Communities and Local Government CommitteeWritten evidence submitted by the KIS Lettings Group

Executive Summary

Responding to this inquiry on behalf of the independent landlords owning and managing five properties of fewer—who make up the majority of the Private Rented Market—this evidence argues that the debate on the future of the Private Rented Sector in the United Kingdom has become unhelpfully polarised between those agitating for the sector to be more heavily regulated and those advocating no change.

It is KIS Lettings contention that neither position adequately addresses the evolving needs of the Private Rented Sector—and more importantly those who rely upon to meet their basic human need for shelter. Further regulation is in our eyes unnecessary. Change is essential.

Britain is now a nation of renters. This means huge opportunities for the Private Rented Sector, but it also means huge responsibilities to tackle issues like the rogue landlords and agents who bring shame on our industry.

Our central contention that no agency, organisation or interest can solve these issue alone and the government and its agencies, local authorities, trade bodies, landlords and lettings agents must collaborate and co-operate on radical and creative solutions.

It is in our view more than achievable for such solutions to make the changes the Private Rented Sector needs without the need for new laws.

As a starting point we have two key recommendations:

The introduction of a mandatory private redress insurance scheme for tenants which agents must offer when signing up a new tenancy, empowering tenants and offering landlords and agents a clear financial interest in providing high levels of service to their tenants.

The adoption of a single, comprehensive industry-standard voluntary code of conduct for landlords and agents, endorsed and publicised by government.

1.0 Why we are Submitting This Evidence

1.1 KIS Lettings Group is a lettings agency in the North East of England, specialising in quality, affordable rented accommodation and managing properties on behalf of almost 700 independent local landlords from branches in Sunderland, North Tyneside and South Tyneside.

1.2 Our aim in submitting this evidence is to ensure the committee hears the voice of the independent landlords of the kind our organisation typically represents –the 67.5% of landlords who own five properties or less and in particular the 23.3% who rent out a single property (Source: ARLA). It is these landlords, often accidental landlords managing personal or family assets as best they can, or prudently and modestly investing for their retirement.

1.3. Furthermore, it is these landlords and agents who will inevitably feel the impact of these changes more sharply than larger players due both to their comparatively limited resources and lack of a collective voice with which to argue their case.

2.0 Why This Inquiry, and Change, is Very Necessary

2.1 In our view, the committee’s inquiry is welcome and timely. The private rented sector—and indeed British society as a whole—is undergoing a period of unprecedented cultural change. The recently-published Census of 2011 showed a jump of 2 million in the number of private renters in England and Wales—a rise of almost 90% in just ten years. In the same period the number of people owning their own homes all but flatlined, rising just 0.5%. It is true to say that a Briton’s home is increasingly someone else’s castle.

2.2 Historically, landlords and lettings agents do not enjoy the best of reputations. With no qualifications or vetting needed to become a landlord or significant barriers to entry into the marketplace, and more and more people seeking rented accommodation, it is crucial steps are taken by our industry to address this predicament.

2.3 Widely-publicised cases of landlords leaving tenants in conditions which would shame a slum have led consumer body Which? to compare the gamble tenants take when choosing a landlord to a game of roulette and other observers to describe the lettings sector “like the Wild West”. Although the actions of unscrupulous and callous landlords are not remotely representative of landlords in general, there is a real risk that they become representative of all landlords in the public mind.

2.4 Although as we shall argue later in this submission, our worry is that people comparing the lettings industry to the Wild West have a vested interest in saying that—they want to be the sheriff—but there’s no question that a handful unprincipled operators are continuing to tarnish the reputation of responsible landlords and agents. As a result the only time you see landlords in the media they’re Rogue Traders or Rigsby. The only songs you hear about us say things like “Let’s lynch the landlord”. At the risk of sounding overly flippant, if people are singing songs about murdering you, your industry clearly needs to take a good look at itself.

2.5 There’s actually something a good deal more serious at stake. It is KIS Letting’s contention that if our industry does not get our house in order there’s a very real chance that someone else will put it in order for us—maybe even through a Leveson-style intervention following a series of high profile acts of serious negligence or immorality by landlords or agents which seriously and permanently tarnish the reputation of and trust in the Private Rented Sector.

3.0 Why Further Regulation is Unwarranted and Unnecessary

3.1 The debate on the future of the Private Rented Sector in the UK has in our view become unhelpfully polarised between those campaigning for the status quo and those who believe further regulation is a silver bullet for the industry’s ills.

3.2 As we have seen, it is our contention that doing nothing is not an option. But will new laws or regulations makes things better? In our view, they will not.

3.3 More than enough laws and regulations managing the relationship between landlords and tenants already exist. The private rentals sector is in fact already subject to vast amount of legislation, with more than 50 Acts of Parliament currently on the statures applying to the way landlords and lettings agents operate.

3.4 The problem is not a lack of laws but a lack of adequate enforcement. It is unlikely any paperwork would change this. In particular, tenants far too often have little idea what their rights actually are, how to enforce them, and a lack of access to routes to justice when they do, other than through prohibitively costly private litigation or reducing access to the support by agencies such as Citizen’s Advice, caused by the significant budget pressure these organisations are currently experiencing.

3.5 Moreover, it is crucial that we do not overreact and make this already burdensome framework even more complex and onerous. To do so would make it harder, or even impossible, for the smaller and independent operators who make up so much of the market to compete and even to function at all. To do so would be an affront to the principles of a free market and completion which underpin our economy and would risk distorting the rental market by creating a near-monopoly for the industry’s larger players, with only the tenants losing out. We must not forget that the majority of our tenants in the United Kingdom are happy with their landlords and agents, with the National Landlord Association research would suggesting satisfaction rates of 80% and higher. There are problem landlords, but landlords are not the problem.

3.6 In addition, our concern is that those agitating most vocally for new regulatory powers—in particular the compulsory regulation of landlords and agents -are only doing so as they see a role for themselves as the administrators of a new regulatory system. Our fear is that this desire is not born out of any genuine concern for the interest of tenants, but instead in the interest of their own organisation’s financial gain.

4.0 Towards an Industry-Led, Nationwide Solution

4.1 It is also our contention that whatever solution, it must be implemented nationwide, and spearheaded by landlords and lettings agents themselves.

4.2 The New Year has seen both the London Borough of Newham and the City of Liverpool introduce a mandatory registration scheme for landlords. It is our contention that their schemes will not work, and cannot work. What is really needed is an industry-led, nationwide approach.

4.3 In line with our previous concerns detailed above, the Newham and Liverpool schemes rely on laws which already exist, but which aren’t being enforced enough. Why are the bad landlords any more likely to obey them now? If the councils had the resources to inspect every property in Newham or Liverpool several times a year before, why didn’t it? If it does now, where have they come from?

4.4 If councils—or any other agencies for that matter—act unilaterally like this, our fear is all they do is place an underserved bureaucratic burden on good landlords, probably paid for either directly or indirectly by tenants. Even if the very existence of this scheme makes slum landlords think twice about operating in Newham, all they’re going to do is literally cross the road to Barking or Hackney. The problem doesn’t go away, it just swaps postcodes.

4.5 The Newham solution also seems to us to again be inadvertently adversarial. Again, we must remember that although there are problem landlords, but landlords are not the problem—landlords and the relevant authorities need to co-operate, not compete. Furthermore, if different local authorities all implement different schemes—which seems to be the government’s preference at present– the risk is that all we do is distort the market and create an immensely-complicated, patchy and incoherent system which ultimately does nothing to protect tenant or improve public confidence in the Private Rented Sector.

4.7 Moreover, any solution which is settled upon must be landlord-led. Who is it who really has the tenant’s interests at heart? The answer is clearly landlords and lettings agents. Although there is a clear self-interest in us saying this, it is an enlightened self-interest. The best state of affairs for tenants and property owners and managers alike are stable long-term tenancies, with landlord-tenant relations based on trust and respect. It is tenants and landlords who have the most to gain from this scenario, and they too who are most experienced and best placed at creating the conditions necessary for it to happen.

5.0 Recommendations

5.1 As we have argued, no agency, organisation or interest can solve these issues alone and the government and its agencies, local authorities, trade bodies, landlords and lettings agents must collaborate and co-operate on radical and creative solutions.

5.2 It remains our contention that solutions like these will render any further regulation of the industry entirely unnecessary, while also addressing the issues which will continue to plague it should no action be taken.

5.3 As a starting point for debate, we have the following suggestions we would like to put on the table:

Mandatory private redress insurance for tenants: A agents and landlords should be required by law to provide mandatory private redress insurance for tenants signing up to a new tenancy.

As this policy would be in the name of the tenants it would give them the resources and support both to carry out remedial work (boiler repairs, for example) quickly and efficiently if landlords prove unwilling or unresponsive and to quickly and affordably secure legal advice and support in the event of disputes with agents or landlords.

This measure would also make it easier for rogue landlords and agents are bought to book using existing laws, by involving the investigative and legal powers of an insurance industry with a clear interest in ensuring compliance. As premiums would inevitably rise for landlord or agents who fall short of the required standards, they too would have a significant financial interest in providing and maintaining services and facilities of a high standard.

As such, the scheme would also be underpinned by the Financial Service Authority, the government would, indirectly at least, have a key stake in the regulatory framework too.

Furthermore, a key problem with the status quo is that landlords all too often are not aware of their legal rights and responsibilities. As part of this policy, we recommend that every tenant is provided with a mortgage or insurance policy style Key Fact Sheet outlining in Plain English what they can expect, by law, from their tenancy and what their landlords should expect from them in return, along with advice about pathways of arbitration and redress.

A code of conduct worth the paper it is written on: We believe in the introduction of a single unified voluntary code of conduct for the sector, compliance with which would allow landlords and agents to display an easily-recognisable logo giving tenants piece of mind that their landlord is competent, reliable and trustworthy.

While it is true that a number of similar schemes already exist they are clearly not effective as the multiplicity of schemes currently available dilutes any impact, especially as public recognition for the various brands and logos associated with them appears to be practically zero. As such, it is clear a single unified scheme should be introduced, with publicised heavily by the government through its channels.

As the imposition of a compulsory scheme would be in our view unhelpfully adversarial, the government could perhaps incentivise signing up to it by offering a modest reduction in the income tax paid on rental income for signatories.

6.0 Final Thoughts

6.1 As we have being preparing this submission, the Housing Minister has announced plan s for a “tenant training scheme” designed to help tenants in social housing make their voices heard.

6.2 As our central contention for supplying this evidence is that any changes make to the regulatory framework shaping the Private Rented Market have empowering tenants as their primary focus, we are broadly supportive of this idea and would also suggest the government considers how private tenants may also access similar process of public information and education.

January 2013

Prepared 16th July 2013