Landlords should beware of cannabis farms

The extraordinary story of former Bath Tory councillor Donal Hassett who used false names, references and cover stories to rent homes to create a network of cannabis farms is a reminder of the problem this can be for landlords. Read the full story here


Cannabis farms in rented accommodation have been a problem for landlords for several years. Criminals spread farms around multiple locations to ensure that production continues even when one farm is discovered and closed. It is this need for multiple locations which leads the criminals to rented or squatted property.


For landlords, the discovery of a cannabis farm can be devastating and frightening. Under S.8 of the Misuse of Drugs Act 1971 a landlord (or anyone managing the property) can receive a maximum of 14 years in prison and/or a fine if they knowingly permit the production of controlled drugs to take place in rented accommodation. Arguably, “knowingly permit” could include turning a blind eye to the production of cannabis to ensure that their rental income continues. A further complication for landlords is that they could then find any rental income received seized under the Proceeds of Crime Act.


Landlords and their agents should therefore take steps to minimise the risk of cannabis cultivation in rented accommodation. Some signs to watch out for include:


• Tenant’s paying a large amount of rent up front;
• Tenant’s refusing or making excuses to prevent regular inspections or restricting access to parts of the property during inspections


Landlords should always carry out regular inspections or instruct their agent to and should look out for:


• Strange smells;
• Excessive heat;
• Blacked out or sealed windows;
• New ventilation units;
• Signs of meter tampering.


If there is a suspicion that cannabis is being grown at the property landlords should not address the matter directly with their tenant but should report it to the police. The landlord is then advised to serve the tenant with a Section 8 notice.


If the police discover a cannabis farm they will attempt to arrest the tenant and the landlord will need to co-operate with any investigation. Unfortunately, while removing the cannabis plants from the property the police will often leave behind the pots, soil, heat apparatus and any other paraphernalia connected to the cultivation of the cannabis. This can leave the landlord with a substantial clean-up bill and a lengthy delay prior to gaining possession.


Despite the tenant’s conduct, landlords cannot simply take back possession they will need to wait for a county court order for possession upon the expiry of the Section 8 notice. Where all the tenants have been arrested, and are not to be released on bail then landlords may be able to treat the property as abandoned however, prior to taking any steps in this respect legal advice should be sought.

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Why the Homelessness Reduction Act is good news for landlords

The Homelessness Reduction Bill has received Royal Assent and become an Act of Parliament. The Act places a new duty on Local Authorities to help prevent the homelessness of all families and single people, regardless of priority need, who are eligible for assistance and threatened with homelessness.


Positive News for Landlords


Until now a common problem for landlords was when a section 21 notice was served, the tenant went to the Local Authority with the notice and the tenant was told that they must wait for a court order and possibly bailiffs before they would be deemed to be homeless and therefore eligible for assistance.The Homeless Reduction Act prevents Local Authorities issuing this advice.


The Homeless Reduction Act amends the Housing Act 1996 adding a new definition of threatened with homelessness:


“(5) A person is also threatened with homelessness if—
(a) a valid notice has been given to the person under section 21 of the Housing Act 1988 (orders for possession on expiry or termination of assured shorthold tenancy) in respect of the only accommodation the person has that is available for the person’s occupation, and
(b) that notice will expire within 56 days.”


Two possible pitfalls to be aware of:


1. The duty only arises if a valid section 21 has been given – landlords need to ensure any section 21 notice they serve is definitely valid.


2. Local Authorities have struggled making decisions on the validity of section 21 notices even before this Act – Local Authorities commonly try to find reasons why a section 21 notice is not valid and no doubt given the fact that some courts struggle with this, this problem will persist.

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Legal Update – April 2017

The legal landscape for landlords and letting agents is ever-changing and here is a summary of what we have encountered in the last month:


Landlords lose mortgage interest tax relief – Effective April 5th 2017, landlords lost the right to claim full tax relief for mortgage interest payments.


Despite a year of protests and a High Court legal challenge, the government has stood firm on the proposals made by former Chancellor George Osborne and has resolutely refused to even water them down.


The Government estimates around 440,000 landlords will pay more tax because of the change.


HMRC plans new tax burden for landlords with licences – Landlords face a new regulation threat as anyone letting a property with a local authority licence may have to prove they file tax returns before moving in a tenant.


HM Revenue and Customs (HMRC) is moving forward with efforts to tackle the black economy with a new compliance tool called ‘conditionality’.


The idea is any landlord who must apply for a house in multiple occupation licence or register with a landlord licensing scheme must show they are also tax registered with HMRC before the licence is granted.


Part 3 of the Housing and Planning Act – Expected to come into force in October 2017, Section 216 of the Act will permit private landlords in England of properties let under an Assured Shorthold Tenancy to seek possession without a court order where the tenant has abandoned the premises.


Part 5 of the Housing and Planning Act – Will allow for regulations to be made requiring Electrical Safety testing by landlords.


At present under the Landlord and Tenant Act 1985 landlords only need to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity. Under the new provisions in Part 5 of the Act this will change.


The Electrical Safety Standards that the Secretary of State may impose are in relation to:


the installation in the premises or the supply of electricity; or
electrical fixtures, fittings or appliances provided by the landlord.


The landlord’s obligations are expected to include duties to ensure that a suitably qualified electrician has checked that the standards have been met, that they obtain a certificate confirming this with a copy provided to the tenant or any other relevant person.


Homelessness Reduction Bill – Expected to come into force in early 2018 this provides real hope that one of the most frustrating issues for both landlords and tenants, that of local authorities insisting on eviction before offering alternative housing, will be eliminated by this Bill.


As the private rented sector adapts to new pressures hopefully the Homelessness Reduction Bill will help landlords to have confidence in their investment and help tenants to feel more secure in their homes.


Banning letting agent fees paid by tenants – The Government has published its consultation paper on banning letting agent fees paid by tenants. The consultation is expected to last for 8 weeks until the 2 June 2017. My personal take on this is the ban is going to happen (probably not until late 2018) and that in order to compensate for the loss of income many agents will pass on some or all of the fees to landlords and this will ultimately put upward pressure on rents. For those agents who were making lots of money from tenant fees they will require a paradigm shift if they wish to flourish.


Compulsory money protection on the way for letting agents – Housing minister Gavin Barwell has confirmed that the government is ready to consult on compulsory money protection in the letting industry after years of misery for renters and landlords who have seen a succession of rogue agents run off with their money.


Tobacco tax evasion – In February, HM Revenue and Customs published a consultation paper on further measures to help tackle tobacco duty evasion and other excise duty evasion.


Part 6 of the consultation paper discusses imposing a statutory duty of care on landlords where a tobacco offence has been committed. A tobacco offence includes the importation and sale of illicit tobacco, which is tobacco that has been imported without the proper declarations being made or duty paid.


With so many changes in the industry it is more important than ever that landlords use a letting specialist to let and manage their property or have some means, such as membership of a trade association, to keep up-to-date with the changes.


This article is provided for information only and does not constitute legal advice.

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DPS Landlord Responsibility to Third Party

Third Party means a person who has paid a Deposit in respect of a Tenancy to a Landlord on behalf of a Tenant and who is a relevant person for the purposes of Sections 212 to 215 of the Housing Act 2004.


The DPS Terms and Conditions covering the landlord’s responsibility to any Third Party are:


• 8. a.
• 8. d.
• 8. e.
• 10. d. x.
• 14. b.


Looking at each of these in turn:


8. a. Where there is a Third Party registered on a Deposit, the Landlord must manage the relationship between the Tenant and the Third Party


DPS Explanation: We would recommend that the Landlord promotes open communication between all parties as much as possible with regards to the deposit, keeping each party informed.


8. d. It is the responsibility of the Landlord completing the Deposit Submission Form to ensure that the responsibilities of the Lead Tenant are fully understood by any Third Party, and that the Lead Tenant is nominated by all of the Joint Tenants and any Third Party


DPS Explanation: All parties (including Joint Tenants and Third Parties) should agree on who will be nominated as the Lead Tenant, as the individual listed as the Lead Tenant will have full control over the release of the deposit with the Landlord on the behalf of Joint Tenants and Third Parties.


8. e. The Landlord will be required to confirm, on the Custodial Deposit Submission Form, that they have explained to any Third Party, the role and responsibility of the Lead Tenant


DPS Explanation: As detailed above, if the Third party has paid the deposit, they should be registered as the Lead Tenant. You are then able to indicate during the registration process that you have made the Lead Tenant aware of their responsibilities.


10. d. x. The full name and title of any Third Party must be included on all Deposit Submission Forms


DPS Explanation: The details of the Third Party can be submitted in the Lead Tenant details.


14. b. The Landlord is responsible for providing confirmation of deposit submission to any Third Party


DPS Explanation: Once The DPS have received payment, the payment will clear within 3 to 5 working days. Deposit Submission Certificates will then be issued to all parties, either by email or by post to the property address. If an email address has not been provided for Joint Tenants and any Third Parties, we will send the Certificate to the property address.

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Minimum level of energy efficiency – a guide for landlords

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 set minimum levels of energy efficiency for private rented property.


From 1 April 2018, all rented property (both domestic and non-domestic) which is to have a new tenancy must have an energy efficiency rating of at least “E”.


This requirement also applies to all renewal tenancies to the same tenant for the same property on or after 1 April 2018. The duty is also triggered by any periodic tenancy arising on or after 1 April 2018 after expiry of any fixed term because the duty is not only triggered by a renewal but also “an extension”.


From 1 April 2020, all domestic property (including existing tenancies) must have an energy efficiency rating of at least “E”. Non-domestic properties have until 1 April 2023 (including existing tenancies) to ensure they meet the “E” rating.


There are several proposed exemptions for the minimum standard where -


• the property is unable to be brought up to the standard
• the tenant refuses consent
• the landlord is unable to obtain consent from a third party
• works required to bring the property up to the “E” level would devalue the property by more than 5% of market value


Penalties


Where a domestic property has been let which does not meet the minimum standard, the tenancy remains valid between the landlord and tenant but a fine will be payable by the landlord of up to £5,000. Fines can be much greater for non-domestic properties depending on their size.


Minimum rating may rise in the future


Suggestions have been made to increase the minimum rating to “D” in 2025 and to “C” in 2030. From all the Energy Performance Certificates (EPCs) collated in 2014 over half of all properties recorded currently have an energy efficiency rating of “D” or below.


What landlords should do now


Check the EPC for your rented property to see what the current energy efficiency rating is. If the current rating is an “F” or “G” you should act as soon as possible to improve the energy efficiency of your property to at least an “E” rating – the skills for improving the energy efficiency of properties are in short supply and as we approach the deadline, they are likely to get even harder to find. Suggestions on how to improve the energy efficiency of your property can be found in the EPC in the section called ‘Top actions you can take to save money and make your home more energy efficient.’


If you do not have a copy of the EPC available, download a copy from the EPC Register using Retrieve Report Using Property Address option. If an EPC for your property does not exist, commission a Domestic Energy Assessor to provide one. Domestic Energy Assessors can be at the EPC Register website here using Find Energy Assessor option.

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Right to rent checks – a quick guide for landlords

Why


It is a criminal offence for a landlord to allow a person who does not have a ‘right to rent’ to occupy premises in England. If a landlord does allow a person to occupy who doesn’t have a right to rent, they may be liable to a fine of up to £3,000 per adult in occupation.


Who


Applies to most types of occupation such as a tenancy or licence where the occupation is:


- for residential use, and
- for one or more adult occupier (18 years or over), and
- it is to be the occupiers only or main home, and
- for the payment of rent, and
- not excluded


The provisions of the legislation apply regardless of how well or how long a landlord has known the occupier who they are providing accommodation for.


What and When


1. Conduct initial right to rent checks before authorising an adult to occupy rented accommodation;

2. Conduct follow-up checks at the appropriate date if initial checks indicate that an occupier has a time-limited right to rent, and;

3. Make a report to the Home Office if follow-up checks indicate that an occupier no longer has the right to rent.


In the vast majority of cases landlords will only need to perform step 1 – initial right to rent checks. Steps 2 and 3 are only required if a prospective tenant is found to have a time-limited right to rent.


Further Reading


A short guide on right to rent


Check your tenant’s right to rent


Right to Rent Document Checks: a User Guide


Copying Right to Rent Documents: Landlord’s Obligations

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5 things landlords must do on the first day of a new tenancy

OK so you have done all the hard work and preparation for the new tenancy but what must you do on the first day of a new tenancy…


1. Give the tenant a copy of the energy performance certificate


Reference: Part 2, Regulation 6, (5) of The Energy Performance of Buildings (England and Wales) Regulations 2012


2. Give the tenant a copy of the last record of the safety check of the gas appliances and flue (Landlord’s/Landlord Gas Safety Record)


Reference: Part F, Regulation 36 of The Gas Safety (Installation and Use) Regulations 1998


3. Give the tenant a copy of the latest version of the How to rent: the checklist for renting in England


Reference: Regulation 3 of The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015


4. Give the tenant a copy of the required documents (to include name and postal address of the manufacturer and importer), instructions and safety information for the electrical equipment supplied


Reference: Regulation 26 of The Electrical Equipment (Safety) Regulations 2016


5. Check the prescribed alarms (smoke and carbon monoxide) are in proper working order


Reference: Part 2, Regulation 4, 1 (b) of The Smoke and Carbon Monoxide Alarm (England) Regulations 2015


6 things we recommend you do…


1. Get the tenant to sign a document to prove items 1-5 above have been carried out


2. Check the property against the Inventory and Schedule of Condition Report with the tenant and get the tenant to sign a copy of the report


3. Give the tenant Legionella control information


4. Give the tenant manufacturer’s instructions for any equipment or product supplied


5. Take photographs of the meter readings


6. Show the tenant where to isolate the utilities


Have we missed anything? do you have any questions? ask a letting specialist.

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Can a landlord refuse to accept early surrender of a tenancy?

Where a tenant expresses a wish to leave during a fixed term or vacate without giving the notice defined in the tenancy agreement, this is an offer to surrender. A landlord may accept or refuse such an offer.


Surrender by operation of law


An agreement by the landlord and the tenant that the tenancy shall be put an end to, acted upon by the tenant leaving the premises and the landlord by some unequivocal act taking possession, amounts to a surrender by operation of law. Phene v Popplewell (1862) 12 C.B.N.S. 334.] The giving and taking of possession must be unequivocal.


Acceptance of keys


Acceptance of the keys by the landlord is not in itself necessarily a surrender; it depends why the keys were accepted.


Acceptance of keys in lieu of notice


In Laine v Cadwallader (2001) 33 H.L.R. 36 the tenant was required to give at least four weeks notice to quit. The act of putting the keys through the landlord’s letterbox amounted to an offer by the tenant to surrender the tenancy early, which the landlord by implication accepted as the required notice commencing on that day. The landlord was therefore entitled to recover rent equivalent to that four week notice period.

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What the Electrical Equipment (Safety) Regulations 2016 mean for landlords

The Electrical Equipment (Safety) Regulations 2016 were enacted on 8 December 2016 and impose statutory duties on distributors of electrical equipment. Landlords who supply electrical equipment to tenants for their use are, consistent with the definition in the regulations, considered to be distributors. The regulations tighten the Electrical Equipment (Safety) Regulations 1994.


What equipment is covered by the regulations?


Electrical equipment for use with a voltage rating of between 50 and 1000V for alternating current and between 75 and 1500V for direct current.


What must a landlord do?


Before making electrical equipment available, the landlord must verify the electrical equipment:


(i)bears the CE marking
(ii)is accompanied by required documents*
(iii)is accompanied by instructions and safety information in English


In addition the landlord must verify that the manufacturer has complied with the requirements of regulation 8 (labelling of electrical equipment) and verify that the importer has complied with the requirements of regulation 18 (information identifying importer).


* required documents means the documents that the manufacturer or importer is required to provide with the electrical equipment pursuant to regulations 8,9,18 & 19 summarised below:


Regulation 8


Before placing electrical equipment on the market, a manufacturer must ensure that it bears a type, batch or serial number or other element allowing its identification and ensure that it is marked with the name, registered trade name or registered trade mark of the manufacturer and a single postal address at which the manufacturer can be contacted.


Regulation 9


When placing electrical equipment on the market, a manufacturer must ensure that it is accompanied by instructions and safety information in English. Such instructions and safety information must be clear, understandable and intelligible.


Regulation 18


Before placing electrical equipment on the market, an importer must indicate on the electrical equipment the name, registered trade name or registered trade mark of the importer and a postal address at which the importer can be contacted.


Where it is not possible to indicate the information specified on the electrical equipment, the importer must indicate that information on the packaging or in a document accompanying the electrical equipment.


Regulation 19


When placing electrical equipment on the market, an importer must ensure that it is accompanied by instructions and safety information in English.

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Small Business, Enterprise and Employment Act 2015 and home businesses

Home businesses are now common but until recently giving a tenant consent to operate a business from their rented home was tricky because the landlord did not want to inadvertently give the tenant a business tenancy that could be caught by Part 2 of the Landlord and Tenant Act 1954. A tenancy under those provisions can – in certain circumstances – give a tenant a right to a renewal tenancy upon expiry of their term, effectively giving a tenancy for life.


On 1 October 2015, the Small Business, Enterprise and Employment Act 2015 was enacted and helps landlords and tenants overcome this problem.


Home business tenancy


Section 35 of the Small Business, Enterprise and Employment Act 2015 essentially allows a landlord to grant a “home business tenancy” and such a tenancy is specifically excluded from any protection under Part 2 Landlord and Tenant Act 1954. This applies to any new home business tenancy granted from the 1 October 2015 in England and Wales except:


• a tenancy which is entered into before 1 October 2015
• a tenancy which is entered into on or after 1 October 2015, pursuant to a contract made before that day; or
• a periodic tenancy which arises at the end of the term where the original tenancy was before 1 October 2015 (where the tenancy is an assured shorthold tenancy).


If a tenancy meets the following conditions, it will be regarded as a “home business tenancy” for the purposes of the legislation:


• a dwelling-house is let as a separate dwelling,
• the tenant or, where there are joint tenants, each of them, is an individual, and
• the terms of the tenancy—
• require the tenant or, where there are joint tenants, at least one of them, to occupy the dwelling-house as a home (whether or not as that individual’s only or principal home),
• permit a home business to be carried on in the dwelling-house, or permit the immediate landlord to give consent for a home business to be carried on in the dwelling-house (whether that be a particular home business, a particular description of home business or any home business), and
• do not permit a business other than a home business to be carried on in the dwelling-house.


What is a home business?


A “home business” is defined as:


a business of a kind which might reasonably be carried on at home.


But, a business is not to be treated as a home business if it involves the supply of alcohol for consumption on licensed premises which form all or part of the dwelling-house.


There are provisions allowing regulations to be made prescribing cases in which businesses are, or are not, to be treated as home businesses. However, at the time of writing there doesn’t appear to have been any regulations made.
Our thoughts as to what businesses could “reasonably be carried on at home” might include:


• Web designer
• Accountant
• Financial advisor


Businesses which might not be suitable could include:


• Dentist
• Mechanic


Let as a separate dwelling


Section 36(2) specifically provides that where a home business tenancy is let as a separate dwelling, that is “let as a separate dwelling” for the purposes of an assured or assured shorthold tenancy. What this effectively means is that an “assured shorthold tenancy” can also be a “home business tenancy”. They are effectively the same thing if the tenancy contains the terms mentioned earlier.


Mixed use


A dwelling-house which is let for mixed residential and business use is capable of being let as a dwelling for the purposes of the legislation.


If, a dwelling-house is let together with other land, then, the following applies –


• if the main purpose of the letting is the provision of a home for the tenant, the other land is to be treated as part of the dwelling-house, and
• if the main purpose of the letting is not as a home, the tenancy is to be treated as not being one under which a dwelling-house is let as a separate dwelling.

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