Tackling rogue landlords and improving the private rental sector Sheila Camp, LGIU Associate 10 September 2015 Summary The discussion paper "Tackling rogue landlords and improving the private rented sector" was published in early August and sought comments by 27 August. It has three main aims: first, to bring forward proposals to tackle the small minority of private sector landlords and/or lettings agents who operate deliberately outside the law. This includes knowingly letting property which is so defective that it is a danger to tenants; illegal eviction or harassment; and letting to illegal immigrants. It is this latter issue which has received most publicity. The second thrust of the discussion paper is to raise standards in the sector via Rent Repayment Orders and a new system of civil penalties imposed by local authorities for less serious breaches of housing standards. Third, there are proposals to help landlords gain possession more quickly when a tenant has abandoned a property. The proposals in the discussion paper will apply to England only and do not cover Houses in Multiple Occupation, for which a separate paper will be produced "in due course". Although the consultation is finished the paper itself gives an indication of possible future action in this area. This briefing will be of particular interest to members and officers with responsibility for housing, particularly house conditions, rented housing and tenancy issues and of general interest to other elected members who are concerned about tackling the criminal behaviour of some landlords and/or lettings agents.
Briefing in full Introduction The private rented sector (PRS) has grown rapidly over the past decade or so, particularly since the financial crisis of 2007-08 resulted in mortgages for first time buyers becoming difficult to obtain without a hefty deposit. That and rising house prices in some areas - London and the south east especially - has seen the PRS expand to house 4.4 million households. The past 10 years have, the discussion paper asserts, seen standards in the PRS improve rapidly, with 84% of tenants satisfied with their homes. The majority of landlords provide a good service and the government does not intend to burden them with "unnecessary regulation". It wants to support good landlords and clamp down on the small minority who operate outside the law by knowingly renting out unsafe housing. The bulk of the discussion paper centres on tackling these "rogue landlords". Later sections deal with penalties for less severe breaches of housing standards and improving the procedure for a landlord reclaiming an abandoned property. Tackling the worst offenders According to the discussion paper, only a small minority of landlords deliberately operate outside the law by letting unsafe or overcrowded homes; even when convicted, they face fairly small fines, as the court must take account of their ability to pay. The government wants to stop these rogue landlords from profiting from their illegal practices, and are suggesting more severe penalties, including repayment of rent and new civil penalties, plus the prospect of being banned for continuing offences. Good landlords will benefit from the curtailment of the activities of the small minority of rogue landlords. Aggravating factors in housing offences Although the cap on the maximum fine for a housing offence was lifted in March 2015, it has had little effect in practice because the court must take account of the offender's ability to pay. Fines are typically averaging 1500. Possible changes could include a minimum fine for repeat offenders; ensuring the officers of a company committing the offence are liable; and widening the scope of "relevant housing offences" to include Providing a local authority with false or misleading information following a statutory enquiry;
Permitting or causing overcrowding; Illegally evicting or harassing a residential occupier; Continuing to let to an illegal immigrant; or Any offence under the Housing Act 2004. The paper asked for views on a range of issues, including whether the current fines for housing offences generally reflect the gravity of the offence and what has been the impact (if any) of removing an upper limit on potential fines for certain housing offences? Blacklisting and banning rogue landlords Because of the rapid growth of the PRS, local councils may have difficulty identifying all rented property in their area. To assist them in tracking down rogue landlords, data held by Tenancy Deposit schemes could be made available to them. For persistent offenders, the government is considering a blacklist of landlords and lettings agents, to be used by local authorities to track offenders who move to another area and restart their activities in a new location. In very serious cases, banning the offender from renting out property for a period of time may be necessary, with a possible prison sentence if the ban was ignored. The circumstances in which a local council can take over the management of rented property could be extended to include blacklisted landlords, with the council able to offset its costs through rent collected. The paper asked whether there should be a blacklist of persistent rogue landlords and letting agents and a series of questions about the reasons for placing someone on a blacklist, the process of doing so, the penalties for breaching a ban and possible stronger penalties for breaching a ban. Fit and proper person test Local authorities granting a licence for an HMO or under a discretionary licensing scheme must be satisfied the applicant is a "fit and proper person"; they can currently refuse a licence if the landlord has committed any offence involving fraud, violence, drugs or sexual assault; discriminated on grounds of sex, colour, race, ethnic or national origins or disability in, or in connection with the carrying on of any business; contravened any provision of the law relating to housing or of landlord and tenant law; for HMO licences, has breached a condition in any applicable code of practice. The government is considering additional factors for local councils to consider, including:
Undertaking a standard Disclosure and Barring check on each landlord. This would provide information about all previous criminal convictions that are required to be disclosed and the information could be taken into account by the local authority when considering the application; Whether the landlord has previously received a civil penalty because they failed to carry out a Right to Rent check; Whether the landlord is an illegal immigrant; Whether the landlord is bankrupt or insolvent; Requiring the landlord or their managing agent to have an office in the UK. Rent Repayment Orders and Civil penalties The thinking behind this section is based on the premise that the offender should bear the costs of enforcement. It is therefore looking at ways to enable local councils to recover the costs of inspection and enforcement, focussing on extending the scope of Rent Repayment Orders and introducing new civil penalties for breaches of housing legislation. Rent Repayment Orders Rent Repayment Orders currently only apply when a landlord has not obtained a licence for a licensable property. The Order can require the landlord to repay up to 12 months' rent; if rent has been paid by housing benefit, the local council can retain it and use it for housing purposes. The government is considering extending the scope of the Orders to cover illegal eviction and failing to comply with a statutory notice, such as an Improvement Notice. Other scenarios will be considered. Civil Penalties Local authorities can currently impose a number of civil penalties without needing to go to court; the best known is probably penalties for parking infringements, but also include failure by letting agents to make their fees transparent and breaches of energy performance building regulations. Prosecution is relatively expensive and civil penalties for certain breaches of housing standards could prove to be an effective way of penalising offenders and improving the property involved. The government is considering introducing civil penalties for: overcrowded property;
breaches of licensing rules; hazardous disrepair; poor sanitation; electrical faults; damp; and infestation of vermin. Local authorities would retain the income and be able to use it for housing purposes, but the primary aim of civil penalties must be to improve housing standards rather than generate income. Abandonment The paper asks for views on how this could work. Where a property is abandoned - the tenant disappears, possibly leaving rent arrears and/or damage - a landlord may be uncertain as to their right to repossess and may resort to court procedure. To help landlords, the paper is proposing changes to reduce the process by up to 2-3 months and avoid going to court via a written warning notice to the tenant that the property is believed to be abandoned. The tenant would have four weeks to respond, but at the end of that period, if the landlord still believed the property to be abandoned, they could terminate the tenancy. House Proud recommendations and the current discussion paper In September 2013, the LGIU, in partnership with the Electrical Safety Council, published "House Proud - how councils can raise standards in the private rented sector". It contained a number of recommendations for central government, as well local authorities. It is interesting to see how far the government recommendations accord with the current discussion paper. The recommendations are set out briefly below, with comments in italics on how this is addressed in the current paper. Allow local authorities more discretion Amend the Housing Act (2004) so that local authorities have more flexibility in introducing Selective Licensing and tackling poor standards. The current paper does not support greater regulation for the majority of landlords Allow councils to recoup the costs of enforcement more effectively. This is partially addressed by the new system of civil penalties Give councils the discretion to introduce compulsory accreditation. The current paper does not support greater regulation for the majority of landlords
Address the need for better data: Central government could play an important role in opening up new data sources to local government. This would allow private rented sector addresses to be more readily available to local authorities. This is partially addressed by the proposal to allow local councils to access Tenancy Deposit scheme data Promote best practice sharing through sector bodies Better investment in sector-led guidance would free up local authorities to focus their limited resources on engagement and enforcement This implies expenditure by government and is not covered in the current paper One of the main differences is that the LGIU publication was seeking greater discretion for councils to introduce selective licensing and accreditation to tackle poor standards in the PRS, whereas the current discussion document is not in favour of greater regulation for the majority of private landlords. On the need for more accessible data and recovery of costs, there is at least partial accord between the two documents. The LGIU publication is wider in scope, in particular looking at the role of tenants in the improvement process, whereas the current discussion paper deliberately limits itself to tackling the very worst landlords. Comment In as far as it goes - seeking redress against the very poor and often illegal practices of a small minority of landlords, the discussion paper provides some useful suggestions, in particular regarding fines, potential blacklisting and a "fit and proper person" test. The proposals on allowing local councils to access Tenancy Deposit schemes data and impose civil penalties are also welcome. However, its biggest drawback is its limitation to tackling "rogue" landlords. In practice, between the criminals and the majority of good landlords are an unquantified number whose practices are at best dubious. They may exploit the relatively powerless position of their tenants by being slow to deal with repairs or improvements, even threatening eviction if the tenants complain. This could possibly be classed as harassment, but this is unlikely, given that the termination of a fixed term assured shorthold tenancy needs only the correct serving of the notice of termination, not any fault by the tenant, for a court to grant possession. Another legal practice employed by some landlords and/or lettings agents is charging for a tenancy renewal when a fixed term tenancy is ended, even though the tenant has not changed; this may also coincide with a rent increase.
It could also be argued that one of the main problems with the PRS especially in high demand areas is that there is no desire on the part of government to limit spiralling rents. "What the market will bear" is becoming increasingly unaffordable for a growing number of households in high cost areas, especially tenants hit by other aspects of government policy such as the withdrawal of child tax credit or the benefit cap. This is not considered in the current paper. Related briefings Review of property conditions in the private rented sector For more information about this, or any other LGiU member briefing, please contact Janet Sillett, Briefings Manager, on janet.sillett@lgiu.org.uk