Why landlord is a dirty word

Property owners are afraid to rent, and tenants are the ones losing out. We need to put our house in order. By Miriam Addison

Jane Wilkins left her rented flat after two years to get married, and looked forward to getting back the pounds 500 deposit she had paid to the landlord, to put towards the wedding expenses. The landlord refused to pay back her deposit, claiming that the place needed to be redecorated and cleaned.

Jane was annoyed, as she and her mother had spent two days cleaning the flat prior to her departure. But her annoyance turned to anger when she visited the flat a week later and discovered the new tenant already installed. "The flat had not been decorated," she said. "The landlord had lied, but I could not afford to take him to court to get it back."

A survey by the Citizens Advice Bureaux this week found that Jane Wilkins is not alone. Far from it: almost half of private tenants who put down a deposit on their rented home in the past five years were unable to get it back when it was time to leave. This means that up to 300,000 people a year are being swindled out of an average pounds 310 each. Only one in six ever get their money back.

The most common excuse employed by landlords to refuse to return the deposit is that the property was left unclean or in disrepair.

However alarming, though, the CAB report is merely highlighting the symptoms of what is a deep-rooted disease that requires careful treatment, not radical amputation nor sticking plaster.

The rental market in Britain is unwell. For the past 50 years it has been plagued by a series of well-intentioned but wrong-headed policies introduced to curb truly nasty excesses by private landlords who came to be symbolised by the name Rachman.

Now equally wrong-headed policies are devastating the Housing Benefit lettings sector, where unregulated landlords and agents often break the rules and tenants are officially encouraged to break the law.

At the turn of the century, over 80 per cent of Britons lived in private rented tenement homes, many in appalling squalor. In the 1950s, the Rent Acts were introduced to improve the lot of tenants and protect them from sudden eviction and excessive rent rises. But they went too far, giving tenants so many rights that most landlords, feeling the law had in effect confiscated their ownership, simply sold up instead of staying in a business that became both stigmatised and unprofitable.

By the early 1990s, Britain had 68 per cent owner-occupiers and only 10 per cent in private rentals, including housing associations. In contrast, West Germany, then Europe's strongest economy, was content with 42 per cent owner- occupation and a further 42 per cent living in non-subsidised.

Throughout Western Europe, Australia and the US people do not buy property until they are thirty-something, settled (or saddled) with families and jobs. At least a third of the population - the young and mobile - will at any time live in private rented accommodation, mainly unfurnished flats let on 3- to 5-year leases. There is no shame in being a landlord and no incentive for either side to behave badly, so letting property is a normal business and the problems so common in Britain are virtually non- existent. In all these countries it is cheaper to rent than to buy an equivalent property.

Compare and contrast with what happens here. Apart from the multi-million pound deposits swindle reported by the CAB, the market is riddled with cowboys. Last week three directors of a lettings company called Downland were convicted of fraudulent trading' they are expected to receive custodial sentences. Downland not only stole deposits systematically but stole the rents as well. The Police had 19 pairs of landlords and tenants who were prepared to give evidence in court and whose losses total hundreds of thousands of pounds.

Preying on the most vulnerable are accommodation agencies which charge innocent tenants - often foreign students and visitors - for lists of allegedly available flats that invariably turn out to be unsuitable or non-existent. Secretary Wendy Bagshaw fell into the trap when she responded to a newspaper ad by Flatlets Ltd and paid them pounds 310. "They gave me two addresses and the flats were disgusting. I then found a flat myself and asked for my money back but never got it."

Following dozens of similar complaints, Westminster Council obtained an injunction against Omar Hayat, the owner of Flatlets and other similar companies, barring him from charging flat-seekers for information. But the practice is still widespread, especially in London, and fines imposed in magistrates courts after expensive prosecutions are risible and deter nobody.

Less extreme cases can also be very aggravating. Jeremy Vine, the BBC's Africa correspondent, let his London flat through Foxtons and has had nothing but trouble from a tenant who simply doesn't like paying the rent. When the unpaid amount reached pounds 3,500, Mr Vine began calling the tenant every day long-distance. Not surprisingly, he feels the agents let him down. His doleful conclusion: "Estate agents don't always care, tenants don't always pay - what a fool I've been."

Altogether too many honest people feel they were made fools of after trying to let a flat or house. Especially disillusioned are those who believe that using housing associations or local councils will guarantee peace of mind.

Paddington Churches Housing Association distributes brochures promising that "The owners have the comfort and assurance of dealing with a large, long-established and secure Association with substantial assets", and that "Your property will be handed back to you in a clean and tenantable condition at Lease end".

Pearl Kavanagh needed some extra cash, so she decided to let her house in South Harrow to PCHA and moved in with her partner. When the house was vacated, Pearl discovered serious damage including a smashed bathroom suite and toilet, broken kitchen units, cooker and window. Wallpaper was torn. Light switches were hanging off walls, and light fittings gone. "The tenants left excrement on walls and indescribable filth everywhere," she said.

Unable to afford litigation, Ms Kavanagh had to accept a settlement of pounds 3,000, which she says falls well short of the damage caused. She will never let her flat again.

Ivan Philips had a similar experience when he leased flats to Kingston Council based on their brochure, which promises to return the property "in the condition it was given to us". In one of his flats Kingston placed a registered methadone user, who set fire to the flat twice, causing serious structural damage. Incredibly, Kingston denied liability and told him to claim on his insurance. He, too, will never let to a council again.

These are but two examples of another crisis facing the lettings market. A growing number of landlords who let properties to people on benefit in the past have decided not to do it again. Instead, the property is either sold or made available only to those able to pay the rent without benefit.

In a recent survey by the Association of Residential Letting Agents (ARLA) it was reported that "Three out of four landlords who let to those on benefit last year won't do so now."

The problems are rooted in the same wrong-headed approach to lettings that got us into the present mess in the first place. The Government reasonably wants to tackle multi-billion pound housing benefit fraud. But their harsh anti-landlord measures are driving out the innocent. For example, the iniquitous "clawback", a law which allows the local authority to demand rent back from the landlord if it discovers that a tenant has received housing benefit fraudulently. In addition, landlords and agents may be fined up to pounds 1,000 if they fail to pass on information about their benefit tenants to the DSS.

AC Holdoms, a letting agent in Chingford, Essex, let a property to a tenant on benefit in 1995 for two years. In September 1997 the agent received a demand for pounds 3,510 from Waltham Forest council for a seven-month period during which time the council says the tenant was not entitled to housing benefit.

This and similar cases caused AC Holdoms to go out of business and be taken over by Mark Kieve, who is chairman of the National Association of Estate Agents' East London branch and an ARLA council member. He is very concerned about the situation and is taking it up with politicians at the highest level.

"Until there are some significant changes in the system, my company will not do any more lettings to benefit tenants," he said. "I have my hands full trying to sort out the benefit problems of companies whose lettings we have had to take over."

At the same time, tenants are being advised by their local councils that if they refuse to leave the property at the end of the agreement, forcing the landlord to take them to court, they will be legally homeless and entitled to be housed by the council. As a result, landlords find themselves having to take expensive and time-consuming court action for no good reason. The Government says this rule does not apply to Assured Shorthold lettings, but has clearly failed to make this clear at local level.

As a result a Chingford couple, who have been letting to benefit tenants for some time, recently served notice on a tenant to leave, only to find that Waltham Forest council was advising her to stay put until a court order for eviction was obtained. Although neither side wants to go to court, that's where the case will end. After that, they will never to let to a benefit tenant again.

Sue Starr, who owns a letting agency in Whetstone, north London, finds the situation heart-breaking. "Although I advertise `No Housing Benefit', I get over 20 calls a week from desperate DSS people looking for homes. I was a single mother myself and my heart goes out to them, but I cannot advise landlords to take them on. When the good landlords are frightened off, all that is left for benefit tenants will be landlords from hell and hellhole properties."

This all seems a million miles from the genteel world of Completelet, a family firm operating in Twickenham, where weekly rentals can easily exceed pounds 2,000. Owner Christian Phelps avoids problems by making both sides sign a 12-page legal document, with details down to the permission to put picture nails into walls. Benefit tenants have no place in this market.