Compulsory licences for landlords in Wales
An article for advisers explaining the details of the new licensing regime for private landlord in Wales
This article was originally published in the March/April 2016 issue of Adviser magazine and was correct at the date of publishing.
The Welsh Government has launched a registration and licensing system for landlords and agents across Wales, intended to regulate the practice of landlords and improve the private rental housing market.
The intention of the Welsh government is to introduce a ‘mandatory registration and accreditation scheme for private sector landlords which will assist individuals and families by regulating the practices of landlords, lettings agents and managing agents. Good private sector landlords will benefit from these changes as it will not allow bad practice to continue.’(1) Part 1 of the Housing (Wales) Act 2014 (‘The Act’) provides the framework for the Welsh Government’s registration and licensing regime, and delegates powers to the Minister to issue a code of practice for landlords in the private rental sector.
Why is it needed?
The Welsh Government’s intention is to ‘improve standards in the private rented sector, make more information available on landlords for local authorities and tenants and lead to raised awareness by landlords of their rights and responsibilities’.(2) The licensing system’s dual purpose is to raise the standard of private rented accommodation and to educate landlords on their rights and responsibilities. During the White Paper consultation, housing sector organisations raised the ‘disproportionate amount of the casework’, from ‘problems [that] are caused by a lack of understanding among landlords and tenants about the nature of their rights and obligations’(3), they also highlight that the number of private tenants has increased by 24% over 10 years (from 130,182 to 184,254. (Census 2001; Census 2011)). In response, the Welsh Government have chosen licensing as the method to educate landlords about their responsibilities.
Rent smart Wales
The Welsh Government has appointed Cardiff City Council as the lead authority to administer the new scheme across Wales, and in turn Cardiff City Council formed the all Wales licensing body called Rent Smart Wales. Rent Smart Wales launched on 23rd November 2015 with the responsibility of specifying requirements in relation to training, authorising training providers, maintaining a landlords’ register, and issuing licenses. The new licence will be in addition to any HMO or Local Authority selective licensing scheme already in existence. Landlords will have a year to comply with the regulations as Rent Smart Wales will not enforce the new regulations until 23rd November 2016.
Who will need to register and apply for a licence?
The two primary pillars of the new regime will be registration and licensing, both relating to the persons involved in letting the property, rather than the property itself. Landlords will have to register themselves as landlords under section 4, with Rent Smart Wales. Landlords who undertake letting activities will have to be licensed by section 6, or appoint an agent who is licensed. In order to be licensed a person must meet certain criteria, including being a fit and proper person (section 20) and requirements relating to training (section 19).
Landlord registration
Registration is compulsory for all private landlords under section 4 of the Act, unless exempt for a few specific reasons. Landlords must register if they have a rental property in Wales, and they must include the address of all rental property in Wales of which they are the landlord in their registration. This means that Landlords living outside of Wales who have a rental property in Wales must register.
Landlords with exemption from registration include registered social landlords, fully mutual housing associations, and landlords who have applied to be registered, gained the interest in the property, or are attempting to recover the property, within 28 days of the enforcement action. The definition of ‘landlord’ excludes those with a lodger.
Failure to register as a landlord with Rent Smart Wales will be an offence and, subject to conviction, the landlord could be liable to a fine on the standard scale 3, which is currently a maximum of £1,000.
Landlord licensing
The requirement to be licensed is separate from registration, and applies to landlords undertaking activities that are either letting activities, and/or property management activities. Section 6 specifically requires landlords to be licensed for letting activities, unless they have appointed an authorised person to undertake the activities on their behalf; this would include letting agents. The definition of licensed lettings works does not include advertising properties for rent or facilitating the communication between a landlord and tenant, as long as the advertiser conducts no other letting or property management work as described. Lettings work and property management works also do not include agents doing things under a contract of service, such as plumbers or electricians on a contract with the landlord.
Letting activities and property management activities
Landlords will have to be licensed to carry out ‘Letting activities’ and/or ‘property management activities’. Both are defined in The Act, beginning with letting activities in s6(2) which are:
‘(a) arranging or conducting viewings with prospective tenants;
(b) gathering evidence for the purpose of establishing the suitability of prospective tenants (for example, by confirming character references, undertaking credit checks or interviewing a prospective tenant);
© preparing, or arranging the preparation, of a tenancy agreement;
(d) preparing, or arranging the preparation, of an inventory for the dwelling or schedule of condition for the dwelling.’
‘Property management’ activities is similarly defined in The Act by s7(2) as:
‘(a) collecting rent;
(b) being the principal point of contact for the tenant in relation to matters arising under the tenancy;
(c) making arrangements with a person to carry out repairs or maintenance;
(d) making arrangements with a tenant or occupier of the dwelling to secure access to the dwelling for any purpose;
(e) checking the contents or condition of the dwelling, or arranging for them to be checked;
(f) serving notice to terminate a tenancy.
Agents and licensed activities
Agents must be licensed when conducting ‘lettings work’ and/or ‘property management work’. ‘lettings work’ means things done by the agent in response to instructions received from -
‘(a) a person seeking to find another person wishing to rent a dwelling under a domestic tenancy and, having found such a person, to grant such a tenancy (‘a prospective landlord’);
(b) a person seeking to find a dwelling to rent under a domestic tenancy and, having found such a dwelling, to obtain such a tenancy of it (‘a prospective tenant’)’;
‘Property management work’ is defined by s12(1) as:
‘(a) collecting rent;
(b) being the principal point of contact for the tenant in relation to matters arising under the tenancy;
(c) making arrangements with a person to carry out repairs or maintenance;
(d) making arrangements with a tenant or occupier of the dwelling to secure access to the dwelling for any purpose; (e) checking the contents or condition of the dwelling, or arranging for them to be checked;
(f) serving notice to terminate a tenancy.’
The licence conditions
The purpose of a licence is to regulate the type of behaviour acceptable in an industry, and conditions on the award of a licence will be an important aspect of the regulation. The two main points to consider alongside the licence are the ‘fit and proper persons test’, and the code of practice for landlords and agents. All licences will be subject to the fit and proper persons test and will be issued on the condition that licence holders comply with the code of practice.
Fit and proper person test
Landlords and agents who fail this test will not be issued with a licence or will have their licence revoked. For landlords, this will mean handing over letting activities to an agent who does hold a licence. When applying the test, Rent Smart Wales, must have regard to evidence of offences involving fraud, violence, firearms, drugs, and sexual offences. Regard must be given to any unlawful discrimination under the 2010 Equality Act and any breach of landlord and tenant housing law. Further guidance will follow on how the licensing authority will apply this test in practice.
Code of practice for landlords and agents
Central to the licensing regime is the new Code of Practice for Landlords and Agents. Section 40 of The Act provides for the Welsh Ministers to issue a code of practice, and licences will be granted on the condition that licence holders must comply with the code.
The code of practice for landlords and agents comprises two elements. First and foremost, it sets out what landlords and agents must do i.e. ‘Requirements’ in order to comply with the law. Unless specified in the code, the ‘Requirements’ apply to both landlords and letting agents. The second element of the code consists of best practice guidelines, which are there to encourage and improve the standard of private rental market.
In brief, section 1 of the code is an introduction followed by:
• Section 2 covers activities before letting a property, and mainly concerns the appointment of an agent. It contains a list of required actions and information an agent must provide to a landlord and the standards required when advertising.
• Section 3 covers setting up a tenancy, from references and checks, agreeing the tenancy, the tenancy agreement itself, documentation, and deposit management.
• Section 4 covers the duration of the tenancy including starting the tenancy, rent collection, contact details, Access, property conditions, and renewal.
• Section 5 covers ending a tenancy with specific requirements around the handling of the deposit.
The code will supplement regulations and laws already in place, which are listed in appendix 2 of the code. This provides a list of legislation and guidance that are relevant to the code, the obvious being the Equality Act 2010, and previous housing acts.
Enforcement
Enforcement will be the key to the success of the new licensing system, and will come into effect from 23rd November 2016. The legislation makes clear that substantial fines could result where a landlord fails to meet his/her legal obligations. The first and most fundamental point is that a landlord who fails to register, subject to conviction, could be liable to a fine of around £1,000. This will rely on tenants reporting that a landlord is not registered, which will be made possible by Rent Smart Wales providing the facility for tenants to check whether their property is registered.
A self-managing landlord’s failure to be licensed is liable to a fine, not limited by any levels on the standard scale and will be decided by a magistrate.
It is also an offence for a landlord to appoint an unlicensed agent or to allow an unlicensed agent to carry on with letting activities. There will be fixed penalty notices available, along with the ability for a tribunal to issue rent stopping orders and rent repayment orders for some offences.
Crossover with Renting Homes Act 2016
The Renting Homes (Wales) Act 2016 and Housing (Wales) Act 2014 complement each other in an overhaul of housing law in Wales. In particular the Renting Homes (Wales) Act will impact on the terms of contracts and the standard practice of landlords in Wales.
Major changes to housing law in Wales includes the majority of current tenancies and licences being replaced with just two types of contract - one for the private rented sector and one for social housing.
There is also a requirement that landlords must issue a written statement of the contract which clearly sets out the rights and responsibilities of both landlords and tenants. Landlords will also have to carry out repairs and ensure rental properties are fit for human habitation. These requirements relate directly to the licence condition of being a fit and proper person; meaning landlords who fail to adhere to the Renting Homes (Wales) Act will run the risk of losing their licence and will therefore have to appoint someone who is licensed to manage the property.
Conclusion
This new scheme is the beginning of a major overhaul of Housing law and policy in Wales. In its infancy, this legislation will reply on the development and administration of enforcement as it comes into force. This is a welcome step in increasing tenants’ rights in Wales, however here will be considerable further guidance and detail released by the Welsh Government and Rent Smart Wales which both tenants and landlords will need to be made aware of for this scheme to achieve its stated aims.
This article was written by Calum Higgins in March/April 2018 as Welsh law expert in the Expert Advice Team at Citizens Advice.
Endnotes
1. Housing Minister Written Statement — Launch of the Housing White Paper, May 2012
2. Housing Minister Written Statement — Housing (Wales) Bill, November 2013
3. Shelter Cymru
