Analysis from leading trade body backs up concerns of SMEs like London Accommodation Centre UK Ltd
In light of the quantity of new legislation imposed on the lettings sector each year, it becomes an inevitability that small businesses operating in the industry will be affected.
This is particularly so when one considers the scale of new laws: one of the leading trade bodies in the industry recently uncovered that the number of laws which generate new obligations for landlords in the private rental sector has increased by 32 per cent in the last nine years.
The analysis, conducted by the Residential Landlords Association [RLA], showed that the total number of regulations in the sector is now at 156, having risen from 118 since 2010 when the coalition government of David Cameron's Conservatives and Sir Nick Clegg's Liberal Democrats assumed power.
However, the RLA’s belief is that the volume of new legislation has not had the desired effect of improving enforcement legislation against landlords acting unlawfully, exacerbated by the failure of local authorities to properly use their new powers.
Indeed, previous RLA research revealed that two thirds of councils had not begun any prosecution proceedings against private landlords in 2017-18.
In the same year, 89 per cent of local councils informed the RLA that they had not used their powers to issue civil penalties [ranging up to £30,000] against private landlords who had committed a range of offences. Furthermore, 53 per cent of councils did not have a policy in place to enable them to properly use the power.
One piece of legislation which the RLA has highlighted for its ineffectiveness in allowing local authorities to root out criminals is the mandatory introduction of licensing fees and document verification within the lettings sector. One industry expert has even suggested that these regulations have proven a bane to law-abiding landlords, calling them both 'costly and time consuming'.
Ghulam Mustafa is a director at London Accommodation Centre UK Ltd, a Hackney based lettings and property management firm. He discussed some of the issues with existing legislation and how it impacted his business in The Parliamentary Review.
Mustafa wrote: “For larger companies, overcoming these obstacles [obligatory licensing fees and document verification] may be easier – they may have more resources at their disposal, or even a dedicated compliance department. As a small family-run business, we struggle with the wealth of new legislation imposed on the lettings sector every year.
“For us, the most serious challenge has always been repossession and recovery of outstanding rent. Most of the regulations dealing with this unfortunate outcome favour tenants’ rights, offering very little for landlords who have lost income and have legal costs to contend with. This issue is, more often than not, dragged out for an unnecessary length of time.”
Often, as Mustafa explained, circumstances leave landlords with no alternative but to go through the legal system to take necessary action.
"Tenants will move into a room or flat, pay the rent for a few weeks or months, then stop paying rent so that they can get a council flat. At this point, we have no choice but to go through the courts by using organisations like Landlord Action; even then, we often have to wait between six and nine months for a court date, all the while losing income.
“After a further two months, the court will order finally repossession. We then need a bailiff to act on our behalf, which takes another month or two to organise. Throughout this period of time, the tenant is living at the property rent-free and enjoying free utilities. Just to get our property back costs us thousands between loss of rent, legal fees and unnecessary utility bills”.
Mustafa favoured a revision of existing regulations in order to offer more support and protection for law-abiding landlords while serving its purpose of rooting out the criminals.
The RLA not only shares these same concerns, but has gone further by calling for mandatory licensing schemes to be scrapped ahead of the December 12 general election.
The association adds that licensing schemes have only proven effective in penalising good landlords with more red tape, while allowing criminals to continue to operate in the sector unchecked given the lack of enforcement, an assertion which is fully supported by Mustafa's perspective.
The trade body proposes as an alternative that councils are given the power to utilise the wide range of data at their disposal to identify landlords, including council tax, benefits, tenancy deposit and electoral roll information, with central government supporting the measure with a multi-year funding settlement to ensure enforcement is resourced appropriately.
Addressing the associations proposals, RLA policy director, David Smith, explained that political parties should be looking to introduce smarter enforcement of the laws in the sector, rather than increasing amounts of legislation which have already hamstrung landlords.
Smith said: “Removing criminal landlords from the sector will only be achieved if councils have the resources and the will to properly use the wide range of powers they already have. Piling more regulations onto the sector which will continue not to be properly enforced is meaningless and serves only to put off good landlords from providing the homes to rent we need.
“It’s time for smarter enforcement, not more regulation.”