Communities and Local Government CommitteeWritten evidence submitted by the Cornwall Residential Landlords Association (CRLA)
1. Thank you for the opportunity to contribute to your inquiry.
2. The Cornwall Residential Landlords Association (CRLA) has approaching 450 members who are largely residential landlords and about 30 letting agents with properties of various types and sizes situated in Cornwall. The Association exists to assist, represent and inform members to ensure that they run their businesses in an efficient and legal manner.
3. To formulate the information given in this document our members were consulted by email and telephone survey. Over half of our members replied to the survey and we have used the most frequently made comments when making this response.
4. Extrapolating from the replies received we are confident in stating that over 4,000 properties are let and managed by the landlords who are members of the Association, not including the properties managed by members who are letting agents. The properties include family and shared houses and flats, bedsits, static caravans and rooms let out to lodgers.
5. The length of tenancies varies as much as the type of property but the average stay in accommodation let by our members is in the region of seven years. The reported tenancy times ranged from under a month to over 25 years.
6. In 2008 Julie Rugg and David Rhodes of York University were commissioned to undertake a review of the Private Rented Sector by the then government. That review accepted the importance of the private rented sector in providing housing for many of the population and the benefits that the flexibility of renting provide to lifestyles and the economy.
Quality of Housing in the Private Rented Sector
7. It has to be accepted that there are bad landlords as well as good but it is felt that the good landlords vastly outnumber the bad ones. In the same way as there are bad landlords, there are also bad tenants but, again, the good tenants outnumber the bad ones.
8. It makes sound sense for any business to provide a quality product at an affordable price and to nurture their customer. Landlords are micro businesses with the only customer being the tenant, so both common sense and business sense encourage landlords to work with tenants to ensure a harmonious relationship. Tenants of good landlords are encouraged to consider the rented property as their home and to contact the landlord or agent as soon as any problem arises.
9. The management of properties is one of the major factors in providing a balanced market. The fact that many of our members’ tenants have been in their current accommodation for up to twenty five years would appear to confirm that they are happy with the standard of accommodation and the management practices of their landlords.
10. The government’s concerns with energy efficiency are lauded but, at least in Cornwall, some of the measures will cause a drop in the number of properties available for letting. The proposal that properties with lower EPC ratings should be removed from the lettings market would prove problematic due to the nature of the older properties in Cornwall. There are a large number of listed buildings and properties within conservation areas which would mean that the potential remedies for improving EPC ratings are not practical and in many cases, are impossible.
11. It was felt that the standards of both landlords and the properties they let out would be improved if the tax status of landlords was changed. Only those landlords who let out to an agent who both finds tenants and manages the property can be said to be investment income. The average landlord needs to be on-call twenty four hours a day, seven days a week to meet the demands of the tenants so letting is very much a business.
Rent Levels
12. Members were asked about the frequency of rent increases and whilst the majority had an annual review of rent written into their agreements, very few actually increased their rents that often. Many landlords only review rents on a changeover of a tenancy and then take into account what potential tenants are able to afford. Where rents are increased during a tenancy they tend to be increased in consultation with the tenant to ensure that tenants can afford the rent requested. A common theme coming from this question was that the quality of tenant is much more important than an increased rent with the possible complications that may arise.
13. For members to accept a link between rents and the retail prices index they ask for support from government to ensure that it is easier to evict those tenants who do not pay their rent. Of the 270 responses received 205 members are owed rent by their tenants. Only 185 members were willing to share the amount owed, the total owing to those members being is in excess of £290,000. Many landlords are reluctant to serve a Section 8 Notice due to its ease of manipulation by tenants and so rely on the Section 21 route.
14. The date specified in a Section 21 Notices must be after a fixed term tenancy has expired and landlords have to give two months notice to the tenant. Once the action proceeds to court there can still be a delay of up to three months followed by a further delay when a bailiff needs to be instructed. In the meantime a tenant often does not pay the rent and the result can be that the tenant lives rent-free for up to eight or nine months. Not a situation which many small or micro businesses can sustain.
Rent Controls
15. The possibility of rent increases being restricted to the retail prices index, however, raised concerns as to whether the rather infrequent rent increases would be sufficient to fund the overheads of running a lettings business. Many members replied that should there be such a control they would have to seriously consider annual increases.
16. Unfortunately members whose letting business extends back to previous times of rent control remembered only too clearly the damage inflicted on the sector by those controls and many felt that any threat of rent control being introduced would be the trigger for them to sell their properties with the potential of tenants having to leave their homes of many years.
17. Members all agreed that rent controls would damage the private rented sector and would be a major cause of a drop in property conditions.
18. There would appear to be no consensus on a method of calculating rent increases. If letting to those in receipt of Housing Benefit most members try to keep rents at or below the level of Local Housing Allowance for their area or look at the market rent and then negotiate with the tenants to ensure that the rent charged is affordable.
Housing Benefit
19. An increasing number of members are refusing potential tenants if they feel the tenant will be in receipt of Housing Benefit. The main reasons for this are the inefficiencies in the administration of benefits together with the increasing number of tenants who are paid direct and who fail to pay rent to the landlord.
20. A popular request from members was that those people who receive Housing Benefit but do not pay that benefit over to the landlord should be deemed to have committed a fraud. Without that sanction members do not feel there is any good reason to accept a tenant in receipt of benefit when a working tenant is also seeking to rent a property.
21. Members were asked about rent arrears and from the 185 members who gave figures we are aware of debts of over £290,000 owed to members by tenants. Of that figure over £267,000 is due to non-payment by tenants in receipt of Housing Benefit.
22. Landlords who do not accept a tenant in receipt of Housing Benefit also report that they are likely to serve a Section 21 Notice if a tenant loses their employment and applies for Housing Benefit.
23. The introduction of Universal Credit will not make any difference to the above attitude but many landlords who now accept tenants in receipt of Housing Benefit have stated that, due to the uncertainties surrounding Universal Credit, they would not in future accept any tenant who was not in regular employment.
24. Additional barriers to landlords wishing to let out to those in receipt of Housing Benefit are the conditions contained in mortgage and/or insurance contracts which provide that a landlord may not let to such a person. We are unclear how these conditions will be amended to reflect the change to Universal Credit.
Regulation of Landlords
25. A large majority of our members supported in principle the idea of accreditation of landlords with the proviso that any accreditation should be voluntary and not just an excuse for local authorities or government to add another layer of bureaucracy to an already over regulated sector. As an Association we continue to support the simple registration scheme as proposed in the Rugg Review of 2008.
26. The costs of any regulation are a major concern. Members felt that Cornwall Council did not have the resources to undertake the work. If costs of accreditation were to be billed to the landlord then that would be yet another business cost which would have to be passed on to the customer (the tenant). Costs of any accreditation or registration scheme should be kept to a bare minimum or met by central government funding.
27. Inspection of properties was felt by our members to be a major part of any accreditation scheme. Property inspections should be carried out by a qualified professional, not by an employee of the local authority or body governing the accreditation scheme. Having the inspection carried out by an independent third party would help to ensure that there was no conflict of interest.
28. A possibly less expensive option to accreditation mentioned by many of our members would be to require all landlords to belong to a professional association such as a landlord association. This would ensure that landlords have access to advice and guidance for their businesses.
29. Members of the CRLA are aware of the large amount of legislation and regulation governing the private rented sector and cannot see any benefit to increasing the legislative burden on the industry.
30. Cornwall Council appear to be dedicated to ensuring that standards are maintained throughout Cornwall. There have been a relatively few prosecutions of landlords as the Council prefer to work with offending landlords to ensure they are aware of their responsibilities and how to respond to those requirements.
31. Members are concerned that the work of Cornwall Council in improving standards is limited by funding pressures.
Regulation of Letting Agents
32. Around 30 letting agents are members of the CRLA and their views have been taken into consideration in making this response. Only a small proportion of members (less than 5%) use agents for anything more than as a tenant finding service.
33. The majority of members are aware of the five main bodies to which letting and managing agents can belong and are aware of the benefits of using an agent who is a member of one of those schemes.
34. Members tend to feel that licensing of letting agents is long overdue whether that is by setting up an umbrella body over the national bodies or by making it a requirement that all letting and managing agents should be a member of one of the existing national bodies. The umbrella option was preferred by members who tended to be somewhat confused by the number of different bodies who may or may not have different standards.
35. Due to the low number of members who use agents we are unable to comment on the fee scales other than to reflect a concern of many members with respect to the fees charged to tenants. It is hard to understand how both tenant and landlord can be charged for the same thing.
Tenancy Agreements and Length of Tenure
36. Almost all of our members give a six month Assured Shorthold Tenancy Agreement. At the end of the six months, assuming the tenant has shown that he or she is complying with the conditions of the tenancy, including paying rent, the tenancy is allowed to roll over to a periodic agreement which can last for many years.
37. Very few members prefer to enter into a fresh agreement with the tenant but those who do tend to fall into two categories:
(a)
(b)
38. Landlords prefer to only grant a six month tenancy so they know that the term of a bad tenant (non-payment of rent, anti-social behaviour etc) is limited.
39.
|
Length of Residence of Tenancy for tenants in residence during 2012 (%) |
|
|
Less than 6 months |
6.02 |
|
6–12 months |
32.02 |
|
1–5 years |
57.80 |
|
Over 5 years |
59.16 |
Void Periods
40. Members tend to have a low level of void periods with many having a waiting list of potential tenants for their properties.
41. Void periods when incurred tend in the main to be due to renovation or redecoration when a tenant moves out of a property.
|
Length of Void Periods during 2012 (%) |
|
|
Less than 1 month |
91.66 |
|
1–3 months |
2.30 |
|
3–6 months |
0.00 |
|
Over 6 months |
6.04 |
Property Standards
42. It is a basic right for everyone to have a safe, comfortable and secure home. We feel that the majority of tenants do enjoy that right.
43. The Housing Health and Safety Rating System considers all aspects of a property to ensure that it is suitable for tenants and their possible visitors.
44. A review of the tax treatment of landlords as businesses not investors together with a reduction in VAT payable on improvements could improve the standards of properties and their maintenance and renovation.
Working with Cornwall Council to Discharge Homelessness
45. Cornwall Council started their Stepping Stones to Homes scheme before the Localism Act was passed. Members are aware of the scheme and a few have joined and are working with the officers in Cornwall Council.
46. One of the main attractions of the scheme to members is the possibility of direct payment of any Housing Benefit to the landlord but we do not know how the change to Universal Credit will affect this.
47. A number of members would potentially be interested in working with Cornwall Council but are prevented from doing so by mortgage and/or insurance conditions which stop them from taking tenants in receipt of Housing Benefit.
48. The 12 month tenancy agreement is a barrier for some landlords whose mortgage companies specify that tenancy agreements may not be for a period in excess of six months.
49. Many members have for many years worked with the Housing Options service in Cornwall Council to find suitable tenants and do not perceive that there is any benefit from joining the scheme.
50. Where mortgage and insurance conditions permit, many members work closely with other bodies such as Probation and providers of supported housing.
Conclusions
51. Landlords need to be able to end a tenancy in a short time if the property is to be sold or if the tenant has failed to keep up to date with rent payments or there if anti-social behaviour on the part of the tenant is a problem.
52. Mortgage companies and insurance companies need to be encouraged to permit letting to tenants in receipt of benefits.
53. The tax inequalities when landlords in the private rented sector are compared with other businesses need to be addressed.
54. A registration/accreditation scheme for landlords as proposed in the Rugg Review should be introduced.
55. Letting and managing agents to be required to join a regulatory body.
56. Rent control of any kind would have a profound effect on the economy as a whole.
57. If you would like clarification of any of the points made in this response please contact Ruth Clarke by email at info@ruthclarke.com or by telephone on 01872 554498.
January 2013