Rant About Scottish Letting Regulation

by John Gell

15:29 PM, 13th September 2013
About 6 years ago

Rant About Scottish Letting Regulation

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Rant About Scottish Letting Regulation

As the Scottish Government gets set to embark on the regulation of letting agents – regulation which is badly needed in my view – I fear that my worst nightmare may be about to become true.

Why? Well, let’s look at what’s happened already with Scottish renting legislation.

Landlord Registration has for the most part been startlingly ineffective in raising standards. In fairness, that perhaps was not its prime purpose (having been introduced under anti-social behaviour legislation) but the fact that we now have a national database of private landlords should allow national and/or local government to target those landlords with awareness-raising advice, invite them to seminars and so on. Those unfortunate tenants who suffer at the hands of malicious or, more likely unaware, landlords need that to happen. I’m fairly sure there must still be many landlords who are not yet registered. The fact that Scottish Government hiked the penalty for non-registration up from £2,000 to £50,000 must surely indicate that registration is seen as important. The requirement to quote registration numbers in property advertisements seemed a pretty good way of bringing all landlords into the system. Yet, how many adverts still appear with no registration numbers? How many unregistered landlords have been fined?

No. I see poor practice flourish aplenty and registration requirement ignored. I see responsible landlords pay their dues while the irresponsible carry on regardless. I see local authority Landlord Registration teams funded by those responsible landlords and, it seems, doing not a great deal to bring all within the net.

Why not simply legislate to make it a requirement that for any individual to rent out a property he or she must either use a regulated agent (when that’s in place) or achieve accredited landlord status (or commit to a time-limited accreditation path)? Overnight, poorly performing landlords would be outlawed.

Look at Tenant Information Packs. Of course it’s good practice to pass incoming tenants information and advice relative to their tenancy and their new property. Responsible agents and landlords have been doing so for years as a matter of course. So surely it’s good that all now have to do so?

In theory, yes, but from our perspective as a letting agency we now find ourselves managing a parallel process issuing the mandatory Tenant Information Pack (TIP) alongside our own one, as the mandatory one is so stodgy as to be a turn-off to most tenants, contains errors, and imparts nothing of substance about the property. The effect of this has been to sap resources, particularly time – our scarcest resource – and so impact negatively on our finances. So a highly responsible agency, regulated by RICS and licenced by ARLA is being forced to go through an ineffective process which hampers business efficiency while less regulated or less responsible agents who decline to do so, or are even unaware perhaps that they need to, sail on in the same old way. How many letting agents have been taken to task for failing to issue a TIP? How many who fail to do so, use a low-fee basis as a means of attracting clients? The answers to those questions are unknown, but I’m pretty certain the first is zero or we’d have heard about it.

Simply Let pays about £2000 per year in professional membership subscriptions and regulation levies. We do that because we believe in high standards, and in demonstrating that we hold that belief. We undertake continuing professional development. We do so because we need to be fully informed in order to serve our clients well. We cannot give our landlord clients and their tenants the service they deserve on a low fee basis.

If a landlord’s agent fails to fulfil one of his client’s statutory obligations, it will be the landlord who is held responsible. Are all landlords aware of this? How many agents are playing fast and loose with their obligations to their clients? Again I don’t have an answer to that. If an agent lands a landlord in trouble as a result of negligence or incompetence does that landlord have recourse to a complaints redress mechanism? If that agent goes bust or even runs off with the cash is the landlord’s money safe? Does the agent have client money protection? Unlike estate agents selling houses, a fairly straightforward one-off task, letting agents have on-going management responsibilities which require detailed knowledge of complex housing law. Currently anyone can set up as a letting agent without any qualifications or training whatsoever and without any insurance or external monitoring and take on responsibility for managing clients’ major financial assets and ensuring tenants’ safety in the home.

You can see then why we favour regulation of letting agents. With a level playing field, landlords and tenants could go about selecting an agent knowing that all agents had the basics in place. Why then do I fear, as I said at the beginning of this blog, that my nightmare is about to be realised?

In my nightmare, responsible and already regulated agents found themselves obliged to register and of course to pay a recurring fee for doing so. In my nightmare less responsible agents continued to operate without appearing on the register. The third strand of my nightmare is that nothing much else happened.

It’s turned out like that with Landlord Registration so it’s perfectly possible that Letting Agent Regulation will go the same way.

Why not simply make it a requirement that in order for any letting agent to practice he or she must have in place:

  • A minimum level of relevant knowledge
  • Professional indemnity insurance
  • Client money protection
  • A complaints redress mechanism
  • Evidence of continuing professional development?

All are currently available to any responsible agent.

The private rented sector involves the very basics of life: a tenant’s home and a landlord’s financial investment (and possibly pension plan). It is critical therefore that all who manage any part of that process, landlord or agent, have the knowledge and capability to undertake their role to a high standard and fulfil it in a professional manner. It is critical too that those who entrust their lot to an agent have the benefit of certain basic protections. So my plea to the Scottish Government, when it develops letting agent regulation, is to make it impossible for any agent who can’t deliver those five elements above to continue in practice. The country and its tenants deserve nothing less. Rant About Scottish Letting Regulation

John Gell MRICS



Comments

Jay James

19:12 PM, 16th September 2013
About 6 years ago

a central register of tenants, from which we vet and licence them? bad record = no housing?

Jay James

19:14 PM, 16th September 2013
About 6 years ago

Reply to the comment left by "Jay Jay" at "16/09/2013 - 19:12":

how ridiculous. ok let's do the same to erm, vehicle rental firms and make them liable for the driving offences of their customers.

Jay James

19:17 PM, 16th September 2013
About 6 years ago

Reply to the comment left by "Jay Jay" at "16/09/2013 - 19:14":

no? of course not because it's ridiculous and would reduce the market for vehicle rent over the long term.
ok, let's try erm...housing providers so we can drive up the cost for tenants and reduce the market over the long term.

dum!!!

Mark Alexander

20:06 PM, 16th September 2013
About 6 years ago

Reply to the comment left by "Jay Jay" at "16/09/2013 - 19:12":

"a central register of tenants, from which we vet and licence them? bad record = no housing?"

HAHAHA

Can you imagine it?

Compulsory registration by all tenants at a fee of ???

Fit and proper persons only.

Homelessness become illegal.

Those failing to qualify to be on the list to report for shipping to the colonies immediately!

Jay James

20:19 PM, 16th September 2013
About 6 years ago

that would be unfair to the colonies (or what is left of them)!

Now there's a thing. Only fit and proper persons can be HMO LLs. I'm sure there are many who own property / have funds but would not meet the requirements of 'fit and proper' in order to be LLs. This unfair requirement means many who would be capable LLs do not qualify, eg those with convictions in their past.

Mark Alexander

20:48 PM, 16th September 2013
About 6 years ago

Reply to the comment left by "Jay Jay" at "16/09/2013 - 20:19":

If bad bad people (no matter how rich or poor) are not imprisoned, shipped off or knocked off they are going to live somewhere. Wherever that place might be you will find a NIMBY (Not In My Back Yard)

John Gell

21:33 PM, 16th September 2013
About 6 years ago

Thanks for all your comments folks.

To put matters in context it's perhaps worth adding that Landlord Registration in Scotland was driven by a small number of MSPs representing constituencies where laisez faire landlords were letting to DSS-funded tenants (and receiving the DSS-funded rent directly from the local authority, with no need to engage with their tenants) and where those tenants were causing significant anti-social issues.

Instead of isolating and addressing that problem, a minor one in the national context, government introduced registration of all landlords and so appeared to be blind to good practice where it existed, lumping all landlords together as "not to be trusted - we need to know where you are"

I feel that the efforts and practices of those letting agents who take pains to act responsibly are about to similarly overlooked in framing agent regulation.

John Gell.

Mark Alexander

21:56 PM, 16th September 2013
About 6 years ago

Reply to the comment left by "John Gell" at "16/09/2013 - 21:33":

Hi John

In your experience, might it be fair to say that good landlords have registered?

Would it also be fair to say that very few bad landlords bothered to register?

If the answer to these questions are both yes, then what was the point and what has actually been achieved other than creating "jobs for the boys"?

John Gell

23:28 PM, 16th September 2013
About 6 years ago

Hi Mark.

I don't think there's a cut and dried answer to that.

Those landlords who are keen to remain below the radar or who distrust authority may not be bad in the sense that that they are ill intentioned. Many, I suspect, are just uninformed - unaware of best practice or of what the law requires.

Responsible landlords will have had their ear to the ground and so will have been aware of Landlord Registration and will have voluntarily registered.

What is lacking is any effective management by government of its regulatory roll out and so unless landlords are astute they are likely to remain blissfully unaware of requirements. So, we have regulation, often with draconian but unenforced penalties, by a government with apparently little understanding of how PRS actually works in practice, many low grade landlords unaware of much of it, and a cohort of responsible landlords who for the most part probably don't need to be regulated but who comply because they're astute and law abiding folks.

I believe it's what's known as a " disconnect"

John.

Scottish Association of Landlords

18:48 PM, 17th September 2013
About 6 years ago

Reply to the comment left by "John Gell" at "16/09/2013 - 23:28":

Hi all

The Scottish Association of Landlords position on Landlord Registration has not changed since we published this piece in January, and we continue to call for proper enforcement of existing legislation such as this.

Landlord registration branded a costly farce
20 January 2013

A multi-million pound scheme introduced to crack down on rogue landlords has resulted in only 11 people being reported to the procurator fiscal in two years.

The Landlord Registration Scheme has so far cost landlords and the taxpayer nearly £18 million since 2006.

That breakdown revealed responsible landlords have paid £11.2 million in fees, while the start-up Scottish Government grant for the scheme was £5.2 million. Annual running fees for the website since 2006 are estimated to be just under £300,000.

Despite that cost, only a handful of cases have made it as far as the Crown Office, and only 40 landlords have been refused registration, compared with 200,000 successful applicants.

The details emerged following a series of parliamentary questions by Scottish Conservative MSP Alex Johnstone.

It means those who let out property and were forced to join the scheme on the grounds it would deal with rogue landlords have paid significant sums, only to see a tiny amount of enforcement.

Scottish Conservative housing spokesman Alex Johnstone MSP said:

“This scheme was set up to root out the kind rogue landlords that have no place in the industry, but so far it has cost over £400,000 for every landlord who has been refused registration.

“According to this scheme, since 2006, there are only 40 rogue landlords operating in Scotland, however many tenants will have had an altogether more negative experience.

“This farcical programme, introduced with the best of intentions, is failing to deliver at a tremendous cost to the taxpayer.

“And responsible people with aspirations to get into the property business are being hit in the pocket because of this inadequate scheme.

“The private rented sector is playing an increasingly important role in delivering solutions to housing need in Scotland, and we need a robust an efficient mechanism to help achieve that.

“These figures suggest that at the moment, the Private Landlord Registration Scheme is not it.”

Scottish Association of Landlords policy and parliamentary affairs officer, John Blackwood, added:

“We represent responsible landlords from across Scotland, and when the scheme was introduced we broadly supported what it was trying to achieve because we want to see rogue landlords out of the sector altogether.

“But with almost £18m of Government and private funds being spent so far with so little, the scheme is doing little to inspire the confidence either of our members or the tenants who look to us for good accommodation and service.

“We appreciate the scheme is also about changing attitudes in the industry, and to some extent it has done this.

“But I also believe that these figures demonstrate a need to review the scheme in order to make it fit for purpose, and I would call on the Scottish Government to instigate this.”

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