Communities and Local Government CommitteeWritten evidence submitted by Greg Jones FARLA, FNAEA

I would like the following points to be considered in your Inquiry into the private rented sector.

My Background

1. I have been a letting agent for over 21 years and I run my own agency. I am a fellow of ARLA and I have passed the Certificate in Residential letting and Management. I attend regular training organised by ARLA throughout the year. I have a single branch and employ seven staff.

Comments on the Industry Generally

2. In my time as a residential letting agent I have seen a great many changes to the sector and a huge amount of legislation heaped upon it. On top of all the general laws that you need to follow when running any business I have listed below just some of the new and onerous laws we have had to deal with over the years:

Furniture & Furnishings (Fire) (Safety) Regulations
The Electrical Equipment (Safety) Regulations 1994
Gas Cooking Appliances (Safety) Regulations 1989
Gas Safety (Installation & Use) Regulations 1998
General Product Safety Regulations 1994
Unfair Terms in Consumer Contracts Regulations 1999
Unfair Terms in Tenancy Agreements
The Water Industry Act
Landlords’ Repairing Obligations (under section 11, Landlord and Tenant Act 1985)
The various and ever changing Housing Benefit Regulations
Gas Safety (Installation & Use) (Amendment) and (Amendment No.2) Regulations 1996
Threshold changes for ASTs
Housing Act 1996 and 2004 and all that goes with it
Tenancy Deposit protection
The Equality Act
Data Protection
Non-resident landlord scheme
Plugs and Sockets
Housing, Health & Safety Rating System
Distance Selling Regulations 2000
The Commonhold & Leasehold Reform Act 2002
Cancellation of Contracts Made in a Consumer’s Home or Place of Work Etc Regulations
Houses in Multiple Occupation
Energy Performance Certificates
The Green Deal
Consumer Protection Regulations

3.Due to all the onerous and excessive legislation it becomes increasing harder for agents to adhere to it all and many agents will just feel swamped or may choose to ignore it.

4.Any further legislation needs to be really carefully considered and should not be “a sledgehammer to crack a nut”. I believe that the great majority of letting agents are honest and respectable. Membership of one of the self-regulating organisations is a very good indicator of an agent’s intentions. As members of ARLA we have to have professional indemnity insurance, client money protection, an insured client account which is independently audited every year, compulsory professional development and a redress scheme giving customers a voice.

Quality of Housing Stock

5. In the area that we operate in we do not have a problem with quality of housing stock. More widely landlords could be encouraged to improve the quality of their property via tax breaks. The Treasury will still gain revenue through tax paid by material suppliers, tradesmen and ultimately higher rents for better presented property.

Levels of Rent & Housing Benefit

6. The rental sector is a “market” so rent controls would distort this and deter private landlords. Although widely reported in the press that rents are high, most landlords with a mortgage struggle to make a profit (and this is in this period of historically low interest rates). When you add all the current costs of excessive legislation, further costs or enforced lower rents would be a problem. Many Landlords are reluctant to accept Housing benefit due to the shambolic way it is often administered. Also Landlords can experience problems regaining possession of a property if their tenant is in receipt of local authority help. Many local authorities advise tenants that they must be evicted by the courts before they are re-housed. For a landlord the prospect and expense of going to court is a great worry. I can assure you that Landlords who have been through this will not let to Housing Benefit tenants again.

Regulation of Landlords & Rogue Agents

7. I am not adverse to the idea that Landlords either have to be licensed or use a licensed agent.

Landlords or their agents should have the following in place:

Client Money Protection.
Annual Audit of Client Money by qualified accountant.
Professional Indemnity insurance.
Membership of Property Ombudsman or Professional body with redress scheme.

Agents can easily be regulated by insistence that they are members of ARLA, NALS or RICS as the infrastructure is already in place.

Landlords not wishing to use a licensed agent will require certification of compliance which can be administered by any of the above or The Property Ombudsman. Tenants can easily search an online database of Landlords and Agents who comply.

Agents Fees

8. Rather like rents, agents operate in a “market”. Self-regulated agents have all the costs as listed above whereas rogue agents do not. You cannot control agents fees unless you control the rogues otherwise it will be law abiding agents who want to do the right thing penalised.

Tenants do need to pay something to use the services of a letting agent although this cannot be capped or controlled due to regional cost overhead variations. Referencing and all the associated administration all costs money. If tenants are not charged anything they will be free to offer on several properties at the same time, wasting time and incurring expenses for the agent and potentially lost rent for the landlord. One solution would be the creation of an independent referencing scheme which tenants could use. They can then approach the agent with their references already in hand. This scheme would need to be accountable to Landlords if the references turn out to be inaccurate. This may also deter tenant bad practice.

Ultimately, if Tenants do not pay for referencing, administration and inventory costs then rents will have to increase to recover this cost. The Tenant in the long run will pay more.

Houses in Multiple Occupation

9. Licensing of large properties turned into bedsits is a sensible measure. Fire-doors, alarms, “fit and proper” management etc all seem to work.

The danger is that these rules are applied to smaller house where perhaps three individuals choose to live together. These houses are a core part of the market and are often belong to people who have been temporarily relocated with their job. If these properties were required to have fire-doors, hardwired alarms, emergency lighting etc they would simply refuse to let them to sharing households. This in turn would mean a huge shortage of rental property suitable for “sharers” and the traditionally younger market.

Tenancy Agreements

10. The current Assured Shorthold Tenancy works very well. If a tenant and landlord wish to agree a three year (less a day) term they can do so. There may be a small demand for longer term tenancies but most people in this country aspire to home ownership so will be reluctant to make such a commitment. If a new type of longer terms tenancy was introduced the Landlord would need to be assured that they can gain repossession quickly and without excessive cost should the tenant default on the terms of the contract. Protected rents and tenancies of the 1970s led a massive decline in the private rented sector and should be avoided at all costs.

Homelessness

11. There are two types of homeless person—a vagrant who resists help and a single person or perhaps a family who have temporarily fallen on hard times.

Incentives should be given to developers to convert current unoccupied offices into homeless hostels. These should not be a long term measure but a short term measure. Homelessness is mainly apparent in major cities which is also where empty offices are. These can easily be converted into small low cost flats and bedsits. As the economic picture improves so homelessness should decrease and the demand for offices should rise. These can then be returned to their original use. Ultimately, there will always be people who want to be homeless but help should be given in this way. Private landlords letting out their home will not want to rent to homeless “vagrant” type people due to the associated dangers with drug/alcohol use. They will be reluctant to let to families due to difficulties with eviction if they are receiving housing benefit.

January 2013