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SECTION 2 - BACKGROUND
Policy
Under the Antisocial Behaviour etc. (Scotland) Act 2004 ("The Act") since 30 April 2006, all owners of privately rented housing in Scotland have been required to apply for registration with their local authority. Mandatory registration is an important strand of the Scottish Government's wider policy framework for the private rented sector, designed to increase standards of management and property condition across the sector, and, by so doing, to reinforce the positive contribution the sector makes to meeting housing need in Scotland.
The Scottish Parliament has passed several pieces of legislation in recent years, over and above landlord registration, including the Repairing Standard, Right to Adapt for disabled tenants and new provisions for the licensing of Houses in Multiple Occupation, aimed at increasing standards and improving the reputation of the private rented sector as a good option for tenants. The Government has also recently launched a National Voluntary Landlord Accreditation Scheme, Landlord Accreditation Scotland, which aims to further improve standards by promoting best practice in private letting through training, advice and guidance for landlords and agents.
The Scottish Government made clear in Firm Foundations2, the consultation paper on the future of housing in Scotland, that it wants to see the private rented sector play a greater role in meeting housing need. As the Guidance Notes for Local Authorities on the Registration of Private Landlords make clear 3, landlord registration plays a key role in this in a number of ways. Successful mandatory registration helps local authorities to improve their Local Housing Strategies by filling gaps in their knowledge of how many private rented sector properties are in their area and where they are located. This in turn leads to more relevant and effective local policies to improve, regulate and support the contribution that the private rented sector makes to local economies and local housing markets. Since April 2006 there have been over 118,000 applications for registration (this includes joint owners and agents of property), with over 172,000 privately rented properties included within these applications. These statistics alone provide us with a greater knowledge about the size and location of the sector and its potential.
The implementation of the landlord registration scheme was informed by an Implementation Advisory Group (The Housing Sub-Group of the Implementation Advisory Group for the Antisocial Behaviour etc (Scotland) Act 2004) 4. The proposals contained in this consultation do not seek to revisit the policy principles agreed by that Group - those principles and the secondary legislation underpinning landlord registration have already been widely consulted on. Instead, this consultation proposes amendments to the legislative framework which are designed to make delivery of the scheme more efficient and effective. The previous consultation paper, Regulation of Private Landlords under the Antisocial Behaviour etc (Scotland) Act 2004 5, and the consultation responses 6 can be accessed on the Scottish Government website.
The proposals set out in this consultation paper have been informed by discussions with key stakeholders as part of the Arneil Johnson review of the implementation of the scheme. (See section below on 'Review').
Application process
Responsibility for implementing landlord registration rests with local authorities. Each local authority is responsible for identifying landlords who are required to register and for ensuring that the registration process is completed satisfactorily. Applicants are required to provide certain information within their application for registration. This includes a list of the properties they let and details of any joint owners and any agents who manage the property.
Before registering a landlord, a local authority must be satisfied that he or she is 'fit and proper' to let property. In assessing whether an applicant is fit and proper, local authorities must take account of a range of information. This includes whether or not the applicant has committed any relevant offences, including any contravention of the law relating to housing or landlord and tenant relations. In addition, the local authority may take account of any other material it considers relevant to the question of whether the applicant is fit and proper. In particular, this includes the landlord's ability to properly fulfil his or her legal obligations as a landlord.
Applications can be made either on paper or online at www.landlordregistrationscotland.gov.uk. A landlord must apply for registration in all local authorities where he or she owns privately rented property, unless an exemption applies.
A principal fee of £55 is charged for each owner or agent plus £11 for the registration of each property. Various discounts are available, including a discount of 75% of the principal fee for registration in multiple authorities.
Implementation
There have been a number of difficulties with the implementation of landlord registration and the Scottish Government has made the successful delivery of the scheme a priority since May 2007. Over the last year significant progress has been made. The latest registration approvals figures show that 79% of all applications for registration have now been assessed and approved nationally. This is against a backdrop of increasing numbers of applications (87,875 applications received by May 2007, 118,055 applications received by June 2008).
Two years into delivery, we are also seeing the wider benefits of registration. Local authorities are more aware of the size and make-up of the private rented sector in their areas and landlords are increasingly aware of the law and their responsibilities towards tenants. In particular, positive engagement between local authorities and the sector has increased over this period through, for example, the development of local landlord forums. We are clear that we want to see this progress continue.
Review of implementation
In response to the difficulties experienced in the delivery of the scheme, the Scottish Government committed to review the implementation of landlord registration. The purpose of the review was to examine the efficiency and effectiveness of existing arrangements and consider where improvements could be made to better support local authorities in the delivery of the scheme. In late 2007, Arneil Johnston was commissioned to undertake a Good Practice Review of the implementation of the scheme by local authorities 7. As a result of this review, Arneil Johnston made a number of recommendations aimed at streamlining delivery and making the scheme more efficient. The recommendations focussed in the main on changes to local authority business practices and processing arrangements, including, for example, moving to a pre-payment application process to avoid some of the difficulties that have arisen in relation to invoicing for outstanding fees. The Scottish Government is currently working with local authorities to take these recommendations forward.
A number of the Good Practice recommendations touched on aspects of the existing legislative framework and areas where this could be improved to further streamline delivery of the scheme. Arneil Johnston therefore undertook further work to focus specifically on the legislation underpinning the scheme and consider opportunities to make this more efficient and reduce administrative complexity. A key element of this work was to consider these issues in the context of the start of the application renewal process. An application for registration is valid for 3 years from the point that the application is approved by a local authority. As the first application was approved in March 2006, the first registration is due to expire in March 2009. This consultation therefore focuses on changes to secondary legislation which will support and improve the registration renewals process.
Arneil Johnston held two focus groups - one with representatives from local authorities, and a second with landlord and agent representative bodies and organisations representing tenants - to explore aspects of the current operation of the scheme and areas where changes to legislation may make the operation of the scheme more effective. A list of focus group attendees is available at Annex A. The views of the focus groups were largely consensual. In general, there was recognition that the implementation of landlord registration had significantly improved, but that a number of legislative changes could have a positive impact on making the scheme more efficient and effective. The views of the focus groups are included within this paper.
Cost of delivering the scheme
The Scottish Government has supported local authorities with the costs of implementing the scheme through the provision of grant funding. A total of £5.2m grant funding was made available to local authorities between February 2006 and March 2008 to support the start-up costs associated with the delivery of the scheme. Under the Concordat arrangements between Local Authorities and the Scottish Government, baseline grant funding of £1.98m per annum in 2007-08 for landlord registration has been rolled up in the overall local government settlement for the period 2008-11. Ongoing funding arrangements for registration activity will be determined locally, in line with the Concordat.
It is the Scottish Government's intention that the scheme moves to full cost recovery over time and that local authority fee income supports the ongoing administration of the scheme. This is in line with other licensing regimes, in particular, HMO licensing.
The Act makes provision for fees to be charged for an application for registration, and for notifying the authority of any changes to the information held on the register. These fees are currently set nationally by Ministers. We intend to continue to set fees nationally for the reasons outlined below.
For the period April 2006 to March 2008 local authorities received approximately £5m in income through registration fees. An application for registration lasts for 3 years from the point of approval. Therefore, a landlord/agent will only be required to pay a fee every 3 years, unless additional properties are subsequently registered. This means that, broadly speaking, local authority fee income over the three year cycle in terms of the application renewal process should be approximately £1.7m per annum. This is based on the current number of landlords and agents registered with the scheme. With an increased focus on enforcement of the scheme over the coming months, we expect the numbers of landlords applying for registration, and, hence, fee income, to increase. In addition, a number of local authorities report outstanding fee payments which, once collected, should further increase income under the scheme. The amount of fee income collected by local authorities varies according to the number of landlords and properties in any given area.
A significant part of registration process is the online system. The Scottish Government currently funds both its provision (including the central server) and continuing technical support. The Scottish Government is also taking forward a comprehensive package of measures to improve the online system, to make applying online easier for landlords and more efficient for local authorities to process applications. These costs are not passed on to local authorities.
Local authority finance returns, outlining income and expenditure under the scheme for the period grant funding was made available (Feb 2006 to March 2008) point to considerable variation in the costs of administering landlord registration. Overall, local authorities report expenditure of approximately £6.6m. This includes expenditure on start up costs, to recruit and train staff and establish local systems and processes, as well as additional staff costs associated with processing the backlog in applications.. Scottish Government grant funding was provided to support these costs.
Arneil Johnston undertook an expenditure analysis earlier this year, based on local authority finance returns up to September 2007. This exercise was intended to draw conclusions on the average cost of processing applications in order to provide a benchmark for local authorities and to inform the Scottish Government's consideration of how fees should be set, the level of fees and whether these should be reviewed. However, the results from this work were inconclusive. Arneil Johnston found that levels of income and expenditure varied significantly between local authority areas. Variations were not always linear, for example, increased costs associated with increased numbers of landlords. Some local authorities had experienced particular difficulties with the administration of the scheme, including the interface with the online system; others had established separate processes and business practices to support delivery; staffing levels and grades were also variable. For these reasons Arneil Johnson were unable to determine a benchmark cost for delivering the scheme. Given the patchy information available to date on costs, we are not proposing any changes to how the principal fee is set and its level at this time. Instead, we believe that the significant progress made in delivering the scheme over the last year needs time to bed in. We can expect reduced administrative costs associated with the Good Practice Review and changes to local authority business processes. The changes proposed in this consultation will also help to reduce the administrative burden on local authorities and, hence, the cost of the scheme overall.
This approach was supported by the focus groups, although a minority of local authorities would like to determine fee levels locally. As any determination of local fee levels would be based on cost recovery, we do not feel that there is sufficiently robust evidence on the costs of delivering the scheme to support this approach at this time. In addition, none of the local authorities at the focus groups had carried out any cost analysis locally on delivery of the scheme. Given that the focus of our review and this consultation is on ensuring that the registration renewal process is as efficient and straightforward as possible, we feel there would be significant practical feasibility issues associated with local authorities setting their own fees at this time. In particular, building variations in local fee rates into the online application system before March 2009 would be challenging. We will, however, continue to monitor the cost of delivering the scheme and will keep the position of local fee setting under review.
This consultation proposes changes to other aspects of the fee and discount structure. These recommendations take into account the views of the focus groups and the primary aim is to simplify the current structure. Where we are able to, we have costed the impact of these changes as they affect landlords and local authorities. Overall, we expect the financial impact of these changes to be broadly cost neutral, with any loss in income to local authorities off set by savings in terms of a reduction in costs associated with administrative complexity. Landlords stand to gain in certain circumstances, when they come to renew their application.
Legislative Context
Ministers have a number of regulatory powers under the Act. These include powers to:
- prescribe information that must be included in an application for registration (Section 83(1)(d) of the Act);
- specify fee levels and how they are determined (Section 83(3) of the Act);
- modify exemptions for particular categories of dwelling (Section 83(7) of the Act);
- make regulations requiring local authorities to provide advice and assistance to landlords and tenants (Section 99 of the Act);
- specify that the tenant is not required to repay any rent due for the period of a rent penalty notice (Section 97(7) of the Act).
The instruments listed below were made in exercise of these powers.
- The Private Landlord Registration (Advice and Assistance) (Scotland) Regulations 2005, SSI/2005/557 - the ' Advice and Assistance' regulations
- The Private Landlord Registration (Information and Fees) (Scotland) Regulations 2005, SSI/2005/558. Updated by: The Private Landlord Registration (Information and Fees) (Scotland) Amendment Regulations 2006, SSI/2006/28 - the ' Fees' regulations.
- The Private Landlord Registration (Appeals against Decisions as to Rent Payable) (Scotland) Regulations 2005, SSI/2005/559
- The Private Landlord Registration (Modification) (Scotland) Order 2005, SSI/2005/650 - the ' Exemptions' regulations
This paper consults on proposals to amend the above statutory instruments.
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