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Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current Buy-To-Let Mortgage Terms

Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current Buy-To-Let Mortgage Terms

Industry welcome to weak tenants’ charter that could see UK PRS landlords at odds with

Buy-To-Let Mortgage Lenders

The new tenants’ charter was announced by the Secretary of State for Communities and Local Government (CLG), Eric Pickles, last Wednesday, allowing tenants to ask for longer tenancies and better transparency of letting agents’ fees.

The new tenants’ charter will also aim to force all lettings and property managing agents controlling PRS rental properties to join a compulsory redress scheme.

The Tenants’ Charter, published for consultation, outlines what tenants should be looking out for at every stage when renting a property in the UK’s private rented sector, including lettings agents having to inform customers what all their fees are upfront, before they have committed to anything, including visiting a property.

However, the introduction of these terms under the banner of the tenants’ charter could threaten the business future of large numbers of landlords who would technically be in breach of the strict buy-to-let mortgage terms imposed by many mortgage lenders, which generally stipulate that tenancy agreements are to be for a period of no more than one year.

Secretary Of State For Communities & Local Government, Eric Pickles

Secretary Of State For Communities & Local Government, Eric Pickles

Mr Pickles stated that the Government intend to publish a code of practice setting standards for the management of property in the private rental sector (PRS) along with guidance setting out the role of public bodies in protecting tenants from illegal eviction.

Mr Pickles said: “This government is on the side of hardworking people and the last thing we want to do is hurt tenants and kill (property) investment by increasing costs and strangling the sector with red tape. But tenants deserve better value for money, and dodgy landlords should be under no illusion they can provide a shoddy service with impunity. These proposals will raise the quality and choice of rental accommodation, root out the cowboys and rogue operators in the sector, and give tenants the confidence to request longer fixed-term, family-friendly tenancies that meet their needs”

Mr Pickles also said that the Government will develop a model tenancy agreement which will clearly set out the rights and responsibilities of tenants and landlords, and ensure families can benefit from longer tenancies, without changing the existing legal framework for the rental market. He said “Longer tenancies will give families greater certainty and security, especially for those with children at school, and reduce costs for both tenants and landlords who will not have to pay letting agents to arrange frequent contract renewals.”

Clive Betts MP, Chair of the Communities and Local Government Committee said: “I am pleased that the Government has embraced many of the recommendations in our private rented sector report. The proposals for a tenants’ charter and model tenancy agreements reflect our calls for greater awareness of rights and responsibilities. Far too often the security needed by families is not being provided by the private rented sector. I am pleased, therefore, that the Government has listened to what the Committee said about the need for more family friendly tenancies. It is also welcome that the Government is taking forward our proposal to allow rent and housing benefit to be clawed back when landlords have been convicted of letting out dangerous property. The Committee will be watching closely to ensure that they are translated into action. We will also press to ensure that the Government’s gathering of information on selective licensing leads to action to raise standards. Much remains to be done if renting is to become an attractive alternative to owner occupation. It is disappointing; therefore, that the Government does not see fit to crack down on cowboy letting agents and their rip off fees and charges. It is also regrettable that the Government has declined to give local authorities the powers and freedom they need to improve housing in their areas.”

Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current
Buy-To-Let Mortgage Terms

Property professionals generally agree with the introduction of the new tenants’ charter but many think that the Government have sidestepped the opportunity to enforce much tighter regulation of landlords in the private rental sector and lettings and property managing agents in particular and many feel that the new measures fall short of what is really needed.

It will be interesting to see if the Government put pressure on the banks and mainstream mortgage lenders to abolish or ignore such limiting clauses, allowing them to deliver on the real aim of the tenants’ charter.

Caroline Kenny, an executive of the UK Association of Letting Agents (UKALA) wants the Government to build on the experience and expertise of those industry bodies which already require higher standards of their members. Commenting “Responsible agents who choose to belong to professional bodies which require client money protection insurance, impartial redress and an adherence to a strict Code of Practice are forced to compete with those who show little regard to professional standards or the needs of their clients. UKLA believe that this package of proposals represents a missed opportunity for the Government to make mandatory the kind of comprehensive protection offered by the UK Association of Letting Agents and other industry regulatory bodies, which are called UKALA & NLAfor by those working in the property industry and needed by hardworking consumers who are unable to differentiate between good and bad letting agents.”

Richard Lambert, Chief Executive of the National Landlords Association (NLA), said: “The NLA has long argued that private renting can be far more flexible than commonly perceived, and we need to tap into this potential to meet the changing needs and expectations of those who rent. We look forward to working with government to make a success of these proposals. However, we believe that the Government has missed an opportunity to require greater professionalism of letting agents. While the requirement to belong to an approved redress scheme is a step in the right direction, it does little to protect the financial interest of landlords and tenants working with unregulated agents.”

Residential Landlords Association

Join The Residential Landlords Association

Alan Ward, Chairman of the Residential Landlords Association (RLA) welcomed the Government action to improve tenants’ understanding of their rights and responsibilities saying: “Tenants take more trouble buying a second-hand car than renting a house” Ensuring that tenants and landlords each understand clearly their rights and obligations to one another ensures a balanced relationship and enables them to hold each other to account based on the large number of laws already in existence. It will also play a vital role in rooting out those willfully criminal landlords who reap misery on tenants. We look forward to working with Ministers on the Charter as well as on how to best get this information to tenants.”

RICSPeter Bolton King, RICS global residential director, said “The long overdue announcement was definitely a step in the right direction. The lettings sector has for far too long been the Wild West of the property industry, with many tenants having absolutely nowhere to go should they wish to complain about shoddy service. The introduction of a code of practice specifically covering those managing rented property should certainly improve standards.”

Chief Executive of the Housing & Homelessness charity Shelter, Campbell Robb said “This announcement is recognition that current private renting arrangements are not fit for families with children, who need greater long-term stability. This is a welcome step in the right direction, and ministers now need to consider how to make longer tenancies a real choice for the families desperate for a more stable place to live.”

The announcement of the new Tenants’ Charter was good news for consumer champions, Which? Who have been campaigning since 2007 when they first called for an amendment to the Consumers, Estate Agents and Redress Act 2007 requiring letting agents to join an approved complaints scheme, just as property sales agents are. The consumer groups investigations also discovered earlier this year that major letting agents are acting unlawfully by not being upfront about the fees charged to clients.

The Enterprise and Regulatory Reform Act 2013, looks set to be implemented in Spring 2014, giving all landlords and tenants access to a complaints scheme. This will mean that 40% of agents who currently aren’t signed up to a redress scheme will have to become members

Which? Executive Director, Richard Lloyd, said: “Renting is now the only housing option for millions so we’re pleased to see the Government taking steps to address problems in the lettings market. Making charges clear upfront will enable people to shop around more easily, and longer tenancies could mark the end of unnecessary renewal fees. The new legislation giving landlords and tenants access to a complaints scheme now needs to be brought in as soon as possible and there must be strong action taken against any agent in breach of the scheme.”

  • Do you think the proposals go far enough?

Take our Poll on the Tenants Charter or leave a comment below!

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Government Manage To Lose Housing Minister

Government Manage To Lose Housing Minister

Government Reshuffle Does Away With

Housing Minister Position

Mark Prisk, the (now former) Government Housing Minister and Conservative MP for Hertford and Stortford, lost his Government position after the cabinet reshuffle last Monday.

 

New Under Secretary of State - Kris Hopkins will be responsible for Housing

New Under Secretary of State – Kris Hopkins will be responsible for Housing

Housing will now be part of Conservative MP for Keighley, Kris Hopkins responsibility as he steps into a new Government role as Under Secretary of State, rather than Housing Minister and he will be deputy to the Secretary of State.

Mr Hopkins is another former leader of Bradford Council, like his ministerial counterpart, Eric Pickles.

News of the ministerial reshuffle was broken last week via the Government’s Twitter site and also by Mark Prisk himself via Twitter, however on the Conservative Party website it was alleged that Mr Prisk had been asked to step aside due to his reluctance to undertake media interviews rather than his actual work.

Government Manage To Lose Housing Minister

Government Manage To Lose Housing Minister

The Conservative MP tweeted “Been asked to step aside for Housing for a younger generation. Disappointing but its been a great eleven years on frontbencher”

Reflecting on the property market recently, the Hertford and Stortford MP commented: “As a Government we have worked hard and prioritised limited financial resources to help the housing market through one of its toughest times and create the right conditions for it to flourish.”

Mr Prisk inherited the Housing Ministers job from Grant Shapps, who was promoted to Conservative Party Chairman, in September 2012. His previous roles included working on the Government’s Construction Strategy at the Department for Business, Innovation and Skills.

Richard Lambert, Chief Executive Officer of the National Landlords Association (NLA), commented on the cabinet reshuffle stating: “The NLA is pleased to welcome Kris Hopkins as Parliamentary Under-Secretary of State. We hope the incoming minister will take a proactive and holistic approach to addressing the issues facing the housing sector exacerbated by the shortage of housing supply. However, it is extremely disappointing to see the Coalition reduce the significance of housing within Government. Given the significant challenges facing households throughout the country it is essential that housing takes centre stage in political debate. We hope the apparent demotion of the housing portfolio from Minister of State to Under-Secretary of State does not reflect a change in priorities from the Government ahead of the General Election in 2015.”

MP’s Claim Universal Credit Is Another Government White Elephant

MP’s Claim Universal Credit Is Another Government White Elephant

Universal Credit Roll-Out faces major delays

The current Local Housing Allowance (LHA) benefit system is likely to continue until at least 2017 for the majority of private rental sector (PRS) landlords and tenants in most of the UK, following major delays to the roll-out of the new Universal Credit system.

Universal Credit was originally due to be rolled out nationally to all new tenants claiming benefits from October this year, however due to continued problems, the controversial welfare reform measure will just be extended to an additional six jobcentres.

The delay is being blamed on poor IT by Government ministers, leading to claims that Universal Credit is just another Government white elephant.

Universal Credit was heralded by its proponents as an easier way to deliver state benefits including housing benefit or LHA and tax credits into one lump sum paid monthly to claimants, but its proposal saw an immediate backlash from PRS landlords, letting agents and landlord associations over the abolition of direct rent payments to landlords.

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MP’s Table New Proposals To Regulate Private Lettings Market

MP’s Table New Proposals To Regulate Private Lettings Market

Two new proposals have been individually tabled by Labour MP’s calling for the regulation of landlords and lettings agents.

Former Labour housing minister John Healey and veteran Labour backbencher, Sir Alan Meale, made the proposals in the House of Commons separately but both are calling for better regulation of the private rental sector

Mr Healey’s Bill seeks to introduce mandatory licensing for lettings and property managing agents and a ban on lettings agents charging fees and is called “The Letting Agents (Competition, Choice and Standards) Bill 2013-14”.

The objective of the proposal is to establish a national mandatory licensing scheme for lettings and managing agents, with established standards and redress for landlords, tenants and leaseholders, and prohibition of lettings and management agent fees; to enable local authorities to administer and enforce the scheme; to require that tenants, landlords and leaseholders have written agreements; and to empower local authorities, either alone or in partnership, to trade as letting and managing agents.”

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Government Offers Direct Payment Guarantee For Social Landlords

Government Offers Direct Payment Guarantee For Social Landlords

Private Rental Sector Landlords
Expected To Fend For Themselves

PRS landlords were left furious after the Government Welfare Reform minister offered social landlords the opportunity for direct payment of housing benefit under the Universal Credit scheme, but there was no such offer for private landlords.

Government Welfare Minister, Lord Freud has offered landlords a series of small concessions over Universal Credit, with payment of housing benefit to tenants temporarily suspended if rent arrears exceed two months. However, this only applies to social housing landlords, i.e local authorities and housing associations and not private sector landlords.

Lord Freud confirmed that direct payment of housing benefit to tenants who are at least two months’ behind with their rent, would be suspended, with the total amount of rent outstanding paid back to social landlords within six to nine months.

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Landlords expected to do UK border agency's job for them

Landlords expected to do UK border agency’s job for them

Private landlords are set to become an extra line in UK Border Control as they will be legally responsible for ensuring that they only let rental properties to people allowed to be in the UK under immigration laws announced in the Queen’s Speech.

This means that Private Rental Sector (PRS) and social housing landlords will have a responsibility to make sure their tenants are in the country legally

Over 3 million buy-to-let landlords are rental property owners in the UK private sector and will be responsible for checking the immigration status of all potential tenants, with fines running into thousands of pounds for those breaking the law.

Employers will also face more substantial fines for employing on illegal immigrants.

It appears that UK landlords and employers are expected to police the immigration system as unpaid members of the UK Border Agency.

Landlords are being given additional responsibility with no recompense other than the threat of heavy fines for failure to comply. Why are we expected to do the UK Border Agency’s job for them when they are paid handsomely for failing to do the job they are employed by the Government to do?

Does this mean that Landlords will be given a financial incentive to turn informant?

I don’t think so…

The new measures are included in an amended Immigration Bill will also limit the ability of European migrants to claim UK state benefits and ensure that the right to residence in the UK on the basis of family commitments is not abused by criminal elements. The UK judicial system will be expected to balance the nature and seriousness of the crime committed against the right to remain resident in the UK.

Temporary migrants will be charged for use of NHS services and only those who have lived in an area for at least two years will qualify for social housing. Regulations will also be amended to ensure that European immigrants cannot claim benefits for more than six months if they do not actively seek legal employment and show they have a genuine chance of obtaining work.

The legislation has been drawn up as the Coalition Government struggles to contain the electoral threat posed by the UK Independence Party (UKIP), which has hard-line immigration policies.

The details of how the measures will be implemented will be set out later in the year. The plans will be the subject of a formal consultation in the coming months.

Ministers expect the legal requirements on landlords will affect those letting rooms in houses of multiple occupancy (HMO) properties. However, the measure will be universal and it will be the responsibility of all landlords to seek copies of passports and appropriate visas.

It is unclear how landlords are supposed to verify the authenticity of documentation, as many employers have already discovered to their cost since the tightening of employment rules surrounding immigrant workers, as falsified information has no way of being checked and is only up to the diligence of the employer to ascertain the true identity of their employees.

The limit of the financial penalties set to be levied on landlords who fail to comply is also yet to be decided but is expected to be severe and may run into thousands of pounds.

Labour MP's Intend To Introduce Regulation To Control UK Lettings Industry

Labour MP’s Intend To Introduce Regulation To Control UK Lettings Industry

The regulation of the private rented sector (PRS) and the UK letting industry as a whole has been the subject of many tabloid newspaper headlines in recent months and now MP’s are adding their weight to the calls for further regulations.

The subject of letting agent fees is now being used by politicians to create civil unrest among tenants and their landlords, in order to bring about even more regulation.

One of the many problems faced by tenants in the PRS has been highlighted by Hilary Benn, Labour’s shadow secretary of state for Communities And Local Government (CLG), who has spoken out over the high charges placed on tenancies by letting and property managing agents and she has claimed that some agents are ‘ripping off’ landlords and tenants.

The shadow secretary of state said Labour are concerned about commission charges and fees for additional services such as Tenant Referencing, credit checking, periodic inspections and sending letters.

The data gathered by the Labour Party suggests that agents’ charges vary to a huge extent, a worrying factor when it is considered that in 2013, the number of residential properties available to be rented out privately is set to exceed social housing in the UK for the first time.

Letting agent charges for Tenant Referencing and credit checking range from £10 (GBP) to an excessive £275 (GBP), while the charge for renewing a tenancy varied from £12 (GBP) up to £220 (GBP).

“What is actually £220 of cost in terms of administration if you had just to send an email, open an envelope and stick it in a file? That seems to me to be a rip-off. It’s a problem not just for tenants but also for landlords.” Said the Labour MP.

Hilary Benn and the Labour party have promised that they will look into ways to cap charges in the Private Rental Sector (PRS) and would be a widely welcomed move by Landlords and Tenants Groups across the UK.

Ian Fletcher, Director of Policy at the British Property Federation (BPF) said: “Anyone can set themselves up as a letting agent, and then potentially abscond with hundreds of thousands of pounds of people’s cash. It is therefore counterintuitive that estate agents who handle relatively little cash are regulated, but letting agents who handle lots of cash are not.”

Labour has conceded that part of the problem lies in the fact that the levels of social housing have still not increased from when they were last in power, and as a result, more and more people are forced to turn to the private rental sector as they are unable to get on to the property ladder and into home ownership.

In the present day, the Labour Party recognises that the PRS is meeting an urgent need and will press on with finding a solution to excessive agent charges.

Jeremy Corbyn, the Labour MP for Islington North has said that he plans to introduce a Private Member’s Bill in order to help regulate the Private Rented Sector (PRS), which he called an ‘utter disaster’.

Speaking in an adjournment debate in the Commons, the labour MP said in his own constituency, 30% of residents live in private rented accommodation and his proposed Bill would also introduce rent controls.

Mr Corbyn stated: “I wish to draw to the House’s attention the huge problems facing people living in the private rented sector in this country. This has to be seen in the context of the overall problems of housing supply and need in Britain. In 2010, 102,000 new properties were provided in this country, but every year approximately 230,000 new households are created. There are 2.8 Million people on the waiting list for council housing in the whole country and 3 Million people living in the private rented sector. I want to talk about the private rented sector because it has been the fastest-growing sector. Even if all the council housing I would like built, was built quickly, an enormous number of people would still be living in the private rented sector. Private rents have risen at double the rate of wages over the past ten years, while people living in the private rented sector are ten times more likely to move than owner occupiers. Furthermore, rents are rising fast despite the low level of wage rises at the moment and the relatively low levels of inflation. In other words, it costs more to live in private rented accommodation.”

He went on: “The terms of tenancies and conditions for people living in private rented accommodation tell a very sorry story indeed. We have a system of Assured Shorthold Tenancies (ASTs) – which give tenants a guaranteed tenancy of only six months and, after that, a two-month notice period – along with very high rents. In my constituency it is quite normal to find people living in private rented accommodation who are paying over half their take-home pay, if they are in work, on their rent. We also have a housing benefit system that militates strongly against people in the private rented sector. The Government have introduced the rent cap, which has limited the levels of housing benefit being paid. I am now facing the trauma – and it is a trauma – of seeing large numbers of tenants in my constituency who were or are in receipt of housing benefit being forced to move out, because their housing benefit has been cut and their rents have gone up, and because they cannot afford to meet the difference from other benefits, if they are on them, or their wages. There is, in effect, a social cleansing of inner London going on because of the imposition of the housing benefit cap. I stress the point that a large number of people in receipt of housing benefit are working – albeit on low wages, but they are in work. The current situation is an utter disaster, but it does not have to be like this, and I hope that things can change. Germany, for example, has 60% of its housing provided by the private rented sector. Germany has permanent tenancies and rent controls provided, and a tax regime that encourages good rather than bad management. Germany has a much more stable community and society as a result. I hope to introduce a Private Member’s Bill to bring about regulation, rent controls, decency and, above all, security in good-quality homes for those living in private rented accommodation. This is a serious issue that must be faced for a large number of people in this country.”

 

The Housing Minister Grant Shapps has again dropped another broad hint that the Government plan to step in and regulate the UK Private Rental sector affecting the rights of both Landlords and Tenants.

A proposed new bill of rights for Buy-To-Let (BTL) landlords and tenants in the UK private rental sector could be introduced by the Government in an attempt to make the PRS market easier to operate in.

The Housing minister said that the plan was to take all the separate housing regulation for both parties and group them in an umbrella-style document, covering all bases. The plans are thought to include regulation covering fire safety and anti-social behaviour.

Mr Shapps said: “One way of reducing the regulatory burden on landlords but also improving the safety and security for tenants would be to provide a central, standardised document, containing all landlord and tenant responsibilities from fire safety to anti-social behaviour.”

Lib Dem MP, Adrian Sanders, is also in favour of the proposed changes, stating that it would “simplify” the private rental sector, in the same way that the planning sector has benefited from a similar scheme.

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Almost 40%, (four in ten) properties in the UK Private Rented Sector, (PRS),  have Buy-To-Let mortgages on them.

The estimate was made by Communities and Local Government (CLG) minister Andrew Stunell in response to a question from campaigning Labour MP Graham Jones asking about “The effects of buy-to-let mortgages on the size of the private rented sector”.

Stunell replied: “Based on data drawn from the English Housing Survey for 2010/11 and the latest figures from the Council of Mortgage Lenders, (CML), we estimate that buy-to-let mortgages currently support some 39% of private rented sector stock. The Government’s Housing Strategy outlines our support for a thriving private rented sector, (PRS), as well as taking a series of measures to build more affordable homes and support home ownership.”

Graham Jones has repeatedly called on the Government to tackle the problem of rogue landlords.

Mr Jones is the MP for Hyndburn in Lancashire, whose council is currently making a second attempt to regulate private landlords by introducing selective licensing.

The authority’s first attempt was blocked when a legal challenge by a collective of landlords was upheld by the courts

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