Where next for the Private Rented Sector?

At the recent CLT Conference I attended, there was an excellent talk by Professor Martin Partington OBE (former Law Commissioner) on possible future developments in the Private Rented Sector (PRS). I set out below a very condensed version of his notes (with his permission).

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.)

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.

Responsible Renting - the final report

After having got back from holiday, settled back in, and dealt with the back log, etc, I have finally got around to reading what is the final report from the Law Commission on their housing projects.

The new legal team on Nearly Legal got in ahead of me with a rather depressing report, taking the view that the proposals are basically ineffectual, and the government probably won’t take any notice of the report anyway.

There does seem to be a deafening lack of action by the government on the Law Commissions proposals. In particular the Renting Homes report which has been out for several years now. However there are I suppose a number of excuses for this. For example:

• The fact that on the whole the private sector is not working too badly so maybe action here is not as necessary as elsewhere in the economy
• The need for the private rented sector to grow to provide much needed housing and therefore a desire not to 'rock the boat' which may discourage investment, and
• The need for recent initiatives to bed themselves down.

The last of these is I think particularly important. In the space of a couple of years we have had three major changes, the new Housing Health and Rating System, the HMO licensing scheme and the tenancy deposit scheme. Very shortly there will also be the need for landlords to provide environmental performance certificates. These changes all need time to settle down and for landlords to get used to them, before anything else new is brought in.

For example it has taken Local Authorities some time to get to grips with the new licensing scheme which came into force in April 2006. The first year was taken up with setting up the new schemes from scratch, dealing with the initial rush of registrations, and getting used to things. The second year was building on this, so it is only now that Local Authorities are starting to do more enforcement work. I am pleased to see many more reports of enforcement action for landlords default, and no doubt this will continue. It will probably take quite a few more years (bearing in mind the limited staff resources available to most Local Authorities) before they dig out all the recalcitrant landlords, and are able to say that they have most of the HMO landlords in their area properly licensed.

Likewise with the Tenancy deposit scheme. As set out in my earlier post, it appears that many landlords are still not compliant, so again this will take some time to work through.

In the circumstances I think that the Law Commission are right not to go for major change, but to seek to strengthen the existing initiatives. Their main proposals are:

• To make landlord accreditation available everywhere rather than in just a few areas, as now
• To set up a housing standards monitor body to carry out further research, develop a single code of practice, and trial initiatives (such as a scheme for home condition certification)
• To have all letting agents regulated (Everyone agrees with this! Apart from the cowboy letting agents of course)
• And to carry out proper evaluation of any new reforms introduced

This all sounds pretty sensible to me. It will lay a foundation for further work, won’t rock the boat too much and discourage new landlords just now (particularly important in the present economic climate), and probably won’t cost too much. The Law Commission also make the point that there is a cost in doing nothing, as poor housing creates costs elsewhere in the system, and therefore (taking a wider view) expenditure in the field of housing could result in significant savings elsewhere in the economy.

There are a number of other reports which have been published recently (which are set out in the Law Commissions paper), plus there is the report commissioned by the government on the private rented sector being undertaken by the University of York which is yet to be published. It may be that once this is out, and now that the commission has completed its housing project and the government is able to look at it as a whole, together with the other reports, government may now decide to do something. For example take steps to bring the Rented Homes Bill onto the statute book.

If you are interested in housing, it is probably worth getting hold of the report – which can be downloaded from the Law Commission web-site here and in the Landlord-Law Law reform section. As usual it is well written and readable (bearing in mind that it is a legal report). I was pleased to see that Landlord-Law was mentioned favorably (page 17), and also interested to see that the responses via the Landlord-Law answer form provided nearly 30% of the total. There is a very interesting appendix where they report on what people responding to the consultation actually said.

Interesting times ahead!

The problem of landlord regulation

A recent article in Inside Housing looks at how landlords are using the governments review of the private rented sector to call for a review of the HMO licensing system, which they say is not working. One organisation is asking for it to be done away with altogether, allowing landlords to ‘self regulate’.

The main criticism of the HMO licensing scheme is the way the license fees vary across the country, with some authorities charging over £1,500 per property and others charging under £200. I have to say I have a lot of sympathy with landlords complaints here, our own Landlord-Law list of licensing fees shows a very wide variation. This cannot be right.

However in my opinion one of the best chances of dealing with poor conditions in properties and rogue landlords should be via the local authorities and the licensing scheme. The problem is though that in many cases they are not using their powers properly, most likely because of lack of resources. The Inside Housing article mentions a "substantial fine slapped on a Liverpool landlord last month" and this is quoted as showing that the regime is working. I am really pleased that at least one bad landlord has got his comeuppance under the regs, but suspect that there are many others slipping through the net. The fact that this item is newsworthy (when if the councils were doing their job, such orders would be common practice) is telling in itself.

Which is a pity, as if the local authority powers, which they already hold, were being used as they should be, then this would do a lot to solve the problems of substandard housing. It really needs an outside body to enforce standards, it is unfair to expect tenants to have to do this themselves. Not only because they are then at risk of retaliatory eviction under section 21, but also because bringing a legal action is a stressful, and (unless legal aid is available, which often it is not) expensive process which many tenants do not want to undertake.

Furthermore, why should they have to? Under the Housing Act 2004, poor standards are technically a crime and local authorities are the organisation charged with enforcement. We do not expect victims of burglaries to hunt down and prosecute the thieves. Why should victims of substandard housing have to sue their landlords in order to obtain the decent standards they are entitled to under the law? The situations are not wholly parallel, I agree, but it is a valid point of view.

As for the suggestion that landlords should regulate themselves, this is laughable. I wholly agree that many, probably a majority, of landlords are law abiding and provide decent properties which not only comply with the standards but surpass them. However how are these landlords, or indeed the landlords associations, going to do anything about the non compliant landlords? They may not approve of them, but that isn’t going to do any good! The only way that landlords could self regulate would be if membership of a landlords or similar association were made mandatory and the associations given powers to act against members who breach their standards. This is one of the options being looked at by the Law Commission in their responsible renting project. However many landlords associations do not want this role.

My preference would be for regulation of non complaint landlords to be done by an outside body, the most appropriate being the Local Authorities, as they already have powers in this respect. The main reason why this is not being done properly already, is a lack of resources. Which means under funding by the government. Over to you, Gordon.

Responsible Renting – have your say

I have already mentioned in previous posts that the Law Commission are undertaking a massive review of housing law and practice. This started with their Renting Homes project, now completed, and continued with their project on Proportionate Dispute Resolution. The final stage is the project on Encouraging Responsible Letting.

Both the dispute resolution and the responsible letting projects currently have consultation papers out, with closing dates respectively of 28 September and 12 October. The proportionate dispute resolution consultation is the second one in the project – this one is specifically on the role of tribunals. We did an online answerform for the previous consultation on Landlord-Law but sadly got very few responses, so we have decided not to do another one this time. If you want to respond you will be able to download an answerform on the Law Commission web-site.

However the consultation on responsible letting is very relevant to the majority of users of Landlord-Law so I have once again, with the agreement of the Law Commission, set up an online form (which they have approved). As with our other online forms, this gives sufficient information to allow the reader to answer the questions without having read the full report, although if you have time this is always better. The answerform can be found at www.housing-law.co.uk.

The reasoning behind the responsible renting project is that we have a lot of law aimed at protecting tenants and ensuring that properties are in good condition. However it does not seem to be working, as so many properties do not meet the legal standards (which themselves are fairly basic). The paper also covers unlawful eviction and harassment, but the main thrust of the questions relate to ‘how can we ensure that property which is made available for renting is in a proper condition?’

The paper puts forward a number of suggestions upon which it seeks feedback, ideally from practicing landlords. The two main suggestions are:

1. That landlords should be required to join a landlords association or accreditation scheme which would take on a regulatory role, and take steps to ensure that their members comply with the relevant law, and/or
2. That landlords be required to obtain a certificate certifying that the property is in a proper condition before being allowed to rent it.

It is not as simple as that of course, and the Law Commission recognise that there are problems with both suggestions. However they also point out that the nettle of enforcing standards against landlords really needs to be grasped, as there is a substantial cost in doing nothing. Poor quality housing leads to increased illness, underachieving children, and generally less socially cohesive and problematic communities.

The cost of these problems may indeed be greater than the cost of improving the condition of the housing. So there is an incentive for government to sink some money into housing for the greater good. Thankfully we now seem to have a prime minister who is taking the issue of housing seriously so we may see some action.

However if you are a landlord or are involved in the private rented sector, I would urge you to read the consultation paper (either in the original, or in my condensed version) and submit your views to the Law Commission. They are very anxious to hear from you. This is your chance to have your voice heard and to influence policy! Do not waste it!

PS See our poll on the right - closes 27/08/07

Housing more important now

An interesting snippet from the afternoon press briefing from No 10 for 28 June:

"On the role of the Minister for Housing, whilst the breadth of her responsibilities would stay the same, clearly the fact that she was in Cabinet sent a very clear message about the much greater importance of the Housing Minister and the role of Housing more generally in the Government's agenda."

It will be interesting to see how that works out. It will also be interesting to see if the new government takes up the Rented Homes Bill so carefully drafted by the Law Commission and published in May 2006.

Which UK law is most in need of reform?

There is an interesting article in The Times online today, where members of their law panel nominate the area of law they consider to be most in need of reform.

I like the answer given by Professor Adrian Briggs, who suggests that law which affects ordinary people should be written in a language which is easy for them to understand. This is also reflected in the response of Andrew Arden QC who says that some legislation almost looks as if it were deliberately designed to be unintelligible to those whom it most affects, citing the Housing Benefit Regulations as an example.

I would add that if the Law Commission has spent a considerable amount of time working on a much needed piece of legal reform, for example the Renting Homes Bill, carrying out huge amounts of public consultation, it seems madness not to use it. But maybe it will be included in the next Queens Speech.

What piece of legislation do you think is most in need of reform?

Another unfair decision against a landlord

I did an advice today for a lady who had brought proceedings for possession (acting in person) on the basis of over £12,000 in arrears of rent. However the Judge put back the date for possession for over seven weeks (during which periode of time it is virtually certain that the tenant will pay no rent) because the daughter of the tenant was due to take her 'O' levels and he did not want her to be disturbed.

I have seen a lot of unreasonable decisions, but I have to say that this takes the biscuit! Why should my client be responsible (effectively) for the cost of housing her tenants daugher during her 'O' levels? Bearing in mind that even once the date for possession arrives, it will then take up to six weeks or more to actually obtain a bailiffs appointment.

No wonder the Law Commission in their Renting Homes consultation (see last post) received so many complaints from landlords about Judges use of their discretion in possession claims!

They propose to solve the problem, by the way, by making the exercise of a Judge's discretion statutorily structured. This means that the Judge will have a checklist of questions they must answer before coming to a decision. Let us hope (if it happens) that it helps them come to more sensible decisions.

Mind you, if my lady had used our repossession service instead of going alone, we would have made sure that the claim form was drafted properly, which would have ensured that the very most time the Judge could have given would have been six weeks - and I expect my barrister would have made sure that the period was actually much less than this. But if landlords will act in person ....

Renting homes - the final report

For the past four years, the Law Commission has been working on a project called 'Renting Homes' which is looking at housing law in England and Wales with a view to making it less complex.

Two consultation papers (with over 400 responses) and over 70 public visits later, they have now produced a final report and draft 'Renting Homes' bill. So what does it say?

Here are some of their recommendations:

• Replacing the 13 or so types of agreement with just two - one for social landlords and one for private landlords
  
• Making tenancy agreements (or rather occupation agreements as they will be used for licenses as well as tenancies) more comprehensive, including all relevant law. They will be much longer than most current agreements, and most of their content will be prescribed (ie will be compulsory)
  
• Landlords will be under a legal duty to to provide an agreement in the proper form - if they don't occupiers will be legally entitled to withhold up to two months rent, plus landlords will not be able to evict them for six months after the agreement is finally provided.
  
• It will be possible to add a new occupier to an agreement without having to draft up a new one
  
• One of joint occupiers will be able to end their liability under an agreement without affecting the other occupiers
  
• There will be a new procedure landlords will be able to use if they think tenants have abandoned the property, to recover possession without having to get a court order
  

However it is a long report so if you are interested you should download a copy and read it for yourself. It can be found at the Law Commission web-site and via Landlord-Law at www.law-reform.co.uk.

If the draft bill becomes law it will be a major piece of legislation affecting millions of people - some 1/3 of all property in England and Wales is rented, approximatly 10% being with private landlords.

The only current types of tenancy which (as the bill is currently drafted) will not be affected, will be protected/secure tenants under the Rent Act 1977 and tenancies under the Rent (Agriculture) Act.

Why not tell the Law Commission what you think about the courts?

Further to my earlier post on tbe Law Commission's issues paper and consultation on housing dispute resolution, I have now placed an answerform online to allow members of the public to respond easily.

So rather than having to read a ginormous paper, and then painfully draft your anwers with paper and pen, all you need to do it go to www.law-reform.co.uk, and read and answer the form online. If you want to check what the issues paper says about one of the questions, the form helpfully gives the relevant section numbers so you can look it up. Needless to say you will find the issues paper online both on my web-site and on the Law Commission's web-site.

If you are at all unhappy about the way housing disputes are currently dealt with in this country, do use the form and let your views be known. The Law Commission cannot take you views into account if they do not know what they are. This is democrary in action - use it!

New Law Commission consultation paper on housing dispute resolution

The Law Commission have recently published a consultation paper on the resolution of housing disputes, giving their proposals for reform, with a deadline for responses of 11 July. For more information see this page.

They have also set up an online forum, hosted by the University of Kent, for discussions on their proposals and on the topic of housing dispute resolution generally, which you can see here.

I have stuck my neck out and put up two posts. If you hold strong views on the resolution of housing disputes go and have a look, and put up your own post. This is your opportunity to put your ideas to those who may be able to do something about it. Don't waste it.

The Scarman Lecture - Scarman's great legacy

Looking at the Law Commission’s web-site recently (as you do) I noticed that they had published the text of a recent lecture (20/02/05) – Law Reform and Human Rights – Scarman’s Great Legacy, by the Hon Justice Kirby (an Australian Judge). So in rash moment I downloaded it and printed it out.

It was most interesting. Kirby compares Lord Scarman to Lord Denning as typifying two different judicial approaches – Scarman judging very much by the letter of the law on the basis that change should come about by Parliament amending the law, as opposed to Denning’s view that Judges had made the common law in the past and could make and remould it for the present and for the future.

However Scarman was not just a boring Judge, judging only by the letter of the law. He accepted that in many aspects the law is deficient and worked to improve this. The lecture looks at two great initiatives championed by him.

The first is the Law Commission. This was set up in 1965 as an independent body to continually review, reform and codify the law, and Scarman was its first chairman. The Law Commission is of course very active today and does excellent work (in my own field it has been looking to review housing law). However there are problems, identified by Kirby. One is the sheer volume of published law nowadays, and the fact that there that there is no guarantee that the carefully considered proposals for reform will actually make it onto the statute book. Another is that powerful ministers often like to have control over the law making process themselves.

The other great reform, championed by Scarman, was an enforceable statement in English law of fundamental human rights. This finally came to fruition as the Human Rights Act in 1988. Judges can now use this to help them ‘attend to injustices that Parliament have created thoughtlessly or overlooked’. However unlike the Denning approach, this is one enshrined in statute.

This is a ridiculously brief overview of an extremely erudite lecture which runs to some 64 pages. However if you have found it interesting I would suggest you read the lecture for yourself, which can easily be downloaded from the Law Commission home page. It is written clearly in an approachable style and will be particularly interesting for anyone interested in Law Reform and its history.

The Abandonment problem

Its tough on landlords. They provide the property, for which they are normally still making mortgage and other payments, and they are responsible for its upkeep and maintenance (for which they can be sued if they fail to comply), but what can they do if the tenant fails to keep his part of the bargain and pay rent? The answer is, incur lawyers fees for proceedings for possession and wait several months for the court case to be concluded, while the rent arrears mount up and up. Nice for the lawyers of course, but a bit unfair on the landlord.

Of course it is even more frustrating if you think that the tenant may actually have gone. But if the keys have not been returned and at least some of the tenants possessions are still in the property, you cannot count on this. If the landlord goes in and changes the locks when the tenant has not really left, then not only is he liable for prosecution, but also the tenant can sue him for unlawful eviction. And claim compensation. A nice way to wipe out those rent arrears.

I mention all this because I was discussing this very problem with one of my clients this morning. Sadly (for him that is) the keys have not been returned and the tenants still have clothes and other stuff inside. We decided that it was really too risky for him to even consider going in, so I have now drafted up the paperwork for the court claim and we will be issuing shortly. But its such a waste if the tenant really has gone after all. Not only of my clients time and money, a property left vacant when someone else could be living there (he has tenants waiting to go in), but also a waste of court time which could probably be better used for something else.

The Law Commission have been reviewing housing law generally, and I understand that it is planned to bring in a new procedure to cover cases of abandonment, similar to that currently used in Scotland. But the promised reforms are taking a long time (the Law Commission were due to bring out a final report and draft bill last summer) and in the meantime landlords are faced with a choice between bringing time consuming court proceedings or risk being sued for unlawful eviction.

Still, looking on the bright side, its all more work for me.