Landlord Licencing – How Much Longer Do We Wait?

For this article I have decided to write about the debate surrounding the proposal of landlord/letting agent registration and licencing. It’s not a new issue as some parties have been calling for it for a number of years but it raised its head again when the Law Commission made recommendations on buy-to-let reform, tabled in Parliament in mid-August of 2008.

Smaller landlords were concerned at the Law Commission’s proposals because they included them being required to join either accreditation schemes, or professional associations. They saw this as adding administrative burdens and higher costs and said that this could possibly lead to not only existing landlords withdrawing from the market but could put off new entrants. However the issue really came to the fore when the Government-commissioned review into the state of the private rental sector (by Dr Julie Rugg and Dr David Rhodes of the Centre for Housing Policy at the University of York) was published the same year.

Dr Rugg made a very sensible and simple proposal to deal with the issue of there being no entry criteria to becoming a landlord – anyone wishing to become one should pay a fee and be issued with a licence in pretty much the same way as a TV licence and with no barriers to registration. If any landlord later received justifiable complaints then it would be possible to get points on the licence or even have it withdrawn altogether. She also saw a licencing scheme as being beneficial for keeping more accurate information on the number of landlords in the country. This is a very important point because the booming buy to let market led to a high number of inexperienced small landlords entering the sector and having read a number of articles on buy to let, this looks likely to start all over again as the market recovers. Another couple of important points she made referred to the rogue landlord element. The first was that if all landlords were required to have a licence, rogue landlords would be easily identified in that they would not be able to produce it if and when asked. Secondly those landlords operating with a licence but that were deliberately failing to follow the law in managing their tenancies could also be the first to lose it.

I contacted a number of industry professionals for their views on Dr Rugg’s proposals including the National Association of Landlords and the Residential Landlord Association. The NLA are the largest representative body for landlords (around 20,000) along with 80,000 local authority associates and the the RLA have over 7,000 landlord subscribers and represent the owners of over 100,000 units of residential property.

The NLA’s senior policy officer, in communication I received in December 2008, said that whilst it was felt that Dr Rugg’s proposals had potential, there were many more details that had to be worked out as to how it would operate and for that reason the NLA were waiting before rushing to welcome it. These details would include who would run it, the cost of running it, what information would be required, and whether or not the original idea of no barriers to entry would remain. The letter went on to say that the NLA were opposed to any system that required checks to be made on the landlord or property before a licence was issued which was a direct reference to the way landlord licencing was introduced in Scotland. Their system was far more complex than that which is being proposed here, because it required checks to be made on both the landlord and the property in order to satisfy the local authority that the applicant was a ‘fit and proper person’. There was also a list of various other factors that had to be taken into account before a licence was granted. I have to say that the notion of this is not an unattractive one but it does take licencing beyond that which Dr Rugg proposed.

The letter finished by saying that the NLA are working with the CLG to develop the recommendations in the Rugg Review in the interests of landlords.

In communication I received in November 2008, from the Secretary/Solicitor who leads the lobbying team for the RLA she said that their idea was to promote accreditation and self-regulation to those landlords who want to be more professional and achieve higher standards of management, in other words something like a star rating for hotels. It would then give the market an edge. The letter went on to say that in principle, the RLA support Dr Rugg’s proposal of a simple central system but ‘the devil is in the detail’.

Ministers too agreed that Dr Rugg’s ideas of ‘light touch’ licencing of landlords and lettings agents was of interest but it would require primary legislation which they would consider along with other proposals and suggestions.

The government published their own response to the Rugg Review in May 2009 in which they proposed establishing a national and independently run register of private landlords. This would be primarily web and telephone based with landlords registering annually and paying a small fee to cover administration costs. In return they would receive a unique landlord registration number that would be a pre-requisite for all business they carried out in their capacity of landlord.

Landlords would also not be required to meet any pre-set criteria in order to register because minimal date would be required such as name, address and the address of any other property holdings at the time of registration. It would also include additional information such as whether the landlord was a member of a landlord association or an accreditation scheme.
There were other proposals to the government register but I’ve focused on those that are pretty much in line with those proposed by Dr Rugg.

In the RLA’s response to the government’s proposals, Point 55 said, ‘As regards the Government’s proposal to establish a National Register for private landlords, our survey of members (as well as talking to them) shows considerable resistance. Opposition to registration is running at 70/30 against the proposal. The RLA does not object to the principle of the introduction of such a register if and so long as changes to the proposal are made as suggested by us. We are against the form of registration as proposed by the Government. We must remind ourselves of what Rugg proposed, namely the no hurdles register’.

Both organisations are also strongly opposed to landlords having all their properties listed at the time of registration as proposed by the government. The NLA believes it to be ‘overly intrusive and of no direct benefit to tenants or landlords’ whilst the RLA state in Point 57 that ‘it is strongly opposed to the idea of a register containing lists of properties. We cannot support this idea and our members are vehemently opposed to it. Details should be confined to names, date of birth, (to aid identity) business address and contact details for each registered landlord. The register should be in two parts: one for members of an approved accreditation scheme and the other for non accredited landlords. It should state the registered number. Point 67 goes even further and says ‘Please take it from us that if property details are required any proposed register will not work. It will become the subject of widespread resistance and there would be very considerable evasion and deception’.

But coming to the end of 2009 the NLA’s stance becomes a bit more confusing. In the article entitled ‘Head To Head: Do We really Need A National Register Of Landlords?’ which I picked up on on 23rd October, David Salisbury, Chairman of the National Landlord Association said that ‘it’s possible to see some benefit to a ‘no hurdle’, low cost easy to use register for landlords as part of a concerted drive to root out rogue operators’. This differs somewhat to his later comments at the NLA annual conference where he said that the NLA is opposed to a national register as it believes that there is already enough regulation of the letting industry and it will not necessarily help the important issue of rogue operators.

The RLA has stated that a database is of itself not the key to better enforcement and continues to promote positive action through accreditation and self regulation. The NLA have themselves argued for years that more effective use by local authorities of existing enforcement powers is required to successfully prosecute landlords who continue to flout the regulations. Whilst I totally support the stance on accreditation this alone is not the answer either: an observation seemingly born out by the government statement in its licencing proposals saying that ‘out of the estimated 8,000 letting (and managing) agents in England, only around half belong to any of these organisations. There the voluntary approach to regulation has not been successful in ensuring all agents reach the same standard and have the right protections’.

There is also the continual reference as to how good landlords musn’t be penalised, something that Mr Salisbury again made reference to at the conference. Whilst it would be understandable if the prospect of a licence was to incur yet more learning of government legislation and amendments perhaps this argument would hold merit. I would be sympathetic because I too have had to become familiar with an enormous amount of legislation in order to effect change in my own block of flats. But it isn’t.

It’s about a large amount of information that is required to meet Dr Rugg’s proposals already being held across a number of individual databases. Implementation would simply be a statutory centralisation of a fragmented market. The government has also made reference to this fragmentation as a contributing factor to the confusion felt by many across the sector. Let’s please remember this is not just about what landlords want but it is also about improving what is essentially being viewed as a consumer led market.

Written by Sharon Crossland of Leaseholdlife

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