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Landlords Need to Understand and Prepare for Some Changes

Jun 18, 2024

Original article from Landlord Vision - Landlords Need to Understand and Prepare for Some Changes - Landlordvision.co.uk

We now know that the Renters Reform Bill did not make it through parliament before close down for the General Election and therefore the future of the Bill very much depends on who wins the Election. 

There are some items which will re-appear regardless of who wins and one of them is the removal of the fixed term tenancy in favour of tenancies which all run monthly and where the tenant can end them with 2 month notice.  I want to talk about the implications of this for us so that we can be prepared for this major change when it happens 

You can read the current version of the Bill  

Renters (Reform) Bill (parliament.uk) 

“Assured tenancies to be periodic with rent period not exceeding a month” 

Removal of fixed term tenancies (Assured Shorthold Tenancies) and replacing them with monthly rolling periodic tenancies from day one.  The tenant would need to give a minimum 2 months notice to end the tenancy but can do so at any time.  

The issue – Tenants who fail affordability and have no home owning guarantor in the UK 

There are several times when this happens but most commonly students, people moving from overseas, people who are self employed… Everything else adds up but they cannot prove that they can pay the rent required. 

Before the Tenants Fees Act 2019 this was usually dealt with by either paying 6 months in advance or by buying a guarantee from a commercial service 

How did the Tenants Fees Act change this?  

Rent in advance can only be taken if the contract shows that it is due.  In other words the contracts states the date on which 6 months(or whatever) rent is due for payment as opposed to stating the monthly amount which is due for payment monthly.  The difference is we cannot take more than 5 weeks rent as a deposit and taking rent before its due is a deposit (money paid to avoid losses for the landlord).  When the contract states a monthly payment and 6 months payment is made that is 5 months deposit which is not allowed under the Act. NB it is still possible to take rent in advance, at this point, as long as the contract is worded appropriately as above. 

Until the Tenant Fees Act  2019 we could ask the tenant to use a commercial service which provided deposits when they pay a premium. The Act banned us from requiring a tenant to use a third party service for which they must pay and therefore this option is not open unless the tenant offers it of their own accord. I have seen online that landlords and agent say that they give the tenant the information and let them choose.  If a tenant “choses” to pay for a guarantee there would be nothing stopping that tenant going for compensation for breach of the Tenants Fees Act at the end of the tenancy therefore this is high risk.

How will the Renters Reform Act change things again? 

One of the biggest changes in the Bill  is removing the fixed term tenancy which, up to now, has been the mainstay of most tenancies which are begun with a 6 or 12 months fixed term. When this is removed there will be no possibility to charge rent in advance because the tenancy will run monthly and can end at any time therefore there is no “in advance” other than the monthly period. 

Whether a commercial rental guarantee would be available on the basis of a monthly tenancy remains to be seen. 

In addition a guarantor will be signing a guarantee for a monthly rolling tenancy and it will be very important to word it correctly so that the guarantee covers the entire time that this tenant lives in the property not the length of the tenancy. Just how this will impact existing guarantees, when existing tenancy become monthly periodic tenancies on the date that the Commencement Order states, is difficult to say but again if the guarantee states that the cover is for the length of the occupancy rather than the length of the tenancy it should still stand up. This is a big undertaking and some guarantors may be reluctant to agree it.   

I believe that having a guarantee will be the shape of things to come and its vitally important that we understand how a guarantee works 

  1. If the guarantor is not a UK homeowner the simple method of putting a charge on their property to recover our losses will not be available to us. A £3 fee and Land Registry will confirm that the guarantor is a home owner – or not 
  1. If the Guarantee is signed and dated after the Tenancy Agreement it is not valid.  The guarantor must, in law, gain something having offered a guarantee, the something that they gain is the tenant is accepted and the tenancy is granted.  If it has already been signed they have gained nothing and can withdraw their guarantee.  
  1. It is always best to have the guarantee signed in the presence of and by an independent witness, the guarantee then becomes a Deed. 
  1. The guarantor must be given a copy of the tenancy contract before being asked to sign and guarantee 
  1. The guarantor must be included in all correspondence regarding any rent arrears which might give rise to a claim on the guarantee. 

There may yet be changes in the Bill if government is persuaded that this is not in the best interest of many tenants and they are being made aware of this by NRLA and other landlord representatives.  My concern is that it is so fundamental to their plans to enable tenants to end their tenancies quickly, for whatever their reason, that they may not see the size of this problem that this will create for those tenants 

The issue –  How do we avoid the voids? 

This will become a big issue for most of us.  The Renters Reform Bill will empower tenants in many ways but there are some powers which tenants already have and which have the potential, combined with the monthly rolling contract and short notice period, to cause us voids.   

What powers have tenants got and from which legislation? 

Since the Landlord and Tenant Act 1988 tenants rights to “quiet enjoyment” have been recognized. 

There are however specific times when  a landlord has the right to visit their property during a tenancy, having gone through the correct procedure. 

One of the actions listed under Harassment by the government in their guide reinforce the tenants right of control in this area  

“ repeatedly entering the property without your permission or without giving you adequate notice” 

Landlord and tenant rights and responsibilities in the private rented sector – GOV.UK (www.gov.uk) 

  • “repeatedly entering the property without your permission or without giving you adequate notice” 

Harassment is a criminal offence and therefore has serious consequences for a landlord or agent who is not respecting the fact that they are entering a tenants home and cannot do so without their permission, regardless of any terms in the contract which say otherwise.  

 “A minimum of 24hr written notice must be given 

 The tenant can refuse the request – this is a request not an instruction as some landlords and agents think. 

The visit must be in normal daylight hours and to suit the tenants lifestyle – if they work nights and sleep during the day this must be taken into account, as must working from home, temporary illness, cannot be present and do not want strangers in their homes while they aren’t there …” 

  • “threats and physical violence”  this includes telling a tenant that they will be given a bad reference, will loose money from their deposit because the landlord will have a void … both these and many others are reported on my facebook group by tenants who fear exercising their legal rights 

There are circumstances where the landlord or agent can enter without giving 24 hrs written notice 

In an emergency where there is fear of flood, fire, gas or tenant may be ill inside 

Or where the tenant has not replied to your 24hr notice  

The tenant is believed to have abandoned the property 

You have a statutory obligation – like a gas safety inspection booked 

Where a neighbour or relative of the tenant has raised concerns 

Then there are times when a landlord, agent nor contractor can NOT enter without the tenants express permission 

To carry out viewings 

The value the property 

To take photographs to market the property to let or for sale 

To carry out an inventory or check out inspection 

The only event mentioned in the legislation is the tenants obligation to allow the landlord or someone working on his behalf to inspect the condition of the property” 

“In a lease in which the lessor’s repairing covenant is implied there is also implied a covenant by the lessee that the lessor, or any person authorised by him in writing, may at reasonable times of the day and on giving 24 hours’ notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair.” 

Section 11 para 6 Landlord and Tenant Act 1985 (legislation.gov.uk) 

“(6)Where a lease to which this section applies of a dwelling in England forms part only of a building, the implied covenant has effect as if the reference to the dwelling in subsection (1) included a reference to any common parts of the building in which the lessor has an estate or interest. 

(7)In a lease to which this section applies of a dwelling in England, there is also implied a covenant by the lessee that the lessor, or a person authorised in writing by the lessor, may enter the dwelling for the purpose of viewing its condition and state of repair. 

(8)The covenant implied by subsection (7) requires entry to the dwelling to be permitted— 

(a)only at reasonable times of the day, and 

(b)only if at least 24 hours’ notice in writing has been given to the occupier of the dwelling.” 

Section 1 para 6, 7 and 8  Homes (Fitness for Human Habitation) Act 2018 (legislation.gov.uk) 

Section 16  part 1 para 16 Housing Act 1988 Housing Act 1988 (legislation.gov.uk) 

“Access for repairs. 

It shall be an implied term of every assured tenancy that the tenant shall afford to the landlord access to the dwelling-house let on the tenancy and all reasonable facilities for executing therein any repairs which the landlord is entitled to execute.” 

There we have it, three pieces of legislation which make it clear 

  1. The tenant is entitled to a minimum of 24 hrs written notice 
  1. We need the tenants permission before entering 
  1. The tenant should give us reasonable access to inspect the condition of our properties and to carry out necessary repairs – not this does not mean improvements and to carry out safety inspections 
  1. For landlord read also agent or someone authorised to act on behalf of the landlord 

Question – What should a landlord do if a tenant refuses access for the above? 

We need to get a court order if all else fails but its worth trying to ask the local council Environmental Health department to help us when a tenant is preventing us from carrying out our health and safety obligations or necessary repairs. 

In my experience as long as we treat our tenants with respect they usually co-operate and if we understand that they have the right to refuse and speak to them in terms of asking their permission they are far more likely to come to an agreed time and date. 

The issue – Deposit Protection – potential for major issues between Landlords and tenants 

Without any doubt one of the biggest stumbling blocks in the relationship between landlords and our tenants is Deposit protection and yet I’m not reading anything about the potential for this to get worse after when we lose ASTs in favour of rolling monthly tenancies. 

There are, of course two options for landlords when taking a tenancy deposit 

  1. We can place it into a custodial scheme with one of the government approved deposit protection schemes at no cost 
  1. We can pay a small premium to use an “insured” option with one of the scheme and hold the deposit in our own bank accounts 

We have 30 days from payment in which to protect the deposit and give the tenant the certificate and prescribed information for tenants. At the end of the tenancy we should try to agree any stoppages with the tenant at move out and we have 10 working days from the date that the tenant requests the deposit to be returned in which to return the agreed amount.  The tenant can raise a dispute with the deposit protection scheme if they do not agree with the amount we want to withhold and the onus of proof is on us to show that we are entitled to our claim. 

Whichever protection we use if tenants regularly give notice of 2 months after a short period of occupancy the cost of protecting and recovering legitimate losses is going to increase.  We cannot charge for check in or check out inventories – this is not new it was prohibited in the Tenant Fees Act – but if the tenancies are for short periods the cost of these inventories is going to be disproportionate to the income we receive.  If we decide not to have inventories carried out the chance of getting a claim through the deposit protection arbiters is very slim.   It’s a quandary  

On the positive side there will no longer be issues where the tenancy has been allowed to roll over or has been renewed and the deposit is protected but not updated. A recent court case confirmed that the limit  for tenant to claim compensation for  non-protection of a deposit is the maximum back 6 years but each new tenancy agreement which was signed is separate  and all that were signed in the last 6 years represent a separate claim of up to 3 times the amount of the deposit which was not protected.  The same case confirmed that if the deposit protection certificate was not signed by the landlord or agent but was sent with a letter which was signed it is acceptable but not otherwise. Therefore attaching the certificate etc., to an email is not acceptable  

It will be tight but this Bill may yet receive Royal Assent before the summer recess be prepared but don’t panic because it will take some time to roll it out fully. 

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