LICENCE TO BE A LANDLORD

With first time buyers struggling to obtain mortgages, demand for social housing massively outstripping supply, and a sharp rise in mortgage repossessions from 2007 to 2008 (40,000 in 2008, which is 1 in 290 mortgages [1]) the role of the private rented sector is growing all the time.

Private Landlords come in all different guises.  There is the large scale full-time commercial  landlord with properties all over town, there is the “hobby landlord”, who took advantage of a favourable buy-to-let mortgage and maybe owns just one or two properties as a long term investment or to supplement their income, and there is even the “Accidental Landlord”, who in the current housing market has failed to sell their property and has been forced to rent it out instead.  What all of these private landlords have in common, whether small or large scale, is that they will soon be subject to the new registration scheme and license for private landlords which the government has proposed to introduce in order to regulate the growing private sector.

Under the scheme all private landlords would be required to pay a fee of around £50 to register, and would then have to comply with certain standards.

The landlords’ point of view is often that the law is weighted against them in favour of the tenants. If a tenant is not paying the rent or has breached the terms of the tenancy it can take a landlord many frustrating months to go through the court procedures to get a possession order.  Landlords also now have to comply with legal requirements in connection with tenancy deposit schemes, and HMOs (houses in multiple occupation) already have a special set of rules. For that reason many landlords will groan at the thought of more regulation and bureaucracy to contend with. They will no doubt have to consider whether it is possible to increase their rents to cover the additional administration involved in complying with the new licensing scheme.

A more positive view is taken by Keshav Thukaram, a buy-to-let landlord from Southwest London, who told The Times[2] 

“the only way we can meet the country’s housing requirements is for the Government to do away with the negative reputation that buy-to-let investors have earned. It’s great that these measures prove there is a commitment to making the sector more professional. Being a landlord should not be seen as a hobby anymore; landlords have to take the role more seriously”.

It is true that the private rented sector does not always have the best reputation, and a well- publicised licensing scheme might improve that. The license could almost be viewed as the equivalent of a “kite mark” or quality assurance mark for private landlords.

There is already a registration and licensing scheme for all private landlords effective in Scotland, which local authorities are responsible for implementing and enforcing.  Many reputable and responsible landlords welcomed the scheme when it was first introduced because they thought that it would level the playing field between them and some of the rogue/cowboy landlords they had to compete with commercially.

In reality the general view is that has not happened.  Shelter Scotland has called for a review of the Scottish scheme after it emerged that a quarter of properties were not registered. John Blackwood of the Scottish Association of Landlords is quoted as saying

“landlord registration has to have teeth in addressing the problems of tackling unregistered landlords or there is simply no point in having it” [3]

There are many questions to be answered about how heavy handed a registration scheme can be before small time landlords are put off altogether. There is certainly a balance to be found, and it is not going to help the government’s aim to increase the availability of affordable homes if landlords decide to give up on letting rather than register for a licence. There are important issue as to how registration could be effectively enforced and policed, and about the level at which penalties for non-compliance should be set. Any scheme would also need to be widely publicised to tenants so that they would know to avoid unregistered landlords.  Letting agents are another factor, and there may also need to be a scheme to regulate them. At the moment membership of the Association of Residential Letting Agents (ARLA) is voluntary, and the Association demands certain standards of its members and has a Code of Practice that members must follow.

Professor Julie Rugg of the University of York was commissioned by the government in 2008 to devise rental accommodation reforms[4]. Her report recommended that the licensing scheme should have a “light touch” and that there should be tax breaks for landlords to help them bring sub-standard properties in line with the licensing requirements.

A government green paper is due to be outlined this month which is expected to set out further details of the proposed scheme.  In the meantime, an idea of the kind of requirements the licensing scheme might involve can be seen in a pilot licensing scheme in selected areas of Hartlepool, which according to www.residentiallandlord.co.uk came into force on 1^st May.  The Environmental Health department of the local authority manages the scheme. Under the scheme failure to license could lead to prosecution and a fine up to £20,000, and landlords could also be required to re-pay all rent received while property is unlicensed.  The conditions of the license include producing a gas safety certificate for annual inspection, maintaining electrical appliances and furniture that they have supplied in a safe condition, ensuring smoke alarms are installed and working, and supplying tenants with a written statement of the terms on which they occupy.  

Sarah Coates-Madden of Sandersons deals with all aspects of residential and commercial Landlord and Tenant law for landlords and their agents, including possession claims and advice on tenancy agreements.  You can contact Sarah via email scoatesmadden@sandersonssolicitors.co.uk.

Tel:       01482 324662

Fax:      01482 223110

e-mail:  enquiries@sandersonssolicitors.co.uk

 Source: Federation of Small Businesses, May 2009