Lights, camera, Pre-Action!

law-library-1241321On 1 October 2017 the ‘Pre Action Protocol for Debt Claims’ came into force.

As this protocol applies to any business seeking to recover debt from an individual it should be taken very seriously by letting agents.

In the protocol’s own terms it: “Describes the conduct the court will normally expect of those parties (creditor and debtor) prior to the start of proceedings.”

The aims of the protocol are to:

  • Encourage early engagement and communication between the parties, including early exchange of sufficient information about the matter to help clarify whether there are any issues in dispute;
  • Enable the parties to resolve the matter without the need to start court proceedings, including agreeing a reasonable repayment plan or considering using an Alternative Dispute Resolution (ADR) procedure;
  • Encourage the parties to act in a reasonable and proportionate manner in all dealings with one another (for example, avoiding running up costs which do not bear a reasonable relationship to the sums in issue);
  • Support the efficient management of proceedings that cannot be avoided.

 

But what does this mean in reality?

In short it seeks to improve consistency in relation to creditors’ attempts to recover debts from individuals, and thereby minimise the need to resort to court action.

It also introduces certain template letters and requires creditors to provide the debtor would 30 days to respond to a claim before they initiate court proceedings to recover a debt.

The objective is to improve clarity and consistency whilst avoiding court if possible, encouraging those unable to resolve issues to consider alternative dispute resolution.

However, the question for most letting agents will no-doubt be how much time will it add to the debt recovery process and what will that ultimately cost?

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English Letting Agents Face ‘Scottish Style’ Regulation

 

It is political soundbite party conference season once again so batten down the hatches and prepare for the onslaught of speeches about our broken housing market, over-stretched public services, and the need to come together as a nation.

Last week saw Jeremy Corbyn remind us how wonderful it was to rent in the 1970s, with rent control, security of tenure, and around 10 per cent of the investment needed to sustain a twenty-first century private-rented sector.

In response Secretary of State for Communities and Local Government, Sajid Javid, took to the stage on Sunday (1 October 2017) to outline the Government’s plans for housing and in particular solutions for those currently locked out of home-ownership.

Good, Bad, or Ugly?

How about all three? He started off strongly, openly deriding Labour’s call for rent control as likely contribute to such ills as inflated prices, unemployment and increased debt.

A decisive tick in the ‘good’ column so far as I’m concerned. 

Next up we had landlord redress. So far as I can tell this means ensuring that private landlords, who choose not to use an agent will need to offer the same level of independent redress as letting agents. This seems fair, although if the standards are to be equal across the board, this could be costly for small landlords.

All in all, this is Likely to drive more business to professional agents, so why-not.

Moving on we get a little hazy on some of the detail. The Government is going to consult on establishing a specialist housing court, seemingly to speed up possession claims and ensure fair access to the judiciary. However, at the same time the minister seemed to announce that the notice period required to use the no-fault (s21) process will increase by 50 per cent – from two to three months.

He giveth, and he taketh away.

We also had a teaser about ‘incentives’ to be included in the Budget to encourage longer tenancies – but little more detail.

Finally, letting agents. Mr Javid confirmed his intention to publish legislation banning fees. No great surprise there. He also suggested that letting agents would be fully regulated.

Speaking to those in the know following the speech, it seems that Westminster are looking northward for inspiration, with the Scottish Government providing some pointers.

It seems most likely that agents will have to meet certain criteria:

  • Abiding by a code of conduct
  • Meeting a minimum qualification standard
  • Adequate client money protection insurance
  • Independent redress

Of course the devil is (as always) in the detail and a major point of contention is likely to be at what level to set the required qualification.

Another difficulty will be fitting in all of the legislation required to make this happen and doing so in a coherent way, which doesn’t drive everyone out of business. After all we are still waiting for the implementation of measures from last year’s Housing and Planning Act.

Answers on a post-card re. when this will become a reality and how it’ll all be paid for!

 

 

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What do agents have in common with Tony Montana?

Apparently they both run cartels, which are of interest to the authorities.

Who knew?

Of course our friend Henry probably wouldn’t be quite so interested in the type of cartel apparently being run by letting agents in Somerset – where according to the Competition & Markets Authority (CMA) a group of six estate agencies contrived to fix their respective commission rates.A far cry from Scarface and his gang of associates! Sorry Henry, but I think it’s for the best in the long-run.

But I’ve never been to Miami!

The case actually relates to an investigation undertaken by the CMA back in 2015, whereby the agents in question organised to drive up fee commissions in their local area.

However, this is the first time the details have been published, and seek to act as a warning to other businesses considering similar ‘co-operation’.

Reinforcing the message, Stephen Blake, Senior Director of Cartel Enforcement said:

“Cartels are a form of cheating. They are typically carried out in secret to make you think you are getting a fair deal, even though the businesses involved are conspiring to keep prices high.”

“We are committed to tackling cartels regardless of the size of the businesses involved. We have taken action against estate agents before, and remain committed to tackling competition law issues in the sector.”

Surely I’m free to set my fees however I choose?

Yes and no. Fee levels in a market do tend to gravitate towards a natural point – the alternative is a race to the bottom which tends to favour those with the lowest overheads and often a laissez faire approach to the rules. However, in this case there was evidence of deliberate collusion between the parties, deemed to breach competition laws.

Following the investigation the CMA fined five of the six agents £370,084 – choosing not to fine the sixth in return for its early ‘co-operation’ with the authorities.

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Administration Fees in the Spotlight Again!

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The London Borough of Camden has become the latest London Borough to crackdown on the use of ‘administration fees’ as a catch-all term for fees recovering the costs of various chargeable services offered by many letting agents.

The latest in a long-running case, which began back in early 2016, has seen Camden Council succeed in its recent appeal against Foxtons Ltd for continuing to use the term ‘administration fees ‘in its tenant facing literature.

Trading Standards in the Borough issued four branches of the letting firm with notices in respect of failing to observe the requirements of the Consumer Rights Act 2015 – namely by failing to detail what services were being provided in return for an admin fee.

In response Foxtons amended their tariffs, but not sufficiently to satisfy the Council – leading to the issuance of four Final Penalty Charge Notices.

Subsequently the agency appealed, with the First Tier Tribunal finding that, although the use of vague terminology did represent a breach, the firm had acted appropriately in amending their literature. As a consequence the penalty charge stood, but was reduced to £3,000.

Never a Council to cut their losses, Camden took up their option to appeal to the Upper Tier Tribunal in June this year, with the tribunal finding in their favour and increasing the notices back to £4,500.

Quick recap:

  • Foxtons given 4 x £5,000 notices
  • Foxtons appeals, notices reduced to 4 x £3,000
  • Camden appeals, notices increased to 4 x £4,500
  • Cost of legal advice, tribunal time etc. etc. ?

In the judge’s opinion the £500 reduction (from the original maximum penalty) was appropriate in recognition of Foxtons’ attempt to comply with the original notice.

Foxtons was given 28 days to appeal (from 25 August 2017) which appears to have lapsed without them taking up the option. However, given the legs on this case who knows if this is really the end.

Camden’s cabinet member for housing, cllr. Pat Callaghan, certainly seems to think this is the end of the matter though, stating:

 “We are delighted with this judgment as it has clarified what letting agents must do when publicising their fees. Because of our successful appeal, customers can now fully understand what they are liable for and make informed choices and proper comparisons with other letting agents about the fees charged.

This judgment also gives clarity to Trading Standards officers nationally when enforcing fees and by assisting to ensure the market place is consistent for all letting agents and their prospective clients.

The moral of the story?

Before they are banned completely, if you are going to charge for administration tell your customers what they are getting for their money – they might even appreciate what you are doing for them a little more.

Or you could spend months in front of tribunals. Your choice.

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Gas Safety and Fire Door Safety – Know your Responsibilities

 

Gas Safety Week and Fire Door Safety Week are both fast-approaching, with the former taking place between 18 to 24 September and the latter between 25 September to 1 October.

With both just around the corner, now is the time to offer a refresher on the issues involved, as well as best advice for compliance.

Background to Gas Safety Week

Gas Safety Week is co-ordinated by Gas Safe Register with support from the gas industry including retailers, manufacturers, consumer bodies and the public. Over 7000 companies and organisations have signed up to take part this year, a thousand more than the same point last year.

The campaign is well-timed, with September being the start of the heating season, when many people will be turning on their boilers after a long, warm summer. With 23 million gas-fuelled homes in the UK, gas safety in the home is naturally of great importance.

Background to Fire Safety Week

Fire Door Safety Week was founded by the Fire Door Inspection Scheme, the British Woodworking Federation, and Fire Kills, the Government fire safety campaign.

Fire Doors remain a significant area of neglect in a property, often the first thing to be downgraded on a specification. Added to which, fire doors can often be mismanaged through their service life from being propped open, damaged and poorly maintained.

Needless to say, fire doors are a crucial part of the fire protection of every commercial, public and some types of multiple occupancy building. In short, fire doors save lives.

Do you know your Responsibilities?

Landlords are ultimately responsible for both gas and fire safety in properties but there will be instances where this duty also lies with agents. Make sure both you and your landlord’s roles are clearly stated in your contract or terms and conditions.

However, if you only offer a tenant-find service then you may want to make it clear to your landlord clients that this is very much their responsibility, and choose not to take their instruction unless they can demonstrate compliance.

Remind landlords about their responsibilities sooner rather than later, especially any new clients who are new to buy-to-let and may not yet have digested all the legal requirements of being a landlord. As the agent you have a duty to be maintaining standards of practice and this includes highlighting safety issues to your clients.

We’ve put together a quick list of duties below. If you are unsure about where the responsibility lies for any of these,  seek clarification between yourself and your client as soon as possible.

Gas

  • Ensure a gas safety check has been carried out on each appliance and flue within the 12 month period before any tenancy commences
  • Provide a copy of the safety check record or certificate to any new tenant before they move in or to an existing tenant(s) within 28 days
  • Keep a record of the safety check made on each appliance, and all other gas work, for two years.
  • Maintain the gas installation and appliances, often best achieved by servicing in line with manufacturer’s recommendations
  • Make tenants aware of the location of the emergency shut off valve to their accommodation and how it is operated

Watch our video on Gas Safety and Carbon Monoxide here.

Fire

  • Provide an adequate means of escape in event of fire and, a level of fire detection and extinguishing equipment appropriate to the size and type of property
  • If a House in Multiple Occupation (HMO) ensure it complies with HMO Management Regulations, or if a licensable property, any licence conditions in relation to fire safety
  • Install and maintain smoke alarms in proper working order
  • Ensure that furniture and furnishings provided by the landlord meet fire resistance regulations

Check-in meetings, while not undertaken by all agents, provide a perfect opportunity to alert tenants to their own obligations, such as not propping open fire doors or bringing in any portable gas appliances.

Following the tragic events of Grenfell Tower we also blogged specifically about how to properly assess fire risks, which you can read here. Alternatively watch our video on fire safety risk assessment here or specifically for larger HMOs here.

More advice on gas and fire safety

UKALA agents should visit the UKALA Online Library for more details about responsibilities when it comes to gas and fire in the home. You can also join the UKALA Agents Accreditation Scheme to show existing and new landlord clients – as well as tenants – that you know and take these issues seriously. We also offer a fire safety logbook, which can be accessed here.

For more information about Gas or Fire Door Safety week

UKALA is dedicated to raising standards in the management of private rented properties, so we encourage all members to support these campaigns. You can pledge your support or follow both initiatives using the information below.

Gas Safety  @GasSafeRegister #GSW17 #CarbonMonoxide

Fire Door Safety @FDSafetyWeek and #FireDoorSafetyWeek

 

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Benefit Reform Shock: Not being able to pay the rent leads to homelessness!

NAO visualisation

All legitimate measures suggest homelessness and the use of temporary accommodation have risen steeply during this decade

National Audit Office (NAO) has reported that homelessness has increased according to all measures since 2010.

In fact, launching a report into the subject, Amyas Morse (head of the NAO) released the following statement:

“Homelessness in all its forms has significantly increased in recent years, driven by several factors. Despite this, government has not evaluated the impact of its reforms on this issue. And there remain gaps in its approach. It is difficult to understand why the Department persisted with its light touch approach in the face of such a visible growing problem.  Its recent performance in reducing homelessness therefore cannot be considered value for money”

Of course the root causes of homelessness are complex and varied, but it is about time that the intransigence of government is highlighted as a contributing factor.

Local Housing Allowance rates have been frozen for some time, and current government policy is to maintain the status quo for years to come. However, this report highlights the fact that benefit payments’ inability to meet the increasing cost of providing housing across the country is a major factor in the rise in homelessness.

Counter-intuitively the Government’s preferred approach has been to allow local authority spending on temporary accommodation to skyrocket rather than address the inability of the system to meet the costs of permanent accommodation.

Likewise the NAO has identified the growing trend in households facing homelessness being moved around the country in search of private-rented homes.

More needs to be done, and it is about time ministers listen to the wealth of evidence suggesting that LHA rates need to closer match the cost of housing around the UK.

To read more about this and the findings of the NAO visit: https://www.nao.org.uk/highlights/homelessness-visualisation/ 

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The results are in…..

OLYMPUS DIGITAL CAMERA

Thanks to everyone who took part in our little bank holiday weekend quiz. It’s been fascinating to watch the results roll in (don’t worry – it was all anonymous), and I’m relieved to see that most letting agents – at least the one who read this blog – know their CMP from their CPI, and understand exactly what they need to do to comply with advertising and transparency regulations.

It looks like – if local councils ever get around to enforcing – you’ll be safe from fines for the time being.

Always room for improvement

Interestingly the knowledge gaps that do seem to exist became apparent in those questions concerning your clients liabilities – specifically when it comes to planning for, and licensing of, houses in multiple occupation.

I can almost hear the rejoinder from lots of agents “we don’t do HMO’s”, but unfortunately a policy such as this is no-longer enough to make sure that you, and your clients are not operating in an area where even the smallest ‘shared’ house or flat can carry with it pretty onerous and unforgiving legal responsibilities.

First-up: Planning

Don’t worry, no-one’s expecting you to recite the National Planning Policy Framework verbatim, or provide every new client with a copy of the area’s local plan. But it is a good idea to get your head around planning use classes for residential use – and crucially if there are any restrictions in place in your particular patch.

Most residential premises are classified as C3 (dwelling house), in fact up until 2010 all premises other than large HMOs housing more than six people fell into this category.

This all changed in early 2010 when the outgoing Labour Government introduced the C4 (small HMO) use class. The intention was for all properties let to three or more people forming two or more households to need planning permission. Long story short; this was amended by the incoming Coalition Government later in 2010 and the situation is that a state of permitted development exists for movement between C3 and C4. i.e. you can let to single households, or sharers without applying for permission – it will be deemed permissible.

Unless an Article Four Direction is in place!

Article what?

Without getting into the details of the process and justifications, an Article Four Direction can be introduced by a local authority in respect of a defined area, in order to remove permitted development rights. As a consequence if you agree to let a property previously occupied by a family, to a group of sharers in an area with an Article Four in place – you need planning permission and odds are you may not get it since they are usually introduced to limit the number of new HMOs. Failure to comply with the planning regulations can result in a considerable fine.

Next: Licensing

Most agents are up to speed with HMO licensing, it’s probably one of the reason lots of us choose not to manage larger shared houses – leaving it to those who specialise (and with considerable patience).

However, when it comes to discretionary licensing it can be more difficult to keep up; especially if you operate within the M25 or in the North West of England where the schemes are more common.

Discretionary licensing refers to schemes introduced by local authorities to cover a defined area within their locality. It can be focused solely at HMOs, which do not match the mandatory licensing criteria, this is additional licensing. Alternatively it can cover all private rental property in the area; this is known as selective licensing.

These schemes run for up to five years, and must be consulted on by the proposing authority. However, it can still be easy enough to miss the introduction of a new scheme if property owners are based out of area or if managers are operating across borough boundaries.

Penalties for operating an unlicensed HMO are severe, amounting to fines of up to £20,000 and the possibility of rent repayment orders.

Most parts of the country are not subject to discretionary licensing, but there are more than 70 schemes currently in place – with more under consideration.

For more about new proposals and upcoming schemes, check out the NLA’s website at: www.landlords.org.uk

 

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