Preparing to fail - the landlords new mantra

With 168 acts and 400+ regulation now Governing the private rented sector, it can be very easy to miss dotting a few 'i's' or failing to cross a few 'T's', but the fall out from this can have a huge impact on landlord both personally and financially, with some breaches of basic tenancy law bringing a criminal conviction or hefty fines.

My advice to anyone renting a property whether an agent or landlord is - Prepare to fail.

Now i am not saying get it wrong and hope for the worst, I am saying prepare with the worst case scenario already planned out.

I find 99% of landlords fail at the first hurdle when they want to evict a tenant because they didn't issue pre-tenancy documents correctly or failed to protect a deposit 

Always make sure you have done PDA - no - not Public Displays of Affection but Pre-During-After tenancy compliance.

Pre-tenancy is just as legally important as during a tenancy and after the tenant has left

Holding Deposit:- Not a legal requirement, but if you take one to secure the property it MUST:

• Be no more than 1 weeks rent
• Held for no more than 14 days without either returning / applying to balance or getting written extension to the 14 days
• You MUST also provide a receipt, written use of the HD and a draft copy of the AST

Or you Breach the Tenant Fee Ban Act and could risk some hefty fines

Before the AST is signed you MUST provide

• EPC- min rating E
• Up to date Gas cert (CP12)
• How to Rent guide ( latest version)
• EICR 5 yr elect test
• Carry out Right to Rent checks

After AST has started

• Protect deposit within 30 days of it being paid NOT of the tenancy starting 
• Provide  prescribed information within 30 days of it being paid NOT of the tenancy starting.

Not a legal requirement

• Security Deposit - a social norm not a legal requirement, BUT if you do take one it must be a max of 5x weeks rent

•Inventory- very good practice but not legal requirement 

During tenancy:

• • Not enter the property without the tenants express permission 
• • Attend to Maintenon in a timely fashion
• • Keep a open dialogue with tenants, don’t just wait for an issue
• • Regular property inspections

At end of tenancy

• Tenant doesn’t have to give notice to end a fixed term is they are leaving on the date it naturally ends
• • periodic tenancy they must give 1 months notice 
• • you can only do viewings if tenant allows- nope doesn’t matter what your AST says
• • check out- not a legal requirement but if you did a n inventory then a C/O is a must if you want a chance at claiming on deposit

Rent arrears

• Contact the tenant when they are 1 day late...Ask if they are ok?  This immediate and softer initial approach gets a much better outcome 

Remember agents may cost you 5%-20% but you are paying for years of knowledge, experience and a detailed understanding of the 168 acts and 400+ regulation

They don’t just let and forget

Self manage when you have the time and experience

Or you could find you are a criminal over night

Water water everywhere - but who foots the bill?

 With utility bills increasing for a variety of reasons, including more people now working from home due to the pandemic, it is not a surprise to know that more and more tenants are looking at ways to manage their money and decrease their bills.

One of the most common approaches for a tenant is to switch utility supplier as soon as they move into a new rental property.

Now, the misconception here by some landlords and agents alike, is that the tenant cannot switch supplier without the landlord written permission.

This is NOT correct......the tenant, as the bill payer has every legal right to chose whichever supplier they wish to suit their budget and the landlord cannot object... in some very rare circumstances they can, but these are not worth mentioning here.

In addition to this, tenants can also request a change of meter and 9/10 this too will not require the landlords written permission, this includes, Smart meters, prepayment meters and most importantly Water meters.

Now, the law does have some weight here when it comes to water meters, the Water Industry Act 1999 s11 states that a clause in a tenancy agreement cannot stop a tenant who pay their own water bills from choosing to have a water meter, however, most if not all water companies will not install a water meter for anyone who has a tenancy of less than 6 months.

But most importantly for landlords is the Flood and water management act 2010 S45, which is very clear that the LANDLORD has a legal obligation to advise the water company that the tenant is liable for the water bill during the tenancy.

If the landlord does not do this, even if the tenancy agreement states clearly that the tenant is liable, the water company do not have to acknowledge this and can/will hold the landlord liable for payment of any water bill while the tenant was in occupation, regardless of how long that tenant was in occupation.

An example of this was when i served my time at CAB, i had a landlord who had debt collectors after him for £24,000 this was a water bill that a tenant of several years, the AST was blatantly clear the tenant was liable for the water bill...... but the landlord nor his agent had taken the time to directly inform the water company, so the landlord was legally liable for the bill.

These days water companies make it extremely easy for landlords, with most having an easy section on their website where you can just fill in a few boxes to advise of the tenant liability, well worth taking a few moments to do this.

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Get outta my 'ouse

 With Covid having a huge detrimental effect on both landlords and tenants in the private rented sector, many landlords are finding themselves directly effected either by lost of employment or change in circumstances which are not of a direct effect of any tenant action.

In these situations many landlords are in desperate need to move back into their rental properties and need to evict their tenants through no fault of their own.

Surprisingly to me, there is a common assumption among inexperienced landlords on Social media platforms that they do not need to serve their tenants with formal notice in order to move back into their properties.

It is unclear where this misconception has come from, but it is a worryingly increasing trend, so to clarify the situation to those who are unsure please see below.

When you rent your property to a tenant on an assured shorthold tenancy agreement you are in the eyes of the law transferring possession of your property to the tenant.

This provides the tenant with 'Exclusive possession' this means the tenants has every legal right to exclude anyone from their home including the landlord and their agents.

There are only two legal ways in which a landlord can regain possession of their property.

1. By the tenant serving Notice to Quit or signing a Deed of surrender and vacating the property voluntarily 
2. By the landlord serving notice seeking possession, proceeding through the court system and having a bailiff exercise an eviction warrant  

If the rental property was previously the landlord home before the tenant move din then the landlord can serve a Section 8 notice using ground 1  which states Landlord wants property to be own home or the property was previously their own home, this is a 2 months notice pre-covid and currently 6 months, reducing to 4 months on 1st June 2021

However, The landlord can't use this ground to get the property back in order to sell it, and most importantly, before the tenant moved into the property, the landlord would need to serve on the tenant a notice ( a letter is fine) stating that this situation may arise, without this pre-ground 1 notice ground 1 cannot be used

If the tenant has not breached their tenancy in anyway and the landlord simply wants their property back to move into, then the formal Notice seeking possession will ned to be served, this will be a Section 21 notice on form 6a, currently that notice period is 6 months notice, this will reduce to 4 month son 1st June 2021 and reduce further to its pre-covid notice period of 2 months on 1st October 2021.

The other important thing to remember is that any notice seeking possession that a landlord issues to a tenant, either Section 21 or Section 8 is NOT an eviction notice and the tenant does not have to leave when it expires, the notice is simply that, a note to the tenant advising the tenant of the date after which the landlord can go to court.

So if you wish to move back into your home for an reason the tenant is still legally entitled to full notice and the full court process.

 

 

In the Dog house - Can a Landlord refuse a support / service animal

A majority of landlords would think twice before allowing a tenant to rent with a pet and most tenancy agreements have a ‘No Pets clause’ as standard.

However if a prospective tenant or existing tenant requests to have a service or support animal, then the landlord cannot just refuse without a very good reason.

The Equality Act 2010 calls these changes ‘reasonable adjustments’.

Reasonable adjustments only apply if the tenant has a disability as set out under section 6 of the Equality Act 2010

The definition as set out in section 6 says you’re disabled if:

• ·         you have a physical or mental impairment
• ·         that impairment has a substantial and long-term adverse effect on your ability to carry out normal day-to-day activities

Some impairments are automatically treated as a disability. You’ll be covered if you have:

• cancer, including skin growths that need removing before they become cancerous
• a visual impairment - this means you’re certified as blind, severely sight impaired, sight impaired or partially sighted
• multiple sclerosis
• an HIV infection - even if you don't have any symptoms
• a severe, long-term disfigurement - for example severe facial scarring or a skin disease

These are covered in Schedule 1, Part 1 of the  Equality Act 2010 and in Regulation 7 of the Equality Act 2010 (Disability) Regulations 2010.

Reasonable adjustments can be changes to policies, practices or terms of your agreement, such as changing a No pet clause.

They can also mean providing extra equipment or support - the law calls this auxiliary aids.

If the changes have to be made, the law calls this the ‘duty to make reasonable adjustments’. It’s covered in sections 20, 21 and 36 and Schedules 4 and 5 of the Equality Act 2010.

If the landlord refuses to make a reasonable adjustment, they may be discriminating against the tenant and could be acting illegally.

This could result in a fine or prosecution.

In addition a Private members bills currently working its way through Parliament which sets to establish a tenants rights to keep dogs and other animals in domestic accommodation, this could see an end to a standard No Pet approach.

In Thomas-Ashley v Drum Housing Association Ltd [2010] the court accepted that it was reasonable that the landlord refused to allow the disabled tenant to keep an assistance dog given the reasons for the landlord’s objection to the dog and the specific terms of that lease. This was despite the tenant’s clear need for the dog on health grounds and the effect that the refusal would have on the tenant’s ability to remain in the property.

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

Benefit changes are coming

From April 2021, the Government is due to remove the enhanced benefit payments it issued to assist people during Covid-19

We always knew this was a temporary measure and the additional income was a lifeline for many on benefits who were struggling to make ends meet.

Many landlords look advantage of this temporary increase, by rising rents, which was coupled with the lift on the benefit freeze, saw an increase in the Local Housing Allowance rate across the UK

However, these landlords may fall foul of this forward thinking when rates are due to return to original levels in April.

There is a little light at the end of the tunnel, the Government has announced that there will be an increase in benefit levels from April, but only against the original figures, which is some cases could see tenants losing over £100 pm in benefits.

This could see an unpredicted rise in rent arrears when benefit rates are reduced, landlords are advised to check what their tenants benefit levels will be come April 2021

The new rates are here, note the figures in brackets are the original payments not the Covid enhanced rates.

Universal Credit (Monthly rates shown)

Standard allowance

Single

• Single under 25: £257.33 (from £256.05)

• Single 25 or over: £324.84 (from £323.22)

Couple

• Joint claimants both under 25: £403.90 (from £401.92)

• Joint claimants, one or both 25 or over: £509.91 (from £507.37)

  
  

  Housing Benefit

  • Under 25: £59.20 (from £58.90)

  • 25 or over: £74.70 (from £74.35)

  • Entitled to main phase ESA: £74.70 (from £74.35 )

Residential tenants liable to pay SDLT

Stamp Duty Land Tax (SDLT) is normally directly associated with purchasing a property or land rather than with our renting tenants, but it may come as a surprise to know that certain long term renters have had to pay 1% SDLT.

Since December 2003 residential tenancies have the potential to be liable for Stamp Duty Land Tax (SDLT) and with more and more people finding it harder and harder to get their first step on the property ladder, and the average tenancy length being 4.5years, it is highly likely that more and more tenants will find themselves liable to pay this surprising Stamp Duty.

SDLT is levied on the rent paid and calculated on the amount of gross rent for the term of the tenancy. This computation produces an amount known as the Net Present Value (NPV).

NPV is calculated by taking into account the highest 12 monthly rents in the first 5 years of the tenancy. It is done via a complicated formula which maybe the HMRC is only capable of understanding.  If anyone is interested in test it, their online calculator is available here: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro .

SDLT is calculated across the total time a Tenant takes a tenancy for, up to a maximum of seven years. If a tenant takes a one year tenancy (AST) and then renews for a further year, this will be considered by the Inland Revenue as a linked transaction and the NPV calculation will be based on the gross rent paid for both years, up until 7 years of a linked tenancy for the tenant.

This cycle can be broken if a new AST is signed BUT it MUST have different terms, if a copy AST is signed this does not break the linked transaction of the tenancy, it may be difficult to sign a new AST which does in fact break the linked transaction cycle.

It is worth noting that when calculating the term of the tenancy, it is likely to include both fixed term tenancy and periodic tenancy (where the tenancy continues after a fixed term).

This SDLT is paid by the Tenant.

From 17 March 2006 if the Rent paid by a tenant (NPV) is less than £125,000, no Stamp Duty Land Tax is payable.  If the rent paid (NPV) is more than £125,000, Stamp Duty Land Tax is due

When SDLT is due the Tenant must complete and submit a declaration form SDLT1 to the Inland Revenue within 30 Days of the date the tenancy commences or the date the tenancy was executed, whichever is the earlier.

If the tenant fails to pay in what HMRC describe as a ‘timely fashion’, which actually means within three months of the filing date, the renter could incur a £100 fine.

Where no payment is made after three months passes that penalty will rise to £200, and could continue to rise to the full amount of the tax due if the return is 12 months overdue.

Covid and the stamp duty holiday.

Although the Stamp Duty holiday is currently being taken advantage by many, it does not apply to these renting arrangements. The reason for this is because the scope of the SDLT holiday relates to tax being lifted for buyers rather than renters, which will offer no comfort to those who do not own their homes.