The Tenant Fees Act 2019 came into force on 1st June 2019. Many commentators were quick to express the additional pressures facing landlords and letting agents by further restrictions for short term letting. For the seasoned buy-to-let property owner, familiar with the blunt end of new legislative regimes, it’s unsurprising that there’s worse to come.
The Housing Act 1988 was celebrated as a revolution in the short-term letting industry with the introduction of Assured Shorthold Tenancies aimed to provide landlords with the security of guaranteed possession on short term lets, whilst giving tenants greater consumer choice. At the time, the conservative government faced the problem of the cost of council tenants, social housing amounting to 30% of all housing and available private rented property down to 8%. To encourage people to rent privately, landlords were given greater rights, particularly around the rent they could charge and to regain possession with a no-fault eviction process. This resulted in a new confidence for landlords with a flood of buy-to-let investors and more properties available for private renting.
The 1988 Act, later amended by the Housing Act 1996, introduced two types of tenancies; the Assured Tenancy and Assured Shorthold Tenancy (AST) – a type of Assured Tenancy. The latter is by far the most popular way to let residential property. After the amendments made by the 1996 Act to remove the obligation for a notice to be served before the tenancy commenced, all qualifying short term tenancies are ASTs automatically, unless the landlord serves notices otherwise – reversing the obligation. One characteristic of an AST is that it doesn’t give the tenant security of tenure, allowing the landlord to claim possession after the end of the fixed term by serving required notices. An Assured Tenancy, on the other hand, requires a court order for possession on particular grounds.
Since 1996 there has been a raft of further legislation aimed at protecting tenants and all with very good intentions. However, many landlords aren’t aware of the effect of the various regulations and requirements. Below is a list (not exhaustive) of some the pre-requisites for letting a property which are often missed:
- The Furniture and Furnishing (Fire Safety) Regulations 1988 requires that any furniture provided by the Landlord must meet the necessary fire regulations
The Energy Performance of Buildings (England and Wales) Regulations 2012 requires an Energy Performance Certificate to be provided when a property is let. Since 1st April 2018, the property must have at least an energy performance rating of E for a new tenancy to be granted. From 1st April 2020, this requirement will be extended to all tenancies irrespective of the date on which they were granted
- The Tenancy Deposit legislation was introduced by the Housing Act 2004 for the protection of tenant deposits. This legislation requires deposits to be paid into tenancy deposit schemes with strict requirements on giving information to the tenant relating to the scheme and providing a certificate by the landlord that the prescribed information has been given to the tenant
- The AST Notices and Prescribed Requirements (England) Regulations 2015 obliges the landlord to provide specific information to the tenant, including the current version of ‘How to rent: checklist for renting in England’ published by the Department for Communities and Local Government
- The Gas Safety (Installation and Use) Regulations 1998 require the landlord to provide a copy of the latest gas safety certificate to an incoming tenant ‘before that tenant occupies the premises’. The Court of Appeal is due to hear the case of Trecarrell House v Rouncefield in January 2020 in which the gas safety certificate was served after the commencement of the tenancy and a lower court found the tenancy was not an AST. The gas safety records must be made available to the tenant and records of all inspections kept.
Each piece of legislation has a good reason for its existence and tenants should be protected, but the cumulative effect has made navigating landlord’s obligations increasingly difficult and failure in compliance could hinder their ability to reclaim possession. It’s obvious that many landlords don’t seek legal advice when entering into tenancy agreements, but rely on old and outdated documents which then result in delays in gaining possession of the property. The law in this area is becoming increasingly complicated with further obligations pending which will take effect in 2020. Good advice is fundamental to understanding the ever-heavy burdens which are falling on both landlords and tenants.
The Tenant Fees Act 2019 prescribes a list of permitted fees which excludes previous fees such as making Rights to Rent checks, fees for inventory checks and fees for collecting references. At present, this legislation only affects new tenancies which were created after 1st June 2019, but a further legislation in June 2020 will bring these provisions into force for all existing tenancy agreements.
Nonetheless, this may not be the worst thing which will happen for landlords in 2020. The banning of section 21 ‘no fault’ possession orders for short term tenancies featured in the Queen’s speech at the opening of Parliament and the contents of the Renters’ Reform Bill will now be debated. This ban will mean that landlords will only be able to claim possession from their tenant if they can prove there has been a fault on the part of the tenant, or if they are intending to sell the property. This movement is applauded in providing tenants with assurance over the permanency of their homes and introducing security of tenure.
This will be a sad goodbye to ASTs and the flexibility which is provided for short-term letting. However, the move to repeal section 21 could be short-sighted. Those looking to venture into buy-to-let property investment are already put off by SDLT burdens, particularly targeted towards owners of multiple properties. This move, together with the increasing restrictions and burdens about letting properties, may have more private landlords leaving the market, which in turn will reduce the number of properties available to rent and drive rents up. Furthermore, it may encourage creative thinking to avoid the AST structure entirely; putting tenants back at risk in limited choice of housing and possibly requiring a new regime in rent control.
If both renting and home-ownership become unaffordable, the question which the politicians really need to answer is where will people live?
Published: January 2020
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January 2020
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