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.

Possessed by Possession notices

On Friday 28th August 2020, the Government continued their usual fun and games of updating important legislation and releasing guidance after the fact.

Only when they confidently believe the majority of housing solicitors, judges and barristers would have opened the second bottle of Merlot do they feel safe to make these Breaking News stories and Friday was no exception and we welcomed to the world the freshly born The Coronavirus Act 2020 (Residential Tenancies: Protection from Eviction) (Amendment) (England) Regulations 2020

The Coronavirus Act 2020 had already increased notice periods and plunged many landlords into an abyss of financial worry with some tenants believing a global pandemic is the perfect reason not to pay rent.

This was quickly followed by a number of Practice Directions which saw the court system closed in relation to possession proceedings.

 Unsurprisingly this blanket ruling had a detrimental effect on property owners whose tenants had built up rent arrears prior to the lockdown or had committed an offence such as anti social behaviour (ASB)

And this is what brought Fridays announcement, now landlords could serve shorter notice periods on those tenants whose breaches are not Covid-19 related, but like everything the Government has done throughout lockdown, these kneejerk announcements come with little or no guidance, but i have done my best to simplify the new notice periods and hopefully make it easier to understand, given that this amendment actually takes in 5 separate pieces of legislation and has incited a collective loss of will amongst property professionals.

I am sure I am not the only one reaching for a cross and some sage when i hear the word "Possession" mentioned in the news updates.  

The most important element for landlords to understand is that the new notice periods are all different and range from 2weeks to 6 months, you will need to ensure you have the correct ground for eviction and dates on your application form.

Section 21, the no fault notice, has its timeframe increased again from 3months to 6 months, in addition its shelf life of 6 months has also been extended to10, meaning landlords will have just 4 months in which to apply to court once the notice period expires.

The common grounds used for rent arrears Ground 8, 10 and 11 now have two sets of notice periods depending on whether the tenant is in 6 months rent arrears or not.

It is also important to make sure that if you are using more than one ground for the reason for eviction, that those grounds all have the same notice period, as you cannot have 2 or 3 different grounds if one is only 2 weeks notice but the other is 3months. 

Here is where it gets confusing.......

Where a landlord is relying on an Anti-Social Behaviour ground which will be 7A or 14, it is worth remembering that Ground 7A is a mandatory ground  but generally requires the tenant (or some other person residing in or visiting the property) to have been convicted of an anti-social behaviour offence or some other relatively serious disorder offence

Whereas Ground 14 although discretionary, only requires the tenant or an occupier to have caused a nuisance or annoyance to their neighbours, the landlord or the landlords agent. 

It is important to note that where ground 14 can be used it actually shortens the notice period for any other grounds that you are relying on for the same notice.

So if a landlord was also seeking possession under ground 1 ( now increased to six months) and also could show that there was anti-social behaviour under ground 14 they could give a notice which required no notice period and apply to court immediately  

If you do not have any evidence to support a Ground 14 claim, then you can't throw it in with the hope of  shortening notice periods overall,  but it can be used where there is evidence, even if the court is not ultimately persuaded to make a possession order under ground 14.

These new notice periods will remain in force until 31st March 2021 and not the previously announced 30th September 2020.

It is also now important to familiarise yourself with the new Pre-action process that will come into force on 20th September, when courts re-open, this will include the need for reactivation notices to be sent to both the court and the tenant along with supporting evidence of how Covid-19 has effected the tenant.

The courts WILL NOT automatically process possession claims which have been submitted prior to 3rd August 2020 so you will need to be proactive when seeking possession. 

Finally and a welcomed surprise, is both Form3and Form 6a have been updated to accommodate the change in notice periods. 

This link below will take you to a simple document explaining each ground for possession under Section 8 and its new notice period term.  

Updated Notice periods

Credit:https://www.jmw.co.uk/services-for-business/commercial-litigation-dispute-resolution/blog/ever-moving-target-changes-notice-periods-private-residential-tenancies

Buy a property and get a tenant for FREE

 In recent months there has been a noticeable increased demand in the BTL investment market for tenanted properties, this could be linked to the fact that tenants are renting for the longer term now and regarding properties as their home rather than a stop gap.

Leeds and Bristol showed the highest increase in demand with 55%, closely followed by Nottingham 51%, Cambridge 47% and Southampton with a 40% increase in demand.

However, the market is slow to catch up with demand, with Leeds only having 2.9% of properties on the market which are tenanted, Bristol 0.7%, Cambridge 1.8% and Southampton 1.6%.

In contrast Cardiff has the highest number of tenanted properties on the market for sale at 3.7% with a demand increase of only 38%.

Buying a property with a tenant in situ also referred to as a sitting tenant, can bring a number of benefits to the BTL investor.

Firstly, there will be no void period after the sale when you would normally be advertising for a tenant, this in turn will mean a saving on agency fees.

You inherit a reliable, trustworthy tenant which is extremely valuable to any landlord and you are guaranteed rental income from day one, you will be able to budget with confidence, knowing the rent you will receive until at least the end of the existing tenancy agreement in addition you will have access to the tenants full rental history something you may not get when using a referencing firm with a new tenant.

With a contract in place, tenants need not be affected at all by a change in the ownership of a rental property, ensuring their happiness and willingness to remain in their home is undiminished.

But it isn’t as simple as it sounds, nothing in property ever is.

It is important to remember when buying with a tenant in situ, the tenant will be entitled to continue to live in the property and the change of ownership does not override the tenancy agreement and the tenant’s rights.

You will not be able to evict or increase rents until a fixed term tenancy ends and depending on when the tenant took up occupation, you may find you have a Protected tenancy which brings its own problems

Buying a property with tenants in situ is different to the normal sales process and will need a conveyancer with commercial experience.

Extra care is needed as in addition to the standard enquiries that need to be made in all conveyancing transactions, it is critical to make enquiries about the tenants.

It is important the seller provides all the details relating to the tenant, including the Tenancy Agreement this is key to establish when the tenancy was created, the status of the tenants and how they may be regulated by legislation, as different forms of security apply to different tenancies.

You will also need to ensure the seller has been compliant and how this will impact you as the buyer, checking the original deposit has been registered and after the sale transferring it to your name, you will need to protect it again, and reissue the prescribed information.

Making sure the property meets safety regulations and all the necessary certificates are in place, such as energy performance, gas and electrical.

(if furnished) that the furniture is in an acceptable condition and meets safety standards.

In an industry where there is a notice for just about everything, it is important to familiarise yourself with the notices and their timelines that will need to be served on the tenants once the property is purchased.

Section 3 of the Landlord and Tenant Act 1985

Section 3 places a mandatory duty on a new landlord to tell the tenant that they are in fact the new owner, having taken over from the old one, this is still the case even if the seller has already informed the tenant.

The new owner must give this notice no later than next rent due date or 2 months from the date of sale, it must inform the tenant that they are the new landlord and must provide their name and address (this must be the landlord’s actual address, not just an address for service of documents).

Important caveats

If the new landlord has not served a S3 notice on the tenant then the previous owner remains liable for any breaches of the tenancy agreement, such as disrepair, until the notice is given, in addition  both the old and the new landlord can be held jointly and severally liable for any breach.

More importantly S3(3) states A person who is the new landlord under a tenancy falling within subsection (1) and who fails, without reasonable excuse to give the notice required by that subsection, commits a summary offence and is liable on conviction to a fine not exceeding level 4 on the standard scale.

In short this means being prosecuted in the Magistrates court and the scale 4 fine is currently £2,500.

Section 47 of the Landlord and Tenant Act 1987

S47 requires that any written demand for rent by the landlord to the tenant, must include the landlord’s name and residential address and if that address is not in England and Wales, an address within England and Wales is required, so notices can be served. The purpose of the requirement under Section 47 is not to give the tenant information as to where the notices can be served, but to confirm the identity of the landlord. Using a managing agent’s address does not confirm the landlord’s identity, as it is not the landlord’s actual address.

Section 48 of the Landlord and Tenant Act 1987

Section 48 of the Act prevents landlords being able to seek possession of the property on grounds of rent arrears until the tenant has been provided with an address at which notices in proceedings can be served and the tenant will not be liable to pay rent until the landlord complies.

Interestingly S48 does not state that the landlord’s personal address is required for the amounts to become due. So a landlord can seek possession of a property on rent arrears grounds or the arrears themselves if he has provided an address at which notices and proceedings can be served. This address can be the landlord’s own address, that of the landlord’s letting agent, solicitor or friend. The address can also be a business address, preferably a registered office.

Finally, if a tenant has already paid rent on a defective rent demand, he or she may well be able to claw back up to six years’ payments on the basis that they were paid under an invalid demand.

What is a tenancy agreement

I see so many keen people entering the property industry as Rent 2 Rent operators believing it to be a risk free money making  option.

Yes it can be a great step on the property ladder but it certainly isn’t risk free.

The most common mistake I see time and time again is R2R operator signing Assured shorthold tenancies (AST) with property owners and then renting the property to tenants who are also issued with an AST.

This equates to subletting, which until specific permission has been sort from the owner, their mortgage company and related insurers is classed as illegal.

So why is an AST not right for R2R?

An AST is an interest in land for a set period of time and for a set rent, the term tenancy is usually used to refer to a short term interests where lease is used for long term interests 

When a landlord and tenant sign an AST the landlord is giving the exclusive possession of the property to the tenant meaning they have control of the property, for this to be legally possible the tenant MUST be in occupation and use the property as they only or main home.

If a tenant never takes up occupation then the AST legally doesn’t come into force.

With this in mind R2R operators who sign ASTs with owners have no agreement in place for the job they will be doing and could find themselves in hot water should the landlord wish to regain possession of his property.

Without the correct agreement in place a R2R operator will have no rights and no power to stop the landlord dealing direct with the tenants and removing the R2R operator with immediate effect.

An AST is a Housing Act tenancies which is also covered by Protection from eviction act 1977, the occupying tenant will also have rights with regards to repairs to the property as well as quiet enjoyment.

If a tenant never takes up occupation none of these can apply, the R2R operator is known as a 'mesne' tenant (pronounced 'mean') and the ladder of interest is below.

Head landlord (owner) > Mesne Tenant (R2R operator) > Subtenant (occupier)

Generally, when a mesne tenancy ends, the subtenancy also ends and the head landlord is entitled to get the accommodation back with no-one living it.

If the mesne tenancy ends, the head landlord can evict the subtenant quite easily. 

In these circumstances they will be regarded as a trespasser and the head landlord doesn't need a possession order to evict.