Housing and Planning Bill

Written evidence submitted by the Law Society of England and Wales (HPB 95)

The Law Society

1. The Law Society is the professional body for the solicitors profession in England and Wales, representing over 160,000 registered legal practitioners (the Society). The Society represents the profession to parliament, government and regulatory bodies and has a public interest in the reform of the law.

2. This evidence has been prepared by the Society's Housing Law Committee and reflects the expertise of a broad spectrum of practitioners who represent tenants and landlords, both in the private and social sphere. One of the Committee’s objectives is to promote improvements in law and practice relating to residential letting in the public and private sectors. This response is limited to issues of housing law, rather than the right to buy provisions or the planning law elements of the Housing and Planning Bill (the Bill).

3. We support the new provisions which introduce a register and new sanctions for rogue landlords and letting agents. We bel iev e that the introduction of these provisions will result in:

§ landlords and letting agents becoming more aware of their responsibilities;

§ tenants having more trust that the property is being properly managed in accordance with the law; and

§ an overall improvement of the standard of private rented properties.

4. We would like to draw the Public Bill Committee's attention to the following proposed measures in the Bill that may prove problematic in practice:

§ the requirement for a criminal burden of proof for the First Tier Tribunal (FTT) to grant a rent repayment order;

§ the proposed accelerated repossession process for abandoned properties; and

§ much of the details and definitions being left to regulations which could lead to satellite litigation.

5. We would be happy to expand upon these points in oral evidence.

Part 2, Chapter 2 – Banning orders (Clauses 13 – 21)

6. Purpose of clauses: to create a power for a Local Housing Authority (LHA) to apply for a banning order against landlords.

7. Law Society concerns:

The Society welcomes the new provisions which introduce powers to tackle the behaviour of rogue landlords and letting agents . However , the impact of the se provisions are dependent on LHAs taking action against landlords / letting agents . The LHA would need to serve notice of their intention t o apply for a banning order on a lan dlord /letting agent , consid er any representations made by them and then apply to the FTT for a banning order. Considering the financial cons traints that LHAs are under , without any dedicated funding to support this work, there may be very few applications for banning orders -t here is no compulsion for a LHA to take action.

8. If a banning order is breached the LHA may impose a financ ial penalty of up to maximum of £5,000 which will be reserved for the worst breaches. We do not believe that such a fine will act as financial deterrent to those landlords who stand to make significant revenue in a highly competitive private rental market. The average rental for a tenancy in 2015 rose to £738.00pcm (outside London) and £1,472pcm in London. At present the greatest fine possible under the Bill for breach is less than a third (28%) of the potential average annual rental income for a London property. Currently, the Bill only allows for the maximum penalty to increase with inflation. Considering the that the annual average UK rent for tenancies in May 2015 was 12.5% higher than May 2014 [1] , this divergence is only like to grow as rents increase.

9. Furthermore , although LHAs may be able to k eep this penalty (although subsequent regulations may order that it is repaid back to the Secretary of State) any financ ial i ncentive for LHAs to pursue a banning order is only triggered where the order is breached. 

Clause 14 - Application and notice of intended proceedings

10. When apply ing for a banning order against someone (X) convicted of a banning order offence , LHAs must;

§ give 28 days' notice of their intention to apply for an order, inviting representations from X;

§ serve the notice within six months of X's conviction, to which the notice relates; and

§ consider any representations that are made by X.

11. I t is unclear as to how the LHA will become aware of that person's convictions. The onus is on the LHA to undertake the process, which must be commenced within a strict timeframe. There appears to be no provisions for the LHA to recover their costs in the event that a banning order is made. This cost of this process may mean that LHAs are dissuaded from applying for the banning orders at a time when their resources are already stretched .

Part 2, Chapter 3 - Database of rogue landlords and letting agents (clauses 22-31)

12. Purpose of clauses: The provisions in this chapter makes it compulsory for the Secretary of State to establish and operate a database. The database is in many ways the lynchpin for holding the landlord accountable to a banning order.

13. Law Society concerns:

Circumstances which may warrant entry onto the register

It is unclear as to what other circumstances would lead to a landlord being entered on the database. Clause 24(1) states that the Secretary of State must issue guidance as to what circumstances may warrant entry. The duty for an LHA to enter the person Clause 23(1) says that an LHA must enter a person who is subject to a banning order. However, the LHA may enter a person to the register who has been convicted of a banning order offence. Apart from stipulating that those subject to a banning order must be entered on the database for the period of the order and then they are removed - it is left open as to what other circumstances, and how other "rogue" landlords would appear on the register.

14. At present the list of banning order offences has not been determined but if the register is to be a true and contemporaneous database then those convicted of banning offences (as specified in subsequent regulations) should be entered onto the register.

15. There are now codes of practice which operate for members of the Property Ombudsman for private sector housing [2] . We would recommend making reference to some kind of benchmark standard which a person has fallen below would define what is a "rogue" landlord. The guidance will need to be sufficiently clear in this respect.

Operation and maintenance of the database

16. Clauses 24 and 25 make it the responsibility of the LHA to maintain the database. With the restraints on local authority resources, it is difficult to see how this will work effectively unless the data is kept very simple with strong links feeding in from other departments within the local authority enforcement sections.

17. Clear guidance will have to be drafted for LHAs to fully understand how the database is to work in practice and to avoid any system of maintaining the register from breaking down for want of uncertainty as to when information should be entered. There is a provision to say that false information leading to someone being entered on the database is a criminal offence. However, on the basis that it would be an LHA who in practice would enforce that offence, it may not be much of a deterrent.

Unintended consequences of appeal route

18. If a person appeals against a banning order within the notice period allowed under clause 26, the local authority may not enter the person into the database until the appeal is determined or withdrawn (ie so there is no possibility of a further appeal). This provision could be abused in that rogue landlords may start appealing as a matter of course, simply to stay off the register. We recommend that this could be avoided by simply to having a section of the register indicating that an appeal is pending.

Part 2, Chapter 4 – Rent Repayment Orders (clauses 32 – 46)

19. Purpose of clauses: The provisions create a power for the FTT to require the landlord to repay rent paid by the tenant, or to repay the local housing authority credit which had been paid in respect of rent.

20. Law Society concerns:

Rent repayment orders are made on the application of the tenant or LHA. If the application is made by the tenant, it must be made within 12 months of the offence being committed. If made by the LHA, it must have regard to guidance given by the Secretary of State (not yet produced), and comply with clause 34 which states that it must give the landlord a notice of intended proceedings.

21. The notice must be given within 12 months of the offence committed. The landlord does not have to have been convicted of the offence a the time the application is made but the tribunal must be satisfied beyond reasonable doubt that the landlord has committed the offence. This seems to place quite a heavy burden on a lay tenant to establish. Also the FTT will need to look at any convictions. Of course it would be much easier if the landlord is convicted of the offence, but the time for application is limited to 12 months from the date the offence was committed and by then the case may not have been processed by the criminal justice system.

22. Also the FTT cannot make costs orders other than wasted costs for unreasonable conduct. So if the award is small and limited to 12 months of rent this is likely be off-putting for lower value claims where the costs are unlikely to be recovered.

23. A LA has a duty to consider applying for rent repayment orders. They may also help tenants apply for rent repayment orders by conducting proceedings or giving advice to the tenant. The LA would have to issue a notice of intended proceedings to landlord and wait 28 days before applying to court; there is no provision for making emergency applications.

24. A tenant’s rent is often part paid by universal credit/housing benefit and part by the tenant directly. The LA can conduct proceedings on the tenant’s behalf under clause 43(2) of the Bill and the FTT can make a rent repayment order in favour of the tenant in these circumstances. However, there does not seem to be any obligation for the LA to conduct proceedings. The LA may simply not bother to incur the cost of pursuing an order, particularly if they are contributing a small sum to the overall rent, they have to issue a notice

Part 3 - Recovering Abandoned Premises in England

25. Purpose of clauses: the provisions provide a private landlord a means of repossessing a property without obtaining a court order provided that the prescribed process is followed.

26. Law Society concerns:

The current position in England is that, if a landlord believes that a tenant has abandoned the premises:

§ it will make investigations and then serve a Notice to Quit (NTQ) in accordance with the Protection from Eviction Act 1977, if rent is paid weekly, 28 days notice must be given and if rent is paid monthly then one months' notice must be given;

§ a landlord may serve a notice under section 21 of the Housing Act 1988 (Section 21 Notice), which can be served to end the assured shorthold tenancy.

27. Once the notice has expired, the landlord has a choice, they can change the locks or they can apply to court for a possession order. The process is not fast when relying on a NTQ. The court will list the hearing between four and eight weeks from the date the application was issued. If the tenant does not attend, the court will often make an order for possession but that it does not take effect for up to up to six weeks. The 'accelerated possession' following a Section 21 Notice is often no quicker although it does not usually require a court hearing unless the tenant seeks to defend the proceedings. A risk averse landlord will then apply for an eviction date which can take a further six weeks.

28. The costs to the landlord of following the above process are considerable. Even if the landlord does not instruct solicitors, it will incur a court issue fee of £280, a warrant application fee of £110 and the lost rent for up to 14 weeks after the Notice to Quit has expired.

29. Whilst a landlord may decide to simply change the locks, this currently exposes them to the risk of claims against them for unlawful eviction, damages for which can run into tens of thousands of pounds [3] . This is very concerning for tenant who may find themselves evicted when they had a good reason for not being in the property and are either unable to afford legal advice or unsure what their rights are.

30. The provisions seek to shorten the time for landlords and stop the necessity to seek a court order provided there are rent arrears and the appropriate notices have been given and not responded to. However, this may cause concern for both landlords and tenants several reasons.

Possible infringement of Equality Act 2010 and/ or Human Rights Act 1988

31. By way of example, if a tenant fails to pay their rent for two months (monthly tenancy) because they have been sectioned under the Mental Health Act 1983 for such a period as to render them incapable of paying their rent, if:

§ it appears to the landlord that they are not living there; and

§ the landlord serves the notices at the property.

32. It could be argued by the tenant when seeking reinstatement that they were treated less fairly due to a disability which could give rise to an additional claim for damages under those provisions. In this situation, it would be unfair for the landlord as they would not have known that the tenant has not simply abandoned the property.

33. It would be easier, in this situation, for the landlord to simply serve a two month Section 21 Notice (provided four months of the tenancy has expired and it is not a fixed term) and seek a court order using the accelerated possession procedure. There would be little difference in the time it would take to use this process. A further alternative (eg if the tenancy was fixed) would be to serve a NTQ and seek a possession order as is the current position. Whilst the costs would be more, the timescales would be similar. In the latter case, proportionality arguments could be raised and properly considered by a court. If the landlord was successful there would be no requirement to hold the property vacant waiting to see if the tenant applied for reinstatement. This would give the tenant greater protection from an unlawful eviction by a rogue landlord by way of the judicial intervention.

Lengthy process

34. If a tenant has taken all their belongings and left the property and the landlord goes in and finds it empty but the tenant is in receipt of housing benefit, the landlord will have to notify the LA and then wait for two months' rent arrears to accrue after the LA decides to stop payments. By this time, the landlord could have already served a Section 21 Notice or NTQ, issue proceedings and have a court date. If the court agrees with the landlord then the landlord will not have to hold the property vacant pending a reinstatement application.

Challenges to notices

35. It is likely that there will be challenges to the form of notice and service provisions which are not entirely easy to comply with especially for a landlord acting without legal advice. This could result in costly legal cases.

Empty properties

36. The reinstatement provisions will effectively mean that a landlord will have to hold a property for four months after expiry of the notice to see if the tenant applies to reinstate. This is not likely to be financially viable for small landlords and may deter the landlord from using the new process.

37. The Society agrees with the criticisms noted in the Housing and Planning Bill House of Commons briefing paper by the Citizen's Advice Bureau and Local Government Association (see pages 33 and 34).

38. We recommend that these provisions are reconsidered and that judicial consideration of any possession claim ought to be retained. A better solution would be to use an accelerated possession application form not requiring a court hearing unless the tenant raises a defence and a direction to the bailiffs that evictions should be carried out within two weeks of the possession order being made. This would save time and costs for the landlord but retain protection for tenants.

Part 4 - Social Housing in England

39. Purpose of clauses: the provisions provide a new power to the Secretary of State and the Greater London Authority to make grants to private registered providers (RPs) in respect of Right to Buy discounts.

40. Law Society concerns:

Like other parts of the Bill, most of the detail will be determined by subsequent regulation (eg "high value" housing stock is to be defined regionally and will be defined by regulations) Consequently the scope and impact of this power remains largely unknown at this stage.

41. There is no mention in the Bill of any exempted properties - such as Almshouses or properties owned by charities.

42. Clause 58 of the Bill appears to introduce a name and shame approach to monitoring compliance with the home ownership criteria, clause 58(6) states that the Secretary of State may publish information about RPs that has not met the home ownership criteria.

43. "Market rent" and "high income" definitions will be dealt with in subsequent regulations. If the provider is a LHA they may not be able to reinvest increased market rents as regulations may require the LHA to make payments to the Secretary of State in respect of estimated increase in rental income.

44. This chapter also includes requirements to hold detailed personal income data including obtaining HMRC information. HMRC may disclose information to enable RP to determine rent level. HMRC is not a party to the landlord and tenant relationship and this could be viewed as an interference with this relationship.

45. The Bill lacks detail as there is persistent reference to "regulations" which will contain the detail. This detail will be in secondary legislation that cannot be amended. As a result the Bill leaves limited room for full debate in Parliament. We recommend that any draft regulations should be subject to a full consultation in order to avoid unnecessary satellite litigation which could emerge if those regulations contain ambiguities or are not sufficiently clear.

November 2015

Prepared 1st December 2015