Why I feel sorry for Rachel Reeves

I never thought that I would utter these words but I actually feel quite sorry for Rachel Reeves this morning. She has been caught red-handed letting out her house without the correct licence from the local authority.

She claims that she was unaware  of the legislation but ignorance is no excuse for breaking the law and she should be fined the maximum amount of £30,000 as an example to ‘rogue landlords’ of the need to comply with all legislation.

The reason that I feel sorry for her however, is that the legislation itself  is unfair and it has been so poorly publicised that many other landlords and a significant number of letting agents are unaware of the provisions and have fallen foul of the rules.

Trade sale fall-through

Recent legislation concerning supplementary and additional licences has had a direct impact on my own business. We recently had a multi-million pound business sale fall through because the lettings manager had  failed to apply for several dozen licences.

“We recently had a multi-million pound business sale fall through because the lettings manager had  failed to apply for several dozen licences.”

Another multi million pound sale has been postponed for the same reason. In addition we have several other businesses that we cannot put on the market until they have applied for and obtained a licence for every single one of their qualifying properties.

It is worth reflecting on how this legislation came about. When I started driving speeding tickets and parking tickets were very rare. Many people would park on a  blind bend  or drive  at twice the speed limit with impunity. There was a consensus that something had to be done and the early legislation that was passed to deal with these issues was both popular and effective.

Money-making councils

But fifty years later most of this legislation has been turned into a shameless attempt to raise money. Local authorities in London issued over nine million penalty tickets last year and earned many hundreds of millions of pounds from parking charges and fines. The system is totally out of control and the legislation is now detested by the majority of motorists including those who originally supported its introduction.

“Local authorities in London issued over nine million penalty tickets last year and earned many hundreds of millions of pounds from parking charges and fines.”

Exactly the same thing is now happening in the property sector. The process started with statutory licences for large HMO’s These were necessary and included sensible provisions such as fire precautions. Some local authorities then introduced licences for smaller properties

The trigger was usually three or more people from different families occupying the same property. The need for this legislation was much less obvious If two friends decide to share a two-bedroom flat and one of them then falls in love and ask their partner to move in – why is the risk to their safety suddenly increased?

Financial motivation

The motivation for this legislation was in my opinion mostly financial and the scheme has raised many millions of pounds for local authorities since it was introduced.

The licence fees have been supplemented by the fines that have been levied on both landlords and agents who have broken the rules very often inadvertently. However despite many objections from landlords and agents the legislation has been extended further.

“This legislation cannot have any purpose other than to raise money.”

Now we have a third category of licensing which means that any property situated in a designated road needs  a licence to rent it out even if it is occupied by just a single tenant. This legislation cannot have any purpose other than to raise money.

Once the fee has been paid the local authority doesn’t have to do anything at all.  There is usually  no inspection of the property and sometimes it takes many months before  the licence is issued.  It is just another way to collect money from landlords for doing nothing at all.

Huge penalties for innocent mistakes

The level of fines that can and are being imposed for innocent mistakes is huge. The maximum fine for not having a licence is £30,000 which  is wholly disproportionate to the offence. The tenants have not suffered any financial loss or being put in any danger but regardless of this a  fine is imposed. Imagine what would happen if the average fine for speeding was to be too increased to £30,000. There would be absolute outrage.

So why is it OK for landlords to be subjected to these draconian penalties ?

I fear that in view of the size of the fines local authorities will soon start to mount proactive campaigns to catch out as many landlords and agents as possible so as an agent it is essential that you take the steps necessary to protect yourself as a matter of urgency.

“As an agent it is essential that you take the steps necessary to protect yourself as a matter of urgency.”

This will require cooperation from your landlords but if any of them  refuse to apply for a licence then you need to take stern action against them. This might include making them aware that they are liable for the fine not you, withholding rent until the application is made and even terminating your contract with them if they continue to flout the rules

Take action immediately

This is not something that you can ignore and you need to take action immediately. We are regularly seeing businesses that are unsaleable and virtually worthless because they’re not compliant with this legislation and the time and money necessary to put things right can be  very significant.

My advice therefore would be to conduct a thorough audit of all of your properties immediately and ensure that you take the necessary action without delay.