Category Archives: regulation

Changes will force letting agents to clarify fees

The Government has announced plans to increase fines against letting agents breaching rules, and will require them to publicly state the fees they charge.

The new rules are aimed at reducing complaints in the sector, after they increased by 23% in 2013, compared with the previous year. Strangely, it is not only renters who are fed up with rogue letting agents – half of complaints were from landlords.

Currently, letting agents are bound by the rules of the Advertising Standards Authority, which requires them to list compulsory charges. However, many additional hidden charges are often added, and it is these that the new rules aim to reveal. The new requirements will be for a full tariff to be shown both on websites, and “prominently” in offices. Warns the Government: “Anyone who does not comply with these new rules will face a fine – a much stricter penalty than currently exists.”

Minister Kris Hopkins said: “The vast majority of letting agents provide a good service to tenants and landlords. But we are determined to tackle the minority of rogue agents who offer a poor service. Ensuring full transparency and banning hidden fees is the best approach, giving consumers the information they want and supporting good letting agents.”

And in a hint that this approach is fundamentally different to the approach suggested by the Labour party, he added: “Short-term gimmicks like trying to ban any fee to tenants means higher rents by the back door. Excessive state regulation and waging war on the private rented sector would also destroy investment in new housing, push up prices and make it far harder for people to find a flat or house to rent.”

Labour’s proposed PRS changes polarise opinion

Britain’s Labour party is promising legislative changes to support tenants in the private rented sector, should the party be voted into power in the 2015 general election. But the announcement has led some to warn that the proposals threaten to frighten off institutional investment in the sector – which is already promising to deal with some of the issue raised.

Labour specifically wants to tackle the insecurity of short tenancy agreements, to enable more steady rents, and to reduce one-off fees and additional costs related to taking out tenancies.

On tenancies, Labour says it wants to make three year long tenancies the norm, with landlords required to give longer notice periods. Said Labour leader Ed Milliband: “Generation rent is a generation that has been ignored for too long. Nine million people are living in rented homes today...a Labour government will take action to deliver a fairer deal for them too.”

This could present a practical problem for small scale buy-to-let landlords. Often mortgages for these borrowers restrict tenancies to a maximum 12 months.

Rent rises would be limited to a maximum ceiling, based on a percentage rise related to local market averages.

And there would be a restriction on letting agents charging fees to tenants. This is often an area for complaint, with up front fees; and often issues around retentions from a deposit, even if there are clear grounds for it being returned in full. Labour says this restriction would save tenants an average £350 per tenancy.

Not everyone is impressed, however. In a letter to the Financial Times, Charles Fairhurst of Fairbridge Residential Investment warned: “Institutional investors in the private rented sector, as well as domestic and overseas buy-to-let investors, will read Labour’s announcements and question whether this is a good time to invest in the sector. The result will lead to a reduced supply of UK housing until the Labour party’s housing plans are clarified, which makes its annual new homes target of 200,000 look unrealistic.”

And at law firm Addleshaw Goddard, Marnix Elsenaar warned: “Rent caps would severely undermine the potential to get the investment we desperately need in the sector.”

Despite the concern over rental controls, some point to other markets where some form of rent control works just fine. Germany – the poster child for the private rented sector – has rent controls and longer tenancies, and the market there is robust, with many major institutional investors happily involved. Other markets including France and American cities such as San Francisco also operate some form of restriction on the pace of rental increases.

Charity bids to improve standards in private rented sector

A new charity has launched, with a mission to improve standards in the private rented sector. The TDS Charitable Foundation is also making grants available, to support projects that will promote knowledge of landlords’ obligations, and raise awareness of tenants’ rights.

The charity is backed by The Disputes Service, while the foundation’s board of trustees includes representatives from the RICS, National Union of Students, and National Association of Estate Agents.

“The TDS Charitable Foundation is providing a valuable new source of funding for organisations which are committed to better standards in private renting,” said Steve Harriott, chief executive of The Dispute Service. “At present, anyone can enter the lettings industry without training or experience, exposing people to many risks; from bad service to substandard living conditions, to financial loss or worse.”

And Colum McGuire, vice president (welfare) at the NUS, added: We’re very glad to be a part of this initiative and believe that the foundation will go a long way to increasing tenants’ empowerment and protection.”

Just some of the problems tenants face are laid bare in a new article by Zoe Williams in the Guardian newspaper, who notes how difficult it can be for tenants to get deposits back. “I think some letting agents see it as a matter of honour not to return the full amount,” she writes. “They are like playground bullies who would rinse you for a piece of string rather than leave you unmolested.”

Williams says the market is skewed in favour of landlords. While the Tenancy Deposit Protection scheme has been successful, other regulation is dismissed as being unnecessary and too many rental homes are poorly maintained.

More on the TDS grants at their website here.

And the Guardian article by Zoe Williams is here.

Changes aim to improve managing agent behaviour

The Government has announced measures it says will help ensure tenants get a better deal, by clamping down on “unscrupulous” letting agents. The new rules come into force as some suggest that Britain’s growing army of renters could become a political force to be courted by politicians, ahead of the 2015 general election.

Under the rules just announced, all letting and property management agents will have to register under one of three redress schemes. These “will ensure tenants and leaseholders have a straightforward option to hold their agents to account,” promises the Department for Communities and Local Government.

Three organisations – The Property Ombudsman, Ombudsman Property Services and The Property Redress Scheme – will investigate complaints about hidden fees or poor service, dishing out an independent ruling on the accusations. Where a complaint is upheld, tenants may be able to claim compensation. Around 3,000 agents – or 40% of the entire industry – have yet to sign up with one of the three organisations, but will be legally required to do so.

“All tenants and leaseholders have a right to fair and transparent treatment from their letting agent,” said housing minister Kris Hopkins. “A small minority of agents are ripping people off, and giving the whole industry a bad name.” He insists the redress scheme will “ensure tenants have a straightforward route to take action if they get a poor deal, while avoiding excessive red tape that would push up rents and reduce choice for tenants.”

The department has released a model tenancy agreement for long term tenancies, and is working through responses to a recent consultation over how to tackle the minority of poor landlords, without unnecessarily penalising those who perform satisfactorily.

And, as Alex Hilton, blogging for The Independent notes, there may be votes for politicians who can demonstrate they will look after renters better. His article suggests that “conditions are becoming Dickensian in nature and exploitation by landlords and letting agents is the norm”, not helped by a largely unregulated lettings market.
He asserts that it is perverse that the government pays large amounts to private landlords via housing benefit, yet fails to spend anywhere near as much on building affordable homes, adding: “Politicians are wrong if they think 9 million renters will accept this meekly at the election next year.”

Planners failing to allocate enough land for homes

Agent Savills has calculated that current planning policies will lead to a shortage of 160,000 homes across the south of England by 2018. Local planners are simply not allocating enough space for new development in their areas, to meet expected demand.

The problem is, while each of them is relying on someone next door or nearby to take up the slack, every authority is playing the same huge game of NIMBYism – the Not In My Back Yard approach to housing development. Savills took the UK target of 240,000 new homes needed a year in England, a figure calculated by the Town & Country Planning Association, and drilled down to individual areas.

Thurrock, Dartford and Gravesham  are just three areas – all to the east of London – where sensible provision has been made. The majority of other local authorities are failing to meet demand, with Surrey, Berkshire and Buckinghamshire noted as falling considerably short of need.

“There is a real crisis looming,” warns Savills planning director David Jackson. “Local planning authorities need to act with urgency and in cooperation with neighbouring authorities to plan for the scale of housing delivery now needed right across the South of England.”

Savills list showing housing provision shortfall, area by area.

Savills list showing housing provision shortfall, area by area.

“The Chancellor’s recent commitment to a new ‘garden city’ in Ebbsfleet, with an initial 15,000 new homes is welcome, but it is a drop in the ocean – the equivalent of just four months’ requirement for housing in London,” says Savills planning director, Jonathan Steele. “New towns or Garden cities alone are not therefore a panacea. A long term commitment is required by government and other agencies to unblock infrastructure and other constraints to ensure that rates of housebuilding achieve a sustained and substantial increase.”

Savills has suggested local authorities need to form an “arc of cooperation” to help address the situation. The big problem is, with an election not too far off, there are no votes in housing developments – most people, if asked, would prefer not to see development near where they live.

More details on Savills’ findings here.

Longer term tenancies needed to make renting more attractive

A leading industry figure has called for longer tenancy agreements as part of a set of measures to help make the private rented sector more professional, and more acceptable, as a long term slice of the UK’s housing market.

Peter Girling, chairman of Girlings Retirement Rentals notes a plethora of recent reports have shone a light on the sector, and pointed out its shortcomings. At the same time, they have noted how long term rented homes form a valuable part of many other Western economies, and have the potential to be just as valuable in the UK.

Writing in an opinion piece on the 24Dash website, he notes that renting works well for many people, including his target audience, the retired. Work needs to be done, he says to kill off the negative perception that renting is somehow less attractive than home ownership. For some sectors of the community, such as mobile workers, buying and selling can be an expensive headache. “The industry needs to look to the future and offer options such as long term tenancies and professional management services to make renting more attractive.” Girling also says that the industry needs to work together to weed out rogue landlords.

More on Girling’s thoughts here.

 

Consultation to change short term rental rules in London

London’s outdated rental laws are due for an overhaul that could simplify lettings. It could also ease the situation that means renters on websites such as AirBnb, the peer to peer accommodation listing site, are often breaking the rules when they offer London accommodation for short term rent.

A consultation has opened into the proposal to align London’s currently unique rules, with those that apply in the rest of the UK. Currently, Londoners have to obtain official permission to rent out a property for a period of less than three months, as under the 1973 Greater London Powers Act, such a rental is considered a change of use.

“London is a holiday hotspot, with thousands of working people visiting every year looking for somewhere comfortable and convenient to stay,” housing minister Kris Hopkins told the London Standard. “Yet the capital’s homeowners get tangled in red tape each time they look to offer their homes. This, and the wide range of property websites offering opportunities to advertise homes for rent, makes this law increasingly outdated and unworkable.”

“I want to hear whether we update this rule, or whether London needs its own rules at all, to ensure as flexible a market as possible for tenants and tourists alike.”

The consultation will bring new and old into direct conflict. Website AirBnB recently put out a report to argue for its service, letting people rent out a room or flat on a flexible direct basis; that argued the website delivers £500m a year of benefit to the London economy, helping hard-pressed homeowners pay the bills while offering accommodation to people who otherwise couldn’t afford to visit.

Naturally, the hotel companies are up in arms, disputing the loss of business argument, and pointing out that private lets don’t adhere to tight health and safety regulations.

Local authorities in London are also not keen. During the run up to the 2012 Olympics, several started enforcement of the rules to prevent enterprising Londoners renting out their flats. One of their arguments is this: if you live in a quiet apartment block, and your neighbour starts renting out a flat via AirBnb or similar, and a succession of weekend stag or hen parties arrive to stay in your building, interrupting your quiet nights and leaving a mess, you’d probably be very unhappy.

You will find more about the rules and legalities of renting out a London home for the short term, here.

And there’s more on the government consultation here.