1st December 2015
Proposed changes for the housing sector through the Housing Bill 2015
The government is proposing quite a few changes to the housing sector at the moment and is currently in discussion with the industry as to how these will be implemented across the board which landlords may need to be aware of as it will affect both landlords and agents.
The bill in fact covers many areas, not just the PRS (Private Rented Sector) but within this article I want to look at the items that directly affect us as residential property practitioners
Rent Repayment orders and Civil Penalties
These are being discussed around “why they should be issued” and “the amount of time” that rent should be paid back to the tenant for.
Firstly should rent repayment orders be allowed to be issued for if the landlord has unlawfully evicted a tenant, and should they also extend to category 2 hazards within the HHSRS?
If the rent repayment orders were extended to include the category 2 hazards, this could result in repayment for something as simple as an unsteady banister which may only require remedial actions and could be deliberately caused by a tenant, so I feel this would be a mistake. In relation to how rent repayment orders are issued, these should not be automatic, but should be issued only after an improvement order has been issued and a reasonable time to fix has passed.
In relation to the amount of time rent should be repaid for, this should be for a maximum of 12 months or the length of the tenancy that has passed, or else a tenant could get paid back rent for a period they were not in occupation, which would be unfair.
Banning Orders
The first call to look at is the call for banning orders on landlords and agents that flout the law, this has been in place for many years for estate agents, but not letting agents, and discussions are in place as to how this could work.
There are 3 key points to consider:
“Who” should be banned?”
Consider you run a large letting agency organisation and one member of staff does something to fall foul of the regs and then as a result the entire company receives the ban instead of the individual, that would mean severe loss of jobs etc as a result of one persons actions. Alternatively consider that the “company” receives a ban for operating illegally, this would not prevent the directors as individuals of that company setting up under a different company and trading again. So the call from ARLA is that it needs to be the individual that commits the offence, that is blacklisted not the company.
“Who can do the banning?”
Consider you have properties in many regions and the councils are given the powers to issue the bans, there could be a discrepancy between one district and another as to what practices are acceptable and which are not, or the level at which they would take the action, we all know as landlords that when working with council officials, the differences between working with one and another, sometimes can be immense. Effects of a ban, would lead to extreme financial hardship, inability to cover mortgages, reputational damage and much more, and I believe that something of this severity, should only be allowed to be issued by a judge, who has considered all points, with rights of appeal in place and for a set period of time, to make this a fair scenario for all.
“Who would be told about it”?
The final point here that is a concern, is that once someone has been added to the banned list, where does this information go? ARLA has called for the banned lists to be made public knowledge, purposefully so that tenants can be aware of banned and also for agents, when recruiting staff, they can check to see if the member of staff is on the banned list or not, as the reputational damage of employing such an individual could be catastrophic for the company’s reputation.
Abandonment
One rather more welcome proposal put forward is to simplify the route to achieve possession following a tenant abandoning a property. The proposed changes and discussions here are around:
Currently this is a very lengthy process, having to issue a section 21 and wait for it to expire, and seek possession through the already clogged court system. The proposed changes, would mean a no court option of a notice being issued to the tenant and a reasonable timescale left before taking over the property, with a maximum of 6 months to return to the property
ARLA has proposed that the 6 month timescale is far too long, and in fact a tenant could actually abandon go and rent something else and then come back and demand his old property back after the previous landlord has re-let it, so ARLA request that this timescale is reduced to 2 months as opposed to 6 and has also asked that the length of time a landlord has to store the tenants furniture past vacation (currently 95 days) is reduced.
Civil Penalties
It has been proposed that Civil penalties be allowed to be issued by councils for breaches of standards/regulations, which would remove matters from the court system and be clearer in the penalties that may be incurred for any breach.
This would make sense and standardise the penalties across the board, which at the moment are irregular at best and could be used for breaches of licensing rules, hazardous disrepair, poor sanitation and infestation, but care needs to be taken for damp and overcrowding, to ensure that the landlord was aware of the level of occupation before fines issued, and that any damp is not in fact caused by condensation, which in many cases is actually a lifestyle issue.
Another point in question is in relation to who keeps the fines, If the councils were allowed to keep the fine to be ring fenced for further housing enforcement, this could help improve the sector for the compliant landlords and remove the rogues as they would have more funds to pursue the non-compliant landlords.
Client Money Protection for ALL letting agents
ARLA has also submitted a draft amendment proposing the requirement for all agents to have Client Money Protection as standard, so that this offers the same level of protection in the property sector as the Financial Services Compensation Scheme (FSCS). Currently it is estimated that agents hold over 2.7 billion in client funds and yet there is no requirement for this to be protected legally.
Although by letting through an ARLA agent, you will be protected by client money protection, a code of practice and audited accounts, to make sure all is running smoothly. In 34 years, only 12 claims have been made for misappropriation of funds within ARLA, demonstrating that this structure, does offer great protection.
At the moment the housing bill is still working its way through parliament and the above are not set in stone, but this article is intended to give you an overview of what is being discussed at the top level of industry and an insight into perhaps what might be coming our way soon, but the message is clear, be a good landlord be a good agents, do things properly and stay complaint or else the road is going to be a rocky one moving forward.
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