As part of a bid to tackle rogue landlords, Croydon Council has pushed forward with a scheme to designate the borough a Private Rented Property License Area. This means that the owners of every privately rented home in the borough must apply to the council for a license in order to continue to rent their property:
- The license, called a Croydon Private Rented Property License (CRPL), will be a legal requirement from 1 October 2015.
- From that date, it will be an offence to rent a property without a license.
- Under the scheme, there will be fines of up to £20,000 for a landlord renting without a license, and with fines of up to £5,000 for breaches of any of the license conditions.
- The license will cost £750 for 5 years, after which it needs to be renewed.
- Landlords who apply to the scheme before 30 September 2015 will get a one off early registration discount of £350 for 5 years.
- Under the scheme, applicants will have to demonstrate that they are a ‘fit and proper’ person in order to be licensed to rent.
Why is this a good policy?
Any proposal to deal with ‘rogue landlords’- landlords who exploit tenants and routinely ignore their repairing obligations and other statutory obligations in relation to health and safety and overcrowding – must be welcomed in a context where they are hugely profiting from tenants’ lack of options in a private rented sector that has doubled in the last fifteen years. A report by the Citizens Advice Bureau in May of this year found that rogue landlords are pocketing some “£5.6bn in rent on unsafe homes that put tenants in danger, including £1.3bn in housing benefit”. The charity also reported that some 740,000 households in England were living in privately rented homes that presented a threat to their health, including 510,000 households with children. All of these houses were found to have category one hazards, such as excessive cold or risk of falls, yet these tenants paid on average £157 a week in rent.
Existing sanctions in the form of fines have proved ineffective as deterrents. A list of convicted landlords put together by Environmental Health News (EHS) found that there have been just 2,006 convictions between 2006 and 2014 in England, and these have resulted in fines of only £3 million in total – or an average of £1,500 per conviction. Many of those convicted are still trading as landlords and housing experts have suggested that many landlords see these fines as merely ‘business expenses’. To put this in context, a rogue landlord identified by the EHS report as the worst repeat offender, having been convicted 7 times and fined a total of £16,565, makes about £188,000 a year in rental income.
Effect of the scheme
By imposing requirements that a licensee be a ‘fit and proper person’ and that they renew their license every five years, local authorities will have far greater powers to prevent repeat offenders to continue trading as landlords. The power to penalise landlords under the scheme is also greater – not only can landlords who fail to achieve acceptable management standards and proper licenses be penalised up to £20,000, in some cases local authorities may even assume management control of a property.
Why Croydon brought in scheme
Croydon Council in its consultations for the scheme identified not only poor management practices by landlords but that intimidation, harassment and anti-social behaviour by landlords was endemic in the borough, which has experienced some of the largest growth in private sector rented accommodation in London. In the last 5 months of 2014, the Council states its tenancy management team documented some 104 cases of illegal eviction and intimidation by landlords and an increase in the seriousness and urgency of complaints about disrepair – some 1,371 complaints were documented in 2013/2014, 17% of which were category 1 hazards.
Landlords attempting to challenge the scheme
Not surprisingly, landlords and letting agencies are nearly unanimously opposed to the scheme. A judicial review is underway, with landlords arguing that this is an unnecessary bureaucratic interference in their tenancies that unfairly penalises the majority of landlords who are acting responsibly. They have dubbed it ‘the tenant tax’, arguing that the increased costs arising from the scheme would only be passed onto tenants in the form of higher rents. The scheme also led to a sort of stand-off between the Government and the Council. In response to landlord association’s complaints about licensing schemes for the private sector, the Conservative Housing Minister Brandon Lewis introduced a bill which required local authorities to obtain ministerial consent before introducing such ‘blanket schemes’. The Labour dominated Council responded by pushing through the scheme 5 days before the bill became law on 1 April 2015.
History of such schemes
Such schemes are nothing new – they were provided for in the Housing Act 2004, and have been implemented in Newham, Barking and Dagenham and Waltham Forest where they are popular with tenants and have been used to bring a number of prosecutions against private sector landlords. Out of all the tenants consulted by Croydon Council, 70% supported the scheme. With authorities continuing to discharge their obligations to house social tenants to the private sector, and more people than ever being priced out of the housing market, it is all the more important to have regulated private rented sector with effective deterrents for rogue landlords.