Welcome To Simplydocs

Category : Author / Iain Mackintosh

Minimum Energy Efficiency Standards – Changes from 1 April

Energy Efficient Housing

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (‘the 2015 Regulations’) established the new Minimum Energy Efficiency Standards (MEES) in the residential private rented sector. Since 1 April 2018 it has been unlawful for a landlord in England or Wales to enter into a new letting (or extend or renew an existing letting) of a residential property with an F or G energy efficiency rating unless an exemption has been registered.

The 2015 Regulations were amended in 2019 by The Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 which imposed a requirement on landlords to contribute to the cost of improving their sub-standard property (F or G rating) up to the value of £3,500 (inclusive of VAT) unless an exemption could be sought.

Extending MEES From April 2020

From 1 April 2020, all existing tenancies are now caught by the Act, and it will be unlawful for landlords to rent out homes that are required to have an energy efficiency rating of F or G unless an exemption has been registered.

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.

Coronavirus, Commercial Contracts, and Force Majeure

As cases of the novel coronavirus, or COVID-19, continue to increase, having now reached pandemic status, as defined by the World Health Organization, many businesses are feeling the impact. This is perhaps most keenly felt where employees are concerned, either with staff taking sick leave, or with the need to increase home-working. As the impact worsens, however, it is likely to start impacting more supply chains and other areas in which contracts play a key role.

The basic principle that applies to commercial contracts that are subject to English law is that the parties remain bound to perform their obligations under them although it might have become more difficult or expensive to do so. However, many commercial contracts include provisions which expressly provide a right to terminate or some other right or remedy in particular circumstances described by the contract. The most common provisions of this type found in commercial contracts governed by English law are force majeure clauses, which excuse performance in the circumstances stated in the clause.

An important question that businesses should be considering now is whether COVID-19 amounts to a force majeure event under the terms of any force majeure clause that is included in any current contract that they have with another party, and if so, how does it apply to the circumstances?

What is Force Majeure?

The term “force majeure” originates in French, meaning “superior force”. A force majeure clause in a contract is designed to relieve the parties from their contractual obligations when events beyond their control (or reasonable control) prevent or hinder their performance of those obligations.

Rather than bringing the contract to an end, the party affected by the force majeure event will often be excused from performance by a force majeure clause in the contract for the resulting delay or non-performance, and the time within which performance is required will be extended. It is also quite common for force majeure clauses to allow one or both parties to terminate the contract – but do not state that the contract automatically ends – if the force majeure event and its effects on performance continue for a certain period of time.

Contracts under English law must include specific provisions covering force majeure if the parties want to be able to rely on such exemptions from a contractual obligation. English law does not apply any doctrine of force majeure or imply any force majeure term or effect in any contract; whether a force majeure consequence arises in relation to a contract will depend on the precise circumstances and wording of the force majeure clause, if any.

Since the courts will generally prefer to enforce the performance of a contract, the party seeking to rely on a force majeure clause will usually not be able to do so unless it shows that the clause applies. Unless the contract expressly says otherwise, it will have to show that performance is legally or physically impossible, not just that it is commercially impractical or uneconomic to perform.

Is the Coronavirus a Force Majeure Event?

Whether or not the impact of COVID-19 amounts to a force majeure event will ultimately come down to the wording of the relevant clauses in the contract. Some force majeure clauses are more specific than others. If a list of possible events is included in the clause, the question will be whether or not the virus falls within one of those events. Until recently, for example, a general reference to “pandemics” would not have been helpful; however, as the World Health Organisation has now classified COVID-19 as a pandemic, such a reference in a force majeure clause would be more likely to be useful. Alternatively, the clause might include other, more general events such as “act of god”, and/or a catch-all provision such as, “any other event which is beyond the reasonable control of the effected party whether of a similar or dissimilar nature to any of the foregoing events”, but such provisions are not a guarantee of success. In any event, it will be for the party claiming that a force majeure clause covers COVID-19 and the particular circumstances relating to the contract to demonstrate that the clause does cover it.

Also of key importance will be the parties’ knowledge at the time the contract was formed. Some force majeure clauses refer to “unforeseeable events”. In such cases, the parties’ prior knowledge of outbreaks of COVID-19 in the relevant areas will be an important consideration. If the parties knew of the outbreak of the virus when the contract was formed and did not make an express reference to it in the force majeure clause, the courts may not subsequently allow a party to the contract to rely on it as a force majeure event under any non-COVID-19 wording in the clause.

Even where it is possible to rely on a force majeure clause with respect to COVID-19, such clauses should be handled with care and do not necessarily represent an “easy way out”. There may, for example, be an obligation to mitigate the impact of the force majeure event (express or implied); the scope of the clause may be limited; and there may be time limits.

Depending upon the wording of a force majeure clause, then, it may indeed be the case that the coronavirus amounts to a force majeure event. Nevertheless, force majeure clauses are not designed to be, and are not, easy get-out clauses. They cannot be used to avoid liability for contractual breaches that would have occurred in any case or which were not caused by force majeure, and many will include limitations to ensure that contracts cannot be prematurely terminated simply because performance has become tricky.

Frustration

Where there is no force majeure or other helpful clause in a contract, or where there is such a clause but it does not cover COVID-19 and the particular circumstances, the English law doctrine of “frustration” might apply in certain very exceptional circumstances. Under this doctrine, if an unforeseen event renders a contract impossible to perform or transforms the obligations under it into something radically different, the contract is, in law, deemed to terminate. This occurs automatically, not by virtue of any termination by either party. Frustration only occurs if, on a strict view of a situation, there is such impossibility or transformation of obligations: if the performance of contractual obligations simply becomes more difficult or expensive, that is very unlikely to be sufficient for the doctrine of frustration to apply. If frustration does apply, it may be difficult to ascertain what financial adjustments between the parties are required to be made under contract law.

Complexity of Issues Requires Proper Legal Advice

Interpreting the scope and effect of any force majeure clause or reaching a view as to whether frustration applies in any situation may be a complicated, difficult, and uncertain legal matter. Similarly, reaching a view as to the financial effect on the parties of the application of a force majeure clause or frustration will also be a complex, difficult, and uncertain issue.

As well as considering suspension or the ending of a contract, it will be necessary to consider whether there is a liability to refund payments already made under the contract or to pay for value received or money expended before the suspension or termination. Therefore, in all cases you should seek appropriate professional independent legal advice as to where you stand in relation to COVID-19 and its effects on the performance of any commercial contract.

Budget 2020 – Extraordinary Measures and the Coronavirus

Downing Street & Whitehall

In the Budget address on 11 March, Rishi Sunak, Chancellor of the Exchequer, announced £7 billion of extraordinary measures to support the economy through the coronavirus (COVID-19) crisis.

The following key measures were announced:

  • The cost of statutory sick pay (SSP) for coronavirus-related absence of up to 14 days will be refunded by the government. This applies to businesses with fewer than 250 employees.
  • SSP will be available “to all those advised to self-isolate even if they haven’t yet presented with symptoms”. This will apply from day one of sickness.
  • Employees will be able to obtain a sick note (fit note) from the NHS non-emergency service (111), which they can use as evidence for absence from work. This initiative is intended to take pressure off local GPs.

The self-employed and those working in the gig economy are not eligible for SSP and so the government has made it quicker and easier to access benefits.

Additional financial support is being made available under a new temporary Coronavirus Business Interruption Loan Scheme with banks offering loans of up to £1.2m to support SMEs.

A special HMRC helpline has also been set up to assist businesses and self-employed individuals in financial difficulties with and outstanding tax liabilities. Those concerned about their ability to pay tax due to the coronavirus can contact HMRC’s helpline on 0800 0159 559.

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.

Preparing Your Business for the Coronavirus

Nurse with Blood Sample

The current strain of coronavirus, known as 2019-nCoV, is part of the same family of viruses that includes the common cold and SARS (Severe Acute Respiratory Syndrome). There are now three confirmed cases of the coronavirus in the UK and the outbreak has spread across China and to at least 18 countries globally.

If the new strain of coronavirus follows the same pattern as the SARS outbreak in 2003, it may be that the impact on the UK is quite limited. Coronavirus is not, however, an issue that employers can just ignore. At present, the risk level is assessed as being low to moderate, but the situation is evolving all the time. Providing a safe and healthy workplace for employees is a legal requirement and employers should consider the following:

  • In general terms, the government advice is for people who may be infected by the coronavirus to take simple, common-sense steps to avoid close contact with other people as much as possible, much as they would with other flu viruses.
  • If any employees are required to travel to China, employers should be sure to follow up-to-date government advice (see advice from the Foreign and Commonwealth Office). Consideration should be given to cancelling visits to affected areas and assessing whether any meetings could be done via electronic means such as Skype or other online video meetings instead.
  • Business continuity plans should be reviewed.
  • Where employees have recently returned from China, consider allowing them to work from home until it is certain that they are not infected.
  • Good hygiene standards should be enforced across businesses with clear hand-washing instructions displayed in kitchens and bathrooms.
  • In the event that coronavirus spreads rapidly in the UK, employers will have to review sickness absence policies and add instructions to follow if employees believe they may have been exposed to the virus.

Advice on infection prevention and control for healthcare providers, including care homes, can be found here on the GOV.UK website.

Updated on 6 February 2020 with new number of confirmed cases in the UK.

Ethical Veganism is a Protected Characteristic

Employment in Focus

Earlier this month, an employment tribunal ruled that ethical veganism is a non-religious philosophical belief that should be protected under the Equality Act 2010. For a belief to be protected under the Act, it must meet several tests including being worthy of respect in a democratic society, being compatible with human dignity, and not conflicting with the rights of others.

The case concerned a charity worker, Jordi Casamitjana, who claimed he was unfairly dismissed because of his philosophical belief in ethical veganism. An ethical vegan is defined as someone who not only follows a vegan diet but also opposes the use of animals for other purposes. Casamitjana is taking his former employer, the League Against Cruel Sports, to an employment tribunal following his dismissal.

Having established that veganism is a philosophical belief, the case will now be taken to a second, full hearing to establish the reasons for Casamitjana’s dismissal. Casamitjana says he was dismissed by the League Against Cruel Sports after raising concerns that its pension fund was being invested in companies involved in animal testing, whereas the charity maintains he was sacked for gross misconduct.

As this is a first instance decision and may yet be appealed, it is not enough to have a binding effect on other tribunals and each subsequent case will depend on its own facts. However, in light of this ruling, employers may wish to review how they support ethical vegans in their business and consider if any changes are required.

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).

Top