David Alexander comment: Landlords punished despite fulfilling acute need

Last year Theresa May fought a general election on a platform of “strong and stable government”...and ended up infinitely weaker than when she started her campaign, a situation made all the more ironic because the poll was completely unnecessary in the first place.

Almost a year on, “strong and stable government” seems to have morphed into “touchy-feely government” as an embattled Mrs May follows a “populist” legislative programme, clearly stung by the unexpectedly strong support for Jeremy Corbyn, particularly among younger voters.

Even before the election, however, the government was starting to make the regulation of the private rental market in England more “tenant friendly” along recent Scottish lines. And it had already introduced tax legislation – applying throughout the United Kingdom – which for many landlords (in particular the one- or two-property individual or married couple) has started to marginalise the investment return on rented property. The official thinking seems to be that landlords enjoyed over-generous levels of tax relief but it seems to be forgotten that, in return, landlords have greatly increased the stock of rented property at a time of acute need and in some cases given a new lease on life to “tired” properties among the national stock.

No one will ever convince me that the tax legislation is not completely over the top because of the way it penalises entrepreneurship and risk-taking – core Conservative values, I would have thought. Ironically, however, I have embraced the laws introduced by Holyrood, which England is now set to follow. The short-assured tenancy, introduced 30 years ago by Nigel Lawson, is now dead in Scotland.

But the circumstances by which landlords can take back tenure – moving in themselves, selling up or carrying out a major refurbishment – seem reasonable enough. The scheme by which rental deposits are shared by a third party which adjudicates in any dispute at the end of a tenancy has also been largely welcomed. This has been a godsend to letting agents who used to spend an inordinate amount of business time trying to sort out disagreements between landlord and tenant.

But as is already the case in Scotland, and soon will be in England, problems remain. The free market has effectively been ended north of the Border. Under the short-assured tenancy a landlord who wished to raise the rent at the conclusion of a lease could do so and the tenant would either pay up or move elsewhere. Now rent rise proposals, should the tenant disagree, have to go to a tribunal for adjudication, thus bringing a layer of bureaucracy to the sector which did not exist before.

One quid pro quo was that in giving greater security to tenants, the Scottish Government would make it easier for landlords to evict tenants who failed to maintain their rental payments or behaved in an anti-social manner (often the two go together). Rather than go to the Sheriff Court to secure eviction, the landlord can now take the case to a tribunal which, in theory, should simplify the process and make it less costly. Unfortunately the tribunal system is grossly under-resourced; it was estimated approximately 700 applications would be heard every year, however in the first three months of the first year of operation the figure was 600.

This has resulted in two negative outcomes. Firstly it seems unfair that rogue tenants can still play the system because the system itself is not resourced to the level it should be. Secondly, because of the tax changes referred to at the start of this article, avoiding long periods of ‘rental void’ (through being saddled with a bad tenant) is even more important to a landlord in securing an acceptable capital return on his or her investment. In theory, the rental legislation system in Scotland should work for the good of all – but it still lacks sufficient tools to be effective.

- David Alexander is MD of DJ Alexander