Changes to Section 21

Guild Blog: What do proposed changes to Section 21 mean for landlords and tenants?

On Sunday 21 July this year, the Government announced that they had launched their consultation on the abolition of Section 21. The consultation, which will only cover England, will be open for 12 weeks closing on Saturday 12 October.

In the consultation, the Government proposes to remove Assured Shorthold Tenancies (ASTs) from the Housing Act 1988, essentially making assured tenancies the only type of tenancy available to landlords.

In the proposal that the Government has put forward, tenants will have the option of agreeing to a fixed-term assured tenancy, which means both parties are committed to a predetermined time or a periodic assured tenancy. In the case where a fixed-term tenancy has not been terminated by the tenant or the landlord using the Section 8 Notice process, it is possible for it to be renewed to a new fixed term. If this doesn’t happen, it will automatically revert to an assured periodic tenancy.

If the decision is made by the Government to move forward with the proposed changes and they are passed into law, there will be a transitional period of six months before the law comes into full effect. So, if nothing else changes and this matter is prioritised, we could see it come into place either towards the end of next year or perhaps early in 2021.

Would the changes impact tenancies currently in place?

According to Iain McKenzie, CEO of The Guild of Property Professionals, there has been confirmation that the Government plan for the changes not to be retrospective. “What this means is that should the law come into place, it will not impact tenancies that are already in place at the time it is passed. So, landlords in these agreements will still be able to use Section 21 until the tenancy comes to an end. Any new agreement thereafter will then become an assured tenancy,” he adds.

What if the landlord or tenant wants to end the agreement?

If the landlord wishes to terminate an assured tenancy, they will have to give the tenant a Section 8 eviction notice based on one of the grounds specified in Schedule 2 of the Housing Act 1988.

“In the instance where the tenant decides to end the tenancy, they would have to give one month’s notice, but only at the end of a fixed-term tenancy or during a periodic tenancy, unless their agreement includes a break clause,” explains McKenzie.

A reformed Section 8 Notice process

If Section 21 is abolished, other aspects will need to come into play to protect landlords such as the improvement of the Section 8 notice process. The Government is proposing that the process for possession be accelerated, removing the need for a court hearing if unchallenged by then tenant.

McKenzie says: “There are several other changes that the Government will be looking to make to Section 8 to mitigate the loss of Section 21, such as adding a new ground into Section 8 for when a landlord wishes to sell the property or widening the current grounds to cover a landlord, their spouse, partner, or family member, should they wish to move into the property.”

It is also proposed to strengthen the current mandatory ground 8, which pertains to rent arrears, as well as ground 13 to allow landlords to use this if tenants routinely refuse access to the property for safety checks and repairs.

For tenants, the Government wishes to include the prescribed information requirements that currently exist via the Deregulation Act for the valid use of Section 21 in the Section 8 process to ensure their existing protection is maintained.

Impact on rentals

Even with the proposed amendments to the Section 8 process, with Section 21 abolished, landlords will feel they have fewer options when dealing with defaulting tenants – which will have repercussions on the rental market.

“If landlords feel they have less protection the likelihood is that they will become far more risk-averse and less likely to want to rent out their property. This could mean the supply of rental properties would decrease, which in the long term could push up rental prices. Landlords will also be far more stringent in their tenant selection process, meaning some tenants may find it far more difficult to find a place to live,” says McKenzie.

What should landlords do to prepare?

The Guild’s inhouse Compliance Officer, Paul Offley, says: “It is important that landlords have a workable process for obtaining possession where there is a justified need for them to do so. Any process which helps execute this process, whilst being fair to the tenant, has got to be seen as a positive move. Any change brings concern but providing MHCLG is working with organisations like The Guild and that they listen to the feedback they receive, then hopefully this will benefit all parties concerned.”

To find out more about what the Government is proposing read this article

If you are looking to rent your property, find your local Guild Member.

Guild Blog: Good Tenants, Bad Tenants … and Amateur Landords

GOOD TENANTS, BAD TENANTS… AND AMATEUR LANDLORDS

 

 

A recent report by a leading Insurance Company claims that one in seven tenants break the rules of their leasing agreements.

The most common offences include a failure to pay rent on time, smoking and keeping a pet; but perhaps of even more concern is that it is claimed that one in eleven (or almost 10%) of renters are living contract-free.

25%    Failing to pay rent on time (or at all)
21%    Smoking in the property  
18%    Keeping a pet in the property   
17%    Damaging or making alterations to the premises  
16%    Changing the locks 
14%    Caused disturbances or a nuisance to neighbouring properties 
14%    Sublet a room without notifying the landlord 
13%    Failed to clean accessible windows 
12%    Redecorated without permission
10%    Failed to check smoke or carbon monoxide alarm 

The most common sanctions for breaking tenancy rules include losing some or all of the deposit (52%), followed by having to pay for any damages (22%) and in some extreme cases, tenant evictions (4%). However, more than one in five (21%) tenants say that the landlord never found out about their misdemeanours.

This lack of transparency can hurt both the landlord and the tenant. The renter risks exploitation and even summary eviction if they do not have a binding agreement to protect them, whilst the landlord is exposed to potential misuse of the property and possibly even a sitting tenant who can’t easily be removed.

In a professional world, the tenant’s behaviour is defined and bound by their contract, and a good landlord will actively manage and nurture the relationship to protect their investment.

Any failures for both sides to act responsibly can be very expensive; for example, a separate report published last week highlighted the risks taken by landlords who don’t properly deal with repairs requests by inhibiting the ability to serve a section 21 notice.

So what should landlords (or their letting agents) do as a minimum? A few simple rules may help:


Legal Agreement:
Ensure that this is appropriate, signed and dated. Writing your own contract will save some money, but may miss out important aspects – it is best to get proper advice, or employ a solicitor or letting agent to assist.  

Regular Inspections: 
If you inspect as opposed to expect, it is much more likely that the tenant will follow the rules. Always ensure that you give the tenant fair warning of your intentions to visit the premises so as not to breach their right to privacy.

Be Informed: 
There are increasing legal requirements on both landlords and tenants, and ignorance will not be a suitable defence if something goes wrong!

Respond in a Timely Manner:
Living with broken or poorly working appliances can be very frustrating, particularly when the tenant is paying significant rent. How long would you put up with a hotel room where the lights or plumbing does not work? Therefore, you should deal as quickly as you can with requests from tenants for repairs and improvements, even if the answer is ‘no’.

 
Keep Communicating:
Legal disputes can quickly get expensive, so the ability to discuss any issues openly and rationally may reduce the stress and potential cost. Remember that very few tenants set out to get themselves evicted.

See Both Sides
You need to think of the property as a business investment and not as your home. Your tenants may have a different lifestyle and tastes to you, and are paying in hard cash for the right (with few guarantees and little or no financial return) of borrowing your property; also, don’t forget finding new tenants can be expensive so you may want to bend occasionally over the small stuff.

With average yields now at about 5% across the UK, taking the time to find a good tenant and looking after them properly (avoiding constant personnel changes and voids) may be the best investment you can make in your rental property.

Also, the legal requirements in relation to letting are now so onerous that having a professional manage your rental affairs might be the best solution in the medium term.

Looking to rent a property? Find a Guild Agent here. 

Guild Blog: How to Survive the Rental Market

HOW TO SURVIVE THE RENTAL MARKET

An increasing number of people are now renting rather than buying. In fact, PwC has recently predicted that by 2025, 7.2m households will be in rented accommodation, compared to 5.4m in 2015.

With rising house prices, first-time buyers are renting for longer in order to afford. But the rental market can also be a challenge. As with most things, it’s much easier once you’re prepared, so here’s an overview of what you can expect so you can sail through the rental market. 
 
Flatmates
Many of us choose to go into flatshares when renting. They’re often cheaper and they’re a great way of making new friends. But they can be a challenge, especially if you’re not the biggest fan of the person in the next room. So how can you be sure that you’ve landed on a good selection of housemates before you start renting? First things first – always meet them before you sign the contract. This seems obvious, but you’d be surprised how many people move in without any idea of who they’ll be living with. 

Although there’s no definite way of being sure what they’re actually like to live with, there are a few things you can look out for when you meet them. Firstly, don’t be afraid to ask questions; go beyond what they do for a living, and ask what they do for fun, how often they’re in the house, and if they socialise together. All of this will add to the general atmosphere in the property. Secondly, take note of how well the house is being looked after when you visit for a viewing. If the bin is overflowing and there are dirty pots on the stove, it might not be for you if you like things to be clean and tidy. Finally, discuss how bills are split and paid. This will give you a good indicator of how organised your potential housemates are, and you can iron out any problems before signing for the property. 

Finding the property
One of the best things about renting is that it’s temporary. Although this can feel like a downside, it does mean that you don’t need to think too far into the future and can find a property that suits your current lifestyle. To find a good rental property for you, make a list of all the things you require for your lifestyle and search for a property that fits the bill. And remember to prioritise; it’s unlikely that you’ll find the ideal property, so think about what is a must and what you can compromise on. 
 
Securing the property

The rental market moves extremely fast, so it’s important to be proactive in your search. Set aside time when you’re available for viewings and ask the lettings agent to take you to a few properties during each appointment so you can compare them easily. When you find a suitable property, be prepared to move quickly and put in an offer on the day or the next day. 

It’s also a good idea to be prepared well in advance for the next few steps. Make sure you have funds for your deposit and references ready so the next part of the process runs smoothly. Informing the lettings agent that you have these available will put you in a strong position for securing the property. 

Fees
It’s now a legal requirement that all lettings agents display their fees on the websites and in their offices. Sometimes, you also have to pay a holding fee to secure the property. Make sure you have a look at the fees before going on viewings so you know how much you will have to pay.

Deposits

A rental deposit covers your landlord should you miss any rent or damage their property. They are typically between four weeks and eight weeks rent, but check this in advance so you can save the money.

It is a legal requirement that your deposit is put into a deposit protection scheme, so always check this before signing any contracts. 
When it comes to getting your deposit back, it’s a case of looking after the property while you’re a tenant and reporting any problems. Check the inventory when you first move in and add any existing damage that you notice, making sure it is confirmed by the landlord. Take photos when you first move in and when you leave so you have proof of any previous damage to avoid being penalised. If the property is furnished, remember to take photos of what is present when you first move in and when you leave. All of this should be recorded on the inventory, so check everything is present and correct. For more advice on getting your deposit back, please click here

Insurance
Tenants can get home contents insurance to cover the cost of their belongings under unforeseen circumstances. Most tenants won’t need to worry about buildings insurance as this should be covered by the landlord, but check this before signing for the property. You can get home contents insurance if you’re renting a shared property, but find out from the insurer exactly what you need to do to ensure you are covered. 

Guild Blog: What is ‘Right to Rent?’

WHAT IS RIGHT TO RENT?

As of the 1st February 2016, no tenancy can legally commence until the right to rent has been established. But what exactly is right to rent? Here is a very brief overview.

Before a property is legally rented, all landlords have to confirm that the tenants have the right to rent residential property in the UK. And, under Section 22 of the Immigration Act 2014, landlords should not authorise an adult to occupy a rented property unless the adult is a British Citizen, is a European Economic Area citizen, or Swiss National, or has a Right to Rent in the UK.

Who needs to be checked?
Landlords or the lettings agent must check that a tenant or lodger can legally rent the residential property in England.
Before the start of a new tenancy, they must make checks for all tenants aged 18 and over, even if:

•    they’re not named on the tenancy agreement 
•    there’s no tenancy agreement 
•    the tenancy agreement isn’t in writing

All new tenants must be checked. 

If the tenant is only allowed to stay in the UK for a limited time, the check needs to be undertaken in the 28 days before the start of the tenancy.

Some types of accommodation are excluded from these checks. Click here to view these types. There is no need to check tenants in some types of accommodation (e.g. social housing and care homes).

How will tenants be checked?
All landlords and lettings agents have to check original documents to make sure a tenant has the right to rent in the UK. 

What will happen if a tenant fails to pass the checks?

If a tenant fails to pass the checks, the landlord or letting agent cannot legally allow the tenant to rent the property.

Further checks
Landlords and lettings agents must make further checks on their tenants to make sure they can still rent property in the UK, if their permission to stay is time limited.

If tenants fail to pass the further checks, they may be evicted from the properties.

What could happen to landlords if they fail to comply?
Landlords can be fined if they rent their property to someone who isn’t allowed to stay in the UK and you / they can’t show that they checked a tenant’s right to rent.

Can landlords delegate the responsibility to a lettings agent?
Landlords can ask any agents that manage or let their property to carry out the check on their behalf. All landlords and lettings agents should have this agreement in writing.

If a tenant sub-lets the property without the landlord knowing, they’re responsible for carrying out checks on any sub-tenants. 

For further information on right to rent, please visit gov.uk

Guild Blog: What Should I Do When a Tenant Won’t Pay Rent?

What Should I Do When a Tenant Won’t Pay Rent?

 

You’ve found the perfect tenants, they’ve moved in without issue, and you’re expecting smooth sailing with the tenancy. But then you check your bank account and find that rent hasn’t been paid that month. What do you do? Guild Members share their expert advice to help in this tricky situation. 

 

1. Communication 

All of our agents agree that communication is key to keep track of payments and to resolve an issue with tenants.

First of all, it is important to check to see if rent is due on time, rather than realising later in the month.

“Check your bank statement the day after the rent is due,” advises Louise Cawley from Newland Rennie. “Your tenant has a responsibility to pay rent the same day every month as if he/she were paying a mortgage, the rent should never be late. If the rent has not come in there may be a simple explanation, a telephone call to the tenant may sort the matter out very quickly.”

“When a tenant defaults with their rent, the first steps are to contact them,” said Suzanne Bellamey of Jackson Green & Preson. “Non-payment of rent does not always mean you have a bad tenant. Sometimes their personal circumstances may change throughout the tenancy, such as losing their job or suffering from ill health and relying on sickness benefits.”

If a miscommunication has happened in the past, now is the time to fix it.

Sarah Green from Mundys says: “Communication is key with tenants to enable the right course of action to be taken in the event that a tenancy is not running as planned. You need to ensure that all the correct information and guidance is provided to the tenant at the commencement of the tenancy so that the tenant is clear on what, when and how payments can be made.”

 

2. Clear records 

Be sure to keep clear records of all communications and decisions while you are trying to get rent from the tenant. It may be needed in court, though hopefully the dispute won’t reach that stage.

Sarah Green from Mundys said: “You should ensure that you keep a record of contact with the tenants, a clear statement of account and copies of letters or notices served to a tenant.”

 

3. Guarantor 

Does your tenant have a guarantor to pay their rent if they are unable to? Now is the time to find their contact details.

Sarah Driscoll from M&M Estate & Letting Agents says: “Remind the guarantor of their agreement to pay the rent should the tenant not be able to. As with the tenants, keep any conversations and emails professional.”

Emma Foreman from Complete Property agrees that talking to the guarantor could solve the problem.

“If you have a guarantor for the tenancy, speak to them immediately as it is likely that they are unaware of any rent issues and may be in the position to pay the rent over directly themselves,” she says.

4. Insurance

Landlord insurance is always a good idea to have in case of situations like rent not being paid.

“If you have any form of landlord insurance now is the time to review the terms,” says Sarah Driscoll from M&M Estate & Letting Agents. “Should you need to make a claim, you want to make sure you have adhered to the T&Cs of the policy. Depending on your insurance, you may find they take things out of your hands.”

Suzanne Bellamey from Jackson Green & Preston has further advice on landlord protection. “I recommend that all landlords take out a ‘Rent Guarantee’ cover offering legal cover, rent arrears and offers financial help for part of the empty period of the property once possession has been obtained through the courts, whilst the property is either being re-advertised or brought back to a satisfactory standard, paying part of the monthly rent.”

Steve Thompson from Thomas Morris says: “A good policy will protect against lost rent when a tenant stops paying but does not vacate a property and will also cover the legal costs involved in recovering possession of the property. This is something we would strongly recommend to any Landlord, though it is important to check and understand the full details of any policy and the cover it provides.”

5. Timeline 

So what should your communication plan of action be?

“When a tenant doesn’t pay, the first thing is a call, email or text to the tenant (the initial check) to ask why,” suggests Joe Gervin, in-house solicitor and Director of LPS in Liverpool.

“Keeping a record of all initial communications is key in case it is required as evidence in court. We would normally recommend a grace period of seven days from due date to allow for banking logistics. If the initial message or call doesn’t work then a formal letter requiring payment forthwith (usually in 7-14 days) is required. Keeping a copy of this letter is imperative. If rent is still not received, then attendance at the property is required. Give 24 hours’ notice that you will be attending to inspect the property to discuss arrears.”

6. Legal

If communicating clearly and giving the tenant time to pay hasn’t solved the issue, it is time to consider legal action.

Sarah Green from Mundys says: “If a landlord is experiencing difficulties with a tenant, speak to the letting agent who will provide guidance on how the matter can be handled. A Legal Adviser and Landlord Bodies such as National Landlord Association can also provide useful advice and guidance for members.

“In the event that the tenant is not keeping up to date with their payments and the landlord is unhappy, it is important to serve the correct section notice at the correct time. A Section 21 notice provides the tenant with a minimum of two months’ notice, coinciding with the fixed term of the tenancy, of the Landlords intention to regain possession. A Section 8 notice can be served where a tenant is two months in arrears and provides a shorter two-week notice of the landlord’s intention to regain possession. Serving the appropriate notice promptly can stop the issue escalating.”

Jenny Owen, Sawyer & Co agrees, though recommends leniency if the tenancy has been successful up to that point.  “If the tenant has always paid on time in the past it, depending on the situation you may decide that giving them a small period of breathing space to catch up is fine, otherwise depending on how long they’ve been in the property, you have the option of contacting your solicitor and serving notice under Section 21.”

The Guild recommends seeking the help of a qualified advisor, such as a solicitor, to get the best advice before serving a legal notice.

 

7. Solutions going forward 

If you are able to resolve the problem and the rent is paid, it is worth looking at solutions to make sure the tenant can pay on time in future.

“If you understand the reason for a late or non-payment of rent, you are able to look at simple solutions. For example, an alteration to the rent payment date so it coincides with the timing of work incomes, or a payment plan if the tenant is struggling to make a single larger payment per month. This will prevent the situation from escalating.”

Guild Members make great letting agents. Find your closest Member here and find out more about lettings services today.   If you would like any advice about a rental property then please contact our experienced Lettings Department on 01765 694802 or 01845 522680.