Category : Property

The government has published a Call for Evidence on Energy Performance Certificates for Buildings. Landlords, tenants and agents of both domestic and non-domestic properties are all encouraged to respond.

The government foresees an expanding role for Energy Performance Certificates (EPCs) as part of its drive to reduce building energy use. The Clean Growth Strategy 2017 set out an aim for homes in the private rented sector to be upgraded to EPC band C by 2030, and an aspiration for as many homes as possible to be upgraded to band C by 2035. In March 2018 the Green Finance Taskforce recommended that the government set a target for all commercial properties to meet EPC band B by 2035.

With these aims in mind, the Call for Evidence aims to collect evidence on the effectiveness of EPCs, to gather information on the suitability of the current system of EPCs for both their current and emerging uses, and to obtain feedback on suggestions for improvement.

The consultation document is 53 pages long and sets out the government’s take on how the EPC system is currently working and how it might be improved. Respondents are asked to answer 26 questions (on pages 44-46). Responses must be given by 19 October 2018.

As a landlord, tenant or agent, how are you finding the current EPC system? Have the new Minimum Energy Efficiency Standards had an impact on your business? What do you think about the proposals for the minimum standards to be higher? Have your say in the Call for Evidence and share your thoughts with us below.

Time is running out for landlords and agents to respond to the government’s consultation on its proposal to introduce a three-year minimum term for residential tenancy agreements in the private rented sector in England. The consultation closes on 26 August 2018.

Responses are sought to 29 questions. They include questions about respondents’ current practices and attitudes and questions about the new proposed framework of three-year tenancies with a six-month break clause and a yearly rent review.

The private rented sector in England doubled in size between 2002 and 2017. In 2016-17 it provided accommodation to 4.7 million households, 20% of all households. 38% of households in the private rented sector include dependent children. Providing these households with a long-term home is one of the government’s key objectives.

Reaction to the government’s proposals has been mixed. Longer tenancies have obvious benefits for tenants in terms of security and stability. They may also benefit landlords by providing a more certain income stream, reducing rental voids and reducing letting fees. It is also suggested that longer term tenants tend to look after properties better, reducing repair costs for landlords. However, many landlords are resistant to the idea as it will reduce their ability to sell or re-occupy a property and there may be issues with mortgage lenders’ rules which usually require tenancies to be granted for 6 or 12 months.

So, what do you think? Have you responded to the consultation? Are longer term tenancies desirable and can the current barriers be overcome? Let us know by commenting below.

The Government is on a mission to drive up standards in the private rented housing sector. More new rules and regulations apply from April 2018 with the introduction of new Minimum Energy Efficiency Standards (MEES), Banning Orders and the Rogue Landlord Database.

Minimum Energy Efficiency Standards (MEES) – England and Wales

From 1 April 2018 it will be unlawful for a landlord to enter into a new letting (or extend or renew an existing letting) of a property with an F or G energy efficiency rating unless an exemption has been registered. From 1 April 2020, it will be unlawful to continue to let a residential property with an F or G-rating.

Landlords who let F or G-rated properties without having registered a valid exemption will be liable to financial penalties of up to £4,000 as well as “publication penalties”. A publication penalty means that the local authority will publish details of the landlord’s breach on a publicly accessible part of the National PRS Exemptions Register.

By now landlords should have taken steps to ensure that their properties are up to standard or, alternatively, have claimed an exemption. Detailed information can be found on the gov.uk website, here.

Banning Orders – England Only

Banning orders are to be introduced in England from 6 April 2018. They can be made against landlords, letting agents and property managers and will ban that person from letting property or engaging in letting agency or property management work for a period of at least 12 months.

Banning orders are intended to be used for landlords and agents who deliberately and persistently fail to comply with their legal obligations. Local authorities will be able to apply for a banning order against a person who has been convicted of one of the offences listed in The Housing and Planning Act 2016 (Banning Order Offences) Regulations 2018. The offences are, in summary:

• ● Using violence to secure entry (Criminal Law Act 1977)
• ● Eviction or harassment of occupiers (Protection from Eviction Act 1977)
• ● Failure to comply with an improvement notice or prohibition order (Housing Act 2004)
• ● Control or management of an unlicensed property under the HMO or selective licensing regimes (Housing Act 2004)
• ● Fire safety offences (Regulatory Reform (Fire Safety) Order 2005)
• ● Gas safety offences (Health and Safety at Work etc. Act 1974)
• ● Landlord and agent offences under the Immigration Act 2014
• ● Various serious criminal offences committed by a landlord or agent against or in collusion with the tenant of the landlord’s property or committed at the property

A landlord who breaches a banning order may face a prison sentence of up to six months or a fine. As an alternative, the local authority may impose a financial penalty of up to £30,000.

Database of Rogue Landlords – England Only

Also on 6 April, a database of rogue landlords and property agents will be established. This will be maintained by local housing authorities in England. Only central government and local authorities will be able to access the database.

Local authorities must add to the database the details of any landlord or agent against whom a banning order has been made. The entry will be maintained while the banning order is in force and must then be removed.

Local authorities may also add the details of any person who has been convicted of a banning order offence (even if a banning order has not been made) or who has at least twice within a period of 12 months received a financial penalty in respect of a banning order offence. Government guidance will be issued in relation to these discretionary entries in the database.

Advice for Landlords

The residential tenancy sector is subject to ever greater levels of regulation. Whilst some of the new provisions, such as banning orders, are designed to catch the worst “rogue” operators, even “good” landlords and agents need to make sure they don’t inadvertently fall foul of the law. Sensible steps to take are:

• ● Keeping up to date with legislative changes
• ● Engaging with the local authority on matters such as licensing and health & safety
• ● Regularly reviewing your business: are there any issues with the properties, the tenants or your paperwork that need attention?
• ● Networking with other landlords and agents
• ● Taking professional advice from lawyers, surveyors, accountants and others as appropriate.

From 1 April 2018 it will be unlawful for a landlord in England or Wales to enter into a new letting (or extend or renew an existing letting) of a commercial property with an F or G energy efficiency rating unless an exemption has been registered. From 1 April 2023, it will be unlawful to continue to let a commercial property with an F or G rating.

Landlords who let F or G-rated properties without having registered a valid exemption will be liable to financial penalties based on the rateable value of the property. The minimum fine is £5,000 and the maximum £150,000. There will also be “publication penalties”. A publication penalty means that the local authority will publish details of the landlord’s breach on a publicly accessible part of the National PRS Exemptions Register.

By now landlords should have taken steps to ensure that vacant properties, and those about to become vacant or be re-let, are up to standard or, alternatively, have claimed an exemption. Landlords need to have plans in place to bring all properties up to standard (E or above) by April 2023 or ensure that exemptions are registered.

Detailed information can be found on the gov.uk website, here.

The Government is committed to improving standards for tenants in the private and social rented sectors. It is therefore supporting a Private Members’ Bill tabled by Karen Buck, a Labour MP: the Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill. (visit the Parliament website here to track the Bill’s progress.)

New Duty for Landlords and Remedies for Tenants

The Bill obliges landlords to keep rental properties in good condition by implying into a tenancy agreement a covenant by the landlord to ensure that the property is fit for human habitation at the beginning, and for the duration of the tenancy.

If a landlord fails to keep a property in good condition, the tenant will have the right to sue the landlord for breach of contract on the ground that the property is unfit for human habitation.

What are Landlords’ Current Obligations?

Landlords already have a statutory duty to keep their properties fit for human habitation. Relevant factors include damp, ventilation, lighting, and facilities for food preparation. This duty is enforced by local authorities using the Housing Health and Safety Rating System (HHSRS). An offence is committed if a landlord fails to comply with an enforcement notice.

However, there is currently no means for a tenant to take direct enforcement action against a landlord. They are reliant on the local authority doing so on their behalf.

How will Tenants Benefit from the New Law?

If the Bill is enacted (which is expected to happen) tenants will be able to take their landlord to court. The court may order the landlord to take action to make the property fit for human habitation and/or to pay compensation to the tenant.

How does this Affect You?

Are you a residential landlord, tenant, or agent? Do you welcome this legislation or are you worried about vexatious claims? As ever, we are keen to know your views.

Last month we wrote about the Government’s proposed HMO reforms. An Order has now been made extending the scope of mandatory licensing by removing the “three or more storeys” requirement. Landlords have until 1 October 2018 to apply for a licence for properties not previously subject to mandatory licensing. There will be no grace period after 1 October.

We await news on the introduction of minimum room sizes standards.

The Residential Landlords Association believes many of the HMO reforms are unnecessary and says they will put a huge strain on local authorities. Despite their raising these concerns with the Government, the Government has pressed ahead with the changes. What do you think? How are landlords, local authorities, and mortgage providers responding to the new HMO licensing rules? Please share your experiences with us by leaving a comment.

The Government has indicated that new rules relating to houses in multiple occupation (HMOs) will be brought into force in October 2018. The key reform is the extension of mandatory licensing of HMOs. There are also new provisions regarding minimum room sizes.

What is a HMO?

In simple terms, a house or flat is a HMO if it is occupied by three or more tenants who form two or more households and the tenants share some or all of the toilet, bathroom or kitchen facilities. There are an estimated 500,000 HMOs in England.

If your rental property is a HMO you will need to comply with legislation relating to the management of HMOs. Depending on the size of your HMO you may also need a licence to operate your HMO.

Mandatory and Additional Licensing – The Current Rules

Currently mandatory licensing applies to “large” HMOs, meaning those that comprise three or more storeys and are occupied by five or more people. Licences to operate HMOs are obtained from the local housing authority.

Additional licensing applies if the local housing authority has designated an area as subject to additional licensing of HMOs. This means that a licence is required for the types of HMO specified in the designation, not just those fitting the description of a large HMO. Additional licensing may be introduced to address problems caused by ineffective management of HMOs in the particular area.

There are serious consequences for landlords and letting agents who do not obtain licences for licensable properties. These include unlimited fines for criminal offences, civil penalties of up to £30,000, rent repayment orders and, from April 2018, the possibility of banning orders.

Why Extend the Scope of Mandatory Licensing?

The Government has decided that smaller HMOs need to be brought within the mandatory licensing scheme. This is because HMOs are particularly attractive to so-called rogue landlords who exploit vulnerable tenants by charging high rents but failing to manage their properties properly. Overcrowding, health and safety issues and a failure to deal with anti-social behaviour are common problems.

What Will Be the New Scope of Mandatory Licensing?

The storey requirement will be removed, meaning that all HMOs with five or more occupiers living in two or more households will require a licence.

Mandatory licensing will also apply to purpose-built flats where there are up to two flats in the block and one or both are occupied by five or more people in two or more households. Each flat, if occupied as a HMO, will require a separate licence.

The new rules will affect around 160,000 houses.

How Will the Licensing Changes be Implemented?

The extension of mandatory licensing is expected to be implemented in two phases. Phase one will last for six months. During this period, landlords who are new to the mandatory licensing regime should apply for a licence. However, they will not be prosecuted if they fail to do so. (But they will be unable to serve a valid Section 21 Notice seeking possession if they have not applied for a licence.) During phase two, landlords can be prosecuted and have rent repayment orders made against them if they have not applied for a licence.

Conversion from Additional or Selective Licensing to Mandatory Licensing

If your HMO is currently subject to additional licensing, your licence will be passported into the mandatory licensing scheme at no cost and with no alterations to the licence conditions for the remaining period of the licence. The Government has indicated that similar conversion arrangements will be made for properties currently affected by a selective licensing scheme (a scheme which requires all private rented properties, including HMOs, in a designated area to be licensed).

National Minimum Room Sizes

Currently there are no mandatory HMO conditions or prescribed standards relating to room size. This is set to change. It will be mandatory for a HMO licence to specify which rooms in a HMO are suitable for sleeping accommodation, and by how many adults and children.

• A room for a single adult or child aged 10 or over must have at least 6.51sqm of usable floor space.
• A room for two adults or children aged 10 or over must have at least 10.22sqm of usable floor space.
• A room with a usable floor area between 4.64sqm and 6.5sqm may be occupied as sleeping accommodation by a child under the age of ten.

These are minimum standards and local authorities may impose higher standards. It will also be for local authorities to make rules about room sizes for rooms occupied by more than two people.

How do These Reforms Affect You?

Are you a landlord or tenant affected by the proposed HMO reforms? Do you agree that they provide a much-needed tightening up of regulation in this area, or are residential landlords being excessively regulated? Do you have any concerns about the implementation of the new HMO licensing regime? Please share your thoughts with us.

Back in April we wrote about the introduction of new measures to tackle “rogue landlords”. Rent repayment orders and financial penalties have already been introduced. From April 2018, the government intends to bring in banning orders for landlords and agents who have been convicted of certain “banning order offences”.

What are the Banning Order Offences?

Draft Regulations have set out the list of banning order offences. If a landlord or agent is convicted of one of these offences, the local authority will be able to apply for a banning order against that person. The list of offences, including Housing Act offences and other serious crimes, can be found here.

What Effect will a Banning Order Have?

A banning order will prevent a person from letting or managing a property or carrying out agency work for a period of at least 12 months.

Database of Rogue Landlords and Property Agents

There will also be a new database of rogue landlords and agents. The database will include the names of people against whom a banning order has been made. It may also include people who have been convicted of a banning order offence but who are not the subject of a banning order.

Access to the database will be for the government and local housing authorities only. It does not appear that the public will be able to access it.

What Should I Do?

If you are a responsible law-abiding landlord, you don’t need to worry about banning orders. Banning orders are designed for landlords who deliberately and persistently fail to comply with their legal obligations. Their introduction gives local authorities one more tool to use in the fight against rogue operators.

A draft Tenants Fees Bill has now been published. As expected, the Bill bans landlords and letting agents from requiring tenants to make any payments as a condition of their tenancy, with certain exceptions.

The Bill applies to assured shorthold tenancies and licences but not to other types of letting such as company lets.

Permitted Payments

The payments that can still be required from tenants are:

• · Rent
• · A refundable security deposit not exceeding six weeks’ rent (the original proposal was one month’s rent)
• · A refundable holding deposit not exceeding one week’s rent
• · Fees for management services carried out as a result of a tenant’s default (such as repairs arising from deliberate damage to the property or a breach of the tenant’s obligations)

Penalties

Enforcement of the ban will be carried out by local authority trading standards officers. They can impose penalties of up to £5,000. A repeated breach is a criminal offence but a civil penalty of up to £30,000 can be imposed as an alternative to prosecution.

There is also a mechanism for Tenants to recover unlawfully charged fees.

Implementation

The Bill is still in draft and has yet to be laid before parliament. The new rules are not likely to come into force before late 2018. However, lettings agents need to start thinking about how they will adapt their practices to comply with the new rules.

Are you considering entering the short-term lettings market? It can be a fantastic source of income for property owners but there are downsides and risks. Here we look at the pros and cons and highlight some issues property owners need to consider before taking the plunge.

The Growth of the Short-Term Lettings Market

In recent years there has been a huge increase in the use of websites such as Airbnb, where home owners can advertise a room or a whole property as available for a short-term let. Originally, these websites were intended for consumer-to-consumer use – part of the “sharing economy” – but they are increasingly being used by property investors who see that there
is potentially more profit to be made from short-term lets than assured shorthold tenancies.

What are the Benefits of Short-Term Lettings?

There is a rapidly expanding market for short-term lettings, with many visitors preferring the independence of self-catering accommodation to a hotel stay. Agent websites such as Airbnb, HomeAway, and others make it easy for landlords to access this market.

Short-term lets are generally more lucrative for landlords than longer term lets, generating up to three times the income. In a prime area, granting short-term lets can be a reliable source of income.

What are the Downsides of Short-Term Lettings?

With a rapid turnover of guests, there is inevitably more work for landlords to do in terms of management and maintenance of the property. Landlords will either need to set aside the time to undertake this work themselves or appoint an agent to do it for them.

Using a property for short term lets can throw up issues with guests, neighbours, superior landlords and the local authority. Landlords need to anticipate the issues that may arise and be ready to deal with them if and when they do. For example, guests may complain about the facilities, neighbours may be unhappy with the behaviour of the guests, landlords may consider short-term lettings to be in breach of the lease covenants, and the local authority may receive complaints about noise or health and safety issues and take enforcement action.

The growth of the short-term let market in a particular area can have adverse consequences for local residents. Problems can include noise and disruption caused by guests, an increase in property prices, and a reduction in housing stock as investors look to acquire accommodation.

What do You Need to Consider Before Granting Short-Term Lets?

Here are some keys issues landlords need to consider before entering the short-term lettings market:

Planning Restrictions

In London, where living accommodation is much-needed, there are restrictions on using residential accommodation for short-term lets. Short-term lets are permitted provided they do not exceed 90 aggregate nights in any one calendar year. (Airbnb now restricts London hosts from letting their properties for more than 90 nights per year; other platforms do not impose this restriction.) If you intend to exceed the 90 night limit, consider applying for a change of planning use from residential (C3) to hotel use (C1).

Local authorities find this rule difficult to enforce as they do not necessarily know how properties are being used. It is possible that a notification requirement will be introduced whereby owners must notify the local authority of the dates when the property is being used for short-term lets.

Lease Terms

If you are a leaseholder, as opposed to owning the freehold of your property, does your lease allow you to grant short-term lets? Such lettings may fall foul of various restrictions in the lease such as:

• · a requirement to use the property only as a private residence (the courts
  have held that short-term lettings are too transient to qualify as “private
  residence” use)
• · a prohibition on using the property for a trade or business
• · a prohibition on causing a nuisance (could be an issue in terms of the
  behaviour of guests)
• · restrictions on subletting

If the short-term let use constitutes a breach of your lease your landlord may seek to forfeit (i.e. cancel) the lease or seek an injunction preventing you from using the property in this way. You may incur significant legal costs if your landlord takes such steps.

Mortgage Terms

Your mortgage terms may not allow you to use the property for short-term lettings. A breach of your mortgage terms may result in the property being repossessed unless you can repay the entire mortgage.

Buildings Insurance

Normal residential buildings insurance is unlikely to cover this sort of use. Check your policy and if necessary obtain specialist insurance.

EPC

An energy performance certificate (EPC) is needed for a property rented out as a holiday let for a combined total of four months or more in any 12-month period. If this applies to you make sure you have a valid EPC to avoid the local authority taking enforcement action.

Security

There may be valuable items in your property and you will be allowing strangers to have access to it. How will keys be collected and returned? Who will check that the property is secure and your possessions intact?

Health & Safety

Ensure appropriate checks are made on gas and electrical installations and as regards fire safety.

Tax

Tax is a specialist area and beyond the scope of this note. Ask your accountant to advise on your tax position.

The Future of Short-Term Lets

Despite the pitfalls and obstacles mentioned above, the short-term letting market looks set to remain strong. Are you already involved in it? Are you tempted to give it a try? Have you been affected by the growth of short-term lettings in your area? As always, we welcome your comments below.