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Are you aware of new civil penalties for agents?

Posted on 2017-06-12

As we often say, it's an exciting time to be a part of the lettings industry. Unprecedented growth, adaptation and technology combine to create a sector brimming with potential and success.

With this sort of expansion, challenges also arise. For the Private Rented Sector (PRS) and particularly those working in it - such as letting agents - one of the biggest challenges that has come with expansion is increased regulation and legislation.

During the past few years, there have been numerous Government measures introduced and sometimes it's hard to keep up with all these changes.

In recent months, the introduction of a restriction on landlords' buy-to-let mortgage interest tax relief and the proposed ban on up-front letting agent fees charged to tenants have been hogging all the headlines.

Add in to this the snap General Election and it's no wonder that one new piece of legislation introduced in April has gone largely under the radar.

On April 6 powers were passed to local authorities in England, allowing them to impose civil penalty fines of up to £30,000 on criminal letting agents and landlords.

The purpose of introducing these measures is to 'crack down' on rogue landlords who 'knowingly rent out unsafe and substandard accommodation', according to the Government.

With this in mind, we’re going to take a closer look at exactly what these new rules mean for letting agents and how they’ll be enforced.

In what scenarios could agents be fined?

A civil penalty of up to £30,000 can be levied on a landlord or letting agent for a range of housing offences.

These include failure to comply with a housing improvement or overcrowding notice or non-compliance with Houses in Multiple Occupation (HMO) management regulations.

There could also be fines for landlords or agents who don't have the correct licence for a property that needs a mandatory HMO, additional or selective licence.

Civil penalties explained

A civil penalty is a fine that in this instance can be used by a local housing authority as an alternative to prosecution. Authorities are therefore not allowed to impose a civil penalty and then prosecute for the same offence.

Government guidelines state that there is no minimum penalty, while the maximum is set at £30,000. In the guidelines for the new measures, it stipulates that the sum of the penalty is to be determined by the housing authority in each separate case. On top of this, the rules are only for new offences, they can't be retrospective.

It’s also set out that both landlords and the letting agent they employ can be hit with separate civil penalties for the same offence - i.e. failing to obtain a licence.

The Government says that funds raised from civil penalty fines will be retained by local housing authorities to fund future enforcement.

Is this good news for the industry?

As we know, it is only a minority of agents and landlords that don't play by the rules and set out to provide substandard accommodation. Put simply, the more that can be done to stop these illegal operators, the better.

Civil penalties provide an alternative to prosecution and so the passing of powers to local authorities marks an important step forward in the fight against the harmful minority. A hefty fine of up to £30,000 could prohibit a landlord or letting agent from operating.

And, hopefully, the prospect of a debilitating fine will also put off criminals from working in our sector.

The fact that local authorities have been given the power to hand out civil penalties to criminal landlords and agents could also be positive when it comes to enforcement. These organisations have a core interest in protecting their local housing market and residents. With this in mind, they may be more proactive about tackling criminal operators and handing out civil penalties when they can't prosecute.

There are a number of local councils that already have strong track records in punishing rogues - Sheffield Council and Barnet Council are two of the most high-profile.

In what other way will the Government crack down on rogues?

As well as allowing local authorities to impose civil penalties, the Government has been working on other methods of clamping down on malpractice in the PRS.

Rent Repayment Orders (RRO) - which allow local authorities or tenants to claim back up to 12 months of rent - have been extended to cover illegal eviction, harassment, violence and failure to comply with a housing improvement or prohibition order.

In the past, RROs could only be claimed in relation to unlicensed properties.

All of these measures come under the Housing and Planning Act 2016. Another significant policy being introduced under this legislation is the database of rogue landlords and property agents, which is scheduled to come into force from October 1 2017.

The database will provide a record of offending parties, with the most prolific and serious being handed banning orders.

Local authorities will be encouraged to enter the details of landlords who have received two or more civil penalties over a 12-month period, although it is not compulsory.

You can see the Government's official guidance on civil penalties under the Housing and Planning Act 2016 in full here.

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