My visit to the home of Property Guardianship
Last week, I travelled to the Netherlands (the first country to adopt the property guardianship business model) to investigate the similarities, and differences, between the Dutch and English legal structures. I also had an opportunity to investigate the role of the independent quality standard committee in the Netherlands.
Comparison of legal structures
The need for the property guardianship business model to be flexible and commercially viabile with cooperation from all involved is universal.
Dutch providers and their legal teams are keen to avoid “full leases” akin to our assured shorthold tenancies because they have even more legal rights than assured shorthold tenants in the UK. For example, tenancy protection for life which automatically transfers to spouses, may be assigned to third parties and can only be terminated on limited grounds. As a result, in the Netherlands, minimising the risk of a court finding of a “full lease” – giving the guardian legal rights at the property indefinitely – is of considerable concern.
To avoid this, Dutch providers and lawyers have tended to focus on ensuring that any fees paid by guardians are deemed “service charges.” These are payable in relation to a particular service, for a specific property, or for an individual guardian rather than an overall fee including provider’s overhead costs, which could potentially be deemed as “rent.” It is hard to see how this could be successfully implemented in the UK (where service charges apply only in the context of a formal lease) without fundamental change to our leasehold system.
Property guardians in the Netherlands do not have any legal rights per se under the Civil Code. However, they have the right to use a safe property free from interference, under a temporary lease agreement, in return for affordable and reasonable fees (see further below). A strict clause imposing a daily €5000 fine for failure to vacate on time provides a deterrent for many guardians refusing to leave.
The role of the independent quality standard committee
I met with a committee member of Keurmerk Leegstandbeheer (“KLB”), an organisation set up to self-regulate quality standards of property guardianship in the Netherlands.
Like the London Assembly’s current investigations in the UK, around 5 years ago, a Dutch Cabinet Minister began questioning property guardians legal rights. The Dutch State General then asked the sector to self-regulate itself.
KLB was set up to improve the quality of vacant property management in the Netherlands to protect both the property guardians and the providers. It is an independent organisation which sets standards for providers to adhere to. KLB aims to protect guardians by offering:
1. Some protection from eviction – providers must give guardians at least 28 days’ notice.
2. A safe place to live – a property must be fire safety compliant, have adequate living conditions and safe facilities (for example, hot water, be windproof, waterproof, and have regular compliance checks). On joining KLB, an external certifier will check the property and then carry out regular checks.
3. Respect for privacy – providers must give guardians reasonable notice of an inspection and try to arrange a mutually convenient appointment. If a guardian does not respond to a request to inspect after 3 attempts, the provider may inspect, but must provide full details of the inspection (including date, time, and who attended.)
4. Capped costs – currently providers are only permitted to charge guardians a maximum of €180 per month without supplies or €250 per month with supplies included. As mentioned above, any provider (whether as part of KLB or otherwise) must clearly state what services the fee covers. The higher the fee, the higher the risk of a finding of a “full lease” as this increases the chance that the additional costs are determined by the court not to relate solely to that particular property.
To date, just over 20 providers have applied and been approved by KLB but some remain unregulated. A provider must pay a one-off registration fee of €1000 and an annual contribution of €2500 to receive the KLB certificate mark.
The role of KLB’s independent Central Complaints Committee acts as a binding adjudicator between guardians and the providers in the case of disputes. If a guardian is unhappy about the quality of the property or notice to determine being given, they can report a complaint to KLB. If a guardian complains about a termination notice, they are entitled to stay in the property until a decision is made (which will be dealt with within a reasonable period).
Thereafter, if the guardian remains dissatisfied, the complaint will be escalated to the Central Complaints Committee to make a binding decision that cannot be challenged. Providers can also seek a decision from the Committee if a guardian refuses to leave. To date, almost all cases have been resolved at the reporting stage without the need for escalation to the Committee.
The London Assembly Housing Committee’s live public meeting took place yesterday and I will report back shortly. We will soon be in a better position to understand whether regulation of property guardianship in London is imminent and I will be arranging a further meeting with the London Assembly to discuss my investigations.
In my view, the Dutch model offers an interesting insight into how property guardianship can work effectively, but there are significant hurdles which will prevent the implementation of a similar model here in the short to medium term. That said, some form of additional guidance is perhaps necessary to avoid inexperienced providers entering the market and giving the sector a bad name. Capped fees are inevitably going to be a concern for providers in the UK, but could be based on a market review and remain profitable, particularly in London. A safe, affordable home with respect for privacy and reasonable notice to vacate is not unreasonable. Focusing on this should not be a burden, but embraced and promoted as a way to win new contracts and develop relationships with your clients.
I will be leaving my blog in the capable hands of Compliance and Fire Safety Expert, Kathryn Gilbertson for the next edition. Kathryn and I will be hosting a joint seminar discussing my reflections from the Netherlands as well as compliance issues for landlords and licensors arising from the Housing and Planning Act of 2016. Before then, I will be getting married and will return as Kirstie Goulder. If anyone would like to discuss any of my findings in October please get in touch.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.