Communities and Local Government CommitteeWritten evidence submitted by Evolve Property Training

Executive Summary

The document submission outlines our reccomendations to the committee on the following points regarding the Private Rented Sector in the United Kingdom.

1.The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard.

2.Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents.

3.Regulation of landlords, and steps that can be taken to deal with rogue landlords.

4.Regulation of letting agents, including agents’ fees and charges.

5.The regulation of houses in multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area.

6.Tenancy agreements and length and security of tenure.

7.How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing.

Submitter Details

Alasdair Melville is an ARLA and NAEA qualified training professional and owner of Evolve Property Training. He specialises in training Estate and Letting Agents in the technical awards with an aim of raising awareness and standards within the profession. His experience in Residential Lettings, Residential Estate Agency, Commercial Purchasing and Learning & Development spans twelve years. During this time he has observed the right way to do things, and the wrong way to do things. He hopes that his submission to the committee, while possibly unorthodox, comes as a plain written view on the issues facing the Private Rented Sector.

1. The quality of private rented housing, and steps that can be taken to ensure that all housing in the sector is of an acceptable standard

Private rented housing is widely varied due to the historic make up of different buildings throughout the British Isles The difficulties facing the issue invariably centre on cost and practicality of updating older buildings to eliminate issues such as damp, and structural problems. Perhaps more stringent rules on identifying and rectifying defects to an acceptable standard may be prudent, although the knowledge of these areas are commonly held in the minds of qualified surveyors. Landlords should be further compelled to not only acquire an EPC on a property, but take steps to improve areas such as lack of insulation, outdated windows and doors (where applicable) and keep up to date with changes in the way properties are heated and insulated—double glazing, central heating and drying washing indoors all means that non-insulated or improperly insulated walls and windows create health-threatening mould and damp. Our way of life has changed, but our legislation has not kept up with those changes. This is something we must address, or at least consider as an example of improving the quality of housing and how that quality impacts the inhabitants, as well as how remedies may impact the income of landlords.

2. Levels of rent within the private rented sector—including the possibility of rent control and the interaction between housing benefit and rents

The PRS rent levels could widely be regarded as being governed by “market value” which is in turn directly controlled by Letting Agents and what could in some cases (but not all, we hasten to add) be argued the greedy desires of Landlords. An agent may over value a property, and thus all other nearby agents follow suit to remain competitive without losing out on potential revenue for themselves and for their clients. There is little or no guidance given to agents on valuation beyond basic economics which can easily be misconstrued, and most are carried out by unqualified or inexperienced staff, rather than those following the RICS codes of practice on valuation for example. An alarming number of valuations are a “best guess” of value in comparison to the results of other “best guess” valuations in that conurbation. Letting agencies must restrict valuation responsibilities to experienced staff, or have staff trained in valuation and all staff should be given guidance on keeping rents at a fair level. It is tempting to observe that this system self regulates to a degree, since the market will not pay more than a property is worth, but this would be a short sighted argument in light of the sheer amount of control that agents have over the market. Without agents as middle men, it could be argued that rents might fall to a fair level and homelessness and housing benefit claims would also see a significant decrease. The market regulates in favour of Landlords and Agents (ie at the top end of market value), not in favour of those with a need for housing (let’s say middle-of-the-road market value as there’s no such thing as a free lunch).

Broad market rental areas do not hold water, as value is largely subjective—individuals assess value by what defines them as an individual, or a group, or a collective—in other words they see the value of something as they are not as it is. Value is known to incorporate not only space, size, décor, location (all of which are again, subjective depending on the end user) but also first impressions, “kerb appeal” ie does it look pretty, does it suit my needs? We therefore know that value can only be expressed on a basis of supply vs demand and thus areas in short supply with high demand will observe higher rents—but are those rents fair? Who decided how much it was worth? Well....a Letting Agent did—and they valued it by comparison with something else, or by seeing how much they could reasonably charge without losing the deal. This method requires serious scrutiny and consideration to bring rental levels back in line with reasonable expectations. Of course, the balance must be struck between satisfying the personal objectives of Landlords and the business objectives of Agents, and a balance sought between potentially punitive legislation and solving the ever increasing demand for housing—population and price of housing cannot simultaneously increase exponentially, the economics mean that either people will become homeless and ultimately die or emigrate, or housing costs will need to come down.

3. Regulation of landlords, and steps that can be taken to deal with rogue landlords

Landlords should be required to study their legal obligations and be held accountable through a professional body, much as agents should be through ARLA or Surveyors through RICS. An adaptation or distillation of the ARLA technical awards would be an ideal solution, and compulsory membership of a redress scheme such as TPO to enable tenants to bring formal complaints. This will do away with a subculture of fly-by-night companies and individuals who cause honest agents, tenants and landlords to tighten their grip to prevent costly losses associated with rental property. Landlord Licensing could be nominal cost, and could even be delivered in as little as a single day. Enforcement can be controlled via Letting Agents and Tenants having somewhere to go to seek formal redress—it will self regulate, and should prohibit rogue Landlords from acting inappropriately or illegally.

4. Regulation of letting agents, including agents’ fees and charges

Letting Agents have free reign over their fees and charges., and an alarming number of staff who deal with day-to-day matters are not qualified and have little idea of their legal and moral obligations to landlords, tenants and indeed other agents. The industry is rife with misinformation, and finding the truth is a minefield for the uncertain and the unqualified who are genuinely seeking further knowledge. There is a transition taking place between the “old school” agents who are now in senior management who prefer the 1980s “beat my client with a club” approach to the 21st century approach of a “Trusted Advisor” who takes on the concerns of both parties to reach a satisfactory conclusion—where business revenue is important, yet comes secondary to ensuring client Landlords get what they need and Tenants are housed with a minimum of fuss. Legislation should state that all agents must undergo compulsory training and become qualified before they are permitted to work in the industry, bringing the Private Rented Sector in line with Financial Services and Legal Services. They must also place their clients AND tenants interests above their own. Surely the role of an agent, after first assuming that it is a profitable enterprise, is to market properties on behalf of landlords, and locate tenants for those landlords and house them and be a source of trusted and honourable advice for both—yet we find increasing evidence of some agencies having carte blanche to do as they please with little chance for recourse from aggrieved parties. Nobody would consider using an unqualified lawyer, or an unqualified IFA or Mortgage Broker, so why consider using an unqualified Letting Agent? Surely we need to bring the industry up to date and ignite a new fresh way of working in the industry to remove the tarnished public reputation of British Estate Agents.

5. The regulation of houses in multiple occupation (HMOs), including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area

I have no recommendations here as beyond training the technicalities I have little practical experience in this arena, and therefore to pass comment without dutiful research would be inappropriate.

6. Tenancy agreements and length and security of tenure

Tenancy agreements are a challenging area to cover—many are drawn up by agents independently, and some by solicitors instructed by agents or landlords themselves, and as such are notoriously one-sided placing a heavy burden of obligation onto a tenant, with marginal obligation on the Landlord, and virtually none on the agent whatsoever. The historical reasoning and judicial precedent behind this is clear, due to rogue tenants and landlords genuinely suffering physical or financial loss due to tenants actions, however the result in reality is highly prohibitive for honest tenants, who are the majority. Parliament must seek to redress the balance and ensure that both Agents and Landlords shoulder more responsibility for their actions, fees and charges. Tenants must remain accountable for their actions and for their responsibilities towards the Landlord and Agent. Agents must be fair and ensure that the tenant has some form of security within a contract and must state what they will, or will not do. Landlords equally must be realistic about the burden of responsibility and must act fairly and expect to be bound by their reasonable obligations when renting property. The law cannot impose that Landlords become the curer of all ills, but certainly some balance must be addressed.

7. How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing

The ability of local authorities to approach private landlords, pay a nominal rent and thus house homeless families is an admirable step in the right direction. With the correct regulation, such schemes could reduce homelessness dramatically. There are many empty houses, closed licensed premises and worthy buildings where people may be housed, with the correct protocols in place. It is sad to see the homeless dying on our streets for the sake of paranoia over legislation. Local Authorities might be perfectly placed to engage officers to tackle housing problem by extending their powers to forge such relationships with landlords directly.

It could also be argued that legislation proposing that agents take a broader view when considering tenants on housing benefit could cut down a growing demand for alternative options for those in desperate need or at risk of homelessness.

Should any of the matters discussed above be of interest and should the committee wish to invite Alasdair to attend to discuss these matters orally, please contact him on the information provided at the top of this document.

January 2013

Prepared 16th July 2013