Selective licensing – can a part- time investor landlord fulfil the requirements?

by Readers Question

7:57 AM, 8th April 2014
About 7 years ago

Selective licensing – can a part- time investor landlord fulfil the requirements?

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Selective licensing – can a part- time investor landlord fulfil the requirements?

I became a landlord about 10 years ago, as a pension investment. At that time, returns in my local area were relatively poor. I bought in an area that had 8-8.5% returns and had my properties managed locally. Selective licensing - can a part- time investor landlord fulfil the requirements?

I am a Chartered Surveyor with significant property management experience, so I believed that I came into the business with my eyes open. It was nevertheless a steep learning curve. After a few years I had to intervene to protect my tenants and my investments, and I now manage these properties myself. I am always at the end of the phone, even on holiday; most of the work on my properties is arranged as planned improvements or maintenance, usually following on from an inspection; and I hope that I provide as good a service as any managing agent (and I acknowledge that there are excellent agents out there; sadly, mine was not one of them!).

The local council has introduced selective licensing. I must make clear that I am not submitting this article in order to complain; whatever I feel about the policy is quite irrelevant. Most of the requirements are clear, and are either already in place, or easily achievable.

However there are several points that I find troubling, and suspect that other smaller investors like myself will have problems with the same issues. These are the problems I foresee, and my proposed solutions:

1) Requirement for monthly inspections. It would be inconvenient to carry these out personally, so I would contract out interim inspections. I will provide a suitable proforma to be completed, with photographic evidence, by an experienced contractor.

2) Antisocial behavior action plan. I take the view that, as a small investor, I have no choice but to issue warnings and if necessary refuse to renew the tenancy on expiry. Of course, if something serious happens long before expiry I would commence possession proceedings. My action plan will set out the behaviour I regard as sufficiently serious for these two options.

3) The requirement to notify tenants of their obligations. All of this is within the tenancy agreement, so I would propose to write to the tenants restating these terms.

4) There is a requirement for emergency and other arrangements in the event of the holder’s absence. In practice, I have always been at the end of the phone, wherever I am, and able to arrange repairs as normal. However, I propose to “nominate” an alternative contact, who will be another landlord like myself.

5) If I am unable to satisfy the Conditions, then it will be necessary to appoint a managing agent. I expect that I would still be required to submit the application in my own name, but with reference to the managing agent in the relevant sections of the form. I would presumably still be liable for any breaches, my only defence being to prove that I took steps to ensure that said agent were fulfilling their responsibilities under the conditions. In my opinion, it would be better to take full and direct responsibility, contracting others in to carry out parts of the requirement as necessary, so I will seek to obtain a licence on this basis.

I am very concerned that the impact of this new control would be to reject any landlord who does not live in the same town, or nearby, as unsuitable for three reasons:

– Sufficiently regular inspections carried out by the licence holder personally may not be practical (although, as said, I intend to arrange such inspections in a way that would satisfy the requirements)

– There would be a problem in attending a training course in the same town as my properties (although one day would not be an issue). I hope that the Council’s requirement here (which is not specified) would be reasonable.

– It might not be feasible for a landlord who does not live locally to take unspecified emergency action. Although the Conditions make no direct reference to personal availability in emergency, I suspect that this could be an implied criterion in assessing an application. I say “unspecified” because I have worked during evenings and weekends to arrange contractors for gas, electric and plumbing emergencies. However, in theory, there might be something that could require the “person in control” to attend immediately.

In summary, I am determined to personally fulfil the requirements of this licence, and would welcome a discussion on practicality for a small investor who is 1) not based locally and 2) has other employment. I am sure that other landlords like myself have successfully obtained and maintained licences, and are providing the service that the council is looking to achieve. However I have not found any discussion of this issue, and therefore hope that this article – and the responses to it! – will prove useful.

Regards

Philip Aston MRICS



Comments

Mark Alexander

8:21 AM, 8th April 2014
About 7 years ago

Hi Philip

I'm sorry to hear that you had a bad experience with a letting agent.

Did you see the article I published recently about "feeling trapped by your property portfolio"?

If not please see >>> http://www.property118.com/?p=64692

What was the justification of your local authorities instroduction of selective licensing and do you agree with it? What did you do about it?

At Property118 we have run several articles to investigate the effectiveness of various forms of landlord licensing and debates have always lead to the same conclusion. In summary, problems are associated with society and poverty in general, supply and demand of housing, that all schemes to date have proven ineffective white elephants, that local authorities see landlords as cash cows and that all licensing schemes are merely "jobs for the boys" - see >>> http://www.property118.com/?s=landlord+licensing&submit=Search+Articles

Now if it was only landlords who agreed one might be forgiven for saying that's just a biased viewpoint. However, there is hard evidence of all of the points made above and and discussions here at Property118 have included local authority staff on the front line from EHO's and tenancy relations officers. Furthermore, schemes such as landlord registration in Scotland now have a six year period to judge results, Oxford are not far behind. Neither have been effective or provided value for money.

I consider myself fortunate that so far I have escaped this red tape but if I do get entangled in it I'm afraid I may have to cut my plans short and sell up. I know I am not alone in my thinking.

I am confident that I can comply, however, I do not feel the red tape is justifiable and I have yet to see any evidence that it is effective, i.e. bad landlords already avoid regulations so new ones make no difference to them.

Many landlords talk about passing on costs to tenants but this is unrealistic in my opinion because rental values are set by market forces. If a landlord puts his rents up to meet costs of regulation he could easily find that he prices himself of of the market. Therefore, profits will be squeezed and investment into the PRS will become less as interest rates rise. The sale of PRS owned stock will go some way to easing demand for owner occupiers but demand is growing well beyond the rate of supply. My conclusion is that the PRS will not grow at the rate required and that ten years from now the government will have a much bigger problem than they do now.
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Gary Nock

8:27 AM, 8th April 2014
About 7 years ago

Philip which council is this? These conditions in particular the one on monthly inspections and ending tenancies in the event of ASB may be problematic. Is a monthly inspection allowing your tenants "peaceful enjoyment" of the property? And if there is ASB and you try and evict the tenants will the council help or hinder you in doing this? Most councils tell tenants to stay put until bailiffs go in.

Mark Alexander

9:01 AM, 8th April 2014
About 7 years ago

Reminds me of this ...


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Joe Bloggs

20:04 PM, 8th April 2014
About 7 years ago

hi phil,
hope you are well.
this illustrates the desirability of investing near home. monthly inspections are a good idea, espec in deprived areas. however, my LBN licences stipulate quarterly rather than monthly visits so you might want to argue that this is an unreasonable imposition.

Mary Latham

20:47 PM, 8th April 2014
About 7 years ago

I am fighting the introduction of Selective licensing in 6 parts of one of my local authority areas at the moment.

1. There is no evidence to support their assertion that it is tenants of ;private landlords who are causing the anti social behaviour - in fact in one area only 7% of the properties are rented by private landlords and even if those tenants were part of the problem they are a very small part. Crime figures do NOT include the tenure of the offenders.
2. There is no evidence to prove that licensing a landlord has any impact whatsoever on the behaviour of our tenants - how could this possibly be the case when landlord cannot control the behaviour of another adult
3. Local authorities, the police and the fire service all have powers to deal with badly behaved tenants - landlord have none. These agencies need to use their powers to stop the problem instead of passing it on to people who are neither trained nor skilled and are not paid to deal with it.
4. Oxford are now sending tenants to Birmingham because the unintended consequences of licensing the whole city it an increase in homelessness. Birmingham - where there is no extra licensing - have issued a press release to tell other authorities that they are not the answer to their housing problems.

Landlords are now seen as cash cow and I warned in my book last year that cash strapped authorities would be using extra licensing to raise funds from landlords. I wish that I had been wrong.

Now to your points

1) Requirement for monthly inspections. There is no evidence to prove that regular inspections have any impact on the behaviour of tenants. If a tenant is doing something wrong in the property he will simply refuse entry to the landlord, as is his legal right. Who on earth would want to have their home inspected every month - outrageous. If a landlord suspects that there is something illegal going on in a property he should inform the correct authorities and enable them to use their powers to stop it.

2) Antisocial behavior action plan. This behaviour can be controlled by Police, local authorities and fire service but NOT BY LANDLORDS. Your Action Plan should be to inform the appropriate authorities and if there is a serious issue to take action to evict the tenant - just where they will all live is anyone's guess

3) The requirement to notify tenants of their obligations. As you have said this is all in your tenancy agreement and to go further could be seen as harassment. You are already meeting this obligation

4) There is a requirement for emergency and other arrangements in the event of the holder’s absence. This is good practice and landlords who work together can achieve this by covering for each other, nothing else is needed.

Philip please do not allow this inappropriate use of legislation have an impact on your business practice - from what you have said you are already a good landlord and this local authority should be delighted to have you as a provider of homes in their area - let them go and find the bad landlords and use their considerable powers to bring them into line with you.

I have been a self managing landlord for over 40 years and one day I may use a good letting agent but I will make that decision based on my wants and needs not on what a local authority, who are not dealing with their own anti social tenants, decide.

No landlord wants bad tenants. No landlord wants to see an area, in which he has invested, going down. Local authorities need to work with us and with RSLs, who often house difficult tenants, and solve the problem not pass on their legal duties to the PRS or expect us to fund their activities

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Follow me on Twitter@landlordtweets
The perfect present for property investors @ £4.64. My book, where I warn about the storm clouds that are gathering for landlords is available on Amazon title. Property For Rent – Investing in the UK: Will You Survive the Mayhem? http://www.amazon.co.uk/dp/1484855337

Philip Aston

23:35 PM, 8th April 2014
About 7 years ago

Thank you Mary for your comments and words of encouragement. I'm grateful to all of you for your responses.

Mark, I did see the article on LettingSupermarket.com. When I first started, I was using an agent who was prepared to devote time and attention to problems. He dealt with a non-payer and helped get one of my houses back without a drama, and was the reason why I continued with full management even though I felt ready to manage personally. However, even he used to arrange cheap bodge repairs. I had the feeling that his other landlords were in it for the short term and looking to get work done for next to nothing. Anyway, he retired, and I won't bang on too much about the sorry mess that ensued. Example: a woodworm infested floor held together with 3 bits of laminate to make a floorboard thickness.

As I said, I don't regard this as an indictment of managing agents, but the truth is I actually enjoy managing properties personally, and would like to continue despite the latest spanner in the works.

The case for the licensing designation ( http://www.blackpool.gov.uk/Business/Residential-landlords/Documents/Detailed-case-for-Claremont-selective-and-additional-licensing-%5BPDF-15mb%5D.pdf )included this

“The London Borough of Newham has also introduced a scheme that is similar to the proposal for Claremont in that there is high anti social behaviour. The Newham scheme became operative on the 1st March 2010 and Newham has seen a clear reduction in antisocial behaviour and criminality and in particular environmental crime. The scheme has received support from professional landlords who have commented that it has had a positive impact on their business.”

I suspect that the “beneficial result” was the result of a general focus on the private rented sector, including increased use of existing powers.

A brief summary of my response to the consultation is this: policing is a police function; a landlord can only evict, which will relocate the ASB and not correct it; if the council target landlords for the actions of tenants, then those landlords will become much more risk averse and this will probably result in them categorically rejecting applicants who are not in employment, thereby throwing them back to the Council; if (as has been said here) the council are not able to provide housing and need to work through me and my fellow landlords, then they need to back off and let us get on with our job – which (also stated here) we want to do without damage to our businesses and our property.

Gary, it's Blackpool. You can find the Claremont licensing conditions here: http://www.blackpool.gov.uk/Business/Residential-landlords/Documents/Additional-licensing-conditions-%5BPDF-103kb%5D.pdf

It includes:
“The licence holder/management agents must make regular (at least monthly) inspections of the property to ensure that the property is in a decent state of repair and that the occupiers are not in breach of tenancy terms and conditions;”

I am pleased that there is a consensus here on the monthly inspection nonsense. I have only 1 tenancy within the area and the tenant is a thoroughly decent man. If necessary he'd have no objection to having a cup of tea with me once a month, but he's exactly the type of tenant who doesn't need the landlord on his case. As has been said, the tenants who need close watching are the ones who won't co-operate with this regime. Joe, thanks for your comments, I will argue this case, referring to LBN, and keep the forum updated. As you say, investing close to home has many advantages, but I have a good rental property here and in this case a very good tenant so I'm not going to give up on this.

There is no explicit requirement to evict for ASB, but since it's our only sanction, I can only presume that, whatever the intention of the licensing regime, the outcome will be intolerance of ASB. It will probably prove too expensive and risky to use S8 so most of us will wait until S21 is applicable. As you say Gary, I know that councils are advising tenants to wait until they are actually made homeless. That would probably only work for a housing benefit situation; a working tenant has more to lose. So, as said, most of us will relet to working tenants. The council will probably have to rent the houses from us, which will cost them much more. Or, as you say Mary, send them elsewhere!

Any comments on the training courses? I would like to think that a case has to be made showing that the licence holder actually needs training. Introducing (in effect) a mandatory qualification works within some aspects of Building Control but I can't believe that it's legal to make someone into a criminal for letting their property to someone without attendance at an (expensive?) course run by the Council. Maybe its another cash-cow thing. As I said, I have a proven track record in management, with a relevant qualification so I would hope to challenge this.

Mary Latham

14:17 PM, 9th April 2014
About 7 years ago

Many local authorities are asking landlords to become accredited through education as part of their licence conditions. This means that the landlord would need to attend a one day foundation seminar and gain CPD throughout their accreditation the keep up with legislation and regulation. I am a big supporter of this type of accreditation and I run seminars every month in the West Midlands. The feed back is always positive with many landlords saying that they did not realise how much they did not know. If you are accredited in one area through what is known as the LASS model you should be able to passport to the other schemes at no cost. This is a partnership agreement that most providers of the LASS model have in place and it avoids landlords needing to attend the same seminar more than once. The cost of the foundation seminar is usually between £90-150 and it is tax deductible so not a major issue for most landlords.

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Follow me on Twitter@landlordtweets

The perfect present for property investors @ £4.64. My book, where I warn about the storm clouds that are gathering for landlords is available on Amazon title. Property For Rent – Investing in the UK: Will You Survive the Mayhem? http://www.amazon.co.uk/dp/1484855337

John Daley

14:20 PM, 9th April 2014
About 7 years ago

I hate to slaughter anyone's sacred cows but Local Authoroties are specifically prevented from using Licensing to raise cash for any other purpose.

There are binding European regulations that state that authorities can only use the income from Licensing for the costs directly arising from Licensing, they can't siphon off the money to pay for wider regulation or to support other budget areas. The Council must also set fees openly and have a process for review.

Before we get any 'Oh yes they can' posts. Please look at Westminster v Hemmings which is the case law on this. Hemmings has won his case at the Court of Appeal and there may be a further appeal to the European Court but that is the law as it stands today.

Joe Bloggs

14:23 PM, 9th April 2014
About 7 years ago

Reply to the comment left by "Mary Latham" at "08/04/2014 - 20:47":

QUOTE - ' 1) Requirement for monthly inspections. There is no evidence to prove that regular inspections have any impact on the behaviour of tenants. If a tenant is doing something wrong in the property he will simply refuse entry to the landlord, as is his legal right. '

REPLY - where is your evidence that regular inspections dont help? is it not obvious that the carrying out of regular inspections is more likely to keep untenantlike behaviour in check than just letting tenants do as they please. if a tenant refuses entry that will set alarm bells ringing. and why do you say that '...is his legal right...' when tenancies usually expressly provided for this.

Mark Alexander

14:59 PM, 9th April 2014
About 7 years ago

Reply to the comment left by "John Daley" at "09/04/2014 - 14:20":

Hi John

Local Authorities have all sorts of ways and means to justify the money they waste spend but Ipswich still managed to fall foul of the EU laws. Perhaps they should have wasted invested more into creative accounting? LOL

See >>> http://news.rla.org.uk/ipswich-begins-refunding-licensing-fees-to-landlords/
.

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