Landlords are you aware?
With the courts reopening and legislation changing, we have put this free guide together to help you navigate the changes that you can expect to see and how they will affect you.
Extension of Homes (Fitness for Human Habitation) Act
Under the Fitness for Human Habitation Act landlords can be forced to carry out improvement works to their properties and be sued for damages for the entire length of the contract.
It was introduced in March 2019 to ensure rented homes are safe and secure. Tenants can take their landlords to court if this isn’t the case.
Tenants who signed contracts on or after 20 March 2019 were able to use the act right away, and as of 20 March 2020 rules will be extended to cover existing statutory periodic tenancies.
NOTE: The rules only apply in England – with responsibility for these standards in Wales falling under the scope of the Renting Homes (Wales) Act.
Minimum Energy Efficiency Standards
Since 2018, landlords have been unable to let their property to new tenants unless it has a minimum energy efficiency rating of an E (unless exempted) on its Energy Performance Certificate (EPC).
This is being extended to cover all existing tenancies from April 2020. This means that anyone whose rentals have F or G ratings will no longer be able to legally let them out.
Landlords will be expected to pay up to £3,500 towards energy efficiency improvement works. However, if work will cost more than that, landlords can apply for an exemption.
Capital Gains Tax
Changes to capital gains tax (CGT) came into effect in April 2020.
CGT is paid on profits made through the sale of any property that isn’t your main home, so will affect the sales of most second properties.
The changes will affect the timescale for payment and the tax relief you can claim.
Currently if you once lived in the home you now let out, you are eligible for ‘lettings relief’.
This means you don’t pay tax for the years you lived at the property, plus the last 18 months you owned the property (regardless of whether you lived there or not during this time).
From April this has now been abolished – and landlords will only be able to claim lettings relief if they share the property with their tenant.
It will also limit the ‘final exemption period’ from 18 months to nine.
Also, from April, landlords will need to pay the full amount of CGT owed on a sale within 30 days.
Compulsory Client Money Protection for agents
New rules on money laundering have been extended to cover letting agents, with an April 2020 deadline for agents to become members of an official Client Money Protection scheme.
Extension of Tenant Fees Act
The Tenant Fees Act came into force in England in June 2019 and is extended to cover all existing tenancies in June 2020.
This means landlords and letting agents cannot charge fees other than rent, deposits, holding deposits and charges for defaulting on the contract – with additional restrictions on how much tenants must pay.
Deposits are already limited to a maximum of five weeks’ rent where the annual rent is below £50,000 for any new or replacement tenancy. If the annual rent is above this, the maximum is six weeks, with holding deposits limited to a week.
Charges for ‘extras’ such as cleaning, pets, referencing, inventories and admin are all off limits.
Where a banned fee has been taken, tenants will be able to get money back via the county court. Landlords could be fined up to £5,000 for a first offence, and £30,000 for subsequent breaches.
More detailed information on the Act is available at www.rla.org.uk/feeban
For the latest on the situation in Wales click here.
Section 21 notices
Ending Section 21 was backed by all major parties ahead of the election, and in the Queen’s Speech the government announced plans to bring in a Renters’ Reform Bill, which it says will: “Introduce a package of reforms to deliver a fairer and more effective rental market.”
The main elements of the Bill will be:
Abolishing the use of ‘no fault’ evictions by removing section 21 of the Housing Act 1988
Giving landlords more rights to gain possession of their property through the courts
Introducing a new lifetime deposit so that tenants don’t need to save for a new deposit every time they move house.
Developing and implementing measures to increase access to and expand the scope of the database of rogue landlords and property agents.
It’s inclusion in the Queen’s Speech means the government intends to bring it in during next Parliamentary term.
For more on the proposed changes and the RLA’s reaction to the announcement click here.
Electrical safety checks
Rules compelling landlords to carry out regular electrical safety checks came into effect on 1 June 2020. Private landlords must now ensure that every electrical installation in their residential premises is inspected and tested at intervals of no more than 5 years by a qualified and competent person. Failure to comply will attract fines of up to £30,000.
The regulations apply in England to all new specified tenancies from 1 July 2020 and all existing specified tenancies from 1 April 2021. 'New specified tenancies' is any tenancy created on or after 1 June 2020.
Following the inspection and testing, a private landlord must:
- obtain a report from the person conducting that inspection and test, which gives the results of the inspection and test and the date of the next inspection and test
- supply a copy of that report to each existing tenant of the residential premises within 28 days of the inspection and test
- supply a copy of that report to the local housing authority within 7 days of receiving a request in writing for it from that authority
- retain a copy of that report until the next inspection and test is due and supply a copy to the person carrying out the next inspection and test
- supply a copy of the most recent report to any new tenant of the specified tenancy to which the report relates before that tenant occupies those premises; and any prospective tenant within 28 days of receiving a request in writing for it from that prospective tenant
We recommend that all Landlords read the full guidance from the Government here.
Property Agent Regulation
There are plans for further regulation of property agents (RoPA), including a new licensing regime, code of practice, regulator and training requirements. The recommendations were made in July last year but there has been no news as to if and when change will happen.
Section 21 changes
From 29 August 2020, Landlords must give six months’ notice when serving a section 21 notice. This supersedes any Break Clause including in the Tenancy Agreement. Meaning that if the Tenancy Agreement has a Break Clause saying the Landlord can end the tenancy by giving two months’ notice, they will still have to give the 6 months’ notice as required by Form 6A, the section 21 notice.
Previously, section 21 notices were only granted a shelf-life of six months, this has also been amended to reflect the recent extension to notice periods required. A section 21 notice will now remain valid for 10 months from the date it is served.
The same rules still apply in relation to the grounds on which you cannot serve a section 21 notice. Namely:
• It is less than 4 months since the tenancy started.
• The property is a house in multiple occupation and requires a licence under Part 2 of the Housing Act 2004 and that licence has not been obtained. Unless a temporary exemption applies, an application for a licence has been made and is still effective or the landlord has notified their local authority that they are seeing a temporary exemption and that notification is still effective. (This applies even if a licence application or notification could not be made due to COVID-19 outbreak).
• The property is other residential accommodation and requires a licence under Part 3 of the Housing Act 2004 and that licence has not been obtained. Unless a temporary exemption applies, an application for a licence has been made and is still effective or the landlord has notified their local authority that they are seeking a temporary exemption and that notification is still effective. (This applies even if a licence application or notification could not be made due to COVID-19 outbreak).
• The tenancy was granted on or after 6 April 2007 or is a statutory periodic tenancy that arose on or after that date and the landlord has not complied with the relevant tenant deposit protection legislation.
• The council has served an improvement notice or an emergency remedial notice in the last 6 months.
• The landlord has not repaid any unlawful fees or deposits (prohibited payments) they charged the tenant – read the guidance for landlords on the Tenant Fees Act 2019.
There is also still the requirement to provide the tenant with a valid EPC, Gas Safety Certificate and How to Rent Guide for the property prior to serving a section 21 notice; since 1 June 2020 you will also need to provide a copy of the Electrical Safety Certificate to the tenant. In addition to complying with the deposit scheme rules and providing the tenant with a copy of the Prescribed Information relating to the deposit within 30 days of registering it with one of the approved schemes.
Section 8 changes
In addition a Section 8 notice must also give a notice period of six months’ apart from in certain circumstances. For a section 8 notice, you must clearly state under which grounds you wish to rely upon for possession
It is important to note that the majority of grounds now require a notice period of 6 months. However, grounds 8, 10 and 11 (which relate to rent arrears) require 4 weeks’ notice for cases where the arrears are at least 6 months.
For any notices served where the arrears are less than 6 months, the relevant notice period is six months.
Similarly, where possession is being sought under Ground 7a (serious anti-social behaviour), the notice period has reverted to the original 4 weeks for a periodic tenancy and 1 month for a fixed-term tenancy. In order to bring a claim to court relying on Ground 7a, you will need to show sufficient evidence detailing the tenants’ serious anti-social behaviour.
Sources: JMW Solicitors, Painsmith Solicitors, NRLA and Government Publications