Article Posted -
05 Jul 2018

 

At the Senedd this week, Chris Norris, NLA Director of Policy and Practice, gave evidence to the committee on the impact on landlords of the proposed Welsh Fees Bill.

Giving evidence to the Equality, Local Government and Communities Committee, Chris argued that the proposed changes will be lead to an increase in costs for landlords.

Chris highlighted throughout the meeting that the PRS has a limited elasticity in the landlord’s or owner’s ability to absorb costs; supply in the PRS isn’t unlimited.

In regards to effective enforcement, Chris also questioned the extent to which the Bill would achieve its intended aims, reflecting his earlier statement on Bill when it was introduced by Welsh Housing Minister, Rebecca Evans AM, last month:

“Whilst tenants and applicants deserve to be treated fairly, and not unduly charged, it is disappointing that the Welsh Government seem to be adding to the enormous amount of change with which landlords in Wales are being expected to contend.

“With all of the uncertainty surrounding the introduction of the new ‘Standard Contract’ from 2019, and ongoing debate about fitness for habitation in the private sector the NLA would like to see the Welsh Government focus on getting the fundamentals right before moving onto new challenges.”

Vulnerable tenants

Jenny Rathbone AM asked whether banning fees would make landlords ‘cherry pick’ the tenants they do business with and leave vulnerable tenants sidestepped.

Chris answered by drawing a parallel to the difficulties encountered by landlords and agents with the right to rent policy. He highlighted that the extra procedures and paperwork involved the process has created a desire for a simple or straightforward tenant.

“From an admin perspective, you see a relatively straightforward process… or a more expensive, complicated process… It is reasonable to suggest that people will favour the simple case if you’re not allowed to recoup the cost of doing [a] longer, more burdensome process… guarantors would provide twice the work therefore if the cost is the same, would be easier to choose the prospective tenant without a guarantor”.

Who gains the benefit?

Jenny Rathbone AM also asked why tenants should be paying the letting agency (administration and referencing) fees, when it’s the landlord who benefits from the service.

Chris argued that where the landlord is procuring a service from the agent, it makes sense for the landlord to bear the full cost e.g. finding a tenant, drawing up a tenancy agreement – and many landlords are surprised to find their tenants are being charged for something they believe they have paid for.

‘However, there are some charges for which both the landlord and the tenant are beneficiaries’ – avoiding pre-screening, referencing, and particularly checking-in – and where there’s a risk of harm for both parties if the process isn’t followed properly through poor service ‘there’s an argument for sharing that cost’. He argued there needs to be ‘a true understanding of who are the beneficiaries of different services, and therefore the costs are met by the people who are benefiting’.

Security deposits

The Bill proposes holding deposits are capped at one week’s rent. Previously the Welsh Housing Minister has said most tenants should only be asked to pay a month’s rent as a security deposit, with the Bill including provisions to limit deposits charged.

Proposed requirements on landlords and agents returning a holding deposit to a tenant are also set out in the Bill. If false information is provided, part of that holding deposit may be withheld.

Chris defended the flexibility of security deposits to allow landlords to mitigate risks as appropriate.

The NLA does not believe there should be a cap, as Chris outlined:

“The security deposit never becomes the landlord’s money. The security deposit always remains the tenant’s money. The legislation already protects that… It’s not in the landlord’s interest, or the agent’s interest, to ramp up the security deposit that they can’t use as operating capital, because it becomes a barrier to getting people in the homes.”

‘Amateur landlords’ and enforcement

The Committee asked whether those giving evidence would agree with the views of RLA policy director David Smith, who told a committee last month about the fee ban in England, stating that current rules regarding fees are poorly enforced.

The Committee also questioned whether the Bill would root out ‘amateur landlords who have little understanding about their responsibilities’.

Chris argued that the committee should ‘be cautious about the term ‘amateur’… it doesn’t mean they’re not responsible’.

Instead Chris recommended that the legislation should be seeking to remove landlords who are irresponsible and do ‘flout the law’ and ‘don’t want to provide a good service’.

Chris also agreed with the impact of poor enforcement and questioned the extent to which this Bill would have the impact intended without a strong enforcement regime to back it up, as seen with existing legislation.

“Wales has an opportunity because of RentSmart Wales and licensing that exists to effect change without resorting to additional legislation, but lack of enforcement makes it ineffectual”.

What happens next?

Following today’s oral evidence session, the Committee will hear more evidence on the Bill.

The Committee will then report back with their findings, and the NLA will have the opportunity to formally respond to the consultation on the Renting Homes (Fees etc.) (Wales) Bill.

The NLA has also submitted a written response to the committee which you can read here

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