Communities and Local Government CommitteeWritten evidence submitted by James Spencer

Executive Summary

1. High house prices and levels of personal debt means that there is a growing group of middle class renters, including families, who are not well served by providers, the regulatory framework or traditional advocacy groups. (Paras 1 and 3)

2. Buy to Let landlords are not treating their activity as a business, which is having a detrimental effect on the life of tenants (Para 2)

3. Complexity of the current laws. Tenancy laws can be too complex for tenants and put them at an unfair disadvantage to more specialised letting agents and landlords. (Paras 4 and 5)

(a)Recommendation for action: A rolling plain language rewrite on the model of the tax law is being rewritten, but using open source editing tools.

4. ARLA’s model tenancy agreement is one of the most influential legal documents in the private rented sector and provides a useful alternative to statutory legislation, which the committee should explore. (Paras 6 to 8)

5. Landlord repairs are troublesome with the current system being overly complex and putting tenants at risk of eviction, and so is practically unworkable. (Paras 9 to 13)

(a)Recommendation for action: A streamlined approach to compelling landlords to do necessary repairs, including a presumed notice period and use of pre-approved contractors.

(b)Recommendation for action: Publication of repair notices to prospective tenants and house purchases if a repair claim has been made and the tenant has been evicted within 12 months of the claim.

6. Non payment of mortgages. Tenants are still at risk from landlords not paying their mortgages. Landlords should be required to communicate to tenants when there is a risk of mortgage default affecting the home. (Paras 14 and 15).

(a)Recommendation for action: A right of information for tenants if a landlord falls behind on mortgage payments

7. Banks that foreclose on rented properties, are still often in a position to over-ride tenant rights. (Paras 16 to 18)

(a)Recommendation for action: Banks should be in the same position that they would be if they had bought the property from the landlord.

8.The housing benefit regime has driven up market rents, and put families who cannot claim housing benefit at a disadvantage. The universal benefit and caps on housing benefit are in the right direction. (Paras 19 and 20)

9.Immigration has helped to sustain an above earnings increase in rents. (Paras 21 and 22).

(a)Recommendation for action: Landlords who rent to illegal immigrants should have similar penalties as employers who hire illegal immigrants.

IntroductionThe Private Rental SectorWhere the Supplier is King

1. High house prices mean that we are expecting families with children to be living in rented accommodation into their mid forties. If this is the case, then we need to find ways in which it should be more pleasant for them to do this. I believe that the core principle of the private rented sector—that private for profit landlords provide housing to tenants in a commercial relationship—is the one that will see the best results for tenants. However there are changes which need to be made.

2. Private landlords tended to regard their investments as a high yield savings account with a building attached rather than a business where they were providing homes, and private letting agents to regard tenants as a necessary evil rather than the end client who provided the actual money.

3. I write as someone who at the age of 32 went from owning a home to renting in the private sector for a period of six years. I now own a home again. I believe that the committee will hear a lot of submissions from the providers of rental accommodation and will also hear from groups such as Shelter and the National Union of Students on behalf of the traditional groups of private tenants. But I believe that young professionals who would ten years ago have naturally bought a home, who provide the greatest growth in the private sector rental market, are likely to be under represented as they have no interest group. I had tried to campaign on some of these issues through a site called repossessed landlord, but that fizzled out a few years ago. The best chance of the committee hearing of their experiences is to get someone like me to write them down.

Making Tenancy Law Comprehensible

4. When I was renting, I would sometimes need to quote the Landlord and Tenant Act to the letting agent, particularly at the end of a tenancy. Most tenants are not trained lawyers the language could be made simpler. I would recommend an exercise like the Tax Law Rewrite project, which aims to make the law concise and easy to comprehend without changing the substance of the law.

5. This could use open source drafting technologies such as wiki software to encourage a wide range of stakeholders to contribute, such as charity and advocacy groups, letting agents, solicitors and even tenants and landlords. This will not only involve a wider audience (and one not dominated by organised interest groups) but could also be done at considerably less cost.

The ARLA Model Tenancy Agreement

6. One of the most influential legal documents in the private rented sector is the Association of Residential Letting Agents (ARLA) model assured shorthold agreement. Few private tenants negotiate substantive changes on their tenancy agreement. A substantial majority of private landlords will use a letting agent to find a tenant and will propose a tenancy agreement essentially unchanged from that supplied by their letting agent. Letting agents will almost always use off the shelf letting agreements, with ARLA being the clear market leader (so much so that they now are required to allow non ARLA members to be able to use their agreement).

7. The ARLA model tenancy agreement is a potentially useful tool in order to bring tenant safeguards in. As well as being able to avoid the potential pitfalls of the inherent inflexibility of statute law, it will also give letting agents a shield when landlords insist on unreasonable behaviour towards their tenants.

8. I’d suggest that the committee closely questions ARLA about how they involve tenants advocate groups such as Shelter and the National Union of Students when making changes to their model tenancy agreement. This could be particularly useful in relation to repairs.

Repairs

9. There is often a problem with repairs. Good landlords treat their houses as business assets, making timely repairs and ensuring that their tenants are comfortable in their homes. However too many landlords tend to treat repairs, particularly where they are not suffering the inconvenience of broken windows or the lack of hot water, as an avoidable or delayable expense to be treated with a lack of response or other delaying tactics.

10. Section 11 of the Landlord and Tenants Act does not provide an adequate safeguard for tenants who cannot get necessary repairs done. The core principle is sound, commissioning work when the landlord refuses to do so and with-holding rent equal to the cost of the work. However the process is too complicated for Section 11 claims to act as a genuine deterrent to lacklustre landlords or to be used quickly and painlessly by tenants if there is continual refusal.

11. Firstly there is the timeline. Currently the tenant has to warn the landlord that there is a section 11 claim that could be made after the Landlord has been informed of the repair and done nothing about it. There should be a presumption that a section 11 claim can be made after a grace period (perhaps seven days where there is not the need for structural work) for the landlord to arrange and begin the repairs.

12. There should also be a streamlined approach to choosing trusted contractors to carry out the repairs. The current competitive tender process makes sense when the tenant does not know trustworthy contractors, but is too bureaucratic where a tradesman has done previous work on the house or other houses that have been let by the letting agent. Tradesmen who have previously been used by the landlord and (in managed lettings) the letting agent should be allowed to be used without competitive tender.

13. Finally there is the issue of the presumption of good faith. One of the biggest worries for a tenant who issues a section 11 claim is that they could get it wrong and find that they are paying for the repair and also facing eviction. If a section 11 claim has been made and a tenant has been evicted then this should be noted when renting out to a new tenant or being sold if this is within 12 months.

The Mortgage Time Bomb

14. Tenants can find that they lose out through the non-payment of mortgages to banks. This can often come as a surprise to tenants. As there is currently a low number of repossessions this has not been a widespread issue, but if there is a growth in repossession then the lack of emotional attachment that a landlord would have to their house compared with an owner-occupier will mean that it is likely that there is likely to be a problem that will affect the private rented sector disproportionately.

15. There should be a requirement that landlords communicate to tenants as soon as they are a month behind on the mortgage, giving the contact details of the banks. This will allow tenants to get in contact with banks at an early stage and make arrangements such as paying rent to the banks. It will also mean that banks become aware of the issue of tenants living in properties with residential mortgages.

The Position of Banks on Foreclosed Properties

16. There should also be a presumption that the bank on foreclosing on a property takes over the legal responsibilities of a landlord, as if they were in the position of a purchasing landlord buying the property from the original. This will mean that if there has been money that has been paid to the landlord for rent in advance (reasonably common when a landlord is in trouble) then the bank will have to take this into account even if the bank has not received this. A bank should also have give the tenants a six month guaranteed tenancy if they request this within a short period of time. This is part of the bank’s credit risk when they lend to landlords and should be factored into the cost of buy to let mortgages and not in to the sudden upheaval of a tenant’s life.

17. It is a relatively easy process for a bank to work out with some degree of accuracy whether properties are rental or residential (for example the use of different addresses for bank statements, the use of another property as security and a more streamlined approach to purchasing without the paying off of previous mortgages).

18. There may need to be safeguards so that an owner occupied property does not become rented during a foreclosure process.

Competition from Housing Benefits

19. One of the greatest issues for private sector tenants is that there is a lot of competition from housing benefits claimants who will often pay higher rents, and on better conditions than tenants who do not receive benefits. This makes it far harder for tenants to bargain down rents. These tenants are also funding this higher overall rents through their taxes.

20. Moves towards a universal benefit will help in this case and exceptions for rental payments should be kept to a minimum (for example for people with severe learning difficulties).

The Effect of Immigration on the Rental Market

21. The greatly increased level of immigration over the last decade has coincided with an above earnings increase in rents, particularly in London, which would have otherwise have been unsustainable. This is particularly the case when there is a higher density of residents per house than native born neighbours which means that a number of people on a relatively low wage can outbid a family on a higher—but still not substantial—wage. Many of these houses will be in practical multiple occupancy, but not registered under these rules.

22. Landlords who rent houses to illegal immigrants should face penalties similar to that of employers who hire illegal immigrants.

January 2013

Prepared 16th July 2013