APPENDIX
Letter to Committee and annexes supplying further
information from Office of the Deputy Prime Minister
Proposal for the Regulatory Reform (Assured Periodic
Tenancies) (Rent Increases) Order 2003
Thank you for your letter of 30 October 2002. The
further information requested by the Committee is set out in the
attached paper which responds to each of the questions in the
order they appear in your letter.
I hope the Committee will find this additional information
helpful.
MARY DYER
Team Leader, Housing Associations and Private
Finance
13 November 2002
1. What evidence does the Department have to
substantiate its claim that section 13 of the 1988 Act imposes
a burden on tenants because it causes confusion and uncertainty,
especially for vulnerable groups such as the elderly?
1.1 ODPM's consultation paper "Proposal
to change the rules on the timing of rent increases for assured
periodic tenancies in England and Wales" set out our initial
assessment of the burdens imposed by the current rules in section
13 of the Housing Act 1988 on the timing of rent increases. In
the paper we said that the interaction of two of the three rules
on timing, which produces for some tenants a minimum rent increase
date which advances each year, was an inconvenience to landlords
and "less than clear from the point of view of tenants."(paragraph
31). We identified as benefits from the proposal "¼the
potential for greater clarity, certainty and predictability for
tenants, and the prevention of the potential unfairness arising
from the progressive divergence in the rent increase dates of
those with weekly tenancies from those with monthly or longer
tenancies."(paragraph 40).
1.2 The views expressed in the consultation
paper were the Department's assessment of the potential burdens
of the current rules and potential benefits of the proposal for
tenants. The assessment was concerned with likelihoods and possibilities.
However, we asked consultees the specific question (Q(b)) as to
whether the current rules on timing of rent increases place a
burden on landlords and/or tenants. Sixty-two responded to this
question and of these, 61 confirmed there was a burden, with 26
specifically agreeing that there was a burden on tenants.
1.3 We further asked whether our analysis
of the burdens on both landlords and tenants of the proposal was
accurate (Q (f)). Fifty-six responded saying our analysis was
accurate but of these only 1 specifically mentioned the burdens
on tenants. We also asked whether we were correct in thinking
that the proposal would benefit tenants if a fixed day for increases
was established (Q(h)). Fifty-eight responded and of these, 53
were positive.
1.4 Our analysis of the potential burdens
also showed that in responses to several questions consultees
raised the issue of certainty/clarity, housing benefit reviews
and service provision. Forty respondents said the proposal would
provide more certainty/clarity for tenants, 10 respondents said
the proposal would help with the timing and administration of
housing benefit reviews and 9 respondents said the loss of income
affects service provision by landlords. The Housing Corporation
confirmed our suggestion that the proposal prevented the potential
unfairness arising from progressive divergence in the rent increase
dates of those with weekly tenancies from those with monthly or
longer tenancies. A sample of the consultation responses on these
issues is at Annex A.
1.5 We consider that these consultation
responses provide evidence to substantiate our initial assessment
about the potential burden imposed on tenants by the current rules
and the benefits to tenants from the proposal.
1.6 We acknowledge in the explanatory document
that the proposal will give rise to a new burden on tenants. It
seems to us that this burden arises because we are trying to adhere
to the intention of the legislation, which appears to have been
to limit rent increases to fixed minimum intervals of one year.
At present, this is only possible for tenancies whose period is
one month or more. For tenancies whose period is one week, the
minimum interval between rent increases under the current rules
is one year and one week, with the increase date continually moving
forward.
1.7 Fifteen respondents to the consultation
commented that the effects of the anniversary rule were not originally
intended by legislation. The proposal seeks to ensure that the
original intention of the legislation is fulfilled as far as possible
for tenancies of all periods. Because of the way the calendar
works and the need to start a new rent at the start of the period
of the tenancy, we do not believe that a fixed minimum interval
of one year is possible for tenancies whose period is less than
one month. However, we have framed the proposal so that the minimum
period between rent increases for tenants with (the most common)
weekly tenancies will be limited to a maximum of 2 days less than
one year in leap years, and 1 day in other years, with a maximum
cumulative drift back of 6 days over a 5 or 6 year period (depending
upon leap years). We believe that this burden of a minimum rent
increase interval of slightly less than a full year is mitigated
by the benefit for tenants of having certainty over the timing
of future rent increases ie having a fixed day, even if a fixed
date is not possible. Forty respondents to the consultation agreed
with our view that the proposal provides greater certainty for
tenants.
2. What are the details of the consultation
process the Department undertook to elicit the views of tenant
groups, tenant representatives and bodies that advise tenants?
2.1 At Annex B is a list of organisations
and individuals who have been consulted on the proposal, either
at the start of or following the consultation period. These are
organisations and individuals that provide a service or advice
to tenants, campaign on their behalf or in some way represent
them.
2.2 Following the consultation period, we
contacted the Black and Minority Ethnic Tenants and Residents
Advisory Network, the Tenant Participation Advisory Service and
the Tenants and Residents Organisation of England. We attempted
to contact the Housing Association Residents and Tenants Organisation
of England but found that it had been disbanded. We also consulted
for the first time the Association for Tenant Involvement and
Control and tenants on the Housing Corporation's Tenant Consumer
Panel in order to get the views of the major national tenants
representative groups and to widen the net for comments as far
as possible.
3. If those consulted responded in writing,
the Committee would like to view the written responses. If those
consulted responded orally, can the Department offer an assurance
that consultees raised no concerns about the proposal?
3.1 I enclose copies of all 5 written responses
received after the end of the consultation period, including those
from the Association for Tenant Involvement and Control and Mr
Michael Gelling. The latter was received on the day before the
copies of the draft order and explanatory document were delivered
to the Scrutiny Committees and after the copies had been printed.
At Annex C is a record of the conversations about the proposal
between officials in ODPM and Ms Brenda Thomas and Mr Frank Mummery.
Neither of these consultees raised concerns about the proposal.
4. Does the Department intend to issue guidance
on the changes to the rules and forms to (a) private landlords
and (b) tenants, both of RSLs and private landlords?
4.1 Yes, we do propose to issue guidance.
5. If the Department does intend to issue such
guidance, when is the guidance likely to be issued, what information
is it likely to contain and how will it be disseminated to its
target audience?
5.1 Our main guidance to landlords and tenants
will be included in the notes to the prescribed forms of rent
increase notice. I enclose at Annexes D and E copies of the current
prescribed forms of rent increase notice for assured tenancies
and agricultural occupancies in, respectively, England and Wales.
The form applying in England was revised earlier this year and
includes notes for guidance for both tenants and landlords. The
overall response to the consultation undertaken prior to the revision
was that the new form was simpler and easier to understand.
5.2 At present the Department thinks it
will probably be most appropriate for the current form 4A (used
in England) and form 4 (used in Wales) to be revoked (but see
paragraph 6.5 below as to the timing) and for two new forms to
be prescribed. One will be for increasing the rents for agricultural
occupancies, which will be similar to form 4A and continue to
refer to the anniversary rule. The other will be for assured periodic
tenancies and this will refer to the new 52/53 week rule. Apart
from a number of relatively minor consequential changes to the
current form 4A to reflect the fact that there will be a separate
form for increasing the rents for agricultural occupancies, this
new form for assured periodic tenancies will need to specify the
first increase date after the coming into effect of the proposed
order, say, 1 March 2003 (included here and in the following draft
wording as a working assumption to enable explanation of our proposals).
The main substantive change from form 4A for this new form will
be to the wording of guidance note 14. Our initial proposed revision
of this note is as follows, although I must emphasise that this
wording may be subject to further change:
Secondly, the starting
date for the proposed new rent is set by reference to the first
increase using this standard notice procedure after [1 March 2003].
This date should be inserted in section 4 of the notice. This
rule has two parts:
(a) the starting date for the proposed new
rent must not be earlier than 52 weeks after the date on which
the rent was last increased using this statutory notice procedure
or, if the tenancy is new, the date on which it started, unless
(b) that would result in an increase date
falling one week or more before the anniversary of the date in
section 4, in which case the starting date must not be earlier
than 53 weeks from the date on which the rent was last increased.
5.3 The views of the National Assembly for
Wales are being sought as to this approach.
5.4 Paragraphs 6.2 to 6.6 explain our proposals
for making and publicising new prescribed rent increase notice
forms.
5.5 ODPM publishes two free guidance booklets
for private landlords and their tenants on assured and assured
shorthold tenancies. These are used in England and Wales and are
available on the ODPM website, through the ODPM's free literature
service and from a wide range of advice agencies such as Citizens'
Advice Bureaux. Copies of the current versions are enclosed with
this letter. Assuming the order is approved by Parliament, we
will ensure that the new versions of both booklets reflect the
change to the rules on timing of rent increases and are available
as soon as the order takes effect.
5.6 In addition, we are discussing with
the Housing Corporation the amendment of the booklets it produces,
and is currently engaged in updating, for the tenants of registered
social landlords. Registered social landlords will be encouraged
to explain the change to the rules in a letter to all their tenants
affected by the rule change. The letter will be despatched with
the notices of rent increases taking place after the order comes
into effect. The National Housing Federation will recommend to
its members a form of words to be included in these letters. The
letters will seek to explain, where a fixed day is being set,
that the effect of the rules described in the notice is simply
to allow the tenant's rent to be increased once each year on a
standard day (such as the first Monday in April).
5.7 Any landlord who after the order comes
into effect continues to increase rents for tenancies whose period
is less than one month on the anniversary date of the last increase
will not breach the new 52/53 week rule.
6. The Committee asks the Department to provide
it with a copy of the revised form prescribed for landlords giving
notice of a new rental as soon as possible and in any case prior
to the Minister laying a draft order and statement before Parliament
for second stage scrutiny.
6.1 The Department will provide the Committee
with copies of the proposed new prescribed forms for use in England
in advance of the laying of a draft order at the second stage
of scrutiny. We will at the same time explain how we propose to
respond to the comments in the recent consultation about the current
form applying in England.
6.2 Regulations to revise the prescribed
forms are needed only if the regulatory reform order is made after
Parliamentary approval of a draft of the order. The draft order
currently provides for it to come into force the day after it
is made. The reasons for this are set out in Chapter 4 of the
Explanatory Document, which also sets out the intended approach
for revising the prescribed forms as respects England. The power
to make prescribed forms was devolved to the National Assembly
for Wales under the Transfer of Functions Order 1999, which will
make its own regulations.
6.3 The Department is concerned to ensure
that, as soon as possible after the regulatory reform order comes
into force, the prescribed forms include accurate guidance on
the statutory rules for the timing of rent increases. It is also
concerned to ensure adequate publicity about the change in the
rules and the new forms.
6.4 Assuming Parliament approves the draft
order, the Department proposes to make the regulations prescribing
the new forms on the day the regulatory reform order is made to
come into force on the next day, at the same time as the order.
We recognise that this does not allow for notice to be given of
the making of the forms regulations. Provided the Scrutiny Committees
report that the draft order can be laid before both Houses of
Parliament, our intention is to write in early January 2003 to
all organisations and individuals whom we have consulted on the
proposal (both at the start of and after the consultation period)
explaining that, subject to Parliamentary approval of the draft
order, we intend to amend the prescribed forms of notice of rent
increases to reflect the change to the anniversary rule, and that
new forms will come into effect on the day after the order comes
into force. The letter will explain how the current forms are
to be amended and will ask advisory/representative groups for
both landlords and tenants to publicise the proposed change.
6.5 ODPM will publicise the new forms on
its website. Once the order and regulations come into force, a
landlord wishing to increase rent using the statutory notice procedure
will be required to follow the amended statutory rules on timing
and use a prescribed form. The Department is concerned that some
landlords, in spite of the publicity we propose, may not become
aware of the changes and may, through ignorance or error, use
the current prescribed form after new forms have been prescribed.
It therefore proposes not to revoke the current form until 1 or
2 months after the date the new prescribed forms takes effect.
During that period landlords who continue to use the current form
will still be using a prescribed form.
6.6 The Department recognises that this
approach will allow continued use of a prescribed form which does
not accurately state the rule on timing which replaces the "anniversary
rule." However it considers that it would be acceptable to
do so for this short period because there will be no ill effects.
A landlord who follows the rule described in Note 14 to the current
form 4A and the notes to section 3 in form 4 (used in Wales) after
the coming into force of the regulatory reform order, will, in
the short period before the current form is revoked, still be
complying with the new 52 week rule. This is because the period
beginning not earlier than the anniversary date of the start of
a new tenancy or of the last increase by notice of an existing
tenancy is greater than the period beginning not earlier than
52 weeks after either of those events. Tenants will not be disadvantaged,
and landlords will not risk having their rent increases held to
be invalid for failing to use the new prescribed form.
7. What account has the Department taken of
estimates of increases or reductions in costs or other benefits
which may result from landlords choosing, under the proposal,
to apply the minimum 52 week period and increase rent at the first
possible opportunity, rather than setting a fixed day for rent
increases?
7.1 In the consultation paper we expressed
the view that the additional administration involved in applying
the 52 week minimum period with the 53 week condition may make
it more costly than setting a fixed day. However, we wanted, through
the consultation, to quantify any costs and savings and so we
asked two specific questions about costs and savings. In particular,
in relation to savings, we asked "Would savings accrue from
the proposal if a fixed day for increases was established?"
(Q(g)). While respondents have not quantified the savings, 6 have
commented on the benefits of increasing rent at the first available
opportunity or on a fixed day. A summary of these responses is
at Annex F.
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