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Renting Homes (Amendment) (Wales) Act 2021

Row of houses

The Renting Homes (Amendment) (Wales) Bill gained Royal Assent on 07 April 2021 (‘the Amendment Act’). The Amendment Act amends certain provisions of the Renting Homes (Wales) Act 2016 (‘the 2016 Act’). The 2016 Act (when it comes into force) will significantly reform housing law and practice in Wales. No date has been set for when the 2016 Act will come into force, but it is expected to come into force early 2022.

The Amendment Act gives residential tenants in Wales greater security. Residential tenancies in Wales will change to give tenants:

  • A minimum 12-month contract;
  • Minimum notice periods to evict tenants will be extended from two to six months in the case of “no fault evictions” (section 21); and
  • Landlords will only be able to serve an eviction notice six months after tenants have moved in (as opposed to four months).

A tenant will therefore be able to move in and spend a year in a property before the landlord can take possession.

When the 2016 Act comes into force, it will simplify and standardise tenancy agreements to make them easier to understand and reduce legal costs. Some of the key provisions of the 2016 Act are as follows:

  • Create a new model written statement, a “standard occupation contract”, modelled on the present assured shorthold tenancy (AST);
  • Many licences will be converted into occupation contracts;
  • The occupation contracts will include certain terms that cannot be varied unless the variation improves the tenant’s or licensee’s position; and
  • It will introduce a new tenancy deposit scheme which will apply to all occupation contracts.

Consultation

The Welsh Government has the power to prescribe model written statements and has now launched a consultation seeking views on:

  • The draft Renting Homes (Model Written Statements) (Wales) Regulations; and
  • The draft Renting Homes (Explanatory Information for Written Statements) (Wales) Regulations

Any interested parties can respond to the consultation and views are being sought on the design, structure, and order of the draft model statements and explanatory information. The terms of the statements are pre-determined (by the 2016 Act). You can read the consultation document and respond online here. The consultation closes on 16 June 2021.

The aim of the 2016 Act is to streamline the housing process in Wales; however, opinion is divided with some stating that these changes will significantly inhibit a landlord’s ability to recover possession even from a problem tenant. This is likely to have a negative consequence for the wider sector with landlords leaving the market when demand for lettings is high.

Electrical Safety Standards – Changes from 1 April 2021

Electrical Checks

The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 (‘the Regulations’) require landlords in England to have the electrical installations in their properties inspected and tested by a person who is qualified and competent, at least every five years. Landlords have to provide a copy of the electrical safety report to their tenants and to their local authority, if requested.

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, care homes, and licences for lodgers (where the occupier is sharing accommodation with the landlord) are excluded.

The Regulations came into force on 1 June 2020, requiring all landlords who took on new tenants from this date to have all fixed electrical installations inspected and tested by a qualified person before the start of the tenancy.

Landlords of existing tenancies (signed before the Regulations came into force on 1 June 2020) must now also ensure that all fixed electrical installations in their properties are inspected by 1 April 2021. It does not appear that this deadline will be extended, despite the complications caused by the current pandemic. Landlords who fail to comply with the Regulations are liable to face fines of up to £30,000.

Since the Regulations came into force, the Government has issued guidance for landlords on these Regulations which can be found here.

Due to Covid-19, it is more complicated for Landlords and agents to enter properties and carry out inspections, tests, and any remedial work. Landlords and agents should ensure that they have taken all reasonable steps to comply with the Regulations as well as complying with the Government’s safety guidelines for people who work in other people’s homes. Landlords and agents should keep a paper trail of all documentation and correspondence they have had with tenants and electricians regarding these works, and any responses they receive.

Covid-19: Key Issues for Landlords

Quiet Town Centre

The Covid-19 pandemic has created upheaval for almost all businesses and individuals. Many landlords and tenants are experiencing financial hardship. To protect commercial and residential tenants from losing their premises during the pandemic, the government has brought in various emergency measures. Landlords and tenants have also worked together to find a way through the challenges presented by this unprecedented situation.

Here are the key areas where law and practice has changed to date as a result of the pandemic.

Commercial landlords: temporary changes of law

  • Forfeiture moratorium: the government has placed a moratorium on forfeiture proceedings for commercial leases. The moratorium initially lasted until 30 June 2020 but has since been extended to 30 September.
  • CRAR: the Commercial Rent Arrears Recovery regime (CRAR) has been amended. In normal times, CRAR rights can be exercised when there are 7 days’ worth of rent arrears. The government amended this in April to require 90 days’ worth of rent arrears. From 24 June, 189 days’ rent must be outstanding, i.e. at least two quarters’ worth of rent.
  • Insolvency law changes: the Corporate Insolvency and Governance Act became law on 26 June. It restricts landlords’ ability to issue serve statutory demands and issue winding-up petitions as a means of recovering rent arrears. These restrictions are expected to apply until 30 September.

Commercial landlords: practice and policy changes

  • Mortgage payment holidays: mortgage lenders have been offering three-month payment holidays to buy-to-let landlords where this is needed due to Coronavirus-related hardship. The scheme has now been extended to 31 October, meaning that new applications for a payment holiday can be made until this date and lenders may agree to an extension of an existing payment holiday.
  • Rent concessions: rent continues to be payable by tenants, even if they are unable to trade from their premises, but many landlords have been adopting a pragmatic approach and instituting temporary measures such as a rent reduction or rent suspension.
  • Government workplace guidance: The government’s Guidance on working safely during coronavirus will be relevant to landlords, particularly if they are responsible for shared parts of a building or estate. The guidance has been updated a number of times as the lockdown has eased, to reflect the new rules and cover additional workplaces. Landlords should insist that tenants are implementing the guidance in their workplaces.
  • New Code of Practice: theCode of Practice for commercial property relationships during the COVID-19 pandemic” has been agreed between the government and many significant bodies in the property sector, including the British Property Federation and the British Retail Consortium. It is a voluntary code which aims to encourage landlords and tenants to work together to keep viable businesses operating during the pandemic. It applies until 24 June 2021.

Residential landlords: temporary changes of law

  • All ongoing residential possession proceedings have been suspended by the courts. Initially the suspension was for 90 days from 27 March. It now applies until 23 August.
  • Until 30 September 2020, the minimum notice period to be given when seeking possession of premises from residential tenants is increased from two months to three months.

Residential landlords: practice and policy changes

New Property Regulations on Default Payments in Wales

Terraced Houses

The Welsh Government has laid regulations on the default payments which can be charged to tenants occupying premises under an assured shorthold tenancy in the private rented sector in Wales.

The Renting Homes (Fees etc.) (Prescribed Limits of Default Payments) (Wales) Regulations 2020 (‘the Act’) come into force on 28 April 2020.

Within the Renting Homes (Fees etc.) (Wales) Act 2019, Welsh Ministers had the power to make regulations specifying the limits for certain types of payment that can be charged in the event of a default by the tenant.

Under the Act, landlords or letting agents in Wales can charge tenants:

  • Interest at a rate of 3% above the Bank of England base rate for the late payment of rent which is more than 7 days overdue; and
  • The actual cost of replacing a lost key and/or changing, adding or removing a lock to gain access to the property, as evidenced by an invoice or receipt.

These default fees are similar to those permitted under the Tenant Fees Act 2019, which affects England only; however, in England there is a longer grace period of 14 days for late payment of rent before interest can be charged. In respect of the replacement of a lost key, the landlord or letting agent in England can charge the reasonable costs as opposed to the actual cost of replacing a key.

Here at Simply-Docs we will update our templates to reflect these legislative changes.

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.

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).

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