A place to stay, a place to call home: a strategy for the private rented sector in Scotland

CHAPTER 3 IMPROVING QUALITY

IMPROVING QUALITY

This chapter examines how the Scottish Government, working with its partners, can help improve standards of service provision and the experience of renting in the sector.

The Current Regulatory Framework

The diagram below highlights the main provisions governing regulation of the private rented sector in Scotland, and when they were introduced.

Figure 2: The PRS Regulatory Framework

Different opinions are held on the adequacy or impact of the range of measures that regulate Scotland's PRS. Regulation plays an important role in the effective functioning of the sector. The Scottish Government wants to ensure that the regulatory regime in place is effective and feedback from the consultation on a draft Strategy has been considered carefully.

The Scottish Private Rented Sector Strategy Group

As part of its work in developing a consultative Strategy, the Scottish Private Rented Sector Strategy Group helped identify a number of key issues for landlords, tenants and local authorities in relation to the private rented sector regulatory framework:

Table 2: PRS Strategy Group Key Issues on the Regulation of the Sector

Tenants	access to more effective redress or dispute resolution when disagreements arise between landlord and tenant about quality of management or property condition; the current tenancy regime not providing adequate security for some; and poor quality of service and illegal fee charging by some letting agencies.
Landlords	many feel the current regulatory format to be unfairly balanced towards placing the burden on landlords; swifter access to legal redress when issues arise ( i.e. evictions, antisocial behaviour etc); improved arrangements for recovery of possession; and tackling the small minority of landlords who operate illegally and may be linked to wider criminal activity.
Local Authorities	resources to effectively enforce the law to tackle poor landlords; length of time for cases to be dealt with by the court and difficulties in retaining witnesses to provide evidence; and lack of priority given within the criminal justice system to housing related cases.

Consultation feedback

A key message from the consultation was that regulation, in order to be fully effective, requires robust enforcement.

Local authority responses focused on the role of landlord registration, with many suggesting that it had to be used more effectively and no longer in a 'light touch' way. Lack of resources in enforcing landlord registration was commonly cited as a key reason for a lack of success in tackling the worst landlords.

More targeted enforcement was also highlighted, in particular to tackle worst practices in the sector by a minority of landlords. Many respondents stated that for the worst landlords, non‑legislative action would not be effective at tackling their poor and often illegal practices.

Landlord representative bodies suggested that 'better' regulation did not necessarily mean 'more' and that the focus should be on effective enforcement of existing regulation.

Recent Legislative Action

Recent legislative action taken by the Scottish Government has put in place firm foundations to build on in delivering the vision set out in this Strategy.

The Private Rented Housing (Scotland) Act 2011

The 2011 Act contained a number of provisions for improving the sector, including strengthening the Houses in Multiple Occupation ( HMO) and Landlord Registration regimes; taking action on the charging of illegal premiums; and introducing a Tenant Information Pack.

Recent Legislative Action: The Private Rented Housing Act (2011)

• Houses in Multiple Occupation:
  - Increasing the maximum penalty for a criminal conviction for non-compliance with HMO Licensing to £50,000;
  - Discretionary power for local authorities to refuse an HMO application on the grounds of a breach of planning control;
  - Discretionary power for local authorities to refuse to grant an HMO Licence if it considers that there is overprovision in the locality where the accommodation is situated.
• Landlord Registration: A number of provisions to strengthen the landlord registration regime, including:
  - Disqualification Orders for unregistered landlords, where a court may disqualify a person convicted of not registering as a landlord from being registered for up to five years;
  - Increase the maximum penalty for a criminal conviction for acting as an unregistered landlord to £50,000;
  - Duty on landlords to include landlord registration number in advertisements;
  - Further consideration to the 'fit and proper' test for firearms and sexual offences;
  - Further power for a local authority to obtain information in relation to landlord registration.
• Clarifying the law on the charging of Premiums: Clarifying that only rent and a refundable deposit can be charged to a tenant in connection with the granting, renewal and continuance of a private rented sector tenancy.
• Tenant Information Pack: From 1 May 2013, landlords have a duty to provide new tenants with a pack containing standardised key information on renting in the private rented sector. This includes information on the tenancy; about the property and landlord; responsibilities of tenants and landlords; and where to go for further information and advice.

Tenancy Deposit Schemes

Three Tenancy Deposit Schemes approved by the Scottish Government opened in July 2012. Introduction of the schemes will protect tenant deposits, providing a fairer and more transparent approach to managing tenant deposit payments. This measure addresses the significant problem caused by a minority of landlords who have unfairly withheld tenant deposits.

The schemes in Scotland are provided without the need for public funding, and are free for tenants and landlords to use. Services provided by each scheme includes a free, independent dispute resolution process, to be accessed when disputes arise over the return of deposits.

Improving the Impact of Regulation and Enforcement

The Scottish Government acknowledges that whilst the majority of landlords are law abiding, there remains a small group of exploitative landlords who bring the reputation of the private rented sector into disrepute. The Scottish Government is committed to ensuring that local authorities have the powers they need to tackle this problem.

This Strategy aims to enable a more targeted regulatory system for the private rented sector in future, focusing tougher enforcement action on those landlords who cause safety and management concerns; tarnish the image of the sector; and destabilise fragile communities.

The Role of Landlord Registration

Landlord Registration has been in force since 2006. The original purpose of the scheme was to provide local authorities and members of the public with a list of private landlords in their area, and for local authorities to ensure that they were fit and proper to let property.

The 2011 Independent Review of Landlord Registration noted that overall, the creation of the landlord register has brought about a more systematic approach to the administration of the private rented sector and has provided useful data on the scale of the sector. The research also suggested that:

• the legislative framework was broadly accepted. However, some confusion remained as to the overall purpose of landlord registration, given its genesis in antisocial behaviour legislation;
• on the whole, local authorities reported that the fees associated with landlord registration do not cover actual local authority costs; and
• the current legislative framework for landlord registration should be tested further before any legislative change is undertaken.

Scottish Ministers established a Working Group in 2012 to identify actions to address recommendations from the independent review. This work includes a detailed scrutiny of the adequacy of the current fee structure and how it is applied by local authorities, and how landlord registration can be run more effectively.

Feedback from the consultation

More effective enforcement of landlord registration was a key theme in consultation responses. Both local authorities and housing associations proposed that increased resources would result in more effective enforcement.

Further key points raised included providing local authorities with wider powers to inspect properties, ensuring effective evidence gathering and better sharing of information, for example between Landlord Registration teams and other council departments, as well as other partners.

The purpose of Landlord Registration

A key action recommendation from the review was for the Scottish Government to re-state the purpose of Landlord Registration.

This Strategy recognises that where local authorities operate a joined-up approach, both internally and with their Community Planning Partners, Landlord Registration can play a crucial role in helping to inform intelligence-led, targeted enforcement action on PRS issues.

Having noted findings from the independent review and the consultative PRS Strategy, the Scottish Government would describe the Purpose of Landlord Registration as:

• providing a register of all private landlords for public inspection, with the added assurance that the local authority has conducted a fit and proper test;
• providing a regularly updated register that can be used to assist dialogue between local authorities and landlords, and to disseminate best practice information; and
• ensuring that landlord registration enforcement action is targeted on tackling the worst landlords in the sector, whether that involves dealing with concentrations of such landlords in vulnerable urban communities, or challenging the practices of individual landlords in more rural or sparsely populated areas.

Tackling Bad Landlords - Local Authority Led Partnership Working

Existing legislative powers, bolstered by recent legislative action, will assist local authorities and their partners addressing the impact of bad landlords on tenants and communities. However, a deeper-rooted problem exists in relation to those landlords who may be engaging in wider criminal activity.

A key theme across the majority of responses to the consultative Strategy was the need for more collaborative and cross-agency partnership approaches. Effective partnership working between a range of public services such as housing, social work, education and police has to be established in order to identify and prosecute landlords who continue to ignore the law and provide inappropriate and sub-standard housing. Such partnership working also enables services to identify and assist vulnerable adults and children living within privately rented properties.

Work being taken forward by Glasgow City Council, supported by the Scottish Government, to conduct targeted Landlord Registration enforcement activity in the Govanhill area of the city is an example of how such partnership working can begin to tackle the problems created by bad landlords. Based on the experience in Govanhill, the Scottish Government has asked Glasgow City Council to share learning on the success of this focused approach, to help local authorities to take forward similar targeted interventions.

Case Study: Partnership Working - Learning from Govanhill

Govanhill is a traditional tenemental area in the south side of Glasgow which faces a complex set of challenges including: a significant problem with 'bad' landlords, major overcrowding, a large proportion of private rented housing in a poor state of repair, problems with factoring, persistent problems of crime, antisocial behaviour, fly tipping and other environmental hazards.

The area has historically long been home to migrants, and is currently home to a new group of migrants, mostly from eastern Europe. Many of the private rented tenants living within this area suffer from a range of financial, health and social issues - an already complex range of issues further compounded by language barriers.

In 2011, the Govanhill 'Hub' was established, bringing together a multi-disciplinary team comprising police, council, housing association officials and other services in order to tackle unregistered landlords and enforce environmental health laws.

The Hub is starting to have a positive impact and this has resulted in an increased number of landlords registering with the local authority, increased engagement with vulnerable tenants (including those who do not have English as a first language) and improvements in environmental health. Whilst the work of the Hub is still at a relatively early stage, and the practices of a number of local landlords still need to be the subject of strong enforcement action, these results are encouraging.

This is a co-ordinated approach undertaken by Glasgow City Council and its partners to address some of the severe and complex issues within the Govanhill area. It demonstrates how a targeted, multi-agency approach can begin to tackle some of the worst landlords operating within the private rented sector, whilst also helping to improve property conditions and build community relationships.

ACTION 1: Work with COSLA, individual local authorities, and landlords to refine the landlord registration regime to identify new means of targeting tougher enforcement action on the worst landlords in the sector. Specifically by:

• using learning from the work of the Govanhill Hub, and other good practice across Scotland, to influence formation of local partnerships to assist vulnerable communities and individuals experiencing problems with bad landlord practice; and
• examining how the powers available to local authorities might be enhanced, enabling them to take stronger, targeted enforcement action in the most vulnerable communities.

The Role of Letting Agents

Professional organisations such as the Association of Residential Letting Agents ( ARLA) and the Royal Institution of Chartered Surveyors provide members with a Code of Practice and Rules of Conduct to adhere to, encouraging responsible business practice and providing a route of redress for landlords and tenants should any disputes or grievances arise.

Many letting agents in Scotland operate in a professional manner, complying with voluntary Codes of Practice and ensuring high quality levels of service for the tenants and landlords they assist. Such good practice is not shared by all however, and further consideration on the regulation of letting agents was included in the consultative Strategy.

Among the main risks arising from bad letting agent practice are:

• agents going out of business and losing all monies held on behalf of landlords and/or tenants; and
• not following correctly the regulations set for the sector - examples are not drafting legally accurate tenancy agreements and charging illegal premiums.

Recent action taken by the Scottish Government to clarify the law on the charging of premiums and introduction of Tenancy Deposit Schemes will help address poor practice. However, there remains the need to examine the requirement for further regulation of the letting agent industry.

The consultative Strategy considered three potential options for this. These were:

• expansion of landlord registration to include all agents;
• a separate system for agents similar to that now in place for property factors; and/or
• a legal obligation that all agents must be a member of a recognised professional body.

Further regulation of the letting agent industry received broad support from across the sector and the Scottish Government will now work with all partners to identify the most effective form that this may take.

ACTION 2: Work with all partners and stakeholders to identify the most effective form for further regulation of the letting agent industry in Scotland, considering legislative change where required.

Better Access to Justice

To provide effective legal redress, the current private rented sector regulatory framework relies largely on cases being raised in the sheriff court by local authorities, tenants or landlords.

Stakeholder feedback on the consultative Strategy highlighted a range of issues regarding difficulties in accessing effective redress through the justice system. Issues highlighted included:

• a view that some sheriffs have limited knowledge of housing issues;
• difficulty for local authorities in pursuing landlords through the courts, with particular issues in relation to time and financial resources; and
• difficulty for landlords in gaining possession of their property by taking court action to evict tenants, in particular time and cost associated with this.

The diagram below highlights some of the issues that stakeholders have highlighted in relation to accessing effective legal redress.

Figure 3: Issues with Legal Redress

Scottish Ministers held a consultation between January and April 2013 on options for improving the system for resolving rented housing disputes. Options included:

• more preventative action: building on existing work to prevent housing problems escalating into housing disputes;
• mediation: seeking to increase the use of mediation to resolve housing disputes before they reach court; and
• creating a new national housing panel to adjudicate on disputes arising between landlord and tenant.

Problems in resolving disputes before they reach court can arise from lack of awareness of respective rights and responsibilities. The Scottish Government's mandatory Tenant Information Pack and other information raising activities across the sector will help to address this knowledge gap.

A new housing panel could provide an alternative forum to the courts for resolving some housing disputes. It could also operate as a problem-solving forum which could make binding interim orders before a case reached court.

Court Reform

Scottish Ministers have also consulted on reforms to the civil court system which will implement recommendations of the 2009 report of the Scottish Civil Courts Review. The recommendations include creating a new third tier of judiciary, to be called summary sheriffs. The new summary sheriffs would be recruited from legally qualified practitioners who have experience and expertise in the kinds of casework which might fall within the competence of the summary sheriff, including housing cases.

It is proposed that the summary sheriffs will operate a new simple procedure which will use clear and straightforward rules written in plain English and under which summary sheriffs will adopt a problem solving approach.

ACTION 3: Use findings from Scottish Government consultations on (i) options for improving dispute resolution in rented housing, including the potential creation of a new Housing Panel, and (ii) proposals for reforms in the sheriff court, to inform action aimed at improving redress for consumers, including legislative change as required.

The Private Rented Housing Panel

The Private Rented Housing Panel is responsible for determining referrals from tenants concerning the landlord's duty to comply with the Repairing Standard under the Housing (Scotland) Act 2006. The Panel is also responsible for making rent assessments related to certain types of regulated or protected tenancies and deciding other tenancy matters in the private rented sector.

The Repairing Standard states that a privately rented property:

• must be wind and watertight and reasonably fit for tenants to live in;
• structure and exterior must be in a reasonable condition;
• water, gas, electricity, heating and hot water installations must be in good working order (these include external features such as drains);
• fixtures, fittings or appliances provided by the landlord must be in good working order and safe to use;
• furnishings provided by the landlord must be suitable to use; and
• must have suitable smoke detectors.

Implementation of the Property Factors (Scotland) Act 2011 on 1 October 2012 created the Homeowners Housing Panel ( HOHP) which operates alongside the PRHP. The HOHP is responsible for resolving disputes between homeowners and property factors relating to property factoring and land management issues.

Responses to the consultative Strategy demonstrated support for broadening access to the PRHP by enabling third party reporting to the Panel. It was suggested that some tenants may be reticent to submit a case to the PRHP due to concerns about being served a notice for eviction or intimidating behaviour. Broadening access would therefore provide a means for the PRHP to continue its work on improving standards of condition, by opening it to Repairing Standard cases that hitherto it has not been able to get involved in.

Enabling Local Authority third party reporting could provide further additional powers to Local Authorities with regards to improving property condition in the private rented sector.

ACTION 4: Broaden access to the Private Rented Housing Panel to drive greater compliance with the Repairing Standard by seeking to enable new third party reporting rights for local authorities and other relevant bodies.

Improving Property Condition and Energy Efficiency

Improving PRS property condition and energy efficiency are key challenges. The private rented sector has historically had higher levels of disrepair and poorer National Home Energy Ratings than owner-occupied or housing association homes.

There are many reasons for this, including the nature of the private rented sector housing stock (with a larger proportion of older stock than other tenures) and historic under-investment in properties by some landlords.

Landlords, as owners of properties, are responsible for maintaining the physical condition of their properties to reasonable standards, including the Repairing Standard ^[21] . However, we recognise that there may be situations where landlords need assistance to enable them to invest in their properties, to ensure long term sustainability and higher standards of service for consumers.

There is a range of national and local government powers, initiatives and funding schemes currently available to help tackle this issue within the private rented sector. A number of Scottish Government schemes offer support to landlords to invest in their properties, particularly in relation to improving the energy efficiency of them, including the Landlord Green Appliance Scheme, Green Homes Cashback Voucher Scheme, Small Business Loan Scheme and the National Retrofit Programme which will leverage funds from energy companies under the UK Government's Energy Companies Obligation and from the private sector through Green Deal.

The Scottish Government has also called on the UK Government to introduce a targeted VAT reduction on building maintenance and repair. This would benefit the construction industry and also make it easier for people and businesses to improve the energy efficiency of their properties. This would complement existing tax relief through the Landlord Energy Saving Allowance scheme.

In summer 2012, the Scottish Government consulted on 'Homes that don't cost the Earth', a draft sustainable housing Strategy, which sought views on proposed actions to support an improvement in housing condition and energy efficiency across all sectors, within the context of targets set by the Scottish Government and Scottish Parliament. This recognised the importance of condition to overall sustainability and the need for change across all tenures in Scotland, including the private rented sector.

The final Sustainable Housing Strategy is due to be published in 2013, and will set out a vision for warm, high quality, affordable, low carbon homes and a housing sector that helps to establish a successful low carbon economy across Scotland.

As part of this, the Scottish Government will work with stakeholders to develop proposals for possible future regulation of energy efficiency in private sector housing. The working group will consider a range of issues, including how any future regulation would fit with incentives available to the private sector (including PRS landlords), such as the National Retrofit Programme and the Green Deal; what standards would apply; and when they would apply from. This will inform draft regulations for public consultation, feedback from which will be considered by Scottish Ministers in determining the introduction of any mandatory energy efficiency standards.

ACTION 5: Publish a Sustainable Housing Strategy in 2013, bringing together policies on climate change, energy efficiency, fuel poverty, planning and the built environment. In addition, work with stakeholders to develop options for setting minimum energy efficiency standards in private sector housing, ahead of public consultation on draft regulations.