Registration of Private Landlords: Guidance for Local Authorities

PART 4: BREACHES, DECISIONS AND SANCTIONS

Key Points:

• Registration intended to be a light touch approach but sanctions should be used as appropriate
• Local authorities should take action to identify unregistered landlords and take appropriate enforcement action
• Where a landlord fails to register local authorities can consider using a rent penalty notice or reporting the case to the procurator fiscal

4.1 OVERVIEW

The landlord registration scheme has been designed as a light touch approach. The great majority of landlords and agents should pass through the process with little or no dispute or disruption to their 'business'.

However, registration also aims to challenge and deal with the failings of landlords and agents and, in particular, with the worst of their number. In those situations, local authorities will be expected to adopt an enforcement role.

In adopting an enforcement role in respect of registration, local authorities should have due regard to the Enforcement Concordat, adopted by all Scottish local authorities. Guidance on best practice in implementation of the Concordat can be found on the Co SLA website ¹⁰ .

When a landlord breaches the terms of the 2004 Act, authorities can apply sanctions which can lead to criminal prosecution or a cessation of the rent payment. These sanctions effectively act as a bar on a landlord's ability to let a house.

Such outcomes must be the right course of action in the worst cases. However, there are cases where a landlord or agent has fallen foul of the requirements for registration yet immediate pursuit of prosecution or removal from the register or imposition of a rent penalty is too drastic (see section 3.4 The fit and proper test).

Local authorities will have to make the judgment but, in some cases, taking into account mitigating circumstances or giving the landlord or agent an opportunity to 'right the wrong' is the more sensible and practical approach before deciding if sanctions are necessary. This is particularly so where the landlord has failed to register through ignorance or inaction; it is better to ensure that such a person registers (provided he or she is fit and proper) than to move to sanctions and quite possibly lose the landlord and the landlord's houses from the market.

However, equally important is that local authorities should undertake enforcement action where appropriate. Effective enforcement is the key to the overall success of the scheme. Robust local processes should be in place to support this.

Types of breaches and sanctions

There are several types of breaches and accompanying sanctions available in Part 8 of the 2004 Act:

Breach	Sanctions available if judged appropriate
Failure to register whilst continuing, or attempting, to let a residential property	Guilty of an offence. Report to the Procurator Fiscal Rent Penalty Notice may be served
Provision of false information or failure to include required information in an application form	Guilty of an offence. Report to the Procurator Fiscal Refuse registration if judged not to be a fit and proper person Rent Penalty Notice may be served
Non-registered owner communicates with a person about taking a lease or occupancy of a house	Guilty of an offence. Report to the Procurator Fiscal
Failure by a registered person to notify changes in circumstances	Review fit and proper person requirements and remove from register if judged no longer to be a fit and proper person
Registered person found to be no longer a fit and proper person	De-register /remove from register
De-registered person continues to let a property	Guilty of an offence. Report to the Procurator Fiscal Rent Penalty Notice may be served
Registered landlord's agent found to be not fit and proper	Landlord's name removed from the register

4.2 BREACHES

Key Points:

• Local authorities should take steps to ensure an application is valid, specifically that all mandatory information is included and that it is paid.
• A range of breaches and sanctions apply to landlord registration.
• If a breach occurs then local authorities should apply sanctions as appropriate.
• A local authority can reassess if a landlord or agent is fit and proper at any time.
• If a registered landlord is found to be no longer fit and proper then their registration can be revoked.

• Failure to register

Gaining knowledge about a failure to register

There are a number of methods by which local authorities can identify owners and residential properties who should be registered.

Key sources of information on unregistered landlords could be:

• tenants
• neighbours
• police
• housing benefit records
• other landlords and agents

Authorities could also share methods of detection and gathering of evidence used, for example, by HMO licensing enforcement officers, antisocial behaviour teams and housing benefit fraud detection officers.

Tenants

One possible source of information about non-registered landlords is tenants who approach the local authority for help with a tenancy or housing benefit payment problem or following a dispute with their landlord. Information retrieval should be carried out sensitively.

It is expected that an authority will pursue a landlord's possible failure to register even where the tenant does not want that to happen.

However, the limited security of tenure which some tenants have and the vulnerability of many socially or economically disadvantaged tenants must be recognised and treated sensitively by a local authority. It must be appreciated that if a landlord discovers that their non-registration has been identified via their tenant, the tenant's residence may be terminated, lawfully or unlawfully. However, the fact that the local authority confronts a landlord about his or her failure to register does not mean that the source of the information must be released to the landlord.

Any tenant who becomes a source (possibly inadvertently) of identifying a landlord's failure to register should be fully advised of the security of tenure position and what to do in the case of harassment or unlawful eviction. Particular advice may be required where a deposit is being withheld.

Should the worst outcome arise and the tenant be forced out, the authority is expected to assist the ex-tenant in whatever way is practicable, for example:

• advice on options (if any) open to them
• referral to a specialist housing aid centre
• provision of temporary homeless accommodation under its statutory homelessness duties

There should be appropriate signposting to the relevant advice and support agencies for the tenant. Tenants can be supported in accessing information and advice services available from voluntary sector organisations such as Citizens' Advice and Shelter, as well as the local authority's own or partner advice services.

The local authority should seek the tenant's agreement to engage the police if an unlawful eviction has taken place. Any action taken would be in the name of the tenant.

Neighbours

A neighbour of a house of a non-registered landlord is another valuable source of intelligence. This may arise from a complaint made to the department responsible for registration or to another department of the authority. The complaint may not relate to non-registration but to another problem such as noise, refuse disposal or drug-taking.

Similar to a tenant's position, care must be taken not to expose a neighbour to any potential backlash from a landlord (or agent) who is confronted with the failure to register.

Police

Complaints that neighbours or tenants of a rented house make to the police are a possible source of information. The police are not obliged to pass on such information, but it is reasonable for an officer faced with a complaint about a tenanted house to enquire if the owner is registered as it is an offence not to be, unless that person is exempt. Local authorities should consider meeting with a senior police officer to discuss whether informal links can be established so that the local authority is made aware of a house or landlord that has come to the police's attention. Some local authorities have already established such links in respect of registration, HMO licensing and antisocial behaviour.

Housing benefit

Registration officers are strongly advised to make contact with colleagues who administer housing benefit. They will wish to be advised promptly when a rent penalty is to be applied to the landlord of a tenant who is a housing benefit claimant. This is because benefit payment must be timeously ceased to avoid having to reclaim benefit from the tenant at a later stage. There is also scope for housing benefit administrators to notify registration officers of landlords identified by claimants, so that these can be checked. Ideally, housing benefit administrators will notify those landlords who are not registered; it would then be for the registration administrators to establish whether the landlord was required to be registered or was exempt, and then to follow up if appropriate. The most suitable arrangement for notification should be discussed locally.

Exercising discretion

Mandatory registration represents a major change in how private letting activity is carried out in Scotland and it is inevitable that it will take some time for an appreciation of what is required to filter through to all landlords. This is particularly true when new, potentially inexperienced landlords enter the market. Many smaller landlords may not even perceive themselves as landlords or as falling within the scope of registration.

Given that registration has now been widely publicised, local authorities should consider whether an owner who has not registered, could fairly have been expected to have known about registration by that time. An assessment of whether there has been a conscious attempt to avoid registering needs to be made and if so whether that, combined with other relevant information, is justification for refusing to register the landlord. Otherwise the appropriate step would be to give the owner an opportunity to submit an application.

If an application is received the approach should be:

• to allow registration (if otherwise judged a fit and proper person)
• to make the owner fully aware of the risk he or she has run and the possible consequences of any future breach of requirements
• to record a note on the registration file about the original failure to apply timeously, so that this information can be considered if there is further cause to doubt the landlord's suitability

Where no valid application is received and the landlord lets or attempts to let a property, an offence is committed. A report may be made to the Procurator Fiscal and a Rent Penalty Notice served. A late application fee should also be considered, where two letters have been issued by the authority

Where a non-registered owner or agent has submitted a valid application to register, together with the appropriate fee, but the application has not been determined, no offence is committed if the property is let out. This exemption from committing an offence does not apply to a person who has been refused registration within the previous year of him or her making another application to register. This prevents a person who has been refused registration from reapplying immediately and being protected from prosecution while the new application is being processed.

• Provision of false information or failure to include required information in an application form

The registration process is intended as a 'light touch' approach, but officers should still be alert to the possibility of false and misleading information being provided or required information being omitted. To be valid, an application should include all mandatory information and the fee should be paid. If an application is invalid and a landlord fails to take steps to provide the missing information or payment, then enforcement action should be considered. The application should be rejected. The implications of this should be explained to the applicant. If their application is rejected and the landlord continues to let property then they are committing an offence.

There are various ways in which owners may seek to deceive an authority when completing the application form. Some examples to note are:

• nominal transfer of ownership of a house by an owner unlikely to pass the fit and proper person test to a third party such as a spouse or other relative, whilst retaining practical control of the management of the letting
• identification of a person (individual or company) as an agent for the management of the letting whilst the owner actually retains practical control
• omission of residential properties owned by the applicant
• omission of the name of a joint owner who may expect to be failed on the fit and proper person test if the name were declared
• omission of the declaration of a relevant conviction or judgment against the owner

If the authority concludes that the false or omitted information was not due to simple error or misunderstanding and that the owner has therefore committed an offence, a report can be sent to the Procurator Fiscal.

The authority might judge that the conscious deception rendered the applicant an unfit and improper person to be letting houses, and so refuse the application. It would then be open to it to apply a Rent Penalty Notice if the house continued to be let.

• Communication by a non-registered owner to a person about taking a lease or occupancy of a house

Where it is brought to the local authority's attention that an owner who has failed to register or has been refused registration or has been taken off the register has proposed letting a house to a possible tenant (or occupier), it should investigate whether an offence has been committed.

The purpose of providing for such an offence is to block a loophole that would otherwise allow an unregistered landlord to have dealings with a potential tenant prior to the completion of his or her registration.

If the authority has sufficient evidence to confirm that a communication about the let or occupancy took place, a report can be sent to the Procurator Fiscal. The communication by the owner has to be specific to a potential client. It does not apply in cases where, for example a potential purchaser of a BTL property is discussing the feasibility of financing the purchase with a mortgage lender.

Where a non-registered owner or agent has submitted an application to register, together with the appropriate fee, but the application has not been determined, no offence will have been committed in discussing a possible let of a house listed on the application form with a potential tenant.

• Failure by a registered person to notify changes in circumstances

Where a registered owner has failed to declare a change of agent or a change of property, it will usually be appropriate to give the owner an opportunity to remedy the situation before imposing any sanction.

If there is repeated failure to notify such changes to the information provided, the local authority will want to take action by re-assessing whether the owner is still a fit and proper person or should have their registration removed. If the authority discovers there has been a failure of a more serious nature, namely, to notify it of a new relevant conviction or judgment in relation to landlord-tenancy law, this in itself should result in a reassessment of whether the registered person is still fit and proper to let residential properties. In addition, the authority may decide that a report should be forwarded to the Procurator Fiscal.

Where the local authority deregisters an agent, the owner of the property should be notified and the local authority should remove that person from the register.

Revocation of registration

A local authority can reassess if a landlord or agent is fit and proper at any time. This will normally be in response to new information regarding the relevant person.

The factors that an authority should take into account when assessing if a person is fit and proper to let residential properties, or to act as an agent for an owner, have been set out in section 3.4 The fit and proper test.

Where a registered person has been reassessed as no longer fit and proper, the outcome may be a clear-cut decision to revoke the registration, in which case, when a person is removed from the register, the local authority must send the person notice in writing of the fact and the date of removal.

Notice must be sent by recorded delivery to the last address given for that person in the register and to anyone the local authority knows to act for that person, provided that it has the agent's name and address. This would include an agent in the register entry and others, for example, an agent who was known to but had not been declared to the authority or one who had been rejected as a fit and proper person.

Information, advice and assistance

A landlord's tenant(s) or occupier(s) must be informed where the landlord's registration has been revoked. This must be done as soon as practicable after the landlord's name has been removed from the register by sending a notice of the decision to the address of each of that landlord's houses on the list for that local authority prior to the landlord's removal.

Clearly, this decision will have potential implications for the tenant(s). The local authority is therefore also required to provide advice and assistance to the occupants of every house listed on the landlord's register before removal. This should make clear that revoking the landlord's registration has no immediate effect on their security of tenure. Relevant law on security of tenure rights should be explained clearly to them. They should be advised of where they can get practical assistance if they are threatened with harassment or are unlawfully evicted. They should be advised of their rights if they become homeless and of the implications if they voluntarily give up their tenancy. The authority's homelessness obligations to them should be explained. Tenants should be provided with the contact details of appropriate officers or agencies to assist them with issues or problems arising from their landlord's deregistration (see Section 3.6 Provision of information and advice).

Some Occupancy Arrangements, such as those used in tied accommodation, may need particular advice given the nature of the arrangement. For example, a tied tenant may need to take advice on employment implications. The local authority should normally have made every effort to ensure that an employer landlord is made aware of the steps that he or she could take in order to be able to obtain registration (see section 3.6 Provision of information and advice).

These information, advice and assistance responsibilities are significant. Such responsibilities will also arise when a Rent Penalty Notice is served or when a landlord is refused registration. There is also the requirement to provide good practice advice to private landlords. All authorities need to identify the resources and skills necessary to provide effective support to private tenants and landlords.

There needs to be the capacity to advise on the effect of homelessness legislation and private tenant-landlord legislation. Good communication skills will also be important. Some authorities are already well rehearsed in dealing with the problems in the private rented sector. Others will have limited experience and will not have had any dedicated officers for this housing sector. Those authorities are advised to plan and resource the delivery of an efficient and effective information, advice and assistance service to private tenants and landlords in terms of the duties arising from mandatory registration, whether this service is delivered direct by officers or by referral to agencies which are known to be available and able to provide suitable assistance.

4.3 SANCTIONS

Key Points:

• A range of sanctions are available to local authorities
• Local authorities should work with their local Procurator Fiscal to establish the evidence that might be required prior to a report being made
• Rent Penalty Notices and Late Application Fees can be effective in tackling non-compliance

• Report the case to the Procurator Fiscal

It would be sensible for a local authority's key registration officer to arrange to discuss with the Procurator Fiscal's office particular expectations the Fiscal has for the types of cases and nature of evidence that should be presented by the authority for there to be a reasonable chance of a prosecution being pursued.

In support of this approach, appropriate local authority officers should be trained in evidence-gathering and making reports to the Procurator Fiscal. Their actions must also be in line with the requirements of the Regulation of Investigatory Powers (Scotland) Act 2000 ( RIPSA).

Local contact with the Procurator Fiscal is important in order to establish effective working relationships and mutual understanding.

• Serve a Rent Penalty Notice

The local authority may decide to serve a Rent Penalty Notice if it is satisfied that a house is being let without the owner being registered or having a valid application under consideration, and that taking account of all the circumstances relating to the owner, service of the notice is appropriate. The notice relates to the particular house; it is up to the local authority to decide whether to serve a notice in relation to one, some, or all of the landlord's let properties. It would be sensible to consider the relative impact on the various tenants affected before making such a decision.

If the occupancy arrangement involves a nominal rent or is on a rent-free basis, pursuit of a prosecution through the Procurator Fiscal would be the more appropriate route for applying a sanction.

A Rent Penalty Notice must specify:

• the name of the owner
• the address of the house
• the date on which the penalty takes effect (not earlier than the day after the notice is served)
• that the effect of the notice is that no rent or other charges are payable under any lease or occupancy agreement applying to that house, until the notice is revoked or overturned on appeal

The notice must be served on the owner of the house, and on any person who has a lease or occupancy agreement relating to the house, or who acts for the owner in relation to the letting, if the authority has names and addresses for such people. If the local authority cannot identify the owner of the house, the notice can be served by publication in two newspapers circulating in the area. If the authority knows the owner's name but not their current address, the notice should be served at the house to which it relates, and at any previous address the authority has for the owner. Failure to serve the notice on any tenants or agents does not invalidate the notice.

There is an obligation on a local authority that has served a Rent Penalty Notice that it must provide to the occupants of the house on which the notice was served advice and assistance on:

• security of tenure
• sources of money and benefits advice
• homelessness services
• the homelessness duties of the local authority

Local authorities should ensure that tenants affected by the notice are, if possible, offered an appointment with a money adviser. If they are in receipt of housing benefit, contact should also be maintained with the housing benefit administration section of the authority. If an appeal by the landlord is successful, back-payment of benefit will be possible.

Where a rent penalty is imposed, the landlord may seek to obtain money from tenants despite the suspension of their legal liability for rent. The local authority should monitor situations where this penalty is used, referring any evidence of harassment or illegal eviction to the Police/Procurator Fiscal and providing advice and assistance to tenants as appropriate. This is particularly important when tenants are from vulnerable groups.

• Additional Fee ('Late Application Fee')

There is an additional fee for late applications after the local authority has issued two separate requests for an application to be made. The late application fee is £110 (twice the principal fee), over and above the registration fee of £55. The online discount of 10% does not apply to the late application fee. Charities can still be liable to pay the late application fee, despite a 100% discount on the principal fee and property fee.

4.4 APPEALS

Key Points:

• A landlord can appeal against a refusal, revocation or rent penalty notice.
• It is important that local authorities have clear decision making procedures in place in order to defend against an appeal.
• Refusal or removal of registration

An applicant or a registered person has the right to appeal to the sheriff against a refusal to register or a decision to remove that person from the register. The appeal is made by summary application; there is a time limit of 21 days for the appeal to be made ¹¹ . The sheriff may make an order that the person should be registered, specifying whether that person is fit and proper as an owner or as an agent.

If the sheriff refuses the application there is a further right of appeal, within 21 days, to the sheriff principal.

Clearly, when making a decision to refuse or remove registration, local authorities should take into account the potential need to defend that decision in court.

• Rent Penalty Notices

The owner of a house may appeal to the sheriff against a Rent Penalty Notice or against the refusal of a local authority to revoke a notice.

Any person with an interest may apply to the local authority to have a Rent Penalty Notice revoked and may appeal to the sheriff if they are unsuccessful.

Appeals must be made within 21 days of the date on which the notice takes effect, or the date of the decision not to revoke.

The tenant must be aware of the appeal in order to set aside rent money so that if the appeal is successful, the accumulated unpaid rent can be repaid if ordered by the sheriff to do so.

Regulations provide that when the landlord appeals, he or she must also serve a notice on the tenant at the same time or as soon as is reasonably possible after lodging the appeal, either by post, hand delivery or email (if consented to by the tenant as an acceptable form of communication). If the landlord does not notify the tenant of the appeal, the sheriff, if granting the appeal, cannot order back-rent to be paid from the date on which the rent ceased to be payable (or the local authority refused to revoke the notice).

Tenants who are affected by a Rent Penalty Notice may often be from groups which suffer financial exclusion. They may well not have access to a bank account, and may find it difficult to budget to save their rent money in the case of a successful appeal. Local authorities should aim to establish whether a particular tenant is likely to face these difficulties, and then ensure that money advice is available if the tenant so desires.

Where an owner has taken steps to register but is still refused registration and the Rent Penalty Notice remains in force, the appeal is likely to be that the decision to refuse registration and so revoke the notice was unreasonable or unjustified. The officers who refused registration or revocation of the notice must ensure that they have good grounds for doing so and that they are able to defend their decision.