Sean Hooker shares the Property Redress Scheme's opinion on the government's 'A Fairer Private Rented Sector' white paper proposals.
Much of the work MPs and peers do is collaborative and less overtly partisan than you would think. A good example of this in action is the select committee system. These consist of groups of parliamentarians, whose role is to examine the work of government and scrutinise their expenditure, administration, and policies. There are select committees for all sorts of things. However there are always committees “marking” each government department.
So, it was not a surprise following the publication of the white paper on reforming the private rented sector that the relevant select committee - namely the Levelling Up, Housing and Communities Committee - would want to have a jolly good look at it.
A call for evidence on the Renters' Reform Bill
They therefore embarked on a month-long call for evidence from interested parties on the key areas of the white paper. This short timescale during the summer was not ideal, but the committee wanted to get on with their work as soon as they go back to work in September.
Of course, given the importance of the white paper, the Property Redress Scheme wanted to submit evidence from our experience and perspective. However, with a limit of around 3,000 words and despite the fact that we do have views on all the elements of the proposals, we decided to concentrate on the part relating to redress and the setting up of a new ombudsman for essentially landlords.
This is where our expertise lies and whilst other organisations will submit evidence on several or all of the questions, I believe concentrating on one will be the most useful for the committee.
Does the PRS need its own ombudsman? If so, what powers should it have?
In our response, we explained that the Property Redress Scheme has been calling for the introduction of landlord redress for several years now. The criminal landlord gets all the headlines; but this is really only the tip of the iceberg. There are a significant number of amateur landlords whose unconscious incompetence is staggering.
While far from the majority, they pervade the sector, especially in those areas where the most vulnerable rely on their services. They are undercutting and undermining the decent, compliant, and professional landlords who do their homework, follow the rules, undertake the relevant training or are circumspect enough to realise their own shortcomings and either join a landlord association or use a qualified agent.
That said, however great a landlord association may be, there is no prescribed standard and no sanctions/repercussions for failing to follow best practice.
The idea of creating an all-encompassing and joined up system, where a tenant can access a robust and clear-cut process of obtaining justice and redress, has been promised for a while now and the recent history of reform proposals have gone through several incarnations.
We went on to explain that a number of mechanisms already exist to deal with complaints in the private rented sector, but these have limitations and gaps which need to be addressed.
However, it would be counterproductive to reinvent these provisions in a totally new process since a number of them have worked very well - namely the current ombudsman and redress schemes, but also the deposit protection schemes.
A one-stop-shop property portal
We recognised that the government has instigated an investigation into how to set up a digital portal, but details of this have not been shared publicly.
From our interpretation of the wording in the white paper, the portal will combine a form of property and landlord registration together with guidance and compliance with new regulations on property condition and access to redress - a one stop shop which brings together a number of the component parts of the proposals.
The ambition is not lacking, and we are probably now at the stage, through technology, to have solutions that will make this feasible. Ideally the data required for the portal to be effective, should be automatically harvested, using existing databases and information.
Other registration schemes have always relied on the active signing up of participants, with penalties for non-compliance. This has led to large gaps in coverage and costs for administration and enforcement.
The experience of running both an agent redress scheme and a tenancy deposit protection scheme has shown us that the more data integration and sharing that can be put in place the better.
An all-embracing ombudsman
Since the concept of a single gateway and access to a universal redress service for the private rented sector, there have been calls for an all-embracing ombudsman.
Advocates of this point to the confusion and disconnect experienced by consumers, particularly tenants, in accessing services and the stress, cost and inconvenience suffered as part of engaging in the process.
Conversely, the scale and complexity of the sector means that the provision of a single entity to deliver effective redress is a major challenge.
The limitations of a single ombudsman organisation
It is our view that even if the challenges of setting up such a body were overcome, the limitations of having one organisation, and the resultant single point of failure, is not desirable.
Whether the body is set up as a statutory body or contracted out by statute, the examples of Financial Ombudsman Service, the Legal Ombudsman and the Residential Tenancy Boards in the Republic of Ireland, show the problems that can arise when only one provider is entrusted with such a huge remit.
The white paper has in part acknowledged this. It is not intending to abolish or incorporate the existing redress bodies into the remit of a single entity. This no doubt recognises the existing bodies have had good success in delivering their services and that this part of the system is not broken.
However, the proposal that there should be a single landlord ombudsman, whilst appearing to acquiesce to the arguments of the single ombudsman orthodoxy, is somewhat confused and the irony is that rather than consolidation and rationalising the landscape, it creates an additional ombudsman.
A lack of detail around implementation
Whilst the white paper states that the new ombudsman will have to work closely with the current agent redress schemes and deposit scheme it gives no details of how this can occur.
We pointed out that the proposals were silent on how landlords and agents would be able to interact together and how tenants would know which organisation to engage with. Huge numbers of landlords use agents, so it makes sense if a tenant is dealing with the agent that a single point of contact is established.
It does not make sense that a tenant is referred to a landlord who may be living abroad, or in the far flung reaches of the country, with limited understanding or ability to deal with the problems they have engaged their agent to deal with them.
Two's company, three's a crowd in redress
The consolidation of the agent redress sector into two schemes also shows that having more than one player gives the flexibility for a continuation of provision if the worst-case scenario occurs and an appointed scheme fails or where a scheme is unduly selective against a certain risk profile.
Whilst a contract can be transferred to a new provider, lock, stock, and barrel - as applies in rail franchises - the expertise and specialism needed is not necessarily widely present outside the rented sector.
Aligning data sharing across organisations
The existing schemes for deposits and agent redress are already established; however, any one of those schemes getting a monopoly in the landlord space would make cooperation with the others difficult, as data sharing could present conflicts of interest.
Squaring this circle is the biggest challenge for this to work and, whilst the prize of a single scheme encompassing every landlord would be attractive to an external provider, the risks and barriers are significant.
One solution to the dilemma would be to have an overarching ombudsman that oversees and coordinates the provision of redress via a single gateway. Practitioners of redress could then be appointed to deliver a particular service in a prescribed way.
The ombudsman would be responsible for standards and quality, and this could be delivered with an effective electronic portal and a small team.
Balancing the powers of the ombudsman
The scope of an ombudsman has to have parameters. However, the flexibility of alternative dispute resolution can be effective in resolving situations that can otherwise be protracted through other methods.
Through a combination of formal and informal resolution, the power of alternative dispute resolution has a high incidence of success and satisfaction.
The balance, however, has to be struck between what is mutually agreed settlement and mandated arbitration, which becomes binding on the parties in the eyes of the law.
Defining the obligations on each party
The obligations on the parties are therefore paramount. Currently the avenues offered to tenants for redress differ depending on what is being complained about and to whom.
As illustrated above, the schemes already in existence operate differently. Agents have no choice but to join a redress scheme, whilst landlords have no such compunction.
Agents are compelled to use the alternative dispute resolution service of their redress scheme and are bound by any final decision from the scheme. The complainant however is not bound by any decision and can revert to court for a solution.
For deposit disputes, whilst the deposit amount must be legally protected, neither party is obliged to use the alternative dispute resolution service and can opt to have the matter resolved in court.
The right of a private citizen to opt for a solution in court is a fundamental right. Compelling the parties to engage in a binding process could be problematic, especially as most landlords do not operate as legal companies but as individuals.
Encouraging engagement with the ombudsman
Therefore, the compulsion for landlords to engage with the processes of the ombudsman will need careful thought. One solution would be to change civil procedure rules to make opting out of ADR more onerous if this frustrates the process of quick and effective resolution.
Decisions are currently binding on agents but not on complainants as the schemes are not regulators. Whilst schemes have the power to exclude the agent from their scheme, which makes them not compliant with the law, the enforcement of this lies elsewhere, with Trading Standards.
Dealing with non-compliance
The challenge with landlords is that, if they fail to comply with a decision, what would be the consequences? They are not regulated and whilst the ombudsman could expel them from the scheme, what powers should they have to say expel the landlord from the register?
The irony of having this power, could lead to the landlord sector being more regulated than the agent sector, who despite the finding of the Regulation of Property Agents, (RoPA) are still unregulated.
What is also clear is that where the main areas of complaints will emerge will be repair obligations. This will be reinforced if the decent homes standard is adopted.
This will bring in qualitative standards into play as well as safety and whilst this gives an ombudsman the ideal scope to play a huge role in resolution, the ultimate enforcement of the regulations will be outside of their powers as currently local authorities and the Health and Safety Executive hold these powers.
Disputes, meditation, and anonymity
One solution for this is for the ombudsman to engage with private resolution between the parties in the first instance and seek a mutual and early resolution to disputes. If the parties cannot agree or the landlord fails to comply, the matter is referred to the local authority for compliance and enforcement action.
Local authorities should also be empowered to instigate rent repayment orders and even prohibition of landlords operating.
The ombudsman will have to balance their role as an intermediary, using tools such as mediation or facilitated negotiation with more formal powers of adjudication and arbitration, which will need to have legal status to be binding.
A vast majority of cases will remain anonymous as trust will be essential between the parties for progressive resolution to be achieved. This is why we don’t believe that decisions - other than extreme cases - should be made public.
The objective will be to raise standards but equally in trying to make the environment hostile for the rogues and criminal elements. The powers of the ombudsman can be wide and embracing but must be tempered with building an environment of trust and mutual interest between tenants and their landlords.
It will be interesting to see what the committee makes of the above and whether they make any recommendations to the proposals.
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