June 9, 2023

A Licence to Rent

Philip Syvret

CONTACT PHILIP SYVRET

Another week, and yet another set of proposals impacting on rental property in Jersey.

In addition to proposals in recent weeks, the Minister for Environment has lodged draft legislation which will require any residential property that is to be let out in Jersey to be licenced.  The proposals, which come under the catchy title of “Public Health & Safety (Rented Dwellings) (Licensing) (Jersey) Regulations” are relatively simple in their terms.  From the 1st January 2024 when the regulations are intended to come in, a landlord will need to apply for a licence for each individual dwelling that he or she lets out.  The owner of a block of flats will need to apply for a licence for each individual flat.  The regulations will extend to all of the Social Housing Trusts and Andium.

Before issuing a licence, the Minister can decide whether the flat should be inspected.  He has a power to withhold or revoke a licence when the dwelling does not meet the minimum standards covering aspects such as health, fire, gas and electrical safety, which standards are already set out in existing legislation.

The rationale for licensing is straightforward – the Minister wants to avoid the cumbersome criminal process that is involved in prosecuting a landlord for failing to meet the minimum safety standards.  Criminal prosecution is an expensive and relatively clumsy way of dealing with non-compliance, in particular requiring tenants to come forward as witnesses to evidence the complaints in Court.

Instead, under the new licensing scheme, if a landlord fails to bring a property up to scratch within a fixed time period then the licence to let the property will be revoked meaning the landlord has to challenge that revocation in Court.

The Minister says that the licencing of a property could be compared to the requirement for car drivers to have a driving licence.  All drivers need a licence, including good and bad drivers.  The licensing process means it’s easy to find and punish the bad ones.

There is validity in that argument.  Equally, few could object to a simple mechanism for ensuring that the minimum standards as to condition and safety are readily and cost-effectively enforceable.

In turn however, there are downsides.  First there are some costs.  These are set in the proposition as £60 per dwelling.  It is said that that cost would fund the six full-time equivalent inspectors who would be required to administer the scheme.  With respect, that seems unrealistic.  I sense that the relatively low fee proposed is to minimise initial objection from landlords.  Instead the wider tax payers (including the vast majority who are not landlords) will be funding the scheme.  Alternatively, the costs of licensing will substantially increase in years to come.

As with so many of these things, the principle sounds simple but the operation will be laden with red tape.  Licences for each unit will need to be renewed every two years.  The licence registration will need to be adjusted on each transfer of a property or any significant alteration.  Administration will burgeon, more civil servants will be required.  Is this a proportionate approach to dealing with the bad landlords who are in a vanishingly small minority within the private sector?

Finally, but perhaps most importantly, this comes at a remarkably bad time.  The imposition of 3% uplift on purchase of buy-to-let properties has significantly dampened the enthusiasm of landlords buying new units.  Some in Government may say in a self-congratulatory way that that has resulted in a downturn in prices.  I rather think however that the new tax has just slowed the market and the downturn in prices is due to wider factors.  Either way, we are seeing less homes becoming available for rental.

In addition, the recent proposals (presently out to consultation) for restrictions on residential rent increases and prevention of no-fault evictions have so concerned many existing landlords that we are seeing them peel away from the landlord role and putting their properties up for sale.

Whilst these latest proposals may seem at first blush a sensible small step, when one steps back and surveys the whole raft of legislation and regulations imposed on landlords, this might be the final item that encourages many to sell up.

I shall therefore keep a close eye on statistics of private rental units available and any raise in rental rates in the short to medium term.  I would recommend that the Minister does the same.

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