Finally, some good news for landlords!

by Christina Jordan on 16 June 2010  |  18 comments
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The coalition Government scraps red tape proposals for landlords. Hurrah!

Love ’em or loathe ’em, landlords tend to generate strong emotions. Some people feel uncomfortable with the concept of people profiting from property when so many Brits cannot afford a place to call home, and they blame landlords for all sorts of ills -- pricing first-time buyers out of the market, creating student ghettos and ripping off unsuspecting tenants at every opportunity.

Others – particularly, um, landlords - claim that buy-to-let investors are villified and over-regulated. After all, the private rented sector is absolutely vital to the UK’s housing market and the vast majority of landlords provide good quality accommodation on fair terms.

In recent years, many have felt that the burden of regulation has made it almost impossible for them to operate successfully. Not only have they had to struggle through the recession and its associated problems -- tenant arrears being a biggie -- landlords have also been constrained by the reams of red tape produced by Whitehall.

Red Rugg to a bull

Last year the problems got even worse for landlords when the Government pounced on the proposals from the Rugg Review it had commissioned to look at measures to improve the private rented sector.

They included a range of new regulations such as introducing a national register of landlords, mandatory written tenancy agreements, compulsory regulation of letting agents and protection for tenants whose landlords default on a buy-to-let mortgage.

For a sector already burdened with a raft of new rules in the last few years -- including tenant deposit schemes and shared housing regulations -- this was a step too far.

So you can imagine the relief of landlords up and down the country last week when the new coalition Government announced it was binning the Rugg Review proposals on the grounds that they introduce too much red tape.

Collective sigh of relief!

Housing Minister Grant Shapps promised England's one million landlords that the Government has no plans to introduce new regulations on the private rented sector.

It will scrap proposals for:

• The national register of landlords
• Regulation of letting and managing agents
• Compulsory written tenancy agreements
• A new housing hotline offering free help and advice for private tenants
• A ‘Trip adviser’ style word-of-mouth website comparing landlords.

Shapps claimed that the rules already in place strike the right balance between the rights and responsibilities of landlords and tenants, with the vast majority of private tenants satisfied with the service they get.

Although he did call on councils to use the powers already at their disposal to tackle the minority of rogue landlords that fail to provide good quality accommodation and blight local neighbourhoods. These include the controversial discretionary licensing powers for Houses in Multiple Occupation, as I recently discussed in Government puts the boot into landlords again!

Tear up the rulebook

Landlords up and down the country will clearly be thrilled by the Tory-Liberal plans to cut the red tape and bureaucracy they were facing. Not surprisingly, their trade bodies are cock-a-hoop at the news that their members will not be subject to increased regulation.

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It described the proposed register as being ‘well-meaning but flawed’ and claimed it wouldn’t have rooted out rogue landlords anyway. Indeed it reckoned it would penalise law-abiding landlords by making them go through the hassle and potential cost of registration while driving the bad apples underground.

It’s a fair point and a similar scheme in Scotland didn’t achieve have the desired impact, with a quarter of rented properties still unregistered after three years.

Longstanding buy-to-let lender Paragon Mortgages, also unsurprisingly agreed with scrapping the register, saying landlords were heavily regulated already. However it was not so supportive of the new Government’s plans to scrap all of the Rugg Review Recommendations.

Tarred with the same brush

Indeed, it does seem overzealous that the new Government has chosen to scrap all the private rented sector proposals in one fell swoop, despite some being widely supported.

Managing director of Paragon Mortgages, John Heron, said that the total rejection of the Rugg Review Recommendations looks ‘ill-thought out and ignores many of the positive outcomes that certain proposals could have generated’.

His biggest gripe is with the ditching of the mandatory regulation of letting and managing agents, and he is right to be annoyed. Frankly, if there was ever a sector that needed to get its own house in order, this is it.

There are currently no controls over letting agents, which doesn’t just affect tenants, but landlords too. Anyone can set themselves up as a letting agent with no experience, qualification or rules to adhere to. While this situation remains, unethical operators will continue to be drawn to the sector.

Recent question on this topic

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Current voluntary schemes like that from the Association of Residential Letting Agents (ARLA) are well respected, and could have been made compulsory to ensure all agents had to comply with some best practice guidelines.

Indeed, ARLA went a step further, saying it is ‘extremely disappointed’ with the Government for ditching the plan to regulate letting agents. It claims that the move risks seriously hampering the improvement of standards in the private rented sector, and the sector's reputation. Plus it fails to protect the consumer who has nowhere to go when there is service failure or fraud.  

I’d suggest that any landlords and tenants look specifically for letting agents that are signed up to a voluntary scheme like ARLA’s, or the National Approved Letting Scheme. That way at least you know they adhere to a code of conduct and meet certain best practice standards.

Of course, nobody likes red tape for the sake of it and it’s true that landlords have had more than their fair share over the last few years. But the Government has thrown out the baby with the bathwater by dismissing all the Rugg Review recommendations in this way. As usual it’s the consumer who really loses out, with less protection and fewer rights.

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