Landlord Licensing - tell the government your views!

The Government recently published their response to the Rugg Review, which was reported by me here. In particular the report proposed mandatory licensing for landlords and regulation for all letting agents. The report is also a consultation.

As before with important consultations, I have prepared an online answerform to allow people to give their views easily.

On my form, I have reproduced the whole of the government paper (less the footnotes and appendix) and have provided form fields in context so you can read the report and write your response there and then. Your answers can then be sent to us easily by clicking the submit button at the end. We will forward them on to the relevant department.

After the end of the consultation period (7 August) I will be preparing a consolidated report of all answers (annonomised) so people can see what the general consensus is.

You will find the online form here.

NLA/SPLA case dismissed

No sooner do I write a post saying that a case looks to continue than I get an email telling me it has been dismissed!

A news release on the NLA web-site here states:

"On Thursday 21 May, His Honour Judge Pelling QC dismissed the legal challenges to the merger. He also ordered those who brought the action to pay the NLA’s costs."

A full written judgement will follow in due course, and will no doubt be made available via the NLA web-site.

SPLA/NLA merger dispute continues

Landlords and property professionals will have been depressed to read an article by Oliver Romain in the excellent Landlord & Buy to Let Magazine, that the legal action brought challenging the merger of the Southern Private Landlords Association (formerly the National Federation of Residential Landlords) with the National Landlords Association, announced last year (and reported in this blog here) it still continuing.

Apparently at a court hearing in March the Judge asked for members to be questioned about their views. Of the 5,200 SPLA members, apparently 1,720 responded, of which 892 said that they did not support the merger, with a similar number supporting the legal challenge. I make that just over 17% of the total membership, which is not what I would really have called a majority.

However it is a majority of those voting, and Mr Stimpson (who is leading the challenge) claims that this justifies his action. A spokesman for the NLA on the other hand apparently claims that large numbers of SPLA are voting with their feet by moving over to the NLA. A specialist marketing company employed to find out members views, apparently found that most of them were sick and tired of the dispute and wanted nothing to do with it.

It is really sad that those leading landlord associations are embroiled in this sort of dispute, when there are so many important landlord issues for them to deal with. Oliver Romain's article concludes that the parties appear unlikely to settle, so it looks as if a contested court hearing may take place. As the costs of this are estimated at some £800,000, landlords may well question whether this is really in their best interests.

Landlords out of pocket for deposits - DPS may be best after all!

A report published in The Times today highlights the growing problem of landlords having to pay up for deposits, when agents go bust.

Under the two 'insurance based' tenancy deposit schemes (MyDeposits and the Tenancy Deposit Scheme run by the Dispute Service) if the agent deals with the deposit on behalf of the landlord, the agent holds the deposit money. If the agent becomes insolvent, this does not affect the tenant (other than perhaps a delay in getting paid) as the insurance company pays out.

However it will have a serious effect on the landlord. This is because the deposit schemes are entitled to recoup their losses by claiming the money back from the landlord, on tbe basis that the landlord is the employer of the failed agent.

The Times report states that "hundreds of letting agents have ceased trading in recent months" and goes on to report that "MyDeposits has received 279 notifications of a letting agent going into liquidation and being unable to return the deposit". In the majority, if not all of those cases, the landlord will have had to pay.

The problem is more likley to occur with MyDeposits as the Dispute Service are now refusing to accept agents who are not members of ARLA, RICS or a similar professional body.

Landlords letting through non regulated agents should therefore think carefully before allowing the agent to manage the deposit unless it is protected by the Deposit Protection Service where the deposit money is actually lodged with the company so there is no possibility of it being lost.

Pain Smith on Foxtons

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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I just wanted to draw your attention to an excellent post from the Pain Smith blog here on the Foxtons case. This points out that nothing is decided yet, and nothing may be finally decided for quite some time if the case goes to the Court of Appeal.

Pain Smith also point out that this case will just be about Foxton's terms and conditions. Although it will, clearly, have a huge impact on what other firms can and cannot do in future, there may be circumstances where a clause criticised in the context of the Foxtons case may be allowable in different circumstances.

This is the most unsatisfactory aspects of the Unfair Terms in Consumer Contracts Regulations - until something has gone to court no-one really knows where they are! It is like walking on shifting sands.

CAB report highlights unfair charges to tenants by letting agents

An item on the BBC news site has alerted me to a new report from the Citizens Advice Bureau on fees to tenants by letting agents. The report comments that many letting agents are regularly making unjustified charges to tenants for "tasks that are no more than the routine business of letting and managing a property" (and sometimes for items they are also charging to landlords). For example, the report states:

"Charges included a non-returnable holding deposit, a deposit administration charge, a reference check charge, an administration fee, a check-in inventory charge, a check-out inventory charge, and a tenancy renewal fee."

Of these, I would comment that one inventory charge is fair if the landlord pays the other (ie one paying check in and the other paying check out) provided the fees are reasonable and reflect the actual cost of the work. Reference checks are probably also reasonable, if they reflect the actual cost of referencing. However, the holding deposit should be credited to the rent or damage deposit if the tenant rents the property, and 'renewal fees' have long been considered unfair by many.

The CAB is right to draw attention to these fees. Often tenants feel that they have no choice but to pay as they fear that otherwise they will lose their home. Many agents act responsibly and only charge for what is fair, but there are a large number who do not. The CAB report comments "charges often bear little or no relation to the cost of the work involved and in some cases letting agents appear to make them up as they go along."

The report also mentions the change in attitude of many agents towards tenants before and after they have signed up. This is no doubt true in many cases - to get a flavour of what tenants think of agents you only need to do a search on 'Foxtons' in twitter.

Hopefully things will improve if the agent licensing plans put forward by the government in their recent report go ahead.

What I can't understand about the MP's expense accounts scandal is this ..

Why didn't they see it coming? Surely it must have been obvious after the Freedom of Information Act was passed in 2000 that something like this was going to happen sometime? Surely anyone with any sense would have known that the press were going to probe at some stage, and would have taken care to be careful. It was only a matter of time.

It is also a shame that the good MPs, the ones who only claimed what was right, are caught up with this too. I hope they sort it out soon.

The phrase 'Augean Stables' comes to mind.

A lady at lunch

Had a great time with Graham and Karen on Radio Norfolk today - they invited me to be one of their Friday ‘ladies at lunch’ which was huge fun.

My co ladies were Pam Brooks aka Kate Hardy (in black in the photo), novelist; and Sara Lock (in turquoise), all round good egg who has been on cash in the attic (and who went to school with the fabulous Joanna Lumley). I am the one in blue, with Karen in green. Graham was heavily outnumbered by us girls.

You can listen to the program again (for a limited period) here.

Graham and Karen are having a week on the Wensum next week which sounds fun. I hope the weather is good for them.

Susskind - the end of lawyers?

I have just listened to an interesting webcast of an interview of Richard Susskind here. Susskind is promoting his new book, The End of Lawyers?: Rethinking the nature of legal services, having written several groundbreaking books on the use of IT and technology in the internet in the past.

Susskind covers quite a wide range of legal IT related topics in the interview, but it is some of the comments at the end which are most worrying (for lawyers). Both he and his interviewer make the point that lawyers are not (on the whole) natural innovators and tend to be resistant to new developments, particularly if they are making a good income as they are.

However he believes (and I have to say that I agree with him) that technology and the internet will have huge implications for the profession, and it is worrying that the Law Society and the government are planning new rules and regulations for the future of the profession, without really taking these properly into account.

For example one thing he mentioned was shared knowledge on forums and how this may develop in the future. In fact however this is happening right now, as there are a number of consumer forums where people exchange information about legal matters, for example this forum here on tenancy deposits. Shared knowledge of this kind could well reduce the need to use qualified lawyers in the future.

The conclusion, more or less, was that there will always be a place for some lawyers and the subject is an interesting discipline in itself, but that the profession has probably passed its high point and things will never be the same again. He also made the point that new lawyers are entering an uncertain profession and many law students should be prepared to use their law degree for something other than practising as a lawyer.

The Rugg Report – the governments response

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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The government published a consultation paper yesterday in response to the recent Rugg Report and the other various reports that have been published over the past few years.

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.

Four more cases on possession proceedings

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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There are four interesting cases in the most recent edition of Legal Action Magazine on proceedings for possession under section 21 and the provisions of the Housing Act 2004, so I hasten to share them with you. They all cover different points. Although they are all County Court decisions and therefore not binding on other Judges, they show how Judges are thinking and interpreting the statute.

Universal Estates v. Tiensia
Croydon CC, 23 Feb 2009
In this case the deposit was paid in instalments. The tenant, Ms Tiensia, fell into arrears and the landlord served a s8 notice based on rent arrears. Ms Tiensia counterclaimed for the 3 x deposit award on the basis that the deposit was unprotected. The landlord then protected the deposit with MyDeposits and faxed the certificate to Ms T. However the Judge found that this was not enough. The landlord had failed to comply with the initial requirements of MyDeposits terms and conditions, and was thus in breach of s213(1) and (4) and s214(1)(a) of the Housing Act 2004. Order for £7K to Ms T.

I was particularly pleased (and perhaps a little smug) to see this decision, as the point about the failure to comply with the schemes own rules, is something I remember writing about some time ago, but has not so far as I am aware been mentioned by anyone else until now.

Seghier v. Rollings
Bow CC, 6 Mar 2009
Here the landlord, Ms Rollings, only protected the deposit shortly before the hearing and handed the certificate to the tenant at court. However she did not fully comply with the notice requirements, and for example had not handed over the MyDeposits leaflet. Here the Judge 'distinguished' (legal phraseology meaning the two cases are not the same) the Sheffield case of Harvey .v Bamforth (where the landlord won) because here the landlord had not fully complied with s214(6)(a). Order in favour of the tenant.

Beal v. McCartney
Plymouth CC, 12 Mar 2009
Poor old Mr Beal was evicted by his landlords mortgage company due to his landlords mortgage arrears. As he had not been given any information about his deposit by his landlord, he sued for the fine of 3 x the deposit sum. He succeeded and was also awarded £500 damages for the eviction (legal terminology is for 'breach of quiet enjoyment'). However the fact that he was evicted by his landlords mortgage company indicates that his landlord is in probably in dire financial problems, so this may be a bit of a phyrric victory.

Raco Ltd v. Roberts
Central London CC, 6 Mar 2009
Unlike the others in this post, this case is about failure to obtain an HMO license. A good sub heading for this case would be 'if at first you don't suceed, try, try and try again, and still fail'!

Here the landlord had served two section 21 notices and issued two separate sets of proceedings. Mr Roberts, the tenant, defended the first on the basis that the s21 notice had been served before the tenancy was signed and at a time when the property was unlicensed, and the second set of proceedings just on the basis that the property was unlicensed. The two cases were joined and dealt with together. The landlord then served a further section 21 notice (presumably by this time having obtained a license) and applied to the court to have the proceedings amended to rely on this notice rather than the earlier two. However the Judge refused the application as a 1996 Court of Appeal decision (Lower Street Properties v. Jones) has held that the s21 notice must expire before the issue of proceedings. (Presumably Raco Ltd have now changed their lawyers and started a new set of proceedings, but we are not told about this).

In conclusion
All of these cases were resolved in favour of the tenant. This just goes to show how careful landlords need to be to follow the rules properly. If you don’t, you risk not only losing your claim for possession, but also being made to pay your tenants legal costs. Which, if they were in receipt of legal aid, could be expensive.

Starlight Children's Foundation - Charity of the Month (May 2009)

The Starlight Children's Foundation aims to brighten the lives of seriously and terminally ill children by granting their wishes and providing hospital entertainment to help take their minds off the pain, fear and isolation of their illness.

It is also the charity being supported by employment barrister Daniel Bartlett for his ten year anniverary fundraising campaign. Daniel is to be congratulated in raising over £10,000 for the charity. You can read more here.

LHA direct payment e-petition

After my earlier post giving details of an e-petition against the governments licensing plans, I have now learned of another one here requesting Local Housing Allowance be paid direct to landlords.

Petitions seem to be taking off - it is a shame therefore that the government is no longer supporting them, according to this report on the parliament.uk blog.

NLA calls for changes in housing benefit/local housing allowance rules

The National Landlords Association (NLA) has recently started a campaign to change the rules for the payment of housing benefit/local housing allowance (LHA). As has been described elsewhere in this blog, LHA cannot normally be paid direct to the landlord in the way that housing benefit was. The NLA consider that this is unfair, particularly in view of the fact that LHA is paid direct to social landlords and local authority landlords.

LHA can be paid direct in limited circumstances, these are (1) if the tenant is deemed to be ‘vulnerable’ or if (2) he is in arrears of rent of over 8 weeks. However benefit offices are not acting consistently in interpreting these rules. For example many are refusing to accept that rent can be in arrears if it is payable in advance (benefit is paid in arrears) which means it can be well over three months before benefit starts to be paid direct to landlords where tenants are in default. Landlords are finding this unacceptable.

The NLA have recently carried out a survey of their members which shows that over 52% say they are less likely to take on tenants in receipt of benefit and 59% say that they are concerned about rent arrears or local authority maladministration.

They are asking for the following:

• an ‘automatic trigger’ for direct payment to landlords after one month’s rent arrears (as opposed to two months/8 weeks as now)
  
• Better local authority administration of LHA
  
• Better determination of the vulnerability of tenants by local authorities, with clear guidelines being laid down
  
• the creation of local authority links with local deposit guarantee schemes so each new LHA application is accompanied by a deposit guarantee bond.

You can read more about this on the NLA website here.

e-petition against landlord licensing

I have been informed that an e petition to No 10 has now been posted by Mark Horne of Property Hawk. The reasons on the petition are

Mandatory licensing would:
1. Undermine the private property rights of a citizen to do what they choose with their property including letting it to a willing tenant.
2. Not drive up standards in the residential letting sector as suggested.
3. Would duplicate existing methods of control and therefore is unnecessary.
4. Restrict the supply of rental accommodation.
5. Be a tax on the rental sector.
6. Be costly to implement and an added financial burden to the citizen.

If you are against licensing you will find the petition here.
Mind you personally I think licensing is probably a good idea (but then I am a solicitor and not a landlord). I provide details of the e-petion in the interests of democracy! There is no reason why those who feel licensing is important should not post their own petition.

Fast Facts on new licensing plans

The Times in an article today has listed six 'fast facts' on the new licensing plans which are expected to be announced formally in a new Green Paper shortly. They are as follows:

• A new licence-to-let which is expected to cost landlords £50
  
• An independent body which will mediate in disputes between landlords and tenants
  
• A government agency which will find new homes for affected tenants
  
• Landlords who flout basic accommodation standards to be banning from letting
  
• A national watchdog to monitor all lettings agents
  
• A lettings register which will name all agents who have signed up to ARLA industry guidelines

It will be interesting to see how correct these are when the green paper is finally published,

New plans for landlords

Two reports in the press this morning on landlord regulation. The Times reports that ministers are considering introducing licensing (as recommended last year by the Rugg Report). They anticipate that the costs will be covered by the licensing fee, provisionally put at £50, plus there is also a suggestion that the scheme will help the revenue track tax evasion.

The BBC site reports that The Association of Residential Letting Agents (ARLA) is introducing a licensing scheme for its UK members and a code of practice for landlords.

In my previous post on the Scottish scheme (commenting on problems highlighted by Shelter), I suggested that funding implications might put the government off introducing any new schemes England and Wales at this time. However if the scheme assists with the collection of tax, this puts a different light on things.

We are told to expect a Green Paper shortly.

Advice for landlords whose tenants are not paying rent

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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A report on the BBC web-site today states that more tenants are in arrears of rent now than since the late 1980's. Which is not surprising given the almost daily announcements of redundancies.

Here is a bit of advice for landlords:

• Keep on top of things and contact tenants as soon as they fall into arrears
  
• Be sympathetic to tenants who respond to you, and consider reducing the rent if they are geninely in financial difficulties through no fault of their own
  
• If tenants are on housing benefit/Local Housing Allowance, tell the benefit office - they should make payment direct to you if the arrears reach 8 weeks
  
• However if tenants have not responded when the arrears reach 2 months worth, serve a section 8 notice and consider issuing proceedings for possession. Remember possession proceedings can take months.

For more information see my article 'Dealing with rent arrears - some different approaches' which you can download and read free of charge in this section of my LandlordLaw web-site.

Further guidance and help is available in my Rent Arrears Action Plan.

Good for the Ghurkhas!

If I may go 'off topic' for a moment, I would like to say how pleased I am at the MPs recent vote which hopefully will result in Ghurkha veterans being allowed to live in this country.

Maybe it will cost a bit. However if we can chuck billions at bankers who have almost brought the worlds financial system crashing down, surely we can spare a bit for some respected soldiers who have put their lives on the line for this country?

And good for Joanna Lumley for all the work she has done for this cause.