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The government have announced that they will be taking away the right for landlords to evict under section 21. But if they do that – tenants will no longer have the protection of
The Section 21 pre-requisites
One of the things which the government has been doing over the past few years is attaching more and more conditions to the right to use section 21.
They are in effect saying “All right, you can evict your tenant without having to give a reason – but only if you comply with these conditions or (as they are normally described as) pre-requisites”.
At present the section 21 pre-requisites include:
Two months notice in the proper form
An HMO license if the property is a licensable HMO
Proper protection of any deposit paid and service of ‘prescribed information’
And, in England only:
Service of a valid Gas Safety Certificate before the tenants move in, and
Service of an Energy Performance Certificate (both for tenancies which started or were renewed on or after 15/10/2015 only), and
Service of the Government’s ‘How to Rent’ booklet
The use of a prescribed form
Time limits – no notice to be served during the first 4 months of the tenancy and the notice to have a life of (in most cases) 6 months, plus
No valid section 21 notice can be served if an improvement notice has been served on the landlord by the Local Authority within the past six months
Why the section 21 pre-requisites are important
Landlords are terrified of losing the right to use section 21 – as they fear being stuck with a tenant who is not paying rent, or who is damaging the property or who is behaving in an anti-social manner.
This means that (when they are aware of them) Landlords make it a priority to comply with all the section 21 rules. As if they don’t – tenants are protected.
But if the right to use section 21 is removed altogether – what incentive will they have to, for example, get a gas safety certificate? Bearing in mind that enforcement is in many areas almost non-existent?
The criminal landlords
Following on from this – the only people who are not bothered by the pre-requisites are the growing number of rogue or criminal landlords. Because they never take any notice of the law anyway.
So equally they won’t be troubled by the removal of section 21. They have other methods of making tenants leave.
One of the biggest problems we have in the private rented sector is the almost total failure of the authorities (with a few honourable exceptions) to enforce the law.
The TFA expressly allows for optional fees. That is a fee which is charged to a tenant but where they have a genuine and reasonable option to avoid the fee.
A possible example of this might be to say to a tenant that they can obtain their own references but if they don’t want to the agent will source the reference for the tenant, for a fee.
This, of course, would rely on the tenant being able to obtain a satisfactory reference without cost and without having to enter into a contract with a third party which might be hard. However, this is an evasion commonly used in Scotland and it may also work in England. However, the guidance for landlords does suggest that this cannot be done.
In practice, it is unlikely that most agents will want to rely on a tenant provided reference and so they will use their own referencing provider. A fee can be charged to the landlord for this but not to the tenant.
Contracts with third parties
Equally, it is not permissible to require a tenant to use a specific provider or to enter into a contract with any person as a condition of the tenancy.
So it would not be possible to not charge a fee but to then require a tenant to enter into a contract with a third party referencing provider who charged a fee to the tenant to provide the landlord or agent with a reference.
Offering a choice of deposit scheme
The other example of optional fees which is sweeping the market right now is offering a tenant the choice of a conventional deposit or entering into a deposit scheme whereby the tenant pays a lesser sum to an insurer who will make good damage and rent arrears to the landlord. These are increasingly popular with agents, possibly due to the fact that some of them are paying a commission to the agent.
However, there is a risk inherent in the business model. All these schemes are making presumptions about how the property will be returned when calculating the appropriate insurance premium to charge a tenant. These assumptions may be entirely wrong and tenants who have paid an insurance premium that they know they will not be getting back may be more likely to return a property without cleaning it or with some minor damage.
However, these schemes are lawful under the TFA provided that they are offered as an option as against a permitted fee, such as a tenancy deposit.
These limits will restrict other types of fees. For example, it will not be lawful to charge a tenant for cleaning services or gardening, but these costs could be included within the rent, in which case they would be permitted. Likewise, a tenant cannot be forced to incur a fee or enter into a contract with a third party.
So it would not be lawful to require professional cleaning at the end of a tenancy, even where the tenant has a pet, as this would be requiring a tenant to enter into a contract with a third party, in this case a cleaning company.
However, it is lawful to load fees into the rent. This could include increasing the rent generally so that it is higher throughout the tenancy to take into account lost fee income, provided that the market will bear the increased cost.
More interestingly, there is no reason in principle why a tenancy could not include a rent increase clause which was triggered if a particular breach occurred. So a tenancy could prohibit pets but then state that if the tenant got a pet the rent would increase by 5%. This is permitted because the permitted fees schedule expressly allows for rent increases clauses which are expressly in the tenancy and allow for rent to be changed according to the circumstances. Here the “circumstance” would be the getting of a pet.
Strangely the landlord guidance states that rent increase clauses are only allowed if they also allow for a rent reduction. This is because the paragraph allowing for rent increases states that they are allowed if the relevant tenancy agreement clause allows for “rent under the tenancy to be increased or reduced, according to the circumstances”.
This is a pretty unusual reading of the legislation. It implies that a clause must allow for both an increase and a reduction which is not exactly what the legislation states.
An alternative reading would be that clauses which allow for increases only, decreases only, or movement up or down are all permitted.
Likewise, the guidance states that it is not permitted to charge a higher rent at the start of the tenancy in the first month by way of a fee replacement. Again, the position on this is less than clear. A clause in the tenancy agreement that agrees a higher rent in the first month and then has it reduced going forward could be seen as a clause which allows for rent to be reduced according to the circumstances.
It might be harder to assert a circumstance but this would be for a Tribunal to decide in the end.
These are a tougher area. Paragraph 4 of the permitted fees schedule states that default fees are allowed where the tenant has lost a key or where rent is more than 14 days late. A default fee is a fixed fee payable by the tenant for a specific breach of the tenancy.
In the case of a lost key the amount payable for the default is the cost of replacement, which the landlord or agent will need to prove if asked. In the case of late rent the default is interest on the late payment, calculated daily at 3% above the Bank of England base rate.
Nothing in these limits prevents a tenant being asked to pay damages for a landlord’s reasonable losses incurred due to a breach, which are to be deducted at a later date from a tenant’s deposit or claimed via a court case. The limit only applies to fixed default fees.
This is where things become a bit odd though.
What is a default fee?
First, there appears to actually be a degree of confusion over what a default fee actually is.
A default fee is nothing more than a pre-estimate of loss. In other words it is a figure placed on damages by contracting parties in advance in order to create certainty in a contract.
So it is really nothing more than a pre-agreed sum for damages.
This is an issue for the TFA, because paragraph 5 of the permitted fees schedule states that a “payment of damages for breach of a tenancy agreement or an agreement between a letting agent and a relevant person is a permitted payment”.
So if a default fee is nothing more than an agreed damages figure then it is presumably permissible.
Caused by confusion?
Part of the confusion may arise from a poor understanding of the sector on the part of the government. The guidance appears to draw a distinction between fees payable by the tenant which are fixed in nature and damages which are to be calculated based on a specific loss.
However, the TFA draws no such distinction and offers no definition of a “default fee” which would change the common law interpretation of a default fee as being a fixed pre-estimate of damages. So it seems that the distinction is between a clause which sets a specific sum for a specific breach (apparently not allowed) and a more general clause which states that something is prohibited and that damages will be payable for the loss (permitted).
Whether this fine distinction will be seen in the same way by the courts in another matter. In the end the difference is minimal, save that tenants will not be able to predict in advance what a specific breach will cost them.
Secondly, the guidance has some very odd statements around the issue fees and damages. This is part of the overall confusion the government has around this issue.
The guidance states that any clause which states that for a breach a sum is payable, even if it is not specified, is an unlawful default fee. But this cannot be the case. A clause which simply says that damages must be paid for a breach is nothing more than a clause clarifying that a tenant must pay damages, something which is unequivocally permitted.
Clauses re Legal fees
The guidance carries this misunderstanding to extremes. It actually states that a clause which requires a tenant to pay a landlord’s legal costs in the event of a breach is an unlawful default fee. The guidance also states that parties are responsible for their own legal costs with the court being free to apportion them in its own way.
This cannot be right. This is pretty clearly a damages clause. The damages being the landlord’s legal costs.
It is in this area that the guidance appears to be heading out of the realms of the legislative purpose and into aspirational attempts to alter the sector and make fundamental changes to the way that legal costs are charged in specific cases.
In fact, such clauses have been common for many years, have been approved by the most senior courts, and nothing in the passing of the TFA suggested any attempt was being made to change this structure.
We will need clarification in the Courts
In fact, some of these disputes are inevitably going to end up being settled in the courts.
As I will discuss later on in a blog on enforcement – it is likely that local authority penalties will be challenged and so will tenant attempts to reclaim monies. In these cases doubt is likely to end up being resolved in the favour of the landlord or agent.
This (if it happens, which sounds probable – as the Labour party have similar plans) will be a major shakeup of the private rented system and could affect the future of housing and housing supply significantly.
I propose to write a series of posts on this blog exploring the various aspects of the proposals to remove the section 21 eviction process and look at the positive and negative aspects. However, in this very first post in the series, we will be looking at
The Background to Section 21
This will involve looking at the history of the Private Rented Sector (PRS), much of which is lost and forgotten in the mists of time. So maybe it is time to remind ourselves of our past.
As you will see, section 21 has played a major part in the development of our current system.
So let us first look at:
The Early Legislation
Before the 1914-18 war, most people lived in rented accommodation (around 80% of households) and the system was largely unregulated. Tenancies were governed by the common law rules which included the rules for ‘notices to quit’ and forfeiture.
Landlord and tenant regulation really began as a result of problems which arose during the first world war. Because of shortages of housing in key locations, local landlords were able to increase rents significantly which caused big problems for politicians.
On Clydeside for example strike action was threatened. As the government had no alternative sources for social housing or any schemes for helping to meet people’s housing costs, the only alternative available to them was to bring in legislation to restrict landlords rights to set or alter rent levels.
To prevent landlords from getting around this by demanding a premium or ‘key money’, this also was outlawed, and tenants were given security of tenure.
After the ‘Great War’
This legislation was only ever intended, at the time, to be a temporary emergency wartime measure and not a long term intervention in the freedom of landlords and tenants to contract. It only applied to rented dwellings which fell below defined net rateable value limits and thus was only intended to protect the poor. (Note – prior to Council Tax, the system for local taxation of property was based on ‘rateable values’).
However after the end of the 1914-18 war, social and political pressures resulted in the original legislation being retained as Government could not afford, politically, to repeal it. During the next 40 years, there was considerable amendment but no real repeal.
The outbreak of the second world war led to a wider range of dwellings being included in the legislation and by 1953 it was estimated that over 90% of dwellings fell within the rateable value limits and most unfurnished tenancies were within the scope of the legislation.
Decontrol and its aftermath
In the 1950s some attempts were made to decontrol the private rented sector. The Housing Repairs and Rent Act 1954 put new and newly converted dwellings outside rent control. Then the Conservative government’s Rent Act 1957 decontrolled all dwellings with a rateable value of more than £30 (£40 in London) at once and provided for other dwellings to be decontrolled when they became vacant.
This led to difficult social and political problems with allegations of landlords ‘encouraging’ tenants to move out, especially in areas of high housing demand. The most notorious of these was, of course, Peter Rachman – which led to the phrase ‘Rachmanism’ meaning exploitation and intimidation of tenants by unscrupulous landlords.
As a result of this, the Milner-Holland Committee was set up to look at, in particular, the effects of the de-control legislation on the housing market in London.
New protective legislation in the 1970’s
In 1964 a new Labour government was elected led by Harold Wilson (pictured). This government was essentially responsible for the protective regime which lasted for the next 25 years.
The first act to be passed was the Protection from Eviction Act 1964. Followed by the Rent Act 1965. These introduced the following new concepts and measures:
Harassment – the 1964 act was the first act to make the act of harassing a tenant into leaving a property a criminal offence
Due process – this is the concept that landlords must obtain a court order for possession, if tenants stay beyond the contractual tenancy period, before they can recover physical possession. This rule applied to all tenants, not just those falling within the scope of the Rent Acts
Notices to Quit – these now had to give at least four weeks, irrespective of the term of the tenancy
Fair rents – instead of inflexible rent controls based on tightly defined statutory formulae, rent levels were to be fixed at a ‘fair’ level which reflected market rent but discounted any inflation for housing shortage. Any appeal was to the Rent Assessment Committees (now replaced by the First Tier Tribunal) and fair rents could be reviewed every two years.
These changes not only affected more properties (as the applicable rateable value was widened to £200 (£400 in London), but were also, for the first time, intended to be permanent.
The Rent Act 1974
This act introduced the following developments:
Furnished accommodation was now brought within the Rent Act scheme
Resident landlords – this was a new concept – landlords who lived in the same building (other than a purpose built block of flats) were not subject to the Rent Act regime, but a less stringent regime called ‘restricted contracts’.
Owner occupiers were given a mandatory ground for repossession if they wanted their own property back to live in, for example after a spell working abroad, so long as they followed certain procedural steps
Succession rights – rights were introduced for spouses and family members to succeed to a statutory tenancy on the death of the tenant.
Statutory consolidation in 1977
In 1977 the Protection for Eviction Act and the Rent Act 1977 were both passed which consolidated all the earlier legislation. So now we do not need to look behind these two acts.
The impact of the legislation
The legislation was complex and not well known to tenants. So although they had strong rights, tenants did not always take advantage of them as intended.
Also, the legislation was also not comprehensive and some tenancy types were out of scope. Landlords would often try to use this to avoid the acts and evict tenants. For example by renting properties as ‘licenses’ and to limited companies as opposed to individuals.
The ‘license’ lets stratagem was knocked on the head by the 1985 case of Street v. Mountford. Company lets are still with us.
However, one major result of the legislation as a whole was the substantial reduction in the size of the private rented sector. Households living in private rented accommodation went down from about 80% in 1918 to about 8-9% at the end of the 1980s. The protective legislation introduced in the 1960s and 1970s were not the sole cause of this but they were certainly a factor.
The Rent Acts were not popular with landlords.
One landlord described them to me as ‘expropriation without compensation’ and a lot of landlords felt the same. Few property owners were prepared to allow tenants into a property if this meant the effective loss of that property for two generations (as often happened).
There were many cases where a property owner allowed someone to live in a property for what was supposed to be a limited period of time (or in one case that I know of, just for a holiday) only to find that they were stuck with them as tenants for decades.
There was also the problem of low rents. The ‘fair rents’ were supposed to reflect the market rent. But as over time, there were no genuine market rents, the fair rent levels drifted down and down.
Landlords, therefore, had little incentive (and often could not afford) to keep properties in good condition and many property conditions deteriorated seriously as a result of this.
A new broom – changes introduced in the 1980s
In 1979 Mrs Thatcher’s conservative government swept into power and ushered in a period of profound change for housing. She was determined to increase the supply of private sector rented housing and to use legislation for this end.
Almost before the removal vans had left No 10, a draft bill introducing what was to become a new form of tenancy was winging its way through Parliament. The Housing Act 1980 introduced the concept of the shorthold tenancy – a form of tenancy where, provided a certain procedure was followed carefully, a Judge had no option but to make an order for possession.
This concept was redeveloped and made more mainstream in the Housing Act 1988 which introduced a new type of tenancy for all private lettings starting after 15 January 1989 – the assured tenancy and its relative, the assured shorthold tenancy. The main difference between the two being the right for landlords of assured shorthold tenancies to evict tenants without giving a reason provided they followed the procedure set out in section 21 of the act.
This new legislation though, did not immediately result in the buoyant private housing sector we have today. It took some time for landlords to fully appreciate the new rights that they had under section 21.
The property crash which started in 1988 also inhibited things for quite some time, and it was not until the introduction of the buy to let mortgage launched by ARLA in about 1995 that the PRS started to take off.
Initially, the assured tenancy was the ‘default’ tenancy – which in many ways was similar to the old ‘protected tenancies’. However, by 1996 and the passing of the Landlord and Tenant Act of that year, we were sufficiently familiar with the concept of assured shortholds for it to be made the default tenancy type.
From that time onwards the private rented sector continued to grow and develop. Section 21 has been enormously important and in many ways is the author of the modern PRS.
Landlords feel secure when renting property to tenants as they know they can get it back again – unlike the situation under the Rent Act 1977
Mortgage lenders are prepared to finance a property purchase where the purchaser will not be living there themselves, again because of the protection provided and the ultimate right to recover possession under section 21
More recent developments with section 21
These will be looked at again in later posts, but in order to complete the story, we should cover them briefly here.
The development of Section 21 Pre-Requites
Initially, obtaining possession under section 21 was fairly straightforward. The landlord had to serve a notice giving not less than two months notice and apply to the court for a possession order. The main challenge for landlords was getting the notice correctly drafted.
The government then started including pre-requisites, the first being
That a deposit (if paid to the landlord) must be properly protected in a government authorised tenancy deposit scheme and
The prescribed information served, both of these within 30 days of payment of the money, and
That licensable Houses in Multiple Occupation (HMOs) must have a valid license
Many landlords fell foul of these rules, in particular, those requiring protection of the deposit.
Then, new rules were introduced (in England) via the 2015 Deregulation Act, including
The need to serve a valid gas safety certificate and EPC certificate, and
The Governments ‘How to Rent’ booklet giving guidance to tenants, and
New rules about timing and
A new prescribed form
Again, many landlords fail to comply and are unable to obtain their possession order as a result.
However, despite this protection, section 21 has been so misused by some landlords, that is is now regarded by many as ‘evil’
Why section 21 is regarded as Evil
By now, the PRS has expanded enormously, partly due to the sell-off of social housing under the ‘right to buy’ and partly due to the massive increase in house prices – meaning that many cannot afford to buy their own home.
So the Private Rented Sector now includes more families and older people who in the past might have been home-owners.
These people feel particularly threatened by the fact that their security of tenure is no longer than the remainder of their fixed term or two months, whichever is the longer.
Sadly, due to the chronic non-enforcement of housing legislation by the authorities, many rogue and criminal landlords have entered the sector. These will terrorise tenants, and hold the threat of a section 21 eviction over their heads if they dare to complain about the poor condition of their properties.
Most of their tenants feel they have no choice but to accept this as often they would find it hard to find somewhere else to rent.
Even non-criminal landlords will use section 21 sometimes to evict tenants who have done no wrong. Which means that many tenants do not feel secure in their homes and feel unable to put down roots in the community. This can be particularly damaging for families with children.
Proposals to end section 21
And so the wheel has come full circle and it is proposed to remove the right for landlords to evict without a reason.
This proposal raises many issues, some of which have been flagged up but not considered fully, in this article. I hope though that it will provide a useful background to the discussions which will now be taking place.
I will be looking at various issues regarding the ending of section 21 in this series of posts.
The Landlord Law Conference (sponsored by Hamilton Fraser) is getting closer. This short series will look at the Conference talks we have on offer and how they will help you.
We are delighted to welcome Katie Gray, another new Conference speaker this year. Katie is a housing barrister from Tanfield Chambers and the full title of her talk is ‘Airbnb and other vacation rentals – should landlords be concerned?’
Katie will be looking at:
The effect of the rise of Airbnb on landlords and tenants;
How can landlords and tenants avoid falling foul of their contractual and legal obligations
Leasehold covenants and their enforcement
Case law update
An interesting and very topical talk.
The Conference in a Nutshell
Date: 17 May 2019 Venue: Sprowston Manor Hotel just outside Norwich (find out more here) Cost: £240 (£200 + VAT) Includes: All refreshments and the Conference handbook with speakers detailed notes Discounts: Landlord Law members and 20% for bookings for 5 or more delegates CPD: 5 hours How to book:click here.
Find out more about our Conference Speakers by watching the short video below:
In her recent Newsround, Tessa referenced the newly published guidance notes for local authorities on enforcement of the PRS.
She commented that she hadn’t had time to read it and emailed me, asking if I would like to review it. I reluctantly agreed.
I say reluctantly because as soon as I saw it had been published I got a sinking feeling. A feeling that grew in intensity when I read it. I hate to sound cynical and negative but I kind of guessed what it would be like before printing it off.
So let me at least start with something positive
It’s probably really useful for people who don’t do the work and who want to know what councils can do. I’m thinking tenants support groups or journalists looking for background information on council enforcement powers.
Right, that’s got that out of the way….now to work.
Beef #1 –
I alluded to this in the positive bit. Nothing I read there in the guides to different regulatory powers would come as any new information for anyone who does these jobs 24/7.
The kinds of enforcement rolls this is aimed at, tend to be populated by experienced and mature people. You don’t see a huge amount of newbies coming into the field at the moment. Austerity cuts having rendered local authority work a precarious choice, compared to what it used to be.
So a lot of the text seems to be setting out what enforcement types already know. I couldn’t see the point of that.
Beef #2 –
Reference is made to good practices among other authorities but again these things tend to be known to people in the trade, who regularly attend conferences, sub-regional partnership meetings, and specialist events. People in Hackney know what initiatives are being used in Liverpool or Redcar. We talk to each other and everyone reads trade magazines and websites where people quite rightly shout about their successes.
One thing housing is good at is sharing best practices, whereas the private sector closely guards their best kept secrets to give them an edge over competitors. This inclusive sharing attitude is something I’ve always enjoyed about working in the public sector.
It has a naïve approach to the education of landlords and tenants. Don’t get me wrong, I’m all for both but by the time you get to the enforcement stage, any normal landlord would have long before complied with the early letters sent out by the various teams.
When you are firmly in enforcement mode you are dealing with landlords and agents who don’t give a toss about laws or educating themselves, like the two West Sussex landlords recently who refused to comply with improvement notices served by the council, appealed against the penalties levied against them, lost and were forced to pay around twenty five grand.
I cant see guys like that willingly signing up for a council training day.
Although they might do now!
As for tenants, I’m always shocked at how little they know about their rights and there is a common yet lazy phrase doing the rounds about empowering tenants, through education. In fact, I am booked to speak at a housing conference on the 25th April in Central London on the topic of empowering tenants, at which I shall be making the point that educating tenants is not the same as empowering them.
You might have the legal knowledge of a housing QC but try standing up for your rights to the sort of landlords who get enforcement knocking on their door and you’ll be out on your ear by the weekend.
Fortune cookie points of interest, for example:-
“The priorities of each local authority vary depending on circumstance and context”
“Landlords can operate across local authority boundaries, and in these cases, officers from neighbouring local authorities can act together to enforce against these practices”….
Well gee shucks, I doubt anyone thought of that before.
“Officers should ensure that evidence gathered is clear and robust.”
And on and on and on. Virtually every paragraph reading like a page from a particularly witless self-help book.
Its light on landlord and tenant law stuff like harassment and illegal eviction, which is reduced to a single page and completely misses the very important point that whenever a council’s enforcement team moves on a rogue landlord the harassment and illegal eviction starts in earnest, as they either try to get the number of occupants below the minimum 5* or get rid of witnesses who might make a statement against them.
Anyone working in enforcement knows this and the little box in section 3.6 advises officers encountering the problem to refer the tenant to a tenancy relations officer, who are, again thanks to austerity cuts, now so rare they are about to be officially registered as an endangered species with the World Wildlife Trust.
I could go on but the nub of the problem, that gave me the sinking feeling I mentioned when I heard it had been published, is the elephant in the room that I knew would be there…
The fact that few local authorities have anywhere enough officers of any kind to deal with the problems.
At risk of sounding like a broken record, staff have been cut to the bone in recent years, while the size of the PRS and growth of the criminal and fraudulent activities are on a strongly upwards trajectory. Government has given us more laws than we know how to deal with in recent years and now this pointless document reads like a housing minister trying to swerve the real issues of seriously committed funding for the work.
Supporters will always point to the new provisions that allow for local authorities to keep penalties to fund enforcement but the fact is, you have to get the penalties in first and for that you need people.
Penalties are not like parking tickets
The procedures for levying them are bound by bureaucracy and appeals and recovery of the money is another minefield, especially when dealing with a limited company who fold up before money can be recovered. Not every rogue you are dealing with has assets, many deliberately avoid having them.
Could councils work smarter with what they’ve got?
Yes of course.
Some are quite good at it and some aren’t but we all know the problems in practice and this guidance document brings nothing to the party that isn’t already known about in the business or isn’t being worked on to varying degrees.
My fear is, like the Homelessness Reduction Act, it’s a nice idea but…………
This is a series of articles originally published on the Anthony Gold blog.
The Tenant Fees Act- An Outline
The government finally published its guidance document (actually three of them) on the Tenant Fees Act on 1 April 2019. The provisions come into force on 1 June 2019 so there is still time (but not much!) to digest the guidance and make changes accordingly.
This is made a little harder because the various statutory instruments which will bring the Act into force and which can (optionally) be used to amend the list of prohibited or permitted fees have not been published and so the guidance operates in something of a vacuum at the moment. In other words, it may be wrong or it may not and its hard to tell!
There are currently three pieces of guidance. One for landlord/letting agents, one for tenants, and one for local authorities.
The Tenant Fees Act (TFA) operates by prohibiting landlords and letting agents from charging tenants any fees for the grant, renewal, termination, assignment, or novation of a tenancy unless they are specifically included on an approved list. That list is pretty short. The Act also prohibits requiring a tenant to enter into a contract with a third party so it prevents the obvious evasion of not charging a fee myself but getting someone else to charge it on my behalf.
The Act has a schedule of permitted fees within it which set out what can be charged. It is important to bear in mind that if a fee falls into one of the categories in the schedule then it is permitted. Even, if it does not fall into other categories or is excluded from another category specifically. It is easy to fall into the trap of thinking that because a category excludes a specific class of fees that these are excluded altogether, even though they are permitted elsewhere.
Enforcement is by local authority trading standards officers. This is by way of civil penalty initially with the option of higher penalties or prosecution for repeated offences.
The TFA is actually very complex and there is a lot of details which need looking at. Not least because parts of it are badly worded and the guidance itself says things that are incorrect, or ambitious at the very least! Therefore this is the first, introductory post, of a series I will be writing over the next fortnight looking at a range of aspects of the TFA.
Next up is optional fees, what is and is not allowed?
Some landlord and tenant news items that caught my eye this week.
An interesting news item about a lettings organisation ‘Lifestyle Club’ which calls itself a club in order to avoid tenants rights in what a Judge described as ‘entirely contrived’ arrangements.
The company has now been fined £22,299 after being prosecuted by Camden Council after it failed to license two HMO Properties and failed to respond to statutory housing notices served by the Council. The company owner and the owner of the property were also fined in their absence (as neither attended the hearing).
Describing yourself as a ‘club’ rather than a lettings organisation is a fairly common scam and Ben wrote about it here.
Rogue landlord enforcement
With this example before us, it is good to see that government is starting to take tackling rogue (or rather criminal) landlords seriously with the publication of a guidance document. With separate guidance for landlords and tenants.
Housing minister Heather Wheeler said:
This package of support for those working on the front line of the private rented sector will ensure they are fully equipped to make use of any new powers which can improve the lives of tenants trapped in poor quality accommodation.
This, along with our further guidance for tenants and landlords on their rights and responsibilities, builds on the ongoing work which sets out to make renting fairer and more accessible for all whilst also ensuring that everyone has a home which is safe and secure.
I have not had time to read it yet – has anyone got any views on it?
Zero deposit schemes in the spotlight
A couple of articles in Property Industry Eye looking at these.
One covers a story from the Daily Mail about a single mother who was left with a £1,318 bill at the end of her tenancy. She paid a monthly fee of £76.80 but when she left was told the landlord claimed £1,318 and she either had to pay this or pay a further £120 fee for arbitration. The scheme she signed up for was not an insurance scheme – in fact on a quick reading of the article it is hard to see what benefit the tenant gets from it.
I suspect that after 1 June (when the Tenant Fees Act 2019 comes into force) it may be illegal.
The other article looks at the commission paid to letting agents by these schemes. This can be as much as 30% which will be very attractive to agents many of whom will lose up to 20% of their income when the Tenant Fees Act comes into force.
Under the Tenant Fees Act, agents need to give tenants a choice whether to opt for a no deposit scheme or a traditional deposit.
However, agents ALSO need to comply with agency law and inform their landlords that they are receiving a commission. If they don’t then they will be deemed to be making a ‘secret profit’ and their landlords are entitled under law to claim this commission from the agents.
Note that ARLA propertymark have published a useful factsheet on Deposit Free Renting Schemes which you will find here.
Rents – increase or decrease?
The story of rent rises or decreases seems to depend on who you are listening to.
An article in Landlord Today claims that rents are increasing as the tenant fees ban approaches. This is based on data from Homelet’s rental index which seems to indicate that rental values have gone up 3.3% in the past 12 months. More than last year.
However, the DPS says its records show that the average UK rent price is now at its lowest level for three years! The article says
The average UK rent fell to £757 per month in Q1, with private tenants paying £5 (0.64%) less than in the previous quarter and more than £14 (1.87%) less on an annual basis.
The decline continues the overall downward trend seen in the first three quarters of 2018, which The DPS believes may be due, in part, to a reluctance among tenants to move until the Government’s tenant fee ban comes into effect on 1stJune 2019.
The killer question though is will rents go up after the tenant fee ban has come into force?
Who can landlords let to after Brexit?
This is the question asked by the RLA who are campaigning for the government to provide more guidance to landlords.
David Smith, policy director for the RLA, said:
Landlords and agents are not border police and cannot be expected to know who does and who does not have the right to live here.
The Government needs to publish clear and practical guidance for landlords and agents about the implications of Brexit on who they can and cannot let to.
If it does not, more landlords will become increasingly fearful about letting to non-UK nationals with the potential of facing prosecution.
The result will be they will avoid renting to anyone who is not a UK national, making life difficult for EU nationals.