From the safety of SA to the shark infested waters of PRS

Serviced accommodation is the fastest growing form of accommodation in the hospitality industry, so it is no surprise that it has emerged as the new business model in the property world.

With the attraction of minimal legislation and great returns you can understand why this would be a great place to start for anyone looking at making it big in property.

But with the shock of a global pandemic swiftly followed by a National Lockdown, the world of SA came to a grinding halt.

Some providers were able to adapt their business model and offer their accommodation to front line works and with key industries staying open such as construction, those who had catered to these markets were able to keep their financial heads above water.

But there are a number of providers for who were unable to adapt and found it impossible to source guests, some of these businesses made the decision to offer their accommodation to the private rental market and try to recover some of the losses that had been felt.

Unfortunately, this has left many with tenants they may never be able to evict as well as the risk of hefty fines or even imprisonment.

Prosecution, Regulation, Statute (PRS)

The Private Rented Sector (PRS) with over 156 pieces of legislation and 400 regulations is a far cry from the more relaxed model of Serviced accommodation.

Safety inspections, Deposit protection and the timely service of pre-tenancy documents are just the tip of the iceberg with regards to the minefield of legislation that the average BTL landlord has to navigate.

The potential for a £5,000 fine for not carrying out a Right to rent check, or £30,000 for not providing an valid EICR certificate or a compensation claim from the tenant for 3 x the value of an unprotected deposit, can come as a shock to those who are unaware of the complexities of the PRS.

Not having these requirements in place can leave providers with a tenant they may not be able to evict, failure to follow pre-tenancy regulations will mean a Section 21 notice commonly used to eviction tenants cannot be issued.

In some cases a provider may have inadvertently created an Assured tenancy rather than an Assured Shorthold, meaning the only means of ending the tenancy will be for the tenant to give notice, or for the landlord to service notice under Section 8 ONLY once a tenant has breached the terms of the agreement.

Many providers are also unaware of the legal requirement to be a member of a property redress scheme and have client money protection as well as correct indemnity insurance and of course permission to let under and AST from a mortgage company if the property is still being paid for.

But most concerning of all, is the prospect that an SA provider unfamiliar with the laws surrounding the private rented sector as a whole, especially those relating to Houses of multiple occupancy (HMO) regulations, may unintentionally create an HMO by providing tenancies rather than short term guest stays.

The ramifications of this, will be that the HMO is not licensed and this alone can incur a fine in the range of £10,000-£40000, and with additional breaches, such as not having the correct fire safety in place incurring fines of £5,000 per breach with possible imprisonment, it is best for any SA provider to safely on the shore to do some extreme research before dipping their toe into the Shark infested waters of the Private rented sector