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