COUNTRY LAND & BUSINESS ASSOCIATION (CLA)

COUNTRY LAND & BUSINESS ASSOCIATION (CLA) RENTING HOMES A BETTER WAY FOR WALES Introduction The CLA represents the interests of over 34,000 owners of rural land in England and Wales. Members in Wales operate a wide range of primarily rural businesses including residential, agricultural, tourism and commercial ventures at the last count the CLA represents some 250 different types of rural businesses. They also manage and/or own a quarter to a third of all heritage, including the built environment, so that the CLA is by far the largest heritage-owner stakeholder group. We have been looking after the interests of our members, as well as promoting the positive aspects of land ownership, land management and rural business activities for more than 100 years. Prior to the CLA s formation, many existing members have been involved in the private rented sector for generations and regard housing provision as a critical role in the community and local economy. CLA members own or manage approximately half the rural land in England and Wales, and the resulting expertise puts us in a unique position to formulate policies. The CLA is pleased to have the opportunity to comment on the proposals in the Welsh Government consultation document Renting Homes A better way for Wales published on 20 May 2013. General comments 1. It should be stated at the outset that the CLA will not be commenting in any detail on proposals to regularise the law in respect of social housing providers as the CLA has concentrated on how the proposals will affect private landlords. Having said that, we believe that the overall supply of housing would be improved by the introduction of flexible social tenancies similar to the recent developments in the English social housing sector. 2. The CLA is generally in favour of simplifying and standardising rental contracts provided there is sufficient ability to tailor to individual circumstances. Often in rural locations landlords need to add particular requirements regarding garden maintenance or access to the property, parking etc. Some older heritage properties, for example, would also need to have carefully tailored contracts to adequately protect the asset. 3. The CLA notes the intention to consult fully on the Model Contracts and would welcome being involved in this process. 4. The CLA has no objection to having the landlord s statutory repairing obligations (S11) expressly set out in the written contract. In fact, the CLA already encourages this. While it is agreed that the use of freely available model tenancy agreements should reduce the potential for challenges under the Unfair Terms in Consumer Contracts Regulations 1999, such agreements will presumably be focused on the statutorily required elements and there are still likely to be gaps that thorough agents and landlords would wish to fill in, both to protect their interests and to ensure that the relationship with their tenants is clearly set out. 5. The CLA does not, however, agree that landlords should face financial penalties for failure to provide such agreements. 1

6. Rent (Agriculture) Act 1976 Tenancies - No mention is made of Rent (Agriculture) Act 1976 tenancies. The CLA is concerned about the extent to which the position of agricultural workers has been considered. This needs to be made clear, as many CLA members still house employees or former employees or their successors under this Act. 7. Assured Agricultural Occupants under the Housing Act 1988 - This category of residential occupier is not mentioned in the White Paper. The CLA requests confirmation as to how they will be treated under the new régime. As above, many CLA members house qualifying agricultural workers who, therefore, are Assured Agricultural Occupants. Is it envisaged that, as such, occupiers are a type of Assured Tenant, so they would have their rights/agreements converted into the new Secure Contract, but we seek confirmation of this. Issues arise, for example: will the ability to have an outgoing agricultural worker housed by the Local Authority still exist? 8. Housing of agricultural workers under ASTs - In practice these days, most agricultural workers are housed under Assured Shorthold Tenancies (ASTs) provided they are served with the correct notice before the tenancy is entered into. The CLA would like to know whether qualifying agricultural workers will still need to be served with a special notice before they are granted a Standard Contract or whether the replacement of the Housing Act 1988 in Wales will make such a step unnecessary. Or indeed, will it be possible to house such workers under a Standard Contract without any additional security of tenure arising? This is an area of the law that is often misunderstood and that will need careful consideration. 9. Service Occupiers - Reassurance is sought with regard to Service Occupiers (in nonagricultural employment) who currently have no security of tenure beyond their employment term. The proposal to remove the confusion over the distinction between leases and licences will need to be carefully considered. In an employment context, where a property is needed to be repossessed for a replacement employee, the concern is that the proposed changes will hinder the flexibility that currently exists. It is not clear from the White Paper whether it is proposed that all licences such as Service Occupation Agreements will just be swept up into the new category and be given a Standard Contract. If so, occupiers could be entitled to two months notice, which would be a considerable extension to the current position. 10. Lodgers -The position of lodgers also needs to be confirmed - will their licences also be converted into the Standard Contract? If so, their landlord s right to evict them will effectively be reduced as, currently, lodgers occupy under licences that are excluded from the Protection from Eviction Act 1977. 11. Licences it is not clear whether or how all licences will somehow be incorporated into the new system. The CLA is concerned about the impact on Holiday Lettings. 12. Tenancy deposits - Tenancy deposits are not mentioned in the White Paper. It is imagined that the relevant legislation (Housing Act 2004) will be amended so as to apply to the Standard Contract. This will effectively increase the reach of the schemes beyond the current AST regime and the issue of ability to repossess property arises. The following are the CLA responses to the questions as set out in the questionnaire: Question 1. Do you support our proposals for changing the legal framework for renting a home? Whilst there is a feeling among our members that the current system works well on the whole and that change in this area should not be a priority for Welsh Government, the CLA applauds 2

the stated aims of the Law Commission to simplify the current housing law régime which it is acknowledged can be obtuse to practitioners, let alone members of the public. The CLA s key objectives are that, both now and in the future, private landlords rights are not reduced and the burdens on landlords are not increased, particularly if existing tenancies are converted under the new legislative régime. The admission in the White Paper that obligatory longer rental terms in the private sector would result in properties being withdrawn from the rental market is wholeheartedly supported by the CLA. Landlords must be free to choose the length of the fixed terms that they grant otherwise some will certainly consider withdrawing from the market. Question 2. Do you agree that the secure contract should be based on the current local authority secure tenancy (paragraph 6.11)? The CLA understands that there will be many instances where households on the statutory waiting list, or bidding through Choice Based lettings, will either reject or not select Housing Association accommodation because they feel it to be less secure than Council accommodation. However, the CLA believes that Welsh Government should be considering flexible tenancies like the Coalition Government s solution, to encourage a greater throughput of housing supply. The CLA seeks clarification as to whether private sector Assured Tenancies will also be automatically converted into this Secure Contract? If so, the grounds for possession must be similar to those under the current Assured Tenancy régime. The CLA s view is that the Secure Contract should not award any greater level of security than the contract it is replacing. Question 3. Do you agree that the standard contract should be based on the current assured shorthold tenancy (paragraph 6.13)? These contracts must not have security of tenure and must continue to be at a market rent, otherwise the supply of private rented properties will be reduced. Many CLA members have been renting properties for decades and, consequently, many are still encumbered by regulated tenancies under the Rent Act 1977. There is a strong view that the relative freedom of the statutory régime under the 1988 Housing Act should not be compromised in any way by these reforms. It is understood that, as with ASTs, the new contracts will be terminable by giving two months notice, but confirmation is sought on this? Question 4. Do you support the proposals in relation to each of the following issues: a) Addressing the anti-social behaviour of some households (paragraph 6.17) The aim is, of course, laudable, but the CLA seeks assurance that private landlords will not be obliged through these changes to police social problems. b) Dealing with domestic abuse (paragraph 6.25) 3

Please see the response to a) above. c) A more flexible approach to joint tenancies (paragraph 6.27) The CLA wants to stress that any alteration of the occupiers residing in the property should be subject to the landlord s permission. Otherwise the landlord may be unable to undertake character or credit checks and this could result in serious management issues. Problems are also envisaged where e.g. the income-earning husband or wife disappears leaving a spouse and dependants at the property who are not in a position to pay the rent. This proposal for a more flexible approach to joint tenancies might be an improvement in the classic student/friends sharing scenario, but perhaps less appropriate to husband and wife or partners. The CLA will want to ensure that if the remaining occupier(s) does not find a replacement then he/she will remain liable for whole of rent. Landlords should not be left with a reduced rental income in such situations. The role of and impact on any guarantor in such circumstances would also need careful consideration here. The CLA believes that the real flexibility issue is that there are not enough houses available to rent. The view is that some of the suggested measures represent a sticking plaster approach to lack of housing supply. The CLA wants to see the ability to deliver an increase in the number of smaller units realised through the planning system. Welfare Reform should be cited as a material consideration through the planning application process. d) Abandonment of the property by a tenant (paragraph 6.31) This is generally welcomed by the CLA as landlords are often put in a difficult position when properties are abandoned. The procedural detail will need to be considered carefully as it could be difficult to establish that a landlord is satisfied that an individual is not returning especially in more volatile domestic situations. e) Renting by young people (paragraph 6.33) Provided landlords are not compelled to let to 16 and 17-year olds there does not seem to be a problem for landlords here. Presumably if they chose to let to a young person, as now, it would be good/standard practice to also insist on a guarantor. f) Standardising succession rights (paragraph 6.36) The CLA is not particularly concerned with the equalisation of succession rights between local authority and housing association tenants, but it is interesting to note that where England has standardised social sector succession rights to just a spouse or civil partner, in Wales they want to equalise them to the more generous position currently enjoyed by local authority tenants and then to extend it further to include long term carers. The CLA is, however, concerned if there is the potential for carers to be eligible to succeed to Assured Tenancies if indeed they are converted to the Secure Contract. 4

It seems anachronistic that if one of the aims of these reforms is increased flexibility in the housing market across the sectors, to be seeking to encumber properties for generations. The potential for two successions is something that CLA objects to in principle. If Assured Tenancies become Secure Contracts with the potential for priority successor and a reserve successor this would appear to be an extension of the existing position where there is currently the potential for only one succession. It is surely a retrograde step to be considering returning to the levels of security similar to those under the Rent Act 1977 which had such a devastating effect on the private rented sector. The CLA seeks an assurance that, where an Assured Tenancy has arisen on the succession of a family member (rather than a spouse) to a protected tenancy under the Rent Act 1977 or the Rent (Agriculture) Act 1976, there would be no further potential successions if such a tenancy were to be converted to a Secure Contract. g) Standardising eviction for rent arrears (paragraph 6.42) The CLA wants to see a ground 8 equivalent remain for private sector tenancies. If, for social tenancies on a secure contract, there will be no ground 8 equivalent this will presumably mean social landlords will have more difficulty securing possession for serious rent arrears than before. Although this applies to social housing, please note that if the grounds for possession appear diminished or too restrictive, fewer private landlords will want to enter into secure contracts. h) Requiring landlords to ensure there are no Category 1 hazards under the Housing Health & Safety Rating System (paragraph 5.5(g)) No. The CLA s view is that the existing powers for Local Authorities to inspect and enforce housing conditions under the Housing Health and Safety Rating System are sufficient and this is an unnecessary strengthening of the law in this area. Additionally, it is reported that the assessment of Category 1 hazards is notorious because it largely relies on the discretion of the individual Environmental Health Officers. Experience in Northern Ireland, following delivery of this policy, demonstrates that sections of housing stock now sit vacant (we can evidence). This proposal brings forward minimum energy performance standards scheduled for 2018 prior to the bedding in of Green Deal or ECO funding. It also ignores the golden rule safeguards developed so that housing supply is not adversely affected. Following completion of 2 million-worth research by DECC into the behaviour of solid walled properties, scheduled for 2015, the EPC assessment methodology should improve. These proposals risk housing supply when adequate proposals are already being brought forward UK-wide to tackle excess cold. There seems to be an inconsistency here between the view that Rent Act tenancies are to be excluded from these reforms because, even though the condition is of a low standard, tenants want the low rents and the intention to force all landlords to offer property at a certain minimum standard which will presumably push rents up. There is adequate legislation to cover this issue and the increasing of burdens on landlords in this way could result in there being fewer properties available to rent, especially in rural areas. 5

Additionally, it should be remembered that often properties are damp and cold due to the way in which tenants use them rather than because they are inherently defective or unsuitable. i) Abolishing the six-month moratorium on no fault evictions (paragraph 6.48) The CLA agrees with this proposal especially as where a worker is housed under an AST it can be the cause of some difficulty if the job doesn t work out and yet the house could remain occupied until an order for possession is granted (currently a minimum of 6 months later) if the tenant refuses to vacate. Many CLA members prefer to let on longer fixed term ASTs in any event so as to reduce turnover and management costs so they will not be impacted by this proposal. However, for those that house their employees, it is certainly a welcome proposal and in the interests of the rural economy to have this increased flexibility. j) Establishing a legal framework for supported housing (paragraph 6.55) k) Bringing housing association Rent Act tenancies within the Renting Homes framework (paragraph 6.62) The CLA does not understand the reluctance to include private sector Rent Act tenancies in the current overhaul. The fact that landlords can own properties that hold a decreased value by virtue of its occupant, with a disproportionately low rent, seems like an outdated state of affairs. Many old properties in rural areas are falling into a state of disrepair as landlords do not have the rental income with which to improve them. This is a missed opportunity to deal with an important issue. The concern here is that landlords under such tenancies are still subject to enforcement action under the Housing Health and Safety Rating System (pursuant to the Housing Act 2004) and potentially can be forced to improve the premises regardless of whether the required works are covered by the often significantly reduced rental income from the property. This and the fact that many of the successors to such properties are able to afford rents above the level set by rent officers leads to iniquitous situations for many long term landlords. As referred to above, the CLA believes that Welsh Government should be looking at flexible social tenancies similar to the Coalition Government s solution to encourage a greater throughput of housing supply. This allows for assessment of households who are too wealthy to remain in subsidised housing and the CLA s view is that this principle should be followed through into Rent Act housing. Many CLA members are renting Rent Act stock to tenants who have no need of subsidised housing often 30% below open market rents. This not only stifles investment, but traps tenants into remaining in one place. The CLA s view is that all Rent Act tenancies should be included in the current proposed programme of reform and that these serious historical iniquities should be addressed. Failing this, at the very least, the The Rent Acts (Maximum Fair Rent) Order 1999 should be removed and there should be an ability to assess the rents based upon all improvements carried out by a landlord rather than just those since the previous review so they become cumulative. If a landlord does some improvements, e.g. double-glazed windows, which are not 6

sufficient in themselves to break the capping on review, and then, for instance, installs central heating at a later date, then all of those improvements should be taken into account at subsequent reviews. Landlords are being disadvantaged by doing piecemeal improvements, but often are forced to do so because of financial constraints. ADDITIONAL COMMENTS Proportionality defence The CLA is looking for reassurance that this potential to challenge repossession actions will not be extended to private sector tenancies. Housing Supply - The CLA s view is that a key priority for Welsh Government should be to enable increased rural house-building so as to enhance rural housing supply. Protection of property rights - If Assured tenancies become secure contracts, rights of succession never envisaged by landlords could be introduced. The CLA does not believe that landlords should be obliged to accept this fundamental change to their property rights. Landlords registration - The CLA notes the reference to the intention to bring in Mandatory Landlord Registration in Wales and repeats its stance that this will be an additional burden on the good landlords and be ignored by those it most needs to impact. Cross-border estates - The CLA is very concerned about the impact of these proposals on its members who own and let properties on cross-border estates. It is possible that individuals will have some tenants in England and some in Wales and the prospect of having to administer two parallel systems is a real concern. The point has been made by our members that far from simplifying the letting of houses, if England has one system and Wales has another, the position will be one of increased complexity for landlords, tenants and agents, especially in the border regions. Administrative burden - It is essential that landlords are not obliged to issue brand new agreements as soon as the new legislation comes into force as this would be a huge administrative burden. Transactional context concern has been expressed by CLA members about how Mortgage lenders will react to the proposed reforms and the effect this might have on the housing and buy-to-let markets. Additionally, Tenancies at Will should remain unaffected. Rent Act 1977 Tenancies as stated above, the CLA s view is that all Rent Act tenancies should be included in the current proposed programme of reform and that these serious historical iniquities should be addressed. The CLA is happy for these responses to consultation to be made public and is happy to be contacted in relation to its response. If you have any questions concerning these representations or would like to discuss anything contained in them, please contact the author, Harry Flanagan, Senior Legal Adviser (tel: 020 7235 0511; e-mail: harry.flanagan@cla.org.uk) or contact the CLA Cymru office: Unit 8, Broadaxe Business Park, Presteigne, Powys, LD8 2LA. Tel: 01547 317085 Ben Underwood, Director A2412038 7