Friday 16 October 2015

Legislation Update: Renting Homes Bill - Model Contracts

Model Contracts

Throughout 2015 the Welsh Government has been consulting and working on a piece of legislation designed to make the process of renting a home simpler and easier to understand. As a part of this process, the Welsh Government wanted to reduce the number of contracts that could be issued to establish a tenancy. What they came up with was a Model Contract that landlords must use when establishing a new tenancy.

The legislation which allows for the Model Contract is the Renting Homes (Wales) Bill, which is currently going through the Welsh Assembly. You may recognise terms from our blog posts such as RHB (Renting Homes Bill) and Model contract, however this piece of legislation (the RHB) allows for much more than just the Model Contract.

What does this mean for Landlords?

Every private sector landlord who rents a residential property in Wales must use the Model contract. It means that when you are setting up a new tenancy, the contract must have certain clauses and conditions set by the Welsh government. You are free to include your own, but they must not clash with or seek to alter any of the Welsh Government fundamental or prescribed terms.

If you carry on using your own contracts and ignoring the Model Contract, or if you don’t issue a contract at all, your contract will be void and the Welsh Government will impose their own ‘Default contract’. This means that the only thing you would be allowed to set is the rent level. After that, if you don’t comply with the requirements, the Welsh Government will set out everything for you.

What will I have to do?

When the RHB passes through the Assembly and the Model Contracts come into force, you will have to ensure that any contract you use is fully compliant.

The Model Contract will, basically, consist of three terms:
  • Fundamental
    These terms cannot be changed and must be included within the contract
  • Prescribed
    These are a set of terms written by the Welsh government, however you and your tenant must decide whether or not to include them within the contract. If you do include them within the contract, you must only modify them to benefit the tenant. Our advice is that if you are going to include them, don’t modify them.
  • Additional
    Here you can include any additional terms you see fit. It comes with a word of warning though, you cannot include terms that impact on any of the Prescribed or Fundamental terms.

Where can I find out more?

At present the RHB is currently at Stage 2 in the Welsh Assembly (4 stages until something is passed) and isn’t expected to pass until later in 2016. Subscribe to ur blog to keep up to date with developments.

If you are a landlord who does not want to go through this onerous process then why not let YOUR AGENT be your agent? And let us take the hassle out of managing your property.

Thursday 15 October 2015

Legislation Update: Renting Homes Bill - Fitness for Human Habitation

Fitness for Human Habitation

As part of the Renting Homes Bill (RHB) the Welsh Government seeks to improve the standard of accommodation in the Private Rented Sector (PRS). In part this is a reaction to some of the very poor accommodation rented out by criminal landlords, however it is likely to also capture a significant number of good landlords.

The Fitness for Human Habitation standard has been based on the 29 hazards under the Housing Health and Safety Rating System, however a number of Assembly Members have insisted that the Fitness for Human Habitation standard goes much further and should be “more ambitious”.

The Communities, Equality and Local Governance Committee suggested, in its report, that they should consider using a model similar to that of the Scottish Repair Standard.

What does this mean for Landlords?

Just like HHSRS you will need to make sure your property complies at the start, during and end of a tenancy. A number of improvements may have to be made, such as the hardwiring of smoke and Carbon Monoxide detectors and any other requirements the Minister sees fit under to tackle the 29 hazards.

What do I have to do?

Right now the RHB (which is the bill that contains the Fitness for Human Habitation requirement) is still going through the process at the Welsh Assembly so no imediate action is require.

Your Agent Comment

This is a key issue and while we want to see standards in the sector improved over time, we do not want end up with unreasonably high standards, that good landlord will spend time and money complying to while the criminal landlords ignores it.

As the RHB progresses through the Welsh Assembly we will continue to send issue updates through our blog.

If you are a landlord who does not want to go through this onerous process then why not let YOUR AGENT be your agent? And let us take the hassle out of managing your property.

Tuesday 6 October 2015

Legislation Update: Renting Homes Bill - The 6 Month Moratorium

The 6 month Moratorium

At present, when landlords issue a new contract under an Assured Shorthold Tenancy, they must include a minimum 6 months fixed term. The Welsh government is looking to remove this requirement so landlords do not necessarily need to offer a fixed term, but could start a tenancy on a month-by-month basis.

Although most landlords would probably still issue fixed terms at the start of a tenancy, this barrier is being removed to encourage landlords to rent to vulnerable people that landlords may have previous considered too risky to guarantee a minimum 6 month contract.

What this means for Landlords?

This means that if you so choose, you could rent on a month-by-month basis just like a statuary periodic contract now. This has lots of benefits, such as increased flexibility for those who want a contract shorter than 6 months and encouraging landlords to rent to people they may have previously considered too risky to give a 6 month contract.

What Should I do?

The removal of the 6 month moratorium has caused lots of controversy both among Assembly Members and tenants groups. The fear is that this will lead to less security in the private rented sector and more people being evicted from PRS accommodation after just a few months. .

Your Agent Comment

Our opinion is that most landlords will continue to offer fixed terms and that landlords do not want a high turnover of tenants.

We would strongly advise that normal business practice should be to issue a fixed term, as this guarantees income for the landlord over that period.

If you are a landlord who does not want to go through this onerous process then why not let YOUR AGENT be your agent? And let us take the hassle out of managing your property.

Monday 5 October 2015

Legislation Update: Renting Homes Bill - Abandonment

Abandonment

Another area being changed in the Renting Homes Bill is the abandonment procedure that landlords follow if they suspect a property has been abandoned. If you have ever been unfortunate enough to have this happen to you, it can be extremely tricky to follow the correct path and seek legal eviction by the court. The Welsh Government wants to make this  process easier to follow so that landlord should feel safer when pursuing possession in cases of abandonment.

So what are they proposing?

The guidance aims to make it possible for landlord to end a contract and regain possession of the property, under cases of abandonment, without the need to go to court. However, you may be required to re-house the tenant should they return up to a year later and could face hefty penalties if you don’t stick to the guidance.

What will you have to do?

Keeping in mind that this dose not yet apply, landlords would be expected to follow the guidance laid out by the Welsh Government. Although the exact guidance isn’t laid out, the Welsh Government has said that this will be highly comprehensive so that landlords feel confident in following the correct procedure.

It is expected that the guidance will involve issuing a formal notice to the tenant (at the property you think they have abandoned), informing them of your intention to recover possession if you don’t hear from them and then giving notice to the contract holder that you are ending the contract. At this point you should be able to recover possession without ever going to court.

Again we would reiterate that this has not yet become law, so evicting for abandonment without a court order at the moment could land you in very hot water. 

Your Agent Comment.

We are concerned that as this policy currently stands, landlord may have to re-house a tenant up to a year after they have recovered possession for abandonment. We believe that if a landlord has followed the Welsh Government’s own guidance on the matter, letter-by-letter, a landlord should not be liable if a tenant returns a year later claiming that they have not abandoned the property.

As the Minister produces more formal guidance, we will keep you informed about the proposals through our updates.

If you are a landlord who does not want to go through this onerous process then why not let YOUR AGENT be your agent? And let us take the hassle out of managing your property.


Deregulation Act 2015 - impact on residential landlords and tenants

The Deregulation Act 2015 (DA) was passed on 26 March 2015 and covers various points which will be of interest to landlords and those appointed to deal with residential properties.

Below is a brief summary of those points and the practical implications. Certain provisions of the DA only apply to property in England ONLY and these provisions have been highlighted accordingly. 

Tenancy Deposit Schemes – provisions in force from 26 March 2015

Since the Tenancy Deposit Scheme (TDS) legislation came into force on 6 April 2007, there have been a number of cases before the courts in which the wording of the legislation has been under scrutiny. The outcome of these cases left landlords taking a cautious approach to the legislation to ensure that they would be able to serve a valid notice to end an assured shorthold tenancy (AST) under section 21 of the Housing Act 1988 (Section 21 notice). 

The DA provides welcome clarification on the steps that a landlord must take to comply with the TDS legislation.
  • What happens if the original fixed term was granted prior to 6 April 2007 but a statutory periodic tenancy arose after 6 April 2007? The Court of Appeal decided in the Superstrike Ltd v Rodrigues case in 2013 that, where a fixed term (which was granted prior to 6 April 2007) ends and the tenant continues to rent the property under a statutory periodic tenancy agreement (which arose after 6 April 2007), a "new" tenancy is created. As this new statutory periodic tenancy arose after the TDS legislation came into effect, the deposit must be protected in a TDS and the tenant served with the prescribed information. If the landlord failed to do so, before it could validly serve a Section 21 notice, it would need to return the deposit to the tenant. The landlord could, however, still be liable for a financial penalty for failing to comply with its obligations.  
  • What if the original fixed term was granted prior to 6 April 2007 and the statutory periodic tenancy arose before 6 April 2007? This was the situation in the case of Charalambous and another v Maureen Rosairie Ng and another in 2014. The tenants had paid a deposit to the landlord in 2002 and the tenancy was renewed twice. Each time the deposit was carried over to the new tenancy. The fixed term ended on 17 August 2005 and a statutory periodic tenancy arose. The Court of Appeal held that there was no obligation on the landlord to protect the deposit as the deposit was received before the TDS legislation came into force. However, as the legislation provided that no Section 21 notice may be given in relation to a tenancy agreement at a time when the deposit is not being held in a TDS, in order to serve a valid Section 21 notice, the landlord had to either protect the deposit or return it to the tenants.
The DA has clarified what should be done in both of the above situations and gives landlords (in most cases) a period of 90 days from 26 March 2015 to comply with their TDS obligations where, on 26 March 2015 a periodic tenancy is in existence and the landlord is holding a deposit in relation to that tenancy. Steps to protect those deposits must be taken now! 

Where you have a periodic tenancy which arose prior to the 6 April 2007 and the deposit is unprotected, in order to serve a valid Section 21 notice at any point in the future, it must be protected by 23 June 2015 and the prescribed information served on the tenant. However there are no penalties for landlords who choose not to protect these deposits in these circumstances. 

Where the periodic tenancy arose on or after 6 April 2007 and the deposit is unprotected, again the deposit must be protected by 23 June 2015 and the prescribed information served on the tenant. In these circumstances, the financial penalties will apply to any landlords who fail to comply.

What if the fixed term commenced after 6 April 2007, the deposit was protected at that time and a statutory periodic tenancy subsequently arose?

The logical view would be that if a landlord has protected the tenant's deposit in a TDS and served the prescribed information upon commencement of the fixed term tenancy, there would be no need to repeat the procedure in the event that the fixed term came to an end and a statutory periodic tenancy arose. After all, the deposit is being held in a TDS and the tenant has been provided with the required information in respect of this.

However, Deputy District Judge Davies, sitting in Birmingham County Court in the case of Gardner v McCusker in May 2014 interpreted the Court of Appeal's decision in Superstrike v Rodrigues as meaning that where a statutory periodic tenancy arises, the prescribed information has to be served, even in circumstances where this was done in respect of the original fixed term tenancy. This placed an unduly onerous obligation on landlords who have already complied with their obligations. 

Thankfully the DA has addressed this and amended the Housing Act 1988 so that where the landlord has complied with its TDS obligations once; they will not need to repeat them for a replacement/periodic tenancy. 

The Following Regulations apply to ENGLAND ONLY

Retaliatory evictions – Provisions to be in force from 1 October 2015 
The DA introduces new provisions which will come into force on 1 October 2015, to protect tenants from eviction in England only. 

These provisions restrict a landlord's ability to serve a Section 21 notice in circumstances where the tenant has complained about the condition of the premises or the common parts of a building of which the premises form part, and the landlord either did not respond within 14 days, provided an inadequate response or responded by serving a Section 21 notice.
  
The tenant can then complain to the housing authority which may serve various types of enforcement notice on the landlord. If the housing authority does this, the landlord cannot serve a Section 21 notice within six months of the date of service of the enforcement notice (or, if the operation of the notice has been suspended, within six months of the date on which the suspension ends).
Although the provisions state that the tenant's complaint must be in writing, they go on to say that they will still apply if the tenant did not know the landlord's email or postal address or if the tenant made reasonable efforts to contact the landlord to make the complaint, but was unable to do so. Landlords should, therefore, ensure that tenants have adequate means of contacting them.
There are various circumstances in which a tenant will not be assisted by the new provisions, including:
  • where the condition of the dwelling house or common parts which gave rise to the service of the notice is due to a breach of the tenant's duty to use the premises in a tenant like manner;
  • where, at the time of service of the Section 21 notice, the dwelling house is genuinely on the market for sale;
  • where the landlord is a private registered provider of social housing; and
  • where the dwelling house is subject to a mortgage which was granted before the beginning of the tenancy, the mortgagee (which includes a receiver appointed by the mortgagee under the terms of the mortgage or in accordance with the LPA 1925) is entitled to exercise a power of sale under the mortgage or under section 101 of the LPA 1925, and at the time the Section 21 notice is given the mortgagee requires possession of the dwelling house for the purpose of disposing of it with vacant possession in exercise of that power.
These new provisions will apply to ASTs granted on or after 1 October 2015. They will not apply to a fixed term AST granted prior to that date even if, after 1 October 2015, the fixed term AST becomes a statutory periodic tenancy. The position changes, however, after the end of the period of three years, at which point the provisions will apply to any AST in existence. 
Practically this raises a number of points for landlords and fixed charge receivers:
  • The importance of adequately responding to any complaints about maintenance or the condition of the property from the tenant within 14 days;
  • Before serving a Section 21 notice, consider why it is being served. If the strategy is to recover possession in order for the lender to exercise a power of sale, this strategy should be confirmed in writing before service of the Section 21 notice.
Section 21 Notices – Provisions in force from 1 July and 1 October 2015

The DA tidies up various aspects of the procedure whereby a landlord obtains possession under Section 21 of the Housing Act 1988.

From 1 July 2015 in England
  • The Secretary of State will be able to make regulations prescribing the form of Section 21 notice to be served. Once these regulations have been passed, the procedure for serving a Section 21 notice should be much simpler and clearer.
  • A landlord will not be able to serve a Section 21 notice if the landlord is in breach of a "prescribed requirement". The prescribed requirements will be set out in regulations and will relate to the condition of dwelling houses and their common parts, the health and safety of occupiers of dwelling houses, and the energy performance of dwelling houses. As such, they could be quite wide and may impose onerous obligations on landlords to ensure compliance prior to serving a notice.
  • The Secretary of State will be able to make regulations requiring a landlord to provide prescribed information about the rights and responsibilities of the landlord and tenant under the AST. The landlord will not be able to serve a Section 21 notice if it is in breach of this requirement.
From 1 October 2015 in England
  • There will be no requirement for the date specified in the Section 21 notice to be the last day of a period of the tenancy.
  • A landlord will not be able to serve a Section 21 notice within the first four months of the tenancy. This will, therefore, limit the landlord's ability to serve notice at the start of the AST.
  • There will be a statutory right for the tenant to claim back rent paid in advance (calculated on a daily basis) where a Section 21 notice brings the tenancy to an end before the end of a payment period.
The new rules will apply to ASTs granted on or after the date on which the relevant provision (as set out above) comes into force. They will not apply to a fixed term AST granted prior to that date even if, after the relevant date, the fixed term AST becomes a statutory periodic tenancy. 

The position changes, however, (in respect of all of the above provisions except the requirement for the landlord to provide prescribed information about the rights and responsibilities of the landlord and tenant under the AST) after the end of the period of three years from the date on which the provision came into force, at which point it applies to any AST in existence.