Navigating the UK property rental market is a daunting task due to its extensive and intricate legislation. Even experienced landlords can inadvertently break the law, which is why it is crucial to be aware of some lesser-known laws whose breach can prove costly and perilous for landlords.
1. Prohibited Payments Under the Tenant Fees Act (2019)
The Tenant Fees Act 2019 (TFA) significantly altered the fee structure that landlords and agents can impose on tenants. While charges for referencing, inventories, and professional cleaning were once customary in rental contracts, the TFA now prohibits all payments unless they are expressly allowed under the legislation. The only fees landlords and agents can now charge are for late rent payments, replacing lost keys, and making changes to the tenancy, all of which are subject to specific restrictions.
Non-compliance with these rules can lead to severe consequences. Landlords may face fines of up to £5,000 for the first offence and up to £30,000 and a banning order for subsequent offences. Moreover, landlords should be aware that the TFA also applies to property viewings. It has been reported that some landlords have been charging tenants to view their properties, which is no longer legal under the TFA.
2. Deadline for Agreement (DfA)
The DfA stipulates that a new tenancy must be established, and the contract signed, within 15 days of receiving the holding deposit from the tenants. Mismanagement of a holding deposit can result in a fine of up to £5,000 and the obligation to refund the holding deposit to the tenant.
It is crucial for landlords to bear the DfA in mind once they have accepted a holding deposit and, more importantly, if they intend to make a claim on it. If a landlord wishes to claim the holding deposit because the tenant withdrew from the tenancy before the DfA, they must make their claim within seven days of the deadline. Failure to do so may lead to a court ordering the return of the holding deposit to the tenant, even if the landlord would otherwise have been entitled to make a claim.
3. The 30-Day Rule for Tenancy Deposits
For properties leased on an Assured Shorthold Tenancy, landlords are required to register any funds received towards the tenancy deposit and issue the prescribed information within 30 days. This means if your tenants pay one-third of the deposit after the contract has been signed but agree to pay the rest closer to the move-in date – which is more than 30 days away – you could face a fine if you don’t register the initial payment.
Fines can equate to up to three times the value of the deposit. This fine can potentially accumulate for renewals as well. For instance, if the deposit was not adequately protected after the tenancy was initially established, and the tenancy was subsequently renewed twice, the landlord could face a fine of up to nine times the deposit amount.
One landlord in 2019 faced this situation when they failed to register the deposit for their tenancy when it was set up and for seven subsequent renewals. The landlord finally registered the deposit seven years after the beginning of the tenancy, but the prescribed information was never served. Initially, the court found that the landlord had breached the Housing Act 2004 a total of 16 times. The tenant was awarded £83,760 as a result – equating to three times the deposit for each breach! This amount was reduced to £7,200 on appeal.
4. Rent in Advance vs Deposit
Another crucial aspect related to deposits is the concept of 'rent in advance.' Landlords must be careful not to inadvertently create an unprotected deposit. Some landlords inquire whether they can take rent in advance and hold it for the duration of the tenancy. If you're holding a month's rent in advance while the tenants continue to pay rent monthly, this could be interpreted as an unprotected deposit.
As previously mentioned, failing to protect the deposit is illegal and could lead to fines of up to three times the value of the 'deposit,' even if it was not intended to be treated as one.
5. Providing Required Certificates
Lastly, but certainly not least, landlords are legally required to provide their tenants with certain certificates at the start of the tenancy. These include a valid gas safety certificate, electrical installation report, and energy performance certificate.
Failing to provide these certificates is not only extremely dangerous for the tenants but can also expose the landlord to legal vulnerabilities. For example, earlier this year, a landlord was fined after it was discovered that they had failed to ensure the gas appliances, fittings, and flues were checked in a group of flats they were renting out. After pleading guilty to breaching Regulation 36(3)(b) of the Gas (Installation and Use) Regulations 1998, they were fined £4,500 and ordered to pay a Victim Surcharge of £175.
Moreover, failing to provide these certificates at the beginning of the tenancy can also impact your ability to serve a Section 21 notice and recover possession of your property. For instance, if you fail to provide the tenants with a copy of the EPC when required, your Section 21 notice may be rejected, and any possession application dismissed in court.
If that happens, landlords might have to wait another two months' notice, plus a further six months or more for the case to be re-heard; during which time the tenants might not be paying rent. This could result in losses of tens of thousands of pounds, not including legal costs.
It is clear that being a landlord involves navigating a myriad of legal requirements, many of which carry severe consequences if not adhered to. It is always advisable to seek professional guidance and use comprehensive, legally sound contracts to ensure compliance with all relevant legislation. This will not only protect the landlord legally but will also foster a more transparent and trustworthy relationship with the tenants.
The information provided in this article is intended for informational purposes only and does not constitute legal, financial, or professional advice. While every effort has been made to ensure the accuracy and completeness of the information contained herein, it is always recommended to consult with a professional or legal expert for individual advice tailored to your specific circumstances. The author and publisher disclaim any liability in respect of any actions taken or not taken based on any or all the contents of this article.
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