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20th May 2009
Good riddance to bad landlords!
Sweeping changes are afoot in the private rented sector for
landlords, tenants and letting agents, as the Government takes a
whip to rogue landlords.
A new landlord licensing scheme is to be launched and all
letting agents could be regulated, in a series of measures aimed
at improving the private rented sector in the UK.
The proposals were announced last week in the
Government's response to The Rugg Review, which was
published last year and included a range of recommendations to
protect tenants, drive out bad landlords and ensure best
practice in the sector.
The Government has now begun a period of consultation on a
number of proposals that, if introduced, could have a
significant impact on both tenants and landlords.
What are the new proposals?
- A national register of private landlords could be introduced. All landlords will have to ensure their properties meet certain criteria, and that they deal fairly with tenants, in order to remain on the list. If the property is not up to scratch in terms of energy efficiency or health and safety, for example, they could be struck off. The proposal is designed to drive out 'bad landlords', according to the Government.
- Written tenancy agreements will also be made mandatory, as it is currently still legal to have a verbal rental agreement. But the Government says that, with a written and transparent agreement, both landlord and tenant have a clear record of their rights and responsibilities.
- Access to the Assured Shorthold Tenancy framework has been extended to cover properties with annual rental income of up to £100,000. The threshold was previously just £25,000, so this means that more properties will now fall within the Assured Shorthold structure, which offers protection and transparency to tenants and landlords.
- Compulsory regulation of private sector letting and management agents has been proposed -- a hugely significant move. The compulsory regulation would require all agents to adhere to a code of conduct, including decent home standards, and have measures in place to protect the landlords and tenants they deal with. These will include client money protection, professional indemnity insurance and independent complaints procedures.
- There will also be greater protection for tenants whose landlords default on a buy-to-let mortgage. The Government wants to help tenants who are caught up in a repossession case through no fault of their own by ensuring they get a full two months' notice. And it is urging landlords and lenders to give tenants adequate time to make alternative accommodation arrangements.
- There will be a strong focus on how local authorities work with
the private rented sector. The Government is proposing a number of
measures to improve this work, including better training of staff.
- Finally, it is also trying to encourage institutional investment into the private rented sector by creating opportunities to invest on a large scale for the long term.
Who do these measures affect, and how?
Good news for tenants
Tenants are the biggest winners from the new proposals which are designed to offer them much greater protection.
The landlord registration scheme will mean that, as a tenant, you
will know that your landlord is meeting basic standards on their
properties before you sign up, like keeping up with repairs and
protecting tenant deposits.
The register should also push rogue landlords out of the market,
although the National Landlords Association has argued that this may not
happen in practice. It argues that such a scheme has already existed in
Scotland for three years but that a quarter of properties remain
unregistered.
The proposed measure to give tenants at least two months' notice if
their landlord is facing repossession is also welcome. It should ensure
that, in the future, no tenant ever goes home to find that, because the
landlord has defaulted on the mortgage, the locks have been changed by
the lender!
This is a serious concern for many at the moment - 1,700 buy-to-let
properties were repossessed in the first three months of this year and
3.09% of all buy-to-let loans are in arrears of three months or more.
Landlords face tighter controls
Many landlords will probably not be too pleased with the
proposals. The registration scheme will mean increased red tape
and costs, and it may or may not offer tangible benefits to most
landlords.
Indeed, it has already been argued that the collection of rental
property addresses and information for the register is overly
intrusive at a time when the last thing good landlords need is
added regulation.
However, landlords could benefit from the mandatory regulation
of letting and managing agents, which will be forced to deal
fairly and transparently with both tenants and landlords. Plus
there will a system of redress for those who feel they have not
been well treated by letting agents via an independent
complaints process.
Personally, I think the Government's response to the Rugg Review
gives good landlords little to fear. Any bad eggs however, will
either have to shape up - or ship out.
Tough times for letting agents
At the moment anyone can set up a letting agent with no
qualifications and no code of conduct to adhere to. Some bodies
offer voluntary membership schemes but around half of letting
agents don't belong to any of them.
The Royal Institution of
Chartered Surveyors has strongly welcomed the proposed
mandatory regulation of agents and said that the measures need
to be acted on swiftly. Action needs to be taken to 'end the
scourge of unregulated agents and protect vulnerable consumers',
it stated.
There's not many people, apart from letting agents, that would
contest their regulation although there will clearly be red tape
and cost implications, which will ultimately be borne by clients
- whether landlords or tenants.
Overall though, the Government's response to the Rugg Review has
shown its commitment to improving the private rented sector
(which accounts for 14% of all housing stock) while introducing
'light touch' regulation. Quite rightly, it has focused on
protecting vulnerable tenants who are at risk because of a very
small minority of rogue landlords and letting agents.
This report was published in The Property Ladder, 20 May 2009, Christina Jordan