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

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

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

What to do with farm workers accommodation

In recent times I have come across clients with an increasing number of enquiries regarding farm worker’s accommodation. It has often been traditional to provide a farm worker with a “tied” cottage as part of his/her employment package.

However, farmers need to take care to ensure they do not create security of tenure should the farm worker no longer be required and recently concerns have also arisen regarding potential tax liability if the rent paid is significantly below the “market” rent, which could result in sizeable back dated tax bill if the cottage is regarded as a “taxable benefit”.

In relation to the security of tenure issue I would advise farmers to offer new farm workers an assured shorthold tenancy (AST). This means the lease can be brought to an end on two months’ notice from the Landlord and one month’s notice from the tenant after an initial fixed term of usually 6 to 12 months. But care must be taken at the start of the lease to ensure that an assured agricultural occupancy is not created which can have serious implications from the landlord’s perspective.

Unlike a normal residential letting, where the default tenancy is an AST, in the case of a farm worker a notice needs to be served on the worker before occupation of the property is taken, specifically notifying the tenant that the tenancy will be an AST. This is important because if this notice is not served the Tenant will have and assured agricultural occupancy and vacant possession of the cottage will be difficult to obtain, even if the farm worker no longer works on the farm.

In addition farm workers, even if granted an AST, are often allowed to occupy the property at a low rent but to be an AST the rent cannot be lower than £250/year (approx £21/month). However, it appears that HMRC may be looking at tightening their rules on whether or not such an arrangement may be considered as a taxable benefit because clearly a rent of £250/year is far less than the market rent which may well be in the order of £600/month or more.

In order avoid the HMRC challenging whether or not such an arrangement is considered a taxable benefit, it is suggested the Landlord/employer reviews the farm worker’s contract to make sure the job description accurately and clearly demonstrates the need for the accommodation. The important points are that the accommodation is provided for the farm worker so he/she can:

• live on-site to protect buildings, people or assets or
• because the worker is regularly required to work particularly long working hours or
• because the accommodation is required because of regulatory requirements

Thus, employment, tenancy and taxation law all appear to be intertwined when letting a cottage to a farm worker and care should be taken to ensure both Landlord and Tenant clearly understand the terms under which a property has been let so as to avoid costly disputes at a later stage.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

PRS - A political hot potato

The private rental sector (PRS) is in danger of becoming as hot a political potato as the EU.

Labour currently has no intention of a referendum on EU membership while Ukip has driven the Tories to despair with its relentless campaign to abandon the EU - and a referendum policy as a populist idea.

But what could be more populist than introducing controls for the PRS, driven by the urge to do highly visible things such as ending letting agents’ fees, which Labour has failed to push through before the General Election in May 2015 but which it promises will be on its agenda, along with three year tenancy terms and fixed rents?

Rent caps in places of high property values are one of the biggest fears that could drive the PRS into terminal decline. Yields become ever smaller as rents are constrained during periods of strong capital growth. Many owners would find it more beneficial to cash in and invest the money somewhere more sensible. Even a bank deposit account with three per cent interest could be better than renting at two per cent yield with all the accompanying risks of repairs, dilapidations, and the costs of regaining possession when yesterday’s dream tenant becomes tomorrow’s nightmare as their economic circumstances change.

Figures from ARLA show that 17 per cent of landlords are expected to sell one or all of their properties in the next 12 months, the highest proportion since 2008. The same source also revealed 59 per cent of lettings agents are reporting more would-be tenants than properties available. Just as the PRS needs to retain landlords, many are plotting their escape route to reap the benefits of the property price surge.

When you talk to lawyers and owners of high end properties in London’s prime quarters it becomes apparent that what interests buyers more is long term capital growth than short term low yield income. Buy to let is out, buy to reap substantial profit could well be coming in if it’s not here already.

Rent caps across the country are unrealistic because there are so many regional variations in property prices and therefore what seems like a fair return on investment. Are we to return to the days of the regional Rent Tribunals as the first avenue of escape for tenants served with notice to quit? The Tribunals, chaired by lawyers, could fix rents as well as deflect a notice to quit and were readily accessible to tenants with some savvy and no lawyer.

With commentators predicting that in very short time there will be more private sector renters than owners, restrictions on landlords and lettings agents could be as good for Ed Miliband as the right to buy council houses turned out for Margaret Thatcher.

Longer tenancies are also a real issue. A tenant who seems heaven-sent on day one could be the tenant from hell by month seven but then it would be too late to serve notice so easily. Employers, who see their staff and assess their performance every day, get four times the trial period it’s proposed to give landlords even though contact with the tenant is frequently non-existent and, at best, sporadic. Three year tenancies by default with a six month trial period will be seen as too risky to be realistic by many landlords. What is designed to protect tenants could actually reduce their chances of finding a home in the first place if availability shrinks. Rents would then rise because the cap is intended to be assessed through market conditions.

Lettings agents’ fees are another conundrum. It’s wrong, it’s said, for agents to charge for referencing or administration such as the inventory but under current plans landlords, and their agents by default, will soon be responsible for checking the immigration status of tenants and their right to live and work in the UK. This would need to apply to every tenant, with a birth certificate and some form of photographic identification to be safe even for those claiming UK birth and lifelong residence. Let to the wrong person and there’s a £3,000 penalty. If that person is working without the right to do so the penalties are stiffer still. When a tenant with the right to live in the UK arrives on the doorstep and it then transpires they don’t have the right to the employment they are using to pay the rent what does the landlord do - allow the tenancy because there’s no right to deny it and then report the tenant for paying the rent?

Someone has to fund the lettings agent’s time in processing all this as Civil Service substitutes because few landlords will want to undertake the task. If there are no fees for tenants, only for landlords, then rents will have to rise to cover the cost. But when the rent is capped, how can the cost of fees be applied?

There is too much fag packet planning and not enough real thought going into all this regardless of which political party happens to be having another bright idea today. Everyone is agreed on the importance of the PRS, everyone agrees it could be fairer all round, but who is going to sit down and work it all out as a policy and not a series of knee-jerk responses to the latest comment article?


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

The rumblings of the Superstrike case continue

The rumblings of the Superstrike case continue, with a tenant defeating a notice to quit in a hearing at Birmingham County Court.

It’s not clear from reports of Gardner v McCusker 3BM70525 whether the notice served was under 21 (4) (A) for a periodic tenancy or a 21 (1) (B) for a fixed term and whether the Section notice was invalid simply because the agent had used the wrong one.

What is clear, however, is the landlords or their agents must ensure they re-serve prescribed information when a tenancy changes from an assured shorthold to a periodic.

The tenant, McCusker, agreed a fixed term for six months in November 2009. There was a deposit of £600, protected in the MyDeposits scheme in January 2010. There were various attempts to serve the prescribed information between November 2009 and September 2012. In May 2010, the fixed term tenancy expired and a statutory periodic tenancy arose. In March 2013, a notice under s.21, Housing Act 1988 was served. Possession proceedings were issued and met with a defence and counterclaim contending that there had been, inter alia, no service of the prescribed information in respect of the statutory periodic tenancy.

The court regarded the failed attempts to serve as non-service, the claim by the landlords (Gardner) for repossession failed, and they were ordered to repay the deposit and a penalty, a total of £1,800, plus costs, some of which were offset against rent arrears.

The moral of the story is that after an AST ends and the tenancy becomes periodic it must be regarded as a new tenancy and although the deposit is not subject to any specific transfers between parties again and remains with the deposit scheme it is regarded as a new deposit in law.

Superstrike and its ramifications are still under consideration by the Government with a view to legislative change but until this occurs a belt and braces approach must be taken with all prescribed information served again successfully in order to protect the landlord’s rights should repossession become necessary.


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