On 6 April provisions of the Housing and Planning Act that directly affect landlords will start to come into force under a recent commencement order, click here. These only apply in England as most of the Act has no application in Wales.
The two key areas which will come into effect in April are:
- the widening of Rent Repayment Orders (RROs); and
- new fixed penalty notices.
Rent Repayment Orders
The Rent Repayment Order (RRO) has been around for some time in relation to the failure to licence a property under an HMO or selective licensing scheme created under the Housing Act 2004. They allow a local authority who is paying housing benefits or a tenant to apply to the First Tier Tribunal (FTT) to recover up to 12 months of benefit payments or rent respectively from the landlord. While a local authority can seek an RRO without securing a criminal conviction first the tenant is more limited and can only act on the back of a criminal conviction or an RRO obtained by a local authority.
The new regime widens the grounds on which an RRO can be obtained and also makes the process of getting one far easier. An RRO can now be sought for a broader range of offences under the Housing Act 2004. This means not just failing to license but also breach of an improvement notice and breach of a prohibition order. It is also possible to seek an RRO where the landlord has committed an offence of harassment, unlawful eviction or violent re-entry. Later this year a breach of a banning order will be added to this list.
In addition, both local authorities and tenants can seek an RRO directly without the need for any form of prosecution first. However, if there has been a prosecution or the local authority has issued a penalty notice for the same matter then the discretion of the FTT is very limited and they are expected to order the entire sum claimed, potentially all the rent for the last twelve months. Where no prosecution or penalty notice has been issued then the FTT has a discretion and should order the amount they consider reasonable in the circumstances. In the past, this has led to the FTT deducting the landlord’s expenses (mortgage, insurance etc.) from the sum awarded. Whether they will adopt the same approach under the new regime remains to be seen.
A further regulation has been made to specify how local authorities must deal with money recovered from RROs, click here. They are permitted to use any money recovered toward enforcement costs associated with private rented sector work. Spare funds after that go to the Treasury.
There is meant to be government guidance on the operation of these provisions but at the time of writing it has yet to appear. It is expected at some point in the week commencing 20 March.
The new provisions also place a local authority under a duty to consider seeking an RRO where they can and is also empowered to assist tenants in applying for an RRO, either by providing advice or even by conducting proceedings.
New Fixed Penalty Notices
The new financial penalty regime also comes into force on 6 April. This allows local authorities to choose, instead of prosecution, to levy a financial penalty of up to £30,000 in respect of any offence under the Housing Act 2004 (eg. no licence, breach of licence condition, breach of HHSRS enforcement notice etc). Again, breach of a banning order will be added later.
The penalties are for each offence committed and so a landlord with no licence, no electrical testing certificate, and a dirty bathroom (a licensing offence and two offences of breaching the HMO Management Regulations) making a total of three offences could find themselves facing a fine of anything up to £90,000. However, the local authority is not supposed to issue the maximum fine in each case and the forthcoming guidance from the government is intended to assist in setting an appropriate penalty for each matter.
A landlord presented with a financial penalty has 28 days to make representations to the local authority after which the local authority will consider these and issue a final decision notice. After the final decision, the landlord can, within 28 days, appeal to the FTT.
As with RROs a local authority may retain any money recovered from financial penalties to meet any cost and expense relating to enforcement in the private rented sector with any residue being passed to HM Treasury.
Landlords should be aware of their obligations under the Housing Act 2004. Lots of properties are HMOs without needing to be licensed and the new penalty regime enables local authorities to enforce against these more effectively. It is likely that many local authorities will invest increasing time and effort into enforcement. As an upside, this may make local authorities re-consider the value of licensing schemes as the new abilities to seek financial penalties may be more effective in tackling bad landlords. It should also be noted that tenants will be motivated to carry out their own investigations and enforcement action with the possible reward of recovering their rent.
Local authorities need to develop clear enforcement policies in relation to when they will use financial penalties as opposed to prosecution and how they will decide on the appropriate fine level. Similar policies will be needed in relation to RROs and what level of support is to be given to tenants.
At the same time, local authorities will need to be clear on how much they are spending on private sector enforcement and therefore how much RRO and financial penalty monies they are entitled to retain.
The Housing and Planning Act changes are likely to revolutionise enforcement in the private rented sector. Landlords will need to ensure that they are scrupulous in complying with their obligations. Local authorities will need to develop detailed policies and a clear strategy in relation to their objectives in relation to the private rented sector and how they will achieve them.
For more information:
- David smith on Reforms to Rental Housing
- Housing and Planning bill – RLA Written evidence
- Housing and Planning Bill – Oral Evidence Tuesday 10th November 2015
- RLA Documents and Guides
- RLA Training