The Conservative’s Green Paper on Housing - Nothing for Tenants

With the implosion of Gordon Brown’s government happening before our eyes, it’s worth looking at Conservative policy on the privately rented sector.  They have a green paper on their site.  It’s 40 pages and goes into some detail on the housing market.  Nevertheless, I can quite easily quote the whole part on the private rented sector as this weighs in at four paragraphs:

The private rented sector constitutes a significant component of the housing market, accounting for 13 per cent of the 22 million homes in England.Often unfairly seen as a fallback option for those who cannot afford to buy but are not sufficiently in need to qualify for social housing, the private rented sector plays a key role in meeting the accommodation needs of millions of households, many of whom greatly appreciate the flexibility and variety that the sector offers.
Yet the sector has the potential to play an even fuller and more effective part in meeting the country’s future housing needs. Private landlords could play an important role in bringing under-utilised or empty homes back into occupation. Individual landlords are also capable of delivering small developments and conversions on sites too marginal or too difficult for larger businesses to undertake. Single operators can quickly and effectively
operate at low margins on brownfield sites.
We will conduct a review of the private rented sector to examine how the sector can play an enhanced role in the housing market. As part of this review, we will look at how consistent and appropriate the current regulation of the sector is, as well as evaluating the cumulative effect of the statutory regulation on landlords.
We will look to eliminate duplication and contradiction, and ensure regulation is proportionate to risk – focusing on public safety and rogue landlords. In so doing, we will end the uncertainty Labour have created about investment in private renting, re-establishing confidence and so encouraging the provision of much needed private sector housing for rent.

There you have it.  This is by a wide margin the smallest section in the paper (energy efficiency gets four pages) and really promises only to conduct a review aimed at making investment by landlords easier.  Nothing on our favourite themes of security of tenure and long term leases.

It seems the tenant cannot expect any help from a Conservative government.

The government talks about licensing landlords

So the government is considering forcing landlords to register, and ARLA have set up a voluntary scheme:

Arla today launched its own licensing scheme to cover all its members. Member agents will be obliged to adhere to a number of requirements, including holding a professional qualification, keeping client funds in annually-audited client bank accounts, and holding valid professional indemnity insurance.

Of course, as shelter says this is ‘a step in the right direction’, but makes you realise that we’re miles from home.  Presumably, before ARLA members could previously keep funds in unaudited bank accounts.

The government scheme seems to involve a £50 license for landlords that can be revoked thereby preventing them letting the property.  The times article includes this worrying quote:

Registered landlords would have to comply with certain standards and those who fail to carry out repairs or who intimidate tenants could be struck off. If that happened, all their tenants would have to move out, although this would not happen overnight, Whitehall sources suggested

This does not seem to address any security of tenure problems, but would perhaps in the long term shake out the bad landlords.  Although, this may well put more demand on the good landlords (pushing up rents) and create a market of unlicensed landlords (good for locating illegal immigrants, skunk farms, etc).

The real problem here is that a landlord needs to be compelled to provide decent housing if they fail to, and should therefore have funds set aside in escrow in case they are needed.  This is exactly how it works for tenants.  I wonder whether landlords would welcome replacing tenants deposits with a license?

Money for nothing? OFT takes on Foxtons…

We are looking to redress the balance between tenants on one side and letting agents/landlords on the other.  In this case the OFT is tackling contract issues between landlords and lettings agents, perhaps next we can encourage them to take on contract issues between letting agents and tenants…

Essentially the OFT is looking to see whether the practice of charging a comission to landlords when an existing tenant renews is an unfair contract term.

We will be following this case with great interest to see whether there is a willingness to take on these inequalities.

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=336181&Page=1

Margin calls begin for leveraged property speculators

The FT is reporting that borrow to letters are facing the arrival of the margin call.  This is an very important development.  A lot of people have been criticising the bankers recently for leveraged speculation, but most people do not realise that the man on the street only has one option for leveraged speculation: property.  The thing about leveraged speculation is that when prices rise, it is extremely profitable.  When prices fall, however, you either need to find cash quickly or face being closed out of your position by the lender.  This forces you to take the loss even if prices may return in the longer term.

Up until now, the lenders have avoided this.  It is partly a prisoners dilemma problem where if one bank starts margin calls it may well cause further distressed sales and therefore more downward pressure on prices which would in turn require more margin calls.   However, the FT story indicates that this attitude is changing.

Forgotten victims of repossession crisis – joint campaign launched

A new campaign has been launched.

Their advice is all sensible stuff:

* Always open mail addressed ‘To the Occupier’. This may include notice of any possession hearings.
* If you’re thinking of moving into a new property, make sure the landlord has permission from the lender to rent it out. Otherwise, the lender does not have to recognise the tenancy at all.
* If you were already living in the premises at the time when the mortgage was taken out, the lender may take you on as a tenant and allow you to pay rent to them directly. If you think you may be in this position, contact a Citizens Advice Bureau or Shelter.
* Try to find out as much you can about your prospective landlord and his/her mortgage status before taking up a tenancy - although in practice this isn’t always very easy.

However, finding out about your landlord is difficult and agents will lie to you.  I still think some new clauses in the contract would help.

How can you avoid a bankrupt landlord?

The media is all over the rise in repossessions of borrow to letters and the impact on tenants at the moment.  On the forums, we have a story of on tenant who may be evicted, but is still expected to sit out the whole tenancy by the agent or face penalties.  He naturally wants to protect his family from a last minute eviction, so found other accommodation.  The letting agent claims he is liable for the whole tenancy.

Although credit checks for landlords are one of our manifesto pledges, we have recently be considering a clause in the AST which helps you get out if the landlord defaults.  There should be a requirement in the AST that the landlord pays the mortgage in full every month.  This way, if they get into arrears you can claim breach of contract and terminate the tenancy.  This affords you some protection from a landlord who takes your rent to pay a mortgage on another property.

Another clause I would like to see is that the mortgage is an appropriate product (i.e. not a owner occupier mortgage). No-one should have to rent from a landlord who is lying to his lender.

Video advice on rights of private tenants

Community Legal Advice has produced a video on how to deal with rent problems.  It’s signed using BSL, but has a voice over as well.  It’s a great starting point on what to do if you’re having problems.

Association of Residential Letting Agents warns of flood unqualified agents…

From the Guardian:

It seems that estate agents up and down the country, unable to sell property, are pouring into the lettings business instead. Like rental properties themselves, the market for letting agents is now saturated. The influx has been so great that the Association of Residential Letting Agents has warned about a flood of “unqualified” agents without professional qualifications or standards hitting our high streets.

An interesting article highlighting the unregulated, poor quality of the private lettings agency business.

http://www.guardian.co.uk/money/blog/2009/mar/17/patrick-collinson-letting-agents

Perils of Defaulting Landlords

This story is been run by the BBC, including a few case studies of blameless tennants evicted due to landlords in arrears.

http://news.bbc.co.uk/2/hi/uk_news/7912025.stm

When asked for comment on why letting agencies credit check tennants, but not landlords, I think the response from Townends (a large agency in Surrey) sums up the problem:

“Credit checks are not something any agent would do on a client. Landlords sign a contract, and have to make sure everything runs smoothly, and we conform to a code of conduct.”

So no argument against credit checks on landlords, other than the fact that they dont already do it.  In this market, with more and more agents attempting to sign up landlords as their sales businesses collapse, it would be a brave agency who tried to credit check a landlord!  This is why legislation or at least changes to the code of practice are required as it will never happen without this change.

Agents are there to represent the interests of landlords and derive their income from the landlords, not the tennants.  Unless that can be changed through legislation, I dont see any way of improving the lot of private tennants.

Steep rise in tenant evictions

“What we’re seeing already is a steep rise in the number of tenants, entirely blameless individuals, who are becoming homeless because their landlords can’t pay their mortgage and their homes have been repossessed,” said Shelter chief executive Adam Sampson.

Tenants can get just days’ notice to leave their home, says the charity, which wants ministers to “act quickly to give tenants far, far longer”.

So, it has started.  Tenants will bear the brunt of all this leveraged property speculation from the buy-to-letters.  Arrears are shooting up:

The buy-to-let sector has been the hardest hit over the past year. The number of landlords who are three months or more behind on their mortgage payments rose by 257 per cent between the end of 2007 and the end of 2008, as landlords failed to secure the rents they needed to meet their loan payments.