Newsletter December 2005Government looks at proposals on Tenancy Deposit Protection The Government is from today consulting on proposals on how statutory Tenancy Deposit Protection will operate from October 2006.
The provisions, among the measures included in the Housing Act 2004, will offer protection for nearly 1.5m assured shorthold tenants and an estimated £768m of tenancy deposits, currently held in England and Wales.
The measures will help drive up standards in the private rented sector, alongside other Housing Act provisions such as HMO and Selective Licensing, the Housing Health and Safety Rating System and Empty Dwelling Management Orders.
The consultation, Tenancy Deposit Protection: consultation on secondary legislation, sets out the rights and responsibilities of both tenants and landlords at the beginning of a tenancy where a deposit is taken. The Housing Act requires all landlords or agents, taking a deposit to be safeguarded by a Tenancy Deposit Scheme (TDS), to provide 'prescribed' information to a tenant. The consultation is seeking views on the content of that information.
The Government announced on 5 August 2005 the start of the procurement exercise to seek potential suppliers to run Tenancy Deposit Schemes. The consultation closes on 1 February 2006.
Runaway tenants leave landlords in the lurch
Half of all landlords have, at some point, had a property abandoned by a fleeing tenant, according to a new survey.
Out of those landlords who have experienced runaway tenants, nearly four out of ten (39%) said that this had happened to them within the last year, with more than a fifth saying it had happened just within the last six months.
It’s not all bad news for landlords however, showed the survey from the National Landlords Association (NLA), as 41% of landlords questioned said that that it had been more than two years since a tenant had abandoned one of their properties. This suggests that perhaps as landlords become more experienced they are less likely to suffer property abandonment.
The NLA’s chairman, David Salusbury, commented: "Despite the fact that the majority of tenancies end satisfactorily for both parties, the findings of our survey show that all landlords face the risk of a tenant abandoning a property at some point in time. If you are a landlord for many years, or if you have a large number of rented properties, sooner or later it will happen to you."
"However, the NLA recommends a number of steps that landlords can take to minimise the risks, such as asking for a written reference from the prospective tenant’s current employer. This confirms that the prospective tenant is indeed a full time employee with the firm and gives the landlord an additional contact should the tenant leave before the tenancy is up."
Tenants are much less likely to abandon a property if a landlord has a record of their place of work and next of kin. A written reference should also be sought from the previous landlord, where relevant. Landlords usually also take a one month deposit at the start of the tenancy which can go part way to covering any lost rent or damages.
They should note however that from October 2006 rental deposits will have to be placed in an authorised tenancy deposit scheme, under new provisions of the Housing Act 2004.
Indeed, the survey findings suggest that once a landlord has experienced an absconded tenant they do, for the most part, take action to guard against a recurrence. More than half (52%) of landlords who have experienced a tenant abandoning one of their properties said that it has only happened to them once.
However, a remaining fifth of landlords said that they had suffered the experience on three or more occasions in the last two years, which suggests that in reality it may be very difficult for landlords to prevent a tenant from absconding.
Once a tenant has disappeared it can be very difficult for landlords to reclaim lost rent or damages, even through the courts, as the tenant may be impossible to trace. The extent of the problem is proven by the fact that the issue of unreliable tenants is one that causes landlords the most concern; second only to increasing government regulation.
David Salusbury continued: "Occasionally, a tenant may lose their job or encounter financial difficulties. I’d encourage people who find themselves in that position to seek professional help and speak to their landlord. It may be that a mutually satisfactory solution can be found. Upping sticks and abandoning a rented property is not the way out of the fix."
"No matter what precautions they take, many landlords may still find themselves prey to the minority of people out there who are dishonest. The UK private rented sector houses a wide demographic spread of people, which includes some of the UK’s most vulnerable."
"Certain areas within the sector, however, do present a higher risk of unsatisfactory tenancies than others, and at a time when government is focusing on improving the rights of tenants it is important that they also ensure that the rights of the landlord are equally protected."
RICS - pension factors sustain lettings market
The continuing pensions crisis is bolstering the UK buy-to-let market as investors choose to hold on to properties for the long term, says RICS (Royal Institution of Chartered Surveyors). Tenant demand for rental property is at its strongest since January 2004. 23% of surveyors have reported a rise in demand over a fall, compared to a 20% rise in the previous quarter. Rent levels have increased for the tenth consecutive quarter.
Current landlord instructions picked up in October, but are rising at an unspectacular pace compared to the boom years of the early noughties. Despite reports of lenders relaxing borrowing requirements there has been no significant influx of new investors – the cost of borrowing (interest rates) and prospects of capital growth remain by far the most decisive factors.
A low proportion of landlords (4.1%) are choosing to sell rather than re-let properties when tenancies come up for renewal - half the level of this time last year. The majority of investors are viewing residential property as a long term investment.
Factors driving tenant demand are rising employment levels and continuing demand from first time buyers unable to get a foot on the housing ladder. Increased immigration into the UK following the accession of the eastern European States is also having an impact in some areas.
The increase in tenant demand has been strongest in London, the South-East and the Eastern region. The North, Wales and the Midlands saw increases from an already firm base. Activity in Scotland is fairly subdued following strong increases earlier this year.
According to RICS spokesperson, Jeremy Leaf: "The strength of the market is demonstrated by the fact there has been no significant investor exodus in the past year despite shrinking returns as house price rises stall."
"Many buy-to-letters are now choosing to stay in for the long haul, viewing their investment as a more significant part of their pension plan. For the time being at least this looks set to continue, with public confidence in pensions at an all time low."
Landlords struggle with hazard rating
Britain’s landlords are struggling to get their heads around the complex new Housing Health and Safety Rating System (HHSRS), according to the latest research from the National Landlords Association, The HHSRS covers twenty-nine different
areas of risk, considerably extending the simple 9 point housing ‘Fitness Standard’ currently in use. However, just over 1 in 10 of landlords say that they have a thorough understanding of the new system. 45% of landlords were ‘aware of’ the Government’s new rules, while a worrying 38% (almost 1 in 4) have no knowledge of them at all.
Given that the Office of the Deputy Prime Minister has already published many hundreds of pages on this subject, it comes as no great surprise that landlords – and local authorities – are struggling to understand the new regime. Yvette Cooper, Minister for Housing and Planning, recently announced a delay to its implementation from this autumn to next spring.
David Salusbury, chairman of the National Landlords Association, "Many of the requirements of the new system do make sense. Nobody would query the need for suitable heating and ventilation, a supply of piped water, drainage, safe electrical installations and lighting. But these matters are mostly already adequately covered by the current Fitness Tests."
"With these twenty-nine new risk categories, the legislation does seem unduly complex: the Government is using a hammer to crack a nut."
"What people haven’t realised is that these same rules apply equally to the homes we own and live in – but can you imagine the reaction if the law forced people to attend to these twenty-nine categories of risk in their own homes?"
The new ‘Hazard Profiles’ are divided into four groupings, entitled Physiological Requirements, Psychological Requirements, Protection against Infection, and Protection against Accidents.
"One can only applaud initiatives to improve the quality of the UK housing stock, both rental and owner occupied, but the sheer weight and complexity of the rules will undoubtedly scare the living daylights out of many landlords," Mr Salusbury said ".And what about owner-occupiers? Surely what’s good for the goose is good for the gander… would you know if your home is at risk from biocides or volatile organic compounds?"
Landlords are similarly unfamiliar with other aspects of the Housing Act. 27% of them said they had no knowledge of the new definition of Houses in Multiple Occupation or of Licensing of HMOs. Only 13% reported that they have a sound understanding of the new definition and 10% have a sound understanding of licensing of HMOs.
David Salusbury concluded: "The private rental sector provides homes for millions of people who need rented accommodation in this country, including many of the most vulnerable. Initiatives to ensure that their homes are safe and decent are laudable, but I believe the existing procedures mostly work pretty well. I just hope that the rating system and licensing procedures are applied by local authorities with a positive, reasonable approach so that landlords are not discouraged from providing rental accommodation – that would be a disaster all around." Housing fitness standard (existing requirements)
o A dwelling house should:
o be free from serious disrepair
o be structurally stable
o be free from dampness prejudicial to the health of the occupants
o have adequate provision for lighting, heating and ventilation
o have an adequate piped supply of wholesome water
o have an effective system for the drainage of foul, waste and surface water
o have a suitably located WC for exclusive use of the occupants
o have a bath or shower and wash-hand basin, with hot and cold water
o have satisfactory facilities for the preparation and cooking of food including a sink with hot and cold water Housing Health and Safety Rating System (new requirements)
The hazard profiles A Physiological requirements - Hygrothermal Conditions
1 Damp and mould growth
2 Excess cold
3 Excess heat
Pollutants (non-microbial)
4 Asbestos (and MMF)
5 Biocides
6 Carbon Monoxide and fuel combustion products
7 Lead
8 Radiation
9 Uncombusted fuel gas
10 Volatile Organic Compounds
B Psychological requirements - Space, Security, Light and Noise
11 Crowding and space
12 Entry by intruders
13 Lighting
14 Noise
C Protection against infection - 15 Domestic hygiene, Pests and Refuse
16 Food safety
17 Personal hygiene, Sanitation and Drainage
18 Water supply for Domestic Purpose
D Protection against accidents - Falls
19 Falls associated with baths etc
20 Falls on the level
21 Falls associated with stairs and steps
22 Falls between levels
Electric Shocks, Fires, Burns and Scalds
23 Electrical hazards
24 Fire
25 Hot surfaces and materials
Collisions, Cuts and Strains
26 Collision and entrapment
27 Explosions
28 Ergonomics
29 Structural collapse and failing elements
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