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Extension of The Homes (Fitness for Human Habitation) Act 2018

Leaking Ceiling

The Homes (Fitness for Human Habitation) Act 2018 (‘the Act’) came into force on 20 March 2019. This Act created a duty on social housing landlords, private residential landlords, and letting agents acting on their behalf (by implying a covenant in new tenancy agreements made on or after the 20 March 2019 for a term of less than seven years) to ensure that a property is ‘fit for human habitation’ both at the beginning of the tenancy and throughout.

For more detail on the Act, take a look at our previous post here.

From 20 March 2020 the Act will apply to all existing tenancies with terms of less than seven years.  This means that existing periodic tenancies will be subject to an implied covenant that the dwelling will be fit for human habitation on 20 March 2020 and will then remain fit for human habitation during the rest of the term.

Landlords may have to make improvements and not just carry out repairs to put and keep the property in a fit state for human habitation. The obligation to ensure that a property is ‘fit for human habitation’ extends to the dwelling and all parts of the building (including any common or shared areas) in which the landlord has an estate or interest.

In determining whether a property is fit for human habitation, the Act amends the Landlord and Tenant Act 1985 by incorporating the hazards set out in the Housing Health and Safety Rating System (HHSRS) to the existing nine hazards listed in the 1985 Act. The courts must decide if the property is so far defective in one or more of these matters that it is not reasonably suitable for occupation.

If a landlord does not comply with these obligations, the tenant can sue the landlord directly for breach of its tenancy agreement. Several exceptions may apply if the property is substandard due to the actions of the tenant, or for a reason outside of the landlord’s control, or if reasonable attempts by the landlord to obtain consent from a third party for works were made but consent was not obtained.

Whilst this Act extends to England and Wales, its practical changes only affect properties in England as similar obligations affecting landlords in Wales are dealt with under the Renting Homes (Wales) Act 2016.

Here at Simply-Docs our property templates were updated to reflect these legislative changes when the Act came into force for all new tenancies made on or after the 20 March 2019. Our property templates can therefore be used for all existing tenancies of less than seven years from the 20 March 2020. We have also published a Guidance Note on the Act which can be found here.

New Draft Regulations on Mandatory Electrical Safety Checks

Electrical Checks

Further to our blog post in October last year (which can be found here), the Government has now published The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020, which impose duties on private landlords of residential properties in England in respect of electrical safety standards.

These regulations require approval from both houses of parliament before they are made into law.

Most tenancies are caught by the regulations, although a number of tenancies including long leases, tenancies granting a right of occupation for a term of seven or years or more, social or resident landlords, holiday lettings, care homes, and licences for lodgers (where the occupier is sharing accommodation with the landlord) are excluded. The draft regulations require private landlords in England to:

  • Ensure that the electrical safety standards (the standards for electrical installations in the 18th edition of the Institution of Engineering and Technology wiring regulations (BS7671:2018)) are met when the premises are let under a tenancy;
  • Ensure that a qualified person inspects and tests every electrical installation in the premises at intervals of no more than 5 years and produces a report to the landlord (some reports only last a year and so landlords will need to check the length of the report before commissioning a report);
  • Carry out the first inspection and test before a tenancy commences on or after 1 July 2020 and before 1 April 2021 for existing tenancies (entered into before the date this legislation comes into force);
  • For existing tenancies, supply a copy of the report to each tenant within 28 days, and if requested by the local housing authority, within 7 days of request;
  • Supply a copy of the most recent report to a new tenant before occupation, or any prospective tenant within 28 days of a request from the prospective tenant;
  • Keep a copy of the report and give it to the person carrying out the next inspection; and
  • Carry out further investigative or remedial work within 28 days of the report or within the period specified in the report and supply written confirmation of completion of such further investigative or remedial work to the tenant and local housing authority within 28 days of this work being carried out.

If landlords fail to carry out further investigative or remedial work (where the work is not urgent) the local housing authority will serve a ‘remedial notice’ on the landlord. The landlord then has 28 days to make the improvements or will be given 21 days to object.

If the landlord doesn’t make the necessary improvements or the remedial work is urgent, the local housing authority can access the property with the tenants’ permission to do the work. If the tenants refuse access, the landlord will not be in breach of this requirement. Landlords have the right to appeal against the decision of the local housing authority to take that remedial action.

Landlords who fail to comply with the regulations are liable to face fines of up to £30,000.

The regulations also seek to amend the electrical safety regulations which currently affect Houses in Multiple Occupation (‘HMOs’) in England to propose new mandatory conditions for licenses to ensure that every electrical installation is in proper working order and safe for continued use.

It has been indicated that the Welsh Government is currently working on producing its own regulations setting out the standards expected of rental properties under The Renting Homes (Wales) Act 2016 and that regulations will require that a property is only fit if a landlord has:

  • Installed working carbon monoxide and smoke alarms; and
  • Undertaken an electrical safety test at least every five years.

In light of the draft regulations for England, the standards will be similar.

Here at Simply-Docs we will keep the progress of the draft regulations under review and will produce any necessary updates and/or content in due course.

Letting Agents and Money Laundering Regulations

HMRC Sign

New money laundering regulations come into effect on 10 January 2020, bringing certain letting agents (dealing with residential and/or commercial property) within the scope of money laundering legislation.

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 were passed on 20 December 2019. These regulations implement the EU’s Fifth Money Laundering Directive and are due to come into force on 10 January 2020, leaving a very short window for letting agents to understand the Regulations and to implement changes in their businesses.

As a letting agent in England and Wales, if you fall within the following definition, you will need to register with HM Revenue and Customs and comply with existing money laundering regulations which require you to put in place a number of policies, controls, and procedures to anticipate and prevent your business being used by criminals to launder money and fund terrorism from 10 January 2020.

“Letting agent” means a firm or sole practitioner who, or whose employees, carry out letting agency work, when carrying out such work.

“letting agency work” means work:
(a) consisting of things done in response to instructions received from:
(i) a person (a “prospective landlord”) seeking to find another person to whom to let land, or
(ii) a person (a “prospective tenant”) seeking to find land to rent, and

(b) done in a case where an agreement is concluded for the letting of land:
(i) for a term of a month or more, and
(ii) at a rent which during at least part of the term is, or is equivalent to, a monthly rent of 10,000 euros or more.

Estate agents that also do letting agency work (which is caught by the latest regulations) should already be registered with HM Revenue and Customs and will not need to register again; however, you will be required to amend your current registration to include lettings.

As well as bringing certain high value lettings into the scope of the money laundering regulations, the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (‘the 2019 Regulations’) amend existing money laundering regulations to ensure that all regulated businesses understand the ownership and control of any company, legal arrangement, or trust structure of the customer. The 2019 Regulations also prescribe mandatory enhanced due diligence measures when a transaction appears to be “high-risk”.

Failure to comply with money laundering regulations can result in civil penalties or criminal prosecution. Senior managers and nominated officers can also be found personally liable for a breach of these regulations.

Here at Simply-Docs we are updating our existing Anti-Money Laundering Documents for Estate Agents (both residential and commercial property) and adding new Anti-Money Laundering Documents for letting agents dealing with high value lets to assist agents in complying with their obligations under the legislation.

New Lettings Regulations for Wales – Pre-Holding-Deposit Information

Traditional Houses in Cardiff

The Welsh Government has passed new regulations on the information to be provided before a holding deposit can be taken by a landlord or a letting agent to secure a tenancy.

Following on from our blog on the Welsh Government’s response to the consultation on the tenant fees ban in Wales (which can be found here), the Welsh Government made the Renting Homes (Fees etc.) (Specified Information) (Wales) Regulations 2019, which were due to come into force on 13 December 2019. These regulations have now been revoked and are replaced by the Renting Homes (Fees etc.) (Holding Deposit) (Specified Information) (Wales) Regulations 2019. These new regulations are due to come into force on 28 February 2020.

A holding deposit may be charged to a tenant to secure a property prior to signing the tenancy agreement. A landlord, or letting agent on their behalf, can still charge a holding deposit to reserve a property whilst suitability checks are carried out on the prospective tenants, but no more than one week’s rent can be charged.

Under the Renting Homes (Fees etc.) (Holding Deposit) (Specified Information) (Wales) Regulations 2019, landlords and/or agents in Wales must provide the following information to tenants before collecting a holding deposit on or after 28 February 2020:

  • amount of holding deposit;
  • address of the dwelling in respect of which the deposit is paid;
  • where a holding deposit is to be paid to a letting agent, the name and contact details of that letting agent;
  • where a holding deposit is to be paid to a landlord, the name and contact details of that landlord;
  • duration of the contract;
  • proposed occupation date;
  • amount of rent or other consideration;
  • rental period;
  • any proposed additional contract terms or proposed modifications to fundamental or supplementary terms or terms proposed to be omitted from the contract;
  • amount of any security deposit;
  • whether a guarantor is required and, if so, any relevant conditions;
  • reference checks the landlord (or letting agent) will undertake; and
  • information the landlord or letting agent requires from the prospective contract-holder.

The above ‘Specified Information’ must be provided in writing and may be given in person or sent electronically where the tenant consents to this.

If the holding deposit is collected without all the Specified Information being provided, the holding deposit must be repaid to the tenant, even where the tenant fails to take all reasonable steps to enter into the tenancy and where the tenant notifies the landlord that they do not wish to enter into the tenancy.

Here at Simply-Docs we will be producing new template letters for use by landlords and letting agents in Wales which set out the specified information and which can be sent to prospective tenants before a holing deposit is collected. We will also be updating our template Holding Deposit Agreements (Wales) and existing guidance notes.

Welsh Government Responds to Tenant Fees Ban Consultation

Modern Houses in Cardiff

Following our blog in July on the consultation on default fees and prescribed information relating to the tenant fees ban in Wales (which can be found here), the Welsh Government has now issued its response.

The response confirms that, following the responses given, the Welsh Government intends to bring forward regulations in two stages:

The first is legislation to set out the prescribed information which must be given by a landlord or agent to a tenant before a holding deposit can be taken. A landlord or agent will be prohibited from collecting a holding deposit if the prescribed information has not been provided. It is intended that these regulations are made before the end of this year.

The second is legislation to describe the default payments (and the limits of such payments) which a landlord or agent can charge where a tenant is in default of their tenancy agreement. If default fees are charged over and above the limits to be set, the excess will become a prohibited payment. The Welsh Government intends to make these regulations early in 2020.

Once the regulations have been passed, the Welsh Government will issue updated guidance to take account of the changes.

Here at Simply-Docs we will monitor the progress of the proposed legislation and will update the documents in our property portfolio following any legislation passed (as and where necessary).

Government Consultations on Energy Efficiency

Energy Efficient Housing

The UK is the first major economy to pass laws to stop all of its greenhouse gas emissions by 2050. In order to meet this target, the Government will need to take a number of steps. The Government has recently launched the following three consultations (with further consultations to follow) to advance the reduction of carbon emissions as soon as possible.

1. Consultation on Changes to the Minimum Energy Efficiency Standards for Commercial Property

The Government’s preferred option is for all commercial properties to achieve a minimum energy efficiency rating of B by 1 April 2030 (if cost effective) or if this cannot be achieved, the alternative would be for all commercial properties to achieve a minimum energy efficiency rating of C by 1 April 2030 (if cost effective). The current minimum energy efficiency rating for commercial properties is E.  If the rating is changed in April 2030 as the Government currently proposes, landlords will not be able to let their properties which are below rating B or C (depending on the outcome of the consultation and subsequent legislation made).

For the improvements to be cost effective, the expected savings from these improvements over a seven-year period must be equal to, or outweigh the cost of, the improvements to get the property to the energy efficiency rating prescribed. If the seven-year payback test cannot be met, there will be an exemption (as there currently is for buildings which fail the seven-year payback test to achieve at least an E efficiency rating).

The consultation also asks for views on whether this should be a single change to the minimum energy efficiency rating or whether the change should be gradual so that the rating is improved in stages. The idea behind a gradual change is there is likely to be more incentive to carry out the works sooner instead of them being done just before the proposed deadline of April 2030.

The consultation applies to England and Wales only. Responses are welcome from property owners, landlords, and investors. A link to the consultation can be found here. The consultation closes on 7 January 2020.

2. Consultation on Increasing Energy Efficiency for New Builds by Amending Building Regulations to Achieve the New Future Homes Standard

The Future Homes Standard for new-build homes in England was proposed by the Government earlier this year and is to be introduced by 2025. The Future Homes Standard proposes that new homes must be future-proofed with low carbon heating and improved fabric standards (such as triple glazing) to limit heat loss.

The consultation sets out two options (Option 2 is preferred by the Government) to amend Building Regulations to raise energy efficiency in new homes as follows:

Option 1 – To achieve a 20% reduction in carbon emissions (from the current standard) by requiring new-builds to be constructed with very high fabric standards (e.g. triple glazing) to limit heat loss and to have a wastewater heat recovery system installed in the house; and

Option 2 – To achieve a 31% reduction in carbon emissions (from the current standard) by requiring the installation of low carbon heating, renewables (such as solar panels) and better fabric standards in new-builds.

The consultation is for England only and responses are welcome from property owners and occupiers, property developers, and builders. A link to the consultation can be found here. The consultation closes on 10 January 2020.

3. Consultation on Amendments to the Heat Network (Metering and Billing) Regulations 2014

This consultation sets out proposals to amend the Heat Network (Metering and Billing) Regulations 2014 to ensure, where cost-effective and feasible, that individual heat consumption meters are installed on heat networks and that customers are charged based on consumption.

‘Heat Networks’ are systems where heat for an area is produced centrally and is transported to end users through a network of underground and overground pipes. Heat Networks reduce carbon dioxide emissions.

The consultation also seeks views on the introduction of three building classes (which will determine whether heat consumption meters need to be installed or not). The suggested building classes are as follows:

  • the ‘Viable’ class (individual meters must be installed)
  • the ‘Exempt’ class (meters not required)
  • the ‘Open’ class (meters or heat cost allocators required if cost-effective)

A link to the consultation can be found here. Responses are welcome from landlords. The consultation closes on 12 December 2019.

Secretary of State Now Has Power to Make Regulations on Electrical Safety Checks

Electrical Checks

New regulations have been passed which give the Secretary of State for Housing, Communities and Local Government powers (from 25 October 2019) to impose duties on private residential landlords in England to carry out mandatory electrical safety checks when premises are occupied under a tenancy.

The Housing and Planning Act 2016 stated that if further regulations are introduced then the Secretary of State may impose obligations on private residential landlords in England to carry out mandatory electrical safety checks.  These powers have now been granted.

The electrical safety checks are likely to require that private landlords ensure all electrical appliances, fixtures and fittings, and installations for the supply of electricity meet a certain standard.  These checks may also require certification from qualified persons.

Now that the Secretary of State has the power to impose mandatory electrical safety checks on residential landlords it is likely that draft legislation will shortly follow once parliamentary time allows.

Here at Simply-Docs we will publish further details on this as developments unfold and will update our documents if necessary once any legislation on this is passed.

Proposed Regulation of Property Agents

Row of Houses

The Government has now received its report from The Regulation of Property Agents (RoPA) working group, which the Government had commissioned last year. The Government asked the RoPA to advise them on whether “Property Agents” in England (which includes letting agents, managing agents, estate agents, online agents, and auctioneers) should be regulated by an independent regulator, with mandatory qualifications and a code of practice and how these proposals would operate in practice.

The working group was made up of members from various institutions and associations, including the Royal Institution of Chartered Surveyors (RICS), the Association of Residential Letting Agents (ARLA), and the National Landlords Association (NLA).

Any person can currently operate as a managing agent, letting agent, or estate agent in England without having any qualifications and without having a licence. This has resulted in bad practice within the industry and a distrust in Property Agents.

Whilst statute does regulate estate agency practices in England to an extent, there are no regulations in force in England which regulate letting agents and managing agents, although some letting and managing agents do follow voluntary codes of practice by virtue of being members of associations such as ARLA and NLA. The report concluded that property agency is an imperfect market for two reasons: 1) Residents do not choose and cannot easily remove an agent; and 2) owners do not have the information to negotiate effectively or hold agents to account. As a result, change is needed.

The RoPA’s report recommended the following:

1) There should be a new proposed regulatory framework for all Property Agents in England. The Government should create a list of ‘reserved activities’ which can only be performed by licensed Property Agents at a regulated firm.

“Property Agents” does not include property portals such as Rightmove or Zoopla or the short-let sector (Airbnb), but the report recommends that legislation should allow for future regulation of landlords and developers.

The regulator should be a new public body which would have the power to enforce the new regulatory framework and take action against Property Agents who fail to comply.

2) All property and qualifying agents should be required to hold and display a licence to practise from the new regulator. Before obtaining a licence, the agents would need to comply with their legal obligations and be subject to a fit-and-proper person test.

3) There should be a single, high level code of practice which sets out the principles applicable to all Property Agents which is set in statute.

4) There should be mandatory qualifications for all licensed agents carrying out ‘reserved activities’ and different qualification levels for those in the industry with compulsory training to continue professional development for all staff levels.

Draft legislation is likely to be introduced to regulate Property Agents, which will incorporate the RoPA working group’s recommendations once parliamentary time allows. A copy of the full report can be found here.

Are you a Property Agent? Do you welcome the recommendations set out in the report? Your comments are, as ever, welcome.

Renting Homes (Fees etc.) (Wales) Act 2019 Now in Force

New Houses

The Renting Homes (Fees etc.) (Wales) Act 2019 (‘the Act’) came into force on 01 September 2019 and applies to Wales only. The aim of the Act is to reduce the “hidden” costs that a tenant can face at the start of their tenancy.

This Act is similar to the Tenant Fees Act 2019 (which affects England only), but there are key differences. Landlords and/or agents that have properties in both England and Wales must make sure that they are aware of both acts and that they comply with the regimes in their respective countries. The Act has less detail than the Tenant Fees Act 2019, with provisions granting ministers to make further regulations in the future.

Residential landlords and letting agents in Wales must ensure their business models, internal practices and procedures are compliant with the Act.

Which Tenancies are Affected?

This Act applies to Assured Shorthold Tenancies (ASTs) granted on or after 01 September 2019, or ASTs renewed on or after 01 September 2019.

This Act does not apply to Company Let Tenancy Agreements and Contractual (Non-Assured Shorthold) Tenancy Agreements nor does it apply to licences.

What Payments are Permitted Under the Act?

  • Landlords can make payments to a letting agent in respect of lettings work or property management work; and
  • A tenant can be charged:
    • Rent (although rent fluctuations are not permitted unless an exception applies);
    • A refundable tenancy deposit (these are not currently capped, but ministers have the power to introduce limits in the future);
    • A refundable holding deposit (capped at no more than one week’s rent). Strict time frames have been introduced for repayment;
    • Payments in the event of default. An AST may require a payment to be made in the event of a breach of the AST by the tenant. These payments will be subject to prescribed limits if further regulations are made;
    • Council Tax;
    • Utilities / communication services / TV Licence, if the payments are required under the AST and relate to the property.

What Payments are Prohibited?

Landlords, or letting agents on their behalf, are prohibited from charging tenants any fees which are not permitted payments (described above). For example, letting fees (such as administration fees, obtaining references, preparation of inventories, credit checks) cannot be passed on to a tenant and must be fronted entirely by the landlord.

What are the Penalties and Consequences for Non-Compliance?

Any breach of the Act is an offence and is prosecutable in the magistrates’ court. Offenders will be liable to a fine (not subject to a statutory limit). The enforcement authority may offer offenders a civil fixed penalty of £1000 for certain offences as an alternative to prosecution, but this is entirely at its discretion.

Landlords and letting agents will not be able to evict a tenant using the section 21 eviction procedure until they have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.

A local housing authority must notify the licensing authority as soon as reasonably practicable after it becomes aware of an offence. The licensing authority will take account of any offence notified to them when determining whether a person is fit and proper to hold a licence under the Housing (Wales) Act 2014.

To find out more about the Renting Homes (Fees etc.) (Wales) Act 2019, why not take a look at our all-new Guidance Note? This new document is available here.

Government Publishes Section 21 Consultation

Signing Property Documents

Earlier this year, the Government announced that it was outlining plans to abolish ‘no-fault evictions’ permitted under Section 21 of the Housing Act 1988 in England. Under the current law in England, landlords can evict tenants (giving them eight weeks’ notice) at any time after the fixed-term contract has come to an end, without specifying a reason. This procedure is known as a s21 eviction procedure.

The Government has now published its consultation which can be found here. This is an open consultation and views are invited from any interested parties. Responses can be submitted online or by post. Further details of the consultation and how to respond are addressed in the consultation.  The consultation closes on 12 October 2019. The consultation considers proposals for England only.

The Government has reaffirmed its commitment to repealing Section 21 to make the rental market fairer and more secure for tenants, as more people turn to rented accommodation in the private rented sector.

The abolition of Section 21 will mean that landlords will only be able to evict tenants under the Section 8 eviction procedure to obtain possession of their property. The Section 8 eviction procedure can only be used if certain statutory grounds (set out in the Housing Act 1988) are proved, such as non-payment of rent or anti-social behaviour.

This consultation therefore considers what improvements need to be made to possession proceedings through the court, and to the existing Section 8 eviction procedure to make it more efficient.

The Government want to speed up the court process and hope that this can be achieved by introducing an online system.

The consultation discusses a range of changes to the statutory grounds for evicting tenants under the Section 8 eviction procedure. These include:

  • Widening the current ground for possession for re-occupation by the landlord, to also apply if a family member wishes to use the property as their home, however, notice would need to be given at the beginning of the tenancy that the landlord may want to rely on this ground, and it could not be relied upon during the first two years of a fixed term;
  • Adding a new ground for possession for sale (again, notice would need to be given at the beginning of the tenancy that the landlord may want to rely on this ground, and it could not be relied upon during the first two years of a fixed term); and
  • Amending the ground for possession for rent arrears, which would permit the landlord to serve a two-week notice seeking possession once the tenant has accrued two months of rent arrears.

If the proposals set out in the consultation become law, the effect will be that assured shorthold tenancies (ASTs) will be abolished and all future tenancies will be assured tenancies (which can only be terminated by the landlord if they gain possession through the courts).  This is because once Section 21 is abolished, there will be little to distinguish ASTs from assured tenancies.

Landlords are concerned that these proposals will make it harder to evict tenants. Landlords may stop renting out their properties altogether or be more selective about who they let their property to. This is likely to decrease the supply of rented properties and increase rents.

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