The private rented sector - is more regulation needed

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The Private Rented Sector – is more regulation needed?

By Nicola Muir

Did you know that there are over 50 Acts of Parliament and more than 70 other pieces of delegated legislation relating to private rented properties?  With so much “law” it’s hardly surprising that there is widespread ignorance amongst both tenants and landlords about their rights and responsibilities.  How then can this be addressed to ensure that, where regulation is necessary, it can be made understandable to those affected?

This is one of the key questions considered by the House of Commons, Communities and Local Government Committee in its Report entitled “The Private Rented Sector” which was published on 13th July 2013.

The trigger for the Report was the substantial increase in the number of people living in privately rented accommodation.  In 1999, only 9.9% of English households rented privately.  However, by 2011/12 that number had risen to 17.4% - overtaking the proportion of households living in social housing.   As well as the increase in numbers, there is also an increase in the range of people renting all with diverging needs.  For example, while families are likely to be looking for a long term home, a student will want to move on relatively quickly.

The Problems

The Report concentrates on four key issues:

 

(1)       how to address the general lack of awareness about landlord and tenant law.

(2)       how to raise the standard of property and management in some parts of the sector

(3)       whether to introduce regulation of letting agents in order to reduce “sharp” practice; and

(4)       whether there should be greater security of tenure so that the market can offer longer tenancies.

Awareness

The Report recognises that the first step towards promoting awareness and understanding of landlord and tenant law would be to have a simpler statutory framework in the first place. It calls on the Government to “conduct a wide-ranging review to consolidate the existing legislation covering the private rented sector with the aim of producing a much simpler and more straightforward set of regulations  . . .”.  Once this has been done, the Report suggests, there would be merit in a publicity campaign led and funded by the Government to raise awareness of what landlords’ and tenants’ respective rights and responsibilities are.

“Consolidating” the current myriad of rules and regulations is easier said than done.  At the moment, there is no simple answer to a tenant’s enquiry as to what his rights are.  In determining which statute applies, the practitioner needs to know whether the tenancy is purely residential, its length, the date it was granted, the nature of the parties and the amount of the rent.   While it would be relatively easy to introduce a new “one size fits all” form tenancy written in plain English, unless the new law has retrospective effect, it will simply introduce yet another statutory regime!  Retrospective amendment would, of course, bring its own problems not least of which would be to interfere with the bargain struck in all existing tenancies.

Raising Standards

The Committee accepted that, in view of the economic restraints faced by Councils, any new enforcement arrangements in respect of sub-standard properties would have to be self-financing.  It was suggested that councils should be allowed to impose fines without recourse to court action where minor housing condition breaches are not remedied within a fixed period.  This would be subject to a right of appeal to a court.

Another recommendation was that in order to prevent unscrupulous landlords from profiting from public money, any landlord convicted of letting sub-standard properties would have to repay the local authority an amount equivalent to that paid out to the tenant in housing benefit. A similar right to reclaim their rent would be granted to privately paying tenants.  Assuming the amount of rent which could be recouped would be dependent on the degree of non-compliance, it is unclear how this would differ from the current position whereby a tenant can sue for damages where the premises are not in repair given that those damages are usually based on the amount of rent paid.

On the safety side, the Committee recommended that landlords should obtain an electrical safety certificate along the lines of the current gas safety certificate required.  In addition, it wants a requirement for all private rented properties to be fitted with a smoke alarm.

Letting Agents

Letting agents came in for a particular amount of stick in the Report.  The general view of those who gave evidence to the Committee was that something has to be done. The consumer organisation, Which? carried out research in 2012 in which respondents complained about letting agents mishandling deposits; missing appointments; employing aggressive sales tactics, providing poor customer service; not passing on rent; not properly vetting tenants; and failing to carry out regular inspections or adequate check-out procedures.  Particular issue was raised with the level of fees charged and the lack of transparency of those fees.

Under the new Enterprise and Regulatory Reform Act 2013, regulations can be made requiring letting agents to belong to an approved redress scheme.  The scheme would be accompanied by a Code of Practice.  The Report calls for the Government to go further and to make letting and managing agents subject to the same regulation as currently governs sales agents.  This would include giving the OFT the power to ban agents who acted improperly, and make client money protection and professional indemnity insurance mandatory.

Longer Tenancies

While, an assured shorthold tenancy does not have to be “short”, most tenancies are granted for 6 months or a year.  This is largely because landlords are aware of the time it takes to get possession back from a bad tenant.  The Committee wants to exploit the flexibility available under the current AST regime by encouraging the use of longer tenancies to give families better long term security.  One way of doing so would be to speed up the eviction process when tenants default.  There could also be an accelerated procedure if landlords can provide proof that they intend to sell the property.  Another difficulty is that mortgage conditions often prevent landlords from offering longer tenancies.  Again the Report urges the Council of Mortgage Lenders to investigate ways of removing such conditions.

The Solution

The Report is wide ranging but the remedies proposed are not fleshed out.  Most of the solutions suggested require the Government to carry out further review of the existing law with a view to creating more or different regulation of private residential tenancies.  While there is no doubt that the current law is overly complex and voluminous, will more “law” really help?

Nicola Muir

Tanfield Chambers

28th October 2013

Published in Estates Gazette