He started by saying that the PRS is now a key feature of the housing market and one which the government needs to encourage. He looked briefly at the prospect of large scale investment in the sector (most private sector landlords have only a few properties) such as the Kick Start delivery initiative, and concluded that it remains to see if these actually result in any developments, although it could happen.

The Rugg Review
Turning to the Rugg Review, this was commissioned by the government after the Law Commission (under Professor Partington) had spent several years carrying out an extensive consultation and research exercise in the same areas. Needless to say, there is a strong suspicion among many that the Rugg Review was commissioned because the Law Commission’s report did not say what the government wanted!

The Rugg Review recommendations can be summarised as follows:

• A ‘light touch’ licensing system for landlords and mandatory regulation for agents
• A new independent complaints and redress system for consumers
• Tax changes to encourage good landlords, and changes to stamp duty to help them buy more properties
• Look at ways to see how PRS can help lower income families, including support for landlords willing to house vulnerable people
• Local Authorities taking steps to better understand the sector and do more to support good landlords, tackle bad ones, and promote tenants rights

The Law Commission was disappointed that it decided against the legal changes recommended in its reports, but it seems that the Rugg approach reflected more closely what government officials were thinking.

The Government’s Response
This was published in May 2009 and was discussed on this blog here. The issues which it looks as if the government will want to take forward are:

• The National Register of Landlords
• A requirement on landlords to provide a tenancy agreement
• The compulsory licensing of letting agents, and
• The raising of the AST threshold limit to £100,000.

The report confirmed that the government are not proposing to implement the Law Commission’s proposed legal changes (note – this recommended two simple tenancy types – one for the PRS and one for social landlords – to replace the current plethora of tenancy types, which many find very confusing) as it could lead to too much upheaval in the market.

However Professor Partington does not agree with this view. In his opinion, for the PRS to achieve its full potential, it is essential that there be a much closer analysis of how the PRS and the social rented sector interact. The Law Commission’s recommendations would have allowed for this.

‘Light touch’ regulation
After its mammoth consultation exercise, the Law Commission did not feel that mandatory self regulation would be appropriate plus it was likely to prove too expensive. However the Government have become attached to the idea of a Landlords’ Register.

The governments paper though, does not appear to address the key question of whether ‘light touch’ licensing will actually be effective in driving out bad landlords. The Law Commission had come to the conclusion that any licensing scheme would either be ineffective or not light touch. This is why they recommended instead, a program of self regulation via landlords associations’ and local authorities working together to promote accreditation and standards.

Tenancy agreements
However Professor Partington was happier with the conclusions on tenancy agreements. The question here however is whether:

1. There will be minimum standards set, allowing individuals to draft their own agreements, based on these standards, or

2. Whether prescribed model agreements will be set out in legislation, which landlords can add clauses to, to reflect individual circumstances.

He suspects the latter, and does not think that the first option would work.

Licensing of letting agents
There is a large body of opinion in favour of this and it is likely that the government will do this, although the paper is short on detail. We will have to see what happens.

Conclusion
Although it looks as if the government are going to do something, it is not entirely clear what this will be. The Conservatives however, in their recent Green Paper have indicated that they will (if they get into power) conduct a review of the PRS to see how it can play an enhanced role in the housing market.

Maybe this indicates that the Conservatives are unhappy with the approach taken both by the Law Commission and the Rugg Review and are looking for a further review to justify a different approach.

(With thanks to Professor Partington for allowing me to use his notes for this post.)

Supporters of the Law Commissions long project and reports, will be pleased to see that this is acknowledged and referred to in the response which confirms that many of the Law Commission’s ideas are being considered. However it also states that they do not think the time is right for the extensive changes in tenure proposed in the Renting Homes report.

No doubt further comments on the paper will be made later, but on a preliminary reading, the following points stood out for me.

The report acknowledges that most tenants are satisfied with their landlords and that the majority of landlords provide a good service. The main thrust of the proposals therefore are intended to support good landlords, improve standards generally across the sector, and drive out the persistent bad landlords.

National Register
The paper proposes a national register for landlords. This will be ‘light touch’ and mostly web based. Landlords will need to register their name and address, and details of their property holdings, and pay a small fee annually. They would then be given a number which would have to be used in all landlord related paperwork such as tenancy agreements, tax forms, benefit claims, and court proceedings etc. The register would be run by an independent organisation.

The benefits of the register for government is that it would give them accurate statistics, and they could use it as a way of disseminating information to landlords (such as regarding energy efficiency standards). It would presumably also (although this is not specifically stated) help the revenue with tax collection.

Landlords who fail to comply with the regulatory regime or where there are ‘persistent abuses’ will be removed from the register, be unable to let out property by themselves, and will probably be ineligible to receive housing benefit.

Tenancy agreements
They are considering introducing mandatory tenancy agreements, as suggested by the Law Commission, and are seeking views on how this should best be implemented.

Rent Limit
They propose increasing the limit above which tenancies are not longer ASTs to £100,000 pa (currently it is £25,000 pa)

Regulation of letting agents
The paper concludes that voluntary regulation of the letting agency sector has not worked, and propose full compulsory regulation of all letting agents. This would include

• entry requirements
• a code of practice
• business and consumer protection (e.g. indemnity insurance, client protection schemes, complaints procedures)
• monitoring of compliance by an independent body
• enforcement powers and sanctions

Dispute resolution, Courts, etc
The Law Commissions proposals put forward in their Proportionate Dispute Resolution paper are being considered in conjunction with the Ministry of Justice.

Encouragement of investment
They are considering setting up a Private Rented Sector Initiate to encourage institutions to invest on a large scale and in the long term

Support for tenants being evicted by landlords mortgagees
They will be looking to change the law to ensure that tenants in this position are given at least two months notice to find alternative accommodation.

Tax changes
Significantly the report simply says that the treasury is aware of changes proposed (e.g. by the Rugg Report) to the tax system to support the private rented section, and will keep them under review. Which presumably means that nothing will happen.

Local Authorities
They discuss how local authorities can better engage with local landlords, perhaps by dealing with them through their small business unit rather than via environmental health, and by giving better training to staff. Many local authorities are of course already doing this sort of thing.

Accreditation
They would also like to build on the various current accreditation schemes for landlords, perhaps with a view to developing a national standard.

There is a lot more in the report (which runs to 37 pages) but the above gives a flavour of what it says.

The full report can be found here

The paper is also a consultation and various questions are asked at various stages for feedback on particular points. These should be submitted to the department by Friday 7 August. Note that I hope to be able to set up one of my online answer forms for this shortly, so watch this space.