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

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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.


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Dr Rosalind Beck

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15:07 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Mick Roberts at 29/05/2019 - 15:05
Thanks, Mick. Let us know if you get a reply.

wanda wang

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21:54 PM, 29th May 2019, About 5 years ago

Reply to the comment left by Ian Narbeth at 29/05/2019 - 13:52
"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." In you legal point of view, what kind of conversation can make a tenant opt to such reference voluntarily , but you are not breach the ban by requiring a tenant. well I have to admit English is not my mother language, I am confused with this, and I have asked around, no one seems can really give me the answer.
wanda

SimonR

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11:22 AM, 30th May 2019, About 5 years ago

Reply to the comment left by wanda wang at 29/05/2019 - 21:54
You can make a tenancy conditional on a satisfactory reference but you will need to cover the cost. Just add £5 or 10 to the advertised rent and that should cover the cost.

Ian Narbeth

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11:38 AM, 30th May 2019, About 5 years ago

Reply to the comment left by wanda wang at 29/05/2019 - 21:54Dear Wanda
The Act is not intended to make life easy for landlords. As I have said elsewhere https://www.property118.com/tenant-fees-act-2019-draconian-legislation/, "If landlords step a millimetre out of line they will be hit and hit hard".
If you normally obtain third party references then it will be best if you now pay for them and absorb the cost or put up your rents (but don't frontload the increase!!!) In theory you can give the tenant the option to provide a reference or to comply with another requirement imposed by you. However, if that other requirement is prohibited you are in breach. You might say "Unless I have a third party reference I will require a guarantor". That might be OK but if the court decided that it was unreasonable of you to require a guarantor for a particular prospective tenant, you will be in breach.
Even if you came up with some clever form of words to persuade your prospective tenants to obtain their own references, it only takes one disgruntled tenant to complain to the Council that you "demanded" they provide a reference and that you "refused" to consider them unless they did so and you are potentially in to a world of pain and weeks of anxiety while the Council invite you to make representations and then decide whether to fine you up to £5000.

Dylan Morris

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12:57 PM, 30th May 2019, About 5 years ago

Not sure why you need a “reference”. I simply ask to see the tenant’s last 12 months banks statements to verify the rent has been paid on time. If tenant pays cash then it’s tough I cannot verify and the application is declined. That is my underwriting criteria.

Ian Narbeth

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11:39 AM, 3rd June 2019, About 5 years ago

Reply to the comment left by Dylan Morris at 30/05/2019 - 12:57Hi Dylan
We demand references because occasionally the landlord will tell you they would not rent to the tenant again. We had that on one occasion and the tenant was an untidy slob even though he paid on time. HMOs are a slightly special case but if your good-paying tenant upsets the other tenants with his slovenly ways you could lose out if the other tenants leave.

Dylan Morris

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13:12 PM, 3rd June 2019, About 5 years ago

Reply to the comment left by Ian Narbeth at 03/06/2019 - 11:39OK Ian let’s take your example, say you’re the landlord of a tenant who you don’t want to rent to again and has slovenly ways that upset the other tenants. A reference comes in from a potential landlord and you’re buzzing like a fridge with the door left open, as finally your tenant is going to move out. Now you need to write up a reference are you really going to disclose everything ? If you do it’s a 99% certainty the new landlord will decline the tenant’s application. So do you hide the truth ? If you provide an honest reference the potential new landlord will decline and you’re left with a really disgruntled tenant who knows what you’ve done, he cannot leave and find anywhere else to live and you know what ? He’s gonna take it out on you by being even more slovenly, upsetting even more of your other tenant’s and you know what ? You can damn well wait for your rent payments in the future as well. So you’re very soon having to go down the section 21 route. The only useful reference is from the tenant’s landlord previous to the current one, because he’ll tell the truth.

Ian Narbeth

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13:38 PM, 3rd June 2019, About 5 years ago

Reply to the comment left by Dylan Morris at 03/06/2019 - 13:12
I take your point Dylan but landlords must answer honestly or decline to answer, which is itself telling. If you ask: "Would you let to this tenant again" and the Landlord answers "Yes" he might be in trouble if he would not have. I appreciate it may be hard to prove but most people won't tell blatant lies so you as the asking landlord may get some useful information.

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19:50 PM, 4th June 2019, About 5 years ago

Ultimatley I would say you do business with whom ever you want, that is your choice, to me it is really that simple, or is that too simple a point of view? Please I invite comments

DavyboyHMO

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20:31 PM, 4th June 2019, About 5 years ago

Reply to the comment left by SickOfBeing LiedTo at 04/06/2019 - 19:50
I agree.. everyone has a choice. Our choice is not to accept DSS over private working professionals. There are so many argument's why... The better question is why would you accept DSS over private tenants?

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