Calling all Private Rented Sector landlords! A legislation update

Property / 29 March 2019

Calling all Private Rented Sector (PRS) landlords!  If you currently let out residential property to private tenants, there’s a raft of legislation out there which could trip you up. Here’s a summary of some of the things currently hitting the headlines which might interest you:

  1. Homes (Fitness for Human Habitation) Act 2018
    This Act came into force on 20 March 2019 and requires landlords to make sure their properties are ‘fit for human habitation’ from the start to the end of the tenancy. This means ensuring there are no serious defects in the property such as damp, poor ventilation, or serious disrepair.  Defective drainage or sanitary facilities and facilities for preparing or cooking food must also be put right.  Exceptions to this include problems caused by fire, storm or flood, or where the disrepair is due to the tenant’s breach of covenant.  The Act is principally aimed at ‘bad’ landlords who have no qualms about letting properties in poor condition.  However, even ‘good’ landlords who generally keep their properties in good repair will need to take care not to fall foul of the legislation.
  2. Minimum Energy Efficiency Standards
    The prohibition on letting residential property with an energy performance rating below an E has been in force for some time but, until now, the so-called ‘no cost to the landlord’ principle has applied, meaning landlords need not spend any money making sure their properties meet the required minimum standard.  But that’s about to change.  From 1 April 2019, PRS landlords will be required to spend up to £3,500 (including VAT) to bring a property up to standard.  This £3,500 ‘cap’ can include money already spent on energy efficiency improvements since October 2017, as well as any third-party funding.  A ‘high cost’ exemption is available if you can show that the property cannot be improved to an E-rating or above for less than £3,500.  Three quotations will be required to prove this.  Existing ‘no cost to the landlord’ exemptions will cease to apply from 1 April 2020.
  3. Holding Client Money
    Again from 1 April 2019, residential property managing agents who hold money on behalf of their clients must be registered with a government-approved client money protection scheme.  This is a welcome move to protect PRS landlords whose money is held by the agents they appoint to collect rent and other payments from their tenants.  The new requirements are separate from the existing tenancy deposit protection scheme, and it seems that an estimated 30-40% of residential property agents have yet to register.  Fines for non-registration are high – up to £30,000 – so check that your letting/managing agents have complied with the requirements. You can find more details here.
  4. Tenant Fees Act 2019
    This Act is expected to come into force on 1 June 2019.  Key provisions include a ban on charging fees for things such as credit checks, references or inventories.  General administrative charges are also banned.  Holding deposits are permitted, but limited to a maximum of one week’s rent. Rent deposits cannot exceed the equivalent of five weeks’ rent for tenancies whose rent is less than £50,000 per year, or six weeks’ rent where the annual rent is £50,000 or more.  Money held must be protected by an approved scheme (see above).
  5. Gas Safety Certificates
    The important case of Caridon Property Ltd v Monty Shooltz in 2018 confirmed that failure to provide a gas safety certificate before the start of an assured shorthold tenancy (AST) will invalidate any subsequent section 21 notice for possession.  Producing the gas certificate the day after the tenancy has begun is not good enough.  A similar case came to court in February 2019, resulting in the same outcome. This means that PRS landlords and their agents who do not hand over the necessary certificate before the tenant takes occupation could inadvertently be granting assured tenancies rather than ASTs – with all the issues that may entail.  Both decisions were made in the lower courts, so there is possibly scope for appeal.  Given the implications of creating an assured tenancy, PRS landlords will hope very much that a higher court judge may overturn these cases in the near future!
  6. End of the road for Right to Rent checks?
    The Right to Rent scheme was introduced in England in 2016 and requires landlords to check the immigration status of prospective residential tenants to ensure they are legally eligible to rent. However, a recent High Court case held that the scheme causes discrimination and is a breach of the Human Rights Act.  We understand the government intends to appeal this decision, and for now, the Right to Rent scheme remains in force – so PRS landlords should continue to undertake immigration checks on all their tenants until further notice.

Letting property to residential tenants can be a minefield.  Make sure you take proper professional advice before doing so.

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