A new landlord licensing scheme is to be launched and all letting agents could be regulated, in a series of measures aimed at improving the private rented sector in the UK.
The proposals were announced last week in the Government's response to The Rugg Review, which was published last year and included a range of recommendations to protect tenants, drive out bad landlords and ensure best practice in the sector.
The Government has now begun a period of consultation on a number of proposals that, if introduced, could have a significant impact on both tenants and landlords.
What are the new proposals?
- A national register of private landlords could be introduced. All landlords will have to ensure their properties meet certain criteria, and that they deal fairly with tenants, in order to remain on the list. If the property is not up to scratch in terms of energy efficiency or health and safety, for example, they could be struck off. The proposal is designed to drive out 'bad landlords', according to the Government.
- Written tenancy agreements will also be made mandatory, as it is currently still legal to have a verbal rental agreement. But the Government says that, with a written and transparent agreement, both landlord and tenant have a clear record of their rights and responsibilities.
- Access to the Assured Shorthold Tenancy framework has been extended to cover properties with annual rental income of up to £100,000. The threshold was previously just £25,000, so this means that more properties will now fall within the Assured Shorthold structure, which offers protection and transparency to tenants and landlords.
- Compulsory regulation of private sector letting and management agents has been proposed -- a hugely significant move. The compulsory regulation would require all agents to adhere to a code of conduct, including decent home standards, and have measures in place to protect the landlords and tenants they deal with. These will include client money protection, professional indemnity insurance and independent complaints procedures.
- There will also be greater protection for tenants whose landlords default on a buy-to-let mortgage. The Government wants to help tenants who are caught up in a repossession case through no fault of their own by ensuring they get a full two months' notice. And it is urging landlords and lenders to give tenants adequate time to make alternative accommodation arrangements.
- There will be a strong focus on how local authorities work with the private rented sector. The Government is proposing a number of measures to improve this work, including better training of staff.
- Finally, it is also trying to encourage institutional investment into the private rented sector by creating opportunities to invest on a large scale for the long term.
Who do these measures affect, and how?
Good news for tenants
Tenants are the biggest winners from the new proposals which are designed to offer them much greater protection.
The landlord registration scheme will mean that, as a tenant, you will know that your landlord is meeting basic standards on their properties before you sign up, like keeping up with repairs and protecting tenant deposits.
The register should also push rogue landlords out of the market, although the National Landlords Association has argued that this may not happen in practice. It argues that such a scheme has already existed in Scotland for three years but that a quarter of properties remain unregistered.
The proposed measure to give tenants at least two months' notice if their landlord is facing repossession is also welcome. It should ensure that, in the future, no tenant ever goes home to find that, because the landlord has defaulted on the mortgage, the locks have been changed by the lender!
This is a serious concern for many at the moment - 1,700 buy-to-let properties were repossessed in the first three months of this year and 3.09% of all buy-to-let loans are in arrears of three months or more.
Landlords face tighter controls
Many landlords will probably not be too pleased with the proposals. The registration scheme will mean increased red tape and costs, and it may or may not offer tangible benefits to most landlords.
Indeed, it has already been argued that the collection of rental property addresses and information for the register is overly intrusive at a time when the last thing good landlords need is added regulation.
However, landlords could benefit from the mandatory regulation of letting and managing agents, which will be forced to deal fairly and transparently with both tenants and landlords. Plus there will a system of redress for those who feel they have not been well treated by letting agents via an independent complaints process.
Personally, I think the Government's response to the Rugg Review gives good landlords little to fear. Any bad eggs however, will either have to shape up - or ship out.
Tough times for letting agents
At the moment anyone can set up a letting agent with no qualifications and no code of conduct to adhere to. Some bodies offer voluntary membership schemes but around half of letting agents don't belong to any of them.
The Royal Institution of Chartered Surveyors has strongly welcomed the proposed mandatory regulation of agents and said that the measures need to be acted on swiftly. Action needs to be taken to 'end the scourge of unregulated agents and protect vulnerable consumers', it stated.
There's not many people, apart from letting agents, that would contest their regulation although there will clearly be red tape and cost implications, which will ultimately be borne by clients - whether landlords or tenants.
Overall though, the Government's response to the Rugg Review has shown its commitment to improving the private rented sector (which accounts for 14% of all housing stock) while introducing 'light touch' regulation. Quite rightly, it has focused on protecting vulnerable tenants who are at risk because of a very small minority of rogue landlords and letting agents.
But what do you think? Do you agree with what the Government wants to do? Share your thoughts using the comment box below!
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