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Lettings legalities

publication date: Jul 9, 2010
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COMPLIANCE FOR LANDLORDS

Mark Daruvalla The list of legal requirements for agents seems endless, but all agents must comply. Some lettings agents – especially those new to the sector – do not fully understand their responsibilities and are not complying with all the legal requirements. The penalties can be severe.

Landlords are responsible for the safety of their tenants whilst they are in the property. They must maintain the property and undertake any necessary major repairs. This includes the structure and exterior as well as electrical, heating, hot water and sanitary conditions. In addition, there are compliance rules to follow and good practice standards to meet.

1 ELECTRICAL APPLIANCES, EQUIPMENT AND WIRING TESTING

wiresLandlords must ensure that the electrical installation and appliances in a property are safe when a tenancy begins and are maintained throughout the tenancy, with minimum safety standard of a CE marking.

Landlords need to carry out regular basic safety checks to ensure the electrical installation and appliances remain in good working order and, although not compulsory, to have an electrical inspection before a new tenant moves in, with a copy of the Periodic Inspection Report available to the tenants.

If the appliances have been checked then each should have a PAT (Portable Appliance Test) sticker on the plug showing the testing date.

If the landlord lets a property with multiple tenants, they must have the electrical installation checked every five years and a periodic electrical safety inspection report must be available.

2 ENERGY PERFORMANCE CERTIFICATES

Introduced in October 2007, EPCs are an extension of the HIP scheme introduced for house sales which means that all properties that are on the market to let must have an EPC that must be available for inspection by prospective tenants. Once an EPC has been obtained it is valid for 10 years.

3 HER MAJESTY’S REVENUE & CUSTOMS

HMRCHMRC performs random checks on lettings agents to ensure that their end of year tax reports are fully compliant. All agents need to provide an annual tax report that shows which landlords own which properties and how much income the agent received on their behalf. The onus is entirely on the property agent to provide this completed form. Again, penalties can be severe.

4 FINANCE AND ACCOUNTING

Professional accounting practices are vital to ensure the business is fully compliant with HMRC and coinsCompanies House. Lettings agents must pay great attention to detail for all aspects, such as reconciling balances and making landlords aware of all commissions they are taking, especially on property maintenance work.

Agents are responsible for paying VAT for landlords and must complete a VAT invoice. If they don’t, the agents themself is liable for any VAT owed. Agents should be able to produce as evidence a list of all the money they hold which is the landlords’ rents and deposits.

It is not permitted to overdraw client’s money, either by way of an overdraft or by paying Landlord A’s expenses from Landlord B’s income. If there is any loss to clients’ money as a result of banking errors, overdrawing or administrative errors, the letting agent should immediately reimburse it from their own office funds.

5 TENANCY AGREEMENTS

keysIt is vital to have a tenancy agreement signed before any tenant occupies a property. It must make the tenant’s obligations clear, as well as the limitations of their rights.

Although contracts vary on aspects such as property type and price, common details include:
Names and addresses of the tenant and the landlord
The let property address
The date of entry into the let property and the termination date
The rental amount and frequency of payment
The amount of deposit required
The type of tenancy eg short term or assured tenancy
Details of the notice period needed to leave the property.

Many lettings agents/landlords are making the mistake of not running their agreement template past a solicitor, which can result in restricted rights to either the tenant or the landlord.

It is imperative that all landlords take notice of the legal requirements and compliance issues surrounding rental properties.

If landlords use a lettings agent, the agent’s management software helps the landlord by ensuring that the landlords are fully compliant and up to date with the law and, therefore, better equipped to deal with any disputes during a tenancy.

6 SMOKE ALARMS & CARBON MONOXIDE

smoke alarmProperties built since June 1992 must have interlinked mainsconnected smoke detectors/alarms on each floor. Older properties must be fitted with standard (battery powered) smoke detectors/alarms which must be regularly checked to ensure that they are in full working order. A carbon monoxide detector should also be supplied but is not compulsory.

When a new tenant occupies a property, the landlord should activate the detectors/ alarms to demonstrate that they work, the tenant should confirm this in writing with a photographic record of the alarms taken by the landlord.

SOFT FURNISHINGS

Soft furnishings must comply with the Furniture and Furnishings (Fire) Safety Regulations 1988 and be fire safety compliant; landlords must check the fire safety label on all furnishings.

7 TENANCY DEPOSIT SCHEME – A LEGAL REQUIREMENT

The Tenancy Deposit Scheme is part of legislation introduced on 6 April 2007 requiring letting agents/landlords to register the start and end of all new tenancies with the CLG.

If a tenant’s deposit is not registered with a scheme within 14 days, the tenant can legally demand three times the amount of deposit in compensation.

All deposits taken for Assured Shorthold Tenancies after that date must covered by a tenancy deposit protection schemes. It does not apply to deposits paid before 6 April 2007, unless the tenancy was renewed after this date.

See our article on the legal issues surrounding this topic on page 50. It can be a legal minefield.

8 EVICTIONS

Giving notice Once a shorthold agreement is signed, tenants cannot be evicted without a good reason within the first six months of their tenancy. Even if a shorter fixed period was agreed, tenants will not be subject to eviction unless they break the rules of the tenancy agreement. Even then, the landlord must give two months notice to quit, unless otherwise agreed by both parties before the tenancy starts.

If landlord wants to visit their property, they must give the tenant 24 hours notice. Although the property is legally the landlord’s, a tenant has the right to live peacefully and without disturbance.

Evicting a tenant

After the initial six-month period, if no longer fixed-term has been agreed a landlord can give a tenant notice and evict them at any time without reason. However, if the landlord fails to give proper notice or tries to evict the tenant during a fixed contract, there must be a reason for the actions – usually failure to pay rent or damage to the property.

Even if a tenant is in rent arrears, a landlord has to serve the proper papers and follow certain procedures to evict them. The landlord has to first serve the tenant notice of their eviction and then apply to the courts for a possession order. Not until a possession order has been granted can a landlord actually evict the tenant and even then, if they refuse to leave, the landlord cannot physically evict them, they will need to get the bailiffs to remove them from the property.

Illegal eviction and harassment

Tenants are entitled to report landlords to the police for any of these reasons:
Cutting off a tenant’s water, gas or electricity supply
Using threatening behaviour to make the tenant leave
Trying to make the tenant sign an agreement that takes away their legal rights
Interfering with the tenant’s possessions
Moving into part of the tenant’s property
Physically removing the tenant out of the property
Changing the locks
Stopping the tenant from getting into part of the property

If this behaviour is reported, tenants may be able to get an injunction against the landlord, which will prevent any further action and will allow the tenant to remain.

9 COMPULSORY FORMS

There is further legislation for lettings agents of non UK Resident Landlords. These agents are obliged to provide at least three further forms – the NRLQ (letting agents must pay the tax due quarterly), the NRLY Annual Return (letting agents must complete this form) and the NRL6 (non-resident landlord’s tax deduction certificate).

10 GAS SAFETY CHECKS

Landlords are legally required to ensure gas fittings and flues are maintained in a safe condition, with appliances serviced in accordance with the manufacturer’s instructions or annually, unless advised otherwise by a Gas Safe registered engineer. An annual safety check must be carried out on each gas appliance/ flue and before any new tenancy starts, these checks must be carried out within one year before the start of the lease date, unless they were installed less than 12 months before, in which case they must checked within 12 months of their installation.

The checks must be carried out by a Gas Safe registered engineer and a record of each safety check kept for at least two years, as well as a copy issued to existing tenants within 28 days of the check being completed, or to any new tenant before they move in.



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