Rogue landlords could be struck off

May 2009

Landlords and agents will need a £50 licence under a new scheme designed to raise standards and to protect tenants

Rebecca O'Connor of the Times writes:

Landlords and lettings agents face higher costs and administrative burdens after the introduction of a new licensing regime that is designed to root out rogue operators and protect tenants.

Under the proposals, buy-to-let investors, including those homeowners who have recently become "accidental" landlords, would need a £50 licence before they could let the property. Agents will have to sign up to a register with the Association of Residential Letting Agents (ARLA) to prove that they are bona fide.

Landlords and agents could be struck off their respective registers if they fail to follow the new standards, which are aimed at improving the quality of rented accommodation and boosting tenants' rights. It is hoped that tenants will use the registers when choosing where to rent.

However, how it will be enforced has yet to be confirmed, leading to fears that licensing may not be enough to weed out rogue landlords.

Related links:

Rogue landlords could be struck off proposed new register

Which?, the consumer group, points out that the last attempt to protect tenants, the Tenancy Deposit Protection Scheme introduced in 2007, was not wholly successful because rogue landlords do not participate. The scheme was designed to ensure that deposits are repaid in cases where the landlord unfairly withholds them.

The Government is expected to support the latest proposals in a response due to be published within the next few days. The ideas for reform were originally outlined in a report published last November by Professor Julie Rugg, of the University of York.

Groups representing tenants welcomed the plans, despite concerns that they might not go far enough, Espe Fuentes, a legal services lawyer for Which?, says: "We receive many calls from tenants — most are about poor living conditions and problems with landlords not putting deposits into the deposit scheme. We'd like to see all letting agents and landlords join a compulsory complaints scheme."

The response from landlords has been mixed. Paul Shamplina, director of Landlord Action, a tenant eviction service, says: "Bringing in this form of tax at this time may turn landlords away from the buy-to-let industry."

Liam Collins, director of CBS, a professional landlord of student lets, says: "The buy-to-let industry is littered with bad landlords who came in during the days of easy lending. A licensing system will do more to eliminate those who can't be bothered to manage their properties properly."

There are about one million private landlords in the UK. Buy-to-let investors who borrowed to purchase rental property or turned to letting their second homes during the downturn have had to pay expensive loan rates or have been refused a mortgage altogether in recent months, as lenders have shied away from the sector.

Research from moneysupermarket.com, the price comparison website, shows that the number of buy-to-let mortgages on the market has fallen by 95 per cent, from 4,384 to 213.

Banks are still demanding deposits of at least 25 per cent from landlords at a time when falling house prices have wiped out an average of 20 per cent of equity in buy-to-let properties. This has forced landlords to dip into savings to reduce their debt to qualify for better mortgage rates, says Melanie Bien, of Savills Private Finance, the broker.

The number of letting agents has also risen over the past year because of rising demand for rented accommodation. Many agents have switched their focus from selling to letting to cope with the shift in demand from buying to renting.

Some letting agents say that this trend has left many tenants and accidental landlords at the mercy of unqualified and inexperienced agents and without any form of redress.

ARLA says that landlords and tenants have suffered as a result of many agents scrimping on professional indemnity insurance, loss of monies if the agency goes into administration, poor legal advice to landlords and the lack of redress. The association's new register will require agents who sign up to offer refunds to customers who lose out.

FAST FACTS

• A new licence-to-let is expected to cost landlords £50
• An independent body will mediate in disputes between landlords and tenants
• A government agency will find new properties for affected tenants
• Landlords who flout basic accommodation standards will be banning from letting
• A national watchdog will monitor all property lettings agents

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