Comment

The government are proposing new measures to crack down on rogue landlords

Thursday, August 6, 2015 - By Richard Tacagni, Managing Director at London Property Licensing

On 3 August 2015, the Department of Communities and Local Government (DCLG) launched a consultation document on a range of new measures to crack down on rogue landlords who rent out unsafe, overcrowded and badly managed properties.

The government point out that 4.4 million households now rent privately in England, with surveys showing 84% of tenants are satisfied with their accommodation and stay in their homes for an average of 3.5 years.

Whilst the government say they want to support good landlords and avoid excessive regulation and red tape, they are determined to crack down on the minority of rogue and criminal landlords who put their tenants' lives at risk. Their aim is to drive these criminal landlords out of business.

With this is mind the consultation paper invites comments on a range of measures to achieve this objective, whilst also addressing the issue of abandonment. To save you time, I have summarised the main issues in the consultation paper:

Increasing the penalty for housing offences

The consultation paper notes that from March 2015, changes in the law mean that most housing offences can attract an unlimited fine in the Magistrates Court, rather than the £5,000 to £20,000 fines previously stipulated. Spot checks by London Property Licensing have found that many council websites have not yet been updated to reflect this change in the law.

Further proposals being considered include setting minimum fines for repeat offenders and exploring how best to deal with offences committed by a company if the offence was caused by a deliberate act or omission by officers or directors of the company.

Sharing tenancy deposit scheme data

Knowing which properties are privately rented and may require a licence or some other enforcement intervention is a constant challenge for councils. With every landlord or agent having to secure deposits through one of the government approved tenancy deposit schemes, DCLG are seeking views on whether this information should be shared with local authorities to help make their job a little easier.

Blacklisting and banning rogue landlords and letting agents

Two separate proposals have been put forward in an attempt to tackle those landlords that repeatedly evade their responsibilities and are not fit to operate. The difficulty with the Housing Act 2004 is that the only penalty available to a Court is a fine, which some rogue landlords simply absorb as an operational cost and carry on regardless.

The first proposal involves setting up a 'backlist' of landlords and letting agents who have been prosecuted for previous housing or other serious offences. The information would then be shared with local authorities, government departments, and other relevant agencies. Exactly how this would work in practice, what appeal mechanisms would exist and how the list would be used is not yet clear.  

The second proposal involves introducing a banning order for rogue landlords and agents who repeatedly flout the law so they could no longer operate. This could be a very useful sanction to address the very worst serial offenders, especially as operating in breach of the ban could result in a custodial sentence. At present, you can be banned from running a food business but not a multi-million pound property portfolio. Much of the detail still needs to be worked out including what happens to the offender's property portfolio if they are banned.

Fit and proper person assessment

Every landlord or managing agent who applies for a mandatory HMO, additional or selective licence must undergo a 'fit and proper person' test. In practice, this is usually done based on a self-declaration on the application form and very few landlords fail the test - but most rogue landlords don't normally apply for a licence in the first place! 

The government are proposing to make the fit and proper person test a much more vigorous process by introducing new criteria, exploring the idea of provisional licences and considering a standard Disclose and Barring check on every applicant. Back in 2010, DCLG guidance had advised that councils should not routinely make police or other criminal record checks (DCLG 2010 guidance, para 83).

Before the fit and proper checks are made even more onerous - thereby increasing application processing times and driving up costs - it would be useful to see what evidence there is that the current process is not fit for purpose.

Expansion of rent repayment orders

The government are considering extending Rent Repayment Orders (RRO) to situations where a landlord has been guilty or illegally evicting a tenant or convicted of failing to comply with a housing improvement notice or prohibition order. At present RROs only apply to licensable but unlicensed properties and enable the council or the tenants to reclaim up to 12 months rent through an application to a First Tier (Residential) Tribunal.

It seems a fairly sensible idea to extend these powers although they are not widely used at present. Research by London Property Licensing found that only 19 RROs had been obtained in London over a three year period from April 2011 to March 2014.

New civil penalties for certain housing offences

Whilst prosecutions remain the appropriate option for the most serious housing offences, the government are considering whether to implement a new regime of civil penalties for certain housing offences. Similar measures have already been implemented for letting agents who do not belong to a redress scheme, and for the new smoke alarm and carbon monoxide detector requirements due to start in Autumn 2015.

It is envisaged that these powers might be appropriate for a less serious or first offence, as an alternative to prosecution or simple caution. The money collected could then be reinvested back into the housing service.

Whether this would work in practice will very much depend on the detail of the scheme. For example, what level should the penalties be set at and is there a danger enforcement officers could be given civil penalty targets to off-set budget cuts when a verbal warning would previously had sufficed for a minor infringement? I suspect this could be the one issue in the consultation paper that causes landlords and agents most concern.

Abandonment

The last part of the consultation paper concentrates on the topic of abandonment and the difficult landlords can experience in regaining possession of their property if the tenant disappears. The proposal involves issuing the tenant with a written warning notice saying the property appears to be abandoned and giving them 4 weeks to respond. If there was no response, the contract could then be brought to an end although the tenant would be able to apply to the courts within 6 months if they thought the landlord had acted unreasonably. The government think this would speed up the possession process by 2 to 3 months.   

Summary

Overall, the consultation paper explores a range of 'tweaks' to housing legislation to help local authorities take tough action to drive criminal landlords out of business, whilst also addressing the issue of abandonment. The proposal for banning orders for the worst serial offenders is a particularly interesting one.

There is very little in the consultation paper that the vast majority of responsible landlords and letting agents need to fear. Having said that, feedback from all interested parties will help to ensure that any proposals that become law are fit for purpose and avoid unintended consequences.

It is only a short consultation period so you will need to act quickly. You have until 20 August 2015 to respond by email to prsreview@communities.gsi.gov.uk. Alternatively, you can complete the DCLG online consultation form up until 27 August 2015. 

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