Communities and Local Government CommitteeWritten evidence submitted by Tessa Shepperson

Introduction

I am a solicitor in private practice and I specialise in residential landlord and tenant law. Since December 2001 I have run an online legal information service for private residential landlords and tenants, called Landlord Law www.landlordlaw.co.uk, and since February 2006 I have published a blog, the Landlord Law Blog at www.landlordlawblog.co.uk. I am also a published writer on landlord and tenant issues.

Starting in June 2012 I ran a series on my blog which I called Housing Law—The Bigger Picture which looked at most of the issues this consultation exercise wishes us to consider. The series was later published online as a free ebook which can be downloaded here: http://www.landlordlawblog.co.uk/2012/10/01/housing-law-the-bigger-picture-the-ebook/

The ideas set out in the ebook come from my experience as a landlord and tenant lawyer for some 20 years and were also influenced by the comments made by readers to the original blog articles.

I copy below, as my contribution to this inquiry, the introductory and concluding sections of the ebook. For my full analysis the committee is referred to the ebook itself, which also has details of the sources quoted plus links to the original blog posts where the comments from readers can be found.

I apologise for the casual style of the ebook, but it was intended for a lay audience.

Extracts from “Housing Law—The Bigger Picture”

1. A time to re-evaluate?

The original problem

When the 1988 Housing Act introduced the concept of an assured shorthold tenancy (where a landlord has the right to recover a property after the end of the fixed term provided the proper form of notice had been served), this was at a time when the private rented sector had dropped to nearly 7%.

Much of this 7% probably consisted of unwilling landlords, forced to be landlords because there was no way in which they could get rid of their sitting tenants.

The PRS at that time was effectively moribund. No one in their right mind would seriously consider going into property renting as a business.

Many of the new lets during that time happened by accident—people letting someone in and then being unable to get them out again.

The Thatcher changes

The Thatcher government in 1987 was elected on a mandate to change things, and one of the things they wanted was to change and regenerate was the private rented sector.

However to do this, drastic action was needed. This is why the assured shorthold tenancy was introduced. In fact it took about five to six years before things started to take off, after the introduction of ARLAs buy to let mortgage.

However things are now different. Now we have a buoyant private rented sector, I suspect that the genie is not going to be put back into the bottle:

many people have invested in bricks and mortar as an alternative to a traditional pension and need the income, and

tenants are unable to afford to buy their own home and so need properties to rent.

Today—a re-evaluation?

So taking this into account—maybe we need to have a re-evaluation of the whole system.

We need to consider whether laws introduced at a time of scarcity are really appropriate once that scarcity is no more.

2. The statistics

One of the inspirations for this book was a report from the Cambridge Centre for Housing and Planning Research.

Changes between 1993 and 2010

The survey found that the balance of home ownership is changing. Mortgaged ownership has fallen across the country from 43% to 35%. Outright ownership has gone up from 25% to 34%.

But this increase in outright ownership is mostly in the older sector, meaning that fewer younger households and families are buying their own homes.

Also private renting is becoming the dominant rented sector (7% to 12% nationally) rather than the social rented sector as before. The increase in private renting is mostly in younger households.

These changes have accelerated in recent years.

The picture in London

The report states that there is a big difference between London and the rest of the country.

In London, social renting is far more important than in the country as a whole. However this has gone down from 30% to 23% while private renting his risen from 12% to 19%.

Overall, owner-occupation is running at around 55% while renting accounts for about 45% of all households—a very significant change from the 68%/32% split at the beginning of the period.

If this trend continues tenants will soon outnumber owners, with important political, social and economic implications.

The future

One of the conclusions made by the report is that these changes are affected by the economy. So if we have a strong economy, then the proportion of properties bought on mortgage will increase.

However if the economy continues to be weak, the private rented sector will continue to become more important—particularly for younger households and for families.

The report also shows that the dependence on renting, in particular private renting, is going to be (as you would expect) in the middle to lower income sector who will, if the economy remains weak, be excluded from owner occupation.

In conclusion the report makes a number of telling points, a few of which are:

That tenancies with longer terms should be considered as these are often better for families—but that these may need to be regulated differently to make them acceptable to both landlords and tenants.

Social housing is vulnerable to being reduced by the right to buy.

“Affordable housing” is more expensive than social housing so if this replaces social housing it will cause difficulties for low income families—many of whom work in essential but low paid jobs.

Home ownership via inheritance is less likely if older people live longer and the cost of care reduces the equity in their properties.

This means that many people in the middle to low income sector may never be able to own their own homes.

And finally

The biggest problem of all is the undersupply of housing and lack of investment in building new homes.

The main sections of the ebook consider landlord and tenant accreditation and my suggestions for a national register. I also look at how a national register could help solve the problem of retaliatory eviction, problems with tenancy agreements, and give some legal background on security of tenure and eviction of tenants. The two concluding chapters are below.

16. Conclusions (1)

Before I start considering recommendations, I want to take a look at the chief objection that has been made by landlords in their comments, when this series was published on the blog:

The necessity to do anything at all.

1. “There is no problem”

Admittedly many, probably a majority, of landlords are decent and honourable and provide quality properties. But there are many who do not.

At present these landlords are “getting away with it”. Do we want to live in a society where bad and often criminal landlords are allowed to rent out substandard and often dangerous property with impunity?

2. “We already have laws for this sort of thing”

Why, people demand, do we need anything else?

The answer is that it is often difficult if not impossible, to enforce the existing laws under the current system.

The Police generally refuse to have anything to do with housing issues, despite the fact that unlawful eviction (for example) is a criminal offence.

The people generally charged with the task of enforcing the regulations are local authorities.

However it is difficult for them:

A criminal prosecution needs to be proved beyond reasonable doubt.

This is difficult to do if the main witnesses (the tenants) are too scared to give evidence in court.

Even if they agree, you need a lot of very clear evidence to prove your case.

As trials generally do not take place for many months, many witnesses will have moved on and/or will find it difficult to remember the events clearly.

Local authority officers are over worked and there are not many of them. It is, practically, very difficult for them to find the time to bring prosecutions, particularly as many of them have not had proper legal training.

When a case does succeed at trial, the penalties handed down by Judges are fairly derisory (and are unlikely to be a deterrent to, for example, millionaire slum landlords).

So at present, the system is not working. Also, I have to say that I am not sure this is the correct system to deal with the problem of bad landlords.

3. Why local authority prosecutions are not the answer

For the problem to be resolved by local authority prosecutions the following would have to happen:

There would have to be a massive increase in local authority housing staff.

They would all have to be properly trained in housing law and the law of evidence.

Ideally cases would need to come to trial sooner.

There would have to be some sort of protection scheme for witnesses.

The penalties for housing relating offences would need to be changed to make them more of a deterrent.

Doing this would be hugely expensive and would increase the council tax bills for everyone.

This is why local authorities are coming round to the view that it is better for the landlord to be compelled to undergo training and comply with the proper standards before being allowed to rent out a property at all.

That way it is more objective, and landlords are unable to “get away with it” by terrorising tenants so they refuse to give evidence.

4. “Regulation will only increase rents for tenants”

Yes, it will be an extra expense, but if the result is greater rights for tenants and a better system, I suggest it is worth paying. Nothing in life is free. But it shouldn’t be too expensive.

There is no perfect answer to the problem of bad landlords and whatever solution is decided on someone will object to it.

But personally I think a system of landlord registration is more likely to deal with the problem of bad landlords than the current system of leaving it to local authorities to bring prosecutions.

And I think, in view of the increase and projected increases in the private rented sector, the problem of bad landlords is something which needs to be tackled.

5. “Tenants don’t want longer fixed terms”

This is true of many tenants, but by no means all. However under the current system, landlords get no advantage and may (if they are unlucky enough to get a bad tenant) be under a considerable disadvantage, if they grant a long fixed term.

It is also very much in the interests of letting agents to retain the current system, as their income is largely derived from finding new tenants and charging for “renewals”.

17. Conclusions (2)

Before discussing my conclusions I want to look briefly at

The point of view

When considering housing law and the private rented sector, there are three ways you can approach it.

(a) From the point of view of the landlord.

Looking at the situation with a landlord’s eye there is probably not a lot of reason to change things. The system is not perfect but works reasonably well from the landlords point of view.

(b) From the point of view of the tenant.

Here the situation is unsatisfactory and tenants’ supporters often express a desire to go back to the days of the Rent Act 1977 when tenants had long term security of tenure and protected rents.

However realistically this is not possible. People are not going to invest in property under those circumstances, neither are banks going to lend money. A return to this regime, or anything like it, is more likely to kill the private rented sector dead.

Therefore I do not think this is an option.

(c) From the point of view of society.

Here you need to strike a balance between the rights of the landlord and the rights of the tenant. But the most important thing is the interests of society generally. This is the point of view I have striven to take in this series.

With that in mind, lets take a look at the various conclusions I have come to.

1. The current system is not fit for purpose

There are two main issues:

dealing with bad landlords; and

giving tenants who want it, greater security of tenure.

Bad landlords are largely “getting away with it” due to the difficulties of prosecution and the lack of local authority staff to do the prosecuting.

Landlords are discouraged from giving (and lenders from permitting) longer fixed terms to tenants who want them (mainly older people and families) because of the difficulties of evicting bad or non paying tenants.

The only reliable and (comparatively) quick eviction method, section 21, can only be used once the fixed term (and the tenants long term security) has come to an end.

Both of these problems are bad for society:

Poor housing leads to poor health and increased costs for the NHS (which we all pay for).

Families in particular need long term security so children can remain in their schools.

Local communities suffer if residents cannot put down roots due to the risk of being “moved on” after six months.

2. Landlord/letting agent registration and accreditation is the best solution to the “bad landlord” problem

Stopping poor landlords from letting in the first place is likely to be more effective than prosecuting them when they break the law.

I propose a nationally operated registration scheme where all rented properties have to be registered.

All properties would have to be managed by an accredited letting agent unless the landlord had undergone training and obtained a landlord qualification.

The letting agent industry should be properly regulated with agents being required to have an accredited letting agent qualification, CPD obligations, professional indemnity insurance and client money protection.

Where properties are not properly registered penalties should apply and landlords be unable to use the quicker eviction procedures.

3. The eviction process should be changed to make it easier to evict bad or non paying tenants

This is key.

The problems involved in evicting non paying tenants during the fixed term is the main (and perhaps the only) deterrent to longer fixed terms.

If change in the eviction procedure does not happen then neither will the longer fixed terms.

I suggest that landlords be entitled to prompt possession orders against non paying tenants as of right, and that if tenants seek to defend and counterclaim, for example because of the property’s poor condition, they be required to pay their rent into court (or an authorised organisation) to abide the event.

However hopefully tenants will be able to deal with poor property conditions under the registration/licensing system and will not need to deal with it by way of withholding rent.

After an order for possession is made (based on rent arrears), if tenants want extra time before they are evicted, this would be on condition that the rent is paid to the landlord, or into court.

I also suggest faster processing for bailiffs appointments, as this can cause long delays, especially in London.

This system need not be more burdensome on the courts—indeed if a paper based procedure such as the accelerated procedure can be used, this would save court time as there would be considerably fewer hearings.

It would require some amendments to the Civil Procedure Rules and maybe to the Housing Act 1988.

An efficient and speedy repossession system for rent arrears would give landlords more confidence in the system and encourage them to grant longer fixed terms to their tenants.

Crucially also this would make it more difficult for lenders to object.

4. Tenants should be entitled to apply for a longer fixed term.

For example after they have been in a property for, say, a year.

This would be on payment of a premium fee which if not agreed between the parties could be set by a court, following a prescribed formula.

This would allow tenants who cannot afford to buy their own homes, to buy long term security in their rented property, allowing them to settle in the community without fear of being evicted after a few months.

However tenants who do not want to remain in the property long term, could continue to sign up for 6–12 month fixed terms allowing them greater flexibility. It would be the tenant’s choice.

Landlords would continue to be able to use the section 21 procedure after a fixed term has come to an end.

However maybe there could be a right for a tenant who has purchased a premium tenancy to be able to renew this within a set period of time upon making a further payment.

5. Mandatory core terms for tenancy agreements

Freely available and in plain English.

6. Conclusion

These are just ideas. On further consideration they may prove unviable. On the other hand they may prove to be a workable solution.

Further investigation and analysis will be needed and extensive consultation if any change in the law is to be made.

I hope you will agree however that something needs to be done. These suggestions and the analysis contained in my ebook are my contribution to the debate.

January 2013

Prepared 16th July 2013