Shoddy HMOs? Don't blame the law, blame the enforcers

A recent article on the BBC news site, complains that landlords are avoiding the HMO licensing regulations by developing HMOs in buildings which do not come within the categories which require licensing, which in most cases requires a building to have three or more stories. Hence, the article implies, landlords are able to get away with shocking standards with impunity.

Well yes, but thats not wholly because of the HMO legislation. There is already power available to Local Authorities to deal with substandard properties. Under part 1 of the Housing Act 2004, Local Authorities can carry out inspections on properties under the Housing Health and Safety Rating System and serve improvement notices on the landlord requiring him to bring the property up to standard. If the landlord fails to do this, the Local Authority can prosecute, and also has the power to get the repair works done itself (and recoup the cost from the landlord).

Any one can contact the Local Authority if they are concerned about the standard of a property, it does not have to be the tenant. Local Authorities have a general duty to "keep the housing conditions in their area under review with a view to identifying any action that may need to be taken by them" (s3(1)).

Then there are the HMO management regulations. These require all HMOs to be managed properly and comply with basic standards. Landlords not complying with these, can also be prosecuted.

So although extending the licensing requirements might help, Local Authorities already have powers to deal with shoddy properties in their area, whether they are HMOs or not. The problem, so far as I can see, is not lack of power to do these things, but lack of funding and manpower. Presumably, as Mr Brown has mortgaged the country in order to pay the banks, this is not a situation which is likely to improve in the near future. What do you think?

HMO Landlords fined in Manchester

More and more landlords and agents are being prosecuted under the HMO licensing regulations. For example, a report in the Sikh Daily Times mentions two cases under the HMO legislation in Manchester.

In cases heard 20 July 2009 at Leeds Magistrates Court, a landlord, Mrs Ghamar Gill, was fined £1,000 and ordered to pay costs of £1,554. An inspection of her property revealed a lack of adequate fire precautions and the property had no fixed heating system which meant tenants had to rely on portable heaters. No doubt the Local Authority will have served an improvement notice on her in respect of this.

The other case involved an agent, Mr Qumar Javed of 2View Properties management company, who had taken over the management of a property on behalf of a private landlord and failed to license it. He was fined £2,000 and ordered to pay costs of £828.

Whether you are a landlord or an agent, the legislation must be complied with. If you own or manage a property with more than five tenants and you don’t know if your property needs a license or not, have a word with someone at your local authority. You can find contact details via my Local Authority Directory.

Do you know of any landlords who have been prosecuted?

Landlord licensing and agent regulation – impact assessments now published

Those interested in the governments consultation paper issued in response to the Rugg Report, will also be interested in the impact assessments which have now been published by the Department for Communities ands Local Government .

Impact assessment for regulation of Landlords
This is available to download from here. This shows that there are two options under consideration. The first is full licensing, which would involve a five year fee of £500 per property. The second is a web based national register. This will involve an annual fee of £30-50 per landlord.

Although both options are discussed in the report, it is clear that it is just the second option, the web based register, which is being seriously considered. All landlords will be required to sign up to this, although landlords who are members of existing organisations (presumably landlord associations) will be passported into the register. In return for signing up to the register, landlords will be offered benefits such as free documents e.g. tenancy agreements, and property advertising.

The report analysis is on the basis of 1 million landlords with 3 million properties.

Impact assessment for regulation of Agents
This is available for download from here. There are only two options discussed in the report, doing nothing and mandatory regulation. Regulation is the favoured option.

The report states that there are around 8,000 letting agents, only half of which are members of a professional organisation (such as ARLA or RICS). The large number of unregulated agents is undesirable as they are not compelled to have any client money protection or undergo any training on property management. Apparently some 60% of landlords use letting agents to manage their properties, so many landlords are at risk of poor practice by unregulated agents.

The report estimates that existing members of professional organisations will be passported into the scheme. Others will have to pay a joining fee in the region of £180 pa, and all agents will then have to pay an annual fee in the region of £120 pa.

Implementation of this (which has been widely called for across the industry) will protect both landlords and tenants from fund misappropriation, and will provide a more 'level playing field' for those agents who are currently operating properly (with the associated costs which this involves).

Note that I have set up an answer form for those wishing to respond to the governments consultation paper here. This now provides links to these two impact assessments.

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.

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,