Communities and Local Government CommitteeWritten evidence submitted by Wayland Smith
I am submitting to this inquiry as a tenant in the Private Rented Sector.
Introduction
This submission draws on my experience as a private rented sector tenant renting directly from landlords and through agents in several UK cities over the past 10 years.
Summary
My conclusions are that a lack of defined obligations on landlords and the lack of an affordable remedial process for enforcing them, allows bad landlords to get away with failing to carry out basic repairs, whilst infringing on the right of tenants to enjoy their home.
The difficult legal process for evicting delinquent tenants punishes both landlords and tenants.
Rent controls would tackle the symptoms but not the cause of high rents which are high house prices. The government should seek to reduce these, relative to full time earnings.
Making it easier to remove delinquent tenants could facilitate the provision of longer, more certain tenancies encouraging tenants to improve their properties, though longer tenancies would probably not happen without regulation.
Tenants are very badly protected against the consequences of landlord mortgage arrears and repossession, despite being credit checked themselves.
Letting agents should not be able to charge tenants fees, similar to employment agencies and job seekers. Letting agents act on the landlord’s behalf only.
Submission
1. The current legislation favours bad landlords and bad tenants. Bad tenants can get away with causing damage and paying little or no rent for a considerable period before a landlord can evict them.
1.2This adds considerable cost and uncertainty for landlords who feel forced to treat all tenants as a damage and default risk, even where references and deposits are taken.
1.3Costs of dealing with lengthy eviction proceedings, tenants who leave without notice and in rent arrears are all reflected in the rents paid by all Private Sector tenants.
1.4Bad landlords exploit the vacuum or lack of written tenants’ rights to avoid making repairs and enforcing unreasonable demands.
1.5Bad landlords also exploit the lack of tenant’s knowledge of their legal rights, achieving outcomes that are contrary to housing legislation.
2. Letting agents fulfil a useful function in the Private Rented Sector allowing great participation in the market by landlords who otherwise would not be comfortable dealing directly with tenants or be sure of fulfilling their obligations.
2.1There is considerable competition in most cities between letting agents for clients (landlords) which ought to reduce in competitive charges for landlords who are able to shop around.
2.2Letting agents in my experience ensure the limited minimum legal standards are adhered to.
2.3Letting agents represent their clients (landlords) and do not represent the interests of tenants.
2.4My experience of renting is that landlords treat their tenants as customers, but letting agents think of tenants more as a nuisance.
2.5Letting agents act as a barrier between the landlord and tenant leading to mutual suspicion and mistrust. Often they fail to pass on information to the landlord, due to general incompetence. The relationship in my experience works best where a tenant can contact both the agent and landlord if required.
2.6Letting agents play a double game—to the tenant they will blame the landlord for being “tight” and not authorising repairs but will also report back any minor issue eg untidiness to their client, the landlord. Often they will agree with a tenant that something has deteriorated beyond an acceptable standard but it will not be repaired.
2.7Letting agents are experienced in general housing matters and can particularly benefit first time tenants living away from home for the first time without having to involve the landlord.
2.8Letting agents are very slow at progressing new applications. Typically it can take four weeks through verbal agreement, fees, deposits, references and drawing up contracts even for a vacant property. This leads to unnecessary voids the cost of which is factored in to all tenancies.
3. Private Sector rents are very high relative to salaries in the United Kingdom.
3.1This is a reflection on house prices, which are also very expensive relative to salaries.
3.2In my current postal code (SN1 4PW) locally two bedroom rented houses have a going rate of circa £575pcm, whilst similar properties are marketed at circa £120,000–£130,000. Most other areas in South West England are more expensive even than this.
3.3This implies a gross yield of around 5.25%–5.75% before voids and other costs.
3.4Being a landlord involves a considerable amount of work which should be considered when looking at the gross yield. Landlords who outsource this work find that fact reflected in the charging structure of their agents.
3.5ONS data indicates in this area the price of a two bedroom house is approximately five times the average UK gross median full time wage (£471/pw).ONS Labour Market Survey September 2012 (Table EARN01).
3.6Rent controls would tackle the symptoms and not the cause of high rents. They would also reduce the supply and quality of rented housing further.
4. House prices in the UK are high for a variety of reasons. These include an increase in smaller households, lack of house building, onerous planning controls and net migration. There are much tighter controls on house building than on migration.
4.1Tax breaks available to landlords, but not available to First Time Buyers mean that Buy to Let landlords can outbid them, leading to low levels of home ownership amongst young people.
4.2Section 106 levies make new homes needlessly expensive. New homes, despite being liable for Council Tax and Stamp duty have to pay for infrastructure, whereas homes in established areas have infrastructure built, maintained and renewed as required. New homes therefore subsidise general taxation.
4.3Home builders engage in land price speculation, buying and selling plots, developing plots only where market conditions suit and not releasing large quantities of houses to the market at once, for fear of lowering prices.
4.4The interests of home builders are to keep house prices high, the objective of government should be to reduce them.
4.5Young people in the Private Rented sector who cannot afford to buy are driven towards Shared Ownership and other dubious schemes designed to subsidise new home builders and use complicated financial structures to encourage young people to buy homes they cannot afford. Many of schemes combine the worst elements of home ownership with tenancies.
5. Tenants are very unsure of their rights and their landlord’s obligations. It is very difficult and expensive to challenge anything a landlord does in law as there are no defined regulations covering most aspects of renting. Tenants will usually go by what is in the tenancy agreement irrespective of law, if they can understand it.
5.1The Housing Act stipulates “Quiet Enjoyment” and “Exclusive Occupation” without defining these. Most landlords and agents will insist on regular inspections. Whilst inspections are generally reasonable, these can be as frequent as monthly, or landlords and agents will try and carry them whilst the tenant is absent. Often notification will be given, rather than permission sought, leading to default unaccompanied inspections. I would argue that all of these excesses are unreasonable, yet are widely practised.
5.2Repair obligations are equally ill defined. A landlord argued with me that having no hot water in the kitchen was not a problem as it worked elsewhere in the property. Tenants who pay for repairs and withhold rent can (eventually) be evicted and suing to recover such costs from a landlord is expensive and uncertain.
5.3The OfT have produced guidance on unfair terms in tenancy agreements, but these are widely ignored. Even agreements in drawn up by large agencies contain many of the examples of “unfair” terms. Letting agents argue the guidance is merely the OFT’s opinion. Generally agreements are not in any way negotiable, either with landlords or agents, as neither really understand them. Often they will draft detailed clauses covering almost every imaginable eventuality eg no pets, no social gatherings etc. In reality it is very difficult to evict in the fixed term period (minimum six months) after which you do not need a reason to serve notice.
5.4Even where law exists it is widely ignored. Often tenancy agreement will say it can be terminated with one months’ notice, where the legal minimum for a AST contract is two months. One landlord served me notice of 28 days when he decided to convert the property to a holiday let to avoid HMO regulations then being introduced, and this was inside the initial six month period. We agreed that I would move to a better property at the same rent only after a lengthy disagreement about this and I threatened the involvement of the local council housing office.
5.5Deposit protection is a good concept badly executed. If there are no claims landlords should not need to be charged to deposit their money into it. The law is very unclear on the sanctions against landlords not protecting deposits, with conflicting test case results where landlords have only protected deposits once challenged. Sanctions must be actionable and certain or there is no incentive for landlord compliance.
5.6Deposit protection is also a complicated and expensive process for landlords to claim for genuine damage.
6. Tenancies are generally short and uncertain. The minimum six month period is the norm, reverting the two month “rolling” periodic tenancies. This gives tenants absolutely no incentive to maintain or improve a property, in addition to landlords who generally do the absolute minimum. This tenure can cause huge disruption and cost for the tenant, especially since the majority of properties are let unfurnished.
6.1Clauses often forbid tenants from making changes or improvements. Generally this is not unreasonable, especially with decoration, though permission should not unreasonably be refused.
6.2Private Sector tenants are excluded from government energy efficiency schemes. Landlords who do not pay the utility bills have no incentive to improve the energy efficiency of their properties.
6.3Tenants living in properties where pre-payment meters have been installed are at a particular disadvantage as the tariffs for these are much higher than for direct debit.
6.4Letting agents charge tenants considerable fees. Typical set up fees are of the order £150–200 covering references and credit checking. The fees far exceed the cost of work undertaken. Private landlords generally charge much lower or no fees, or refund monies if the checks are passed.
6.5Letting agents charge both parties in the contract. They should be allowed to do this. They are the landlord’s agent and not the tenant’s agent. Housing is a distress purchase and similar to employment agencies neither landlords nor agents should be allowed to charge these upfront fees.
6.6Credit checking and references are not portable between agencies so have to be done and paid for again at each tenancy, which might only last six months. These fees are unaffordable at times of financial stress (like moving house) and contribute to indebtedness of young people as well as necessitating the use of expensive credit facilities eg payday lenders.
6.7Greater certainty for landlords over removing bad tenants could mitigate the effect of providing more certainly in the form of longer contracts. However landlords would probably not do this by choice and their agents would not advise them to.
6.8Longer tenancies would encourage tenants to fulfil a more active role in improving their property, benefitting both landlords, tenants and local neighbourhoods.
7. Tenants are especially badly protected in the case of mortgage arrears. I viewed a shared house in Bath let through an established agent. Having paid the holding deposit and fees, I was invited to meet to other tenants at the property. They showed me a letter from Bath County Court dating to before my payment stating that court bailiffs would be entering the property at a date next week and that all tenants leave with their possessions before that date.
7.1On challenging the agent, they admitted the mortgage lender was a receiver of rent (paid by themselves) but would not concede that they property had been repossessed, which in the legal sense it already had. They said the landlord had assured them it was a misunderstanding and there would be no eviction. A major row erupted where I pointed out it was not in the landlords power to force the eviction to be rescinded. In the end the agent refunded my fees rather than continue, but I only found out by chance because it was a HMO.
7.2The agent in question was ARLA registered, but ARLA code of practice is geared almost exclusively to the client (landlord’s) interests and not the tenant.
7.3Despite requiring extensive references and credit checks against tenants, tenants themselves have no way of ensuring landlords are solvent, mortgages are not delinquent and that landlords have their lenders permission to rent out a property.
January 2013
