Statistics have shown that the private rented sector is increasingly important – and is set to become more so.
Over the next 20 to 30 years it is likely to house an increasingly larger proportion of middle to low income households and families.
Given its importance generally to society and the cost to us all through our tax bills, of poor housing (not least to the National Health Service) I have suggested that we can no longer allow this sector to remain unregulated (a decision already reached in Wales).
The framework could work something like this:
1. Compulsory accreditation and regulation.
Letting agents
All letting agents would be required to obtain proper qualifications and be regulated by a national body as a condition of being allowed to stay in business. In the same way that solicitors are.
This need not be that difficult. We already have excellent training programs run by national bodies such as ARLA. The better agents already provide regular training for their staff.
Agents should also be required to hold clients and tenants money in separate ring fenced accounts. As more and more cowboy agents go bust taking their hapless customers money with them, it is being recognised nationally that this must happen. I don’t see how anyone can argue against it.
I also think that they should have their accounts audited annually, as solicitors do. What do you think?
Landlords
All landlords should be required to register as a landlord and register the properties to be rented out in a national rented property register.
I don’t think this is something that can be left to local authorities as standards need to be imposed nationally. Otherwise, if different landlords in different areas are subject to different standards this will be perceived as unfair (as the current licensing fees regime is seen as unfair now).
If a landlord wants to manage his properties himself, then he would need to become accredited as a landlord. This could be based on the accreditation schemes that already exist. For example the UKLAP already has an accreditation system and training courses for their landlords.
Any landlord who did not have the accredited landlord qualification would be required to use an accredited agent.
2. A national rented property register
All rented property would be required to be registered as a condition of being rented out. The landlord could either nominate himself as the manager (if he is accredited) or nominate an authorised letting agent.
Part of the register would be closed (for example landlords renting through an agent could choose to have their ownership kept confidential). Some records could be available just to tenants of that property, and others could be available to anyone conducting a search of the register.
All or part of the cost could be met from registration fees, fines for non compliance, and fees charged to anyone searching the register.
Here are a few advantages that would flow from this:
- It would help prevent fraud – for example maybe it could be linked to the Land Registry records so fraudsters could not purport to rent out properties they do not own
- It could contain links to tenancy deposit and EPC records to allow tenants to check these important matters
- If a property was found to be sub standard, say after an HHSRS inspection by a local authority, any category 1 hazards could be noted on the register. This could prevent ‘retaliatory eviction’ as once the hazards were on the register, evicting the tenants would not help the landlord. The only way they would be removed would be by getting the work done.
- It would also help government plan for the future.
At present no-one really knows how many landlords there are in the private rented sector. We know (more or less) how many rented properties there have been in the past from surveys and the census, but we don’t know exactly how many there are NOW.
How can government plan properly for the future if they do not know the true situation?
3. Carrot and stick
The new system could provide benefits for accredited landlords. For example:
- more favourable taxation
- access to grants to improve their properties
- maybe online guidance, forms and information
However landlords who failed to register could:
- be fined heavily
- be unable to use the section 21 procedure to evict their tenants, and
- tenants could be entitled to withhold rent and claim back rent already paid
It is also possible that where a landlord persistently refuses to register and/or put his property in proper repair, it could be taken into pubic ownership, repaired and then used to house the homeless (only as a last resort – but why not?).
No excuses
Many landlords will not like any of this. However it is clear that the sector cannot regulate itself (any more than the financial sector can). Individual landlords and agents may be excellent, but there will always be those who fail to comply with voluntary standards.
With the increasing importance of the private rented sector, this is no longer acceptable.
Having a national register could also help in other areas. I’ll be looking at some of these over the following weeks.
I agree with all your ideas Tessa. Any system has to be fair to both landlords and tenants and what you propose is. Although I doubt many landlords would take that view.
The Welsh proposal talks of a nationally set standard adminsitered by a local authority, which effectively deals with the frustration of having local standards.
This doesn’t need to be a massive cash-cow milking exercise as so many landlords are worried about. I like the simplicity of having a system which says “Here are the rental standard – if you breach them, you can no longer rent without uising a professional to manage”.
And lets face it, basically all that is being suggested is a way to remove cowboys from the industry easily and quickly, which in turn professionalises the PRS which decent landlrods and agents call for anyway.
I have long been on landlord’s side in much of the discussions and I both hear and sympathise with their concerns but as you say, nothing is going to happen from inside the industry, despite those concerns so its time to impose the standards.
For Landlords and agents who run a tight ship, rent out decent properties, follow legal procedures it will just be business as usual because they do things properly anyway.
Thanks Tessa (and Ben)
1) Have we not had it all over the media recently of an agent (a member/ex member of NALS) going bust and a shortfall in the client accounts?
2)Re Land Registry link, you don’t have to be the owner to be the landlord. It is common enough to, with the owners consent, rent from the landlord and sub let the property. This is perfectly lawful in principle.
3)Sorry but deposit protection and EPC document links are a very weak “benefit”. the vast majority of tenants are not currently interested in the EPC. More work is needed to raise awareness of the benefits and then tenants would still need a choice of properties to rent a different one (this is a supply and demand issue). Deposit protection document have by law to be given to the tenant anyway so there is little gain there.
4)You seem to suggest that under HHSRS you would not be able to serve a section 21 notice till the work for a category 1 hazard was done and this would be some sort of benefit. Firstly, it is not always possible to remove a category 1 hazard (simple example of a listed building with a steep set of stairs). Secondly, the current legislation does not stop just because the tenant is evicted. If there is a prohibition order on the property it applies just as much to another tenant or even a future owner occupier. Your suggestion would not really therefore change the fact the local authority can enforce anyway.
5) You suggest taking a property into public ownership. We already have management order for properties that are not properly run. I cannot see legislation of taking someones property away surviving a Human Rights challenge.
I am not against the argument that the sector cannot regulate itself. However the legislation is there to regulate it but is not used by the local authorities. Many of the worst landlords are committing criminal offences in what they do, why do we think if they don’t follow the current laws they will follow another new law? The trouble is that the good landlord and agents make less money from renting their houses because of higher costs incurred in good management Therefore if you increase the costs to landlord the first ones for whom it is not attractive to stay in that investment are the very ones we want to encourage.
The coalition government stopped the Labour proposals to license all landlords and agent on the basis that enough laws exist, they simply need to be enforced. You are not fundamentally suggesting any new standards for rented properties, for example you are not saying will have to have appliance checking etc, the issue is the allocation of local resources to enforce the standard that currently exist. Why would this suddenly change if we had national licensing. If the millions that would be needed were put in the licence fees then the good would be paying for the bad. In all these discussions it has to be remembered that we have a history of legislation with unintended consequences. Take the Rent Act 77, designed to protect the tenant with artificially controlled rents and life time security. Did this really help the tenants when over the years since the second world war the private rented sector collapsed to a lowly 8% and as anyone who has worked with Rent Act 77 tenancies knows, it is hard to claim it increased the condition of the rented stock. What change the supply and improved the rented stock standard (on average), yes, de-regulation. In 1988 the Labour opposition said they would repeal it if they got to power. Did they? No by the time they got to power they realised that actually it was doing good for the market. In the current economic conditions, however unpleasant it is we have to accept we are in the difficult situation we are in and therefore public sector housing is not likely to grow suddenly. We are going to become increasingly dependent on the PRS. Sure there will be challenges but at the end of the day landlords will only be landlords if it economically viable. Before we consider any more laws, we should consider if we are applying the existing laws. Yes it costs money but look at the local authorities who got to keep £150,000 out of using the proceeds of crime legislation. We need these creative solutions that hit the criminal and substandard hard, WITHOUT excessive penalties for the good.
Quite an argument David but I’m afraid I don’t buy it, although I accept that you understand that existing legislation is there to tackle it you don’t address the twin issues of cuts in staff and resources that have so denuded staff there are few left to carry out the work and the sheer unwieldiness of using existing legislation when they attempt to do so, which means that 99% of the time criminal landlords not only walk away but are free to carry on letting with impunity. This simply has to stop.
On your point 5 this is a classic example. Councils can take properties under their control but they don’t have the staff to do so in practice so it is dead legislation to all intents and purposes.
On the matter of the registration scheme. You quite rightly point out that you don’t have to be an owner to be a landlord, a quick land registry search tells you who the owner is in seconds but the value of the Welsh model is in being able to identify who is running the property, because that’s where the problem lies.
I’ve met many a decent owner let down by their agent.
The Welsh idea is to cut out landlords, their representatives and their agents who fall short of the standards. Using complex criminal laws without the back-up of the police or the judiciary does nothing.
Finally I completely disagree with your assertion that de-regulation and market forces improved housing stock post 1988. Like you I have been around since before this and have not only seen no improvement I would argue I am busier than ever with complaints and Dickensian property conditions.
Harassment, illegal eviction, retaliatory eviction and dreadful property standards are rife and despite PRS landlords agreeing that it needs improving this no move is made from within the Community to address things in a satisfactory way.
I read with interest your column in today’s EDP here in Norwich re. accreditation and licencing. One point I would like to make is that whilst there is a strong argument for a national acceditation scheme, which as the name suggests is voluntary, licensing is very different. This is compulsory, and we at The Eastern Landlords Association do not believe that this is in the best interests of the market or of landlords. We disagree strongly with the idea that tenants can withhold rent if the landlord is not accredited or has not used an accredited agent. What would happen if the landlord was at the start of the tenancy, and then for some reason loses this due a bureaucratic error, not unheard of with government? So the landlord is then deprived of income.
We do believe that there is an argument to offer incentives for an accreditation scheme, and this should include the ability, if the tenant is in receipt of Housing Benefit, to be paid direct.
The argument of treating landlords as a business is rather an old chestnut, and it would require a change from HMRC in its policy, and unfortunately any synergy between government departments is almost non-existent.
Thank you very much for your comments Peter.
This series is just a discussion series airing ideas. I am not a government minister and what I say is not going to make law! It is an opportunity for people to express their views which may perhaps filter back to government (if any of them ever read blogs!).
So I am very pleased to have the comments of the ELA.
The suggestions for licensing and compulsory training are based on reports which say that an an increasingly large proportion of our population are going to be living in the PRS – in which case maybe there should be some proper regulation (as we have for other professions such as surveyors, solicitors and the medical professions).
When local authorities are not able, through underfunding and lack of staff, to enforce the existing regulations (or when derisory penalties are awarded when they do) this sends a very negative message to tenants and allows the bad landlords out there to believe (with some justification) that they can act with impunity.
I am sure that the majority of ELA landlords are excellent, but there are many others who are not.
To be honest, I am not a landlord but I have many friends and associates who are. I had a paticular set of friends who allowed a couple we were on housing benefit to stay in their property.
Long story short they caught this couple growing illegal substances in the property and had the police come and arrest them.
So as you do, it goes against the tenancy agreement they signed so they were looking to get rid of them.
The couple then decide to lie and say they never signed a tenancy and that it was forged. The issue is they were dragging this out for so long, that the decent landlord’s ended up having to pay them money to vacate the premises. (O and I forgot to mention they were vandalizing the property each day they were there).
So they got the property back but it was in tatters.
I just honestly find it crazy how this country work’s when it comes to renting properties, I don’t understand how the tenant has more right’s than the owner of the property.
Rant over!
Regards,
Karl
Hi Karl
Yes bad tenants can be a major problem. I discuss the issue of bad tenants later in the series eg here http://www.landlordlawblog.co.uk/2012/09/10/housing-law-the-bigger-picture-bad-tenants/