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  • Buy-to-Let

    Private Rental Sector - Summary of legislative changes

    Here is a summary of upcoming legislative changes that will be of interest to all in the private rented sector. We want to make sure you are aware of these and can plan for their impact.

    The changes are due to come into effect shortly, following the receipt of Royal Assent yesterday for the Consumer Rights Act (letting agent transparency) and De-regulation Act (retaliatory evictions and tenant deposit protection). Regulations for selective licensing have recently been made and the legislative changes on smoke and CO alarms are due to be debated next Parliament.

    Please find below a brief description of these changes, when they come into force and where to find further information. We would urge you to read this document fully and, where appropriate, take the necessary actions to ensure compliance.

    Private Rental Sector - Summary of legislative changes

    Letting Agent Transparency

    Letting agents will be required to publicise a full breakdown of their fees, state whether or not they are a member of a client money protection scheme and which redress scheme they have joined (if they are required to) prominently in their offices and on their website.

    As lawyers can act on behalf of a landlord or tenant, for example to draft a tenancy agreement, the broad definition of a letting agent includes members of the legal profession carrying out lettings-related work. Secondary legislation, laid today, excludes legal professionals from the requirement to publicise their fees etc when they engage in lettings-related work.

    For further information on the provisions requiring greater transparency for letting agents, please see the relevant section in the ‘Improving the private rented sector and tackling bad practice: a guide for local authorities’ guidance available at: http://www.gov.uk/government/publication...uthorities

    Comes into effect: 27 May 2015

    Selective Licensing

    We have reformed the system of selective licensing which will help local authorities to focus their enforcement activity where it is most needed while ensuring that good landlords are not adversely impacted. Local authorities will have to seek confirmation from the Secretary of State for any selective licensing scheme which, either on its own or when combined with other schemes, would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area. This approach will help ensure that local authorities focus their activity on areas with the worst problems while helping to ensure that they do not adversely impact on good landlords.

    A guide for local authorities on Selective Licensing in the private rented sector along with a copy of the General Approval is available at: http://www.gov.uk/government/publication...uthorities

    A copy of the Statutory Instrument is available at: http://www.legislation.gov.uk/id/uksi/2015/977

    Comes into effect: 1 April 2015

    Smoke and CO Alarms

    Subject to Parliamentary approval, private rented sector landlords will be required to have working smoke alarms on every floor of their property and carbon monoxide alarms in rooms where a solid fuel heating system is installed. Alarms must be tested at the start of every new tenancy. The regulations do not stipulate the type of alarm to be installed; rather, landlords should make an informed decision and choose the best alarm for their circumstances and property. Landlords who fail to comply with the duties outlined in the regulations may be subject to a civil penalty

    For further information please refer to the relevant guidance at: http://www.legislation.gov.uk/ukdsi/2015...9/contents

    Comes into effect: 1 October 2015

    Retaliatory Eviction

    Tenants in the private rented sector will be protected from being evicted by their landlord simply because they have made a legitimate complaint about the condition of the property. Where a tenant has made a complaint to their landlord, and a local authority has confirmed that a repair needs to be carried out to prevent a potential risk to health and safety, the landlord will not be able to evict the tenant for 6 months.

    A landlord will also be prevented from evicting a tenant where they have not complied with certain legal obligations such as supplying Gas Safety Certificates and Energy Performance Certificates. This restriction would be lifted as soon as these documents are provided. It will no longer be possible to serve a section 21 eviction notice at the start of a tenancy and landlords will have to wait a minimum of four months before they can serve an eviction notice.

    In parallel we are making it easier for landlords to evict where it would be legitimate to do so, by introducing a prescribed form notice which will reduce errors and remove the need for a landlord to specify the exact date a tenancy comes to an end, while retaining the requirement to give two months’ notice.

    Guidance on the new legislation will be published in due course.

    Comes into effect: 1 October 2015

    Tenant Deposit Protection

    There are three changes relating to the protection of tenant’s deposits that landlords, letting agents and tenants should be aware of:

    • Section 32 (Tenancy Deposits: deemed compliance with requirements). In response to the Superstrike Court of Appeal case where landlords took a deposit prior to the introduction of the tenancy deposit protection legislation on 6 April 2007 in respect of a tenancy which (a) rolled over into a statutory periodic tenancy on or after that date and (b) is still in existence landlords have, in most cases, until the end of 23 June to protect their tenant’s deposit or potentially face a fine. In cases where legal proceedings are already underway and the case is due to be determined before 23 June, the landlord will need to protect the deposit and send the prescribed information to the tenant prior to the date on which the court makes its determination. Section 32 of the Act also covers cases where a landlord “receives” a deposit on or after 6 April 2007 (which could be at the start of a brand new tenancy or at the start of a renewed tenancy and subsequently protects that deposit and sends the required information to the tenant. If the tenancy is subsequently renewed or rolls over into a statutory periodic tenancy, then so long as the deposit remains protected in accordance with the same authorised tenancy deposit scheme from one tenancy to the next, there is no requirement for the landlord to re-send the same information to the tenant each time the tenancy is renewed or rolls over: the landlord will be treated as having complied with the tenancy deposit protection requirements afresh at the start of each new tenancy. This applies not just to the first “renewal” of the tenancy but also to cases where there are multiple tenancy renewals, which could include a mixture of fixed term tenancies and periodic tenancies.

    • Section 30 (Tenancy deposits: provision of information by agents).The Act also makes retrospective amendments to the Housing (Tenancy Deposits) (Prescribed Information) Order 2007 to make it clear that each of the references to “the landlord” in the order are to be read as references to either the landlord or the letting agent where relevant.

    • Section 31 (Tenancy deposits: non-compliance with requirements). Finally the Act also sets the decision made in the Court of Appeal case of Charalambous and another v Ng and another [2014] EWCA Civ 1604 into statute. Namely, that where the landlord received the deposit prior to the coming into force of the tenancy deposit legislation on 6 April 2007 in respect of a tenancy which began before that date, and which has continued without renewal since before that date, landlords will need to protect such deposits if they wish to be able to rely on the no-fault ground for possession in section 21 of the Housing Act 1988 at the end of the tenancy. However, landlords in this situation will not be subject to any fines should they fail to protect deposits.

    Comes into effect: 26 March 2015

    For further information please see the full Acts and accompanying explanatory notes for the Act, available at: http://www.legislation.gov.uk
    For more on TDP and the De-regulation Bill, we have a video with Steve Harriott, Chief Executive of TDS, explaining the changes:

    Letting agents’ fees should be banned to protect tenants in the private rental sector, Citizens Advice has said.

    The charity’s call came on Friday – the same day the Consumer Rights Bill received Royal Assent, which will make it a legal requirement for all letting agents to display their fees both online and in their offices.

    Under the Act, agents will have to show and describe their fees and what they cover, and state if the charge applies to the property being let or to each individual tenant.

    The enactment of the Bill, which has been broadly welcomed by ARLA, follows an Advertising Standards Authority ruling that letting agents should display fees.

    ARLA managing director David Cox said the new legal requirement to display fees was “a sensible alternative to an outright ban”. However, CAB said that the new law would have little impact.

    Citizens Advice said it had evidence that tenants are frequently “ripped off” by fees often hidden by letting agents – to the tune of £337 on average.

    These charges come on top of advertised rent prices and deposits, and can force people into debt, the charity said.

    The Still Let Down report claims letting agents have refused to adopt measures that were supposed to bring transparency and competition to the market.

    Full/source story
    Tenants and do gooder organisations have been whinging about Letting Agent fees for ages but nobody bothers about the very much larger fees suffered by purchasers, including stamp duty which most tenants avoid. Tenants should join the real world and realise that the end user always pays regardless of how that payment is made. No upfront fees means higher rents.
    Wish I could buy a property for just £337 in fees.
    Regarding section 31, in my view the main purpose is to remove the risk created by Charalambous.

    Indeed, I don't think that there was a need to transcribe the decision into the statute. However the decision highlighted the possibility that, in addition to not being able to serve section 21 notices, landlords could also be liable for the non-compliance penalty.

    This risk is now no more.

    Thanks for the Info Vanessa.Very helpful.

    Is it all going the tenant way or am I been over pessimistic as landlords becoming sitting targets?
    Why don't shelter and CAB tell people to go and buy property and pay all the costs of owning a property....and take tenants to Court,evict them....etc.
    There is no money in this game any more specially with the very low yields.
    I am already selling and need to look at another business so I can sleep at night and not worry about .....tenants.

    Hi Knight,

    I think the position is clouded by the General Election.

    Tenants are a far bigger voting group than landlords, so policies are being created or mooted to win them over.

    There will be a period of uncertainty up until May and some landlords may understandably feel wobbly! Property Tribes is here to support through challenging times like these.

    Shelter's agenda is merely as a lobbying group and they just seek headlines and worst cases to hammer home the point. They often paint tenants as "victims" when in fact tenants have a wide choice of rental property to choose from, mostly provided by private landlords.

    I find the use of the word "victim" to be very disempowering to people. Organisations should be seeking to highlight best practice and align good tenants with good landlords through education and awareness.

    The "Better Relations" campaign by Endsleigh Insurance is one such example of how good landlords and tenants are celebrated and this can inspire others.

    As for you as an individual, it is a personal choice as to what level of risk you accept. For instance, if you had Guaranteed Rent, then you wouldn't really have anything to worry about, although your net cashflow would be less.

    I think its a good practice to answer problems with solutions, not more problems!!

    Real problems can always be solved with a bit of lateral thinking, input from someone else, or taking time away to get some perspective.

    The private rented sector is growing and thriving and tenant demand is only going to increase. There is a lot to be optimistic about as a landlord. Focus on the positive, and use the negative to direct your education and future strategy is my advice. Smile

    I've just been hit with a reference to the new regs for Legionella risk reduction (£109 per prop for an assessment). I fired back at my agents the paragraphs below from https://www.hse.gov.uk/legionnaires/faqs.htm#Landlord:

    "In most residential settings, a simple assessment may show that the risks are low and no further action may be necessary. (An example of a typical lower risk situation may be found in a small building (eg housing unit) with small domestic-type water systems, where daily water usage is inevitable and sufficient to turn over the entire system; where cold water is directly from a wholesome mains supply (no stored water tanks); where hot water is fed from instantaneous heaters or low volume water heaters (supplying outlets at 50 °C); and where the only outlets are toilets and wash hand basins). If the assessment shows the risks are low and are being properly managed, no further action is needed but it is important to review the assessment regularly in case anything changes in the system."


    "Where showers are installed, these have the means of creating and dispersing water droplets which may be inhaled causing a foreseeable risk of exposure to legionella. However, if used regularly (as in the majority of most domestic settings) the risks are reduced but in any case, tenants should be advised to regularly clean and disinfect showerheads. Instantaneous electric showers pose less of a risk as they are generally coldwater-fed and heat only small volumes of water during operation."

    I think a simple questionnaire should avoid the need for most let props to be further investigated.