Review of the Private Rented Sector: Volume 4: Bringing Private Sector empty houses into use

8 A DUAL APPROACH TO BRINGING EMPTY HOMES INTO USE

8.1 This chapter sets out how local authorities can most effectively work with owners to bring empty homes into use through a combination of support and, where unavoidable, enforcement. Support can come in a variety of forms - from straightforward information and advice through to tangible financial incentives via loans and grant-aid. Enforcement can draw on a variety of powers from notices to require repairs to be carried out, to the power of compulsory purchase. Financial assistance is a significant "enabling" power to support the return of empty homes into use and is addressed in Chapter 9.

The dual approach: working with owners

8.2 The case studies demonstrated that critical to the success of bringing empty private homes into use was the support given by local authorities to owners and partnerships forged with private landlords. In Scotland, a number of authorities have developed positive working arrangements with private landlords via landlord forums, newsletters, rent deposit guarantee schemes, leasing schemes and direct contact with organisations such as the SRPBA. Evidence is lacking that the issue of empty private homes specifically has been raised at such forums and, given the view of Scottish Association of Landlords that its members will not own empty homes; these forums are unlikely to be an effective means of contact with owners of empty homes. However the landlords attending may provide a useful consultation mechanism, able to give valuable feedback on the approach an authority proposes to adopt.

8.3 The significant learning experience of working with owners comes from England but the general philosophy of English local authorities has been to pursue a dual approach with owners - a combination of support and enforcement. Case study analysis revealed a clear emphasis on providing owners with advice, support and financial incentives but this was backed up by the threat of enforcement action of various forms even, possibly, compulsory purchase. At each stage of engagement with an owner, a 'voluntary' response would be sought while making the owner aware that enforcement could, and would be, adopted if there was no positive reaction. Two case studies, exemplified the dual approach - Kent Partnership and Islington Council.

• The Kent No Use Empty Partnership ²⁴ first used negotiation and encouragement, because an initial resort to enforcement was seen to be counter-productive and potentially more costly. An awareness-raising campaign, sending out regular newsletters and opening a website ²⁵ were key methods to encourage owners to come forward and seek help. Financial support towards refurbishment and repairs was operated via a "revolving" loan scheme with loan offers conditional on the upgraded or repaired property being made available for sale or rent (not necessarily to meet housing need). Procedurally, three standard letters were sent out reiterating the local authority's willingness to help but, successively, they escalated its determination to use enforcement powers, i.e.EDMOs and compulsory purchase. The Council would even seek warrant for entry and change the locks.
• Islington Borough Council supported owners without the skills or know-how to bring their empty property back into use. Under a contract with an RSL, owners could pay for an improvement service. For an owner wishing to sell, the Council could assist by advertising the property through its web-marketing tool. It could also offer to act as an intermediary to sell the property to low paid or key workers or, alternatively, it could 'place' the owner with an RSL who may purchase the property on behalf of the Council. At the time of the research, the Council had not used EDMOs but was proceeding with a CPO programme on the most difficult empty homes cases.

8.4 A review of the various English case studies identified three key features of the supportive approach adopted by LAs:

• First, to develop an understanding of an owner's circumstances, both the reasons why the house - an asset - has lain empty and whether the owner's financial "health" could meet the costs of making it safe, secure and habitable. When the house could be used to meet housing need, an assessment would be made of what was required in terms of assistance to encourage the owner to bring it up to a lettable standard.
• Second, to make an offer of assistance, be it in the form of grant, loan, officer expertise or management through a leasing scheme. Assistance could be linked to a requirement for the house to be offered for rent for a specified period or to meet a housing need identified by the local authority.
• Third, to be persistent and back-up offers of assistance with the threat of enforcement action e.g. using EDMOs or compulsory purchase. Most authorities have a system of three letters escalating in tone as described for the Kent Partnership above.

8.5 When advice, assistance or even incentives fail to persuade a private landlord - or other owner - to bring an empty home back into use, a local authority will have to decide if it wishes to proceed with enforcement action to require the owner to make the property available for occupancy and, if appropriate powers are available, to then decide whether or not to use them.

The dual approach: enforcement powers

8.6 Scottish local authorities have a range of legislative powers to deal with empty and occupied houses by requiring their repair, maintenance, improvement and even by seeking their compulsory purchase in certain circumstances. A key point about Scottish enforcement powers is that they are designed to secure housing quality rather than occupation, although reuse may be the consequence of action taken. The only exception could be the successful compulsory purchase of an empty dwelling (but not for its demolition).

Enforcement powers in Scotland

8.7 Other than powers available under public health, planning and environmental legislation, the 2006 Act offers the main platform for local authority enforcement action to require owners to improve and repair their homes, including empty homes. The 2006 Act was designed to place primary responsibility for the upkeep of houses in the private sector, first and foremost, on their owners. However, the Act gives local authorities powers to:

• Serve a Work Notice on a sub-standard house (including a BTS house, a house in serious disrepair or likely to damage other premises) and to carry out works in default. Some form of assistance must be offered to the owner.
• Recover the costs of any works the authority carries out and administrative expenses incurred, including the power to place a repayment charge on the property;
• Serve a Maintenance Order on an individual house or premises containing more than one house and approve, change, replace or revoke the subsequent Maintenance Plan;
• Provide the "missing share" where a communal repair is prevented from going ahead because, for example, an owner cannot be traced; and
• Enter the property to carry out or arrange to have carried out, works related to a range of notices and orders under the 2006 Act.

8.8 In addition, and of particular relevance for empty homes a landlord seeking to let, must ensure the property meets the statutory Repairing Standard - a standard covering a range of criteria to ensure the house is fit for letting ²⁶ both at the outset of a tenancy and throughout the tenancy.

8.9 The Repairing Standard obligations on private landlords are designed to provide physical standards for let property, enforceable by tenants. However, it can be argued that, in some cases, the obligations may inhibit a landlord who owns an empty property from repairing and re-letting the property using a "repairing lease". Such a lease would incorporate payment of a minimal rent by the tenant in return for which the tenant agrees to accept responsibility for repairs to the property. Such a situation could be mutually beneficial to both parties if freely entered into. In fact, the 2006 Act has provision for such a lease. For a tenancy ( e.g. a Short Assured Tenancy) of less than three years, the proposed repairing lease must be approved by a Sheriff (who can also modify or reject it) and must be seen to be reasonable and freely agreed by both parties. If the lease operates from its commencement, for at least three years, approval by a Sheriff is not required.

8.10 Before proceeding with any enforcement action, a local authority will have to weigh the risks, costs and benefits if it embarks on action but the owner fails to respond. A decision will have to be made either not to pursue the matter or to exercise any default intervention powers it may have, to carry out the terms of the notice or power used. The availability of financial and staff resources, together with recognition that direct intervention cannot guarantee the re-occupancy of the property, will have to be central to the final decision.

Enforcement powers in England and Wales

8.11 In England two specific powers are available to local authorities to target the problem of empty homes:

• The power given to a local authority by the Housing Act 2004 to serve an Empty Dwelling Management Order ( EDMO) on a vacant house ²⁷ . It became operational in July 2006. There is no Scottish equivalent power.
• The power given by the Law of Property Act 1925 and the Land Charges Act 1975 to allow a local authority to bring about the enforced sale of an empty property to recover its costs in relation to works carried out to the property ²⁸ .

The EDMO

8.12 Where an owner of a home empty for a continuous period of at least 6 months has rejected offers of support and has no plans to use the property, and it is in decline, the local authority can serve, subject to approval by a Residential Property Tribunal, an Interim EDMO which lasts for up to a year. During this time, the local authority cannot put tenants in the property unless the owner agrees. In effect, this gives the owner a final opportunity to reach an agreed solution. An interim EDMO can be replaced with a Final EDMO, approved by the local authority, to give it management control of the property for up to seven years. The local authority may manage and let the home itself or transfer management to a housing association but in either case, the letting should be at a market rent. If at any time the owner agrees to sell, let or cause the property to be reoccupied, the Order will be revoked ²⁹ .

8.13 An EDMO cannot apply where there is a plan and progress is being made to sell, rent or renovate the property. Nor will it apply whilst the ownership of an empty home is resolved through probate. Such properties are also exempt for a further 6 months after probate completion.

8.14 From case study feedback, preparing a "case", attending the Tribunal, negotiating with the owner and serving the Order, are resource-demanding on a local authority, with no guarantee at the outset, of success. South Oxfordshire Council was the first council in England to have secured a Final EDMO in 2007. The proceedings at the Residential Property Tribunal for its Interim EDMO are available online ³⁰ .

8.15 The costs of an EDMO can be very high and given the seven year lease period, effectively exclude the longer term, more problematic empty homes in disrepair and restrict the benefit of an EDMO to lower repair cost properties to ensure cost-recovery from the rental income stream. Hounslow Council on completion of one Final EDMO incurred a cost of £93,000 to bring a property back into use - a cost made acceptable because the Council paid itself £15,000 renovation grant, recovering the remaining cost at a monthly rental of £1,100 over the seven years. It is understood that the London Borough ( LB) of Hammersmith estimated it will cost £45,000 to serve an EDMO and the LB of Lewisham may not serve an EDMO requiring more than £20,000 refurbishment work.

8.16 Although there is no centralised collation of figures on the number of Interim EDMOs, or Final EDMO's, a UK parliamentary written answer of the 24 February 2009 confirmed that Interim EDMOs had been used only 17 times since 2006. However, from case study interviews and the parliamentary answer, the point has been made that it is the threat of using an EDMO that has been seen to be effective ³¹ .

Enforced sale of an empty home

8.17 Using the Law of Property Act 1925, the Enforced Sales Procedure ( ESP) is a means of debt recovery by which an English local authority can bring about the sale of a privately owned, empty house to recover incurred costs (for instance, repairs or the cost of the authority boarding-up the property to prevent squatting or arson). The vacant dwelling has to be registered with the Land Registry for the debt to be registered. The local authority can then sell the property on the open market to recover the debt. However, properties can drop out of the ESP process prior to sale, usually because the debt had been repaid or the property had been sold by the owner or was no longer vacant. No information on the total number of ESPs served in England is available but, like EDMOs, they appear to have been used to a limited extent to date.

8.18 Enforced Sale is seen as an alternative approach to EDMOs because it is easier to apply and allows recovery of costs where work has been carried out. It is seen by local authorities who have used it, to have benefits. It does not attract compensation or a Local Public Inquiry (as with a CPO). It is a faster process than for a CPO. It applies to properties in probate. It is less risky as the local authority never takes ownership, and still leaves room for the owner to negotiate alternative solutions. However, the final use of the property after an enforced sale cannot be controlled by the local authority unless the sale is to an RSL or approved, 'investor-type' of landlord, where meeting some type of housing need could be achieved. Manchester City Council uses Enforced Sales to sell properties to RSLs on the highest value after seeking three valuations.

8.19 The Law of Property Act 1925 does not apply to Scotland ³² . However, there is the long-established power to compulsory purchase a house in Scotland. It is clearly an onerous power but the research found that it was being used in England by some local authorities (despite its potential to trigger a Local Public Inquiry) in preference to an EDMO. It was often targeted at empty private homes in poor condition where repairs could not be secured with the finance available during a 7 year lease period. After CPO, the property would be sold to a local RSL that had funding from the (then) Housing Corporation to renovate the property.

8.20 In Scotland, compulsory purchase powers can be invoked by sections 9 ³³ and 121 ³⁴ of the Housing (Scotland) Act 1987 and the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947. They are however difficult to serve and there was evidence from the survey of only one local authority (Glasgow City Council) using CPOs to bring about the reuse of empty private homes (in this case for an abandoned property ³⁵ ).

Conclusion

8.21 The conclusion drawn from this chapter is that a dual approach to owners - offering appropriate types of help, underpinned by recourse to sanctions where necessary, is the most appropriate means of bringing empty homes into use. From the experience in England, for all but the most difficult owners or where property ownership is unknown, obtaining the voluntary agreement of owners was held to be preferable and more effective than having to resort to enforcement action.

8.22 For Scottish local authorities, the lessons are clear. Unambiguous communications, building the owner's confidence, offering tangible forms of assistance (financial and non-financial) and demonstrating persistence of intention, are the foundations to achieve a positive working relationship with owners. Clarity in communicating both the availability of enforcement powers and a willingness to use them is equally important. Often intimating the threat to use enforcement action, conveyed with escalating determination, rather than the actual employment of the enforcement power, should be sufficient to convince all but the most reluctant owners to enter into a voluntary agreement.

8.23 Interviews with Scottish local authorities suggests that re-use of empty homes for housing need, not just for resale or market rent, is important. However, Scottish housing legislation has no power to require a privately owned, empty home to be made available to meet housing needs - a fact that reinforces the importance of strategies to work with owners to address housing need and supply. As mentioned in Chapter 6, the earlier the engagement with owners, the more chance there may be of securing a positive outcome in returning properties to use that also contribute to meeting a range of local housing needs.

8.24 The value of new legislation to create a similar, even if less bureaucratic and complex, procedure than the English EDMO is very questionable. It would not be a "quick fix". Firstly, it would require primary legislation and would have to accord with Human Rights legislation. Secondly, there would be little value in such legislation unless it could guarantee a solution to homes in serious disrepair with a maximum management period greater than seven years incorporated to ensure recovery of costs. For the LA, a management plan would be required to be drawn up and the local authority would be required to draw down resources that were possibly disproportionate to the gain of achieving a single occupied residence.

8.25 On the other hand, it has been the threat of using a power such as an EDMO that has been the trigger to finally make some owners in England, agree to co-operate with the LA. In Scotland, without introducing a new management "control" power, the central importance of local authorities developing a proactive approach to working with owners and using the Scheme of Assistance, is reinforced. However, authorities will need to be explicit about their willingness, where necessary, to use enforcement and Repayment Charge powers under the 2006 Act. Without such a signal, the most intractable owners will conclude authorities lack the determination to achieve their objectives.