Changes to the Lettings Industry Everything a Landlord Needs to Know
Rental Reforms – the industry is seeing the biggest changes in generations
The lettings sector is seeing a substantial overhaul with a number of new industry-changing laws and legislations soon coming in to force. There are 4 million people living in the private rental sector and few places for Landlords to find the all-important information they need to know. We at The Happy Tenant Company have summarised the key points Landlords should be aware of and how they will need to act on them.
Section 21 – ‘no fault’ evictions coming to an end
The government has recently announced plans to consult on new legislation to abolish Section 21 evictions – meaning private Landlords will no longer be able to evict tenants at short notice without good reason. At present Landlords are able to evict tenants in as little as 8 weeks after the fixed term has ended utilising Section 21 of the Housing Act (1988), which has always been an attractive feature for Landlords within the buy to let market. The new changes propose open-ended tenancies meaning private tenants are more secure in the knowledge they will not be swiftly evicted once their fixed term has ended, and more effective means for Landlords to get their property should they need to – in the case of neglect or arrears. Whilst this is an excellent initiative which will encourage peace of mind and security for tenants, the repercussions and costs for Landlords may be increased, especially if court hearings are required in order to evict tenants, which take time to process and are costly. Should a property be professionally managed by a reputable Managing Agent, they will oversee this process on the Landlord’s behalf, ensuring all laws and guidelines are fully complied with and processed efficiently.
Ban on Tenants Fees
1st June 2019 marks a considerable change to lettings procedure with the introduction of the Tenants Fees Act 2019, whereby estate agents and Landlords will no longer be able to charge tenants supplementary fees when renting property on assured shorthold tenancies. It is usual to practise for agents to pass on costs such as inventories and contract preparation to tenants, and from this date, there is stringent regulation in place defining what can and cannot be charged for. This will save tenants across the UK an estimated £240m a year, which equates to £70 per household. This law has been long-awaited, both inside and outside of the industry, as there are a large number of questionable parties who have taken advantage of tenants unaware of the process, charging them exorbitantly, unjustified fees. This has fallen under the radar for many years and has had a negative impact on the reputation of the industry as a whole, therefore as well as protecting tenants, this new legislation will protect Landlords and agents alike. Reputable agents will ensure their Landlord clients will adhere to these regulations, ensuring professional references are still taken for all tenants residing within the rented property.
This is a serious initiative and a breach of the legislation can result in the agent or Landlord being fined £5,000 initially. If there is an additional breach within 5 years the fine can be raised to £30,000 as an alternative to prosecution.
The table below shows the main areas of what can and cannot be charged to tenants post 1st June 2019. Any tenancy dated prior to 1st June 2019 may include fees written into the agreement.
|Charges||Pre 01/06/19||Post 01/06/2019|
|Holding Deposit||Usually one week’s rent deductible from the initial rent in advance. There are many cases whereby the property rental falls through and the tenant is not refunded the holding deposit||Holding deposit capped to one week’s rent and must be returned in all circumstances should the tenancy not go through, except if the tenant withdraws from the process or does not pass the right to rent check|
|References||Previously paid by tenant||Landlord’s responsibility|
|Deposit||It is usual for agents to charge 6 weeks, or in some cases even 8 or 12 weeks deposit||Capped at no more than 5 weeks rent where the total annual rent is below £50,000, or 6 weeks rent where the total annual rent is £50,000 or above|
|Inventory and check out fees||Cost usually split between the Landlord and tenant, or paid for entirely by the tenant||Cost will need to be covered by the Landlord or agent|
|Changes to the tenancy||Should a tenant within the property or other parts of the contract need changing, fees are charged at the discretion of the agent||Fees are capped to £50 or reasonable costs incurred, if higher|
|Default of tenants – such as a lost key or late payment of rent||Tenants can be charged enormous penalties for losing keys/late payment of rent||Should the agent need to replace a key or security device, the Landlord or agent is only permitted to charge reasonable costs incurred|
|Early termination of Tenancy, when requested by the tenant||Penalties in excess of rental void often charged||Tenants can only be charged for the period of loss the Landlord will incur. I.e. no more than the rent until the end of the tenancy|
|Professional Cleaning||Sometimes charged to tenants at end of tenancy||No longer allowed. The tenant is required to return the property in the same condition but there is no enforcement of professional cleaning|
New Energy Efficient Regulations
Energy Performance Certificates are required by law when letting a private rental property. The certificate determines the energy efficiency of each property and provides guidance on how to increase the efficiency, which is better for the environment and ultimately the tenant’s pocket. The ratings are defined from A to G, with A being the most efficient and G being the least.
Since 1st April 2018 the Energy Efficiency (Private Rented Property) (Amendment) (England and Wales) Regulations 2019 has been in place whereby private Landlords are not permitted to rent properties which fall below the E rating within their EPC. EPC F and G rated properties are the most energy inefficient of our housing stock and impose unnecessary energy costs to tenants and the wider economy, and can lead to poor health outcomes. These properties also contribute to avoidable greenhouse gas emissions.
Properties which were already tenanted prior to April 2018 are able to continue being let until 1st April 2020, when Landlords must normally make energy efficiency improvements which raise the EPC rate to minimum E before they let the property.
If a property is rated F or G, the Landlord is obligated to make the necessary improvements to property to raise the rating. There is a government set budget cap for this which falls at £3,500. If the improvements exceed this amount, Iandlords may be able to claim an exemption from this prohibition. Managing Agents can advise on and oversee these works, taking the pressure and responsibilities away from the Landlord.
As well as a direct benefit to tenants, with reduced fuel costs and better insulation, there are also a proven number of benefits to the Landlord by improving the energy efficiency including increased tenant satisfaction and reduced void periods, reduced long-term property maintenance costs, and making properties more attractive and easier to let. Managing Agents can advise on and oversee the works, taking the pressure and responsibilities away from the Landlord.
Under the new EPC regulations, local authorities can issue compliance notices and ultimately penalty notices should the property have been let in breach of the regulation. The authority may also publish details of the breach on the PRS Exemptions Register. The penalties will reflect the degree of infringement and the length of non-compliance, with fines ranging from £2,000 to a possible maximum £150,000.
Homes (Fitness for Human Habitation) Act 2018
March 2019 saw the launch of new legislation ensuring all rented property is fit for human habitation, meaning they are safe and free from issues that could cause them harm. There are too many tenants living in squalid uninhabitable conditions and this new law gives tenants the right to make irresponsible Landlords improve their properties or face a financial penalty. If a rented property is not fit for human habitation, tenants can take their Landlords to court. The court can make the Landlord carry out repairs, put right health and safety problems and also make the Landlord pay compensation to the tenant. If a property is already professionally managed, there is little cause for concern as the Managing Agent should ensure the condition of the property is suitable for occupation.
The law is in place for any tenancy agreements dated 20th March 2019 or later. If a new tenancy is dated prior to this date, Landlords have until the date of the next tenancy to make all changes required.
The Happy Tenant Company
The Happy Tenant Company was founded by a group of experienced Landlords who felt the old way of managing their properties needed to be transformed and realised other Landlords would also benefit from a truly professional and specialist service.
Our unique approach ensures Landlords feel safe and secure in the knowledge their prime asset is in competent hands. Our team of knowledgeable property managers take the pain out of property rental and maintenance, giving Landlords complete peace of mind.
We have teamed with a large number of reputable agents and offer Landlords preferential rates, lower than their standard fees with no renewal fees should tenants stay for a further period. We also run a completely transparent system whereby no surcharges for made for arranging repairs and maintenance, nor commission taken from our suppliers. This ensures our Landlords get the best possible returns from their property investment. All this is on top of all the usual services offered by Managing Agents, such as property maintenance and regular inspections.
Contact us for a chat, we would love to hear from you.
The Happy Tenant Company
781 Finchley Road, London,
NW11 8DN, UK