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8. Administration of Registration
This section of the report looks at the specific types of landlords required to register and areas where authorities have reported concerns or displayed good practice.
8.1 Letting Agents
8.1.1 Requirement to Register
In the main, letting agents have worked with local authorities in ensuring that landlords are aware of their legal obligation to be registered and also to declare any agent acting on their behalf. However, the current guidance on an agent's legal obligation to register is a grey area which has caused confusion. For example the current guidance states that;
'The owner of a registerable property must declare an agent who acts for him or her in relation to letting. It is not compulsory for agents to register in their own right, but agents may find it more convenient and cheaper and for their clients to do so.'
As this statement contains the phrase 'it is not compulsory', some agents have taken this to mean that they do not require to register. It requires to be rephrased so that there is no discrepancy as agents are required to register under the act if they act on behalf of an owner.
Good Practice Recommendation
Guidance regarding the legal position of letting agents in relation to landlord registration requires to be clearly defined to avoid confusion. This includes a clear definition of 'agent' and to whom this applies.
8.1.2 Definition of 'Agent'
Similarly the definition of 'agent' has also caused confusion and has been challenged by some who state they that they are not required to register. A particular concern here was a solicitor advertising services as a property agent, but stating they do not currently have any clients and therefore do not require to register.
Good Practice Recommendation
It is recommended that clear guidance is available to agents on both their legal position in relation to registration and their clients and also regarding the definition of agent. The definition currently included in the guidance is relatively clear however local authorities requires this information to be made more readily available to agents.
8.1.3 Payment Options
At present, if a landlord registers and lists the details of an agent who is not registered on their application, an additional principal fee is payable. The guidance then recommends that if this is the case, the landlord should seek to recover the costs from the agent. Whereas if the agent has registered previously the agent has already paid the principal fee and there is no additional cost to the landlord.
In addition, some letting agents have seen landlord registration as a business opportunity, by applying on behalf on landlords for a set fee. Highland Council reported that this arrangement has not always been successful in that agents do not always include all the landlord's details including contact or convictions information, or they have incorrectly appeared as joint owners on the application form. In addition, they have also found that the letting agent also then receives the landlord's online user details.
Good Practice Recommendation
In some instances, landlords have paid for agents' registration on behalf the agent which is unfair. The current guidance to landlords requires to be clear, that if the agent they are currently using or hope to use is not registered (and they can check the public register for information on this) that an additional cost will be incurred. This should act as a market incentive to ensure that agents become registered.
8.1.4 Keeping Records Up to Date
Agent's client base and portfolios will regularly change and it is up to the agent to ensure their records for the purposes of landlord registration are kept up to date. Some authorities had began to work closely with local agents to ensure that they required all new landlords to have registered before they advertise their properties.
Good Practice Recommendations
It is recommended that as agents can act as a useful source of information on the local private rented market and therefore local authorities should work closely with them to identify unregistered landlords and properties.
In particular, it is recommended that agents require a landlord registration number before taking on a new property or landlord and also they should regularly update their registration records when they take on new landlords or when landlords leave the agency.
Good Practice Examples
The City of Edinburgh Council worked with agents to ensure they were aware of landlords' obligation to register. As a result agents have begun to practice an entry/exit strategy with landlords:
- 'entry strategy' - when an agent takes on a new landlord, they ensure that they are registered before acting for them;
- 'exit strategy' - when a landlord leaves an agent, the agent ensures that they are dissociated from the landlord's property on the register.
8.2 Joint Owners
The main issue local authorities reported regarding joint owner applications is that the online application form allows landlords to apply for registration without providing the full information for all joint owners. For example where a property is jointly owned by more than one individual and they do not together form a 'legal' person' each will require to register separately. Some applications are indicating that there are joint owners but the other owners have not applied. Also another issue raised has been where joint owners do form a 'legal person' that applications are being submitted without the other owners full contact details.
Good Practice Recommendation
It is recommended that the online application form should not allow the submission of an incomplete application form. Therefore all joint owner information should be included and submitted as part of the same application form rather than being treated as a separate application.
Guidance accompanying paper applications should make it very clear that all joint owners details should be included before a valid application has been submitted.
8.3 Houses for Holiday Use
Residential properties that are let or occupied for holiday purposes are exempt from registration. Local authorities with large holiday or second homes markets have reported that this is often difficult to recognise as often, these properties can and are being let on short assured tenancies.
Good Practice Examples
The following authorities have dealt with holiday lets accordingly:
The City of Edinburgh Council: Edinburgh's holiday let market is substantial and in order to identify a holiday let they have relied on the HM Revenue & Customs guidelines. However, proving this is often difficult. As a result, Edinburgh runs additional checks such as;
- does the property get trade waste pick ups?
- has a risk assessment by fire services been completed; and also a
- check the council tax records.
If these checks apply to the property it is defined as a holiday let.
The Highland Council: If HM Revenue & Customs records show properties as holiday lets and the properties apply to this criteria then it is accepted as a holiday let. However, if Short Assured Tenancy is in place then the owner is expected to register as a landlord.
Orkney Islands Council: In the summer months properties are let as holiday lets and in the winter months they are used as short term accommodation for locals, typically accessed by local homeless households. The Council has prepared an information sheet for landlords to explain that these 'winter lets' are not exempt from registration. The impact has been a reduction in the number of winter lets which the Council hope will reduce the number of homeless presentations in March each year.
8.4 Agricultural, Small Holding and Crofting Tenancies
A typical issue, particularly regarding crofts is that they are being sub-let and occupied by tenants.
The following was reported:
Argyll & Bute Council reported that there are crofts in this area that are being sub-let, which should not happen. These are therefore being referred to the Crofters Commission as they need explicit consent to sublet. If a croft is being sub-let the owners need to notify the Council and require to be registered. Where a property is an agricultural small holding, the Council requires to see documentation for this and if none available the owner requires to register.
Good Practice Recommendation
There requires to be a clearer definition of when a croft or agricultural small holding is sublet and who is legally required to register. The Scottish Government's interpretation of the law (which can be tested in the courts) is that the landowner is required to register. A tenant farmer should register as an agent on behalf of the small holdings that are then sublet to tenants.
Crofts are exempt from registration and should be dealt with by the Crofters Commission if there is evidence that they are being sub-let.
8.5 Prospective Landlords
Despite the current guidance stating that any person intent on entering the letting market should seek registration prior to the purchase of a property to check that they are, or are not, judged to be fit and proper person for letting purposes, no authorities have undertaken promotional work to target this specific group. For example no authorities interviewed consulted with local buy-to-let mortgage lenders, independent financial advisors or solicitors to ensure that their clients are properly briefed on registration and future landlord responsibilities. However, it is recognised that some prospective landlords may be aware of registration through localised advertising of the scheme and promotion of the public register in the local authority.
Good Practice Recommendation
Local authorities should seek to work with local buy-to-let mortgage lenders, independent financial advisors and solicitors to ensure their clients are fit and proper to let property prior to investing in property. For example, it would be good practice for buy-to-let mortgage lenders to begin to ask for registration numbers as part of their application process. It is noted that prospective landlords may not have purchased property at this stage but they can still apply to be registered. There is no requirement to have a portfolio before registering. If this was the case it would then be made clear to the applicant that they require to keep their details up to date once property is purchased.
As this market is mainly dominated by large national mortgage lenders, it should be standard practice that no buy-to-let mortgage is granted for a property in Scotland without the landlord first being registered or have an appointed registered agent in place. A registered landlord will have a registration number and buy-to-let mortgage lenders should request this as part of the application process.
At a local level, authorities can raise awareness with buy-to-let mortgage lenders but in general, encouragement for this national shift in practice requires to come from the Scottish Government in partnership with the Council of Mortgage Lenders and other financial institutions operating in Scotland.
8.6 Landlords Resident Outwith Scotland
In general, most authorities stated they were surprised at the level of landlords that are resident outwith Scotland. It is not surprising that this particular group of landlords are not only difficult to identify but can also be very difficult to contact, particularly if no letting agent is in place and no email or phone number is supplied with the application. It is thought that as landlord registration is not a legal requirement in other parts of the UK or in some countries abroad, awareness of a landlord's obligation to register may be limited. In addition, all local authorities have advertised registration locally, in local newspapers, shops, agencies, buses, public buildings etc and therefore awareness of obligations outwith Scotland will be minimal. Also most local authorities have not specifically targeted advertising to tenants and therefore this information has not been passed from tenants to landlords.
At present, it is reported that 6% of addresses within the online system are from landlords resident outwith Scotland. It should be noted that these are the landlords that have applied to date and all authorities reported that there are landlords yet come forward and register. It is also noted that concentrations of landlords from outwith Scotland may be higher in specific areas or markets, for example in busy student markets, larger cities or in areas of high concentration of second or holiday homes.
Good Practice Recommendation
The main issue with landlords resident outwith Scotland is that they are not aware of landlord registration. As this is an issue that is a concern to all local authorities, it is recommended that a national press release to target landlords resident in Northern Ireland, England, Wales and Eire would be beneficial in raising awareness. An internet press release may also be helpful in raising awareness to landlords that may reside outwith the UK.
Where landlords are resident outwith Scotland and no agent is in place to manage the property, it does raise the question of whether that landlord should be deemed as 'fit and proper'. This may be a particular area of risk that local authorities should consider closely in that if a landlord resides outwith Scotland the authority should be satisfied that sufficient procedures are in place to ensure property maintenance and tenancy management occur.
For example should landlords who are resident outwith Scotland and do not have an agent in place be deferred pending review and be subject to close inspection prior to registration?
It is also recommended that telephone numbers and email addresses be mandatory on application forms which should help simplify contact. A question could also be added for such landlords to confirm that they have systems/procedures in place to meet their obligations to their tenants with an appropriate link to what these obligations are.
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