New Announcements on HMOs

The Department for Communities and Local Government has today published its response to comments made on a previous consultation on the planning status of HMOs and has also launched a new consultation in relation to additional and selective licensing powers.

In July 2009, the CLG launched a consultation on possible ways to deal with the creation of ‘HMO ghettoes’, where large numbers of HMO properties cluster together in a small area. We reported on this here. This issue is particularly prevalent in areas with high student populations. There were several proposals to deal with this but the most highly advocated, and the one most supported by the consultation was to create a new planning use class specifically for HMOs. Currently, dwelling-houses make up the C3 use class and are defined as properties comprising one household with up to 6 occupants. The definition of household is unclear but is not the same as that used by the Housing Act 2004. HMOs falling outside this class were uncategorised and required planning permission to be sought but a large number of smaller HMOs fell within the class and had no involvement from planning officers. The proposed changes will mean that a new use class is created which will be for HMOs specifically and will replicate the definition in s254 of the Housing Act 2004. That is properties rented to three or more occupiers where those occupiers do not form one household. The change will be implemented by an amendment to the Town and Country Planning (Use Classes) Order 1987 which will come into effect on 6 April 2010. In short, properties to be rented to three or more sharers after that date will require planning consent. This change has enormous potential effects. A large number of properties are let to small groups of sharers and are therefore HMOs without ever becoming licensable. Properties that are to be let in this manner after 6 April will require planning permission to be sought in advance. As the government accepts, this will lead to a significant rise in planning applications. What it appears not to have realised is just how large that rise could be and, in addition, that there will be a concomitant rise in planning appeals. It is not yet clear whether an application for the new use class will be met by an addition of that class to the current one or whether the use class will be changed. If it is the latter then landlords will, of course, need to make another application to change the use back again if they wish to let to a family. Landlords will therefore need to choose between letting to families or as an HMO or resign themselves to making regular applications for a change of use.

In addition the the response the CLG has published a ‘short’ consultation for a change in the process by which local authorities gain permission for additional and selective licensing schemes under the Housing Act 2004. Additional licensing allows for a local authority to license HMOs that fall outside the mandatory licensing set by Government. Selective licensing allows for the licensing on non-HMO landlords in areas of low-housing demand where there is a problem with anti-social behaviour. Currently in order to be permitted to carry through such licensing a local authority must carry out a consultation exercise and then seek the permission of the Secretary of State to go forward. The intent is to give a blanket permission to all local authorities so that they need merely carry out the consultation exercise. On the face of it this seems perfectly reasonable. However, when we consider that a number of authorities have been refused permission for additional or selective licensing or have been asked to provide more information then there must be doubt as to whether it is appropriate for this control to be removed. There is certainly a danger of a number of costly and time-consuming judicial review applications in order to challenge the local authority consultation process. For a landlord facing a prosecution such action, while unattractive, may be preferable to a substantial fine.

Although the Government, in announcing these measures reiterated their commitment to a landlord registration scheme this is something that will require primary legislation and, unsurprisingly, will not make it into this Parliament and, unless Labour wins the election, presumably not into any Parliament. One is therefore left to wonder if the latter measure is an effort to introduce partial landlord registration by the back door.

We do not usually comment on political matters, but it is disturbing to see these measures, along with others, being introduced in very short order in April. It immediately gives rise to concerns as to the level of consideration that has been given to the measures and their likely effects. It also gives the appearance of measures being forced through prior to an election in order to score points with the electorate or simply on the basis that the Conservative party, should they win an election, will be too busy to reverse them. One hopes that is not what is going on but if it is then it is sad to see cheap political point-scoring at the expense of the private rented sector which houses a significant percentage of the population and makes a substantial contribution to, an already weakened, economy.

Filed under: England & Wales, consultations, Housing Act 2004, planning

Tenancy Deposit Protection- A Binding Decision

Tomorrow (Monday 25 January 2010) PainSmith has a case appearing in the High Court which should provide the first binding decision on Tenancy Deposit Protection under the Housing Act 2004.

In Draycott v Hannells Lettings Ltd there are two issues for the Court to consider.

1. Whether an agent can be pursued for the usual penalties under s214 due to the deposit being unregistered; and
2. Whether the penalties under s214 bite merely on late registration or only if the deposit is unregistered when the Court comes to consider the matter at hand.

PainSmith is acting for the Defendant lettings agent in this case which is expected to have far-reaching effects across the industry. There is unlikely to be a final decision tomorrow but it should follow relatively shortly and will, no doubt, be reported here when it does.

UPDATE: Mr Justice Tugendhat has reserved his decision. At this stage we do not know when a final decision will be rendered. We will post more information here as it becomes available.

Filed under: England & Wales, deposits, Housing Act 2004

Draft Scottish Housing Bill

On 13 January a draft of the Housing (Scotland) Bill was published. It is intended to become law in 2010. Much of the bill is about housing associations and a new regulator for social housing but there are some matters which impinge on the private sector too.

Part 12 contains some amendments to Part 8 of the Antisocial Behaviour etc (Scotland) Act 2004 which deals with registration of private landlords. Possibly the most important change is a substantial increase in the penalty for failing to register, from £5,000 to £20,000. There is also a new power for local authorities to seek information to assist with exercising powers under the act and a refusal to provide information is a criminal offence with a maximum fine of £500. There is also provision for a new fee to be paid when an agent is appointed except where that agent is already on the register.

There are also amendments to the Housing (Scotland) Act 2006. The HMO licensing system has been altered, most notably to allow refusal of a licence on the grounds that the use would breach planning restrictions. The inability to refuse a licence for this reason has been a source of local authority complaint both north and south of the border and England and Wales would also do well to adopt this change.

Finally, the new bill also makes provision to permit Scottish ministers to make further provisions to protect tenants whose landlords have not got permission from lenders to let their property and have defaulted on the terms of the loan. Again it would be good to see something similar being applied south of the border.

Filed under: Scotland, draft bill, legislation

Protect Your Property

The Land Registry has launched a new campaign to encourage property owners, particularly those who do not live at the property they own (ie. landlords) to make sure that their details are up to date. This is supported by a leaflet which is being distributed through solicitors and other advice centres and can also be downloaded from the Land Registry website.

Not having the right details makes it easy for fraudsters to take control of a property as any changes made to the registry entry will only be notified to the address the Land Registry holds for the property. If this is not up to date then the notification will not reach the owner and changes may be made to the registry entry without their knowledge.

It is possible to have up to three addresses on each property file and a notification will be sent to all of them when the register changes. Adding addresses and keeping the register up to date costs nothing and is a matter of filling in a simple form.

Filed under: England & Wales, Land Registry

Commercial Rent Arrears Recovery on Hold

Under centuries-old common law principles commercial landlords have been able to “distrain”, or seize tenants’ goods, without the need for a court order, and sell them to recover arrears of rent. The right to distrain arises as soon as rent becomes overdue and is a self help method used for recovering unpaid rent. However the method is considered draconian and has long been prohibited in relation to residential property. The Tribunals, Courts and Enforcement Act 2007 was expected to stop distress in relation to commercial leases and accordingly it introduced a different method to deal with unpaid rent known as Commercial Rent Arrears Recovery (“CRAR”).

However, it now seems that the introduction of CRAR is to be delayed in light of the announcement by the Justice Minster, Bridget Prentice, who suggested that the implementation of the procedure may be postponed until April 2012.

Part 3 the Act contains the new CRAR procedure. Many landlords do not like the effects of CRAR as it significantly reduces the their rights with regards to distress for landlords, because it requires them to give their defaulting tenants advance notice of the proposed seizure of goods before the CRAR procedure can be used. Further it will also limit the circumstances in which distress can be used.

The Act received Royal Assent over two years ago, however CRAR needs further regulations (not yet introduced) to be implemented before it will be fully functional. Until the regulations are passed landlords can continue with the current regime of distress given that the announcement by Justice Minister, Bridget Prentice, seems to indicate that there are no imminent plans to implement CRAR. Ms Prentice did not directly refer to CRAR in her speech however she did state that a consultation process would be commenced shortly in relation to Part 3 of the Act, which contains the CRAR provisions, with a view to implement the changes in 2012.

It therefore seems that CRAR will not be implemented before the general election and, if we do not see a Labour victory, there must be serious doubt as to whether CRAR will be implemented at all.

Commercial landlords might therefore have some grounds for celebration or at least some grounds for considering how they might vote!

Filed under: England & Wales, commercial leases, legislation, rent

Selective Licensing

Selective Licensing

Selective licensing is provided for by Part 3 of the Housing Act 2004 and is related to the licensing of HMOs. Unlike, normal HMO licensing however, it allows for the licensing of any rented property in a designated area irrespective of its HMO status. To undertake selective licensing the individual local authority must make an application for permission to the government sowing that the area is one of low housing demand or that the area is one suffering from anti-social behaviour.

Local authorities are supposed to publicise their application process and the making of a selective licensing designation but it seems that these often pass people by.

The following Local Housing Authorities are known to have gained permission for selective licensing in some or all of their areas of responsibility although they may not yet all have schemes in operation:

• Salford
• Manchester
• Gateshead
• Middlesbrough
• Sedgefield
• Blackburn with Darwen
• Hartlepool
• Burnley
• Easington
• Bolton
• Newham

It should be made clear that the failure to obtain a licence for a property that is subject to selective licensing carries the same criminal and civil penalties and restrictions as would be imposed in relation to an HMO that has no licence and, indeed, a landlord in Salford has already been prosecuted and fined due to a failure to have a licence required under a selective scheme. Notably, however, the fine was relatively small at £2,500.

It is usually best to keep an eye on the LACORS website as they tend to be aware of the applications of local authorities for selective licensing consent. This is definitely something that local authorities in England and Wales are being encouraged to carry out and will probably continue to grow during the course of the year.

Filed under: England & Wales, Housing Act 2004, LACORS, property licensing

New Regulations and Agent’s Terms of Business

The Provision of Services Regulations 2009 came into force on 28 December 2009 and apply to all United Kingdom jurisdictions. These were brought into force to comply with the EU Service Directive which required compliance by (strangely) 28 December 2009.

The main effect of these regulations is to require that certain information is made available to users of services in the UK. A large number of services are covered by the regulations including lettings and estate agency and solicitors. While there are a number of ways that this information can be provided it is probably easiest for it to be put into the Terms of Business.

Key information that is required is:

1. Business name and the status of the business (eg. partnership, limited company, sole trader etc.)
2. A business address and full contact details (this is partly to deal with internet businesses who wilfully make their business details obscure)
3. Registration details of any entry in a trade or public register and any statutorily required registrations (for agents this will mean details of their OEA and OFT registrations)
4. There is also a general requirement to make clear your charges and the other terms on which services are provided.

Some information must also be made available on request. This includes:

1. The price being charged for the services provided or where that price is not available the method of calculation
2. Information on any code of conduct to which the supplier is held

Information required under the regulations must be provided in a clear and unambiguous manner and must be available before the contract is concluded.

There is no direct offence of failure to comply with the regulations. However, the Office of Fair Trading, local Trading Standards officers, and the Department of Enterprise, Trade and Investment (in Northern Ireland) have the power to take action for a breach of the regulations.

The Department for Business Information and Skills has provided guidance on the regulations.

PainSmith Solicitors are able to supply updated terms of business which are fully compliant with the regulations.

Filed under: England & Wales, Northern Ireland, Scotland, agent terms of business, legislation, regulations

2010- What’s to Come

Welcome to 2010! At this time of the year speculation inevitably turns to how things will shape up in the next 12 months. Therefore we have decided to take give a brief run-down of expected events in the residential landlord and tenant sector this year.

Legislation-wise it is likely to be a quiet beginning to the year. The election expected in early May or June means that little or no primary legislation is likely to be enacted and anything that is put before Parliament is only likely to carry on past June is Labour wins the election. Speculation on what other parties will introduce if they win is largely pointless.
However, there are some changes that can be made without the introduction of primary legislation and, following the now established pattern we can expect some new Statutory Instruments to be introduced in early April.
Already on the cards is an increase in the maximum rent threshold of Housiung Act 1988 tenancies from the current £25,000 per annum to a figure in teh region of £100,000. A change of this nature was suggested in the Rugg review and was flagged in the Government’s response.
This change will have a significant impact on the residential lettings sector in central London, where a number of properties exceed this threshold as well as on some student areas as many student HMO properties also exceed this limit. The key change will be that many more of these properties will fall within the realms of the Tenancy Deposit Protection regime introduced by the Housing Act 2004. This will undoubtedly lead to a further surge in litigation in respect of unprotected deposits as well as an increased workload for the three protection schemes.
Also expected is a change in the Mobile Homes Act 1983 which will remove some fact-finding aspects from the Courts and transfer them to the Residential Property Tribunal Service. We highlighted and commented on this just before Christmas.
Elsewhere in the UK, the Scottish assembly has made clear its desire to intorduce a Scottish equivalent to Tenancy Deposit Protection and the regulations to make this happen will no doubt appear before the year is out. In Northern Ireland, a draft Housing Bill has been put forward for further consultation following a an earlier consultation in the latter part of 2009 and this will probably see further activity before year’s end.

In the Courts, the OFT v Foxtons case will rumble on, with Foxtons having now appealed the original decision. More on that here.
Tenancy Deposit Protection will also continue to see the County Courts and there are at least two appeals headed for Courts of record as well. PainSmith has a case in the High Court near the end of January and another case is listed for the Court of Appeal in the spring.

In other areas it is likely that there will be a continued drive by Local Housing Authorities toward extending the licensing of HMOs and other properties under their powers in the Housing Act 2004 and this will, doubtless, keep the Residential Property Tribunal busy.

So there it is. Some small but significant changes in England and Wales. Potentially large upheavals in Scotland and Northern Ireland and some important issues for the Courts to contend with. It will be interesting at the end of the year to see what happened that we did not expect!

Filed under: England & Wales, Northern Ireland, Scotland, comment, forecast