Recent plans to force landlords in the private rented sector to check
the immigration status of their tenants have been significantly
watered down. The issue first came to light in the Queen’s speech at
the beginning of the month and it looked like being a major pain for
landlords across the UK. Landlords faced huge fines if they ended up
letting properties to illegal immigrants. If the plan had gone ahead,
it would have become a bureaucratic nightmare for landlords.

Why the change?

This change has come about because the government is apparently
concerned that ordinary landlords would have become bogged down in an
inordinate amount of red tape. The Communities department, run by
Eric Pickles, was concerned about the “unfair administrative burden”
landlords would have to bear.

The unwanted effect of immigration checks

Inevitably the cost of performing checks on a potential tenant’s
immigration status would have been passed on by landlords, so rents
would have to go up as a result. There was also a concern that such
changes would discourage new landlords from investing in the buy to
let market, and with so many councils reliant on housing in the
private rental sector, this would have been a disaster.

Immigration checks to go ahead in some areas

Although the government has changed its mind about introducing
landlord immigration checks across the board, some areas of the UK
will still be affected. However, the new scheme will primarily be
focussed on some boroughs of London where large numbers of immigrants
are known to live, specifically Hounslow and Ealing.

An article in the Telegraph yesterday suggests that if Labour comes
back into power, they will introduce caps on rents in the private
sector in a bid to curtail the continually rising welfare bill. The
information came from Mr Byrne, Labour’s Shadow Work and Pension
Secretary, at the same time as Ed Milliband prepares to make a speech
outlining how Labour will be seeking to curb welfare spending.

Crackdown on Private Landlords

“A lot of people say to us why are we spending £24 billion on housing
benefit – a lot of that money is going to private landlords,” Mr
Byrne told the BBC.

“Why don’t we give local councils the power to bring down the cost of
rents, particularly in the private rented sector, and use some of
those savings to actually build more social housing? That would stop
the housing benefit bill going up and up and up.”

Big Spenders

Labour has a reputation for being the last of the big spenders, so Ed
Milliband is trying to get away from that negative image. In line
with the current government, Labour is now willing to concede that
welfare spending needs to be brought under control and capping
housing benefit costs is one way to do this. Since a large proportion
of housing benefit payments go to private landlords, the private
rental sector may well take a hit if Labour are voted into power.

Contributory Principle

Another one of Labour’s ideas is to give those who have a history of
work a higher level of benefit payment.

A landlord’s properties are his or her investment, so if anything
happens to that investment, it isn’t a good thing. So imagine how you
would feel if you went to visit one of your rental properties and
discovered there was nothing left but a vacant plot of land and a
pile of rubble? Well that’s exactly what happened to one landlord!

Council Bulldozers Moved In

The property in question was one of three located in the middle of a
regeneration scheme. The council had issued a compulsory purchase
order on the property, but although the council and landlord had been
in negotiation prior to the demolition, the landlord had not yet
accepted a final offer. So you can imagine the landlord’s surprise
when he belatedly discovered the council had sent bulldozers in and
reduced his house to dust.

A Danger to the Public

The council’s excuse for demolishing the house was that it had been
in a dangerous condition. They allege that the properties had
deteriorated badly and were a danger to the public, therefore they
had to come down. The landlord does not believe this explanation: he
claims he received zero documentation and was not given a chance to
accept any offer of financial recompense for his loss. He added:

“I have been treated with utter contempt. I will be taking this to
the local authority ombudsman.”

How Do Compulsory Purchase Orders Work?

According to Newcastle Council: “For landlords, offers of
compensation are based on the current value of the property, together
with certain statutory expenses to help them buy a replacement
property and, in some cases, an additional loss payment. Valuations
may change if the condition of the house deteriorates.”

Following on from the first consultation paper back in April, the Labour Party has released details of a further policy review. Labour’s aim is to improve the private rented sector and provide good quality homes for all.

Hilary Benn MP, Shadow Communities and Local Government Secretary:

“Wherever we live, we all want a safe and secure home for ourselves and our families. The private rented sector is playing an increasingly important role in providing homes for people, and the majority of landlords are responsible and do the right thing. But there are also bad landlords whose properties are poor quality, hard to heat and who charge high rents. And that’s why we are considering practical steps to deal with them and ensure that all homes are of the right standard.“

Main Features of the Policy Review

 Landlord register – designed to improve the standard of private rented properties, Labour believe that a landlord register will help local authorities to identify landlords in their local area. It will also assist HMRC in tracing landlord tax evaders, who are thought to owe millions of pounds in unpaid tax on their rental income.

 Selective licensing – licensing schemes have already been rolled out in some parts of the UK, but if Labour has its way, red tape will be relaxed and local authorities will find it easier to introduce selective licensing schemes.

 Sanctions on rogue landlords – Labour wants to make it non-profitable for rogue landlords to operate. They also want to remove landlords with criminal convictions from a landlord database, thus making it impossible for them to stay in business.

 Minimum property standard – Labour plans on setting minimum legal standards for energy efficiency and deposit protection.

According to recent research conducted by the Local Government
Information Unit 33% of councils are considering the introduction of
compulsory licensing in an attempt to regulate the private rented
sector better. Nearly all of them also believe that local authorities
“have an important role to play” in the private rental sector.

One of the main reasons councils are beginning to sit up and take
more notice of the private rented sector is that increasing numbers
of people are renting their homes from private landlords. Figures
from the latest census indicate that the number of people renting
homes in the private sector has increased by a whopping 88% since
2001. Local Authorities are also using homes in the private rented
sector to place homeless families and others in need of
accommodation, mainly because there is such a shortage of council
properties.

Why are councils pushing for compulsory licensing?

Safety is a big issue with accommodation in the private sector. Most
landlords take their responsibilities seriously, but there are a
small minority who fail to carry out safety checks on gas and
electrical installations or take notice of fire safety legislation.
Councils are worried that there is not enough regulation is place and
vulnerable tenants are at risk.

Phil Buckle from the Electrical Safety Council has been quoted in the
Guardian as saying: “Despite the fact that electrical accidents are
the number one cause of domestic fires in Great Britain, most
landlords are not legally required to have their electrics checked or
provide their tenants with safety certificates – a requirement for
gas certificates has been compulsory since 1998. With increasing
numbers of people renting privately, it is imperative that proper
regulations are in place to ensure their safety.”

The Daily Mail is advising its readers this morning on “how to build
a buy to let empire” as a way of propping up their dwindling pension
pots. The Mail cites falling house prices and the availability of buy
to let mortgages as two of the main reasons for the buy to let boom.
So just who are these new landlords and why are they taking the
decision to capitalise on rental properties?

Existing Property Owners

Not everyone wants to sell a property when a house move is on the
cards. Some families are forced to move for employment reasons, but
rather than selling the family home, they are letting it out instead.
For many, this approach makes perfect sense. Your mortgage is covered
by rental income and you have a nice nest egg waiting in the wings
should you decide to sell at a later date.

Investment Opportunists

In some areas, rental properties are in big demand and there are
multiple tenants fighting over a handful of homes. If a house or flat
happens to come on to the market at a decent price, there are plenty
of would-be landlords eager to snap it up and capitalise on the
rental income it is capable of generating.

Pension Income

The traditional way of saving for retirement has always been to pay
into a pension plan. Sadly this isn’t working for a lot of people
these days since interest rates are at an all time low. Rental
income, on the other hand, offers a far better return on investment—
one leading expert has estimated rental profit to be around 5.3% of a
property’s value, which is a lot higher than most measly savings
accounts.

A landlord from Exeter had a nasty shock when he made a routine visit to one of his rental properties: The only tenants in residence were 42 cannabis plants. Unfortunately, in a misguided attempt to make it nice and comfortable for the growing plants, the original tenants had pretty much wrecked the flat in the process.

Skilful damage done

The flat had been let to two brothers. One was a carpenter and the other was an electrician. Putting up a few shelves or wiring in a new plug socket would probably have been acceptable, but these two decided to make extensive holes in the ceilings of the flat so that they could install a complicated ventilation system. They also took the decision to knock through some of the rooms downstairs to make one large growing space.

Cannabis factory prosecution

The hapless duo were subsequently arrested and later appeared in court. Amazingly the judge took a somewhat lenient approach to their crimes. Because the brothers claimed that the cannabis crop was entirely for their own use and there was no evidence to show they had planned to sell the drug, the judge decided not to send them to jail. They were, however, sentenced to do 100 hours of community service and pay costs.

How to protect your rental property from cannabis farms

Making regular checks on rental properties is an essential task for landlords. You might not be able to prevent tenants from running a cannabis farm, but at least you can minimise any long term damage to your property.

According to the Association of Independent Inventory Clerks, a large
number of landlords are being forced to deal with tenants who make
changes to their property without asking permission. Unfortunately,
it can cost time and money to return a property to its former
condition—and not all tenants are happy about paying the bill.

What kind of changes do tenants make?

If a tenant has lived in a property for a long time, it is not
unreasonable for them to want to make a few changes here and there.
Often these changes affect the garden. For example, a tenant might
dig out a pond or install some timber decking around the back of the
property. It could be argued that this kind of change is an
improvement, but if you are the landlord of the property, you might
not necessarily agree, particularly if the work is of a sub-standard
quality or it devalues the property.

What should tenants be asked to do?

It is normal to expect a tenant to keep a garden in reasonable
condition. If the property is let in an unfurnished state, the
landlord does not even have to provide the tools, although you may
wish to in order to increase the chances of your tenant doing the
gardening on a regular basis. Sadly not all tenants have green
fingers and many can’t be bothered to even cut the lawn. So if you
suspect your property is being neglected or the tenant has made
changes without permission, talk to your tenants and remind them that
they are in breach of their tenancy agreement if they don’t return
the property in the same condition as they found it.

The British Property Federation is warning landlords that even if a
letting agent has signed up with an Ombudsman, their money is not
necessarily protected. So if your letting agent has some of your
money in the form of deposits and rent payments, you could still lose
it all if they go bust.

Why use a letting agent?

For some landlords, a letting agent is a useful intermediary. If you
are an absentee landlord or you don’t have time to manage your
properties, a letting agent can do much of the hard work on your
behalf. They can find you tenants and manage the everyday business of
running a rental property. All you have to do is pay their fees and
pocket the rental income. Unfortunately, not all letting agents are
scrupulous—some dip into clients money for their own use and others
simply mismanage their finances and end up going out of business as a
result.

How can landlords protect their interests?

Dealing with letting agents who are registered with an industry
ombudsman means you have an avenue for complaint if things go wrong,
but it won’t necessarily protect your money. Before signing up with a
letting agent, it is a good idea to check whether they are registered
with a client money protection scheme. If they are, your rights are
protected and if the agent subsequently goes out of business, your
money is safe. But even if they say they are registered with a
protection scheme, you should still check them out to make sure they
actually are registered.

Housing Associations and social landlords are becoming increasingly
concerned about the mental health of their tenants as the economic
downturn continues. Many deprived communities are feeling the strain
and the “bedroom tax” is already having a significant effect on many
tenants. People who have lived in larger properties for many years
are now expected to make a greater contribution towards their rent
for the privilege of having an extra room or two. In some cases, this
is causing huge strain, both financial and emotional, and at least
one tenant has been reported in the media as taking their own life as
a result.

Training in mental health issues

Staff are being trained to help them identity whether a tenant is
showing the symptoms of mental health problems and is at risk of
suicide. Housing support workers are being sent on training courses
to help them manage their tenants. Some of the concern is as a result
of other community support workers being withdrawn from vulnerable
communities because of a lack of available funding.

How can social landlords help vulnerable tenants?

If you work in the social housing sector, it is likely that one or
more of your tenants are experiencing financial difficulties.
Desperate people sometimes do desperate things, so if you suspect
that a tenant is at risk of mental health problems or could even be
suicidal, try talking to them to see of they need any extra help.