The Must-Known Legislation To Let A Property Compliantly

Landlords, are you aware of the two main pieces of legislation that you need to comply with to remain safe and compliant? 

In the ever-changing private rented sector, it can be difficult to keep up with the latest laws and regulations that govern this space. However, failing to meet the government’s requirements can result in serious consequences in the form of; notices, fines and prosecution.

That’s why we at Concentric Sales and Lettings are focused on helping you get the compliance information you need on all aspects of Landlord law. In this blog, we’re going to dive deeper into the two pieces of landlord legislation designed to ensure the safety of your tenants within your private rented properties. These two laws are The Landlord and Tenant Act 1985 and the more recent Homes for Fitness & Habitation Act 2020.

 

The Landlord and Tenant Act 1985

Section 11 of the Landlord and Tenant Act 1985 details a landlord’s obligation for repairs. Simply put, as a Landlord, you must ensure the safety of your rented properties.

Specifically, you must ensure that the air, space, water, and heating of the property are properly maintained and kept safe. The law also clearly states that you must carry out repairs on your properties as and when they are due. 

This brings up the question – when are repairs due? 

The legislation states that repairs should be carried out on a “reasonable timescale” based on when you are first notified of the repair requirement. “Reasonable” is somewhat subjective and difficult to define but generally depends on factors such as (a) whether or not the tenant is living in the property and (b) whether or not the severity of the repair warrants an urgent response.

Major repairs (as in water gushing through a ceiling) are required to be acted upon immediately. You, as a Landlord, should take all reasonable steps to carry out any maintenance work or repairs to the best of your ability. Some repairs may take time to be rectified, but as long as you have taken the steps that you can take, the law will consider it reasonable. 

 

Protect Yourself Against Claims

We recommend that you always act as quickly as possible when carrying out repairs for your tenants. This is not just for the comfort of your tenants within your rented property. It is also one of the best ways to protect yourself from potential claims that the tenant may choose to pursue against you. 

Under the law, tenants have the right to report any outstanding maintenance issues to the local authority. The council may then decide to carry out a full inspection which can often lead to a much longer list of repairs. 

It’s important to remember that you are not the only person given responsibilities under Section 11. Tenants are also obligated to “behave in a tenant-like manner”, meaning that they are required to take care of the normal maintenance activities that keep the property clean and functional. This includes things like changing lightbulbs, keeping the drains clear, cleaning the gutters, and other similar activities. Now that we’ve covered the first piece of legislation for landlords let’s cover the second, more recent law. 

 

Homes for Fitness & Habitation Act 2020

This law does not replace the one we’ve discussed but creates additional rights and responsibilities. Generally, it focuses on areas that are not necessarily covered under the Landlord and Tenant Act 1985. There are two key factors you should be aware of when it comes to this law. 

First, this act gives tenants the right, for the first time, to take a Landlord to court for not maintaining their repairing obligations. The government has removed the requirement to first go to the local authorities and has enabled the tenant to go directly to the courts. Landlords must be aware of this change.

Secondly, Landlords are now responsible for hazards and repairs within communal areas throughout the tenancy. You are obligated from the moment the tenancy begins through to the conclusion of the tenancy to ensure that the property is fit for human habitation at all times. The only way to achieve this is through regularly inspecting the property. You must not rely on tenants to report repairs because they do not always do so. 

 

Final Thoughts

Your main focus as a Landlord should be to ensure that your tenants are safe at all times. Failure to comply with these laws can result in; prosecution by the tenant in court, penalties issued by the local authority, fines, and improvement notices that can restrict your right to gain possession of your property. 

With over 170 different pieces of legislation regulating the private rented sector, you may be wondering how to be compliant as a Landlord. 

Fortunately, we have created several resources to help you stay safe, compliant, and up-to-date. That’s why we run a quarterly webinar hosted by Dawn Benett, where we spend 2 hours diving deep into various pieces of legislation that you need to know about. Click here to register for FREE today!

Should Your Address Be On A Tenancy Agreement?

Landlords, did you know that there are over 170 separate pieces of legislation that directly impact the private rented sector? Here at Concentric, one of our big goals is to help educate you to be able to navigate this maze of rules and regulations so that you can stay safe and compliant. 

While you may prefer not to share your residential address with your tenants, did you know that there are laws that govern whether or not you are permitted to withhold your address? The two main rules that apply to your address are Section 47 and Section 48 of the Landlord and Tenant Act (1985). Let’s get into them. 

 

What Section 47 Means To Your Tenancy Agreements

Let’s start with Section 47. Section 47 of the Landlord and Tenant Act of 1985 states that a landlord’s address must be present on all documents that are, in fact, a demand for payment. The document that most commonly falls within the purview of this legislation is your tenancy agreement. This means that you, as a landlord, have a legal obligation to include your residential address on your tenancy agreement. Is your address present on your agreement currently? If not, you could be falling foul of this regulation. What does this mean? 

Your tenants are not legally liable or responsible to pay any rent they may owe you until you have shared your residential address. The law is clear. If you’re using an agent, you are not permitted to use your agent’s address. Rather, the address on the agreement must be the landlord’s residential address, wherever that is in the world. The reason this legislation applies to the tenancy agreement is that it is, in the eyes of the law, a demand for payment. Until and when you have provided your residential address, the tenant does not legally have to pay. It makes sense that you, as a landlord, may feel some reservations about having to share your home address with your tenants. However, in the private rented sector, this is a given right that the tenants have been legally granted. Section 47 grants tenants the right to identify the person from whom they are renting. 

Moreover, if the tenant makes a formal demand, in writing, to you as the landlord or your agent, each party is obligated to respond to that request within 21 days. As we have already mentioned, failure to supply the information within that timeframe could result in the tenant refusing to pay rent until the information requested has been provided. In that situation, the tenant would be in their full legal rights to withhold payment from you, the landlord. 

 

Why You Need To Know About Section 48

The other significant rule that impacts whether or not a landlord must share their address is Section 48 of the same law. Again, this section focuses entirely on the landlord’s address. However, in this case, the legislation refers to an address being given to a tenant in England or Wales for the sole purpose of serving notice to that tenant. In this case, landlords have more flexibility, as the address can be that of your agent or your place of business, depending only on your preference. If you are a company landlord, then the address to provide tenants, under this section, would be the registered address of the business.

Ultimately, these sections of the Landlord and Tenant Act of 1985 do not carry penalties or fines if you are in violation. However, that does not mean that they are inconsequential. The ultimate penalty could be that your tenant simply chooses not to pay the rent. In that event, the law would not require the tenant to pay until the residential address of the landlord was provided. 

 

Conclusion

To recap, Section 47 places a clear obligation on landlords to provide their residential address to their tenants on their tenancy agreement and on any other documents that are payment requests. Section 48 requires that landlords share their business address (or the address of their agent) when serving notice to tenants, only when the tenants reside within England or Wales. 

We hope that you’ve found this information useful. It’s important to always stay informed about legislation so that you can remain in compliance and continue to serve your tenants. If you’re curious about where you can get more information on the latest and most important legislative updates, our very own Dawn Bennett hosts a quarterly webinar where she drills down into a variety of the many pieces of legislation that apply to our industry. 

Spring Newsletter – Property Market Update

Sales Focus

I think it is safe to say that 2020 was a year like no other for obvious reasons! And from a property market point of view certainly a year which has defied expectations – with the UK experiencing its strongest annual price growth recording since the summer of 2016. To close out 2020, December alone saw over 129,000 homes change hands which is 32% higher than December of 2019 – this only added to what is always a mad rush in the middle of the month to hit clients exchange deadlines so they could enjoy Christmas with peace of mind.

The Mortgage Market has recovered with the bank of England reporting approvals to be up 3.7% on the previous year. Already this year we have seen more mortgage products released again, particularly on 90% loan to value mortgages which of course will be a big help to first-time buyers. And with an estimated 10% more sales agreed in 2020 than in 2019, the start of 2021 has been incredibly positive. The New Year itself was reported as being the busiest ever start to a year by our friends at Rightmove with visits to the website up by 30% and sales property enquiries up by 11% compared to the same period a year ago.

They have also reported that sales agreed in January are up 9% year on year. However – we have seen a new supply of properties coming to market reduce by 12% and the total number of homes for sale down by 6% as new sellers remain cautious while lockdown restrictions remain. This has caused a supply/demand imbalance and is only likely to maintain upward pressure on prices. But with surveys suggesting a large percentage of would-be sellers are holding off due to the pandemic, perhaps we can expect a surge of new supply towards the summer as lockdown measures are eased. Many sales are currently in the conveyancing process, in fact, there are approximately 650,000 transactions currently going through and the process has been a lot slower meaning a heightened level of stress for a lot of home movers – especially those who were pushing for the stamp duty deadline that was previously set for the end of this month. 

But that stress has been lifted for so many with the latest budget announcement as the stamp duty holiday has been extended to the 30th June – so there is some breathing space and opportunity. The chancellors budget announcement was on the 3rd March and represents a number of changes and factors for the housing market. Here are my 4 key takeaways: Starting with Stamp duty – so it is a 3-month extension from the end of March to the end of June meaning that stamp duty is only payable above the threshold of £500,000 which represents savings of up to £15,000 on purchases. This excludes the 3% second property surcharge for anybody who is unsure. – furthermore, to avoid a ‘cliff edge’ when this period ends, the tax-free threshold will then drop from £500,000 to £250,000 for a further three months before finally returning to the normal level of £125,000 from October 1st. This is huge news as savings of up to £5,000 can still be had for completions across the summer months.

Secondly, 95% mortgage guarantee scheme. – I said earlier that the return of 90% LTV mortgages has helped more first time buyers get back into the market with a 5% rise in demand from said buyers in the first 6 weeks of the year. And sales of between £100,000 and £250,000 have seen an increase of around 18% in the first couple of months of this year which is in keeping as buyers of lower value properties tend to be more reliant on the availability of finance – especially at higher loan to values.

So this mortgage guarantee scheme is part of a government initiative to turn generation rent into generation buy and means that the lenders who sign up for it (so far the likes of Lloyds, Santander, Barclays and HSBC are all involved) can purchase insurance from the government to cover some of their losses if the property is repossessed. A bit like an indemnity policy. So a safety net for the lenders to be comfortable offering high loan to value products to buyers again. And this is not just for the first-time buyer but also existing homeowners and those trying to re-mortgage with low equity. (this of course excludes buy to let mortgages which remain at a minimum 25% deposit required)

The third takeaway is Tax thresholds being frozen – a number of tax thresholds including those for capital gains tax and inheritance tax, will be frozen until April 2026. – Capital gains threshold will be held at £12,300 for the 21/22 tax year whilst inheritance tax remains at £325,000 (meaning tax payable only kicks in above those amounts.

So who does this affect?

The move to freeze CGT means anyone selling an investment property or a second home will have to pay capital gains tax of 28% on any increase in the property’s value since they first bought it above £12,300.

Couples who jointly own a property can combine their CGT allowance to £24,600. Inheritance tax is paid at 40% on all assets worth more than £325,000 that are not left to a spouse or civil partner, although this threshold increases to £500,000 if you leave your home to your children or grandchildren. Of course, the speculation over a hike in capital gains tax has already seen some landlords act and we have seen a spike in the sale of previously rented homes. With the 5 year freeze this may well reduce the number of landlords thinking of selling again.

And finally, the extension to the furlough scheme will be extended until the end of September. I have put this in here for 2 reasons: firstly if the government is continuing to support people’s incomes who can’t currently, work then they are less likely to struggle to keep up mortgage payments meaning we are less likely to see a spike in forced sales or repossessions that some have been speculating. And secondly, for all of you landlords with tenants who are being supported by the furlough scheme it means they are less likely to struggle to upkeep your rent payments! That’s a definite positive for all of us! It really is no surprise that reports are stating that we are experiencing one of the busiest ever Spring markets!

 

Lettings Focus

To start with we are still seeing average rents across the UK rising with a 1.4% increase across the last year. Interestingly though Zoopla reports some major cities to have decreased with London most notably dropping by around 8% and more locally Birmingham is apparently down by almost 1% year on year. So taking London out of the equation and the UK increase would in fact be more like 2.5% year on year. And this is expected to continue for the foreseeable future. 

So, guys, I would always encourage regular tenancy compliance checks and a rent review is something I personally tie in with those checks as its always good to know where you stand versus current market rates. A few other interesting points to note starting with a look at where the demand is at its strongest and it appears that commuter belts are stronger than main cities themselves right now. So take our area for example...

Rents in central Birmingham fell by -3.4% in the year to December 2020, but average rents across neighboring boroughs, including Bromsgrove, Sandwell, and Wolverhampton rose by an average of 5.3%. And as my area is Wolverhampton, I just want to advocate why our area is great to invest in for anybody who is actively looking...

1)We are seen as the best value commuter area outside of Birmingham – this takes into account the average cost of rent or mortgage payment plus annual train ticket. Second to us is Cannock! 

2)The average Gross rental yields are now above 6%

3)Tenant demand is unbelievably high right now and there is a real supply issue in the local rental market. – We have personally seen a further 50% increase in the number of tenants registered as looking for a property so far this year and Rightmove reported an increase or 22% in enquiries on properties for let in the New Year. All perfect ingredients for a buy-to-let and I will leave that there but if anybody wants to discuss further I do have a Buy-to-let advisory service which you can contact me if you want some help or are interested!

So that concludes the Spring property report and I do hope you found it useful or at least interesting! If anybody wants to share their views or opinions with me or perhaps would like some advice, please do contact me – I would love to hear from you!

 

Ali Durrant

Branch Manager of Concentric Sales & Lettings

ali@concentricproperty.co.uk

How To Get Better Tenants

Who is your perfect tenant?

Let’s think about how we define our perfect tenant. It might differ from landlord to landlord and will depend on what’s important to you. You’ll also consider the type of property you own and the area you’re in – for example, is it a HMO? Are you located in a city centre full of professionals? Or is it an area popular with families?

The type of person you are able to target will determine how you categorise them, such as:

Nice to meet you

The best way to get a feel for a prospective tenant is to actually meet them. As humans, we have an in-built ability to make hundreds of judgments based on seeing and talking to another human being, so what better way to get an idea of whether a person is right for your property?

This creates the opportunity to ask them questions about their situation, such as their reasons for moving, past rental situations, their jobs, and even their hobbies. It’s a great way to get a feel for who they are in a more natural and less formal way.

Don’t make promises at this stage, though. It’s perfectly ok for you to tell them that you’re not ready to make a decision yet and that you’ll be in touch, especially if you’re not getting a good vibe from them. You don’t have to take the first tenant you meet – in fact, you probably shouldn’t.

Check them out

Make sure that you do all the proper checks. Having a credit check, verifying their income, and immigration checks, will all determine whether they are the right tenant for you, and whether they can afford to pay their rent. However, be careful not to discriminate – letting things like race or colour, religion, or even benefit claims cloud your judgement is a big mistake, and as well as being unfair, is illegal.

Something else you might consider; using Google. Many people use social media, whether that’s Facebook, Twitter, or Instagram, and it’s surprising what you can find out about a person just by searching their name. It’s a useful tool if you want to make sure that the person applying to rent your property is right for you, as you can often get a good feel for their background, friends and opinions, which could all give you an indication of how they will be as a tenant.

Go with your gut

Above all, trust your instincts. If you want better tenants, it really is worth making the effort to meet them, talk to them, and don’t be afraid to do a bit of basic research into their background. Ask questions, and take the time to get a real feel for who they are. And be brave enough to admit if you don’t like them – there’s absolutely nothing wrong with admitting they are not a good fit for you, and looking for someone who is. So many landlords are in such a rush to get someone into their property that they just sign up the first person who takes an interest – and then have regrets when they create problems in not maintaining the property, or worse still causing damage or complaints.

Hopefully, this post has given you a little bit more confidence to go out there and seek out your perfect tenant. Making that little bit of extra effort can save you so much heartache in the long term.

Has The Tenant Fee Ban Encouraged Recent Rent Hikes?

There have been several reports over the past month suggesting that landlords have begun to increase their rents by as much as 22% since May. These same reports say that the hikes are due to the recent Tenant Fee Ban, but could there be other factors also in play?

Since the introduction of the Tenant Fee Ban earlier this summer, landlords all over the UK have been thrown into disarray due to a huge drop in income – the Ban has meant that landlords can no longer charge new tenants any upfront fees for services such as inventories and administrative costs, and this has led to a massive fall in income of up to 30% in some cases.

The fallout became apparent in June, where reports show a significant increase in rents following the Ban – a pattern which we also saw in Scotland when their Ban came into force earlier in the year.

Seeing the results from Scotland, Government made efforts to warn landlords not to increase rents, but look at other ways to increase income. But with the added pressure of changes to Section 21, and changes in demand for housing, the industry as a whole is being forced to raise rents in order to evolve and survive the upheaval within the property sector.

Other factors in rising rents

All of the changes in the industry, a combination of the Fees Ban, Section 21, and general cost increases, have come together to put pressure onto landlords, and we have seen a decrease in the number of landlords investing in new properties. Many letting agents have reported a drop in the number of managed properties on their books, and it’s not yet certain whether this is due to landlords saving costs by trying to manage the properties themselves, or whether they are simply ‘cutting their losses’ and selling up.

If there are, as predicted, less rental properties on the market over the coming years, the increase in demand for them will also mean that landlords and agents can secure those higher rents, because there is likely to be much more competition, especially in those more sought after areas, where people are not able to afford to buy on a mortgage.

Optimistic

Despite all the odds, though, it does seem that the majority of landlords and agents are optimistic about the future of the lettings industry.

The property sector, especially lettings, has always had the ability to ‘roll with the punches’, and adapt – perhaps because changes are so frequent that we have all come to expect it and learned to evolve more readily than other industries.

There will always be a need for good housing in the UK, and it looks like for the foreseeable future, there will be a rising demand for rental properties, and as long as landlords and agents can continue to work together to improve the property market and keep up the excellent standards that tenants have come to expect, then despite rising rents, they will seek out properties knowing that they are still getting value for money.

The Future of Lettings

There is an upside to all of these changes – because those landlords who stay the course will be the ones who can offer a higher standard of accommodation, can keep up with legislation in order to keep tenants safe and the property in good repair. In short, it may be, in the long term, a way to shake up the industry in order to bring it up to the standard we’ve all come to expect.

Looking For A Higher Rental Yield? These Are The Top Areas To Buy Rental Properties

There’s no denying that the lettings market has had it tough over the past 12 months. We’ve seen massive changes in legislation, not least the Tenant Fee Ban, which has mad things harder, both in terms of workload and income. As landlords, it’s difficult to know which path to take – how can we continue to grow and even thrive in this new landscape? And where should we be looking if we want to expand our portfolio to get the best return for our money? Here, we will talk you through some of the recent figures showing the good, the bad, and the downright ugly when it comes to the highest yields in the buy to let market.

The Great Postcode Lottery

As with everything these days, location is king, and that’s particularly true if you’re searching for buy to let properties. It might come as no real surprise to learn that areas boasting the highest yields tend to be in university catchment areas, so if you happen to be looking within NG1, for example, you’re quids in with a massive 11.99% yield – the highest in the UK.

But that’s only part of the equation – if you’re thinking longer term, you’ll also be considering things like capital gains, and rental price growth. With this in mind, information gathered by the UK Land Registry and Zoopla recently looked at the best and worst areas to purchase buy to let properties in the UK – and the results are quite surprising.

The overall ratings

Taking into account the overall yield, plus capital gains and growth, the research revealed that the most lucrative place for buy to lets is Colchester – perhaps influenced by the University of Essex winning the ‘University of the Year’ award in 2018. In fact, the majority of placed that ranked in the top 10 were University cities, which is not surprising as they tend to be the most sought after by the annual influx of students looking for accommodation near to where they study.

The rest of the best were as follows:

  1. Colchester
  2. Stockport
  3. Manchester
  4. Birmingham
  5. Canterbury
  6. Coventry
  7. Wolverhampton
  8. Peterborough
  9. Enfield
  10. Luton

The rising stars – The Midlands

There are three notable Midlands based cities in the top 10 – Birmingham at 4, Coventry at 6, and Wolverhampton at 7. Interestingly, Wolverhampton seems to be the one to watch – an area which has risen from 20th position on the last recorded survey. Recent regeneration in the Midlands as a whole has ensured that properties in these areas will remain to be sought after, and are expected to see future growth with the forthcoming HS2 rail line, making it more accessible and attracting new business to the area.

In contrast, areas around London have begun to see a decline, as again the landscape has changed, and we see more people being ‘outpriced’ by the property market.

The lowest yields

The bottom five in terms of yield are TW20 Twickenham with 2.00%, WD7 Watford with 1.99%, N6 London at 1.93%, HP9 Hemel Hempstead with 1.91%, and bottom of the league CW12 Crewe, with a mere 1.88%. Landlords who have properties to rent in these areas may find that they have to work a whole lot harder to increase those yields.

Other ways to increase the yield of a rental property

When you’re looking at ways to increase the yield of a property, there are a few basic things you can do which could help you get those numbers up – and they’re often overlooked.

Check your spending – It might seem pretty obvious, but if you’re spending out for things like insurances and mortgages, that’s all money taken from your profits, so it’s important to review what you’re spending on a property, and shopping around for better deals if you want to maximise your income.

Research tenant needs – In order to make your property as attractive as possible to tenants, you need to think carefully about what they might be looking for. Nowadays, people demand adequate storage, a good number of electric points, and plenty of space to fit kitchen appliances – if you can provide what they need, and offer additional sweeteners, then they will choose your property over one which doesn’t have those things – and they will pay a premium for it.

Kerb appeal – and the ‘wow’ factor – People shop with their eyes, so think about what your potential tenants see when they approach your property. Make sure that the garden is tidy, fences and gates are in good repair, and doors and windows are clean. First impressions of your property are vital in getting a ‘yes’ to what you are offering. And that means creating an attractive exterior, as well as a well decorated and maintained interior.

Wolverhampton Letting agents packs the room EVERY 3 months with landlords wanting to learn.

Wolverhampton Letting agents packs the room EVERY 3 months with landlords wanting to learn.

On a wet cold and windy night on the 12th June, local Lettings Agents Concentric (incorporating Lawsons) which have been renting and managing properties in the Wolverhampton area for nearly 30 years, ran its second seminar of the year, with one intention in mind… Educating landlords

Over the last few years, there has been literally hundreds of legislative changes that affect a landlord renting their property out, many which now carry heavy penalties such as fines, prosecution and even criminal sentences, not to mention banning orders, so it is more important now, more than ever, that landlords keep abreast of the legislative changes and keep themselves up to date.

Some of the changes include having to register with the ICO (due to GDPR regulations) registering deposits, not charging fees to tenants, numerous changes to agreements and notices, massive changes around the HHSRS and rules allowing tenants to now take legal action against landlords for maintenance failings… just to mention a few.

Concentric and previously Lawsons have been running seminars for year, with their first ones being around 1997, so they are no stranger to running such events, but rather than just put on random speakers, like many do, they use their own team of experienced experts, that are also expert speakers and compliance coaches, so the standard and quality of the content shared is of an extremely high level. Higher than any content many have seen at any other seminar out there for landlords.

 

Dawn Bennett MARLA and former ARLA regional representative, is the key speaker at most of the local agents seminars, and she is the Concentric groups Compliance Director, and has worked alongside Sally Lawson for over 13 years, (Sally is a national figure in the Residential Lettings space, author and former ARLA president)

Dawn oversees the centralised management centre for Concentric, (formerly known as “Lawsons”) and as a result takes care the team who managing literally thousands of properties all over the UK, from standard tenancies, HMO and LHA, everywhere from Newcastle to as far south as Portsmouth, meaning there isn’t much she hasn’t seen.

Dawn. Loves to educate and support landlords, and has an easy, practical and relaxed style, full of case studies, stories and real live examples, to help you understand and remember the key points…

The events are every quarter, normally held in the Novotel in Wolverhampton centre, and hold a maximum of 60 people, and generally are fully booked weeks before the event, so if you want to pop along, book you place early to be sure of a place

When asked why she runs these events for FREE for local landlords, Dawn said “I cannot believe how attacked landlords are being right now by the government and all they are doing is trying to provide safe homes for people, its wrong… this is my community and we need to keep them safe, or else there may be a mass exodus from the market by private landlords, and then where will everyone live? I love it, it helps landlords stay safe, and it keeps more people with roof’s over their heads, what can be wrong in that”

So, when you next attend remember to take your note book with you, you might need it!

To get a flavour of some of the content shared, visit the dedicated Youtube playlist of excerpts from some of Dawn previous legal updates Dawns Legal Playlist Youtube

And to reserve your space at the next event visit www.wolverhamptonlandlordseminars.co.uk

Client Money Protection Scheme will now be mandatory

From 1st April 2019, it has become mandatory that all property agents hold a registered membership with a certified money protection scheme. This is by way of insurance for landlords and tenants, to prevent rogue agents from keeping back money from deposits and rents if something goes wrong. Let’s look at what this means for landlords, and what you should be looking out for when you employ an agent to manage your properties.

Imagine your horror if you learned that the agent you’d trusted with your deposit money had shut up shop and had got on a plane using your money. What would you do, as a landlord? In the past, if your agent wasn’t a member of a money protection scheme, you’d be the one who was out of pocket, and as such you would be liable for reimbursing that money to your tenants.

Scary thought – and although rare, some landlords sadly faced this scenario. Imagine if you had a portfolio of 10 properties, and you lost the deposits for all of them. Assuming you worked on one month, at, say £500 as the average monthly rent upfront, that would put you at a massive £5,000 loss. That’s a lot of money to recoup.

That’s why it’s absolutely vital that you ensure that the agent you have employed, and have entrusted to take care of your money, is registered with a money protection scheme.

And as of April 2019, it has become law that all property agents are insured under a money protection scheme, and that they let you know which one. They are required to have the information displayed on their premises, and should also state the company they use on their paperwork when you employ them. If they don’t you need to ask for it.

Where can I find out if my agent is insured?

Now that agents have a legal obligation to be insured by a money protection scheme, they should have the name of the company they use, as well as the certificate of membership displayed on their premises, and on their website. Most agents will have the logo displayed on their home page (sometimes you’ll find it at the bottom of the page, along with other memberships and governing bodies they are part of). If you don’t see it, drop them an email, or call them to ask them to provide you with a copy of their certificate of membership.

Government approved CMP schemes are as follows:

If you see any of the above logos on the agency website, you can be assured that they are covered, and therefore so are you.

I’m an agent – what if I’m not a member of the Client Money Protection Scheme?

As of the 1st April 2019, it is a legal requirement that you are a member of one of the approved schemes as detailed above. Your local authority can and will fine you if you are found to be in breach of the regulations.

The penalty for not being a member of a money protection scheme can be up to £30,000. There is also a fine for not displaying membership, and not informing clients of change of membership, which can be up to £5,000.

What are the joining fees?

The fees for agents are set up depending on your total property values. Following prices are as a guide, and may differ depending on which suppliers you use:

Up to £500K – from £360 + VAT

£500K to £1M – from £575 + VAT

£1M to £3M – from £1,020 + VAT

Concentric Compliance Director Dawn Bennett discusses the Client Money Protection Scheme at our recent landlord seminar event:

Are you in danger of being banned as a landlord?

Since April 2018, it has been possible to be banned from being a landlord. Not unlike facing a 12 month ban from driving if you break the law, as a landlord, you could now be stopped from letting out or managing properties for being found guilty of housing offences. It’s a pretty radical, although arguably necessary move, brought into play to crack down on rouge landlords and agents. So what does it mean, exactly, and how could it affect you?

Reasons for banning

This rule has come in as an attempt to crack down on not only rogue landlords, but also rogue agents. It exists to protect tenants from being scammed, being put in danger, and being forced to live in conditions which could affect their health and wellbeing.

There are now 170 pieces of legislation that landlords and agents have to comply with. And every one of those legislations fall under housing offences if you are found to be non-compliant. Of course, it’s virtually impossible for a landlord to be able to list all 170 pieces of legislation, but this just highlights the importance of keeping as up to date as you can with relevant laws and changes in the industry.

If you fall foul of having up to date gas certificates in a property, have an unlicensed HMO, or have failed to do immigration checks, all of those things, amongst others, are criminal offences, and could get you banned for a minimum of 12 months, or in some extreme cases lead to imprisonment. If you are found to have put someone’s life in danger by cutting corners, or by not complying with legislation, that could lead to a lifetime ban and imprisonment.

The Rogue Landlord Database

Those landlords who are found guilty of an offence are now entered onto a database for either the duration of their ban, or at least two years where the entry was made under the authority’s discretionary powers.

Unfortunately, at the present time, the contents of the database are only accessible to local authorities and deposit schemes, and cannot be accessed by members of the public.

The only exception to this at the moment is London, where the Mayor of London and the London Assembly have set up a separate database of landlords who have been prosecuted or fined by London Boroughs for housing related offences, and this can be viewed by the general public. As it stands, there is no plan to roll out anything similar in the rest of the UK.

However, on the advice of Government authorities, local housing authorities are encouraged to allow tenants to request information about specific landlords if they suspect they might be on the rogue landlord database.

Who can apply a banning order?

Banning orders can be applied for by any local housing authority, and the rules state that the ban must be for a minimum of 12 months. It is up to that local authority to recommend the length of time a landlord or agent should be banned for, according to the severity of the offence.

If the offender has a history of failure to comply with regulations, these can also be taken into account when that decision is made.

What happens to tenants if a landlord is banned?

A tenancy cannot be invalidated if a landlord is banned. In some cases, the local housing authority responsible for the ban may take ownership of the tenancy. In any case, the occupier of the property will not lose their rights as a tenant.

Can a landlord appeal against a ban?

It is within a landlords’ right to appeal if they believe they have been banned unfairly. The appeal has to be submitted within 28 days of notice of intention of the banning order.

Could Brexit be good news for landlords?

2019 is proving to be an unpredictable market for properties in the UK. As with many other industries, people are hitting pause in anticipation of the outcome of the Brexit deal. Evidence suggests that over the past few years, people putting a mortgage down on a property has fallen, and continues to do so, while people renting privately is rising, at roughly the same rate.

This of course, is not all down to the Brexit effect – the rise of house prices over the past decade will always determine the number of house sales, in part because there have been some major changes in both economy and regulations, making it harder for the new generation of 20-somethings to make their way onto the ladder. But it seems, those same threats are encouraging people to take the less risky, and more flexible option, of renting. And it seems logical that the fear of Brexit has had quite an impact.

The 2019 rentals market

Property experts predict that we will see these trends continue into 2019, which will see the market slow down at a steady rate. In contrast, this proves to be a positive for property investors and landlords, because those same experts are predicting that the uncertainty of Brexit will further fuel the huge demand for rentals in the UK, particularly in the private sector.

Figures show that across England and Wales, the number of rentals has risen by 17.4% year on year, and 24.6% in London.

It seems then, that Brexit is having no effect on the rentals market as a whole – demand is still growing for good rental properties and looks set to continue to do so.

Ongoing shortages

Contrary to the belief that rentals will begin to decline following less migration from Europe post-Brexit, there is still a huge shortage of affordable rental housing due to the ongoing chronic undersupply and difficulty in getting a mortgage due to new restrictions. This doesn’t appear likely to let up, as Government intervention makes it more and more difficult to purchase property in the UK with new legislations and tax changes.

There is more demand than ever for rentals, and that demand has increased since this time last year, and some experts are advising that property developers take advantage of the current climate and levelling house prices while they can. We are still in the very strong situation whereby the income from rents is significantly more than the cost of buying a property even with a mortgage attached.

The next five years

Along with the increase in the number of rentals, it has been predicted that due to the sheer demand of rental properties, the price of rents will increase by around 15% in the next five years. This is from a report published by the Royal Institute of Chartered Surveyors.

It ties in with the increase in demand, of course, but also follows the impact of taxes in the buy-to-let sector, which is affecting landlords decisions in buying property. This in turn is creating a further shortfall, which is having a knock on effect on the rental demand.

It seems evident that for those landlords and property developers who are able to stand firm through the current uncertainty, there could be rewards to be had, as there will never be a shortage of people looking for properties to rent.

Sally Lawson CEO of Concentric says, “after 3 decades in the rental sector and at least 2 recessions, the rental sector has held firm, never waning, with steady growth every year since 1987, and predicted to grow from being 20% of the entire uk housing stock to over 50% by 2050, I see no signs of this trend changing in the near future, Brexit or no Brexit, people have to live somewhere”