Real Estate

Landlord Law Newsround #272 – The Landlord Law Blog

Welcome to this week’s Newsround bringing you all the latest trending housing news.

As we fast approach the end of the year, there is no slowing down in the housing sector. This week we start with deposits.

A loophole in zero-deposit schemes

It appears that agents are cashing in on zero-deposits schemes and encouraging tenants and even making a condition of their tenancy to take this out rather than pay a four-week deposit up front when moving into a property (in breach of the tenant fees legislation).

Zero-deposit schemes only require a fee payment of about a weeks rent which is why they appeal, especially if the tenant does not have the money for a big deposit up front.

The Observer said

Unlike a traditional deposit, the fee is non-refundable, with tenants remaining liable for damages at the end of their tenancy. They can also face extra costs for membership renewals and – unlike with standard deposits – face fees for adjudication in the event of a dispute, leaving them worse off in the long run.

Agents can earn up to 30% commission from a referral.

David Votta from the Assoc of Residential Lettings Agents said

It’s often not the agent trying to pursue them, it’ll be debt recovery, and they will want their money with top interest, fees and charges on top, What we don’t want is a PPI moment. The concern would be that there would be people getting sued off the back of it. They could say, you’ve mis-sold this to the tenant: you’ve not provided them with sufficient data to make an informed decision, and you enforced this product on them to earn commission and hit your target.

You can read more here.

This is also reported in The Negotiator where a leading insurer has called for an industry code of conduct as there are fears that it is being mis-sold with some tenants saying they were forced to sign up to zero-deposit schemes.

Sam Reynolds chief executive of Zero Deposit– a regulated insurance provider – has called for the industry to crack down on mis-selling. He said

We are at the point where enough is enough. We are calling for a code of conduct across deposit alternatives that makes FCA regulation and consumer protections mandatory. We have long warned of the risks of certain unregulated alternatives, and we are seeing that in practice, in terms of pressure selling, unfair pricing and punitive charges at the end of tenancy.

Tenants have also complained of high fees at the end of their tenancy where they want to challenge a deduction.

Regulation closes in on Airbnb and other short lets

The debate continues on the tightening of regulation where holiday lets and other short lets are concerned.

Generation Rent is backing a new proposal by labour MP Rachael Maskell who wants councils to issue temporary licenses for Airbnb and other short lets, and to be able to cap their numbers. This is going to be debated in the Commons today.

It is thought that the government still prefer to go down the route of planning consent where these lets are concerned.

Dan Wilson Craw deputy director of Generation Rent says

High nightly rents and the lack of tax and regulation have fuelled an explosion in holiday lets at the expense of people who just need a place to live. In many parts of the country that is forcing people to move away from the places they grew up, and leading to shortages of workers. The government is beginning to recognise the need to intervene. However, it is not clear that planning changes are the answer given how limited their impact has been in London. The permanent nature of planning permission would also make properties designated as holiday lets disproportionately more valuable than other properties.

Instead, councils should have the power to require holiday lets to have a time-limited licence, and cap their number where there is a severe shortage of homes. This would be a more flexible and responsive approach than using the planning system, and would be easier for councils to enforce.

He also claims that the housing supply is greatly impacted by second homeowners.

Modular homes to order?

Two companies have announced a joint venture to provide 1,000 affordable, sustainable, zero-carbon homes. Legal and General Modular Homes (LGMH) and VIVID said the homes will be modular and factory-made and some will be Built to Rent.

LGMH says modular is the way to go in meeting the government’s targets for housing and net zero. They claim they can deliver 75,000 a year which will also create new skilled jobs and increased productivity in factories.

Their new modular homes are highly affordable, high quality and carry a greatly reduced carbon footprint both during construction and across the lifetime of each home.

LGMH claim that their modular home is 60 per cent more efficient to run than a Building Regulation compliant new build home, and their apartments are up to 30 per cent cheaper to heat and run than the average apartment.

Would you buy one? You can read more here.

Governments housing target falls desperately short

Staying on the housing theme the government’s programme of building £21bn more affordable homes in England is falling short by 32,000 homes.

The affordable homes programme risks failing further if the Department for Levelling Up, Housing and Communities does not get a grip on soaring construction inflation.

Grants are issued to housing associations but only 241,000 out of 250,000 homes will be built and about 1.2 million households are on the waiting lists for social housing in England.

Meg Miller, chair of the committee said

The human cost of inaction is already affecting thousands of households and now the building programme is hitting the challenges of increased building costs. This does not augur well for ‘generation rent’ or those in desperate need of genuinely affordable homes.

You can read more here.

Licensing scheme not working

Landlords in Liverpool are unimpressed with their labour council which launched a selective licensing scheme in April but has only granted 104 licences to date despite over 31,000 applications having been made.

Going at this pace, it would take the local authority 148 years to process all applications they have had in so far. This, it is being claimed, makes a mockery of their claim that the scheme would address the sub-standard housing in the city.

The National Residential Landlords Association (NRLA) has chipped in by saying that information they have from the Freedom of Information between 2020/21 is that out of 103 civil penalties, only 89 of them were related to the previous selective licensing scheme.

Ben Beadle, chief Executive of NRLA says

If Liverpool council really believes licensing is so key to ensuring properties are safe, it begs the question why it takes so long to process applications for them. At a time when the condition of housing is under such scrutiny, the council is spending too much time administering a licencing scheme and not enough time taking enforcement action to tackle poor quality housing.

Rather than penalising good landlords with a blanket policy, the council should use the range of data already available to them to find and root out the minority of landlords who fail  to provide safe housing.

You can read more here.

And we stay with NRLA to end our Newsround this week with their response to comments made by Felicity Buchan, Minister for the Private Rented Sector.

Not enough rental properties

The Housing Minister, Felicity Buchan, has now admitted to MPs that the rental sector has shrunk by some 260,000 households since 2016 and is now under immense strain.  She attempted to explain away the problem by blaming it on the pandemic and multiple households ‘bubbling up’.

Chris Norris of the NRLA, Policy Director for the NRLA, said in response:

We welcome the Minister’s recognition of the supply crisis in the private rented sector, but the Government needs to rectify the mistakes it has made in causing this. Since 2015 successive Chancellors have sought to choke off investment in the market with a series of tax hikes. All this has achieved is to cut supply whilst demand continues to soar for fewer and fewer properties. The ultimate losers in this are tenants, who are finding it more difficult to access the homes they need.

We cannot continue to limp along without a pro-growth strategy which embraces tax measures to support investment and ensure renters can find a place to call home.

Another new study, this time from Open Property Group has also warned that more must be done to keep landlords in the sector, which means reversing some of the punitive landlord measures it has introduced.  It says its research shows that England is facing a significant homeless and housing crisis – which I think is something anyone in the sector can see coming down the line.

The Government has now recognised that there is a problem.  Let us see if they can do anything about it.


Newsround will be back next week.

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