Should landlords have the right to refuse DSS tenants?

Should landlords have the right to refuse DSS tenants?

10:43 AM, 20th May 2019, About 5 years ago 125

Text Size

And so the onslaught against private landlords continues. Earlier this month, we were shocked to hear that a cornerstone of tenancy law in the UK was to be overturned, with the scrapping of Section 21. Farcically, we were told that a consultation would take place after the decision had been made.

This was an unexpected move, as in fact the Government had been conducting one of their ‘post-decision’ consultations on the idea of ‘3-year tenancies’ (something Shelter had been pushing for). Section 21s had not even been on the agenda. Such is the floundering, knee-jerk politics of today, that a completely different policy decision emerged from it.

The abolition of Section 21s had been called for by the anti-landlord organisation Generation Rent. As part of their campaign, they deliberately misrepresented Section 21 by repeatedly referring to it as a ‘no fault’ eviction – such that this phrase is now used by everyone, as though landlords evict the clients they are dependent on to cover the costs of their businesses, ‘for no reason.’

In fact, as we all know, often Section 21 is used because it is the least awful solution to dealing with rogue tenants. The anti-landlord representatives say it means landlords can evict ‘at a moment’s notice’ when in fact, although it is supposed to take 2 months, the average time taken is 6-7 months if the tenant does not want to leave. During this time, the tenant is often paying no rent.

The reason the only other possible Section – Section 8 – is not used as often is because the tenant can raise spurious defences, for example lying that the house is in disrepair.  The judge often then adjourns the case and the tenant gets even more months rent-free, while the landlord is pushed further into debt through no fault of their own – some even have to take out loans to cover the mortgage on the rental in which the tenant is living.

This is not only costly financially; a survey has found that private landlords’ mental health also suffers significantly because of, amongst other things, the way that the system is set up to enable these rogue tenants to ruin landlords financially, especially, as it is often the case they also wilfully wreck the property. Landlords’ mental health | National Landlords Association

This can cost landlords tens of thousands of pounds. No-one in Government is looking at this issue at all. The demonisation of private landlords has gone so far, hardly anyone in politics or the media is speaking up for them, despite them facing these gross injustices and the legal system completely letting them down.

And now, if, as is expected, the Government continues with its move to scrap Section 21, ‘charities’ like Generation Rent and Shelter will start pushing for the next punitive measure against landlords; the most likely contender for this is to somehow force landlords to take tenants on benefits, even if this is not the client group landlords wish to occupy their properties.

Shelter has been conducting a campaign on this for some time and various Government Ministers have jumped on the virtue-signalling bandwagon. Shelter has even been bullying landlords and letting agents into removing the words ‘no DSS’ from adverts and they also threatened to sue a letting agent, before the agent settled out of court, rather than face the stress and costs of a court case. Shelter now represents this as a legal victory and claims it is now recognised as discriminatory to specify ‘no DSS.’ It isn’t. Being in receipt of benefits is not a protected characteristic according to equal opportunities legislation. Settling out of court to avoid the stress and costs of a £60 million ‘charity’ hounding you through the courts does not create new law.

As part of their campaign on this, Greg Beales, Campaign Director at Shelter, has claimed that there is no evidence that tenants are benefits are ‘less-good’ tenants than others. There’s ‘no evidence that people on benefits are ‘less-good tenants’, says Shelter spokesman

He said that, given that, landlords and letting agents who do not accept those on benefits are engaging in ‘disgusting’ and ‘immoral’ practices. https://inews.co.uk/opinion/comment/housing-benefit-renting-no-dss-shelter/

Such rhetoric demonstrates his ignorance. Of course as Shelter provides no housing to anyone, they would not have first-hand experience of the issues involved. As landlords, however, we know that there are many reasons why it makes no sense to accept people on low wages and/or on benefits. No amount of banning landlords and agents from specifying ‘no DSS’ will change these facts.

Some of the reasons why it often does not make sense to accept people on benefits as tenants:

  1. Tenants on benefits often cannot afford the rent. This is partly because benefits have been capped and have not kept pace with market rents. Housing benefit on average only covers 57% of the cost of a private rental. https://speyejoe2.wordpress.com/2018/08/23/dear-polly/ What I want to know is: why would a person agree to rent a home to someone who so clearly cannot afford to rent it?
  2. The housing element of benefits, including in the new Universal Credit system, is paid in arrears, and landlords need the money in advance as that is when they pay their mortgages. Working tenants pay in advance and are therefore able to meet the terms of the tenancy agreement.
  3. If for some reason the tenant does not make the benefits claim in the right way, on time or at all, or if they do not turn up for an appointment, lie or make a mistake in reporting on any work they’ve done for example, the benefit can be stopped. The landlord then does not receive the rent because of something the tenant did or didn’t do. Large amounts of arrears can accrue in this way, which the landlord will not get back.
  4. If it is discovered that the tenant in some way claimed fraudulently, the authorities have been known to threaten the landlord and/or ‘clawback’ the money by not paying the rental element for another claimant the landlord is housing. A landlord was recently threatened with having to pay back 4 years of the housing element paid to him, because of a fraud by the tenant. What landlord wants to face this prospect, when they can simply house people in work?
  5. If a tenant does not pay the rent and is evicted owing a lot of arrears and/or having caused damage to the house and the landlord has incurred legal and court fees, with a working tenant they can apply for an attachment of earnings and eventually the debt can be repaid to them. With a tenant on benefits there is no employer on which to apply an attachment. There is therefore no way the landlord can ever recover the debt.
  6. If a tenant is on benefits and/or on low wages, they may struggle to heat the house. Without proper heating and ventilation, the house may fall into disrepair. If the Environmental Health Officer then calls around, they will most likely blame the landlord for the disrepair. So the landlord’s home is adversely affected and they then face possible fines.
  7. People on benefits naturally spend more time at home. This increases wear and tear on the property.
  8. Often insurance companies and lenders specify that they will not accept tenants on benefits. In such circumstances, if the house burnt down for instance, the landlord’s insurance would be invalid. In terms of contravening the lender’s requirements, the landlord could face the liquidators being called in if the lender finds they have contravened the terms of the mortgage. The landlord could face a demand to immediately pay back the capital; this will usually be impossible. The landlord in this situation would face huge losses, purely because they had accepted as a tenant someone on benefits.
  9. Because of the Government’s fiscal attack on private landlords – most outrageously and absurdly in Section 24 of the Finance (no.2) Act 2015, which means landlords now cannot offset the finance costs of their businesses before calculating profit – it is imperative that landlords select the tenants with the greatest means and get the rents as high as they can go. This is not for the landlords’ benefit, but rather to pay the huge new tax liability, which can exceed 100% of actual profit. This is explained in a briefing paper I wrote for the Institute of Economic Affairs with the economist and professor Philip Booth. Taxation without justification — Institute of Economic Affairs
  10. Also, if Section 21 is scrapped, landlords face tenants being granted lifetime tenancies. If this is the case, then landlords will want the best possible tenants to occupy their properties – ones who have no problem paying the higher rents forced on the sector by the Treasury and ones who, as mentioned, can afford to look after the house properly. This will greatly restrict the options for those on benefits. As the economist Ryan Bourne has stated: “The results of this policy are therefore obvious to anyone who understands basic economics. First, landlords will be far less likely to rent to tenants they consider high-risk. The incentive to engage in serious vetting, demanding extensive guarantees from tenants, will skyrocket. https://www.telegraph.co.uk/business/2019/04/26/no-fault-evictions-ban-epitomises-paucity-tory-economic-thinking/

This final point demonstrates how various forms of Government interference in the private rented sector are having the opposite results to the alleged intentions. One change causes landlords to not be able to take on tenants on benefits; the next tries to ban them from not taking on tenants on benefits. We all know the next will be rent caps. It is like trying to shove a lid on a boiling pot when it is about to boil over.

And at the same time that they are trying to ‘disallow’ landlords from having control over their own assets, are ‘disallowing’ landlords from offsetting their finance costs, and ‘disallowing’ landlords from choosing the tenants they want, they leave the social sector completely alone despite 61% of eviction notices actually coming from this sector 24housing and despite the fact that this sector also is moving away from accepting tenants on benefits.

As an expert on this said: “Shelter and the National Housing Federation are engaging in deliberate known deceit in their combined campaign over NO DSS in the private rented sector – A campaign that is so superficial it shames them both…Social landlords… do routinely operate affordability tests and they do refuse to accommodate the benefit tenant and thus they operate the same NO DSS practices as the private landlord.” https://speyejoe2.wordpress.com/2018/08/23/dear-polly/

Where is the hue and cry about that?

No. They turn a blind eye to this, because they are fixated to an almost manic degree on private landlords; a fixation which is already starting to wreck people’s lives by pushing them out of housing.


Share This Article


Comments

Steve B

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

8:15 AM, 25th May 2019, About 5 years ago

I don't see how we can be forced to offer anything to anybody once we have carried out our risk assessment/tennant enquiry!

If I went into my local BS or Bank for a mortgage they would carry out an affordability check. We, as PRS landlords are only doing the same thing. I can't go to Shelter et al. and complain that ABC Bank Ltd won't offer me a mortgage because I am on benefits!

Badger

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

20:05 PM, 28th May 2019, About 5 years ago

Reply to the comment left by Dr Rosalind Beck at 23/05/2019 - 08:01
Absolutely true, but I can see the howls of manufactured outrage from here.

Dr Rosalind Beck

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

20:17 PM, 28th May 2019, About 5 years ago

Reply to the comment left by Badger at 28/05/2019 - 20:05
Actually, I've just had a reply from Greg Beales at Shelter. I asked him to address my 10 points. I may print his response here later, but on the wear and tear point, my comment was:

'People on benefits naturally spend more time at home. This increases wear and tear on the property.'

Greg Beales said in response to this specific point:
'We believe its important to move away from the stereotyping of people relying on the benefits system. Landlords who have these policies are writing off huge numbers of good tenants for no good reason.'

So, he doesn't accept this at all and instead, in the usual way of deflecting from legitimate arguments throws out the accusation that we are stereotyping. Also implicit in his point is that he is a better judge of what makes a good tenant than we as housing providers are. I find it rather presumptuous that he believes he has the right to have such a say over our businesses in this way. He gets his salary every month whatever; we hand over the keys to our valuable assets to the wrong person and we're screwed.

On the specific point of wear and tear though, perhaps Mick could send him his explanation of this? He may not have read all the comments below this article. Let's see if he answers that.

Of course this is unlikely as he skirted around and was dismissive and didn't answer some of the other points as is par for the course these days. I find it really weird how people don't engage with the arguments and either admit they were wrong or counter these with rational responses; instead they deflect and prevaricate.

Mick Roberts

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

6:57 AM, 29th May 2019, About 5 years ago

Reply to the comment left by Dr Rosalind Beck at 28/05/2019 - 20:17Do u want to send me his contact details or I give anyone full permission on here to send him/Shelter my quotes-Real world situations which are happening in our HB houses.
I've sent Shelter clear facts before on why a lot of us aren't taking HB any more https://www.24housing.co.uk/opinion/why-i-dont-take-housing-benefit-tenants-anymore/
But they never got in touch, although Frank Fields MP did & more recently RLA may be using some of my cold hard truths.

Ian Narbeth

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

12:54 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Annie Landlord at 22/05/2019 - 19:51There is a point which should be widely mentioned. Shelter, politicians et al say that landlords should deal with tenants on a case by case basis and not reject DSS tenants out of hand.
In an ideal world, maybe. The difficulty with conducting due diligence on every tenant is that it costs money in terms of the landlord or agent's time and in expenses such as credit and referencing checks. Unfortunately the new Tenant Fees Act makes the recovery of even one penny of the legitimate costs of doing that due diligence an offence. The message to landlords is: "Please spend a lot of time and money reviewing prospective tenants, of whom a large number will be unsuitable instead of taking the perfectly sensible commercial view that people on benefits are much less likely to be accepted than people not on benefits and that time is not a free commodity." Predictably, the Tenant Fees Act will make it worse for tenants on benefits than it is already.

Dr Rosalind Beck

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

13:08 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Mick Roberts at 29/05/2019 - 06:57
Hi Mick.
Can you do it? I've just sent him an email specifically about Shelter's position on s24.
His contact details are: Greg_Beales@shelter.org.uk
Thanks a lot. I think it is important to confront him with the hard facts, rather than just accept his accusation that we are stereotyping when we say unemployed people spend more time at home and spending more time at home increases wear and tear.

Dr Rosalind Beck

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

13:09 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Ian Narbeth at 29/05/2019 - 12:54
Excellently put, Ian.

Annie Landlord

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

13:12 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Ian Narbeth at 29/05/2019 - 12:54
I certainly agree that 'time is money' and there is some cost involved in referencing. The time and cost factor, whilst a hugely relevant factor for large scale portfolio landlords with a regular turnover of tenants, is negligible for the majority of landlords who own fewer than 5 properties and experience little churn in tenants. Are there sensible proposals to put forward to mitigate the costs and to save prospective tenants from wasting their time? Prospective buyers are frequently declined viewings of popular properties if they haven't already secured a decision in principle mortgage offer. What evidence could prospective tenants gather as a DIP? Most definitely references from current and last but one landlord. A rental statement from their current landlord? An Experian report? A working, homeowner guarantor? I think we have already lost the battle of a blanket ban on 'DSS' so we need to be ahead of the game in framing the requirements of a tenant application

Ian Narbeth

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

13:52 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Annie Landlord at 29/05/2019 - 13:12"Are there sensible proposals to put forward to mitigate the costs and to save prospective tenants from wasting their time?" Short answer: No. In fact the contrary.
Landlords cannot require tenants to bring their own references or credit report. From the guidance to the Tenant Fees Act:
"Q. Can I require a tenant to obtain a reference?
No. You cannot require a tenant obtain a reference through a third-party reference service as a condition of granting a tenancy, but a tenant could opt to obtain such a reference voluntarily. You can ask a tenant to supply a reference from a former landlord or agent, but the previous landlord or agent cannot charge the tenant for this. If you request a reference directly from a tenant’s previous landlord or agent, and they want to charge for doing this, you will have to negotiate this with the previous landlord or agent directly and pay any associated costs if required.
Q. Can I charge a tenant to undertake a credit check through a third party?
No. You can ask a credit referencing agency to carry out a check on a tenant, and you can ask the tenant to provide the necessary details to complete the check. However, you cannot make the tenant pay for this. If the tenant does not provide the information reasonably required by the third party to carry out a check and they have been given reasonable notice, you may be able to retain their holding deposit, if they paid one.
Q. Can I refuse to let to a tenant if they do not have a reference check provided by a third party?
No. You cannot require a tenant to meet any conditions that could only be met by paying a fee for a third-party service. This means that you cannot require a tenant to pay a fee through a third party where there is an alternative option which does not require a fee but imposes an excessive or unrealistic requirement on the tenant. For example, you cannot ask a tenant to pay a fee to a third party for a credit check where the alternative requires them to provide five years’ bank statements.
You can ask a tenant to provide any information you reasonably require in order to undertake referencing or credit checks through a third party. If a tenant does not provide this when requested and they have been given reasonable notice, you could be entitled to retain their holding deposit, if they have paid one."
Section 1 of the Tenant Fees Act says:
(7) For the purposes of this section, a landlord does not require a relevant person to make a payment, enter into a contract or make a loan if the landlord gives the person the option of doing any of those things as an alternative to complying with another requirement imposed by the landlord or a letting agent.
(8) Subsection (7) does not apply if—
(a) the other requirement is prohibited by this section or section 2 (ignoring
subsection (7) or section 2(6)), or
(b) it would be unreasonable to expect a relevant person to comply with
the other requirement.
Good luck, landlords, understanding what is allowed and whether you come within the exception or within the exception to the exception. We will need to wait for some sacrificial landlords to be punished for having a different view from the judge as to what is reasonable before we know what will be allowed.

Mick Roberts

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

15:05 PM, 29th May 2019, About 5 years ago

I've sent my bit to Greg at Shelter.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Automated Assistant Read More