Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence

Memorandum by the Residential Landlord's Association Ltd (DHB 28)


  1.  The Association is opposed to licensing. It considers accreditation schemes are the more appropriate way forward coupled with training for landlords.

  2.  The Association is concerned at the cost implications—not only fees for licensing but also the cost of works.

  3.  The Association is worried about burdensome requirements.

  4.  It is believed that the number of properties which would need a compulsory licences has been significantly under estimated.

  5.  There is no need to bring shared houses into the net of compulsory licensing or to change the definition of HMOs to include them.

  6.  The role of tenants in looking after themselves is ignored.

  7.  There are concerns as to implementation and the Association has suggested an alternative.

  8.  The sanctions for non-compliance, particularly with the tenant having no legal liability to pay the rent, are disproportionate and unnecessary.

  9.  HMO licensing will set back the advance of the private rented sector.

  10.  Too much has been left to be prescribed by regulations etc. The inter relationship with planning controls if of concern.

  11.  Lessons should be learned from what has happened in Scotland.

  12.  Paragraphs 19 and 20 set out in detail concerns regarding the draft Bill.

  1.  The Residential Landlords Association ("the Association") remains opposed to any kind of licensing in the private rented sector. The Association believes that accreditation schemes are the way forward. The Association is in the course of implementing its own accreditation scheme at the present time. Voluntary accreditation schemes, not coercive measures are the best way of making improvements to the private rented sector "PRS". Landlords are encouraged to join accreditation schemes because it gives them a competitive edge and once this is seen by others they in turn will join.

  2.  The Association also strongly believes that training has a vital part to play and should form part of any accreditation scheme. Landlords who are educated and trained will inevitably provide a better service to tenants, thereby also enhancing the PRS.

  3.  History has shown that a licensing scheme of the kind now proposed will require considerable financial investment by landlords. Inevitably this will be passed on to tenants by way of higher rents and this will in turn lead to increased housing benefit costs.

  4.  Experience of enforcement by local authorities leaves landlords to believe that they will be faced with detailed and burdensome requirements. Landlords have no faith in enforcement by local authorities as their officers are frequently antagonistic and hostile to the PRS. There is also an inherent conflict of interest in local authorities acting as enforcement agencies when they are still the provider of a substantial amount of accommodation themselves. The Association is concerned at the exemptions to be afforded to local authorities and registered social landlords. In particular most of the fires which are reported tend to be in local authority or similar type accommodation.

  5.  The Association considers that over the years politically motivated individuals have deliberately misrepresented the incidence of danger from fire in HMOs. Unfortunately, statistic are kept so that all three storey and above properties are "lumped together". Whilst the Entec Report has gone someway towards showing how wrong these misrepresentations have been in the past they are still being repeated time and time again.

  6.  The Association's view is that a wholesale licensing scheme of the type now proposed is a wholly disproportionate response to what is overall a relatively small risk in relation to the danger from fire. It is the sledgehammer to crack a nut approach which is not justified if one looks objectively at the available statistical information.

  7.  It would appear that the government have wrongfully underestimated the number of properties which will be caught up in the compulsory-licensing scheme for HMOs. They envisage 120,000. When one takes into account the number of shared houses throughout the country as well as the other types of property it is felt that a much larger number will be required to be licensed. Local authorities simply do not have the skills or resources available; nor the man power.

  8.  As always the devil is in the detail. This is a framework bill. We have no idea what is proposed by way of licensing requirements. The cost of bringing a three storey house up to current standards in respect of fire can be at least £10,000.00 when one takes into account the cost of fire alarms, fire doors etc. The Association believes that again the Government have wholly underestimated the huge cost and expense which will fall upon the PRS.

  9.  The Association's view is that it is wholly unnecessary to alter the definition of HMO to bring the small shared house into the net, even where they are three storeys in construction. Shared houses are lived in by groups of young working people and students. Their shared communal lifestyle means that they do accept some responsibility for each other. Whereas if there is a fire in a bedsit the other occupants of the building may well not know who else is there so they cannot be accounted for. This is certainly not the situation in a shared house. Again, such statistics as are available from Entec indicate that even in the case of shared houses which have five or more occupants and three or more storeys the risk in relation to fire is, relatively speaking, low. Huge costs are going to be incurred to avoid a minimal number of deaths. The loss of one life is to be deplored but one must adopt a proportionate response. Perhaps one should compare the number of deaths in road accidents every year (around 3,000) to the number of deaths in HMOs.

  10.  The draft Bill and Consultation Paper fail to recognise the important part tenants/occupiers must play. Everything is directed at the landlord; not the occupier of the property.

  11.  The Association are particularly concerned at how the proposals will be implemented. The Consultation Paper indicates a three month lead in time. This is hopelessly inadequate and fails to take account of the massive effort which will be required to meet the requirement for mandatory licensing of HMOs. The penalties for not having a licence when once is required are draconian, a fine of up to £20,000.00 and loss of the right to receive all rental income. Again, they are wholly disproportionate. Even if we were only concerned with 120,000.00 properties (the Association is convinced that there will be many more than that) it is a daunting task. Some passporting which is envisaged may assist. One needs to appreciate how historically Environmental Health Officers have gone about their task. They carry out a detailed survey of a property; often involving the Fire Officer as well. This leads to a detailed schedule of works required with accompanying plans. This can take at least a day for one property. Notices then have to be prepared and checked. They have to be sent out and enquiries have to be considered and dealt with as appropriate by the Environmental Health Officer involved. Points may need to be referred back to the Fire Officer. This has to be repeated each time for each property to be licensed. Separately there will need to be consideration of the applicants background. In the view of the Association there is no way in which local authorities will be able to grant the necessary licence before implementation. The landlord who is not then licensed simply because of the huge bureaucracy involved then faces ruin because he cannot collect his rent. This is a nightmare scenario but there is every fear that it will come about unless there is a drastic rethink of how this whole scheme is to be brought into being.

  12.  A property which is not licensed will become worthless. Has anyone considered the impact of this so far as the lender is concerned? Tenants cannot be evicted for non payment of rent because there is no rent for them to pay. The landlord would have to wait until any shorthold tenancy ran out and obtain an order for possession. In the meantime the landlord will go bankrupt (or worse commit suicide). People would be thrown on to the street. Lenders will repossess. A disaster could be round the corner.

  13.  Prior to the coming into force of the Housing Act 1988 the private rented sector in England and Wales faced extinction. This process has been reversed. There has been very considerable investment by landlords, as well as those who have acquired under "buy to let". Over the years those who have not really been able to afford to buy their own homes have been forced to do so because of the lack of rented property. We now have a situation, particularly in the South East, where homes are too expensive to buy. The young first time buyer cannot get on the property ladder. The PRS has to a certain extent expanded over the last 10 years or so but this vital trend could well be reversed by what the Government are now proposing. There is no mature investment market in the PRS. Traditionally, large institutions have kept away. This is a legacy of the Rent Acts. Lenders are still wary because of past experiences. Undoubtedly investment confidence will be shaken by what is now proposed by the Government.

  14.  As always, these days, much is left to be prescribed by regulations by a Code of Practice and by a risk assessment procedure which has not even been written. In the view of the Association it is wholly wrong that detail is not available at the outset so that everything can be considered properly in one go. Instead we have legislation by dribs and drabs.

  15.  As if mandatory licensing was not enough, there are further wide-ranging powers for local authorities, subject to Government approval, to bring in further categories of HMOs. This may well mean that local authorities with few HMOs bring in schemes just for the sake of it. Similarly, the Association is most concerned at proposals to licence properties in areas of low demand. There is no reason to suppose that this will improve the downward spiral.

  16.  As always experience shows that local authorities will concentrate their energies on the majority of honest reasonable and responsible landlords. The rogues will still get away with it. It will make no difference. Recently, there have been complaints of this nature in relation to the police. It is far easier to pursue a middle class shopkeeper than a drug addict. The same applies in the PRS so far as local authority enforcement powers are concerned and even more so since local authorities do not have a power of arrest to back up what they are doing.

  17.  The Association is concerned at the inter relationship of the proposed legislation with development control under the Town & Country Planning Legislation. Class C3 of the Town & Country Planning (Use Classes) Order currently classifies a dwelling occupied by single dwellings with up to six unrelated residents as being a dwelling so that it has the same treatment for planning purposes as a normal private residence occupied by a family. The Association's view is that the planning treatment of properties should be by way of a separate code and enforcement regime. In other words, the need for planning permission should not be a prerequisite of obtaining a licence.

  18.  The Association would urge everyone to look at the experience of what has happened in Scotland where licensing has been a fiasco.

  19.  In considering the draft Bill in detail in relation to licensing of HMOs the Association has a number of comments, as follows:

  (a)  Shared houses should not be brought within the definition of HMO, at least where the occupants do not exceed six in number. There is no evidence of particular danger in regard to these properties even if they are located on more than two storeys.

  (b)  The scope of mandatory licensing should be curtailed. This should be done by excluding shared houses. The current cut off point of three storey properties with five or more occupants is too low a cut off point. The draft legislation has been portrayed as only affecting larger higher risk HMOs. This is not reality in the light of what is now proposed.

  (c)  There should be no additional powers for a local authority to designate further properties as being subject to licensing. This is a wholly unnecessary power. Unfit properties can be dealt with through the Housing Condition Provisions. Management Regulations can be relied upon to deal with any other difficulties.

  (d)  The Association are opposed to the wide-ranging power for the licence to contain whatever provisions the local authority sees fit. If for example, local authorities require shared houses to have the benefit of planning permission before they will grant a licence then this will cause mayhem. The matters which can be the subject of licence conditions/requirements should be prescribed and circumscribed. We must learn from the experience in Scotland in this regard. Over-prescriptive requirements have been of great concern then and imposed a huge burden on landlords.

  (e)  As regards implementation it is the view of the Association that once an application has been lodged with the local housing authority this should suffice. It would then not matter how long the local authority took to process the application, if they faced a heavy back log of applications. Urgent cases where there were concerns could be prioritised by the local authority. The way in which is envisaged that it would work would be that the applicant would lodge the application with the local authority. They could then consider it and give notice to the applicant as to what works they considered were necessary to the property and their other proposed requirements. A reasonable timescale for compliance would then be laid down. There is a precedent for this approach in relation to fire certificates under Section 5 of the Fire Precautions Act 1971. Subject to any appeal, so long as the applicant then carried out the works within the required time then the licence would be issued subject to the other requirements specified. It is envisaged that there would be rights of appeal both against works and requirements. In other words, in effect, a provisional licence would be granted but if the applicant did not then carry out the works within the required time the application would be deemed to be refused. At that point the property would of course then be unlicensed and susceptible to penalties for failure to licence. In the opinion of the Association it is wholly unrealistic to go straight to a situation where a full blown licence is required. Provided that an application had been lodged then the applicant would be protected. He could still collect his rent and would not be liable to any criminal sanction.

  (f)  The Association considers that the proposal that the landlord of an unlicensed HMO should not be able to recover rent is wholly disproportionate. It is considered that this is a breach of Article 1 Protocol 1 of the European Convention on Human Rights. This is particularly so if it is due to the high volume of applications and the inability of local authorities to process them. A criminal sanction is sufficient, in the view of the Association.

  (g)  The Association is concerned at the apparent power to impose conditions as to the behaviour of occupants/visitors. Again, it must be appreciated that a landlord's powers are limited. It is all too common for tenants to cry harassment, without justification. In particular the Unfair Contract Terms Regulations mean that landlord's rights are limited. For example a landlord cannot enter a property there and then without notice. A landlord who visits regularly will be accused of harassing his tenants. As already pointed out, the proposed legislation fails to put the necessary emphasis on requiring occupants and visitors to behave properly. If this is to be dealt with by way of conditions on licences it may mean that landlords are in a situation where a licence is revoked for circumstances essentially beyond their control. At the present time if a landlord takes action for possession on grounds of nuisance/annoyance the remedy is only discretionary. A landlord is faced by a tenant who is legally aided so that he faced the prospect of having to fund the whole action himself and the indignity of having to possibly pay the tenant's costs if the tenant is successful. If the landlord succeeds there is no guarantee that a possession order would be granted even in a serious case.

  (h)  The current provisions are widely drawn so as to enable local authorities in effect to prescribe/enforce room sizes. It is not clear what standards may or may not be laid down nationally in this respect. This has been an ongoing source of friction over the years. Again, it is symptomatic of the wish for Environmental Health Officers to control properties and lay down matters in excessive and unnecessary detail.

  (i)  Licences will not be transferable. As with many other types of licences (eg liquor licences) why should the licence not be transferable? All that the local authority would be concerned about was whether the transferee was a fit and proper person and he may well have other properties where he has already satisfied that test. The transfer of a licence would then be a speedy process. Instead we are faced with the prospect of a complete re-inspection and the possibility of new requirements and whatever else may be involved. This will impede the sale of properties. This surely flies in the face of what the Government is trying to do with the Home Information Pack, ie to supposedly speed up the sales process.

  (j)  No provision is made as to what happens when the licence holder dies. The licence presumably dies with him so his Estate cannot recover rent. Surely the personal representatives should simply step into the shoes of the licence holder for a period of time of, say, at least a year.

  (k)  There would appear to be no restriction on a limited company holding a licence. The Association believes that companies as well as individuals should be entitled to hold licences.

  (l)  The maximum duration of five years for a licence is considered inadequate. Why not a 10 year period. Instead we have the whole bureaucratic process of having to re-apply every five years. This seems wholly unnecessary when there is power for local authorities to take revocation proceedings.

  (m)  The Association are concerned at the size of the fees involved. This is particularly so as local authorities are entitled to recover all their expenses. We could be looking at fees of at least £100.00 per bed space. Again, this is a huge burden to impose on what are essentially in the main small business men and women.

  (n)  Local authorities are to have power to take a wide number of matters into account when deciding whether or not to grant a licence. Even then the power is granted in terms of "may". There is no obligation to grant a licence even if the applicant meets the prescribed requirements. Once the applicant has met a set a standard of national prescribed requirements then the local authority should be under a statutory obligation to forthwith issue the licence.

  (o)  The Government seem to have accepted the need for nationally prescribed standards. This is welcomed. An HMO owner in one area should be treated the same in another area. The Association believe that it is imperative that so far as possible everything should be prescribed by way of national standards; rather than left to local discretion. It is wrong that an HMO owner should have to go to trouble and expense each time to find out the requirements of different local authorities and then comply with them.

  (p)  The Association are concerned at matters which may be taken into account when deciding whether or not a person is "fit and proper". The legislation allows matters which are supposedly evidence which are to be taken into account. The Association considers that in addition to convictions matters which have been proven in Court or before a Tribunal should be the only ones to be relied upon. One should not descend into the realms of hearsay and gossip. Otherwise it should be incumbent on the local authority to make out a case which could be proven on the balance of probabilities to the satisfaction of a Court before refusing to grant a licence. There should be a need to produce proper evidence in support.

  (q)  As currently proposed, if a licence is not granted initially, then it will be a criminal offence and no rent will be recoverable even though an appeal may be pending. Again, this is of concern in relation to implementation. The problem would be overcome if the Association's proposal regarding relying upon the application were to be adopted. Otherwise, if it is found that a licence has been wrongfully refused then the local authority should be compelled to pay compensation to the landlord for losses incurred.

  (r)  The Association are concerned at the wide-ranging power for the authority to revoke a licence. HMO landlords' livelihoods are going to be at risk. There should be consideration of alternatives to revocation eg if a licence were transferable it could be transferred over to someone acceptable to the local authority. Fortunately, the principle has been accepted following representations made in past consultation which do allow someone else to apply as replacement licensee. It would be far easier if this could be done by way of a transfer to avoid revocation proceedings.

  (s)  The Association is concerned to note that local authorities will have power to take into account changes in standards if they are considering variations to licences. Variations should be judged according to the standards prevalent at the time of the original application and any subsequent enhancement of standards should be left out of account, in the view of the Association.

  (t)  From enquiries to the ODPM it is understood that it is their intention that fire hazards etc are dealt with by way of Warning Notice/Improvement Notice rather than through the licensing procedures in the case of HMOs which require a licence. The Association's view is that Clause 65(4) of the draft Bill does not achieve this intention. It refers to sub-section 3(b). This refers only to conditions relating to the condition of the house. There is no reference to sub-clause (3)(c) under which a licence holder can be required to carry out particular works. The reference in sub-clause (4) ought to be to both paragraphs (b) and (c) in sub-clause (3).

  20.  The Association also have concerns regarding the part of the draft Bill concerned with housing conditions. These include the following:

  (i)  At present save in case of urgency the local housing authority must serve a "Minded to" Notice prior to serving a Works Notice/Repair Notice under Section 189 or 190 of the Housing Act 1985 (as amended). They cannot recover their administrative costs so long as the Minded to procedure has been complied with by the owner. Although it is accepted that this will depend on the guidance it appears possible for the local authority instead now under the new regime to serve an Improvement Notice rather than a Warning Notice simply so that they can recover their administrative expenses. This is a wholly wrong approach. Quite rightly there has been a wish to reduce the regulatory burden on small businesses. Save in case of urgency, in all cases a warning notice should be given as a preliminary. It is then an incentive to the landlord to comply so as to avoid administration charges involved should it be necessary to serve an Improvement Notice for non-compliance.

  (ii)  A risk-based approach means a subjective approach. It will all very much depend on the person who is carrying out and his or her prejudices and experience.

  (iii)  At present it is not clear what will be a Category 1 hazard and what will not. This comes back to the point already made that in the absence of guidance it is very difficult to pass comment on the detail of the draft Bill. The Association believes that it is imperative that only more serious matters are addressed and classified as Category 1 hazards.

  (iv)  There are potential problems of detail in relation to the situation relating to flats/common parts. The Bill as drafted does not recognise the fact that these may be the responsibility of the management company even though that company does not actually have an interest (eg a leasehold interest) in the building. This is a quite common situation. Notice may be served on a freehold owner when in fact it is the responsibility of the management company to carry out the work.

  (v)  Again, although this may be subject to Ministerial Guidance, there is no requirement for the period in which the work is to be carried out to be a reasonable one.

  (vi)  If an Improvement Notice is served (rather than a Warning Notice) an owner will be severely prejudiced unless he appeals. It is common in this situation for owners to negotiate on such notices and they therefore do not lodge an appeal so that they can then be out of time. There should be specific power for Local Authorities to extend time pending negotiations and there should be an obligation placed upon Local Authorities to give such an extension of time whilst negotiations are being property pursued. Again, this is a good reason to serve warning notices as a preliminary procedure.

  (vii)  Under the Minded to procedure there would have had to have been prior consultation.

Unlike licensing of HMO's there is no power for the Court to extend the period for appealing even for good reason.

  (viii)  In making these submissions, it is assumed by the Association that present policy will be continued. In other words, prohibition orders/closing orders/demolition orders will be served only in the very serious cases. Generally speaking the warning notice/improvement notice route will be followed. If there were to be any change from current policy, this would be of great concern to the Association. Again, this is difficult to comment in the absence of knowing what the guidance from Government is to be in this situation.

  (ix)  The Association is concerned, as always, that very extensive and unnecessary works may be required at great expense. There is a great tendency for Local Authorities to over-prescribe and to be over-zealous in the exercise of their enforcement powers.

  (x)  There is no power to extend the period of time for appealing against the making of a prohibition order.

  21.  In relation to the Management Regulations the provision of Section 372 of the Housing Act 1985 should be reworded so that the local authority can require works as an alternative to prosecution for non-compliance.

  22.  Where there is a building regulation applicable this is the standard which should apply.

  23.  As already emphatically stated, the Association is vehemently opposed to the proposed scheme for licensing HMOs. It is unnecessary and totally disproportionate to the problems involved. Indeed, the fact that Local Authorities are loath to use their existing powers supports this. Surely, if there had been a major public outcry, they would have done so regularly and frequently. This is all, in reality, a "non problem". The whole situation has been hyped up by certain organisations and individuals to whom the PRS is an attema.

  24.  The Association supports the replacement of the current fitness standard with a risk based approach which can deal more specifically with problems that do pose a real threat.

  25.  The Association was most concerned at the huge burden and cost which will fall upon the PRS as a result of the measures now envisaged, particularly licensing of HMOs. This is not just a matter of the licensing fees, bad as these will be, but also the compliance costs are totally underestimated by those putting forward this legislation. Thousands and thousands of pounds per property will have to be spent. Who pays for this? In the first place it would be the landlord but eventually, the tenant. Undoubtedly there will be a loss of accommodation, much of it good accommodation. It will make it harder for people to find homes. Those who cannot afford a home because of the ever spiralling rise in house prices will face a "double whammy" of having to pay more rent to meet the cost of improvements as a result of licensing HMOs. There will be a loss of reasonable cheap accommodation. Owners will get out of the sector. Investors will lose confidence. We must learn from the experience of what has happened in Scotland and avoid another fiasco of that kind.

  26.  The consultation document makes it clear that those undertaking a consultation exercise should approach matters in an open-minded fashion. It is very much hoped by the Association that those concerned will therefore listen to what is said by the Association and others who represent landlords.

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