Author: Tom

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.

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.

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.