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CHAPTER 2: RESPONSES TO PROPOSALS UNDER THE FEE REGULATIONS.

When making an application for registration, landlords and agents pay a fee relevant to their circumstances. The key elements of the fee structure are the principal fee (£55) with an additional property fee for each property registered (£11 per property). There are also a number of additional fees and discounts, the detail for which is prescribed within regulations.

A total of 7 questions were asked in relation to the fee regulations.

QUESTION 1:

Do you agree that a flat discount rate of 60% should be applied to applications made simultaneously online to more than 1 local authority? If not, what should the level of discount be?

Applicants applying to more than one local authority simultaneously using the online system currently pay the principal fee to one (lead) authority and receive a discount of 75% on the principal fee for all other consecutive local authority areas.

The consultation proposed to replace this discount with a simplified version. This would mean that a landlord applying to more than one local authority would receive a flat discounted rate on the principal fee for all local authorities applied to simultaneously. The consultation proposed that this discount be 60%.

A total of 141 responses were received, of which 85 (60%) agreed with the proposal, 28 (20%) disagreed and 28 (20%) did not have a view.

63% of landlords and agents agreed with the proposal, 17% disagreed and 20% did not have a view.

50% of local authorities agreed with the proposal.

57% of the housing organisations agreed with the proposal while 43% did not have a view. All of the landlord organisations agreed with the proposal.

Comments supporting the proposal included:

Fife Council stated:
"This seems fair. Income implications should be identifiable only over time. Losses may be offset in the future by tracking down unregistered landlords". (LR124)

While the Scottish Association of Landlords said:
" SAL supports this proposal and believes that the removal of a lead authority will simplify the application process for both landlords and local authorities". (LR141)

Those respondents who disagreed with the proposal cited two main issues.

Loss of Income

Firstly, some local authorities were concerned about the loss of income which could occur by the removal of the concept of 'lead' authority.

Glasgow City Council said:
"Glasgow currently has 2,065 landlords who have applied simultaneously to another local authority. Glasgow would lose £34,644 in fees as a result of the proposed change. Administrative savings are expected to be only £3,000 - equals a net loss of £32,000". (LR135)

A minority of local authorities felt that the discount should be removed altogether.

City of Edinburgh Council quoted:
"Consecutive discount should be seen as a one-off discount made available at the launch of landlord registration 2 years ago………the consecutive multi authority application discount should not apply to those renewing their application as not all registrations will reach the same renewal date". (LR139)

There were also comments from various landlords that the discount should be 60% or greater and that the method of calculating the discount was still complicated. However 2 local authorities stated that the discount should be lower.

Dundee City Council stated:
"We agree that there should be a flat rate discount but would prefer to see a 40% discount. With a 40% discount all LA will receive £33 per registration which is a fairer estimate of the costs than £22, as proposed. We also see that it is unfair that landlords applying to only one authority should pay more that a landlord that is applying to two". (LR131)

Fee Anomaly

Secondly, a number of respondents were concerned about the anomaly created under the new discount, whereby a landlord applying to two local authorities would pay less than a landlord applying to one. These respondents called for this anomaly to be addressed. Several local authorities stated that the discount should be amended to 50% in order to overcome this anomaly.

East Renfrewshire Council, for example, whilst agreeing with the proposal, said:
"The anomaly created by applying a flat discounted rate of 60%, where a landlord applying consecutively to two authorities pays less than a landlord applying to one authority, needs addressed. If it is not, unnecessary paperwork will be created by landlords with property only in one authority area applying to a second local authority simply to obtain the discount. This will also distort the registration figures. We would suggest that a discount of 50% both removes the anomaly and provides for a modest increase in income to contribute towards running costs and implementing renewals". (LR133)

Some other respondents suggested that the anomaly could be addressed by created a sliding scale of discounts.

The SRPBA said:
"The SRPBA is broadly supportive of this proposal and believes that the removal of a lead authority will simplify the application process for both landlords and local authorities. However, as a number of our members have indicated that they have properties in more than 6 local authorities we are slightly concerned about the cost implications for these members, and would like to suggest that an additional discount is given. We would also suggest that the anomaly where a landlord applying consecutively to two local authorities will pay a fee of only £44 - which would be less than that for one local authority where the fee would remain at £55 - must be addressed. We would suggest that landlords applying consecutively to two local authorities must be required to pay at least the minimum fee of £55. To overcome these issues would it be possible to introduce a sliding scale of discounts: 50% discounted flat rate for landlords applying to 2 local authorities simultaneously online, 60% discounted flat rate for those landlords applying to 3 to 6 local authorities, and 70% discounted flat rate for those landlords applying to more than 6 local authorities". (LR101)

There were also concerns among local authorities that the discount will be difficult to administer at the renewals stage (starting March 2009).

QUESTION 2

Do you agree that the discount for accredited landlords should be removed?

In addition to landlord registration, a number of local authorities also run a local landlord accreditation scheme. These schemes promote best practice in private letting through provision of training, advice and guidance. Also a national voluntary accreditation scheme, Landlord Accreditation Scotland, was recently launched.

At the time the original regulations were introduced, two of the local accreditation schemes included a fit and proper person test in their requirements. This was the same test as that required for registration. A discount for accredited landlords was therefore provided for those accreditation schemes which included the fit and proper test, meaning that those accredited landlords who had previously been assessed as fit and proper were passported into landlord registration without having to pay an additional registration fee. A property fee was still required for any non-accredited properties.

The consultation proposed to remove this discount. The new National Voluntary Accreditation Scheme and the majority of local accreditation schemes do not operate a fit and proper person test and local authorities are responsible for checking applications in the normal way.

A total of 141 responses were received, of which 67 (48%) agreed with the proposal, 49 (35%) disagreed and 25 (18%) did not have a view.

39% of landlords and agents agreed with the proposal while 44% disagreed.

50% of landlord organisations and 29% of housing organisations agreed with the proposal. 57% of housing organisations did not have a view.

92% of local authorities agreed with the proposal.

Those respondents who agreed with the proposal cited the fit and proper person test as the basis for their decision.

City of Edinburgh Council stated:
"Most accredited landlords need the fit and proper check carried out so the full fee is required. This causes confusion with many landlords and significant enquiries. A removal of this discount will simplify the application process and reduce the number of errors in the application that take time to correct. ". (LR139)

Glasgow City Council also agreed:
"Glasgow would not want membership of the National Accreditation Scheme to attract a discount as it does not remove the need for the authority to apply the 'fit and proper person' test and therefore does not reduce registration costs". (LR135)

CIH Scotland said:
"The CIH agrees that the 'fit and proper person' test is crucial. Whilst that test is not included in the landlord accreditation criteria, it is not reasonable for a 100% discount to apply. Should landlord accreditation include that criteria at some point in the future then this position can be reviewed to encourage the raising of standards in the sector". (LR134)

A number of respondents stated that there should be some/remain an incentive to apply for, or to be an accredited landlord.

Landlord associations called for the accreditation discount to be extended to cover all accredited landlords.

The SRPBA said:
"The association does not agree with this proposal. The SRPBA recognises the Scottish Government's argument in relation to this issue, but remains firmly committed to the belief that there should be a discount for accredited landlords. …Some level of discount for those landlords participating in an accreditation scheme should be given. If the Scottish Government is committed to improving quality and recognising good practice by private landlords, then a fiscal incentive of some form of discount on their registration fee would be a positive demonstration of this commitment…The SRPBA suggests that a discount of 50% of the principal fee would be a suitable level of discount for accredited landlords…Whilst we recognise that the proposals contained within the consultation are designed to simplify the process and application of this discount may not achieve this, we do believe that there is a need to underline the commitment to accreditation by the provision discount". (LR101)

It was also suggest by some landlords that both Landlord Registration and Landlord Accreditation Scotland should be merged into one. A respondent commented:
"The existence of two schemes seems confusing, and wasteful. The two could be merged into one as the authoritative check on landlords". ( LR21)

QUESTION 3

Do you agree that the charities discount is increased from 80% to 100%?

Charities applying for registration receive a discount. This is currently 80% of the total amount payable (principal fee plus property fees). In practice, the application of the 80% discount has placed an administrative burden on local authorities when processing payment which is disproportionate to the fees being sought.

The consultation proposed to increase this discount to 100% in order to ease the burden of collecting small amounts of outstanding fees.

A total of 141 responses were received, of which 101 (72%) agreed with the proposal, 26 (18%) disagreed and 14 (10%) did not have a view.

67% of landlords and agents agreed with the proposal while 23% disagreed. The remaining did not give a view.

100% of landlord organisations and 57% of housing organisations agreed with the proposal, while 29% of housing organisations did not have a view.

96% of local authority responses agreed with the proposal.

The local authorities that agreed with the proposals stated that the burden involved in calculating/invoicing the charity, does not cover the income it generates.

City of Edinburgh Council said:
"Currently CEC has 56 registrations of this type. The slight reduction in income is balanced by the cost benefit from the reduced cost of invoicing". (LR139)

East Ayrshire Council said:
"In East Ayrshire it has on occasion cost more to invoice the charity for payment of the fees than what the fees are. For example to issue an invoice it is printed off the web site and entered into the local authority financial system, it is then printed off and sent to the landlord, the cost of staff, printing and posting sometimes adds up to more than the £2.50 charities have been charged". (LR129)

However, some landlords were of the opinion that charities should bear some of the costs of the scheme and that they should not be subsidised by commercial organisations/other landlords and should pay the full fee. A respondent stated:

"I don't see why a charity with many houses should have to pay less than an individual who happens to have a flat or 2. Charities run the houses as a business and I find it unfair that they get advantage from this status while those of us with 1 or 2 properties have to fork out to subsidise them". (LR16)

QUESTION 4

Do you agree that the on line discount should be increased from 10% to 20%?

Applicants using the online system currently receive a 10% discount on the fee payable. This discount is intended to reflect the reduced administrative burden on local authorities when applications are made online.

The consultation proposed to increase this discount to 20%, in order to further encourage applicants to apply online.

A total of 141 responses were received, of which 101 (72%) agreed with the proposal, 23 (16%) disagreed and 17 (12%) did not have a view.

77% of landlords and agents agreed with the proposal, 12% disagreed while 12% had no view.

54% of local authority responses agreed with the proposal, while 42% disagreed.

100% of landlord organisations and 57% of housing organisations agreed with the proposal, while 29% of housing organisations did not have a view.

There were a number of local authorities, landlord/agents and housing organisations that thought this proposal would encourage on line use and reduce the administration costs for local authorities. However some were of the opinion that the discount should only be increased if amendments/changes are made to improve the IT system and that the full transaction is made on line, including payment.

Argyll and Bute stated:
"This discount should only apply if the applicant also pays online. If they request an invoice then they should pay the full fee as this situation has posed considerable difficulties to local authorities in issuing invoices and tracking payments. There is also the cost of creating the invoice". (LR114)

East Renfrewshire Council said:
"We feel that increasing the online discount from 10% to 20% will encourage more people to apply online and manage their own accounts, with consequential savings to local authorities in administrative costs. However, this discount should only be increased if the necessary changes/ improvements are made to the system to enable landlords to apply/ manage their accounts with minimum assistance from local authorities". ( LR133)

SRPBA commented:
"The SRPBA agrees that the online discount should be increased. However, many of the SRPBA members with large portfolios experienced problems with their online applications which meant that the discount for online application was negated by the time required to input the property details. Therefore, we hope that the increase in the online discount would help to address this issue but suggest that it will only have an impact on reducing the level of paper applications if it is implemented alongside an amendment to the online system to allow the simultaneous entry of multiple properties as outlined above". (LR101)

A number of local authorities raised concerns about the loss of fee income if the discount was increased to 20%.

City of Edinburgh Council said:
"There is no evidence that applicants who apply on line keep their records up to date any more so than those who make paper applications therefore increasing the discount to encourage more to apply on-line will have no affect on the updating of records.
In Edinburgh of 25,000 applications 20,000 were made on-line. Increasing the discount will not be attractive enough to encourage those 20% of applicants who have many reasons for not wanting to use a computer to do so.
If the discount were applied CEC's income could drop by £108,000 approximately.
In addition if the proposal caused half of the current 20% who make a paper application to go on-line and thus get the proposed 20% discount this would reduce our income by a further £33,000. However the reduction in the cost of invoicing of £26,125 would result in a net loss of £6,875.
A potential loss of nearly £141,000 would have a serious affect on our funding and thus our ability to fulfil our processing and enforcement activity". (LR139)

While Glasgow City Council stated:
"Of the 15,271 applications made to Glasgow to date, 12,268 (80.3%) have been made on-line (although not all have paid fees). The proposal to increase the online discount would reduce fee income in GCC by £71,674, even if the proportion of on-line applications did not rise as a result. If the number of on-line applications increases - further loss of income. LA admin savings cannot be quantified. By maintaining this discount at its current level there is no additional cost to landlords and LAs will be allowed sufficient time to realise any savings through reduced administration" (LR135) .

Renfrewshire Council commented:
"The assumption that there would be efficiency savings is flawed. While paper applications result in increased time spent on inputting details, these applications tend to involve less difficulty than online applications where the applications are made incorrectly or are incomplete. In those cases paper applications are simply returned with a note of the issue/error/omission. With online applications Council staff tend to become heavily involved in direct contact with the applicant to coach them through the online application". (LR93)

QUESTION 5

Do you agree with the proposal to remove the discount for single property agents?

When applying for registration a landlord must declare any agent who acts for them in relation to the property. An agent who manages more than one property on behalf of a landlord(s) will pay a principal fee of £55. This reflects the local authority requirement to assess all agent applications to determine if the agent is a fit and proper person to act for a property.

An agent operating in relation to only one property currently receives a 50% discount. This discount was intended to encourage single property agents to register.

The consultation proposed to remove this discount due to the complexity of administering the discount.

A total of 141 responses were received, of which 70 (50%) agreed with the proposal, 48 (34%) disagreed and 23 (16%) did not have a view.

40% of landlords and agents agreed with the proposal, 44% disagreed while 16% had no view.

92% of local authority responses agreed with the proposal.

100% of landlord organisations and 43% of housing organisations agreed with the proposal, while 43% of housing organisations did not have a view.

The majority of local authorities and some housing organisations thought that this discount causes confusion amongst landlords and that a significant amount of time is spent amending applications, chasing payment and contacting the individuals concerned. Some thought that flaws on the website allowed landlords to claim this discount not just agents. Some felt that there is also a limited impact on income received by local authorities.

Aberdeen City Council said:
"This discount has caused significant confusion amongst landlords applying for registration and significant time has been required to amend incorrect applications and pursue missing funds". (LR100)

South Ayrshire Council stated:
"The discount for single property agents has caused confusion amongst landlords and agents and increased the administrative burden on local authorities". (LR128)

East Ayrshire Council said:
"In East Ayrshire a high number of enquiries have been received as this discount is very confusing. Many applicants are misled by the wording and think that if they are a landlord who manages one property they should tick this box. These applications can sometimes be more costly to local authorities in terms of time and cost on correcting the information". (LR129)

SRPBA stated:
"The SRPBA agrees with this proposal, and believes that removal of the discount will address confusion amongst agents and relieve the administrative burden on local authorities". (LR101)

However, several landlords stated that removing the discount will be a disincentive for agents with small portfolios and they will simply avoid registration. The landlord registration scheme should be to encourage new business rather than discourage. One respondent said:

"I currently rent out one property only. To remove the discount for single property agents I feel is unfair. Surely there is another way of capturing agents who are not being honest when applying. Why should I be penalised for their dishonesty?" (LR26)

QUESTION 6

Do you support the proposal to extend the family discount to all joint owners? Do you foresee any unintended consequences of extending this discount?

Joint owners who are family members currently receive a 100% discount on the fee payable. A lead joint owner is nominated and pays the full fee, with family members registering their details but not paying a fee. This practice ensures that each registered person is assessed as fit and proper to let property, but minimises the financial burden for joint owners of property who are family members.

The consultation proposed to extend the joint owner family member discount to all joint owners. All owners, joint or otherwise, will still need to be assessed as fit and proper.

A total of 141 responses were received, of which 97 (69%) agreed with the proposal, 20 (14%) disagreed and 24 (17%) did not have a view.

68% of landlords and agents agreed with the proposal, 16% disagreed while 17% had no view.

83% of local authority responses agreed with the proposal, while 17% disagreed.

100% of landlord organisations and 43% of housing organisations agreed with the proposal, while 57% of housing organisations did not have a view.

The majority of local authorities and some landlords/agents thought that the discount should be extended to all joint owners and see no unintended consequences of this. They thought that this would simplify matters and although there will be a reduction in fees for local authorities, this should go hand in hand with a reduction in administration costs.

Glasgow City Council said:
"This discount has resulted in a considerable amount of intervention by staff to allow the online system to accurately represent the relationships between owners. Glasgow has 366 joint owners who are not family members of the lead owner and the proposal to extend the 100% discount would involve a loss of £18,455 in fees. However, the change is justified because of the admin savings.
There is a potential unintended consequence in that joint owners who also own property in their own right may be able to avoid paying a registration fee by applying firstly with the joint owner and then adding further properties to their own account once the discount has been received. It appears this would not be legal, but it would be hard to prosecute. Numbers in this category are not thought to be significant. Unlikely landlords would know how to do this - and only saves £50". (LR135)

City of Edinburgh Council stated:
"There is agreement with all that is said in the consultation paper. It is an administrative burden and confusing to applicants however if implemented there would be a loss of income to CEC". (LR139)

East Renfrewshire Council commented:
"Extending the joint family member discount to all joint owners would simplify the matter for both the public and the local authority and support accurate payment at the point of application. While there is likely to be a loss of income for local authorities, we do not feel that this will be significant and will go hand in hand with a reduction in administration". (LR133)

However several local authorities were of the opinion that this discount should be removed and that all owners should pay the full fee. Some felt that unrelated persons could register for free and then register more properties that are not related to the first property.

South Lanarkshire Council said:
"We do not support the proposal to extend the joint owner discount to all family members. We would recommend that the discount is in actual fact removed and that all owners regardless of their status as family members should pay the full fee. Again, Local Authorities require to apply the same administration process for all owners regardless of their relationship including the "fit and proper" person test including legal action. We would support the review of this after the first renewal of registrations takes place but would strongly disagree that this be extended at this point in time". (LR127)

Argyll and Bute Council stated:
" Unrelated persons could register for free and then go on to register more properties that are not related in anyway to the first property ownership". ( LR114)

QUESTION 7

Do you agree that members of an unincorporated trust, other than the "lead member" should receive a 100% discount on the application fee for landlord registration?

In its original guidance to local authorities the Scottish Government advised that a trust should be treated as a single body, equivalent to a company. Having reviewed this issue, we now consider that this advice does not accurately reflect the current legal position as regards unincorporated trusts. Such trusts are not separate legal entities and should not be treated as such. An unincorporated trust cannot therefore be regarded as a single entity owning property. In law, members of an unincorporated trust jointly own the property.

Current practice is therefore for individual members of an unincorporated trust to register as joint owners, with each being liable for a full fee.

The consultation proposed that although individual members of an unincorporated trust would still be liable to register; only a 'lead member' would be liable to pay a fee and other members should receive a 100% discount.

A total of 141 responses were received, of which 95 (67%) agreed with the proposal, 14 (10%) disagreed and 32 (23%) did not have view.

63% of landlords and agents agreed with the proposal, 12% disagreed while 25% had no view.

92% of local authority responses agreed with the proposal.

100% of landlord organisations and 57% of housing organisations agreed with the proposal.

Several local authorities and 2 housing organisations stated that unincorporated trusts should be treated the same as joint owners as it would be simpler to administer and that the proposal at question 6 on joint owners would therefore cover unincorporated trusts. Some respondents felt that there would be a disincentive to register if all members of the trust have to register and pay a fee.

Glasgow City Council stated:
"Unincorporated trusts are dealt with similarly to joint owners. All trustees must apply for registration and pay the full registration fee of £55 in most cases. Those fitting into this category cannot be identified as there is no tag against unincorporated trusts or the trustees. The numbers are thought to be very low and the financial impact is not therefore significant". (LR135)

City of Edinburgh Council said:
"This can only occur if the proposal in Question 6 above is agreed, in essence that all joint owners get a 100% discount. This would have no affect on income". (LR139)

The SRPBA commented:
"The SRPBA does agree with this proposal, although the Association would have preferred for the Scottish Government to treat an unincorporated trust the same as an incorporated trust in line with the light touch approach that landlord registration is meant to take. It would appear that to treat the members of an unincorporated trust as joint owners (requiring them all to be registered) and apply the joint owner discount is a sensible approach to take if the Scottish Government is not minded to treat them in the same way as members of an incorporated trust". (LR101)

However one local authority disagreed with the proposal stating that:
"If each individual needs to apply and therefore be processed with its associated costs then each should pay. If they wish to be treated as a single legal entity and treated as such then a legal body should be formed". (LR114)

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