Increasing numbers of Housing Benefit claimants are being excluded from the private rental sector as the number of properties listed as ‘No DSS’ grows according to a House of Commons Briefing Paper. ‘No DSS’ (standing for “Department of Social Security” which was replaced by the Department for Work and Pensions 16 years ago) means the landlord or agent won’t rent a property to someone on housing benefit or local housing allowance.
The House of Commons reports corroborates anecdotal evidence from the Hackney-based private renter information and campaign group Digs which found only one studio flat on the market available to Housing Benefit claimants in a survey of 50 local estate agents between December 2015 and February 2016.
Despite calls from renters rights groups to outlaw the proscription of renters receiving state benefits on discrimination grounds, the House of Commons briefing paper stated that such restrictions on Housing Benefit claimants is “unlikely to amount to direct discrimination as income and employment status are not protected characteristics under the Equality Act 2010.”
The paper also highlighted other factors which may be exacerbating landlords’ reluctance to let to Housing Benefit claimants which include:
uncertainly around the roll-out and implications of Universal Credit
the payment of Housing Benefit in arrears
restrictions in mortgage agreements and insurance requirements
impending tax changes resulting in landlords focusing on “less risky” tenants.
The House of Commons report was soon followed by significant coverage of the publication of a list of banned tenant types from Britain’s biggest landlord, Fergus Wilson, which included tenants receiving benefits. Mr Wilson also included workers on zero-hour contracts, single parents, battered wives and plumbers on his list of undesirable tenant types.
In addition the the reluctance of many landlords to rent to people on benefits, mortgage lenders may also be exacerbating this situation. In 2012 for example, the buy-to-let lender, The Mortgage Works, stated that no new mortgages would be advanced to landlords whose tenants received benefits. This condition was later withdrawn after significant negative press coverage. Other property letting websites also include a search filter to screen out properties which do not allow tenants on benefits.
This situation is of such importance to large numbers of renters that the housing charity Shelter has published a guide for benefit claimants to convince a landlord to rent to them.
Around a million renters living in HMOs (Houses in Multiple Occupation) will soon benefit from extra protection from rogue landlords being planned by the government.
HMOs, familiar to many students and flat sharers, are defined as properties shared by more than one unrelated persons. Typically these may be groups of friends such as is common for student accommodation or by strangers. Typically the house sharers will have their own bedrooms but will share communal areas such as bathrooms or kitchens.
Under the government’s proposals, tenants living in a HMO may soon benefit from:
minimum room size standards (6.52m2 for one person rooms and 10.32m2 for double rooms)
improved waste disposal facilities
tackling rogue landlords through the introduction of a fit and proper person test for HMO landlords
Most significant is the proposed extension of the HMO licensing regime to include small HMOs which are currently exempt from mandatory licensing.
To date only large HMOs (3 stories or more) require mandatory licensing. The government seeks to extend HMO licensing to all properties irrespective of size and will push all HMOs with five occupants or more from two different households into the mandatory HMO licensing regime (with the exception of purpose built flats).
Due to the higher risk of poor quality housing in HMOs complex licensing regimes exist which may vary significantly across the UK. The move to license all HMOs will also help reduce such regional variation in licensing regimes and housing standards. These extra renter protections will enhance currently existing license checks for properties which currently include minimum building quality standards (gas/fire safety) and the payment of a license fee.
Currently landlords operating an unlicensed HMO which requires licensing are liable for criminal prosecution and may be subject to an unlimited fine. Under such circumstances tenants may apply for a Rent Repayment Order to receive refund of up to 12 months’ rent on the property.
Posted for residents of Ashford (Kent), the list of unacceptable tenants include:
Zero hours workers
Tenants on housing benefits
Tenants with children under 18
People with pets
Low income workers
Despite Mr and Mrs Wilson’s estimated wealth of £200 million, the couple are known for penny-pinching. In 2014 Fergus Wilson lost a court battle to charge a tenant £3,000 for a broken toilet lid even though the tenant had offered to replace it out of his own pocket. Judith Wilson is also believed to owe £3,000 in court costs after a failed attempt to sue a gas engineer for £5,000. The Wilsons had claimed that the engineer’s decision to issue an “At Risk” notice on gas equipment in one of their properties had made the house unrentable. Such considerations factored into Fergus’ decision to ban plumbers as tenants in his latest letting criteria since he believes they “rip him off” about repairs and “invent” problems with the properties which he says they bill him for.
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Fergus Wilson’s ban of domestic abuse victims comes after the 69-year old’s unsuccessful bid to stand as an independent candidate for Kent’s Police and Crime Commissioner last year which was blocked for incorrect submission of nomination papers. It was also expected that Wilson’s candidature would be deemed ineligible for a conviction of assault for which he was fined £500. Wilson, who planned to stand as an independent, intended to run on a platform of tackling domestic violence saying that he was particularly concerned by two domestic abuse cases involving Kent Police and would have used his £85,000 salary to fund a rapid-response team of four officers.
Commenting on the tenancy rules Fergus said the criteria are revised every year and are concerned with “financial fine tuning of the business” adding: “it is just economics… I live in the big bad world of reality, if I do not let properties and do not get the rent then I do not eat, I starve to death… it is the Government’s job to help poor people.”
Last week the government tightened its Right to Rent rules, making it a criminal offence for a landlord to let to anyone they know, or have reasonable cause to believe, is an illegal immigrant. Previously breaches of this law were sanctioned by civil penalties. However as of 1st December the penalty for failing to check a tenant’s right to rent is a criminal offense which may risk a prison sentence.
Under the Rent to Right policy, landlords must check that their tenants can legally rent a property. Tenants must produce a document, such as a passport or a certificate of naturalisation, to prove their Right to Rent.Under the new rules, landlords could also receive government notices to terminate tenancies for people disqualified from renting. In such circumstances renters may face eviction without a court order.
This policy has serious ramifications for renters. According to a survey conducted by the housing charity Shelter, 44% of landlords said the policy would make them less likely to rent to people who appear to be immigrants, with similar numbers saying the same about people without a British passport.
In addition to potential discrimination , reports exist of letting agents charging prospective tenants additional agency fees to conduct Right to Rent checks.
In 2015 a Home Office evaluation of the Right to Rent scheme found that some landlords were charging a fee which ranged from £10 to £120 to carry out immigration checks which the government estimates would take around five minutes to complete. The Right to Rent policy must be applied to all tenants and by law, landlords must check that every tenant has the right to rent in the UK which could lead to increased lettings fees for tenants.
Although the Chancellor Philip Hammond’s Autumn Statement announced plans to ban lettings agent fees, there is an important window where landlords and letting agents can pass on the enhanced Right to Rent checks to tenants. Renters should therefore be vigilant that they check the amount charged by landlords for administration fees before the letting fee ban officially comes into force.
In his Autumn Statement today the Chancellor Philip Hammond announced plans to ban letting agent fees in England “as soon as possible” which may be save 4.3 million households hundreds of pounds.
Currently many tenants face charges to draw up tenancy agreements, conduct immigration and credit reference checks in addition to the payment of a non-refundable holding deposit paid before signing up to the deal.
The move comes as numerous reports have indicated that many tenants living in sub-standard housing are discouraged from moving out because of extra fee charges. A report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees.
Nonetheless, landlords groups have claimed that banning letting fees will not necessarily reduce rental costs with landlords and letting agents increasing rental values to offset loss of income. However, renters groups assert that the ban will make it easier for tenants to compare the cost of different properties and reduce the incentive for letting agents to replace tenants.
The move is a culmination of greater regulation of the letting market and will move England further in line with Scotland where lettings agency fees to tenants have already been banned. Since 2015 lettings and managing agents in England and Wales have legally been obliged to clearly publicize their fees.
More than 170 tenants are being evicted every day according to 2015 Ministry of Justice figures.
More than half of the 42,728 evictions recorded in England and Wales last year were attributable to private landlords with rent arrears being cited as one of the most common factors. Retaliatory evictions of tenants who complain about poor property standards was also a factor in a significant number of the eviction cases. Many such evictions may have been brought forward in anticipation of laws against revenge evictions which entered into force on 1st October 2015.
It is believed that a significant fraction of the rise in evictions originated from the private rather than the social rental sector. Ministry of Justice figures show that the majority of evictions in 2015 resulted from a section 21 accelerated procedure which are usually a feature of private landlord evictions.
This situation is set to deteriorate as increasing numbers of people are forced into the rental sector due to the housing affordability crisis. According to information from the Association of Residential Letting Agents (ARLA), home ownership is expected to be permanently out of reach of around a fifth of people in the UK. Property unaffordability is exacerbated by rising rents with an average renter in the North East and London estimated to spend around £31,300 and £68,300 respectively on rent over a decade. To compound this situation further, rents are forecast to climb at a faster rate than house prices in future.
Since the entry into force of the Tenancy Deposit Scheme many landlords and letting agents have devised ways of evading and ignoring deposit protection rules.
One common tactic which renters should be aware of is issuing tenants with a “licence to occupy” in place of an “Assured Shorthold Tenancy”.
A licence gives the right to occupy and is typically used for bed and breakfasts, hotels, holiday lets and some HMOs. Often tenants only discover that a license has been issued when attempting to recover their deposit at the end of their occupation. However, despite being called a license, you may still have an Assured Shorthold Tenancy (AST) in the eyes of the law. In this event it may be possible to use typical AST measures to recoup moneys owed.
Do I have a License or a Tenancy?
A tenancy is created automatically if someone moves in and starts paying rent. Some landlords incorrectly issue licenses, either through inexperience or design to give tenants less rights than they would usually expect with an AST. A tenancy cannot be turned into a license merely by both parties signing a piece of paper headed ‘license agreement.’ A landmark case which defined the requirements for a tenancy as opposed to a license was Street v. Mountford in 1985. This stated that one has a tenancy if one:
pays a rent
occupies the property for a term
enjoys exclusive possession of land / property
These conditions do not apply if one does not pay rent or if the occupier does not enjoy exclusive possession such as in a shared room or if cleaning and meals are provided as in a hotel.
The clearest way to identify the difference between the two [license and Assured Shorthold Tenancy] is exclusivity. If a tenant has exclusive use of at least one room in the property, and that room(s) is specified, this will usually be classed as a Tenancy Agreement. If the property is shared with more than one individual, this is more likely to be a Licence.
I believe I have been incorrectly issued with a license and my landlord has not protected my deposit, what should I do?
It may therefore be possible to claim damages from your landlord if they incorrectly issued you with a licence and failed to protect your deposit. According to current deposit protection rules, your landlord must register your deposit in one of the three government-approved deposit protection schemes within 30 days of the start of your tenancy. The penalty for non-compliance is a fine of between one and three times the deposit amount.
Despite the pessimism of most young people who voted to remain in the EU in June, there have been some suggestions that Brexit may be good for British renters.
Whether brexit is good or bad for renters depends fundamentally on whether house prices fall relative to the earnings of renters.
Following the referendum result, Zoopla predicted that house prices may fall up to eighteen per cent. KPMG envisages a more modest decline of 5 per cent with London hit harder than the rest of the country. Both cite possible limited future access to the European market which might make British property less attractive to overseas buyers. Others speculate that there will be no house price fall since demand has far outstripped supply over the past few decades. However one ought to bear in mind that over optimism in the Housing market is a constant feature of house price predictions in the UK. Few for example predicted the 2007 sub-prime mortgage crisis and subsequent recession.
The devaluation of sterling might also offset any reduction in the attractiveness of UK property due to exclusion from the single market for international investors.
On the side of earnings; before the referendum, the Treasury warned that Brexit would cut economic growth by 3% to 6%. The TUC also warned that leaving the EU could reduce average earnings by £1976 per year by 2030. However, it is still too early to say whether wage decreases offset house price falls.
Fundamentally the most important cause of Britain’s housing crisis is British government policy, not international investors or the EU. The remedy, liberalization of planning laws and regulation of the letting sector, is opposed by most English and Welsh MPs. It is therefore unlikely that Britain’s decision to leave the EU will improve or worsen the lot of private sector renters.
Letting agent Foxtons is facing an £80m “class action” over letting agent fees which could see the company forced to pay back hundreds of pounds to current and former tenants.
The case, launched by the social entrepreneurial firm CaseHub, claims that Foxtons’ fees could be illegal under the Unfair Terms in Consumer Contracts Regulations 1999, and its successor the 2015 Consumer Rights Act. CaseHub’s founder, Michael Green, claims that “service charges” such as £420 for administration, £300 for name changes and £165 for checking out a property are vastly inflated. Green states that fees for such services should instead range between £10-£55.
The Foxtons’ case comes at a time when the issue of letting agent fees and regulation has attracted increasing Parliamentary attention. In May the Conservative MP for Lewes, Maria Caulfield, secured an Adjournment Debate in the House of Commons to discuss the Government’s actions in relation to letting agent fee capping.
Miss Caulfield reported research from Seaford and Lewes Citizen’s Advice Bureau which found that letting agent fees can range from £175 to £922. This is in addition to an average of a six-week rent deposit. During the debate Conservative MP Kevin Hollinrake, co-founder of Hunters Estate Agents, argued against fee capping. Hollinrake claimed that agents may choose to decline tenancies to prospective tenants with inferior credit histories or increase rents should fees were scrapped.
Green states that the proposed class action against Foxtons is about extravagant, gratuitous and hidden fees. These include overcharging, double charging landlords and tenants and introducing fees at the last minute.
Foxtons dismisses the claim, saying its fees are “open and transparent” and that tenants have full visibility of charges before renting a property.