A new assessment of legislation and council rules surrounding the private rental sector suggests a severe crackdown may be coming in 2021.
Property data tech platform Kamma warns that with 44 licensing consultations now in progress, the next few months could see the same volume of new restrictions and controls as have been agreed over the whole of the past two years.
It also says councils and the HMRC are preparing to collect an estimated £400m in licensing fees and fines, plus almost £2m in unpaid taxes relating to the sector.
Kamma believes that the lead authority showing a clampdown on the private rental sector has been Newham in London, which so far has identified 27,000 non-compliant landlords and alleged tax evasion adding up to £115m - just in one borough.
“Today, despite being one of 408 local authorities with the power to issue licences, Newham accounts for 17 per cent of all those issued” according to Kamma, which says other councils are making provision to adopt Newham’s more aggressive and proactive stance.
“The property industry has to expect an increase in both legislation and enforcement in the next 12 months. Arguably this is already the case as Westminster announces a new discretionary scheme following the Newham model and the Mayor of London launches a new search engine through which unlicensed properties can be identified and reported by tenants. Whilst this tool lacks the accuracy required for compliance purposes, it is accurate enough to act as a sign post for council investigations” the platform says in a new report.
Kamma suggests that while this may be depressing news for the private rental sector as a whole, the likely crackdown gives letting agents an opportunity to shine.
“Faced with a larger burden of compliance, challenges which tip arguments in favour of more legislation, and tools which tip the balance of power towards tenants over landlords, lettings agents in particular are facing a more complex task in 2021” it says.
But it adds: “In any challenge, however, lies opportunity, and that is particularly the case in an industry with so few barriers to entry. The ability of agents to differentiate has been impacted over the years as technology has reduced sunk costs and new, low-cost business models have challenged long- standing best practices. The importance of quality, expertise and peace of mind has given way to a race to the bottom.
“In this context agents should welcome complexity as a way to reclaim lost ground. In a more complex market it is experts that thrive. Managing risk makes agents trusted partners, which may even be worth a premium, when the cost of fines is factored in.”
Kamma urges agents to de-risk their own portfolios to make them more efficient, invest in technologu to improve performance, and to offer to hold and manage licences for landlord clients to help customer retention and play the role of ‘trusted friend’.
The platform continues: “In such a transactional relationship the only way to win is to change the balance of the equation. If landlords are seeking nothing more than savings in time and cost, then alert them to the complexities of licensing and the risk of fines.
“These are, on average, £4,333 but this is per breach, not per property. The largest single fine recorded, for one landlord with multiple breaches, was was £167,000. When managing properties, agents are jointly liable for these fines so there is both huge risk to manage on behalf of landlords, and huge potential downside for agents.
“The best agents are doing more than managing, by offering a licence application service as a value- add to their landlords they turn the challenge into opportunity and risk into revenue.”