by Malcolm Harrison

The private rented sector is rapidly descending into a trough of total disrepute. That this is the case has been evidenced twice in less than two weeks.

Buy-to-let investors have been subjected to the same sort of attack as tax evaders and money launderers, and solicitors are seeking to bring a class action against a major lettings firm with the very real possibility of more actions to come.

The first attack came from Ian Cowie, a respected personal finance journalist. Writing in the Daily Telegraph, Cowie demanded that private sector landlords should forfeit tax relief on their mortgage interest payments.

Cowie makes this call in the apparent belief that these investors are receiving fortunes and make bad landlords, while missing the point that buy-to-let mortgages are usually more costly than equivalent mortgages for owner occupiers.

Most staggering of all, he seems to forget that buy-to-let is a business just like any other, be it widget manufacture or running a guesthouse. Nobody suggests that there should be no investment reliefs for these businesses. So why should residential property investment be any different?

And surely by now, the professional bodies and the mortgage lenders should have got the message to Cowie and others that, typically, a net return for buy-to-let is between 3% and 5% and that the capital gains which can make the investment attractive are subject to Capital Gains Tax just as with the sale of any other business.

For anyone to suggest otherwise begs two questions: has the Private Rented Sector fallen into such disrepute and have the guardians of the sector, the professional bodies, failed so significantly that nothing can counter the increasingly held view that residential rentals is a festering soup of Rachmanism peppered with con artists?

The sorry saga of a possible class action against Foxtons, whatever truth lies behind it, suggests that the claims of pressure groups from Shelter to Generation Rent must surely carry some weight.

For a long time now, startling claims have abounded: above all, the stories have been about tenants being grossly overcharged for agreement fees, inventories and credit checks. So widespread are these claims that, long before the Foxtons story broke, they began to be greeted with the thought “no smoke without fire”.

But tenants are no longer the only perceived victims. Landlords, too, have been overcharged and pillaged.

In addition to the overcharging of landlords at the same time as their tenants, there is a common belief that management bills have been excessive.

However, perhaps most invidious of all, is the common practice of pillaging a landlord’s rent before it is even due, let alone before it is received by the agent. Commission is taken in advance on the rent due for the entire term.

In the days when probity was common in the private rented sector, commission was only taken as the rent was paid. Now times may be changing again with two haystacks full of straws blowing in the wind.

We should take notice when Ian Cowie, a journalist of experience and repute, suggests residential investors should lose tax breaks and, by inference, be treated as if they were tax evaders; and the major class action being orchestrated against a powerful letting agent could have implications for many others.

It is to be hoped that agents, landlords and tenants will not be picking over the detritus of a broken lettings industry in the near future. This could happen.

Not only as a result of potential court cases, but as landlords and tenants learn of the class actions and take matters into their own hands and negotiate charges, fees and commissions down to unprofitability.

When that happens, good agents will also be washed away along with the dirty bathwater.

All of this when housing desperately needs a thriving and well run lettings industry that has the confidence of the public.

* Malcolm Harrison is the former spokesperson for ARLA