Scottish Government

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Introduction

1. The purpose of the proposed regulations and orders is to provide the detailed framework for the implementation of measures in Parts 7 and 8 of the Antisocial Behaviour etc. (Scotland) Act 2004, which deal with landlords in the private rented sector. Those measures are:

• Powers for local authorities to serve an antisocial behaviour notice, which requires a landlord to take specific action to address antisocial behaviour at or in the locality of a house let by the landlord (part 7); and
• A requirement for local authorities to establish and maintain a public register with details of those landlords and others approved for registration, on the basis that a person who lets houses while unregistered commits an offence (part 8).

2. Although the two sets of powers are related and in some cases provide alternative options for action by a local authority, this paper deals with them separately in the interests of clarity.

3. This paper provides an assessment of the impact of the proposals for subordinate legislation which are included in the consultation paper, Regulation of Landlords under the Antisocial Behaviour etc. (Scotland) Act 2004. It is a draft assessment. A final assessment will be produced in the light of the outcome of the consultation, and will be used to inform the final form of the subordinate legislation and its scrutiny.

ANTISOCIAL BEHAVIOUR NOTICES

The regulations and orders concerned are:

s. 68(6): order regarding holiday lets (proposal not to make an order yet)

s. 72: regulations about notification etc. of tenant where landlord appeals against an order as to rental income

s. 74/sch. 3: regulations about administrative charges under a management control order

s. 78: regulations about use of expenses sanction

s. 80: regulations about advice and assistance to be provided by local authority

Purpose and intended effect

Objectives

4. The Antisocial Behaviour etc. (Scotland) Act 2004 ("the Act") legislates for antisocial behaviour notices as part of the package of powers available to local authorities to address antisocial behaviour. Where there is antisocial behaviour at or in the locality of a house other than a house belonging to a local authority or Registered Social Landlord (and certain other types of owner), it may be that the landlord is aggravating the situation by failing to use normal good tenancy management practices to address the antisocial behaviour of the tenant or other occupants or visitors. The local authority can serve an antisocial behaviour notice which specifies actions that the landlord must take to address that behaviour. This would normally be in addition to action by the local authority directed at the antisocial person, such as an antisocial behaviour order.

5. If the landlord fails to comply with the notice in the specified time, he or she is committing a criminal offence. In addition, the local authority can seek an order from the sheriff court to suspend rent liability or transfer management control to the local authority and the local authority can also hold the landlord liable for the cost of actions to deal with the antisocial behaviour that the local authority has to take because the landlord has failed to act.

6. The financial memorandum to the Antisocial Behaviour etc. (Scotland) Bill assumed that around 100 notices would be issued in a year, that in 20 of those cases the landlord would fail to comply and the local authority would apply for court sanctions (15 for an order as to rental income and 5 for a management control order) and would seek recovery of costs of action that the local authority had required to take because the landlord had failed to act, and that in a further 20 cases the landlord would be subject to recovery of costs only. It was further assumed that 10 landlords would appeal against an order as to rental income.

7. These assumptions were on the basis that antisocial behaviour notices would be used in situations where the selective registration arrangements in the Bill were not applied. The registration requirements in the Act have general, not selective, application. Discussion at the working group which helped to develop the proposals in the consultation paper confirmed that local authorities are likely to use registration powers to deal with landlords who fail to manage responsibly. But it was also felt that the antisocial behaviour notice powers would be useful on occasion, for example where the specific issues around managing antisocial behaviour were not sufficiently serious to warrant removing registration or the additional sanctions available were particularly helpful in the individual case. If anything, the extension of registration could reduce the figures assumed in paragraph 6, but given the small scale of those figures and the absence of hard evidence to support them, as explained in the financial memorandum, the true figures are likely to be of the same order of magnitude. This paper therefore uses the same assumptions.

8. Section 68(6) of the Act allows Scottish Ministers to modify Part 7 by order to make it suitable for application to lets for holiday purposes. The consultation proposes not to use that power at present. The objective of that proposal is to allow further evidence to be obtained, from the consultation and from experience of local authorities in using antisocial behaviour notices, as to whether an order should be made and what it should contain.

9. The objectives of the regulations proposed in the consultation paper are to reinforce the provisions in the Act in the following ways:

s.72 regulations : notification of tenant etc. when the landlord appeals against an order as to rental income.

If a landlord appealed successfully against an order as to rental income and the rent which had not been paid since the order was made then became due, the tenant and his or her family could be placed in severe financial difficulties if the tenant was unaware of the appeal and had not planned for the possibility that back-rent would be payable. It is proposed that the regulations should require the landlord to notify the tenant of the appeal and provide specified information. This will alert the tenant to provide for the possibility that a back-payment could be required. If the landlord does not do what is required by the regulations, the Act provides that the sheriff principal cannot order payment of back-rent. In terms of the assumptions above, this would have effect in 10 cases per year and help to protect the tenant in any of those cases where the appeal is successful.

s. 74 and sch 3 regulations: administrative charges under a management control order.

The proposed regulations aim to ensure a consistent approach to the use of local management control orders in which the costs charged to the landlord relate to the purpose of the order, which is to address the identified antisocial behaviour. This would apply to the estimated 5 management control orders per year in terms of the financial memorandum to the Act.

s. 78 regulations: use of expenses sanction

The proposed regulations aim to give local authorities more detail on the reasonable use of the power to hold the landlord liable for their expenses in taking actions made necessary by the landlord's failure to comply with the antisocial behaviour notice. They also aim to ensure consistency of approach between different local authorities. This would apply in the estimated 40 cases per year.

s. 80: regulations about advice and assistance to be provided by local authority.

The proposed regulations require local authorities to give a landlord advice and assistance on the management of antisocial behaviour before serving an antisocial behaviour notice. The aim is to ensure that the local authority seeks to assist landlords to change their approach so that the need for enforcement through an antisocial behaviour notice is avoided if possible, or where a notice is served, the landlord complies with the notice.

Background

10. The Antisocial Behaviour etc. (Scotland) Act 2004 has established the policy and framework for antisocial behaviour notices. The Act can be found at http://www.opsi.gov.uk/legislation/scotland/acts2004/20040008.htm with explanatory notes at http://www.opsi.gov.uk/legislation/scotland/en2004/2004en08.htm . The Act provides a package of measures to assist local authorities and the police to address antisocial behaviour in local communities. The provisions affecting landlords are new arrangements in Scotland. The evidence that was obtained for the Antisocial Behaviour etc. (Scotland) Bill and referred to in the Policy Memorandum showed that a failure by landlords to adopt good management practice in the handling of antisocial behaviour in their properties could compound problems for the community. There are currently no powers for public authorities to require landlords to address such failures.

Rationale for government intervention

11. It is the Scottish Parliament's will through the Act to provide local authorities with the power to make antisocial behaviour notices. If no regulations were made and the power was brought into effect without achieving the objectives described above, some local authorities might not use the power because they felt that it was not sufficiently defined and that they could be open to challenge on the way that they had used it. Other local authorities might use the power inconsistently. They might also use it inappropriately, for example by using notices without first seeking to improve the situation by advice and support, or by charging the landlord amounts under the management control order or the expenses power which went beyond what was intended by Parliament to be relevant to the landlord's failure. Some tenants and their families (including vulnerable individuals and individuals not directly responsible for the antisocial behaviour) could be subject to financial hardship where their landlord appealed successfully against an order as to rental income without notifying them.

Consultation

12. The Department for Work and Pensions has been consulted on the effect that the introduction of antisocial behaviour notices could have on tenants in receipt of Housing Benefit. Where the tenant's rent liability is affected by a rent penalty or the house is managed by the local authority under a management control order, this can have an impact on some tenants. DWP intends making necessary alterations to the relevant Housing Benefit Regulations and issuing appropriate guidance to Housing Benefit administrators.

13. The legislation which these regulations will bring into effect was itself subject to extensive public consultation. This Regulatory Impact Assessment is being published to accompany a public consultation document on the regulations, orders and accompanying guidance to be issued by the Scottish Executive and the outcome of that consultation will influence the final form of those documents.

Options, Costs and Benefits

s. 68(6): holiday lets

Options

1. Do nothing (at present)

This would meet the objective of allowing evidence to be obtained from consultation (and if necessary other sources) and experience with the use of antisocial behaviour notices, to inform decisions on whether and how to use this power.

2. Make an order modifying Part 7 for holiday lets

This would make some provision for holiday lets, but the current level of information suggests that there would be a risk that it could fail to target the problems which are most significant and that it could make modifications which did not reflect the practicalities of administering antisocial behaviour notices.

Costs and benefits

Sectors and groups affected:

• Owners of holiday accommodation
• Holiday-makers
• Neighbours
• Local authority

For each of these costs and benefits, numbers are unknown and the impact is not financially quantifiable.

s.72: notification of tenant etc. where landlord appeals against order as to rental income

Options

1. Do nothing

This would not protect tenants and their families from an unexpected demand for payment of back-rent when their landlord had appealed successfully against an order as to rental income.

2. Provide for landlord to notify the tenant and give prescribed information

This would ensure that the tenant was aware of the risk of a requirement to pay back-rent if the landlord's appeal was successful and could make arrangements to ensure that money was available should that happen.

3. In addition, require the landlord to offer the facility of a joint account requiring both signatures

Although payment into a joint account would give the tenant a means of ensuring that money was available if necessary, it would normally require both parties to visit a bank, the availability of an account would depend on the credit-worthiness of each party and it would take some time to establish. It is therefore unlikely to make a useful contribution to achieving the objective and the tenant would be better to seek advice on financial management.

Costs and benefits

Sectors and groups affected:

• Tenant of landlord who appeals against an order as to rental income
• Landlord

s.74/ sch 3: administrative charges under a management control order

Options

1. Do nothing

Local authorities could still make orders but some might hesitate to use them through lack of detail in the legislation. There might be inconsistency between those who did make orders, in the basis on which they charged costs to the landlord.

2. Provide for charges to relate to the costs of managing the house on a short-term basis and to be recoverable by normal debt procedures

This would achieve the objective of consistency and avoid the possibility that some local authorities might use management control orders to carry out longer-term improvements that were not necessary to meet acceptable minimum property standards.

3. Provide, in addition, for charges to be recoverable by a charging order

This might give the local authority greater assurance that the costs of the management control order would be recovered in due course, and so encourage greater use of such orders, but it would not necessarily lead to greater consistency between local authorities than would be achieved by option 2.

Costs and benefits

Sectors and groups affected:

• Local authorities
• Landlords

s. 78 : use of expenses sanction

Options

1. Do nothing

Local authorities would be without an indication of Parliament's intentions for the way in which the expenses sanction should be used, and inconsistency would be likely to result.

2. Indicate what would be reasonable and require an estimate to be notified in advance

This would achieve the objective.

Costs and benefits

Sectors and groups affected:

• Local authorities
• Landlords

s. 80: advice and assistance to be provided by local authority

Options

1. Do nothing

The objective would not be met because local authorities could be inconsistent in their approach and some might use antisocial behaviour notices when advice and assistance could have resolved the problem.

2. Provide advice and assistance to landlord before serving an antisocial behaviour notice

This would achieve the objective.

Costs and benefits

Sectors and groups affected:

• Local authorities
• Landlords
• Neighbours

Small/Micro Firms Impact Test

14. Many private landlords are small businesses. However, the service of an antisocial behaviour notice will only affect a very small number of businesses. Where there is an impact it will be a direct result of, and in proportion to, a failure to run the business according to normally accepted standards of management practice. None of the options for the content of regulations themselves has a significant impact on the effects of antisocial behaviour notices on competition in the private renting market.

15. The proposals for the regulations have been developed in consultation with a working group including representatives of the Scottish Association of Landlords and the Association of Residential Letting Agents, whose contributions to the working group's discussion have been taken into account. The consultation paper will be sent to further representative organisations and to any individuals expressing an interest and is intended to generate further comment to influence the proposals and inform the final RIA.

"Test Run" of business forms

16. There are no business forms to be tested.

Competition assessment

17. Antisocial behaviour notices will be used where a landlord is not using normal good letting practice. Their use should therefore help to remove an element of unfair competition in the private rented market by requiring such landlords to bear the same practical and cost burdens that responsible landlords already bear. The options for the proposed regulations described above will not individually have significant differential effects on this situation.

18. The proposal not to make an order in relation to holiday lets could mean that some owners of such property are able to operate at a lower cost than might otherwise be the case, but without the further information about this type of activity which is needed in order to decide whether to make an order, it is not currently possible to assess the impact in this segment of the market.

Enforcement, sanctions and monitoring

19. The proposed regulations under section 72 are self-enforcing since, if a landlord fails to comply with them, the sheriff principal will not order back-payment of rent if the landlord's appeal is successful. The potential sanction for the landlord is therefore the loss of rent for the period from the making of the order as to rental income to the determination of the appeal.

20. The other regulations impose requirements on the local authority. If it fails to comply with regulations regarding costs, it is likely to fail to recover expenses it has incurred that are not in accordance with the regulations. It is likely to have an application for sanctions refused by the court if it has not provided advice and assistance to the landlord.

21. Information will be sought from local authorities on a continuing basis on the appropriateness and effectiveness of the provisions in the regulations relating to antisocial behaviour notices, with the intention of making further or amending regulations should the evidence warrant it.

REGISTRATION OF PRIVATE LANDLORDS

The regulations and orders concerned are:

s. 83(1): regulations specifying further information to be included in application

s. 83(3) and s. 87: regulations about fees

s. 83(7): order excluding further categories from registration

s. 97: regulations about notification etc. of tenant where landlord appeals against a rent penalty notice

s. 99: regulations about advice and assistance

Purpose and intended effect

Objectives

22. The primary objective in making regulations and an order for registration (together with accompanying guidance) is to provide detailed aspects of the system of landlord registration required by Part 8 of the Act, in order to allow the necessary administrative and information processing arrangements to be established. They therefore enable Part 8 to be given effect.

23. The secondary objective is to minimise the burden of registration on applicants generally and on local authorities, while ensuring the system provides information on landlords and a means for dealing with the worst landlords. The Scottish Executive is making arrangements to provide an electronic system which will facilitate this approach.

24. These objectives apply to the package of regulations and an order as a whole. The package as proposed comprises in summary:

• Regulations specifying further information to be supplied with an application, including convictions; a declaration that the landlord is aware of and complies with relevant law; and other information to allow streamlined processing of the application.
• Regulations on the structure of fees to be charged by the local authority
• An order exempting resident landlords from registration
• Regulations requiring the landlord to notify the tenant of an appeal against a notice suspending rent liability and give specified information
• Regulations requiring the local authority to give tenants advice and assistance when suspending rent liability.

Registration is for 3 years, but changes of circumstances within that period require to be notified.

Background

25. The Antisocial Behaviour etc. (Scotland) Act 2004 has established the policy and framework for registration. The Act can be found at http://www.opsi.gov.uk/legislation/scotland/acts2004/20040008.htm with explanatory notes at http://www.opsi.gov.uk/legislation/scotland/en2004/2004en08.htm.

Minor changes to the registration provisions are proposed in the Housing (Scotland) Bill which is currently before the Scottish Parliament and can be found at http://www.scottish.parliament.uk/business/bills/billsInProgress/housing.htm. These do not affect the regulations and orders dealt with in this paper.

26. The registration provisions are new arrangements in Scotland. Houses in Multiple Occupation (which form between 5 and 10% of the private rented sector) are subject to licensing, which is a detailed process dealing with the standards of each house and its management. Registration is a much lighter form of regulation which focuses on the fitness of the landlord but requires no more than the addresses of individual houses let.

Rationale for government intervention

27. Registration is intended to help promote a healthy private rented sector and further enhance its contribution to meeting housing need. Local authorities have a role in promoting the sector in this way but are hampered by a lack of basic information, which registration would go some way to correct. Registration provides tenants with an assurance that the person from whom they are letting is fit and proper to be letting houses. Without registration, most tenants would continue to have no reliable means of checking this. Registration also provides an effective means of driving the worst landlords out of the sector. Without it, local authorities would continue to find that there were cases where this clearly needed to happen but that they were unable to act.

28. These regulations and order will allow the Scottish Parliament's will to establish landlord registration in Scotland to be given effect. They do not in themselves represent a further intervention beyond that already required by the primary legislation.

Consultation

29. The Department for Work and Pensions has been consulted on the effect that the introduction of the registration requirement could have on tenants in receipt of Housing Benefit. Where the tenant's rent liability is affected by a rent penalty, this can have an impact on some tenants. DWP intends making necessary alterations to the relevant Housing Benefit Regulations and issuing appropriate guidance to Housing Benefit administrators.

30. This Regulatory Impact Assessment is being published to accompany a public consultation document on the regulations, orders and accompanying guidance to be issued by the Scottish Executive and the outcome of that consultation will influence the final form of those documents

Options

31. The following options relate to the package of regulations and an order as a whole, since any one of them made on an individual basis would not be sufficient to enable the introduction of registration.

1. Do nothing

The primary and secondary objectives could not both be achieved without making a package of regulations and an order. If the regulations requiring further information to be included in the application were not made, the intended electronic processing system would not be feasible. Local authorities would have to seek out that information by methods which would be costly and time-consuming.

If regulations specifying further information to be supplied with an application were not made, the proposed 'light touch' approach involving a declaration and a central electronic system would not be possible.

If an order exempting resident landlords from registration were not made, local authorities would have to identify and keep track of this informal and fluid part of the market, creating an additional burden and diverting resources.

If no regulations on fees were made, it is likely that there would be inconsistency in the basis and structure for fees across the country.

If no regulations about appeals against a rent penalty notice or the provision of advice and assistance were made, enforcement action could be taken unnecessarily and adverse effects on tenants would not be minimised.

2. Make regulations and an order as proposed in the consultation paper

The proposed package of regulations and an order are intended to complement the practical arrangements for implementation and system design established by consultation with an expert working group. The package would achieve the primary and secondary objectives.

3. Make regulations and an order as proposed but include resident landlords.

The registration scheme required by the primary objective would apply to a larger number of landlords, but the secondary objective would be unlikely to be achieved because of the expected burden on resident landlords and on local authorities.

4. Make regulations and an order as proposed but include maximum fees.

There is not firm information on the likely costs of administering registration, principally because it is difficult to estimate the proportion of applicants who will apply online and the level of enforcement activity that will be necessary. Including maximum fees before firmer information on these issues emerges could therefore create a cost burden on local authorities or (if local authorities charged the maximum when it exceeded their costs) on landlords, and the secondary objective would not be achieved. It is therefore proposed to use administrative arrangements to achieve suitable fee levels in the first instance, on the basis that further regulations can be made if it proves necessary to limit fees.

Costs and benefits

Sectors and groups affected:

• Landlords
• Tenants
• Local authorities
• Scottish Executive

Small/Micro Firms Impact Test

32. Many private landlords are small or micro businesses. Research in England has shown that the average size of a landlord's portfolio is 4 houses. We are not aware of particular factors that would make the average different in Scotland and so use this as our estimate. Registration should provide more robust data for the future. Landlords with the smallest number of houses often treat letting as their secondary source of income, but they will still want their letting business to be profitable.

33. The options for regulations and the order have been developed in consultation with an expert working group whose membership includes representatives of the Scottish Association of Landlords and the Association of Residential Letting Agents, both of whom could speak for the interests of small landlords. They, and representatives of local authority and consumer interests on the group, indicated the importance of ensuring that small landlords remain in the sector. They agreed that resident landlords should be excluded partly because this group of micro firms would be more likely to leave the sector rather than seek registration. The formal consultation will include other organisations representing small landlords and the paper will also be sent to individuals who express an interest.

34. Registration will allow small landlords to market their houses on the basis that the landlord has been confirmed as fit and proper. However, there will be a cost to registration. The regulations are intended to allow this cost to be minimised. Landlords are likely to pass the cost on to tenants. This should not make small landlords less competitive in the general market because all landlords will require to register. It may alter the competitive balance between mainstream letting by small landlords and the taking of lodgers by resident landlords because it is proposed that the latter should not be required to register. We believe that resident landlords form a distinct segment of the market and that any such effect will be slight.

35. Some small landlords may need to use agents in order to achieve registration standards. Where this happens, they will be providing a higher standard of letting than they would otherwise have done. They may have to charge more in rent to cover agency fees and in consequence become less competitive in their existing market. Where this occurs, it will be a consequence of their coming into line with landlords who are already fit and proper.

"Test run" of business forms

36. The regulations and order will enable the introduction of an application system based on an on-line web-based application, with a manual alternative available where necessary. The expert working group, including representatives of landlords and agents, has been involved in the specification of the system. It is intended to test the system and the manual alternative to ensure that it is as clear, simple and as easy to complete as possible for the applicant.

Competition assessment

37. Because the registration requirement is general, it should have no significant effect on the relative competitiveness of well-run landlord businesses. It should reduce the competitive advantage of running a letting business to less than acceptable standards. The proposed order excluding resident landlords from the requirement could mean that their competitiveness in relation to other types of letting is increased. We consider that this is a distinct market segment and that there is unlikely to be a significant shift of demand from letting houses and flats to lodgings as a result.

38. The additional cost of fees could be a factor in investment decisions by prospective landlords or by existing landlords contemplating alternative ways of investing. The expected fee level associated with the system to be supported by the regulations and order is around of 0.18% of the average rental for the registration period. We think that for most investors this will not have a determining impact by comparison with changes in other economic factors affecting investment decisions.

Enforcement, sanctions and monitoring

39. The enforcement of the registration requirement, including those aspects dealt with in the regulations and order, will be carried out by local authorities. The Act provides them with sanctions to deal effectively with landlords who fail to comply. The appropriateness of the approach in the proposed regulations and order will be monitored by continuing contact with local authorities, including analysis of management information from the registration system and contact with local authorities through the proposed officer network.

Annex 1: Assumptions in calculation of costs and benefits for registration options.

Figures have been rounded