Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Changes in Home Ownership Attitudes

The Today programme tells me that the Chartered Institute of Housing has published a new study which suggests that young people, in particular, are turning away from house ownership after being scared off by the economic downturn and the concomitant drop in house prices.

This leads to the immediate question about where these people are living. Presumably this will lead to an increase in renting. Inevitably much of this increase will be felt in the private sector. However, the private sector is not really geared towards the longer-term renter which is something that will be desirable to those seeking to stay in the sector. Indeed, the legislation tends to discourage longer term arrangements.

Contractual provisions can provide the long-term security that tenants will seek but few landlords are prepared to grant such long-term rights. In addition mortgage companies, freeholders, and insurers all tend to refuse consent for such long-term lettings. In addition there is no protection for tenants whose landlords fail to maintain their mortgage payments which inevitably erodes the security offered. Finally, the creaking Civil Court system is too slow to deal with possession claims and this pouts landlords off lettings where they cannot get rid of tenants easily.

The Law Commission proposed changes to the legislation which would help here. The creation of two tenancy types giving short-term and long-term rights would allow landlords and tenants to make a clear choice as to the nature of tenancy they were in the market for. However, without other legilative and structural changes the Law Commissions proposals will fall on barren ground.

The current government as well as its challengers are all keen to talk about housing and to make sweeping statements. However, much of this proposed action seems to get lost in a maze of reviews. Until these are backed by real legislative intent and proper incentives things are unlikely to change.

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The Life and Death of Tenancy Deposit Scheme

This week has seen a degree of excitement in the world of Tenancy Deposit Protection. We know….the excitement is just too much to bear.

A new tenancy deposit scheme appeared to have set itself up earlier this month calling itself MyTenancyDeposit. Its website described itself as a custodial scheme. This was a surprise to the three government approved schemes and indeed to the Department of Communities and Local Government as no such scheme had in fact been authorised. Much paper was expended behind the scenes and the telephone wires turned red hot!

All has now been revealed. Looking at the website today it appears that MyTenancyDeposit had already registered with the MyDeposits scheme and was, in effect, acting as a deposit taking agent protecting its holdings with the MyDeposits scheme. They are now apparently taking legal advice as to whether they can continue to operate.

While it appears that there was no intent to evade the provisions of the Housing Act 2004 the website was, at best, deceptive about the actual method of operation of the system. Given that the system was essentially free and actually paid £10 to agents who registered deposits with it, it is hard to see how it was actually going to make any money as its earnings on the deposits would be limited to that obtainable as interest on a ring-fenced account.

Anyway, the system may reappear depending on legal advice given. However, MyTenancyDeposit may find it hard to persuade MyDeposits, or any other provider, to work with them.

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Sale and Rent Back Regulation

The Financial Services Authority has released more details of its plans to regulate the sale and rent back sector. In the downturn this sector has grown substantially and unscrupulous lenders have excited the interest of the Office of Fair Trading and HM Treasury due to a lack of good information being given to consumers.  This is an interim regime and will ultimately be replaced by a full regime which is expected to come into operation on 30 June 2010.

Unauthorised firms operating in the sale and lease back sector will now need to seek authorisation from the FSA.  The scheme is expected to come into operation on 1 July 2009 and firms will have until 1 August 2009 to seek authorisation.  Already authorised firms will need to apply for a variation of permission to allow them to continue to operate.

Firms wishing to apply for authorisation should look at this page on the FSA website which contains information to assist with an application including the type of information that will need to accompany the application. The FSA states that the page will soon also contain draft application forms.

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