Airbnb and the risk of subletting

Airbnb is a phenomenon of our age and, in January of this year, it was reported that over 4million people in London had used the service since launch in 2008. As the go-to website – or app – for a host of travellers, Airbnb provides a convenient solution for those seeking an alternative to a traditional hotel room.

In recent years, its ease of use has seen Airbnb broaden its reach beyond the hospitality sector and into the lettings market, and while this might seem like an optimum solution for short-term tenancies, it is also proving to be a challenge that the industry is yet to navigate.

A primary hurdle that has arisen for landlords is around subletting, and a growing number of landlords are launching possession proceedings against tenants who have sublet their property via sites such as Airbnb, without the requisite permissions. Tenants who do this without consent risk eviction for a breach of their assured shorthold tenancy agreement – but for some, this is a risk they are willing to take.

At the same time, if the rent is paid in full and on time, some landlords might be inclined to turn a blind eye to the practice. However, it is worth remembering that while it is an ARLA Property mark standard to vet tenants at the start of a contract with full references and credit checks, tenants are unlikely to do this on behalf of landlords for subtenants, creating risks for all parties.

Furthermore, while the tenant signing the contract might show up well on paper, they could be subletting to just about anybody, with no verification of their credentials whatsoever.

It goes without saying that in not knowing who precisely is occupying a property can be disastrous for landlords, with unpaid rent, bills and damage to a property.

As such, we do urge landlords to ensure that they enter into an up-to-date contract with their tenants, which legislates against subletting under any circumstances. This is a clause inbuilt to every Carter Jonas contract, but for independent landlords who operate without an agency, it is worth checking the wording of all tenancy agreements.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Airline immigration case just the ticket for landlords

While the worlds of lettings and budget air travel might appear disparate, landlords might want to show thanks to Ryanair after it successfully challenged a recent legal claim over an immigration dispute.

When the Home Office imposed a penalty on the budget airline after it was found that two Albanians had illegally entered the UK on a flight from Spain using forged Greek passports, Ryanair went to the Central London County Court to state a challenge.

Spanish officials had failed to notice the forgeries, but UK Border Force officers were more vigilant. As a result, the Home Office penalised Ryanair £2,000 for each Albanian, but the airline contested the charge.

Parallels are clearly drawn for landlords under the Right to Rent scheme, which stipulates that documentation has to be checked to ensure that potential tenants and other occupiers of a property aged 18 or over have a legal right to be here.

The Code of Practice that accompanied the implementation of the Immigration Act 2014, set out in the Immigration (Residential Accommodation) (Prescribed Requirements and Codes of Practice) Order 2014, says that landlords “will not be penalised, if, having taken all reasonable steps to check a document’s validity, they are fooled by a good forgery which appears to be genuine.”

The difficulty comes in knowing what a good forgery is, but the Ryanair case seems to give at least a clue as to a definition.

Two immigration officers gave statements that missing security elements in the passports used by the Albanians were in their view “reasonably apparent” to a member of airline staff and that they should have been spotted. However, other immigration officers in similar cases had found that the forgeries were not “reasonably apparent”. The Court took the view that missing security elements that are relatively hard to find, even for trained professionals, would not be reasonably apparent to busy airline staff, even though they have an annual refresher course.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

EPCs 10 years on – time to reassess their impact?

It’s a decade since residential properties in the UK were first required to have a ten year Energy Performance Certificate (EPC) before they could be sold or let. As the ten year anniversary approaches, the time has come for the early starters to be reassessed.

Originally part of the Home Information Pack (HIP), loved by a few and loathed by many - but which would have been useful if implemented as originally intended, the EPC survived when the HIP requirement was abandoned in 2010.

At first regarded as a bureaucratic irritation rather than a necessity, the EPC gained more traction recently when the introduction of Minimum Energy Efficiency Standards (MEES) meant that from April 2018 it will be difficult, but not impossible as some suggest, to let a property with an Energy Efficiency Standard below Band E on its EPC. There are exemptions that can be registered, but these are subject to re-application every five years, and it is by no means certain that this will continue ad infinitum. Indeed, it’s expected that the rules will become tougher and eventually exclude Band E properties.

With that in mind, it could be beneficial to review the EPC for your property even if you are not yet required to replace the original purchased 10 years ago. In fact, some landlords are relying on an EPC that exists from when they purchased the property, and therefore was provided by the vendor rather than themselves.

Where a property is Band F or G, but also for those with a low score in Band E, having a new EPC assessment could make the difference between 10 years of worry-free letting and the stress of not knowing whether an exemption granted in time for April 2018 will be renewed in 2023.

The energy assessor who provides the EPC will check for items such as double glazing, boiler efficiency, radiators, and insulation for the hot water tank, walls, and loft. The results are fed into a software program that produces a figure for the EPC, which in turn determines the banding in some instances. The assessor can override the program if there’s visual or written evidence that standards are higher than the software assumes.

Where you are borrowing to fund the purchase of a lettings property, your lender may want confirmation of its energy efficiency standards, especially where the current banding could make it borderline in the future and therefore bring a possible diminution in its asset value. Therefore, taking care of what was once regarded as a merely administrative necessity could pay dividends.

Certain classes of building are exempt from the need for an EPC. As far as residential landlords are concerned, the principal category concerns those that are officially listed as of historic interest.

From April this year, tenants have had the right to ask their landlords to approve their installation of energy efficiency measures. Originally this would have fallen under the Green Deal - a scheme that already had drawbacks before its funding was withdrawn because of low take-up.

Improvements were supposed to be funded through energy bills applicable to a property, provided the benefits of the improvement outweighed the cost of making them.

But it’s much better to make these improvements independently, as part of an investment in your lettings property, rather than using a scheme that allows tenants to take charge, as this may ultimately restrict which energy company you can use in the future, as not all energy providers are involved. While this may seem insignificant, consumers are growing more energy aware and may resent having their opportunities to switch curtailed.

My recommendation is that where tenants ask to carry out an energy survey, you allow it to go ahead, but then consider whether or not it’s to your advantage to implement the improvements yourself so you retain control. It may also be that the work can be completed at lower cost than the tenant’s chosen contractor offers.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

A Clearer View - September edition

Since the government implemented its Stamp Duty Land Tax ('SDLT') reforms in April of this year, applying an additional 3% levy to buy-to-let ('BTL') properties, many landlords are scrutinising their portfolios to ensure that their investments are maximised.

Navigating SDLT reforms, however, is a sensitive and complex manoeuvre, and often calls for expert advice. In this edition of Clearer View, we have invited the Tax Team at Price Bailey Property to share key advice for buy-to-let investors.

Company ownership for buy to let properties
Many of the country’s landlords are starting to question the fairness of the UK tax system following the introduction of tax changes in the buy-to-let market in April.

Despite the financial implications of the reforms, many landlords have not considered how they hold their interests in property and what this means for their investment. While owning property personally is simple and requires minimum fuss, for many individuals, it isn’t very tax efficient, and we are anticipating that post-tax returns on property investments could be lower under the new legislation.

Potential tax advantages
Income Tax on rental profits can be anything up to 45%, which seems a significant imbalance given that companies currently pay Corporation Tax at 20%. This already favourable rate will reduce progressively to 17% over the next four years and may even drop as low as 15% - a figure previously quoted by George Osbourne, the ex-Chancellor of the Exchequer, following the result of the EU referendum.  Therefore, if a landlord does not require rental profits on which to live, or if they are not being used to repay loan capital, establishing a private company to manage lettings portfolio starts to look attractive.

Furthermore, from 2017, loan interest will be restricted to Income Tax, but not Corporation Tax, further enhancing the appeal of the company model.

When residential properties are sold, individuals pay Capital Gains Tax (‘CGT’) of up to 28%, whereas on residential property gains, other than in limited circumstances, companies pay Corporation Tax at the lower rates mentioned above. In addition, companies are often taxed on a lower gain because they can claim an inflation allowance (known as indexation).

Shareholding and future planning
Corporate ownership allows a wide range of investors to participate as shareholders, rather than having direct interest in the properties. This also benefits Inheritance Tax planning, as assets can be passed to the next generation without having to transfer the property. For example, landlords can introduce their adult children as minority shareholders, or with generous grandparents, grandchildren can become shareholders, and dividends can be paid to them to fund school fees or other expenses, rather than grandparents paying out of their taxed revenue. Dividends can also be paid to the wider family group, which is likely to improve overall tax efficiency.

In summary, prospective and existing landlords should consider their ownership structure before making any further property purchases.

For those BTL landlords who own portfolios personally, it may be possible to move them into a new company structure; however, inadequate or poor advice could increase the risks of triggering high CGT and Stamp Duty Land Tax liabilities with no cash to settle them.

Price Bailey are a firm of chartered accountants and tax advisors who are experienced in this area, having successfully assisted clients reorganise BTL landlord property portfolios without incurring ‘dry’ CGT and SDLT charges.

Price Bailey are happy to give clients a free initial portfolio review to assess whether benefits can be had from the recent tax changes, as discussed above. Contact details can be found below.

Price Bailey Property Tax Team
Jay Sanghrajka
Partner, Head of Property
T: +44(0) 207 7382 7431
Jay.Sanghrajka@pricebailey.co.uk

Chris Hammond
Senior Tax Consulting Manager
T: +44(0) 1223 507 632
Chris.Hammond@pricebailey.co.uk

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Prescribed forms changed

As a clear reminder of how vital it is to keep on top of legislative changes, amendments have been made to prescribed forms for assured tenancies and for assured agricultural occupancies.

The Assured Tenancies and Agricultural Occupancies (Forms) (England) (Amendment) Regulations 2016 came into force on April 6th 2016. The regulations prescribe forms for various provisions under the Housing Act 1988.

There is a new prescribed Section 8 Notice Seeking Possession under the Housing Act 1988 (Form 3). This is the notice that you serve when ending a tenancy, typically for rent arrears or other breaches of tenancy. It’s the third time it has been updated in a year, but this time only for England as in Wales the previous updated form is still current. Here’s a link to the new regulations and forms.

The Section 13 notice (form 4) used when rent is being increased for an existing tenant without the issuing of a new tenancy agreement and form 5, which applies to agricultural tenancies, have also received minor amendments to correct formatting and drafting errors and in respect of the Section 8 notice to refer to the new form 6A prescribed form for giving notice under Section 21 of the Housing Act 1988. Do not ignore them. These prescribed forms must be used on or after April 6th 2016.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Our lettings team shortlisted for Best Letting Agency Group in ESTAS Awards 2016

I have pleasure in announcing that our national lettings team has reached the final stages of the ESTAS Awards 2016, having been shortlisted for the Best Letting Agency Group. 

In the ESTAS regional categories, the Carter Jonas Barnes, Bath, Cambridge, Newbury, Wandsworth Common and Winchester offices have also been shortlisted. The ESTAS are one of the largest and longest running awards in the UK property industry and winners are decided purely on ratings provided by a firm’s clients. This year, the shortlist was announced based on the biggest-ever number of customer surveys. 

To be shortlisted for these awards is a real honour for our national lettings team and is testament to the hard work that we put in to ensure our clients receive the best possible service.  We’re extremely proud to be rated so highly by our clients and thank them for this. 

Since we began our lettings service to operate alongside our residential sales offering, it has been our aim from the outset to be included among the best national lettings agents, and so we are delighted to be recognised in this way. 

The winners of all categories will be announced at the annual ESTAS Ceremony held in April at the Grosvenor House Hotel in London. 

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Right to Rent is closer than you think

Right to Rent has been widely publicised as the need to check on a tenant’s immigration status with regard to occupying residential property in England.

But in reality it is much more; status checks need to be completed on every adult occupier aged 18 or over for all English tenancies starting on or after 1 February 2016.

The effective date from which to begin undertaking checks is January 3, 2016, the start of the 28 day period leading up to February 1 because all checks must be completed in the 28 day period before the tenancy comes into effect.

Whereas in the past a landlord or letting agent might meet the lead tenant and only hear about the others who would be occupying the property, the landlord or letting agent now needs to see every adult occupant who will occupy the property even if they are not named on the tenancy agreement while simultaneously checking immigration status and documentation.

There is no need to check an occupier’s children, but the landlord or letting agent should satisfy themselves that they are under the age of 18 at the time the tenancy begins and keep evidence of this. Further checks on a child will not be needed if the child turns 18 during the tenancy, unless and until the tenancy is renegotiated, or a repeat Right to Rent check is required.

There is no requirement to create a written tenancy agreement listing all those who will live in the property, but Home Office guidance suggests that landlords, agents and householders may find it advisable to do so. If the tenancy agreement is oral or implied, the checks should still be made on all adults living at the property. If there is evidence a landlord, agent or householder was aware of a person living in the property but did not check them, they may be liable to a civil penalty, regardless of whether the agreement is written, oral or implied.

It is advisable to record the following:

• The full name and date of birth of all adults who will live in the property;

• The names and dates of birth of all children under 18 who will be living with them in the property;

• Whether each of the adults named has current permission to be in the UK.

The requirements were enacted in the Immigration Act 2014, which also lists some exemptions I have highlighted below:

• landlords and agents do not have to check the Right to Rent of existing occupiers who moved in before the requirements are introduced;

• where the start of a tenancy pre-dates the requirements, and is renewed between the same parties at the same property without a break, then there is no requirement to conduct checks;

• holiday lets (but the Home Office advises that landlords letting holiday accommodation should consider how a person will be using the property to decide whether Right to Rent checks are necessary. A letting of three months or more, or extending time-limited lettings, would be circumstances where checks would be advisable.);

• agreements to which the Mobile Home Acts 1983 applies, that is an agreement under which a person is entitled to station a mobile home on a site and use it as their only or main home, are exempt. However, should a mobile home owner decide to let their mobile home for use by another adult, this residential tenancy agreement will be subject to the Scheme.

• A residential tenancy agreement that grants a right of occupation in accommodation provided by an employer to an employee, or by a body providing training to an individual in connection with that training, is exempt from the Scheme.

• All halls of residence (whether the landlord is an educational institution or private accommodation provider) are exempt from the Scheme, as is any accommodation provided for students directly by a higher or further educational institution.

• Leases which grant a right of occupation for a term of seven years or more are exempt. An agreement will not grant a right of occupation for a term of seven years or more if the agreement can be terminated at the option of a party before the end of seven years from the start of the term.

The following two groups of people have unlimited right to rent: British citizens, EEA and Swiss nationals.

A landlord will need to see evidence of any adult occupier’s identity (over 18 years) and citizenship e.g. passport or biometric residence permit and compare the original document with the individual face to face. Copies of the documents should be taken and retained for one year after the tenancy ends. The Home Office has published a landlord's guide to checking immigration documents, which may be useful for landlords click here. 

If it is not possible to check the documents before entering into the tenancy agreement (e.g. if the potential tenant is overseas), the landlord/ agent may enter into a conditional tenancy agreement – conditional on production of evidence of Right to Rent before moving in. 

The Act makes it an offence to let premises to someone (either the tenant or any adult occupying the property with them) who the landlord knows or has reasonable cause to believe does not have the Right to Rent.

Given the potential for discrimination, the Government’s code of practice advises that documents should be requested from all potential applicants. Refusing a tenant because they have limited right to remain may amount to indirect discrimination.

When Right to Rent was first mooted, there were concerns that people born in the UK might not hold a passport and therefore find it difficult to prove their residence entitlement. However, a combination of documents such as a birth certificate and driving licence (the guidance states with or without a counterpart, although counterparts have been invalid since June, 2015), are acceptable proof.

A landlord should know or have reasonable cause to believe a tenant does not have the Right to Rent if:

• It failed to check the documents in the first place.

• The tenant had a time limited or discretionary Right to Rent and that period has now ended. This means the landlord must monitor and make sure an occupier’s right to occupy does not lapse.

• The Home Office has served notice that the occupant has no Right to Rent. 

If a person sub-lets a property, they will have responsibility for making the checks, although this responsibility can be passed up to the landlord by agreement. It is recommended that the agreement as to allocation of responsibility for checks is in writing. Likewise, anyone who takes in a lodger should check they have a Right to Rent before allowing them to move in.

It is worth bearing in mind that in his March, 2015, Budget statement the Chancellor included under the section about a sharing society measures to amend its model agreement for an assured shorthold tenancy by summer 2015, to provide that tenants in private rented accommodation can request their landlord’s permission to sub-let or otherwise share space, on a short-term basis. 

The Immigration Act 2014 provides for a “civil penalty scheme” whereby landlords and their agents could face fines of up to £3,000 per tenant. If the Immigration Bill 2015 is approved in its current form, criminal sanctions may apply in situations where a landlord or its agent knows or has reasonable cause to believe that a person does not have a Right to Rent. Criminalising the sanction means that imprisonment may become an applicable punishment.

At Carter Jonas we are taking advice from the Association of Residential Letting Agents (ARLA) and Pain Smith Solicitors putting in place procedures ahead of the legislation taking effect in February in the areas in which we operate.  Where we do not manage our clients’ properties they will need to put in place their own procedures to check the tenant’s right to rent.

The landlords Code of Practice gives very helpful guidance and I recommend that everyone involved in residential lettings studies it. This link connects: https://www.gov.uk/government/publications/right-to-rent-landlords-code-of-practice/code-of-practice-on-illegal-immigrants-and-private-rented-accommodation#only-home

A landlords’ guide to checking immigration documents can be found at: https://www.gov.uk/government/publications/rules-and-acceptable-documents-right-to-rent-checks

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Delay causes alarm - but be ready for quick introduction of new rules

There is considerable confusion within the lettings industry after the House of Lords literally pulled the plug on legislation that would have seen smoke alarms become compulsory from October 1 – only for it to be reinstated a week later.

Many in the lettings industry had already geared up for the change, seen as a major advance with regard to tenant safety. But the noble lords declared that the industry had not been consulted sufficiently ahead of the measure becoming effective so rejected the legislation with only three weeks to go to the deadline for implementation.

With exactly two weeks to go, the legislation was then passed meaning that from October 1 the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 will be in force.

All landlords in England, or agents acting on their behalf, will be required to install smoke alarms on every floor of their property and test them at the start of every tenancy.

Landlords or their agents must also fit carbon monoxide alarms in rooms with a solid fuel appliance, which includes wood burners and open fires.

Those who fail to meet the regulations face fines of up to £5,000.

Landlords who have not yet prepared for the smoke alarm installations believing that they no longer need worry about the October 1 deadline must now ensure they have the necessary alarms in place or risk being fined.

It is already the case that under the Buildings Regulations 1991 all newly built property from June, 1992, and houses in multiple occupation (HMOs) must have fitted mains-powered smoke alarms with battery backup.

For some time, in anticipation of the regulations that come into effect on October 1 we have been advising landlords to install smoke alarms in all properties to both protect the occupants and help prevent legal action against landlords.

It is also already a legal requirement for HMOs to have a carbon monoxide (CO) alarm fitted. We have been advising landlords to install CO alarms in all properties to protect the occupier and help prevent any legal action against the landlord.

Landlords of all rental properties (subject to a small number of exemptions – such as licensed HMO properties and properties where there is a resident landlord) are required to do the following:

1. Install at least one smoke alarm on each storey of a rental property that is used as living accommodation. These alarms may be battery powered or hardwired although some local authorities may have local regulations which require more stringent conditions. This requirement is for all rental properties, not just those with tenancies beginning after 01 October 2015. Install a CO detector in any room that contains a solid fuel appliance which includes coal- or wood-burning fires and wood-burning stoves. Wood-burning stoves installed since 2011 must already have a CO detector and a certificate proving they have been safely installed.

2. Currently gas appliances are not covered by the above Regulations but we strongly advise that CO detectors are installed in properties with gas- or oil-fired appliances. Remember, installation of CO alarms is a requirement for all rental properties with solid fuel appliances not just those with tenancies beginning after October 1, 2015.

3. Carry out testing to ensure that all smoke and CO alarms are in working order at the start of each new tenancy commencing on October 1 2015 or thereafter. There is currently no requirement to check alarms during the tenancy as this responsibility will lie with the tenant.

Ensure that you are ready for the October 1 deadline. Despite the confusion caused by a week when all believed the legislation might not go through, there is unlikely to be any period of grace.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Warm-hearted tenants are a better bet

It’s not long until changes come into effect regarding the energy efficiency of let properties.

From April next year, tenants will have the right to ask their landlords to approve energy efficiency measures under the Green Deal and while this may seem attractive the scheme has its drawbacks, not least that the Government has just decided to stop funding the Green Deal Finance Company.

Green Deal improvements were funded by repayments through the energy bills applicable to the property. If the benefits of the improvement outweighed the cost of making them then they suited Green Deal requirements.

But it was always much better to make these improvements yourself as an investment in your let property rather than use the Green Deal scheme which may have restricted which energy companies tenants could use in the future as not all providers were part of the scheme. While this may seem insignificant, consumers are growing more energy aware and may have resented having their opportunities to switch curtailed, particularly as a measure in the recent Budget was for switching to be made possible within 24 hours.

At Carter Jonas, approximately seven per cent of our lettings properties fall into EPC Bands F and G, possibly limiting their lettings potential. Landlords therefore need to start paying attention to the need to upgrade. It’s true that exemptions from the new rules will apply and all listed homes fall outside the EPC requirement but it’s never a good idea to rely on a loophole that can subsequently close.

My recommendation is that where tenants ask to have an energy urvey done you allow it to go ahead but then consider whether or not it’s to your advantage to implement the improvements yourself so you retain control. It may also be that the work can be completed at lower cost than any Green Deal scheme contractor may have offered and there was always the right to refuse improvements that were not cost effective.

Where listed buildings are concerned, it’s worth bearing in mind that the feature that has led to the listing may not actually be within the living space.

Garden walls and dovecots are among the many reasons a property can be listed and the doves are less likely to be worried about the energy-saving potential than the tenants!

If this affects you, then see how you can improve your property’s energy performance independent of anything a tenant may want to do. The appeal of living in a listed building is sufficient for many people to sign a tenancy agreement without question.

But how much better is it if your tenant not only feels warm-hearted towards the building because of its listing but also is actually physically warmed by its energy-saving features?

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

£3 million to help landlords meet fire safety rules

Private rented sector landlords will be required to have working smoke alarms on every floor of their property and carbon monoxide alarms in rooms where a solid fuel heating system is installed with effect from October 1, 2015.

Alarms must be tested at the start of every new tenancy - the regulations do not stipulate the type of alarm to be installed; rather, landlords should make an informed decision and choose the best alarm for their circumstances and property. Landlords who fail to comply with the duties outlined in the regulations may be subject to a civil penalty.

The good news is that the Government launched a £3million fund on March 19 which means thousands more tenants living in private rented homes will have working smoke and carbon monoxide alarms distributed through England’s 46 fire and rescue authorities.

The funding will benefit private rented houses across the country, providing around 445,000 smoke and 40,000 carbon monoxide alarms which will be available free from local fire and rescue authorities to private sector landlords whose properties currently do not have fitted alarms.

The new legislation coming into force in October that requires anyone renting out their home to ensure there is a smoke alarm on every floor of the home at the start of the tenancy is very positive and Carter Jonas property managers will ensure that our landlords adhere to this rule to ensure tenant safety.


However, whilst landlords will be under a duty to install and initially test alarms, Housing Minister Brandon Lewis, when announcing the proposals which he hoped would prevent 26 deaths and 670 injuries a year, said tenants were urged to “regularly test their alarms to ensure they work when it counts”.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Parliament's dying Act clarifies tenancy law

You may be growing weary of election-speak and politicians but before Parliament dissolved at the end of March there was one outcome that brings major relief for landlords in the private rental sector (PRS).

One of the last acts of the Commons was to pass into law the Deregulation Act 2015, which came into force on March 26, 2015. It clears up the confusion caused by the now infamous Superstrike case, the outcome of which caused some panic about deposit protection and whether or not a valid Section 21 notice could be served to regain possession.

The outcome is still mindbending for some, but the important date to remember is June 23, 2015, by which time all deposits held but not registered with an approved tenancy deposit scheme must be registered and the prescribed information given to the tenant.

It has been compulsory since April 6, 2007, for landlords to protect a tenant’s deposit in respect of an assured shorthold tenancy (AST) in an approved tenancy deposit scheme and to provide certain prescribed information to the tenant within 30 days of receipt of the deposit. Failure to do so prevents the landlord serving a valid Section 21 Notice to bring the tenancy to an end and leaves landlords at risk of a financial penalty of up to three times the deposit.

A deposit on an AST taken before April 6, 2007, that continues to be held as a statutory periodic tenancy which also started before April 2007, does not need to be protected. In these circumstances, landlords seeking to gain possession of the property using notice under Section 21 of the Housing Act, 1988, must protect the deposit and issue the Prescribed Information to the tenant prior to serving the Section 21 notice.

A deposit on an AST taken before April 6, 2007, that continues to be held against a statutory periodic tenancy which began after April, 2007, must be protected with an authorised scheme, if this has not already been done, by whichever is the earlier of either:

- the 23rd June 2015, or;

- before a court decides on proceedings under Section 21 of the Housing Act 1988 (possession) or;

- before a court decides on proceedings under Section 214 of the Housing Act 2004 (failure to protect a deposit).

A deposit taken on an AST after April 6, 2007, and correctly protected, with Prescribed Information served to the tenant, does not need the Prescribed Information reissued to the tenant on future renewals of the AST or where the AST rolls into a statutory periodic tenancy so long as the landlord, tenant, and property information remain the same and the deposit remains in the same tenancy deposit protection scheme.

The Deregulation Act also clarifies that where an agent has protected a deposit on behalf of a landlord, the agent’s contact details can be provided within the Prescribed Information.

The law is relevant to any deposit currently held on an AST. It assists landlords who did not re-protect deposits or re-serve Prescribed Information when a tenancy was renewed or when a statutory periodic tenancy arose. Tenants must still be given revised Prescribed Information about their deposit if there is a change in tenant(s), landlord(s), premises or the deposit protection scheme.

There are also changes creating a new form of Section 21 notice coming into force on July 1, 2015. Any tenancy created after that date will need to use a new style of Section 21 notice, tenancies created before then, or based on renewals or extensions of tenancies created before then, can still use the old style notice. From June 1, 2018, all ASTs will need to use the new style notice irrespective of when they began.

The remaining changes to Section 21 - the limit on serving notice in the first four months and the various alterations regarding tenant complaints about condition - do not come into force until October 1, 2015, and, again, are only applicable to new tenancies commencing after that date until they become applicable to all tenancies from October 1, 2018.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

What the energy efficiency proposals really mean for the PRS

With apologies to Mark Twain for the paraphrasing, reports of the demise of poorer-rated, less energy-efficient domestic rental properties have been greatly exaggerated.

Twain was referring to the premature publication of his obituary notice. He was happily able to tell the world he was still alive.

Publication by the Department for Energy and Climate Change (DECC) of the Private Rented Sector Energy Efficiency Regulations (Domestic), which sets out the views of the Government on proposals for energy efficiency in the private rented sector (PRS), led to immediate reports that properties with EPC ratings (placing them in Bands F and G) could be doomed.

On the face of it, that’s what the document says. But read it and the story is less pessimistic. Owners of such properties should not give up hope.

The basic premise of the document, a response to a wide consultation on making let properties more energy efficient, is that from April 1, 2016, domestic tenants will have the right to request consent to make energy efficiency improvements and landlords would need to respond within a month under the regulations that have been laid before Parliament.

The minimum energy efficiency standard applied to all categories of domestic private rented property will be set at E energy performance, in line with the non-domestic sector. From April 1, 2018, the regulations will apply upon the granting of a new tenancy to a new or existing tenant, extending from April 1, 2020, to all privately rented property within the scope of the regulations.

But, crucially, there is the ability for landlords to seek exemptions. The essential paragraph reads:

Where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard, the landlord will need to provide such evidence to a centralised register, the “PRS Exemptions Register.” Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.

There will be a number of safeguards to ensure that only appropriate, permissible and cost effective improvements are required. Landlords will be eligible for an exemption from reaching the minimum standard where they can evidence that one of the following applies:

- They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost effective measures are those improvements that are capable of being installed within the Green Deal’s Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.

- They are unable to install those improvements that are cost-effective without upfront cost because the funding entails Green Deal finance, and they or their tenant fail the relevant credit checks.

- The landlord is required by a contractual or legislative obligation to obtain a third party’s consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.

- The landlord requires consent, and the occupying tenant withholds that consent.

- Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
- The regulations will also include specific protections relating to wall insulation improvements as an additional safeguard for the minority of situations where such insulation may not be appropriate. There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion from a suitably qualified person or from the independent installer engaged to install the measure advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part).

The long term hope is that the ratio between the cost of implementing change in comparison to the value of savings to be made in the domestic energy bill will naturally adjust to the point where they coincide in the vast majority of cases. The recent fall in oil prices, and consumers’ hope that domestic energy prices will follow more closely, might damage these prospects in the short term.
However, energy prices will inevitably rise again in tandem with technology improving to make energy efficiency more easily achievable at affordable costs.

Coupled with this is the knowledge that no Government will want to willingly remove otherwise good housing stock from the PRS. The political colour of the UK Government at Whitsun is likely to be very different from that of the Government on the May Day bank holiday. But whether the predominant shade is blue or red, and whatever fringe parties are tugging at the sides of the wheel to get their own policies into play, neither major party will steer a course that sees homes with lower energy efficiency ratings removed from the PRS in the foreseeable future.

Labour will not want to deny people perfectly good homes when voices are already loudly raised about the amount of good housing stock that stands empty. The Conservatives, with their commitment to austerity, will not want to fund the replacements for these homes from the public purse. Of course, nobody will get away with using the regulations for letting seriously sub-standard property and nor should they.

The Government is promising guidance between now and the implementation of the regulations from April 1 next year and there’s a requirement to review the operation and effect of them at no less than five yearly intervals, with the first in 2020 by which time it will have evidence about the progress and effectiveness of the regime.

Far from being a portent of doom for domestic rental properties in Bands F and G, look on the proposals as a long term fitness regime for the less able to be brought up to peak physical performance and with the proviso that those who can’t won’t be relegated to the scrap heap.

Details of the legislation can be found here.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

UK landlords should take care in reporting rental incomes

With the January 31 deadline for submitting self assessment tax returns to HMRC and paying any income tax due now passed there’s a temptation to put all thought of tax affairs to the back of your mind.

Some time ago, HMRC announced it would be looking into under declarations of rental income by landlords in its Let Property Campaign, giving buy to let and other private landlords the opportunity to make a full and voluntary declaration of any tax owing on relatively favourable terms.

HMRC has widened its sweep and has the power, through issuing statutory notices, to force lettings agents to provide details of rents collected on behalf of all landlords. It estimates up to 1.5 million landlords may be under declaring every year and has sophisticated data gathering abilities to check figures.

Already, it has announced that almost £8 million has been collected from landlords who under declared so make sure your house is in order, so to speak, and voluntarily contact HMRC if you suspect there may be anomalies.

Tenant deposit loans

In the last issue of Clearer View I outlined the new tenant deposit loan scheme launched by the Government into both the public and private employment sectors.

It’s worth pointing out that if a deposit is being paid by a third party on a tenant's behalf by way of an agreement with that tenant then the s213(10) of the Housing Act 2004 definition applies to those paying deposits on behalf of tenants as "relevant persons" and they must be served the information prescribed by the Housing (Tenancy Deposits)(Prescribed Information) Regulations 2007 covering key information about the tenant deposit and where it is protected.

Failure to do so could mean it is not possible to serve a valid notice under s21 of the Housing Act 1988 on any tenant when the prescribed information has not been served on them and on any relevant person. In addition either the tenant or the relevant person (or possibly both of them) can make a claim for the usual financial penalties.

Landlords and agents must convey the necessary information to employers in good time.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

The ESTAS 2016

We pride ourselves on the customer service we provide to all our clients and for this reason we have entered our lettings teams into “The ESTAS 2016”, the most prestigious award scheme in the UK property industry.

The ESTAS is a completely independent award scheme which highlights Estate & Letting agents providing high quality service based on research conducted with sellers, buyers, tenants and landlords in the UK. Voting has commenced and we would therefore appreciate it if you could spend just a few moments to complete a questionnaire on line via a link which your local branch can provide. You can find out your local branch by clicking here.

Please note your responses are anonymous and we do appreciate your honest feedback!

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Tenant deposit loans to uplift lifestyles, reduce travel, & invigorate lettings market

Government-wide support for a new scheme with potential to help thousands of tenants is great news for the private rented sector (PRS).

Housing Minister Brandon Lewis yesterday announced Government-wide support for a new scheme for tax-free deposit loans that will become available to thousands of potential tenants.

All of Whitehall has now agreed to offer deposit loans to staff looking to take up new tenancies in the PRS, following initial action by the Department for Communities and Local Government.

The scheme works in the same way as a staff season ticket loan, with employees borrowing some of their salary in advance in order to pay for rental deposits. The loan is then repaid from salary over up to a year – the scheme is available to be taken up in both the public and private sectors and not limited to Civil Service employees.

The Department for Communities and Local Government is working with the Department for Business Innovation and Skills to increase availability across the private sector. It will help landlords access a significant pool of tenants, those joining graduate schemes for instance, and essential workers at present struggling to find accommodation as they try to match deposit requirements even though they have sufficient salary to meet the rents themselves.

Living closer to work is the ambition of many people employed in London but often the need for a high deposit is more of a deterrent than the rent itself, which could be afforded especially as it would eliminate much of the cost of commuting.

Instead of season ticket loans, which this new scheme effectively mirrors, employees will be able to rent the home of their choice, use their savings on travel costs to contribute to rents, and enjoy a better lifestyle through the diminished need for daily travel.

Generally employees are offered interest-free loans to pay their deposits when they move into a privately-rented home, paid back through their salary over the course of up to a year. The loan is conditional on the deposit being secured through a tenancy deposit protection scheme and staff pay back the loan through deductions from their monthly salary across no more than the following 12 months.

The department has worked with Civil Service employee policy colleagues to produce guidance that can be adapted by organisations looking to implement deposit loan schemes.

This is far from limited to the capital, however, and should help the PRS in other regions where both deposits and travel costs are high. Young professionals especially, who stay in an area for a year or two before moving to develop their career, will now find moving more flexible and so, too, will employees regarded as essential staff. Carter Jonas will investigate how employers can be encouraged to adopt the scheme to widen its take-up beyond the public sector.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Revenge evictions bid fails - but may return

You may remember in an earlier Clearer View we raised the issue of gas safety and in that article mentioned a Private Member’s Bill put before Parliament by Liberal Democrat MP Sarah Teather.

The Government agreed to back her Bill and allow it time to progress through the essential Parliamentary stages – but its second reading on November 28 was talked out by two Tory MPs who spoke for more than two hours until the Bill ran out of time.

However, it’s reported that Housing Minister Brandon Lewis is seeking a way to insert a clause to prevent so-called “revenge” evictions into the Deregulation Bill in January.

The Bill sought to ban such evictions by landlords of tenants who had requested repairs – once a repair had been requested, the Bill would have made it impossible to serve a Section 21 notice for repossession.

This restriction would also have applied where no valid gas safety certificate exists or where the tenant has not been given an EPC for the property but its failure in Parliament is no reason to avoid ensuring all necessary paperwork is valid and up to date.

EPCs are arranged at the point of marketing by all our branches. Our property managers arrange gas safety certificates for our managed properties and it remains a legal requirement for Houses of Multiple Occupation (HMO) to have a carbon monoxide alarm fitted. However, we advise all landlords to consider the installation of alarms to protect the occupier and help prevent any legal action being taken against a landlord.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Lack of gas safety certification will have major consequences

British Gas has revealed that 14 per cent of landlords among their customers who took part in a survey knew nothing about gas safety regulations.


It would be nice to think they had just sampled the wrong customers but that’s not likely to be the case.

With recent prosecutions seeing several landlords fined heavily for not having gas safety certificates for their properties and the startling results of that survey, perhaps it’s timely to remind all our landlords that gas safety inspections are a vital part of being a responsible landlord.

Sometimes it’s easier to remember essential electrical safety checks just because the signs of the power source are so obvious with sockets and plugs in virtually every room.

Gas, though, especially when powering hidden equipment such as boilers, is less apparent and much easier to ignore. Sadly, when things do go awry it’s also more difficult to detect. True, straightforward leaks are apparent by the smell of the escaping gas but when a gas appliance malfunctions in its combustion or exhaust processes the resulting leak of CO, a highly toxic and invisible gas with no odour, can have disastrous consequences. Victims of CO poisoning can, at worst, drift totally unaware into a deep sleep from which they never awaken.

Every landlord should ensure that all gas supplies and appliances are checked and certificated every year without fail. Where we are instructed to manage your property, we will arrange this on your behalf.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

New code will help tenants and landlords

The Private Rented Sector Code of Practice endorsed, and commissioned, by the Government and drawn up by the Royal Institution of Chartered Surveyors (RICS) has launched.


Another 16 industry bodies, including ARLA and The Property Ombudsman to which, with RICS, we are affiliated, joined RICS in its creation. Some key points of the code affecting landlords are:

- Landlords should choose agents who are members of an accredited body; belong to an independent redress scheme; have client money protection; and have insurances such as professional indemnity.

- Agents should keep client money separate, in a dedicated client account which should be in credit at all times and kept in an FCA-authorised bank or building society. Any interest earned on client money should be credited to the client or tenant.

-Agents should declare any commission received from the repair and maintenance contractors at the time that estimates for work are provided to the landlord.

-Carbon monoxide detectors should be provided in all properties with a gas or solid fuel appliance.

Electrical certificates should be provided to the tenant. Full wiring tests should be carried out every ten years (five years in HMOs). There should also be regular portable appliance tests (PATs).

-If the tenant refuses access, neither landlord nor agent can enter without a court order.


It’s all fairly straightforward but the difficulty has always been that many tenants, and quite a number of landlords, don’t know what to look for when they are seeking a property to live in or, in the case of a landlord, someone to manage a letting on their behalf.

Hopefully, this new guidance will make life easier for those who need to buy rather than rent and we are looking to put all parts of it into practice.

The Code can be downloaded here.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Find out what our tenants have said

Earlier this year we offered our all our tenants the opportunity to provide feedback by way of a questionnaire on what they really want a rental property to provide, their properties management service and to share their thoughts on the UK rental sector. We had a fantastic response and I would like to share with you the results in our first Tenant Insight report. Download our latest report.



Lisa Simon, 
Partner
Head of Residential Lettings
T: 020 7518 3234 
E: lisa.simon@carterjonas.co.uk

Immigration checks guidance causes confusion

Not for the first time, landlords and lettings agents have been left mystified by Government plans for them to become partly responsible for policing immigration.


We have all been aware for some time that, come October, we would have to be responsible for checking tenants’ immigration status. Now Government guidance has been issued that leaves things even cloudier rather than clearer.


The guidance issued first on August 7, withdrawn in the early hours of, and then reissued a short time later, on August 8, appears to have watered down the requirements and speaks only of an introduction “in late Autumn 2014”.


The “factsheet” now states that checks will only come into force in one area of the UK this year and may then be rolled out more widely during 2015.


But so far there is no clue as to where that area will be and the draft Codes of Practice, guidance, and on-line resources for making the checks, including an aid to help landlords and tenants identify whether they are affected and, if so, how to conduct a check will be published at the same time.
In some ways this is a relief – it could take the pressure off many landlords. But the downside is that none of us knows whether or not we are affected so we still have to be vigilant, prepared, and await the announcement as to which area of England will be the policy pioneer. No landlord, or letting agent, can be sure they are off the hook temporarily because they are not in the launch area or permanently because the latest guidance also infers that rolling out the checks more widely may not happen.


The Government says the checks will be very simple and in most cases can be carried out while avoiding the need to contact the Home Office. But the Government has also promised it will provide a comprehensive set of services to help in conducting the checks, including both on-line and via a local-rate telephone helpline providing general information as well as a checking service for more complex cases.


In the meantime, it’s suggested landlords and tenants take a look at the right to work check (www.gov.uk/legal-right-to-work-in-the-uk), which is similar to the resource being introduced for landlords. The Government says the employers’ resource has “attracted praise as being user friendly, quick, and easy to use”.


Landlords and lettings agents who fail to carry out the checks will be given a civil penalty up to a maximum of £3,000. Thankfully this means it is not a criminal conviction but there is no explanation as yet as to who imposes the penalty or assesses its scale.


Checks will be “simple and straightforward” to complete. Landlords will need to obtain and copy documents demonstrating an individual’s right to rent in the UK, such as a passport or biometric residence permit. In most cases there will be no need for landlords to contact the Home Office but to be safe the credentials of all tenants, even those apparently “British” will need to be checked, if only in the interests of racial equality.


The case-checking service will be used for status verification where the prospective tenant has an outstanding immigration application with the Home Office or the Home Office has their documents. This service will provide a clear yes/no response within two working days. If a landlord has not had an answer from the Home Office within two working days, they can go ahead and rent without risk of incurring a penalty.


Landlords will only have to conduct checks on new, and not existing, tenants from the implementation date.


Perhaps the most worrying aspect of the guidance from the Home Office is the note at the end: “August 2014 – All information in this factsheet was correct at the time of publishing but is subject to change.” So even though we have guidance, we have no definite idea of what is to come!
However, rest assured we are watching developments closely and I will update you immediately there is confirmation, when we also put in place appropriate internal procedures.

The Home Office factsheet can be found at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/341876/Factsheet_Landlords_Aug_14.pdf



Lisa Simon, 
Partner
Head of Residential Lettings
T: 020 7518 3234 
E: lisa.simon@carterjonas.co.uk