Welcome to the first news post of February. What has been happening news wise?
Fergus WIlson Litigation
You may remember that Mr WIlson was suing vlogger Danny Hyde for £10,000 under the Malicious Communications Act as he objected to comments made by Hyde criticising his policy to ban non-white tenants “because of the curry smell they leave behind,”
Helped by Giles Peaker of Anthony Gold and counsel Gerard Clarke of Blackstone Chambers, acting on a pro bono basis, WIlsons case was thrown out and he was ordered to pay £3,000 costs.
Peaker said:
“I’m delighted the claim was dismissed. It had no legal basis and was brought simply to threaten a young man who had said something that Fergus Wilson didn’t like.
“Danny Hyde was simply exercising his right to free expression. The award of pro-bono costs against Fergus Wilson will hopefully make clear that threatening people with baseless claims is no way to behave.”
HMO Regulations
According to Housing Minister Dominic Raab, in response to a question in Parliament:
“The Government proposes to extend the scope of mandatory houses in multiple occupation (HMO) licensing, so that a licence is required for HMOs with five or more occupiers.
“We published our response to our HMO reforms consultation in December 2017, and we plan to lay the necessary regulations before Parliament shortly with a view to bringing them into force (subject to approval) in October 2018.”
The new rules are expected to change the requirements for mandatory HMO licensing removing the ‘three storey’ rule meaning that it will apply to all HMOs with 5 or more tenants in two or more households bringing some further 160,000 more properties into scope.
As explained by Sarah Cummins of Anthony Gold here there will be a six months grace period for landlords to register after which they will be vulnerable to the various fierce penalties for non compliances which include fines and rent repayment orders.
There will also be new minimum room sizes. Rooms used for sleeping by one adult will have to be no smaller than 6.51 sqm and those slept in by two adults will have to be no smaller than 10.22 sqm. Rooms slept in by children of ten years and younger will have to be no smaller than 4.64 sqm.
This further increase in regulation is expected to drive further landlords into selling up. One problem is the huge variation in license fees, and the high cost of many:
NALS research, conducted by London Property Licensing, shows that in 2017, licensing fees for a three-storey HHMO with five unrelated occupants can range from £125 (City of London Corporation) to £2,500 (Lewisham Council).
It found that in 23 of London’s 33 boroughs licensing fees are over £1,000 for a similar sized property. Overall, average fees have climbed every year since 2014 and the average cost has risen by 12.9% in 2016/17 and a further 5% this year (standing at £1,119).
Still, even so I suspect that if managed carefully, a buy to let property will still be more remunerative than many other forms of investment.
Problem with foreign owners register
I mentioned in my last Newsround that government were considering setting up a reigster reveal foreign ownership of British land and assets.
It is now being claimed by tax expert Gary Heynes, of RSM that this could be a ‘criminals charter’.
“What is extremely concerning is the inference in the Government’s announcement that this register will be publicly available.
“The use of offshore companies to acquire property in the UK is not solely for tax, or even criminal, reasons.
“Celebrities not wanting a stream of paparazzi camped outside their house, those with wealth, who perhaps live in politically unstable countries under fear of kidnapping and attack, vulnerable persons and a wide range of politically exposed individuals would all prefer not to have the precise location of their home in the UK revealed.”
“The UK already suffers from title theft where fraudsters assume false identities to pass off as property owners, enabling them to offer security for a loan or sell the property to third parties.
“While the Government is right to seek to clamp down on tax evasion and criminal activity, a public register which reveals highly confidential information is not the way the way to go about it.
He has a point.
Committee stage on tenant fee ban bill
Some telling points are being made by people giving evidence to the Communities and Local Government Committee.
David Cox, CEO of ARLA is worried that lack of clarity in the bill could result inn courts potentially holding that default fees were unlawful at some point in the future, possibly resulting in what he called a “PPI moment” for letting agents.
He later told Property Industry Eye:
“We are worried that as the tenant default fees clause in the Bill is so widely drafted that there is the possibility that if agents do charge such fees, a court could find in a few years time that such fees are unlawful which would require all such fees to be repaid across the industry (hence the PPI analogy).
“We are asking for absolute clarity on the face of the Bill as to whether such fees will be lawful.”
He has also called for clarity on deposit replacement schemes and suggested that the new rules should not come into force until client money protection has been made mandatory.
Isobel Thomson, chief executive of NALS has also warned that it is likely that rents will go up, plus disallowing the cost of referencing tenants would mean that certain types of tenants, in particular tenants on benefit or Universal Credit will find it still harder to find accommodation.
Challenges to Right to Rent
Two challenges are being brought against the Home Office to the controversial right to rent scheme introduced in February 2016.
- The Camden Community Law Centre (CCLC) is representing a woman who claims she failed a Right to Rent check as her passport was lost by the Home Office
- the Joint Council for the Welfare of Immigrants (JCWI) is bringing a judicial review of the rules themselves.
There are many problems with these rules, not least that they prejudice the aprox 17% British people who do not have (and may not be able to afford) a passport. The JCWI research has found that landlords are 48% less likely to rent to someone without a British passport – particularly since criminal sanctions were introduced.
The challenge is being supported by the Residential Landlords Association. RLA Policy Director, David Smith, said:
“When this policy was first discussed we warned the Government of the unintended consequences of the Right to Rent scheme. How can a landlord be expected to know what every passport in every country is supposed to look like?
“For the overwhelming majority of landlords it makes no commercial sense to limit their access to a large proportion of the prospective tenant market. It is the fear of criminal sanctions for getting it wrong which is causing many simply to want to play it safe.
“Landlords should not be used as scapegoats for the failures of the border agencies. It is time to suspend this controversial and unwelcome policy.”
Quick Snippets
Here are a few more news items for you:
- The Guardian is reporting on new Labour plans to force landlowners to sell land to the state for a fraction of its value
- Property Industry Eye report on a landmark case where a Council has suceeded in getting a ruling that the Proceeds of Crime Act (POCA) can be used against landlords for breaches of licensing conditions
- The government is being urged to introduce new rules for short stay wbsites such as Airbnb
Newsround will be back next week.
NALS research, conducted by London Property Licensing, shows that in 2017, licensing fees for a three-storey HHMO with five unrelated occupants can range from £125 (City of London Corporation) to £2,500 (Lewisham Council).
So City of London administer the same scheme for 5% of the cost that the dreadful Lewisham Council charge. This is nothing more than a money making, empire building opportunity for most of the greedy, avaricious Local Authorities.
Have to highlight a couple of points here
Licensing cannot be a money maker. The law governing it allows only for the fee to be used for running the scheme, not as an income generator, as is the case with say parking violations. You cant even use the licensing fee to take action against perpetrators, which is why the government gifted us the Housing and Planning Act 2016.
ON your City v Lewisham point John, as an ex Lewisham rogue landlord enforcement officer I can say that Lewisham has one of the largest amount of HMOs around, due to the nature of the type of housing stock, comprising large, Victorian properties, easily converted into multi units away from prying eyes. Hounslow and Hillingdon for instance is mainly 3 bed 1930s semi’s with big back gardens, so beds in sheds are more prevalent there than other boroughs. The City has hardly any rental properties at all, let alone HMOs, compared top these normal boroughs, so the costs are bound to be very low.
Lets break Lewisham’s £2,500 fee down. Firstly that fee covers the cost of the licence for 5 years, which is £500 per year. An average rental income on a standard HMO of say 5 people, usually nets between £4,000 and £5,000 per month. Some of the larger ones are much more. I know, I’ve been involved in hundreds of them. That breaks down at £923 per week, so the licensing fee will cost the landlord 4 days rental income, per year per property.
I dont intend to point out any more than that bottom line figure just for a bit of sanity before the comments go mad HAHA
That doesn’t sound right. With fewer properties to licence the proportion of the fixed costs needed to be covered by each property would be higher so the cost per property should be higher.
The rental costs should not make a difference iif only costs are being covered. If rental costs are being used to justiy the licence cost are you are doing that implies that the licence cost is more of a tax that just covering the costs.
Scotland with its national scheme charges £55 per authority and £11 per property for 3 years.
Requiring registration less frequently should reduce costs, but wages are likely higher in London so maybe £125 is justified.
The only way that I can see such high licence costs being possibly justified is if the money is being used to enforce the scheme as well as administer it, That is to pay for enforcement officers, but the councils should be doing that anyway, and anyway making the law abiding pay for the rogues does not seem right,
Peter I cant comment on the Scottish model. I know little of it but enough to know its not a good comparison for England..
When I was at the Trading Standards conference last week, David Cox of ARLA pointed out that the letting agent fees issue doenst cross map. I am loathe to debate on such comparisons, because they work on a different system to England.
You have said that the only way you can see justification for the licensing fee is because it is being used for enforcement but that is absolutely not the case and is why councils have always had this problem. Licensing fees pays for the administration of the licensing scheme but if a landlord doesnt get a license and needs prosecuting the costs dont come out of that pot, which is precisely why the government built the penalty scheme into the Housing and Planning Act, because there was this gap between licensing and enforcement.
If licensing fee money could be used for enforcement then the issue wouldnt have arisen at government level, so claiming that this is the case is pure fantasy.
Key people in the game who have twigged to the opportunities have realised that for every enforcement penalty, they can pay for an enforcement officer and the reason they are thinking in this untraditional and fly way is because you cant pay for enforcement out of licensing. Its a nonsense to claim that.
How an individual council comes up with its licensing fee will vary on the amount of properties in their area, Hereford is not going to have as many as Hackney or Birmingham. The amount of staff needed to deliver the scheme will also be a factor, as will office rental space, support contracts from legal services and other service level agreements with internal and external partners. There is no single model and there are over 300 local authorities, 32 in London alone so all will impact on how fees are assessed.
Also bear in mind that such matters are regulated by the Secretary of state, who is also responsible for granting permission to extend licensing schemes. Councils dont operate in a self regulating bubble.
Running any council service is subject to ministerial control, audit trails and legislation. If the MHCLG thought that Lewisham’s fee was beyond the pale they would intervene.
Government introduced HMO Licensing not councils and in doing so they allowed councils to set their fee level relative to the costs of that particular authority, which is, as I say above, dependant on a range of factors. I understand that licensing is emotionally unpopular with landlords but every law that is introduced in any country in the world creates polarities of opinion.
You say the council should be prosecuting rogues anyway and I agree but the money to do so doesnt appear out of thin air. Elements of my council tax is used to fund services that I dont even subscribe to, I dont have anyone in my family in need of mental health services but its part of being a member of society. My income tax is used for a range of things I find abhorrent.
Paying for services we dont use ourselves is part of living in our kind of society. The alternative is to go for Trump-world, where citizens only contribute to to services that relate to them,
That still doesn’t answer the question of why is Lewisham Councils license fee 20 times that of the City of London.
https://www.investopedia.com/terms/e/empirebuilding.asp
“What is ‘Empire Building’
Empire building is the act of attempting to increase the size and scope of an individual or organization’s power and influence. In the corporate world, this is seen when managers or executives are more concerned with expanding their business units, their staffing levels and the dollar value of assets under their control than they are with developing and implementing ways to benefit shareholders.”
Delete/insert taxpayers.
http://www.bbc.co.uk/news/uk-england-london-11984977
“A council in east London spent more than £111m on one office block, including more than £1,800 on individual designer lights, an investigation has revealed.”