to have simple requirements for any National Register.
54. At the same time we need to look at the middle market. The top end of course does not really need regulation anyway. So far as the middle market is concerned, i.e. the majority of landlords, we need to encourage professional approach for those who manage properties through accreditation and training. As accreditation spreads then from the tenant’s perspective the advantage of renting from accredited landlords become more and more apparent. This will happen in exactly the same way that stars and other similar systems have driven up standards for hotels etc.
The proposed National Register
55. As regards the Government’s proposal to establish a National Register for
private landlords. Our survey of members as well as talking to them shows considerable resistance. Opposition to registration is running at 70/30 against the proposal. The RLA does not object to the principle of the introduction of such a register if and so long as changes to the proposal are made as suggested by us. We are against the form of registration as proposed by the Government. We must remind ourselves of what Rugg proposed, namely the no hurdles register.
56. First and foremost any register should be restricted to landlords who manage properties. With properties managed by an agent then the agent would under the Government’s proposals be licensed. We firmly believe that the focus needs to be on management; people not properties. Those who control rented properties on a day to day basis in the sector are the ones who should be registered, rather than focusing on ownership. We need to look again carefully at the concept of what constitutes management; rather than rely on the concepts of “person having control” and “person managing” which is the historic basis under the Housing Act 2004. These are outmoded concepts based on the old idea of looking at the tenant’s rent book in pre-war days. Management constitutes a number of elements collection of rent, organising repairs and safety aspects (e.g. gas safety checks), managing the tenancy agreement once it has started and exit arrangements. Under our proposal a manager, either a landlord who self manages or a managing agent would take responsibility for each tenancy. It would be their registration/licence number which would appear in tenancy documentation.
57. The RLA is strongly opposed to the idea of a register containing lists of properties. We cannot support this idea and our members are vehemently opposed to it. Details should be confined to names, date of birth, (to aid identity) business address and contact details for each registered landlord. The register should be in two parts one for members of an approved accreditation scheme and the other for non accredited landlords. It should state the registered number.
58. The Government’s proposal for a data base for properties owned by landlords would replicate the land register maintained by H M Land Registry. All Government departments have a love affair with the idea of embarking on vast IT projects. Experience shows that these repeatedly fail at worst, or at best are subject to very significant cost overruns. Modern Government has an obsession for conducting surveillance on its citizens. This is yet another instance of this disturbing trend.
59. The proposal made is for the listing out of properties as at the time of registration. What about sales and purchases? Surely if the Government’s idea was to proceed, as properties were bought and sold, they would have to be taken on and off the register. This is something which the vast resources of the Land Registry are equipped to do so why would this have to be repeated? Unless the register was kept up to date the landlord register would be highly confusing. What about the tenant of newly purchased properties who checked the Register. It would not be there. This would result in endless follow up action, queries etc. For larger landlords a huge burden of checking and updating properties is being proposed.
60. The complexity of compiling this register must not in any way be under estimated; nor its cost both in time and money. According to the Government we have one million landlords with 3.4 million properties to be processed. Such a gargantuan task must be avoided; the register needs to be confined only to the most basic details.
61. To the cynic the real reason for its proposed enterprise is tucked away in the impact assessment i.e. “more efficient tax assessment”. H M Customs and Revenue have already got extensive powers which they use and readily extend. This consultation should be about what it is really about namely improving and professionalising the PRS not helping the Government garner more taxes. We must concentrate on improvements to the housing market.
62. The Government’s response says that the register will free up local authorities to use enforcement to better target the worst cases. We disagree. A data base is of itself not the key to better enforcement. It ends up as another self serving bureaucracy and the resources are concentrated on maintaining the register. You still have to get out on the ground to deal with individual landlords and individual properties. As we have repeatedly pointed out we need positive action through accreditation and self regulation to bring up levels of the sector over a period of time. Otherwise, we will end up with a situation which we now have with HMO licensing and, as happens in Scotland, the register will just be a list of responsible compliant landlords.
63. Local authorities can already identify properties they wish to target by access to the Land Register and the use of various powers to require information e.g. such as Section 16 Local Government (Miscellaneous Provisions) Act 1989 and specific powers under the Housing Act 2004.
64. One key matter is omitted in this proposal. Landlords who manage properties and who are registered on the register must be subject to compulsory training as we have already advocated above.
65. We agree that the register will be a way of disseminating information and updates. It would enable monitoring of follow up CPD Training to take place in our proposals regarding training were to be adopted.
66. Unfortunately for many landlords with the perception of the register will not be one of it being to support them; rather it will be seen as a way to police/regulate them. The Government has a habit of trying to persuade its citizens that measures imposed on them to regulate them are for their benefit. This is a delusion. Most emphatically private rented sector landlords will not see it this way particularly for very many small part landlords. Instead it will be seen as a big brother exercise, particularly at a time when there is rightly rising concern about the ever increasing interference by the State in our individual lives.
67. Please take it from us that if property details are required any proposed register will not work. It will become the subject of widespread resistance and there would be very considerable evasion and deception. It would lead to a growth in property ownership by offshore companies and the use of nominees. Just as universal property licensing in Scotland has not worked a register listing properties will not be a success. Why this obsession with ownership. Anyway what is meant by ownership? Are we talking about legal ownership (i.e. the power to dispose of the freehold upon which the land register is based) or are we looking at those who actually have a share or interest in the proceeds of sale of the property?
68. Whilst we acknowledge that a register has to provide a disciplinary sanction this is an issue which has to be approached with very great care by the Government.
69. Ideally the registration entry should continue indefinitely until death, it is cancelled by the landlord or following disciplinary action. Alternatively the RLA believes that registration of landlords should be subject to renewal at five yearly intervals. This both reduces costs and administration. At the same time it allows the register to be cleared of those who are no longer operating e.g. those who have died or stopped letting their properties altogether. A fee should be charged for registration but only initial registration. This should be no more than £50 per landlord. This figure is the figure supported by our survey respondents.
70. Time and time again experience shows that exercises like this grow like topsy. This has to be resisted. For example, we consider that the contents of the register should be stated in primary legislation in their entirety; not left to powers to prescribe additional requirements by statutory instrument. This would be a statement of the Government’s sincerity in keeping the register a simple “no hurdles” exercise. Time and time again civil servants and Government love to extend these things.
71. The response then poses a number of questions. We disagree that the response proposes the right level of information. As explained we strongly oppose the listing of property holdings whether at the time of registration or any other time. None should be required. The proposed list would, in any case, soon be out of date if it did not have to be updated on a real time basis as and when properties were sold or transferred.
72. We disagree that the register should be some kind of mechanism for sales pitches at landlords. All landlords could be given an appropriate starter pack. Forms are better provided by others such as Solicitors, law stationers, landlords associations and the like. For a start you have to get the right form. For example there are two variants of Section 21. When you get the form you need to know how to fill it out.
73. The use of the register for circulating changes in the law is a very useful way of disseminating information to the landlord community. The response suggests a public facing element for the register. We do not believe that the register should become a show window for landlords. It should simply be a statutory register of landlords. All the add on items will soon increase the complexity of the register particularly the setting up of the IT systems involved. It will make it a very unwieldy project. There is an old saying, “keep it simple stupid”. The Government’s track record for all singing and all dancing IT systems is appalling. This will be a statutory register set up at the expense of landlords and it should not have to contain all of these elements, because landlords, including their tenants, would inevitably end up paying for the vast cost overruns which would ensue. Companies and organisations already offer these kind of services. They should not have to operate in competition with a statutory scheme which is underwritten and subsidised by landlords in general and therefore inevitably in turn by tenants through their rents.
74. The purpose of the register should not be to give information about landlords to tenants. Rather, it should confirm to them that their landlord is registered and is therefore legally compliant in this regard.
75. If the Government is looking to have a register which is a shop window or which contains considerable amounts of information they must not underestimate the burden which will be placed on landlords if they had to update the information. They should not underestimate the inaction factor. Many landlord associations already operate websites e.g. for advertising properties. You may realise how difficult it is to keep this information up to date such as taking down properties when they have been let.
76. Questions are raised regarding EPC data. We are far from sure who this would link in to a national register even in the light of the Government’s ideas. The register could certainly be used to “mail shot” landlords about energy performance issues. Putting the EPC on a property register in this way is again another burden. You have to deal with updates and such. EPC information should be kept separate. Joined up registers seem to be another love of Government but they do not work in practice.
77. Details of funding the energy efficiency schemes could be sent out via the landlords register.
78. We agree with the proposal regarding the use of landlord numbers on documentation, if the landlord is self managing. Otherwise, it would be the licensing number for the agent.
79. We propose that the register should be operated and maintained by a statutory independent registration authority operating on a national basis. Obviously in turn the registration functions could be contracted out under the supervision of the registrar.
80. In our view, access to the register should be confined to landlords themselves (to check their own entry), local authorities and approved accreditation schemes. Existing tenants should be able to check the register by a request to the registrar. They should only be able to do this on proof of tenancy. Prospective tenants should be entitled to check the register but only with the consent of the landlord concerned and then again via the registrar. We do not agree that Central Government or other public bodies should have access to the register. Obviously statistical information could be made available in a form so that identification of individuals is not possible. Obviously, the landlord himself could give consent to anyone else to have access to his register entry if he so wished.
81. So far as fees are concerned as we have said elsewhere we believe that there should only be a one off fee and this can be kept to a minimum if there is a no frills register as we advocate. We support the idea of concessions linked to landlord organisations those who pay HMO fees, and those who are members of accreditation schemes. There should also be an incentive fee for early registration.
82. What the response fails to deal with is the sanction for non-registration. We would be opposed to criminal sanctions. Too many criminal sanctions have been created already by the Government which is why the criminal justice system is a “joke” to many.
83. We would be very strongly opposed to a sanction of complete irrecoverability of rent for non registration. The reasons for the failure in registration could be many and varied from the wilful down to the ignorant. The mandatory penalty system in relation to tenancy deposit schemes is already causing injustice. People have been penalised because of technical faults caused by the system operators. People have been penalised even after they have returned the deposit. A one size penalty fits all is unfair. We would therefore suggest that a system based on the idea of the rent repayment orders should be applied (although this of course would not need a criminal conviction). This could be coupled with non reliance on section 21.
84. We are concerned that smaller landlords in particular would be ignorant of the requirement to register. Again the Government should not underestimate has long it takes these things to filter through. Many people (and this is not simply landlords) have an ostrich in the sand approach to these kind of matters and simply convince themselves that it does not apply to them. Of particular concern are occupiers who let their homes out e.g. because they are working away. There are people who let out properties they inherit from relatives. Again, the Government should resist its much beloved idea of trying to scoop everybody up into a net which is simply not feasible or realistic. We therefore believe that there should be exemptions from registration in certain cases. Likewise, those who rent properties to family members, as well as holiday lets. Anyone letting out their own owner/occupied property should be exempted. Getting the “commercial” landlord on to the register is going to be a big enough task.
85. The response addresses the issue of the removal of the register. The RLA believes that removal should be limited to serious failures or significant repeated failures. Apparent serious issues may not always justify removal from the register because there could well be mitigating circumstances. Removal should be something done as a very much last resort. We believe that one should be looking at cases where landlords obviously flout the law or those who for whatever reason simply seem incapable of compliance. Even then this must be on the basis of proven misconduct/incapacity. Removal could be for a fixed period of time or indefinitely for the most serious of cases. There could be a period of supervision (effectively probation) for less severe cases. Suspension for a period of time would be another option.
86. We question of the idea of taking and managing properties belonging to those who are “struck off”. Management orders (and control orders before them) have proved unpopular with certain local authorities. For example, Leeds City Council, the largest HMO licensing authority, has encountered significant procurement issues in trying to find someone to manage stock under management orders. The lack of any accurate prediction of the volume of business is a particular issue, especially if one is expected to act on short notice. We also oppose the suggestion of depriving a landlord of housing benefit. Local housing allowance is paid to the tenant to assist the tenant with his rent. Such an idea would simply leave the tenants of such landlords vulnerable at the risk of losing their homes. They would also undergo considerable anxiety as to their position, to say the least.
87. Rather, our idea is that there should be a landlord banning order procedure to deal with landlords who are regarded as no longer suitable for registration. This is a serious step and must be subject to appropriate procedural safeguards. Where appropriate, an application could be made for the landlord to be banned. If granted the landlord would be struck off the register or suspended as appropriate. Arrangements would then have to be made for a licensed managing agent or a registered self manager to take over management of the properties. We need to look at the idea of having a panel of super managing agents who will take on responsibility for these properties and because of the difficulties involved be entitled to charge a premium on top of the normal management fee for managing the properties.
88. The RLA does not agree with the suggested process based on some kind of points system. This is too broad brush. In any case the one off breach might be of such seriousness it would justify immediate removal anyway. Breaches can come in all shapes and sizes and a points system is too imprecise to cater for variations.
89. Application should be made by enforcement bodies (i.e. local authorities) and if a scheme of self regulation were to be adopted by accreditation bodies concerned. Hearings should be by the Residential Property Tribunal with the right of appeal to the Lands Tribunal.
90. As indicated local authorities and accreditation schemes should be able to apply, but we do not think that voluntary bodies such as the CAB are equipped to do so. In any case they can pass on complaints.
Licensing/Selective licensing
91. When it comes to assessing the existing licensing regimes, we are opposed to the continuation of HMO and selective licensing. We are most concerned that the Building Research Establishment Report has not been published so that it could inform replies to the Government’s response. Why is this when the final report has been delivered to CLG?
92. We believe that selective licensing will be shown to have harmed areas by damming them as failing localities. Adding yet more criteria will only extend the risk of this occurring. Selective licensing has been embraced by a number of authorities, such as Manchester City Council because local politicians like the idea of exercising controls over landlords in the private rented sector. This has been done without any discernable programmes of improvement to operate alongside such licensing schemes in order to improve areas. Selective licensing is proving yet another example of a new toy that appeals to local authorities.
93. We are at a loss to see what selective licensing can achieve in terms of energy performance. HHSRS powers can be used to require individual properties to be upgraded to deal with excess cold. Area improvement schemes can take place without the need for selective licensing.
Written tenancy agreements
94. We agree with the principle that tenancy agreements should be in writing for the reasons set out in the Reply. The RLA has long advocated this and helped this trend by publishing its own Plain English Campaign, Crystal Marked, tenancy agreement. This is a well intentioned idea but on closer examination its attractiveness may be superficial. Years of litigation over the Statute of Frauds, the doctrine of part performance, and, since 1989, the provisions of the Law Reform (Miscellaneous Provisions) Act of that year should have taught us a few lessons by now.
95. What is to be the sanction for non compliance? Presumably it would be to invalidate any tenancy. It is unfair to the landlord that he gets no rent but even more unfair to the tenant who metaphorically gets thrown out of the property. We would again reiterate our concerns about the high level of incidence on these sorts of matters with many small landlords especially landlords who let out their own homes on a casual basis.
96. At the moment a tenancy agreement can be created by verbally agreeing the identity of the property, the identity of the landlord and the tenant, the rent and the length of the term. In practice it may come about simply by the landlord accepting the rent from the tenant.
97. In our experience quite a number of lettings are still verbal or are quite informal with few written terms. There is also the issue of the long standing verbal agreements from the Rent Act days.
98. The RLA considers the most practical way forward is to have a basic statutory form of default agreement in simple terms such as those appearing in most if not all standard tenancy agreements. Tenancies could then still be agreed orally.
99. The current exception under Section 54(2) of the Law of Property Act 1925 for short term tenancies of less than three years which can be oral should be reduced to say two years or perhaps even one year although we have doubts about a period of less than 2 years. The same rule could apply for short term lets including periodic tenancies which could still be verbal but the default tenancy terms would then apply. There are cases where there are only a few written terms, but if the agreed written terms fail to deal with an item which was addressed in the default terms the default terms would apply but if the written terms were different they would supersede the default terms (unless it was a statutorily compulsory term e.g. section 11 of the Landlord & Tenant Act 1985).
100. The requirement for a tenancy agreement to be by deed should increased to a term exceeding 7 years to accord with Land Registry Registration requirements.
Licensing of Letting and Managing Agents
101. The RLA agrees with the proposal to licence letting and managing agents. We have already expressed our concerns as to how one differentiates such letting and managing agents from landlords who self manage. Companies, partnerships, individuals and other business entities would be licensed; you would have to, however, put in place a mechanism to oversee/discipline individuals. Each licensed agent would need to be given a number which, as already explained above, would be used in tenancy documentation in respect of the tenancy/property which the agent managed.
102. Unlike for landlords there is in reality no current statutory regime. Financial protection is vital. We agree that such licences it should be compulsory and it should be overseen by an independent body.
103. The existing organisations referred to should be able to continue as self regulating bodies. We agree with the measures (i.e. code of practice, professional indemnity insurance, public liability insurance, complaints and redress) referred to in the Reply should be put in place. Training is also a vital element. Fee setting should be left to the market. We oppose any ban on administration fees and the like as proposed by the CAB.
104. Our view is that the independent body should act as an oversight authority supervising self regulatory bodies so as to ensure that they operate self regulation correctly. Essentially, RICS, ARLA, NALS, should be the bodies involved. Some may amalgamate or there may be a new self regulatory body which could be forthcoming so long as it is able to comply with the licensing scheme. There would be merit in looking into a single ombudsman scheme.
105. We agree that managing agents should be brought within the same regulatory regime where they operate in tenures other than renting.
Voluntary organisations/voluntary bodies/local authority advisers
106. The experience of landlords is that voluntary organisations involved with the private rented sector are frequently heavily biased towards tenants and can be hostile to the PRS. Inevitably they only see the problem cases and not the very many satisfied tenants. To maintain a balance we believe that it is vital that their workers receive appropriate specific training relative to property letting and management in the PRS. Landlords encounter the same attitudes with tenancy relation officers and local authority advice centres. They should receive similar training. In the light of the proposal that local authorities should treat landlords as small businesses local authorities, particularly larger authorities, should set up a dedicated team to provide advice and assistance to smaller private landlords. These should not be the same individuals who advise tenants.
Assured tenancies – maximum rent
107. We opposed in the past the suggestion to increase the level beyond £25,000. We fear that an increase to £100,000 would take far too many higher end tenancy agreements out of the scope of the assured tenancy regime and this is not necessary to protect either landlords or tenants in this situation. It appears that it has just being done to bring as many cases as possible within the tenancy deposit scheme. We consider that if there is to be an increase it should be in line with inflation since 1988 to £50,000 or £60,000.
108. We believe that in future any increase should take place in line with inflation.
109. The figure of £100,000 would exclude all but the very top end of the letting market and this is not the maximum figure that was intended originally.
110. Increasing the limit to around £50,000 to £60,000 would be appropriate if this is to be implemented.
111. It is important that there is a transitional provision so that any increase only applies to new tenancies entered into after the commencement date for the change. This should not extend to any tenancy which is already in existence or any renewal of that tenancy.
Improved redress
112. The RLA believes that on too many occasions landlords are ill served by the current judicial system and the position is likely to generally worsen as less and less resources are available to County Courts due to cut backs and public funds. It is not just the time taken to obtain a Court Order for possession, where possession is required. There are also concerns over the pressure on the County Court Bailiffs System. In our view any Court Enforcement Officer should be able to enforce an order for possession; not just County Court Bailiffs.
113. Our view is that six weeks is too long for a Section 21 Claim to be disposed of under the accelerated possession procedure. The target should be no more than 28 days for paper disposal and six weeks if a hearing is required.
114. Landlords continue to express concerns about delays in Court proceedings. The landlord is put in a very difficult and special position which is different to that of other Court users in that he cannot evict a tenant legally who is in arrears or otherwise breaching the terms of his tenancy. He/she has to continue to provide accommodation on an involuntary basis often without being paid for it. There are increasing signs of pressure on resources in the Court system which is leading to increasing delays. The Court service is experiencing cut backs. Because they are in this special position and are usually small business people it is imperative that priority be given to possession claims and wherever possible that these are speeded up. Otherwise, the inevitable consequence is an increase in unlawful evictions, or disinvestment by landlords. The 28 day period for a possession hearing does not happen in practice. There is a maximum period of 8 weeks. Reference should be made to Civil Procedure Rule 55.5.3. In reality hearings are usually scheduled around 6 weeks after the date of issue. However, Manchester County Court currently takes two months to issue claims!
115. Coupled with this issue, landlords frequently express concern about the easy availability of legal aid on the part of tenants to either pursue unmeritorious claims or dispute possession claims, without good reason. As their home is at issue there seems to be a more or less automatic tendency for the legal aid authorities to grant legal aid especially in relation to defending possession proceedings. In the past there has been experience of certain claims handling firms and firms of solicitors targeting specific areas for work e.g. distributing leaflets, on the back of legal aid. It is extremely difficult in practice to make successful representations to the legal aid authority asking for the grant of legal aid to be cancelled and this is a time consuming process anyway.
116. We take the view that all mandatory possession claims, including those under Ground 8, should be subject to a paper based accelerated procedure. If a Defence is then submitted in writing a hearing can be directed where appropriate.
Supporting the Market
117. The RLA supports additional protection for tenants where landlords default.
We believe that this can be achieved without adversely affecting the position of mortgage lenders. It can be done in such a way that enables the lender to receive rent assisting keeping down mortgage interest or even repaying the loan. The current situation shows that many mortgage lenders have already learned from their experience in the 1990. More and more they now tend to appoint Law of Property Act Receivers more frequently than in the past. We fully agree that steps should be take to protect tenants, so far as possible, as their position is overlooked when possession proceedings are taken against a landlord. The objective should be so far as possible to allow the tenant to remain for the duration of the current tenancy, especially where this is a fixed term agreement.
118. The key areas which need to be looked at if matters are to be improved are :
(1) At present the tenant has no right to be joined in so as to become a party to the proceedings or to be heard, unless there are particular circumstances which would make the tenant’s tenancy binding on the lender. One of the few situations where this would be possible would be where the tenancy was already in existence when the mortgage was entered into because the tenant’s interest would then become binding on the lender.
(2) There is no power for the Court to suspend an order for possession/adjourn proceedings to take account of the tenancy or the tenant’s circumstances.
(3) Even if the lender was willing to collect the mortgage repayments there are legal obstacles. Lenders wish to avoid going in possession in these circumstances with a tenant still in occupation because of the obligations which the law then imposes on them as mortgagee in possession. The usual step would be to appoint a receiver but this is a more costly process. We therefore need to look at ways to protect the lender’s position whilst enabling the lender to accept payment of rent and manage the property, without incurring the liabilities of the mortgagee in possession in this situation or having to appoint a receiver
(4) The normal period between issuing the proceedings and the hearing will be around six weeks anyway, but this could be allowed to extend the notice period between the date the order is made and the date of possession. This will be particularly useful in cases where there was only a short period outstanding before the tenancy ended e.g. up to two or three months.
119. Any right for the tenant to remain in occupation would need to be subject to the rental payments being made direct to the lender.
120. Unfortunately, the current situation can bring the Private Rented Sector in to disrepute where a tenancy is terminated prematurely through no fault of the tenant. The tenant then gets less than he/she originally bargained for when they entered into the tenancy agreement.
Private Rented Housing Investment Fund
121. The RLA awaits with interest the outcome of this initiative which has been promoted by Homes and Communities Agency. Nevertheless, as Rugg rightly points out, the strength of the PRS lies in the large number of small landlords. Traditionally institutional investors have shied away from this sector, which is indicative of the low level of returns which they perceive to be available, coupled with the complexities of managing PRS tenancies.
Mortgages for the Rented Sector
122. We have already commented on the key importance of the availability of
mortgage funding. As regards rent back schemes, quite rightly there have unfortunately been a number of abuses and these need to be tackled for the benefit of the PRS as a whole.
Improved engagement with the sector
123. We agree that those who are engaged with the PRS on a professional basis must do so in a proper business like fashion and make support available for landlords. One important way of helping the sector would be to reduce the flow of legislation and regulation, including the many and varied codes of practice which impact on the sector.
Improving the evidence base
124. Again, we agree that decisions must be made on the basis of a proper understanding of the sector. We welcome work to develop the English Housing Survey. One aspect which needs to be looked at carefully in this regard is the operation of the local housing allowance. The current regime for direct payments is a disaster and is leading to reduction in accommodation available to this important sub market.
Private Rented Sector and the Voluntary Sector
125. We agree that tenant focused organisations have a wrong perception of the PRS. They always tend to see the negative when there is much which his positive. This is because their focus is on complaints which they deal with in the course of their day to day advisory work. As stated elsewhere we agree that workers for these voluntary organisations should attend training so that they are made fully aware of the difficulties which can be encountered by landlords in managing housing in the PRS.
126. The RLA itself is working with various local authorities to help them both with training and accreditation. Landlord associations have an important role to play.
127. Currently, the RLA provides the following:-
(1) A helpline – giving specific individual advice
(2) A web based forum to enable members to exchange experience and views.
(3) A bimonthly “glossy” magazine.
(4) Regular email letters to our extensive data base to update them on developments.
(5) Very extensive website with a wealth of information
(6) e-learning.
(7) Face to face training sessions.
(8) Plain English campaign crystal marked Tenancy Agreements.
(9) Tenancy vetting/credit referencing
(10)Court Forms
(11)A Scheme to complete Tenancy Notices
All for £75 p.a. !!
128. We are currently developing –
(1) A national landlords accreditation scheme
(2) What would be the most comprehensive available fire risk assessment package for residential accommodation.
129. Local Authorities, in particular, could start dedicated advice schemes for the small landlord. These would need to be kept separate from tenant advisory schemes because of the perception of a conflict of interest. Likewise, for voluntary organisations there is very much the perception, particularly with small landlords, that they are biased towards tenant interests.
Local Authorities in the Private Rented Sector
130. We have already commented elsewhere on the perception of many landlords
as to how local authorities treat them. The reality is that an awful lot, however, has changed but nevertheless, there is a long legacy which needs to be overcome. There are many examples of constructive engagement and this good work needs to be extended and continued. As always there are problems of resources. For example, local authorities have limited resources to make available for local authority accreditation schemes, landlord forums etc. As the Response says, however, constructive engagement of this kind is still not, however, universal. For many it is still all about enforcement. Unfortunately, also, some consultation is still going through the motions; ticking the boxes.
131. For our part, we acknowledge, that local landlords have to be better resourced and more organised which we believe, from our experience, is an ongoing difficulty. For ordinary landlords who have to manage their properties engaging with local authority bureaucracy, the various departments and individuals involved with the local authority, can be a time consuming process. There are lengthy documents to absorb. Unfortunately there is a very great tendancy on the part of local authorities to provide this documentation at the last minute. Time and time again one goes to meetings where agenda papers have only been distributed a few days before or are even put on the table at the meeting. This is not real consultation. Local Authorities have to be made aware that it takes time to absorb this detail and landlord representatives are not full time salaried people. On the other hand the local authority attendees at these meetings are salaried officers who have time and resources available to them to prepare.
132. Whilst things are going in the right direction, we now have to start addressing the issues of how consultation is conducted and how landlords representatives themselves are supported, trained and resourced to engage in meaningful consultation. It is vital that local authorities do look at matters in the round from a strategic perspective. We would reiterate, however, that the fundamental approach must be to adopt a worst case first approach. As we have highlighted elsewhere in this response, we need to refashion the whole enforcement process in order to achieve effective change.
133. When it comes to day to day engagement we agree that the local authorities should be encouraged to look at the ways in which they improve their engagement with private landlords at a local level. It is important to get away from the old concept of doing this only through enforcement. We welcome the idea that small business units within local authorities should become involved. Again, local authority staff need proper training in understanding the technicalities and difficulties involved in PRS housing management. It should not be necessary for local landlord associations to have to encourage local authority members to involve the PRS in local housing strategies. They should do it anyway. The PRS is now acknowledged as a vital component of the housing market as a whole and it should be standard practice for local authorities to involve local landlords when drawing up these strategies. Likewise, local authorities do need to maintain proper evidence basis.
134. The RLA would propose there be a target/objective that each local authority should have a standing consultative committee comprising local landlord organisations and representatives who discuss local issues e.g. local housing allowance administration, operation of HMO licensing or selective licensing (where applicable) and how enforcement policies are working etc. Smaller groupings allow what can often be quite technical issues to be properly discussed and debated, outside larger scale meetings.
135. Alongside each local authority should have some kind of landlord forum which can be open to all landlords within the area. It is important that when setting agendas for these meetings, this is not simply dictated by local authorities but there is a genuine input from the local landlord.
136. There should be a full expectation of proper consultation on all issues effecting the PRS with local landlord organisations representatives.
137. This approach works to the mutual benefit of all. Contrast two situations regarding implementation of HMO licensing:-
Examples
Leeds
Leeds has a far better history of involvement with landlords. It is the largest single HMO licensing authority. Landlords and agents have responded to the challenge of engaging with the local authority by creating the Leeds Residential Property Forum comprises Leeds Property Association representing landlords, Leeds Letting Agents Association and the Residential Landlords Association. Before the introduction of HMO licensing a landlord consultative committee was set up. This committee played in large part in the preparation and trialling of the application form and subsequently in formulating license conditions, amenity standards etc. Documents were passed backwards and forwards and amendments were agreed. 2,500 licenses were issued without undue delay.
Sheffield
On the other hand in Sheffield as of now no HMO licenses have been issued for the bulk of properties. There have been long standing disagreements due to the intransigent attitude of certain local authority officials. A new student landlord association and the existing local landlords association had to combine and go to great lengths to bring about agreement, particularly in relation to license conditions and fire safety standards. This has taken a huge amount of time and effort with the need to engage professional representation. Credit is now due to the relevant Cabinet Member and Director of Housing who will have had to personally intervene to clear up the mess. A new private rented sector manager has also helped greatly. This particular situation is indicative of a legacy of hostility towards PRS which is now breaking down. Had proper consultation mechanisms been in place undoubtedly this situation could have been avoided and Sheffield would have issued its HMO licences long ago.
Local Lettings Agency
138. The RLA supports the proposal that every local authority should develop a
more co-ordinated approach to secure PRS tenancies for low income households. However, the temptation should be avoided of widening out the remit of these agencies e.g. to become involved in management of PRS stock. Essentially what we need are introduction agencies who will help facilitate the tenants into the PRS. Housing options in Leeds is an example. This will involve support e.g. tenancy deposit schemes. With the ongoing lack of availability of social housing PRS can contribute by making accommodation available. However, we would very strongly reiterate that until the issue of direct payment of local housing allowance is satisfactorily resolved, with the reinstatement of the right of tenants to request direct payment, it is not going to work. Likewise, difficulties which are going to be put up by discrimination legislation under the Equality Bill will make it harder for landlords to regain possession when dealing with more challenging tenants. As indicated by the Government’s response we need to look at packages and measures to assist depending on local conditions in the markets.
139. Experience has shown that some local authorities require landlords involved in these kinds of introductory schemes to become members of local accreditation schemes. This provides significant challenges for the accreditation scheme managers who often have limited resources. The reality is that landlords who are ill prepared for the accreditation schemes are being pushed onto these schemes. We need to ensure that the compliant landlords who wish to voluntarily engage with accreditation are encouraged, not forcing landlords onto this scheme who are not already best suited for them.
Improved coverage for accreditation scheme
140. We have already made the point on a number of occasions of the importance of developing accreditation. One or more national schemes are vital and the RLA is in the course of developing such a national scheme to cover the whole of England, as explained. When it comes to local authorities operating accreditation schemes themselves there is often a perceived conflict of interest between the role of the authority as enforcing authority and as scheme operator. Landlords themselves often regard such local authority schemes as yet another arm of local authority enforcement. We need to develop the idea of moving the operation of such schemes away from direct local authority management, although obviously retaining the involvement of the local authorities as an essential stake holder/funder.
141. To give accreditation credibility, particularly among tenants, tenant representatives, it is vital that accreditation schemes themselves are accredited. We argue this in our detailed paper on self regulation in Appendix 2. The RLA is supporting ANUK in its work of developing a scheme for the accreditation schemes. It would be a vital element of the RLA model for self regulation.
142. As we have already indicated we do not feel that either Rugg or the Government Response place as much emphasis on accreditation as is needed. Accreditation offers the main vehicle to improve quality and professionalism throughout the PRS but especially in the “middle” sector which as with everything in life the vast majority. We therefore fully agree with the proposal that accreditation should be made available to all landlords.
143. We endorse the view that now is the time to establish a basic standard for accreditation. This needs to be done along side a national minimum standard for the PRS, which we have already advocated. The development of a scheme for approving accreditation schemes should be led by the industry. It is already work in progress. Obviously, the Government needs to be involved in the process and to endorse the outcome.
144. In Appendix 2 we set out the elements which we feel accreditation needs to cover particularly to enable it to develop it to a model for self regulation. We firmly believe that this is the way forward for accreditation schemes in order to give them real purpose and effectiveness. In summary, accreditation should be based on
(1) responsible management by landlords
(2) pre-entry vetting for suitability
(3) landlords themselves volunteering to become accredited
(4) self certification
(5) auditing through inspections but such inspections should be limited so far as numbers are concerned but obviously expanded if there is a perceived risk
(6) operate according to a code of practice modelled on the minimum national standard
(7) provide redress with a complaints procedure and sanctions
(8) develop so as to provide redress
145. We address the advantages of accreditation in our theme regarding self regulation/accreditation in Section C above.
146. By concentrating any national registration scheme on the property of managers we can realistically develop a scheme for professional training and follow up continuous professional development. It is then far harder for those involved to claim ignorance! Many training schemes are already in place with a well developed syllabus available through ANUK which is already supported by landlord associations. These are already in place but now need to be rolled out.
147. As regards the cost of accreditation, we fully accept that accreditation is going to have to be much more funded by the landlord community themselves. The cost of operating different schemes will vary. Some may operate with gold standards. We feel that within reason it is best left to individual schemes to set their own fees. The requirements of the market will dictate levels to a large extent.
148. In its conclusion CLG asserts that the proposals set out in Section 2 of the Response represent a comprehensive package of measures that support the PRS and will deliver against Government objectives of greater professionalism, better protection and improved stock condition. Whilst many of the measures will work towards achieving these objectives, we believe that some of the proposals, particularly a national registration scheme which requires the listing of properties would have a severely adverse impact on the PRS. Furthermore, in our section of this reply setting out the themes which influence the PRS, we feel that the Government in its response has not grappled with all of the many and varied facets that influence the development of the sector. The PRS fully endorses the idea of improving professionalism leading to better quality in the sector, as well as advocating the idea of treating tenants as consumers. We believe that it is vital that the Government address these matters as well if its objectives are to be obtained in an effective way.
E. CONSULTATION WITH LANDLORDS
We have run a web based consultation with landlords and the results are at Appendix 4.
F. CONCLUSION
Rugg has been a refreshing look at the PRS. When reports of this kind are produced they are intended to be looked at as a whole. Unfortunately, on this occasion, as so often happens, the Government has cherry picked the recommendations and, again, as always seems to happen, has decided to significantly expand on the recommendation regarding the proposed national registration scheme. The rejection of universal licensing is applauded but the substitute registration scheme as proposed by the Government will provoke wide spread resistance and would lead to a costly and impracticable scheme. We strongly advocate a far greater degree of self regulation to hive off the generally good/compliant landlords in to a separate regulatory/enforcement regime; thus enabling local authorities to genuinely concentrate on the worst cases. We are fully supportive of improvement professionalism in the sector. Our ideas of self regulation through accreditation would bring this about, coupled with compulsory training of property managers and the introduction of a Code of Practice/Minimum National Standards. We would urge the Government to look carefully at our themes set out in Section C of this Reply as we believe that a better understanding of these would also aide the development of the PRS as a significant housing provider in this country. In particular, issues such as direct payment of housing benefit need to be addressed urgently to support the poorer sections of the community. The tenancy deposit scheme needs to be revisited urgently to address the iniquitous penalty scheme. Alongside this response any changes to the Use Classes Order should be abandoned and we have submitted a separate Submission to the Department regarding this. We have to recognise, however, the reality in that with an impending General Election will anything happen? We strongly urge the Government to look again, very carefully, at its proposals for the national registration scheme; otherwise much of the goodwill engendered by the Rugg Review will be lost and it will be a missed opportunity to really bring about change and increasing professionalism in the PRS.
The following Appendices were submitted along with this RLA submission. Clicking on any of these links will open a new browser window
Appendix 1:
The RLA manifesto for the Private Rented Sector
Appendix 2:
A new enforcement model for the Private Rented Sector
Appendix 3:
RLA Submission to Building Research Establishment’s Review of Licensing
Appendix 4:
RLA Survey Results : Government PRS Review