Balancing the Books

It will come as no surprise to learn that Local Authorities have experienced a vast reduction in the monies they have collected since the start of the Covid- 19 pandemic. Reductions and exemptions on business rates, reduced parking income as a result of locked down town centres mixed with the likely increased spending on Universal Credit payments and supporting those most affected by the current circumstances must have led to a hugely unexpected shortage of reserves.

It is therefore unsurprising to learn that it appears that the level of enforcement action being taken by Local Authorities against private landlords appears to be increasing. This is something Landlords should be aware of not least as the ongoing economic situation may mean that this activity is intensified further as time goes on.

Until 2017, Councils only had the power to impose a civil penalty (that’s a fine without having to take the landlord to court) of up to £5,000, and the average fine was only around £1,500. Arguably for some, a fine at such a level was considered an occupational hazard of operating in this sector.

However, in April 2017, the maximum civil penalty in England was given a huge raise to £30,000 and banning orders were also introduced. Now, if councils discover a property is not being safely and legally let, they can not only fine landlords up to £30,000, but also ban them from letting and share details with other councils across the country via a database of ‘rogues’. Importantly, the money raised from these fines is ring-fenced to help fund further enforcement activity within the local authority area.

The most common offence is a breach of the 2004 Housing Act which can carry a fine of up to £30,000. Your first notification of this may be a letter from your Local Authority entitled Section 249a, Housing Act 2004.If you receive such a letter it is important that you take it very seriously. Bear in mind that in addition to any fine which can be levied, from April 2018, any conviction for an offence under the Housing and Planning Act 2016 will result in your details being put on a ‘rogues’ database shared by local and central government.

The most common breaches which appear to be cited include Section 30, a failure to comply with an improvement notice, Section 72, a failure to licence an HMO, Section 237, a failure of HMO Management which could include a failure to display the Managers details, failure to maintain common parts or a failure to provide adequate waste disposal facilities.

If you operate such accommodation then I would urge you to review your portfolio to ensure it is compliant and appropriately maintained. It is not rare to see fines being levied at figures in excess of £20,000.

It is not only HMOs which appear to be the focus of attention. I was recently approached by a private landlord who had a number of improvement notices against single let properties and where the average penalty sought was £16,000 per property. 

Rent Repayment Orders are also available where the local authority can require the return of Housing benefit/Universal Credit payments for any period relating to an improvement notice. Aside from that I have heard anecdotal evidence that Local Authorities have been known to help tenants claim back rent if it is the case that the Landlord has committed an offence under the 2004 Housing Act.

The solution is to ensure that your portfolio is fully compliant. For those of you experienced in this sector this should be possible as part of a well organised business. For those more unsure about their obligations, it really could pay dividends to appoint an experienced managing Agent to ensure all of the compliance boxes are ticked.

Unpaid debts to the local authority can be charged against your property and may accrue additional interest payments. You will no doubt appreciate that the inclusion of such an entry on the property title could unsettle your mortgage lender, impact your Building Insurance and create problems further down the line should you wish to refinance or sell the property.

Your inclusion on the Rogue Landlords database could seriously impact your ability to obtain or renew an HMO or Selective Licence and could jeopardise your membership of any accreditation bodies or professional organisations.

Please ensure that you have  a full understanding of your obligations as a landlord and adopt a positive and proactive approach to the management and maintenance of your portfolio. The alternative could be very expensive!