The Letting Centre
Letting Handbook and Factsheets
2nd Edition Back to contents
The Letting Handbook © The Letting Centre 10/2019 Back to contents
The Letting Centre
Letting Handbook and Factsheets
2nd Edition
Editors: Paul Ives Bsc (Hons), MBA and Tracey Cheyne ACILEx
Consultant Lawyers: Anthony Clark BLaw (Hons), FNAEA and Phillip Hopkins LLB (Hons)
The Letting Handbook © The Letting Centre 10/2019 Back to contents
The Letting Handbook © The Letting Centre 10/2019 Back to contents
Copyright and Contact Information
Published by:
The Letting Centre Ltd, Old Vicarage, Withycombe Village Rd., Exmouth, EX8 3AG.
Tel: 01258 857375
© Paul Ives & The Letting Centre, 2019
ISBN: 0 9532085 0 8
First published in 1997 by The Letting Centre Ltd. British Library Cataloguing in Publication Data. A CIP catalogue record for this book is available from the British Library
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system without prior permission from the publisher.
Handbook Revision Service
The Letting Handbook is produced in a loose-leaf format in order to facilitate updates, and an update service is available on a subscription basis. For more information, please read and complete the form included in the Preface section (see following pages) of the Letting Handbook or contact the Letting Centre.
The Letting Handbook © The Letting Centre 10/2019 Back to contents
About us
The Letting Centre was established in 1993 as an independent organisation providing support to landlords and businesses involved in property management. Prior to that, the founders were involved in lettings as landlords in their own right and as agents for local landlords in the Cambridgeshire area. The Letting Centre supports local charities and takes pride in its donations towards good causes.
The Letting Centre founded and published the Letting Update Journal between 1994 and 2011. Driven by the need to collate the mass of data and regulatory requirements necessary to compile the Journal, and by questions asked by our subscribers, we produced a database which comprises over 2500 records of information related to the letting market landlord and tenant law, including recent legislation and case law.
As well as the Letting Handbook, we publish a range of other products and publications for use in residential letting situations which have been drafted with our 20 years of experience.
Other products available:
Our range of products include our Professional Packs and Professional Series Agreements which are provided in a clear and concise format, written in plain English and come with comprehensive drafting and guidance notes. Our agreements have been drafted by our lawyers with experience in the letting industry and experience in drafting tenancy documentation.
Housing Law is continually undergoing change by way of new Acts of Parliament, case law and legislation.We ensure that all our Professional Series forms are kept up-to-date by continually monitoring any feedback from new legislation and customers in the field and carrying out an annual review of our full product range.
For more information on the products we publish please see Appendix C.
The Letting Handbook © The Letting Centre 10/2019 Back to contents
Preface
The roots of this Handbook arose from the need to reference the mass of law, regulations and other information relating to residential letting and property management. Not only is such information currently spread across numerous reference books, Acts of Parliament, Statutory Instruments and in recent case law, but it is also constantly changing.
The aim of the Letting Handbook is twofold. Firstly, it is intended that the Handbook will act to consolidate and index all the main sources of information available to the practitioner in order to provide a single point of reference. Secondly, it is intended that the Handbook shall keep track of any changes in legislation or general practice; the loose-leaf format should help to ensure that the information can be updated on a regular basis.
In collecting the large amount of material for the Handbook, we have in some cases used existing material from the Letting Update Journal. In other cases, the material is original and independently researched. I am very fortunate to have been assisted in the preparation of this edition by Mr Tony Clark, formerly General Secretary of the National Association of Estate Agents (NAEA) who is a lawyer and has great experience in the practical application of the law to residential lettings and the dealings of agents. Mr Clark helped prepare the section dealing with Rents and Deposits, and also the section dealing with Harassment and Illegal Eviction. David d’Orton-Gibson had assisted me on severals occasions with updates to the Housing Benefit section - an area which he has great knowledge, and which continues to baffle most mortals like myself who struggle with its complexity. I am also grateful to my assistant, Rachel Townsend for her help in researching the early editions and preparing the section on Disrepair. My sincere thanks to all these individuals for their invaluable contributions and without whose continual encouragement, the Handbook might still be in the ‘ideas stage’.
Finally, love and thanks to my wife, Jane, for providing much support and encouragement, for patiently enduring months of neglect whilst the Handbook was in preparation, and for fastidiously proof-reading the manuscripts prior to publication.
Paul D. Ives
December 1997
The Letting Handbook © The Letting Centre 10/2019 Back to contents Acknowledgements
The author would like to extend thanks and acknowledgements to the following individuals for their assistance and encouragement in developing this Handbook:
Linda Blair Barrister Frances Burkinshaw FNAEA Tracey Cheyne ACILEx Graham Clarke BSc ARICS MCIH Tony Clark BLaw(Hons), FNAEA Roger Critchley Geoffrey Cutting David d’Orton-Gibson MCIM, FNAEA, CRLM David Dixon Solicitor Lesley Farbridge Gareth J. Hardwick M.I.Mgt. Phillip Hopkins LLB (Hons) Patrick Maple Nigel Parkinson Solicitor David Perkins FNAEA Anne Quieti Rachel Townsend Eric Wynne Bsc(Est. Mngt) Organisations
Thanks also to the following companies and organisations for invaluable technical advice, support and inspiration:
Association of Residential Letting Agents Campaign for Bedsit Rights Cambridgeshire Trading Standards Department Department of the Environment Department of Trade and Industry Health & Safety Executive Housing Law Practitioners Association HMO Network Joseph Rowntree Foundation National Association of Estate Agents Rent Officer Service Royal Institution of Chartered Surveyors Shelter Small Landlords Association Southcourt Property Management The Scottish Office
The Letting Handbook © The Letting Centre 10/2019 Back to contents
Handbook Revision Service
The Letting Handbook is produced in a loose-leaf format and can also be viewed online if you have purchased ‘Letting Handbook Online.’
The Letting Centre aims to update this publication each year as legislation and guidance changes.
If you would like to keep your Handbook totally up-to-date, we recommend that you subscribe to the Letting Centre’s Handbook Revision Service. The current cost* of this service is: • Printed loose-leaf format: £35 per annum* • Printed loose-leaf format and Online version: £59 per annum (including £4.00 VAT for the online element)* To subscribe to the Handbook Revision Service, please complete the form attached and return it to the Letting Centre at the address given below.
N.B. If you require a revision service for your Letting Handbook, it is strongly recommended that you subscribe to the service within 12 months of purchase. The Letting Centre cannot guarantee to provide updates for each of the earlier editions prior to this point.
*prices correct at time of publication, but subject to change thereafter.
Handbook Revision Service Form
1. Revision Service Please send me updates for the Letting Handbook until further notice. I understand that I can cancel the service at any time. 2. Payment I enclose payment of £35.00 / £59.00 [delete as appropriate] I understand that you will invoice my company as appropriate at the start of each subsequent yearly period. Name: Company: Address:
Town: Postcode: Tel: Email Address:
Please return this form to: The Letting Centre, 13 Fleetsbridge Business Centre, Upton Road, Poole, BH17 7AF.
The Letting Handbook © The Letting Centre 10/2019 Back to contents
The Letting Handbook © The Letting Centre 10/2019 Back to contents
Contents
Chapter Page Preface and Acknowledgements Contents Index and Glossary Scope, Customer Suggestions Form
Section 1: Practical Aspects The Event Sequence 1. Pre-tenancy Issues and Procedures General requirements 1 - 1 Licensing and planning controls 1 - 2 Energy Performance Certificates 1 - 4 Tax issues 1 - 5 Rental valuation 1 - 6 Preparing the property for letting 1 - 7 Drawing up an inventory 1 - 8 Agency instruction 1 - 10 Duty to disclose fees 1 - 12 Redress Schemes 1 - 12 Client Money Protection Schemes 1 - 13 Data Protection 1 - 13 Property Title and Lease Restrictions 1 - 14 Insurances 1 - 15 Tenant vetting 1 - 16 Tenant references and credit checks 1 - 17 Immigration Checks 1 - 20 Pre-Tenancy checklist 1 - 22 2. Granting and Managing the Tenancy The tenancy agreement 2 - 1 Financial issues 2 - 3 The check-in 2 - 4 Management issues 2 - 5 Maintenance issues 2 - 6 Other management issues 2 - 8 3. Terminating the Tenancy Renewal 3 - 2 Termination of tenancies 3 - 3 Holding-over 3 - 5 Checking out the tenants 3 - 7
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Section 2: Legal Section 4. Basic Principles in Housing Law Types of occupation 4 - 2 Essentials of a tenancy 4 - 4 Other characteristics of a tenany 4 - 5 Types of tenancy 4 - 9 Residential tenancies and the Social Rented Sector 4 - 10 Characteristics of shorthold residential tenancies 4 - 11 Termination of tenancies 4 - 13 Distinction between a tenancy and a licence 4 - 14 Lodgers 4 - 16 Room as a tenancy and shared occupation 4 - 16 Implied and equitable tenancies 4 - 17 Leasehold property and the Commonhold 4 - 18 Licensing, planning and HMO controls 4 - 19 The origins of English law 4 - 20 Letting and the law - key statutes and regulations 4 - 22 5. Assured and Assured Shorthold Tenancies Differences: the assured tenancy and the assured shorthold 5 - 3 Separate dwelling and sharers 5 - 3 Setting up an assured tenancy 5 - 4 Fixed term and periodic tenancies 5 - 5 Replacement tenancies 5 - 6 Ending the tenancy 5 - 7 Rent control 5 - 9 Varying the terms of assured tenancies 5 - 11 Succession and matrimonial rights 5 - 12 Matrimonial homes rights & separation 5 - 12 Terms implied by law 5 - 13 6. Other Types of Residential Tenancy Private sector tenancies 6 - 2 Common Law tenancies 6 - 3 Company lettings 6 - 4 Main or principal home 6 - 5 Holiday lettings 6 - 8 Lettings to employees 6 - 10 Lettings of agricultural land and agricultural holdings 6 - 12 Tenancies with high and low rental values 6 - 13 Business tenancies 6 - 14 Protected tenancies and the Rent Act 1977 6 - 16 Public sector & “quasi public sector” lettings 6 - 16 7. Housing Law: Key Statutes Housing Act 2004 7 - 2 Housing Act 1996 7 - 3 Housing Act 1988 7 - 5 Landlord and Tenant Act 1985 7 - 7 Housing Act 1985 7 - 8 Housing Act 1980 - protected shorthold tenancies 7 - 9 Rent Act 1977 7 - 9 Protection from Eviction Act 1977 7 - 10
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Criminal Law Act 1977 7 - 10 Health and Safety at Work Act 1974 7 - 11 Defective Premises Act 1972 7 - 14 Accommodation Agencies Act 1953 7 - 15 Law of Property Act 1925 7 - 16 8. Safety Regulations The Gas Safety (installation and Use) Regulations 8 - 2 Gas safety glossary 8 - 9 Furniture & Furnishings (Fire) (Safety) Regulations 8 - 12 The Electrical Equipment (Safety) Regulations 8 - 18 The Plugs and Socket Regulations 8 - 21 Construction (Design and Management) Regulations 2015 8 - 22 Other safety regulations 8 - 24 9. The Tenancy Agreement A tenancy: the essential characteristics 9 - 2 Glossary of tenancy terms 9 - 3 Implied and express obligations 9 - 4 Landlord’s implied obligations and terms 9 - 5 Tenant’s implied obligations 9 - 6 The tenancy agreement 9 - 7 Legal requirements 9 - 9 Unfair Terms in Consumer Contracts 9 - 10 Term of the tenancy 9 - 12 Rent 9 - 13 Rental deposits and dilapidation deposits 9 - 14 User covenants 9 - 16 Subletting and assignment, Repairs and alterations 9 - 17 Other clauses; re-entry, break clauses etc. 9 - 18 Joint occupancy and joint tenancies 9 - 19 Lettings to minors 9 - 21 The agreement in use - practical considerations 9 - 22 Commencement and termination dates 9 - 23 Notices 9 - 24 Granting the tenancy 9 - 25 Completing and signing the agreement 9 - 26 Stamp duty 9 - 28 Renewing and rollover 9 - 30 Renewing the tenancy using a periodic tenancy 9 - 31 Termination 9 - 33 Where can I obtain a suitable form of agreement? 9 - 36 Rent guarantees and guarantors 9 - 37 10: Rent and Deposits Non-rent payments 10 - 3 Rent & housing benefit 10 - 3 Rent control 10 - 4 Rent reduction 10 - 4 Rent increase procedure 10 - 5 Rent recovery 10 - 6 Deposits 10 - 7 Tenancy Deposit Protection 10 - 8 Statutory Information Requirements 10 -12
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TDP - Dispute Resolution 10 - 15 The Localism Act 2011 10 - 16 Tenancy Deposit Money - General Rules 10 - 17 Deposits and the Tenancy Agreement 10 - 18 Returning the deposit 10 - 20 Tenancy Deposit Case Law 10 - 21 The Deregulation Act 2015 10 - 22 11. Disrepair and Fitness Landlord’s responsibilities 11 - 1 Tenant’s responsibilities 11 - 2 Disrepair - the law of disrepair 11 - 3 What is disrepair? 11 - 4 The contractual repairing obligations 11 - 5 Covenants implied by statute 11 - 6 The Landlord and Tenant Act 1985 11 - 6 Common law obligations on landlords 11 - 8 Common law obligations on tenants 11 - 13 Remedies 11 - 14 Law of disrepair: obligations arising in tort 11 - 15 Defective Premises Act 1972 11- 15 Law of disrepair: local authority powers 11 - 16 Environmental Protection Act 1990 11 - 16 Homes (Fitness for Human Habitation) Act 2018 11 - 17 Gas safety regulations 11 - 17 Disrepair and houses in multiple occupation (HMOs) 11 - 18 Pre-Action Protocol 11 - 18 Housing Health and Safety Rating System (HHSRS) 11 - 19 Pests 11 - 24 Energy Efficiency 11 - 25 Japanese Knotweed 11 - 27 Notes and Further Information 11 - 28 12. Termination of Tenancies The termination process 12 - 2 Termination of assured (and AST) tenancies 12 - 3 Termination of assured tenancies:contractual provisions 12 - 6 Holding over 12 - 7 Forfeiture 12 - 8 Surrender 12 - 9 Termination of assured tenancies: landlords options 12 - 10 Choosing the correct possession route 12 - 11 Choice of court procedures 12 - 12 Pre-Action Protocol for Debt Claims 12 - 14 Possession examples 12 - 14 Notice Requiring Possession under s.21: H.Act 1988 12 - 16 Service of notices 12 - 18 Service of a Notice Seeking Possession under s.8 12 - 18 Period of notice 12 - 20 Completing the Notice of Seeking Possession form 12 - 21 Possession proceedings 12 - 22 Standard possession procedure 12 - 22 Liaison with the Courts 12 - 24
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Rights of Audience 12 - 24 Accelerated possession procedure 12 - 25 Commencing proceedings 12 - 26 Termination of common law tenancies 12 - 30 13. Harassment and Illegal Eviction Background 13 - 1 Unlawful eviction 13 - 3 Determining harassment 13 - 6 Surrender and abandonment 13 - 8 Evidence of surrender or abandonment 13 - 10 Notice of abandoned property 13 - 11 Abandonment clauses in tenancy agreement 13 - 12 Abandoned property - Rights to enter, inspect & secure 13 - 12 Abandoned property - Tenant’s personal effects 13 - 13 14. Taxation of Rents and Property Income tax on rental income 14 - 2 Preparing accounts 14 - 6 Allowances for capital expenditure 14 - 7 Rent-a-Room scheme 14 - 13 Furnished holiday lettings 14 - 14 Overseas landlords - Agent’s obligations 14 - 15 Council tax 14 - 17 Value added tax (VAT) 14 - 21 Capital gains tax (CGT) 14 - 22 Inheritance tax and Stamp duty 14 - 25 Sources for further information 14 - 26 15. Housing Benefit Transition into Local Housing Allowance 15 - 2 Housing benefit legislation 15 - 3 Housing benefit - general rules 15 - 4 Rules relating to timing of claims and payments 15 - 7 Local Housing Allowance (LHA) 15 - 8 Calculation of LHA entitlement 15 - 10 Rent Allowance payments 15 - 11 Housing benefit payments 15 - 13 Recovery of overpayments 15 - 14 Rights of appeal and the appeal process 15 - 16 Administration issues for landlords and agents 15 - 17 Management issues and risk 15 - 18 Common problems and solutions 15 - 20 Universal Credit 15 - 23 References 15 - 31 Sources of further information 15 - 32 16. Houses in Multiple Occupation Introduction 16 - 1 HMO registration and licensing schemes: overview 16 - 2 Licensing schemes 16 - 3 The HMO licence 16 - 4 Definition of HMO 16 - 5 HMO definition: examples 16 - 7
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Licensing procedure 16 - 8 Minimum amenity standards in licensed HMO 16 - 10 HMO management regulations 16 - 12 Management issues 16 - 14 Building Regulations 1991 & planning control 16 - 16 Other legislation and powers 16 - 18 Fire safety in HMOs 16 - 19 HMO fire safety glossary 16 - 21 Sources of further information 16 - 29 17. The Law of Agency Establishing an agency relationship 17 - 1 Duty of Care 17 - 3 Tenancies created by agent 17 - 4 The agency agreement 17 - 5 Termination 17 - 11 The legal rights and duties of an agent 17 - 12 Duty of obedience 17 - 12 Duty of care and skill 17 - 12 Duty of loyalty 17 - 14 Duty of personal performance 17 - 15 Duty to account 17 - 15 Rights of the agent 17 - 15 Powers of attorney 17 - 17 Example power of attorney 17 - 20 Third parties 17 - 21 Accommodation Agencies Act 1953 17 - 22 The Housing and Planning Act 2016 17 - 22 Banning Orders 17 - 22 Client Money Protection Schemes 17 - 23 Section 3: Factsheets Section 4: Appendices
Appendix A. Directory of Useful Addresses: - Suppliers of legal forms - Addresses of stamp duty offices - Other useful addresses
Appendix B. Key Statutes and Other Legislation - Housing Act 1988 - Landlord and Tenant Act 1985 - Protection from Eviction Act 1977
Appendix C. Statutory Forms - Statutory forms
The Letting Handbook Content-6 © The Letting Centre 10/2019 Back to contents KEY: LF = Letting Factsheet (see Section 3) Index E.g. LF16 = Letting Factsheet No. 16 A rent book 5-13, 10-6 Abandonment 12-9, 13-8 rent control 5-9, 10-4 abandoned property 13-13 replacement tenancies 5-6 Accelerated possession procedure 12-12, 12-25 succession 5-12 rent arrears 12-13 tenancy agreement 2-1, 5-4, 9-26 Access for repairs 5-13 termination of tenancy 12-3, 12-16 Accommodation Agencies Act 1953 7-15, 17-22. varying the terms 5-11 See LF16 Assured tenancies 5-1 Address access for repairs 5-13 disclosure of landlord’s address 17-4 agricultural land 6-1, 6-12 notice of landlord’s address. See also Notices under company lettings 5-1 LTA s.48 definition 5- 1 Affidavit 12-28 ending the tenancy 5-7 definition. See glossary grounds for possession 5-7 Agency high rents 5-1 advertising 1-12 individual tenant 5-1 agency agreement 17-5 licensed premises 5-1 authority 17-8 matrimonial rights 5-12 contract terms 17-10 mortgages 5-7 duty of care and skill 17-3, 17-12 possession - annoyance 7-4, 12-19 duty of loyalty 17-14 possession - breach of agreement 12-19 duty of obedience 17-12 possession - discretionary 5-7, 12-19 duty of personal performance 17-15 possession - mandatory grounds 12-19 duty to account 17-15 possession - nuisance 5-7, 7-4, 12-20 emergency powers 17-9 possession - owner occupier 5-7, 12-20 fees 1-12 possession - periodic tenancies 12-16 holding of deposits 17-8 possession proceedings 2-6, 12-22 indemnity 17-8, 17-16 possession - rent arrears 5-7, 12-18 instruction 1-10 prescribed form 10-5 law of 17-1 principal home 5-1 principal 17-1 renewal 5-6, 9-30 right to reimbursement 17-16 rent 5-1 right to remuneration 17-15 rent arrears 12-18 secret profits 17-15 rent book 5-13, 10-6 termination 17-11 rent control 5-9 terms of business 17-5 replacement tenancy 5-6 Agreement. See Tenancy Agreements repossession 5-7 Agricultural holding 4-9, 5-1, 6-13 resident landlords 5-1 Agricultural land 6-1, 6-12 security of tenure 5-7 Agricultural occupancy 5-1, 6-10. See LF33 shorthold tenancy 5-3 Alarm systems statutory periodic tenancies 5-6 in HMOs 16-24 subletting 5-13 smoke detectors 8-25 succession by spouse 5-12 Alternative dispute resolution (ADR) 10-15 varying the terms 5-11 Annoyance 9-16 B Antique furniture 8-13 Bankrupt 12-6 APP See Accelerated possession procedure . Bankruptcy of tenant 12-8 Appliances 2-7 Banning Order offences 17-22 ARLA 17-5 Blinds 8-17 Assignment 5-13 Boilers definition See glossary . gas 8-9 provisions in agreement 9-17 oil-fired 8-24 Assured shorthold tenancies See LF19 . Bond creation 5-4 definition. See deposits definition 5- 1 Breach of agreement 12-8 differences with ordinary assured 5-3 Breach of covenant 10-18, 11-14, 12-8 ending a tenancy 5-7 Break clause 9-18, 12-4, 12-6 fixed term tenancies 5- 5 Building Act 1984 16-18 periodic tenancies 5-5 Building Regulations. See LF36 renewal 5-6, 9-30 electrical safety. See LF37 The Letting Handbook INDEX-1 © The Letting Centre 10/2019 Back to contents
relating to HMOs 16-16 use of premises 9-16 Bunk beds regulations 4-24, 8-24 user covenants 9-16 Business Tenancies 6-14. See LF33 usual covenants 9-4 Business use 6-4, 6-14 Criminal Law Act 1977 7-10 Buy-to-Let 1-1 Curtains C fire safety 8-13 Capital gains tax 1-5, 14-22 D Carbon monoxide 2-7, 8-10, 8-25 Damage Carpets agent’s liability 17-13 fire safety 8-13 assessment of 10-20 Catalytic gas heater 8-25 by frost 11-13 CDM Regulations 2015 8-22 by relevant defect 11-15 Change of landlord 9-34 by third party 11-11 Checkout covenant against 9-16 tenancy checkout process 3-7 deposit as security 2-3 Cigarette test 8-13 during repair work 11-11 Client Money Protection Schemes 1-13, 17-23 furniture and appliances 11-12 Clients accounts 10-19 non-structural 11-7 CO Detectors 8-10 payment for 3-10 Commencement dates 9-23 recording of 3-9 Commissions 17-15 recording on inventory 1-9 Commonhold 4-18 resulting from condensation 11-7 Commonhold & Leasehold Reform Act 2002. tenant’s obligations 9-6 See LF35 to common parts 11-9 Common law 4-17 to tenant’s possessions 11-14 Common law tenancies 4-5, 6-2, 6-3 Damages Company letting 6-4 for disrepair 11-14 Compensation for illegal eviction 13-3 business tenancies 6-14 for occupation. See Mesne profits by payment of rent 9-13 liquidated 10-19 for breach of agreement 10-20 Damp 11-12. See also Condensation for damage 4-12 rising damp 11-4 Condensation 11-12 Data Protection 1-13 Construction Dates action for negligence 11-15 in tenancy agreements 9-23 defects & LTA 1985 11-6 Death Consumer Protection Act 1987 8-1. See LF10 of landlord 9-35, 17-11 Consumer Rights Act 2015 1-12, 9-10. See LF10 of tenant 5-12, 9-35 Contractual periodic tenancy 3-2, 5-6 Deed 9-9, 9-12 creation following renewal 9-32 requirement for witness 9-27 rent increase procedure 10-5 Defective Premises Act 1972 7-14 Contractual tenancies 6-3 Deposits Contra proferentem 9-8 calculation of deductions 3-9 Conveyancing 9-27 held as ‘agent’ 10-17 Co-operative held as ‘stakeholder’ 10-17 definition. See glossary held by landlord 10-17 Corresponding date rule 9-23 interest on 10-17, 10-18 Cost of Leases Act 1958 9-9 maximum allowable 2-3, 10-7 Council tax 1-7, 14-17 repayment of 3-10, 10-20 County Courts Act 1984 12-23 Tenancy Deposit Protection (TDP) 10-7 Covenants See LF24, LF24a, LF24b 2-3 against alterations 9-17 against assignment or subletting 5-13 Deregulation 13-3 against nuisance 9-16 Derogate from the grant 9-5 against waste 9-6 Dilapidations. See also Damage breach. See Breach of covenant assessment 10-20 derogation from the grant 9-5 calculation of 3-9 express 9-4 schedule of 3-9 implied 9-4 Dilapidations deposit. See deposits payment of rent 9-6 Diplomatic immunity 6-4 quiet enjoyment 9-5 Diplomats 6-4 repairing 11-5 Disability Discrimination Act 1995 1-16. See LF25 The Letting Handbook INDEX-2 © The Letting Centre 10/2019 Back to contents
Discretionary grounds 5-7, 12-19 definition. See glossary Display labels 8-14 Express covenants 9-4. See also Express obligations Disrepair 11-1 Express obligations common law obligations 11-9 alterations and improvements 9-17 Contractual obligations 11-5 payment of rent 9-13 Defective Premises Act 1972 11-15 repairs 9-17 definition 11- 4 subletting and assignment 9-17 Energy Efficiency Regs 2015 11-2 6 use of premises 9-16 Environmental Protection Act 1990 11-16 Express terms 9-4 express terms 11-5 Extension Green Deal 11-25 of tenancy 5-6, 9-31 implied covenants 11-6 japanese knotweed 11-27 F landlord’s responsibilities 11-1 Fair rents 6-16 law of disrepair 11-3 Finance Acts 1994-95 4-22 local authority powers 11-16 Fine/premium LTA 1985 11-6 definition. See glossary pests 11-24 Fire blankets 8-26 pre-action protocol 11-18 in HMOs 16-27 remedies 11-14 Fire doors 16-23 requirement for notice 11-7 Fire escapes 16-13, 16-22 standard of disrepair 11-4 Fire extinguishers Structure and exterior 11-7 in HMOs 16-27 tenant’s responsibilities 11-2 Fireguards 8-26 tortuous liability 11-15 heating appliances 8-8 Distance Selling Regulations. See LF34 Fire Precautions Act 1971 16-18 Distress Fire resistant filling 8-13 definition. See glossary Fire retardant treatments 8-17 right of 10-6 Fire safety 8-12, 16-21 Doors antique furniture 8-13 in HMOs 16-23 carpets 8-13 self-closer 16-24 display labels 8-14 Door seals 16-23 HMOs 16-19 Duty of care match test 8-13 negligence 11-15 tenant’s furniture 8-15 to occupiers 11-3 Fitness standards. See LF28 Homes (Fitness for Human Habitation) Act 2018 9-5, E 11-17 Easements 9-5 Fixed term tenancies 4-8, 5-5 Effluxion of time 4-13, 12-30 common law 12-30 Electrical safety 2-7, 8-18 Fixtures Electrical safety regulations 8-18. See LF4, LF27 Law of Property Act 1925 7-16 Electricity 2-7. See LF5 LTA 1985 11-6 resale of. See LF5 Flats Electricity Act 1989 4-22 repairing obligations 9-5, 11-9 Emergency lighting 16-27 Flues 8-11 Employees Forfeiture 4-13, 12-8 letting to 6-10 breach of condition 12-8 Energy efficiency 11-25 construction of clauses 9-18 Energy Efficiency Regs 2015 1- 4, 11-26 re-entry 12-8 Energy Performance Certificate (EPC) 1- 4. See LF38 waiver 12-8 English Law Freehold origins of 4-20 definition. See glossary Environmental Protection Act 1990 11-16 Frost damage 11-13 Estoppel Furnished lettings 5-3 definition. See glossary Furniture European Communities Act 1972 4-25 belonging to a tenant 8-15 Eviction 4-13, 13-3 blinds 8-17 Housing Act 1988 7-6 safety regulations. See LF3 Protection from Eviction Act 1977 7-10 sale of 8-16 retaliatory eviction 12-17 Furniture & Furnishings (Fire)(Safety) Regs 1988 Exclusive possession 4-2, 4-14 8-12 Ex parte See LF3 8-12 The Letting Handbook INDEX-3 © The Letting Centre 10/2019 Back to contents
Fuses HMO. See Houses in Multiple Occupation, LF40, safety requirements 8-21 LF41 Holding deposits 1-16 G holiday lettings 6-8 Garden furniture Holding over 3-5, 12-7 fire safety 8-13 definition. See glossary Gas Holiday lettings 6-8 resale of. See LF5 booking deposits 6-9 Gas Cooking Appliances Regulations 1989 8-8 council tax 10-3 Gas safety 1-3, 2-7, 8-9 furniture 1-7 bottled gas 8-3 ground for possession 12-20 gas pipework 8-3 Housing Act 1988 5-1 gas safety check 8-3 insurance 6-9 gas safety records 8-4 letting agreement 9-16 gas safety report 8-9 rental payments 6-9 second-hand appliances 8-11 service charges 2-2 Gas Safety (Installation and Use) Regulations 1998 VAT liability 14-21 8-2, 11-17. See LF7 Houses in multiple occupation agent’s responsibilities 8-7 definition 7- 8, 16-5 amendments 8-2 fire safety 11-3, 16-19 annual checks 8-3 HMO Management Regulations 16-12 competent persons 8-4 licensing 7-2, 16-3, 16-4 long leases 8-6 local authority powers 7-8 maintenance provisions 8-3 repairing obligations 11-5, 11-18 prohibited appliances 8-5 room sizes 16-4 record keeping 8-4 Housing Act 1980 7-9 repairs 8-5 Housing Act 1988 7-5 safety certificates 8- 5 anti-eviction provisions 7-6 tenant’s appliances 8-6 assured shorthold tenancy 5-1, 7-5 General Product Safety Regulations 1994 8-24. assured tenancies 5-1, 7-5 See LF9 Housing Act 1996 changes 7-3 Glass Housing Act 1996 7-3. See LF22 in HMOs 16-22 Housing Act 2004 7-2. See LF23 Green Deal 11-25. See also Disrepair Housing and Planning Act 2016 Grounds for possession 5-7, 5-8, 12-19 banning order offences 17-22 agricultural occupancy 6-11 Client money protection schemes 17-23 definition. See glossary Housing benefit 2-5, 15-1 holiday let 12-20 appeal 15-16 landlord’s home 12-20 benefit cap 15-2 5 mortgagee claiming possession 12-20 eligibility 15-3 nuisance 7-4 entitlement rules 15-4 student letting 12-20 liability for two homes 15-5 Guarantor agreements 9-37 payment 15-13 Guarantors 1-19, 9-37 pre-tenancy determinations 15-11 definition. See glossary recovery of overpayment 15-14 See LF45 1-19 referrals to rent officer 15-1 1 Guardian ad litem rent issues 10-3 definition. See glossary single room rent 15-6 Guests and lodgers 9-17 tenants in prison 15-6 H Universal Credit 15-23 Housing, Health and Safety Rating System 7-2, 11-19. Harassment 2-6, 13-1 See LF28 Protection from Eviction Act 1977 7-10 appeal procedure 11-23 Head lease 9-16 categories of hazards 11-20 definition. See glossary enforcement 11-22 Health and Safety at Work Act 1974 7-11, 8-2 How to Rent Guide 5-4 legionella 7-12 Risk assessment 7-13 I Health and Safety Executive 8-2, 8-18 Immigration checks 1-20. See LF34 Heating Appliances (Fireguard)(Safety) Regs 1991 Immigration Act 2014 1-21 8-8 Immigration (Hotel Records) Order 1972 1-20 High rents 6-13 Implied covenants. See Implied obligations
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Implied obligations 4-6, 9-4 summary of 4-22 landlord’s 9-5 Lessee quiet enjoyment 9-5 definition. See glossary repairing 9-5 Lessor repair: landlord 11-1 definition. See glossary repair: tenant 11-2 Licence 4-14 tenant 9-6 agricultural occupancy 6-11 Implied terms. See Implied obligations bare 4-15 Improvements contractual 4-15 business tenancies 6-14 definition. See glossary capital gains tax 14-23 occupation by employee 6-4 damage following 11-11 Occupation by employee 6-10 repairing duties 11-6 Protection from Eviction Act 1977 7-10 tax position 14-9 See LF44 7-10 tenant’s obligations 9-6 Licensee 4-3, 4-14 Income tax 14-2 Allowing trespasser to remain 12-31 wear and tear allowance 14-7 definition. See glossary Inheritance tax 14-25 Licensing 1-1 Injunction hmos 7-2 definition. See glossary selective licensing 1-2 eviction & harassment 13-5 Limitation Act 1980 10-6 Inland Revenue Local Government and Housing Act 1989 7-3 non-resident landlords 14-15 Local Government Finance Act 1988 6-12 Rent-a-Room scheme 14-13 Local Government Finance Acts 1988-92 4-22 tax on income 14-2 Local Housing Allowance 2-5 Inspections 2-8 Local Housing Allowance (LHA) 15-2 Insurance Broad Rental Market Area 15-9 cancellation insurance 6-9 capping 15-8 landlord’s insurance 1-15 Lodgers 4-16 tenant’s 1-15 Low rents 6-13 Interpretation Act 1978 4-23 Low Voltage Electrical Equipment Regulations 1980 Intumescent seal 16-24 8-18 Inventory 1-8, 9-22 check-in 2-4 M check-out 3-7 Mail 2-8 Inventory clerks 1-8 Maintenance 2-6, 11-1 Investment appliances 2-7 property. See LF30 covenant to maintain 11-5 Defective Premises Act 1972 7-14 J emergency repairs 2-8 Japanese knotweed 11-27 gas safety 8-3 Joint tenancies 2-1, 4-7, 9-19 Mandatory grounds 12-19 surrender 12-9 match test 8-13 Judicial review. See glossary Matrimonial Rights 5-12 mattresses L fire safety 8-13 Landlord Mesne profits 12-8 change of landlord 17-11 notice to quit 12-32 disclosure of information 4-17, 17-4 Minors, letting to 9-21 property checks 1-14 See LF46 9-21 Landlord and Tenant Act 1927 4-23 MIRAS 14-10 Landlord and Tenant Act 1954 4-23 Misuse of Drugs Act 1971 4-25 Landlord and Tenant Act 1985 7-7 Mixed-use tenancies 6-14. See LF33 Landlord and Tenant Act 1987 4-22 Mortgage Law of Property Act 1925 7-16 definition. See glossary Lease Mortgagee 7-16 definition. See glossary Mortgage interest 1-5, 14-10 equitable 4-17 Mortgages Leasehold property 4-18 as verification of title 2- 2 Leasehold Reform, Housing and Urban Development lenders permission 1-3 Act 1993 10-19 Legionnella 7-12 N Legislation Negligence 17-2
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by tenant 11-13 choice of route 12-11 disrepair 11-15 exclusive 4-11 Neighbours notice of seeking (s.8) 12-18 nuisance to 7-4 notice requiring (s.21) 12-16 Noise. See LF31 summons for 12-22 Noise Act 1996 4-22 Possession order 4-13 Non-resident Landlord Tax Scheme. See LF26 APP 12-28 Notice of assured tenancy 5-4 definition. See glossary Notice of AST 5-4 Power of attorney 17-16 Notice requiring possession 5-7, 12-16. See LF29, Premium 10-1 LF21 definition 10- 1. See also glossary Notices Housing Act provisions 5-13 of seeking possession(s8) 12-18. See LF8 Principal home 6-5 prior notices (HA88). See LF29 Prison 15-6 requiring possession (s21) 12-16. See LF21 Product safety 1-3 service of 12-16, 12-18. See LF29 Protected shorthold tenancies 7-9 to quit. See Notice to end a tenancy Protection from eviction 4-15, 12-1 under Grounds 1 & 2 9-24 Protection from Eviction Act 1977 7-10 under LTA s.48 9-24, 10-6 Public Health Act 1984 4-25 Notice to end a tenancy 4-8, 12-30 by agent 12-31 Q by landlord 3-4, 12-5 Quiet enjoyment 4-5, 9-5, 11-10 by tenant 3-4, 12-4, 12-30 definition. See glossary definition. See glossary R expiry 12-30 position of licensees 12-31 Race Relations Act 1976 1-16 prescribed information 12-31 Rateable value withdrawal 12-31 council tax 14-17 Nuisance 9-16, 11-15. See LF31 high rents 6-13 low rents 6-13 O Recorded Delivery Act 1962 4-23 Obligations. See also Terms Redress schemes 1-12 Express. See Express obligations References 1-17 Implied. See Implied obligations on guarantor 9-37 Occupiers Liability Act 1957 4-20 Renewals Occupiers’ Liability Act 1957 11-3 Assured and AST 3-2, 5-6, 9-31 Oil-fired boilers 8-24 generally 3-2 Open flue appliance 8-11 periodic tenancies 9-31 Open flue appliances 8-5 provision to renew 9-32 Ouster order Rent definition. See glossary assessment 10-4 Overcrowding 7-8 council tax 10-3 Overseas companies 6-4 definition 10- 1 Overseas Landlords 14-15 guarantees 1-19 P See LF45 1-19 Paraffin heaters 8-25 high rents 6-13 Periodic tenancies 4-8 housing benefit 10-3 common law 12-30 increase procedure 10-5 Permanent labels 8-14 low rents 6-13 Pests 11-24, 11-25 maximum 10-2 See LF48 11-24 minimum 10-2 Pets 9-16 payment date 10-2 See LF47 9-16 payment method 10-2 Pillows recovery 10-6 fire safety 8-13 repayment 10-6, 12-17, 16-4 Plain language 9-11 valuation 1-6 Planning control when due 10-3 relating to HMOs 16-16 Rent Act 1977 6-16, 7-9 Plugs and Sockets Regulations 1994 8-21. See LF27 Rent-a-Room scheme 14-13 Possession 12-1 Rent-A-Room scheme 1-5 accelerated 12-12 Rent arrears 2-6, 12-15 pre-action protocol debt claims 12-14
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recovery of, 6 year rule 10-6 Signing Rent assessment committee 10-4 tenancy agreement 9-26 Rent books 5-13, 10-6 Small Claims Court 10-6 Rent control 10-4 Smoke detectors 8-25, 16-25. See LF50 Housing Act 1988 5-9 See LF50 8-25 Rent Act 1977 7-9 Sockets Rent increase 10-5. See LF13 Electrical safety 8-21 Rent officer Solicitor 2-1. See Preface definition. See glossary affidavit 12-28 setting a fair rent 6-16 drafting agreement 2-1 Rent period 10-2 Squatters 12-33, 13-4. See L14 Rent recovery 10-6 Stamp duty 9-28, 14-25. See LF32 Rent review 5-4, 9-14 Start dates Repairs. See LF11 on tenancy agreement 9-23 action for damages 11-14 Statutes Gas safety regulations 8-5 criminal 4-22, 4-24 generally 2-6 Statutory nuisance landlord’s obligations 11-1 definition 11-1 6 payment for 1-11 Statutory periodic tenancy 3-2, 5-6 specific performance 11-1 4 assignment 5-13 standard of 11-4 varying the terms 5-11 tenant’s obligations 11-2 Statutory tenancy 6-16 tenant’s remedies 11-14 Student lettings Replacement tenancies 5-6 council tax 1-7 Repossession. See Possession Housing Act 1988 12-20 Resident landlords 6-5 landlord’s restrictions 1-6 Reversion 4-6 Rent Act 1977 7-9 definition. See glossary Subletting Reversionary lease provisions against 9-17 definition. See glossary Sub-tenant Right of re-entry definition. See glossary definition. See glossary status of 12-31 provision 9-18 Succession 5-12 Rights of audience 12-24 definition. See glossary Rules of interpretation 9-8, 9-11 Supply in the course of business 8-12, 8-15 S Surety 9-37, 10-9 Safety glass 8-26 company lettings 6-4 in HMOs 16-22 Surrender 4-13, 12-2, 12-9 Section 8. See Notices, LF8 by operation of the law 13-8 Section 21 12-16. See LF21 definition. See glossary Section 48, LTA. See Notices joint tenants 12-9 Secure tenancy 6-16 Survivorship 9-34 Security of tenure definition. See glossary agricultural occupancies 6-10 assured shorthold 5-7 T assured tenancy 5-3 Tax business tenancies 6-14 council tax 14-17 generally 4-2, 4-11 generally 14-1 high rents 6-13 holiday lettings 1-5 holiday lettings 6-8 income tax 14-2 Rent Act 1977 7-9 overseas landlords 14-15 Self-assessment taxation 14-15 stamp duty 9-28, 14-25 Service charge 2-6 value added tax 14-21 definition. See glossary Taxes Management Act 1970 14-15 Service occupancy 6-10 Tenancies Sexual Discrimination Act 1975 1-16 agricultural 6-12 Sexual Offences Act 1956 4-25 assured 5-1 Shared ownership assured shorthold 5-1 definition. See glossary at will 3-5 Sharers 1-6, 4-16 business 6-14 Short lettings 6-8 common law 12-30
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fixed term 5-5 forfeiture 12-8 periodic 5-5 of assured and ASTs 12-6 service occupancies 6-10 of tenancies 3-3, 12-2 to companies 6-4 surrender 12-9 to employees 6-10 Termination dates 9-23 Tenancy Terms of the tenancy. See Tenancy agreement agreement 9-1 express 9-4 at will 4-7, 12-30 implied 9-4 checklist 1-22 Tied accommodation definition 9- 1. See glossary definition. See glossary document checks 5-4 Title 7-15 equitable 4-17 Trespassers 4-3 essentials of 4-4 implied 4-17 U legal requirements 4-9 Unfair Contracts Terms Regulations 4-11, 9-10 mixed-use 6-14 Universal credit 15-23 of a room 4-16 Unlawful eviction 4-13, 13-3 other characteristics 4-5 User covenants 9-16 tenancy at sufferance 4-7, 12-30 Usual covenants 9-4 Tenancy agreements 9-1. See also LF18 V ambiguity 9-8 break clause 9-18 Variation 5-11 counterpart 9-22 VAT (Value added tax) 14-21 definitions and labels 9- 8 Ventilation example AST form 9-26 for gas appliances 8-10 express or contractual obligations 9-4 requirement for 8-10 extension of 5-6 Vermin 11-24 forfeiture clause 9-18 W implied obligations 9-4 Waiver 12-8 implied terms 5-13 Waste 9-6 joint occupancy 9-19 Water Industry Act 1991 4-22. See LF12 legal requirements 9-2 Witness letting to minors 9-21 signing tenancy agreement 9-27 notices 9-24 original 9-22 preparing 9-22 renewal/roll-over 3-2, 5-6 rent increase 9-14 rules of interpretation 9-8 services 9-13 signing 9-26 stamp duty 9-28 term 9-12 use of dates 9-23 usual covenants 9-4 variation of terms 5-11 witnessing 9-27 written agreement 9-24 Tenancy Deposit Protection (TDP) 10-7 accepting deposits 2-3 alternative dispute resolution (ADR) 10-15 repayment of deposit 3-10 See LF24, LF24a, LF24b 2-3 Tenant 9-1 death of 5-12, 9-35 displacement of (during repairs) 11-10 vetting 1-16 Tenant Fees Act 2019 1-12, 2-1, 17-22. See LF51 Tenant-like use 9-6 Termination common law tenancy 12-30 effluxion of time 12- 2
The Letting Handbook INDEX-8 © The Letting Centre 10/2019 Back to contents GLOSSARY OF TERMS
Abandonment - Abandonment occurs when an occupier leaves a property without giving prior notice to the landlord or formally terminating the tenancy (abandonment is not recognised as a legal term).
Affidavit - Written statement made on oath before a person with the authority to administer it.
Assignment - Transfer of an interest in a property (e.g. tenancy) to another person.
Break clause - A break clause is where tenants have the right to end the tenancy early, normally on giving a specified period of notice to the landlord
Co-operative - Housing which is jointly owned or managed by the occupiers.
Covenants - the terms contained or implied in a lease which cast obligations on the landlord and tenant.
Damages - Compensation recoverable through the courts by any person who has suffered loss, detriment, or injury, to his person, property or rights through the unlawful act or omission or negligence of another.
Deed - a formal written legal document which must make it clear on its face that it is intended to be a deed. The main requirements are that it must be signed by its maker in the presence of a witness, or at the maker’s direction in the presence of two witnesses. A deed normally takes effect on delivery, which consists of presenting it to the other party.
Deposit - Sum of money requested by a landlord at the beginning of a tenancy as security against non-payment of rent, damage to property or removal of furniture.
Dilapidations - damage to the property, missing items from the Inventory, re-decoration work required, and such like, which is normally assessed on the check-out of a tenant following the end of a tenancy.
Disrepair - The condition of being worn out or in poor working order; a condition requiring repair.
Distress - the lawful taking of goods to enforce payment of rent.
Estoppel - The doctrine that if one person acts on another’s promise or agreement, the person making the promise is bound by it.
Ex parte - An ex parte injunction is one granted after hearing one side only. An ex parte hearing in court is on behalf of the applicant.
Excluded Tenancy (PEA 1977) - a tenant under an excluded tenancy has no protection against eviction under the Protection from Eviction Act 1977. See section entitled ‘Protection from Eviction Act 1977’ in Chapter 7 for more information.
Fair rent - A rent fixed on a regulated tenancy or a secure housing association tenancy taking into account all the circumstances except scarcity value.
Fine/premium - a sum of money or other consideration paid normally by the tenant to the landlord on the grant or assignment of a lease.
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Forfeiture - A landlord terminating a tenancy because of a breach of the agreement. This can only be used if the lease allows for it, and the landlord follows a set procedure.
Freehold - Land which a person holds with no-one having a superior interest.
Grounds for possession - Statutory reasons for a landlord regaining possession of a property. Mandatory grounds only have to be proved for a Judge to grant possession. With discretionary grounds, a Judge has to decide if it is reasonable to grant possession.
Guarantee - a contract of guarantee (in the context of lettings) is a contract whereby the guarantor (or surety) promises the landlord to be responsible for the due performance by the tenant of his obligations (pay rent etc.) under the tenancy agreement if the tenant fails to perform these obligations.
Guarantor - a person who agrees to guarantee the obligations, financial or otherwise of a third party (often a tenant with poor references or credit rating).
Guardian ad litem - a person who is appointed as a guardian of a child during a court case, for example a social worker.
Head Lease - a lease out of which lesser interests (called sub-leases) have been granted.
HMO - House in Multiple Occupation. This definition covers many categories of housing where a house is ‘occupied by persons who do not form a single household’. Typical cases include sharers (in a single house), bedsits, hostels and carehomes. See chapter 16 for more information.
Holding over - where a tenant continues to occupy the demised premises after the end of his lease.
Indemnify - to secure against future loss, damage or liability.
Injunction - a court order which prohibits a person from doing something or orders them to do something. For example, an injunction may be granted to allow a person back into a property from which they have been illegally evicted.
Inventory - (in the context of lettings) a detailed list of property, which is the subject of a tenancy agreement, from which particular items can be identified. This list will generally include the dwelling, any fixtures and fittings therein, and any outbuildings and other significant assets attached to the land.
Judicial review - process whereby a decision of a public body, such as a local authority, is challenged.
Lease/Tenancy - a contract under which an owner of property (landlord or lessor) grants another person (the tenant or lessee) EXCLUSIVE possession of the property for an agreed period, usually but not necessarily in return for rent and sometimes for a capital sum known as a premium. In common usage, the term ‘Lease’ is generally used to refer to both the written agreement that creates the lease, and the lease itself. A ‘tenancy’ and a ‘lease’ mean exactly the same thing, but ‘tenancy’ is usually used to refer to periodic and shorter-term interests (i.e. tenancies less than three years).
Lessee/tenant - the person to whom the lease is granted.
Lessor/landlord - the person who grants the lease.
Licence - a permission to occupy without having a tenancy, for example where the occupier does not have exclusive possession of the premises.
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Licensee - a person who occupies a property with the permission of the occupier or owner, e.g. a person staying in a hotel.
Mesne profits - compensation or damages for the use or occupation of land during unlawful possession.
Minor - a person under the age of legal competence (usually under 18).
MIRAS - Mortgage Interest Tax Relief at Source. This tax relief used to be available on the first £30,000 of a mortgage but was withdrawn in April 2000.
Mortgage - lease of a property as security for the repayment of money borrowed.
Notice to Quit - notice often required to be given by landlord to tenant, or by tenant to landlord, before a tenancy can be terminated. The Protection from Eviction Act 1977 lays down statutory requirements for some Notices to Quit.
Ouster order - a court order telling an occupier to leave a property by a certain date, with possession reverting back to the landlord or lender.
Parol - oral, not in writing.
Possession order - A court order telling an occupier to leave a property by a certain date, with possession reverting back to the landlord or lender.
Premium - A sum of money (non-refundable) paid to a landlord for initial occupation of accommodation.
Protected tenancy - A contractual residential tenancy in which the tenant has the right to a fair rent and security of tenure. Protected tenancies have been replaced by assured tenancies under the Housing Act 1988 but protected tenancies already in existence continue to have the same protection as before.
Quiet enjoyment - Refers to undisturbed enjoyment of premises by the occupier of that property. Tenants can sue a landlord for breach of covenant for quiet enjoyment, e.g. in cases of harassment.
Remedy - to put right; to correct.
Rent - Consideration paid for use or occupation of property.
Rent officer - Officer appointed by central government to assess “fair rents” and the level of Housing Benefit subsidy to be paid to local authorities on assured tenancies.
Resident landlord - A landlord who lives in the same property as his tenant.
Reversion - the interest retained the lessor on the grant of a lease.
Reversionary lease - a lease granted to take effect at a future date.
Right of re-entry / forfeiture - a right for the landlord to determine the lease, and re-enter the land in the event of a breach of covenant by the tenant.
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Secure tenancy - A residential tenancy granted by a landlord who is a local authority, the Housing Corporation or a housing action trust. The tenant has strong security of tenure, can only be evicted using a court order in specified circumstances, and can be succeeded by a relative if the tenant dies.
Service charge - charge payable to landlord or management company by tenant or leaseholder in addition to rent, to cover costs of services, maintenance, insurance, etc.
Service tenancy - a tenancy in which the landlord is also the tenant’s employer and the premises were let as a condition of that employment. see also Tied Accommodation.
Shared ownership - a form of lease available to a tenant who cannot obtain a sufficient mortgage to buy a property outright, giving her/ him part ownership of the property whilst paying rent as an ordinary tenant on the rest.
Statutory tenancy - a tenancy that comes into existence when the contractual element of a protected tenancy is terminated and the former protected tenant continues to live at the property (a company cannot be a statutory tenant).
Sub-tenant - Tenant who leases all or part of a property from an existing tenant.
Succession - the transfer of a property from tenant to spouse or member of family upon the tenant’s death. Different types of tenancy provide different statutory provisions or rights to succession.
Surety - a person who assumes legal responsibility for the fulfilment of another’s debt or obligation and who becomes liable if the other defaults.
Surrender - Voluntarily giving up a tenancy to a landlord, who accepts that surrender.
Survivorship - the passing of the share of a joint tenancy to the remaining tenant upon a joint tenant’s death.
Tenancy - an interest in land (as opposed to a “licence” which is a personal permission to occupy) whereby a person(s) enjoys exclusive possession of a property over a period of time usually in return for rent.
Tied accommodation - accommodation which is provided in connection with employment, e.g. a house for a school caretaker.
Tort - a civil wrong or injury arising out of an act or failure to act for which damages may be brought.
Trust for sale - the joint ownership of property where property is automatically considered to be held on trust for sale. Hence any joint owner can force a sale against the wishes of the other owners.
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Common Abbreviations
ARLA Association of Residential Letting Agents AST Assured Shorthold Tenancy CCJ County Court Judgement CGT Capital Gains Tax CPO Compulsory Purchase Order DoE Department of the Environment DSS Department of Social Security DTI Department of Trade and Industry EHO Environmental Health Officer HA88 / HA 1988 Housing Act 1988 HA96 / HA 1996 Housing Act 1996 HB Housing Benefit HMO House in Multiple Occupation HMSO Her Majesty’s Stationary Office (now called ‘The Stationary Office’) IS Income Support LA Local Authority LAG Legal Action Group LTA 1985 Landlord and Tenant Act 1985 MIRAS Mortgage Interest Tax Relief at Source NAEA National Association of Estate Agents NRL Non Resident Landlord NTQ Notice to Quit PEA 1977 Protection from Eviction Act 1977 PDT Pre-Tenancy Determination RAC Rent Assessment Committee
RICS Royal Institution of Chartered Surveyors
SA Self-Assessment
SI Statutory Instrument
SRR Single Room Rent
TSO Trading Standards Officer
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The Letting Handbook Gloss6 © The Letting Centre 10/2019 Back to contents
Scope and Definitions
In writing this Handbook, it became necessary from an early stage to define the scope of the work with regard to type of information and situations that are commonly encountered. For this reason, we have decided largely to restrict the information to recent or contemporary Housing law and residential tenancies as governed by the system of assured and assured shortholds provided by the Housing Act 1988. Any amendments to the 1988 Act (i.e. Housing Acts 1996 and 2004) have, of course, been included whereas information on pre-Housing Act 1988 tenancies is of only a brief and general nature, since it will apply to a minority of private lettings.
Also, it must be understood that the Handbook is not intended to be a substitute for obtaining professional legal advice where necessary. Housing Act 2004 The Housing Act 2004 received Royal Assent on 18th November 2004 and introduced several important amendments to the operation of private residential lettings and private sector housing law generally. This handbook includes the key changes introduced by the 2004 Act. Scotland, Northern Ireland and Wales Although much of the law and many Acts have equivalent provisions in Scottish law, N. Ireland and Wales there are also important differences. Due to the difficulty of obtaining the information and short notice by Government when introducing new laws we are unable to provide a comprehensive analysis of the differences in the law in these areas. In this current edition, we have generally restricted the scope and coverage of the information to the housing law in England. We have attempted to track the differences in Wales in a separate Factsheet (No. 40) as the law in Wales has moved away from England over the past years. Readers in other areas will find much of the information useful but will have to make their own enquiries where local law differs. Gender etc. For simplicity, references are generally used in the masculine form; and no preference or bias is intended. References to ‘he’ or ‘his’ cover also ‘she’ or ‘her’. Similarly, references to the singular are generally deemed to include the plural (thus ‘tenants’ is often interchangeable with ‘tenant’). Structure For ease of reference, the Handbook is currently divided up into four main sections:
1. Practical Aspects 2. Legal Aspects 3. Letting Factsheets Reference 4. Appendices: Addresses, Statute, Example forms etc.
The first two main sections are divided up into chapters in the normal manner (see Contents pages). Some of the larger chapters are further divided into sections and subsections. Thus, references within the general text to ‘this section’ or ‘the following section’ are normally references to these chapter sections unless stated otherwise.
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The Letting Handbook 1 © The Letting Centre 10/2019 Back to contents
The Letting Handbook 2 © The Letting Centre 10/2019 Back to contents Section 1: Practical Aspects
Section 1:
Practical Aspects
The Letting Handbook 1 © The Letting Centre 10/2019 Back to contents The Event Sequence The Event Sequence
Pre-Tenancy Issues
Investing in residential property & financial issues Regulatory control: HMO, Planning and Fire Safety checks* Regulatory control: Gas safety and EPC certificates* Mortgagee’s Permission to let Tax Implications Rental Valuation Preparing the Property Water, Electricity and other bills Preparing an Inventory Roles of a Letting Agent Tenant Vetting & Guarantors
Insurances
Granting and Managing the Tenancy
Preparing the Tenancy Agreement Signing the Agreement Accepting Rents and Deposits (*Deposit Protection Controls) Checking in the New Tenants Rent Collection Maintenance Issues Safety Checks* Inspections
Redirection of Mail
Terminating the Tenancy
Early Termination Renewal Notice by landlord, notice by tenant Checking out Assessing Dilapidations and Return of Deposit * - denotes mandatory controls/checks
The Letting Handbook 2 © The Letting Centre 10/2019 Back to contents Pre-Tenancy Issues and Procedures
1. Pre-tenancy Issues and Procedures
In this initial chapter, we take a look at the various requirements and steps that the landlord or letting agent will need to take in order to prepare a property for letting.
General requirements
When this Handbook was first introduced in the 1990s, there were few legal requirements that needed to be met when letting property in the UK. This is no longer the case.
Consumer safety legislation has greatly added to the burdens of the landlord and the letting agent in preparing a property for letting, and the introduction of tenancy deposit protection (TDP) in 2007 has increased the complexities of setting up new tenancies (and the potential penalties if mistakes are made). In addition, there is now considerable regulation of houses in multiple occupation (HMOs) since these types of property are frequently subject to safety and management problems - the regulatory regime for this type of property is explained in more detail in chapter 16. In the future, further legislation has been proposed that would require all landlords and their agents to be licensed.
The landlord may be wishing to rent his property for a variety of reasons. Some landlords have acquired rented property purely for investment reasons, whilst others may simply find their property available due to relocation or a period of absence working abroad. Whatever the background, the property will represent a considerable asset to the landlord and preserving the condition of the property will generally be as important as maximising the rental yield.
Residential Investment
In recent years, there has been a growing interest in the purchase of residential property for purely investment purposes - the so-called ‘Buy-to-Let’ market. The overall yields provided by such investments are comparable to, or in some cases even more favourable than, the more traditional investment routes provided by the building societies, equities etc. When choosing investments in such properties, it is however very important to assess the rental potential of each property. Properties in rural areas often give lower yields than those near larger towns and areas of student populations. The potential investor should at all times look at factors such as local rent levels and expected occupancy levels in order to optimise the rental yield. Where there is multiple occupancy, the potential investor also needs to ensure that the occupancy levels do not exceed the planning restrictions for the property.
Licensing and Planning Controls
Licensing schemes and planning controls have existed for many years in relation to certain types of property but, in recent years, landlords and letting agents have come under an increasingly regulatory burden aimed at improving fire safety and standards in rented property, and also to
The Letting Handbook 1-1 © The Letting Centre 10/2019 Back to contents Pre-Tenancy Issues and Procedures
control anti-social behaviour. Many of these controls were originally introduced in relation to higher risk houses in multiple occupation (HMOs) but local authorities now have powers to introduce licensing schemes in defined local areas that can affect other categories of HMOs (additional licensing) and indeed all types of rented property (selective licensing). Selective licensing is described further below. Landlords who do not make appropriate checks regarding such schemes before renting a property, may find themselves renting illegally and open to fines and other sanctions. Where a landlord is required to operate under a local authority licensing scheme, a licence fee is generally payable, and the local authority may impose other checks and conditions including a requirement to carry out extensive and often costly improvements in some cases.
Agents should also check that, where required, a suitable licence is in place when arranging the tenancy even for let only situations if the agent receives the first month’s rent. Where the terms of business state that the landlord is responsible for licensing the property the agent will still have a duty where they meet the statutory definition of ‘person having control’ or ‘person managing’ the property under the Housing Act 2004 which includes receiving rent on behalf of the landlord.
HMOs are where a property is in shared occupation by unrelated people, and typically, in these types of property, more stringent fire safety and management rules will apply. This process often involves an inspection by the local authority to ensure that the property is suitable for occupation for the specified number of persons. A mandatory licensing regime also exists for larger or higher risk HMO properties. The full definition of an HMO, and details of the licensing schemes and other regulatory issues that apply to management of HMOs are given in chapter 16.
Whilst there is currently no general registration or licensing requirement for renting residential property in England, a landlord registration system does now operate in Scotland and Wales.
Selective Licensing
Some local authorities have introduced a general licensing scheme in their local areas called selective licensing. Selective licensing, where adopted, applies to all properties (except those HMOs which are subject to mandatory and additional licensing schemes - see page 16-2 for more information on HMO licensing) where the whole of the house is occupied either under a single tenancy or licence or under two or more tenancies or licences in respect of different dwellings contained in it.
Part 3 of the Housing Act 2004 provides local authorities with power to introduce a selective licensing scheme in areas of low housing demand and areas where there are anti-social behaviour issues which some private landlords are failing to manage effectively. Part 3 applies to a person who ‘has control of or is managing a house which is required to be licensed under a selective licensing scheme.’ Private landlords and agents should check with the local authority as to whether such a scheme applies. Where the property is in an area that is subject to a selective licensing scheme the landlord or agent must apply for a licence and pay a licence fee.
Exemptions Some tenancies are exempt from selective licensing and include: • business and agricultural tenancies; • licensed premises; • where a prohibition order is in force; • where the property is managed by a local authority; • the building is occupied by students controlled by a university or college; • the occupier is a member of the landlord’s family who himself holds under a lease of the property for a minimum of 21 years; • holiday lets; • the occupier shares any amenity (e.g. a toilet, bathroom, kitchen or living room) with the landlord or a member of the landlord’s family; Where the landlord is taking steps to make changes a temporary exemption will be granted. The Letting Handbook 1-2 © The Letting Centre 10/2019 Back to contents Pre-Tenancy Issues and Procedures
Granting a licence The local authority will consider whether the landlord or agent is a ‘fit and proper’ person to be the licence holder and whether they have a sufficient level of competence to be involved in managing the property prior to granting a licence. The local authority have discretion to set out specific conditions of the licence with regard to anti-social behaviour and general management of the property which may include conditions relating to the use and occupation of the property and measures to deal with anti-social behaviour. There are also mandatory conditions which are set out in Schedule 4 of the Housing Act 2004: • to provide a gas safety certificate annually to the local authority; • to keep electrical appliances and furniture which is made available to the occupier in a safe condition and to supply to the local authority on demand a declaration of safety; • to ensure smoke alarms are installed and kept in good working order and to supply to the local authority, on demand, a declaration on condition and position of the alarms; • to supply the occupier with a written statement of terms of occupation; • to obtain references from prospective occupiers. Local authority requirements may be different in each area and landlords and letting agents should check with each local authority as to what licensing conditions apply. Where the landlord or person managing the property fails to obtain a licence for a property in a selective licensing area or is in breach of the licence conditions a fine of up to £20,000 could be imposed. Gas safety Many landlords and practitioners will be aware of the gas safety requirements for rented property due to the introduction of new legislation and the supporting publicity that it has received. Landlords are now required to ensure that gas appliances in rented property are properly maintained before letting and checked on an annual basis. It is a further requirement that each tenant is furnished with a copy of the gas safety certificate at the start of the tenancy. These regulations are discussed in greater detail in chapter 8.
Product Safety Regulations
Regulations also exist with regard to general product safety in rented property. Items such as furniture, electrical goods and electrical appliances are specifically included. The product safety regulations have one significant exemption in that they fundamentally only apply to agents and landlords letting in the ‘course of business’. Thus a person who buys a house which is specifically used to generate rental income will be required to comply whereas the person who lets his home whilst abroad for a short time will be exempt.
Where the regulations apply, it will be necessary to check that upholstered furniture and similar upholstered items such as headboards, cushions and pillows all comply with current safety standards. In most cases, it is evident whether an article is compliant; by law, all items covered by the regulations and sold by retailers after 1st March 1990 should conform to the new safety standards and have attached identification labels. The same landlord will also need to verify that any other items supplied in the property are in a satisfactory and safe condition. Special care needs to be taken with electrical appliances which should be tested for safety by an electrical engineer. As above, the detailed requirements of these regulations are explained in chapter 8.
Mortgaged Property and Property Title
Where the property is subject to a mortgage, it will normally be a condition of the mortgage that the property owner or mortgagor cannot let the property without prior permission of the mortgage company or lender. Permissions should be checked prior to letting. Most lenders are prepared to allow the mortgagor to let the property but many will ask to see a copy of the tenancy agreement and associated documentation (and may charge an administration fee for these checks). Some lenders will also insist that the mortgagor pays a higher interest rate whilst the property is let. Most mortgage lenders will also require that the property is covered by an appropriate buildings
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insurance policy. It is good practice to check that all necessary insurance policies are in place before a tenancy is granted. See ‘Insurances’ section on page 1-15 for more information.
It is important to check the title deeds to ensure that the owner of the property is the landlord and to check the terms of any headlease to ensure there are no restrictions prohibiting certain activities. See ‘Property Title and Lease Restrictions’ on page 1-14 for more information. Energy Performance Certificates (EPC) When buildings are to be rented out, landlords and letting agents are responsible for ensuring a valid Energy Performance Certificate (EPC) is made available to all prospective tenants. This legal requirement that applies to homes which are available to rent in England and Wales came into force on 1st October 2008. Letting Factsheet No. 38 contains further details on EPCs. The regulations have been amended in 2012 & 2013 and the key requirements are:
1. An EPC must be commissioned by the landlord before the property is put on the market (i.e. made available for sale or rent) unless a valid EPC already exists. Since January 2013 all advertisements for renting a property must clearly show the energy rating (both numerical and letter) of the building which includes any written information provided by the landlord, advertisements in newspapers, magazines and on the internet.
2. Any person acting on behalf of the landlord (including a letting agent) must be satisfied that an EPC has been commissioned for the property before the property is marketed. Enforcement officers may require an agent to produce a copy of the request for the EPC.
3. The landlord and letting agent must use reasonable efforts to ensure that an EPC is actually obtained within seven days of the property being on the market. Where it is not available the landlord or letting agent must ensure it is obtained within a further 21 days.
4. It is no longer a requirement for the first page of the EPC to be attached to any written particulars or description of the property. The full EPC must be provided free of charge to a prospective tenant at the earliest opportunity before entering into a contract or, if sooner, where information is provided in writing or at the time the prospective tenant views the property. Where green deal improvements are carried out on a property an amended EPC must be provided. See page 11-25 for more information on the green deal.
5. EPCs are required where a tenant rents separate self contained accommodation.
It would be good practice to attach the full EPC to the tenancy agreement and ensure that it is initialled as received by the tenant in order to evidence compliance. An EPC for rented property is valid for ten years, and can be reused for successive tenancies within this time. It is not necessary to commission a new EPC for each change of tenant. If a landlord already has an EPC for the property, for example because it was recently purchased, this EPC can be used for the subsequent rental. The Regulations are enforced by Trading Standards departments. Penalties apply for non-compliance - £200 per offence at the time of writing. Existing tenancies When a tenant is in occupation before 1 October 2008 and continues to be in occupation after this date, an EPC is not required whilst these same tenants remain in occupation. When the tenant leaves, an EPC will need to be obtained to show any prospective new tenants. Energy Efficiency The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 require all residential properties that are rented on a new tenancy (including renewals) on or after 1st April 2018 or statutory periodic tenancies that arise on or after this date to have a minimum energy perfomance rating of at least an ‘E’ rating. All existing tenancies will be required to comply from 1st April 2020. See page 11-26 and Letting Factsheet 38 for more information.
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Tax Issues
Income tax implications
For tax purposes, any rents derived from the letting of property will be treated as income and may be taxable. The full tax rules applying to rented property are quite complex and have changed significantly in recent years. Profits from property are treated as arising from a business and treated on similar principles
Whether tax becomes payable on such rental income will depend on a number of factors: • Nature of the letting • Landlord’s personal circumstances • Amount of allowable expenses incurred by the landlord Exemptions are available for certain categories of letting. For example, the Inland Revenue’s Rent-A-Room scheme provides that the first £7,500* of rental income derived from letting rooms in the landlord’s home is exempt and special rules also apply for furnished holiday lettings.
Certain expenses may be offset against the rental income if incurred ‘wholly and exclusively’ for the purpose of the let. These include: • Mortgage interest • Expenditure on maintenance & repairs • Insurance premiums • Management charges, advertising and related expenses • Water rates and council tax (if appropriate) • An allowance for wear and tear Where the property income is received in the UK on behalf of a landlord residing abroad, the rules of the Non-Resident Landlord Scheme will apply. If the rent is collected by an agent, then unless the agent has obtained special permission from the Inland Revenue, tax will need to be deducted from the rental income at source and collected on behalf of the tax office.
Capital Gains Tax
A person’s own home is normally exempt from capital gains tax but rented property will normally be subject to capital gains tax like any other major personal or business asset.
If the landlord lets only part of his house, then capital gains tax may again be payable depending on the proportion of the dwelling which is let, and the length of time over which the letting took place. Dealt with in more information in chapter 14.
Mortgage interest and other tax reliefs
If the landlord is renting out a property where he previously lived as his main home, then it is likely that tax relief is given on the mortgage interest payments. It is important that either the lender or the Inland Revenue is notified and the property withdrawn from the scheme.
The tax rules, exemption schemes and Non-resident Landlord Scheme is described in more detail in chapter 14.
*N.B. Correct as at 04/2019 but tax thresholds do change.
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Rental Valuation
Most landlords will be keen to ensure that they maximise the rental yield from the property and so it will be important to establish the correct rent. If the property is advertised at too low a rent, then clearly the landlord will suffer a shortfall in the income (and the tenants will likely be very happy with the deal). Yet it is equally important not to set the rental too high since the property may become difficult or impossible to let and the loss of rental income from the vacant period will far exceed the advantage of the higher rent level.
If using an agent to organise the letting, then the landlord can rely on the expertise of the agent to determine the appropriate rental from his knowledge of local market rents. When providing a rental valuation, the agent will look at several different factors: • The size of the property (no. of bedrooms, size of rooms) • The general condition of the property, its decor and the its various facilities • Whether furnished or unfurnished (and the extent and quality of furnishings) • The location with regard to transport, schools and other local amenities • Whether rents include water rates and other bills • Seasonal factors. High demand can affect rent levels at some times of the year • Length and type of tenancy available • Restrictions of the letting (Multiple occupancy, pets, students etc.)
Multiple occupancy & other factors
The rental income may also depend on less obvious factors. If for example a four bedroomed house is rented to a family, then there is likely to be an average local rent level for this size of house. Yet, the same house may also appeal to say a group of students or young professional people living as a group. The group may well calculate the rent on a per-room basis against the comparable cost of a bedsit in the same area with the result that the rents achievable under multiple occupancy is often higher than the average rents.
In this situation, the landlord needs to balance the higher rental income against the possibility of higher wear and tear costs from the group, and the cost of compliance with further fire safety measures should the property need to be re-classified as an HMO.
A landlord may also decide to apply other restrictions to the property. He may not wish to allow pets, children, smokers or other categories of people. All these factors can easily impact the ease with which the property can be let. For example, it is not uncommon to find a landlord wishing to offer an immaculate four bedroomed house and not wishing to entertain applications from either families with children or sharers. In practice, the property proves difficult to let; few professional couples wish to be over-accommodated in this way.
Timing is also an important factor. If the landlord makes the property available with reasonable notice, then he stands a fair chance of obtaining the optimal rent. Conversely, if the property is available at short notice, it may be more profitable to accept a lower rent on the initial letting rather than allow the property to rest empty and without income.
Sources of information
In order to determine local rent levels, various sources of information are available: • Properties advertised by other local landlords and agents and property portals • Local papers and similar publications
• Office for National Statistics Index of Private Housing Rental Prices
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Preparing the Property for Letting
Like most transactions and commodities, it is common sense that the landlord should present a property in a clean and correct condition in order to make it attractive to prospective tenants. Where a property has a garden, this should be tidy, the lawn mown and any shrubs pruned at the start of the tenancy. A landlord should consider providing some basic tools such as a lawn mower, shears, etc. so that the tenant can maintain the garden during the tenancy. Alternatively, a gardener could be employed, with such costs included within the overall rent.
There are several important reasons why the property should be put into good general repair and decorative order prior to granting the tenancy:
1) Once tenants have moved in, it will be more difficult to gain access to carry out repairs. Tenants have a legal right to ‘quiet enjoyment’ and landlords are expected to give adequate notice to the occupiers prior to entering the property to carry out repairs.
2) By arranging that the property is properly cleaned throughout to a good overall standard prior to the tenancy, it will make it easier to ensure that the property is returned in a similar condition at the end of the tenancy. In such a situation, it will be difficult for tenants to claim that ‘the cooker was dirty when we moved in’ or ‘the garden was always untidy’.
3) The Landlord is legally obliged to keep certain parts of the property in a good state of repair. All plumbing should be in good working order and drains free of blockage. Electrical wiring should be safe and fault-fee, and any equipment or appliances in good working order.
Furniture and Furnishings
In 1980s and 1990s, the majority of short term residential tenancies were let as furnished lettings. Legal changes, safety legislation and changes in renting patterns have led to a significant increase in the proportion of unfurnished lettings, and long term tenants prefer to use their own things. Holiday lettings require the property to contain a more complete inventory. A letting agent can generally advise on the optimum level of inventory or furnishings to provide. Landlords and agents must comply with furniture and furnishing regulations and full details are provided in Chapter 8.
Council Tax
For most lettings, responsibility for payment of council tax will rest with the tenant(s). The main exceptions to this are where the property stands empty, the property is occupied by students (students are not required to pay), or where the property is occupied as a house in multiple occupation (landlords have to pay council tax for HMOs).
Water, electricity and other supplies
Generally, unless the tenancy agreement specifies otherwise, services consumed at the property are legally the responsibility of the tenant. Traditionally, landlords used to pay the general and water rates for a property. Since the introduction of the council tax system, these costs are now normally met by the tenant. Prior to moving out, the landlord should notify each of the suppliers of each of the utilities available at the property (e.g. water, electricity, gas, telephone etc.) and the incoming tenants make a new supply arrangement.
Where there are reconnection charges (e.g. telephone), these are normally the tenant’s responsibility.
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Drawing Up An Inventory
Prior to letting, a complete inventory and schedule of condition of the property should be prepared. This can be prepared either by the landlord, the agent or an inventory clerk
The inventory and statement of condition, is the most important weapon in the letting agents armoury. Because it protects the landlord, tenant and agent alike, one cannot over-stress the necessity for the utmost diligence in its preparation. Unfortunately, this vital document does not always receive the attention it deserves. The end result is invariably a dispute which can become acrimonious, with both sides blaming the agent for real, or supposed, deficiencies. At the very least, the landlord or agent may spend an inordinate amount of time endeavouring to resolve the dispute. At worst, the dispute may be required to be resolved by a tenancy deposit scheme adjudication process, or court proceedings.
Purpose
The inventory forms an agreement between the landlord and tenant as to the true condition and contents of the property at the date of entry by the tenant. It will obviously be used, when the tenancy terminates, to determine any dilapidations.
Detail
The schedule should be as detailed as possible and will record the condition of each room and every item in the room. The inventory is a written description and not merely a list of contents. It has to paint a picture to reveal to someone who was not present, the true nature of the property and contents.
How much detail is required will depend on the type of property and value of the contents. An expensive house, full of antiques, will require much greater detail and clarity compared with a terraced house with nondescript furnishings. However, every property is a castle in the eye of the owner and more descriptive detail is better than less. The guiding principle is to be as precise as possible; ‘Rosewood Chippendale cabinet with three drawers and gilt-edged top’ is a better description than ‘cabinet made of red wood’.
Inventory clerks
Most landlords and letting agents will undertake their own inventories, but for those who do not wish, or are unable to do so through volume of work, specialist firms of inventory agents are available in most main centres. For an agreed fee, these specialist firms will undertake the statement of condition and contents immediately before, and immediately after, the commencement and end of the tenancy. The advantages are obvious in not only having a specialised company undertaking a vital task, but the tenant may more readily accept their schedule of dilapidations at the end of the tenancy as being independent.
Visual aids
While words alone are descriptive, photography is an added advantage. The old cliché that ‘every picture tells a story’ is never more true in dilapidations disputes. A video camera, mobile phone or tablet is an ideal piece of equipment. It has the advantage of speed. Not only is the time, date and year automatically recorded, but the photographic images give a general impression of condition, both interior and exterior, at the commencement and end of the tenancy. Still photographs are equally acceptable but it is preferable to use a type which allows the date and time to be recorded on the photograph. Alternatively, make a written note at the time and sign and date the back of the photographs. Photographs should be of good quality in order to be useful as evidence and
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are best embedded into the inventory report. Photographs can be useful to provide a before and after comparison.
Preparation
A pre-printed schedule is invaluable to ensure that nothing is missed from the inventory. As well as a list of the contents of the property a detailed description of each room including the main entrance, hallways, any garden, garage or conservatory should be provided. The description should list the items, the type of decoration, and the condition of each room or area (including doors, walls, ceilings, light switches and fittings, wood work, windows, heating (including radiators), electricals, sockets, appliances, furnishings, carpets and floor coverings etc). The schedule should fully describe the contents/item and any damage or blemishes. The type of windows should also be recorded e.g. single or double glazed and also whether or not relevant items have safety labels.
Descriptions may include things like, damage to doors, whether windows and doors open and close properly, that taps, showers, oven/hob are clean and in full working order and whether there are any signs of damp, or any marks or stains on the walls etc.
Guidance from the deposit schemes also advises that the cleanliness of the property should be recorded as this is not the same as the condition and an adjudicator will not be able to establish if the property’s cleanliness at the end of the tenancy has deteriorated if there is no evidence of this at the start of the tenancy.
Utility meter positions should be included in the schedule together with their serial numbers. Meter readings and levels of any oil tank should be recorded together with a note of what keys have been handed to the tenant including any key fobs/cards for gates.
In order to demonstrate acceptance of the inventory and schedule the safest option is for the schedule to be signed by both parties and dated to show when it was compiled, re-typed or amended. There should also be sufficient space for comments to be made relating tothe condition of each item. An alternative would be to provide the tenant with the report stating that any discrepancies or alterations must be notified to the landlord or agent within 7 days of receipt of the report. Failure to respond within the timescale is normally considered to be acceptance by the tenant that the report is accurate at the start of the tenancy. Abbreviations Some inventory clerks may use abbreviations to compile a report but care should be taken with abbreviations. While w.c. is generally understood by the public they may have more difficulty with n.w.m. (normal wear marks), or m.a.a. (marks according to age). Whilst these abbreviations are more understood by the landlord or agent, they may not be so easily discerned by the tenant, or the court, if there is a dispute. The answer is to use abbreviations for speed, but the pre- printed schedule should have a dictionary of all the abbreviations used. After all, the landlord is requiring the tenant to acknowledge the correctness of the inventory and the tenant can hardly do that if he does not understand it.
Garden and outbuildings
The condition of the gardens, front and rear (if any) and any outbuildings, fencing or driveway should be carefully recorded. Failure to keep lawns cut, flower beds dug and shrubs trimmed, is a frequent cause of friction and dispute, as the requirement in the lease to upkeep the garden is the one clause frequently breached. More than the breach of most covenants, lack of attention to the garden is likely to incur the landlord’s wrath and cause expense to the tenant from the dilapidation deposit, which he is loathed to pay. It is important to make a note of the condition of the garden and take photos at the start of the tenancy.
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Agency Instruction
In many letting situations, the landlord will wish to employ an agent to act for him. There are many advantages to using a good letting agent; a landlord may be living abroad or simply not have the time to manage the property himself. Most importantly, a letting agent is employed by the landlord for the care and skill that can be provided by such practitioners who are specialists in the field, in contact with prospective tenants and familiar with the local market.
Letting services
The letting or managing agent may provide a range of different functions. Typically, these fall into two broad types: • Introduction or ‘Let-only’ service • Full management
Introduction service
An introduction service will generally include: • Advising the landlord on a suitable rental value • Advertising the property • Finding suitable tenants • Taking a holding deposit • Taking up references and credit checks on the prospective tenants • Drawing up the tenancy agreement (if required) • Drawing up an inventory for the property (if required) Typically, following receipt of satisfactory references, the agent will then collect the dilapidations deposit from the tenant together with the initial month’s rent. Having deducted his fees for arranging the letting, the agent will then pass all money onto the landlord. Occasionally, the agent may also be involved in the issue of keys and checking the tenants into the property. This will depend on the extent of the service offered by the particular agent and the requirements of the landlord or owner.
Full management service
This type of service normally includes the agent co-ordinating all aspects of the day-to-day management of the property from finding or introducing the prospective tenants to managing all issues during their occupation and through to overseeing any subsequent checking out process and their replacement with new tenants. Thus (in addition to those functions listed above), the managing agent will: • Issue keys and check the tenants into the property • Collect rent at the start of the tenancy and on regular intervals thereafter • Manage any repairs and organise regular maintenance • Inspect the property at regular intervals • Manage the renewal of the tenancy or replacement of the tenants • Ensure that the tenancy is properly terminated at the end of the tenancy, including checking out the tenants and arranging for any repairs or redecoration.
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Clearly, the exact extent of the service offered will differ from agent to agent. The agent will occasionally be required to provide other types of assistance and advice: • Advice on purchasing of suitable property to rent • Advice on mortgages and other methods of financing the purchase • Guidance on what furniture and other items to include in the inventory • Assistance with the transfer of utilities • Assistance with completion of tax returns and general tax advice • Advice on general legal problems associated with letting • Assistance with co-ordinating major renovations or repairs • Arranging any buildings, contents or legal insurances • Taking action when rents are overdue or tenants are causing other nuisance • Locate and liaise with solicitors if legal action is required
Instructions
When a landlord has decided to employ or instruct an agent to let the property, it is common practice for the parties to sign a written agency agreement or ‘instructions’.
The agency or management agreement should include: - Authority that the agent may act for the landlord in letting the property - What services are included in the letting or management service - Details on all fees and other charges - Authority to deduct agent’s fees from client money collected - Details on taking deposits (whether as agent or stakeholder etc.) - A clause indemnifying the agent for any expenses or loss incurred whilst pursuing the interests of the landlord client. - Detail on who will be responsible for preparing the property for letting including the co- ordination of gas and product safety checks and drafting the inventory. - Information on how repairs and maintenance will be conducted. This will often include an expenditure limit or level of authority that the agent may decide without consultation.
- Details on how the agreement may be terminated.
A more comprehensive description of the law of agency and the essential requirements of the agency agreement is provided in chapter 17.
Landlord Fees
Typically, the agent will collect any fees and bills for repairs and maintenance out of the rents collected. Where collected, the agent should not make any deductions from the dilapidations deposit which should be held in a separate and secure client account.
For providing a tenant introduction service, landlord fees vary according to region, but typically range from 5-10% of the initial rental period. The fee will normally be charged to the landlord at the beginning of the tenancy and deducted from the initial rents collected.
A full management service will typically cost between 10-15% of the rents collected, and again, this varies according to the individual firm and local area. Some firms also make extra charges for specific items such as the preparation of the inventory, drafting the tenancy agreement, overseas telephone calls etc.
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Duty to disclose fees
Advertising Standards Authority
Key information, including any fees and charges should be provided to the tenant up front and not gradually throughout the tenancy. The Advertising Standards Authority require that advertisements placed by letting agents and private landlords must make it clear to tenants what their fees and charges are. The Tenant Fees Act 2019 prohibits certain fees being charged to tenants for new or renewal tenancies granted on or after 1st June 2019 and for existing tenancies from 1st June 2020. See Letting Factsheet 51 for more information.
Consumer Rights Act 2015
Under Section 83 of the Consumer Rights Act 2015 letting agents must publish a list of fees payable by landlords or tenants in respect of letting agency or property management work carried out by the agent, or in connection with an assured tenancy, where it is likely to be seen at each office and on their website (if they have one). Agents cannot charge tenants prohibited fees under the Tenant Fees Act 2019. Agents will also be required to list their fees on any third party website where the letting agent advertises. The list of fees must include a description of each fee providing an understanding of the service or cost that is covered by the fee and where the amount of fee cannot be reasonably determined in advance a description of how that fee is calculated must be published. Only permitted payments under the Tenant Fees Act 2019 may be listed for tenant fees.
Under the Consumer Rights Act 2015 agents are also required to publish with the list of fees a statement of which client money protection scheme and which redress scheme they belong to.
Redress Schemes
All agents who carry out ‘letting agency’ or ‘property management’ works in England are required to become a member of an approved redress scheme for dealing with complaints in connection with that work under Section 3 of the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014.
There are exclusions under ‘letting agency’ work (s4) and ‘property management’ works (s6) such as student lettings managed by institutions, employers where the prospective tenant is an employee and local authorities etc. The most relevant to private residential lettings is that agents will not be required to join a redress scheme where they only publish advertisements, disseminate information or advertise property for rent and pass the contact details of prospective landlords to prospective tenants.
At the time of writing there are two approved redress schemes; The Property Ombudsman www. tpos.co.uk and The Property Redress Scheme www.theprs.co.uk. Each scheme will have their own rules in relation to compliance and agents should ensure they are clear on the requirements. The enforcement authority for non-compliance is the local authority and failure to comply could result in a penalty. Agents can appeal to the First-tier Tribunal where the decision is unreasonable, based on an error of fact or wrong in law or where the monetary penalty is unreasonable.
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Client Money Protection Schemes
The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2018 require all letting agents carrying out letting agency work or property management work in relation to housing in England, who hold money on behalf of a client, to belong to an approved client money protection scheme from 1st April 2019.
The client money protection scheme provider must be one that has been approved by the government under The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018. Letting agents will need to obtain a certificate confirming that they are a member of a client money protection scheme and display the certificate in accordance with the regulations. See Chapter 17 for more detail.
Data Protection
Agents and landlords should ensure that the tenant is clear at the start of the tenancy as to how and when their personal details may be passed on. The General Data Protection Regulations (GDPR) apply in the UK from 25th May 2018 and came into force under the Data Protection Act 2018. These regulations have similarities to previous data protection requirements under Data Protection Act 1988 but update data protection laws for the digital age. The Information Commissioner’s Office (ICO) oversees the implementation of data protection and helps to police the various data protection regulations. A‘Guide to the General Data Protection Regulations’ is available on the ICO website www.ico.org.uk. A key change to data protection is explicit consent requiring a very clear and specific statement of consent from the individual and a positive opt- in, meaning a ban of using pre-ticked opt-in boxes. Consent will be harder to obtain and can be withdrawn at any time and more information must be included on a privacy notice. Processing Data
The GDPR apply to data controllers and data processors. A data controller is a person who decides how, why and when personal data will be processed such as a landlord or an agent dealing with contractors and referencing agencies. A data processor is a third party who is responsible for processing personal data for the data controller for example referencing agencies. An agent may be a data processor where they are acting on behalf of the landlord. The use of any personal data under the regulations must be justified using a lawful basis for processing data which are; that the person gave explicit consent, to fulfil or prepare a contract, that there is a legal obligation, to save someone’s life or in a medical situation, to carry out a public function or there is some other legitimate interest. Any lawful basis for processing data which agents and landlords wish to rely on will need to be documented in a privacy notice.
It is important that contracts are in place between the data controller and processor setting out details of data processing. For example, clauses should be included in agency agreements/terms, contractor terms and conditions and referencing agents’ terms ensuring that the parties agree to comply with their obligations under the data protection act. Letting agents who rely on explicit consent will need to ensure that the individual has agreed to the sharing of their data and an automatic opt-in tick box or consent has not been used. For example, agents may need to obtain consent in order to share tenants’ details with third parties such as utility companies, maintenance contractors and debt collection companies etc.
Letting agents and landlords may be able to rely on the ‘legitimate interest’ or ‘contract’ lawful basis with regard to using personal data. In order to fulfil the ‘legitimate interest’ basis a legitimate interest must be identified, you must be able to show that the processing of data is necessary to achieve it and it must be balanced against the individual’s interests and rights e.g.
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sharing data for referencing purposes. To fulfil the ‘contract’ basis you must have a contract with the individual and you need to process personal data in order to comply with your obligation under the contract or, if there is no contract yet, you have been asked to do something and you need to process their personal data to do what they have asked e.g. tenancy application form or preparing a tenancy agreement.
Companies must document all processing activity but those with less than 250 employees only need to document processing activities which are not occasional or could result in a risk to the rights and freedoms of individuals or involve processing of special categories of data. Information to be documented must include the company details, the purposes of processing, a description of categories of individuals, their data and recipients, details of transfers to third countries, retention schedules and a description of the company technical and security measures. The ICO provide an example documentation template that can be used on their website.
Information must be retained appropriately, kept secure and protected by using appropriate technical or organisational measures such as restricting access and encrypting data. Privacy Notice
Individuals have a right to be informed about the collection and use of their personal data. A privacy notice must be displayed on a company website and given to the individual at the time data is collected. Privacy notices are not new under the GDPR; these have previously been required under the Data Protection Act 1998. However, more detailed information is now required. A privacy notice informs people who will be collecting their personal data, how it will be used and who it will be shared with. The following information must be included: • The name and contact details of the organisation and any representative or data protection officer, who is collecting the data and what data is being collected; • Whether it will be shared with any other organisation and their details including any third countries or international organisations; • The purpose for processing the data, the lawful basis for processing the data, the legitimate interests for the processing and how it will be used; • The recipients of personal data and the retention period of the data; • The right to withdraw consent and the right to lodge a complaint; and • Details of whether individuals are under a statutory or contractual obligation to provide the personal data. Where data has not been obtained directly from the individual they must also be informed of the source of where it was obtained from and whether it came from a public source.
Property Title and Lease Restrictions
Under the Accommodation Agencies Act 1953, agents must ensure that the owner of the property is in fact the true owner. Section 1 (c) states that any person who “issues any advertisement, list or other document describing any house as being to let without the authority of the owner of the house or his agent, shall be guilty of an offence.”
Prior to letting out the property an agent should obtain Photo ID from the landlord such as a passport or driving licence and the title deeds of the property should be checked to estabilsh whether: • the landlord is the true owner; • the property is subject to a mortgage or lease; • there are any restrictions on the use of the property; • the property is jointly owned.
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A copy of the title deeds can be obtained from the Land Registry for a small fee and will show the property owner(s) whether the property is subject to a lease and whether there are any restrictive covenants or easements (rights of way) attached to the property.
Lease Restrictions
Where the property is a leasehold property the landlord or agent should carefully check the terms of the headlease before letting. Restrictive covenants may prohibit certain activities e.g. holiday lettings or keeping pets at the property. Where a lease restriction is breached, the landlord would have primary responsibility for the breach of covenant of his lease, but the agent could also be held liable for a breach of duty of care.
If there is more than one owner then consent must be obtained from all owners of the property and, where the property is subject to a mortgage, consent may need to be obtained from the lender. It would be advisable to get any consent in writing. For more information on mortgaged property see page 1-3.
Insurances
Property insurance
The landlord will generally be responsible for insurance of the property being let and is advised to check that appropriate buildings insurance has been obtained. It is also prudent to check the policy provides adequate cover when the property is let since some policies specifically exclude cover for this situation. Some policies exclude specific types of lettings or include conditional terms for certain types of letting e.g lettings to students, houses in multiple occupation, business tenancies (which could include child minding) and unoccupied property etc.
Most landlord policies include protection for public liability cover but it would be wise to check this. The landlord should also consider taking out insurance cover for any high value contents provided in the property either as an extension of the buildings insurance or as a separate policy. Although the tenant is legally responsible for any damage to the contents of the property, in practice it is unlikely that a sufficiently large damage deposit would be held to cover significant losses (such as a major fire) and the tenant may not have sufficient financial means to .pay
Legal & rent protection schemes
Insurance products are now available which can provide cover for landlords against legal expenses, or other losses (e.g. loss of rent) incurred when a tenant defaults. These can be helpful to guard against sitting tenants, rent arrears and the high costs associated with taking appropriate legal action and possession proceedings.
Zero deposit
As an alternative to accepting and holding a dilapidation deposit there are several insurance policies available which offer an equivalent protection to a dilapidation deposit known as a ‘no deposit option’ - without the associated administrative and regulatory burdens.
Tenant Insurance
The landlord’s insurance will not generally provide cover for the tenants’ belongings and tenants should be advised to make their own independent provision for insurance cover.
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Tenant Vetting
Once the property is advertised for let, it will be necessary to arrange viewings of the property (giving existing tenants adequate notice) and an application will hopefully soon come forward from the prospective tenant.
The landlord may have established criteria for initial vetting of prospective tenants as discussed above (see ‘Rental valuation’). For example, the landlord may wish to exclude tenants with pets, or tenants receiving housing benefit and so on. Care must be taken not to exclude certain categories. Tenants may not normally be excluded on grounds of race (Race Relations Act 1976) disability (Disability Discrimination Act 1995) or on grounds of sex (Sexual Discrimination Act 1975).
Holding deposit
There is generally a delay between the tenant applying to take the property, any references and credit checks being undertaken, and the property becoming vacant.
It is common to protect the landlord’s position during that period by taking a holding deposit. Under the Tenant Fees Act 2019 a landlord can take a holding deposit of one week’s rent from a tenant to reserve the property whilst reference checks and preparations for a tenancy agreement are undertaken. It is important to provide written information to the tenant to explain why a holding deposit is being taken, the amount required and in what circumstances the tenant may lose all or part of the holding deposit. Landlords will have 14 days to enter into a tenancy agreement with a tenant once a holding deposit has been received by the landlord or his agent unless a different deadline has been agreed between the parties.
A holding deposit can only be retained where the tenant provides false or misleading information which the landlord can reasonably consider when deciding to let a property, where the tenant fails a right to rent check, where the tenant withdraws from the property or fails to take reasonable steps to enter into a tenancy agreement with 14 days of receipt of the holding deposit and the landlord or his agent has taken reasonable steps to do so. More information on the rules regarding holding deposits and tenancy deposits is given in chapter 10.
Information from tenants
Each prospective tenant should be asked to complete and sign a tenancy application form providing personal information. This information will be important in helping the landlord to vet the applicant, and contact any employers, previous landlords and other referees. The information requested of the tenant should include: • Current address, previous address (if not at address for more than 3 years) and dates • Personal details: age, occupation, smoker/non-smoker, next of kin, pets, children etc • Details of current employment (whether full time, length of service) and dates • Confirmation of entitlement to live or work in the UK (‘right to rent’ checks) • Details of character references and current or previous landlord references • Banking details (for bank reference) • Details of any previous County Court Judgements (CCJ) or convictions • Whether a tenant is in receipt of housing benefit Comprehensive information together with supporting documents (e.g. passport, driving licence, utility bills, bank statements, wage slips etc) will provide a statutory record for ‘right to rent’ purposes and will assist landlords to identify situations where the tenant has supplied misleading or false information. The tenancy application form may also be useful in tracing the tenant where they have absconded owing rent.
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Tenant References and Credit Checks
It is standard practice to take up references and checks on tenants before granting the tenancy. The importance of these checks should not be underestimated; landlords who have been unfortunate to experience sitting tenants or non-payers will be aware of the high costs of such tenants resulting from loss of rent, solicitors costs and administration time and general inconvenience. Once a bad tenant is allowed into possession, it can take as long as five months to repossess the property; a tenant can only be evicted by a bailiff pursuant to a court order.
When following up references, it is regrettably necessary to adopt a stance akin to that of a detective since there are many pitfalls for the unwary. Landlords should question all facts and information provided until the checks are satisfied to a reasonable level. Tenants have occasionally been known to supply phoney information for references and guarantor agreements have been deemed worthless due to signatures being falsified. Therefore, as a matter of prudence, make independent enquiries direct to the parties rather than rely on information supplied by the tenant, avoid reliance on verbal statements and double check details where necessary.
Best practice requires that the tenant supplies forms of ID to carry out identity checks. This might include sight of passport, and copies of utilities bills, bank statement or other proof of address. Defaulting tenants also provide a problem of traceability. If the tenant leaves the property with money owing, then the ability to be able to change address so easily makes it more difficult to pursue such debts. Therefore the more that is known of the tenant and the tenant’s circumstances, the easier it can be to trace a defaulting individual. It would be good practice to ask for an address for use at the end of the tenancy which could be an address of a family member or next of kin.
Tenant information and Ground 17
A new ground introduced by the Housing Act 1996 makes information supplied with the tenant’s application an important part of the tenancy documentation. Under the new Ground 17, this information can now be used to afford the landlords further protection in case of default. Where a tenant has supplied the landlord or agent with false or misleading information which has led to the landlord granting the tenancy, this ground can be used by a landlord to apply for possession of the property. For this reason, information should be comprehensive and searching, taken from the applicant in writing (i.e. application form), and carefully filed.
References
Landlords will typically require two good references, perhaps from an employer, the applicant’s bank or a previous landlord. In practice, the particular type of reference or information requested will differ according to the procedures adopted by different landlords and agents. For example, if references are to be checked by a third party or credit checking company, then the company may specify what information is required from the tenant.
Ideally, the references should establish that the applicant is sound financially, and spiritually (i.e. likely to look after the dwelling and act in a good ‘tenant-like’ manner). Traditionally, there are four widely used types of references; employers reference, bank reference, previous landlord’s reference and a character reference.
Employer’s reference
It is important to establish that the prospective tenant has the necessary means or income to support the future rental payments and an employment reference is an important check. The net income of the tenant needs to be considered with respect to the rental value (or share of the rental value in a joint tenancy). A significant period of full time employment is useful (since it suggests a stable income stream), and the employer may also be asked to comment on the individual’s good character.
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Often, the tenant is between jobs or the duration of current employment is short due to a relocation following a change in employment. In this case, similar details relating to the previous employment should be obtained. Employment start and finish dates should be obtained where required.
Knowing the identity of an employer also presents a further possible safeguard in case of rent arrears or other financial disputes resulting from the letting. By knowing the tenant’s employer, it is possible to enforce repayment of debts using a powerful mechanism known as ‘attachment of earnings’ should the tenant leave the property with money owing.
Self-employed
If the applicant is self-employed, then detailed checks will be necessary. Self-employment can provide an individual with a more unpredictable income stream; much will depend on the nature of the business. Again, previous earnings history will be a useful indicator but the most successful self-employed professional as easily as an employed person can suddenly find himself out of work in today’s employment climate.
For self-employed people, it is usual practice to ask to see the accounts of the particular business, other evidence of a steady income stream or an accountant’s reference. Comparisons are difficult but self-employed individuals can offer present higher risk for the landlord and so more thorough checks are normally undertaken.
Landlord’s reference
In many cases, references given by a previous landlord are useful, especially if the previous landlord is known to the new landlord. The information that should be requested should include: • Verification of tenancy address, dates and rent details • Whether rent has been paid on time • Whether the property was left in good condition • Whether any other problems were encountered • Whether the person is generally considered reliable and trustworthy One important word of caution with regard to landlord references. A landlord with a defaulting tenant will be eager for the tenant to leave and may be reluctant to disclose details that prejudice the tenant’s chances of getting accommodation elsewhere, but few landlords are capable of continuing the deceit fully. A telephone call can be useful to confirm the written reply received.
Bank reference
The procedure for obtaining a bank reference for each individual bank may differ. The person or company taking out the reference will normally apply directly to the applicant’s bank asking for a reference. It will be necessary to send a letter to the bank including the name and address details of the tenant, their account details, the name and address details of landlord or agent, the amount and frequency of payment of the future rental liability, payment of the bank’s credit reference charge and the tenant’s consent to disclose the details. Bank references are less common these days and it is more useful to request copy bank statements from the tenant confirming receipt of the tenant’s wages, evidence of expenditure and previous rent or mortgage payments.
In the case of a company let, then a credit search should be conducted on the company. Character reference Some landlords request a character reference. These can vary considerably in usefulness. A character reference from a relation is of little assistance whereas the reference from someone of
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important professional standing and knowledge of the community (e.g. magistrate, judge, doctor etc.) is very helpful. Typically, when taking such references, one should ask: • nature of relationship with applicant • how long the person has known the applicant • whether the person is considered to be reliable and trustworthy Credit checks
It is becoming increasingly common to take up credit checks in addition or in place of one of the references. A credit search essentially works by comparing the tenant’s supplied details with information contained on large national consumer credit information databases. Information supplied is generally compared in two basic ways:
a) PERSONAL DATA. The database search will attempt to find any credit information for the individual or subject of the search at the address given. Details are matched against the Electoral Register and other linked information such as County Court Judgements (CCJ), bankruptcy, data of birth, residency status, family member, details on other credit checks undertaken and previous address information etc.
b) SOCIAL / GEOGRAPHIC DATA. Where only limited information is available from the personal data checks, a credit score is sometimes derived by looking at the address of the subject property and any default or high credit risk patterns connected with that direct neighbourhood.
The various checks each contribute in a pre-calculated way to determine an overall credit score for the subject applicant. Details of CCJ’s and bankruptcy may be provided separately. Based on the resultant credit rating, the credit referencing company can then advise on the overall credit worthiness of the individual. An agent should provide copies of the references received to the landlord. There are occasionally grey areas and where it has not been possible to obtain satisfactory references, full details of the tenant’s application and circumstances should be supplied to the landlord in order to make the final decision whether to grant the tenancy on the basis of the information received. Guarantors
In some situations, such as a young person, leaving home with no previous employment, a full set of references may not be obtainable. Equally, earnings may be insufficient to cover the rent. In this case, the applicant should be asked to nominate a relation (normally a parent) or other related person (or even business) that would be prepared to act as a guarantor.
The guarantor will be legally obliged to accept responsibility for any arrears or other costs and liabilities that may be incurred by the tenant in the first instance. The guarantor will therefore take on the financial responsibilities of the tenant in this case and, consequently, it is necessary to take the same financial references or checks of the guarantor as we would originally request of the tenant. Typical examples of situations where a guarantor might be required are: • student (no employment references available) • bankrupt individual • person relocating from abroad Once a landlord or agent is satisfied with the financial status of the guarantor, then the parties should be asked to sign a guarantor agreement. Because of the reliance that may come to be placed on the guarantor, the guarantor agreement should ideally be signed by the guarantor in front of the landlord or agent in order to verify the authenticity of the signature. See Chapter 9 for more information on Guarantors.
Satisfactory References and Confirmations
Landlords and agents should obtain evidence to support any references, for example, bank statements, wage slips and P60 forms confirming income and expenditure. All references should
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be followed up, in particular, the employer’s reference to ensure that the employer is who they are and not just a relative. In Hale v Blue Sky Property Group 2016 (Bristol County Court) the agents used a third party referencing company. As a result of the agent not carrying out the proper checks following issues raised in the report the landlord lost around £4,000 in unpaid rent and interest plus costs and expenses. The judge found that the agents were at fault as they should have reported a County Court Judgment (CCJ) to the landlord and also the fact that the credit risk had been given as medium in the referencing report. The tenants had also lied on the application form as the male tenant had ticked to say he had never had a CCJ and the female tenant had no job - she had listed a relative as her employer. The agent failed to obtain further documentation such as bank statements which would have revealed that the tenants had other debts.
This case highlights that referencing reports should be checked carefully and, if there are any issues showing in the report, they should be followed up. The fact that the tenant had lied about the CCJ should have warned the agent and further checks should have been carried out. Landlords rely on an agent’s care and skill to find a suitable tenant for the property and failure to do so could result in landlords seeking compensation from the agent for loss of unpaid rent, costs and expenses. A copy of the tenant application form and referencing report should be sent to the landlord to obtain approval, in writing, that the landlord is happy for the letting to go ahead.
It is important to make it clear to the tenant and the referee that the agent will need to pass the information onto the landlord. The Information Commissioner’s Office state that‘The agent can pass this information to the landlord, as long as, when the reference is asked for, they make clear to the tenant and the referee that this will happen.’
Upon receiving satisfactory references, the agent is now in a position to send out confirmations to the landlord and tenant, and make arrangements to set up the tenancy agreement. Any confirmations will need to be qualified as ‘subject to contract’ to avoid creating a contract before the tenancy agreement is signed. The confirmations sent should include: • name of the other party to the agreement • details of the proposed tenancy including start dates and length of tenancy • the agreed rental • details of any deposit • a copy of the draft tenancy agreement
Immigration Checks
Immigration (Hotel Records) Order 1972
The Immigration (Hotel Records) Order 1972 requires any person who for reward receives any other person aged 16 or over to stay in the premises where lodging or sleeping is provided, whether on his own behalf or as manager (‘the keeper’) to keep a record in writing of the date of arrival of each person and their full name and nationality. Where the person is not a UK citizen the keeper must also be given the number and place of issue of their passport, certificate of registration or other documentation establishing their identity and nationality and upon departure from the premises details of their next destination and full address, if available. The keeper is required to ensure that all persons who are 16 or over who stay at the premises comply with their obligations to provide the information and the keeper must keep details of the information provided for a period of at least 12 months. Although this is an older piece of legislation these requirements extend to landlords and letting agents and it would be wise to include checks on occupiers who are 16 and over when carrying out immigration checks under the Immigration Act 2014 detailed below.
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Immigration Act 2014
The Immigration Act 2014 received Royal Assent on 14th May 2014. Section 22 of the Immigration Act 2014 states that a landlord must not authorise an adult (‘adult’ is defined as 18 years old or over) to occupy property as their only or main home under a residential tenancy agreement unless the adult is a British citizen, or EEA or Swiss national, or has a ‘right to rent’ in the England. Landlords who breach section 22 may be liable for a civil penalty. Primary liability lies with the landlord but an agent can become responsible where this is agreed in writing.
The provisions relating to residential tenancy agreements were initially introduced into five pilot areas in the Midlands in December 2014 and subsequently rolled out in England on 1st February 2016. Landlords in England are required to check the immigration status of adult occupiers prior to granting a residential tenancy agreement. The Government have provided an online checking service for landlords at www.gov.uk/landlord-immigration-check. A Code of Practice on illegal immigrants and private rented accommodation is also available and provides guidance for landlords and letting agents. For further information see Letting Factsheet 34.
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This checklist has been designed as a summary for landlords and letting agents. To ensure you have covered all areas you should refer to the relevant chapters in the Handbook. Property Checks Chapter Ref Have you carried out appropriate landlord identity checks? 1 Have you carried out the necessary property ownership checks? 1 Have all property owners given consent to rent out the property? 1 Have you checked leasehold conditions and any restrictions on property use? 1 Is there a buy-to-let mortgage or has the mortgage company given consent to let? 1 Have you checked the insurance policy for any restrictions including property rental? 1 Is the property to be let in a good and safe condition? 1,11 and 16 Have you drawn up and agreed an inventory? 1,2,3 and 9 Have you taken photos of the condition of the property? 1 Legal and Safety Checks Chapter Ref Have you installed smoke and carbon monoxide alarms and have they been tested? 8 and 16 Has a Gas Safety Certificate been provided within the last 12 months? 8 Does the furniture (if any) comply with the Furniture & Furnishing Fire Safety Regs? 8 Have the electrical appliances and circuits (if any) been checked and tested? 8 Do products supplied comply with Product Safety Regulations? 1 and 8 Have you carried out appropriate risk assessments? 7 and 8 Is there a valid Energy Performance Certificate for the property? 1 Has the tenancy deposit been protected and prescribed information given to the tenant? 10 Have you provided the tenant with a copy of the Government ‘How to Rent’ Guide ? Lfacts 21 Have you carried out appropriate Immigration checks on all occupiers (if required)? 1 Is the property in an area which is subject to a selective licensing scheme? 1 Is the property a House in Multiple Occupation (HMO)? If yes: 16 - Is an HMO licence is required e.g. a mandatory or additional licence? - Has a copy of the HMO licence been given to the tenant? - Has the electrical wiring been checked and a certificate provided in the last 5 years? - Have you complied with fire safety requirements and the Management of HMO Regs? Rent and Other Checks Chapter Ref Have you decided on a market rent and amount of deposit? 6 and 10 Have you carried out tenant vetting, referencing and credit checks? 1 Have you drawn up a tenancy agreement? 9 Does the Tenancy Agreement comply with the Tenant Fees Act 2019 Lfacts 51 Is it clear in the tenancy agreement who is responsible for paying utility bills? 1 - If it is the tenant have you informed the utility companies of the new tenant details? 1 Do you need a guarantor, if so do you have a guarantor agreement? 1 and 9 Have you checked any tax implications (especially overseas landlords)? 14 Have you provided the tenant with details of how their personal data will be used? 1
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2. Granting and Managing the Tenancy
Only when all checks and references on the prospective tenant have been satisfactorily received is the landlord in a safe position to grant the tenancy
Type of tenancy
Since the introduction of the Housing Act 1988 on 15 January 1989, the majority of private residential lettings came under the system of assured and assured shorthold tenancies. The legal framework was further amended on 28 February 1997 whereby such lettings on or after this date became automatically an assured shorthold tenancy (AST).
Therefore, when granting the tenancy, an assured shorthold tenancy agreement is the most common form of tenure. There are however, several notable exceptions: • lettings where the landlord lives in the same house as the tenants • lettings where the rent is over £100,000 per annum • business tenancy or company letting • holiday lettings In the above situations (a complete list and more details are provided in chapter 5), the letting will fall outside of the control or statutory provisions of the Housing Act 1988, and a ‘common law’ or ‘contractual’ tenancy will normally result.
Tenancy Agreement
Although in previous times, tenancy arrangements were less formal (and there is still no legal requirement that a tenancy agreement shall be in writing unless the tenant requests one), landlords are well-advised to have a properly drafted and written tenancy agreement. The agreement will normally be drawn up by a letting agent or a solicitor although simple standard forms of agreement may be obtained from a legal stationer.
Where there are several tenants, then all tenants in the property need to be included on the tenancy agreement; this is generally known as a joint tenancy.
When drafting the tenancy agreement it is important that any clauses relating to charges do not fall foul of the Tenant Fees Act 2019 (TFA 2019). Under the TFA 2019 letting agents and landlords are not allowed to charge prohibited payments to tenants from 1st June 2019 for new or renewal tenancies and can only charge certain permitted payments. See Letting Factsheet 51 for more information.
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The agreement should contain: • the main terms and conditions of the letting • any extra terms or restrictions required by the landlord • a copy of the inventory and schedule of condition • any required statutory notices The agreement can be prepared and supplied in advance of occupation. This is helpful in giving the tenant a chance to read the agreement and contained terms before signing. A tenant may sometimes wish to refer the agreement to his solicitor who may request changes before agreeing to sign.
Where the property is subject to a mortgage, the lender may also wish to examine a copy of the agreement before agreeing to the letting.
N.B. It was a requirement that the tenant was served with a statutory Notice of Assured Shorthold Tenancy prior to signing the tenancy agreement. With effect from 28 February 1997, this notice is no longer required.
Signing the agreement
All tenants listed on the tenancy agreement will need to sign the agreement. For various reasons care should be taken when signing the tenancy agreement in advance of occupation especially when the landlord does not have vacant possession. It is often easier to sign on or near the day of occupation (see Chapter 9 for more information).
Last minute changes to the agreement should be avoided but where changes are necessary any additions, deletions or amendments to the agreement should also be initialled by both the tenant(s) and the landlord (or his representative).
Tenancy agreements often include a space for the signature and details of a witness to be recorded. Although this is not a statutory requirement, it is a safeguard for the landlord’s interest in case the tenant disputes the validity of the agreement. Agents often ask tenants to sign agreements at the office in the presence of a colleague who can act as a witness to safeguard against the unusual situation where a person denies ever signing or being shown the agreement in the first place.
Prior to Occupation
The tenants should normally be expected to make their own arrangements for supply of the main utilities (electricity, water, gas & telephone), otherwise landlords take the unnecessary risk of paying these costs if a tenant defaults. Occasionally, it is not possible to separate the billing of the tenant’s supplies (e.g. resident landlord, HMO etc.) or not appropriate because the property is to be let for only a very short time (e.g. holiday lettings).
Because of the delays in transferring or reconnecting the services, this should be done sufficiently in advance of occupation. Local utility companies will be able to advise on their normal lead times.
A set of keys (for each tenant) should be prepared, tested and itemised on the inventory.
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Financial issues
One final procedure before allowing the tenants into possession, is to ensure that all money due at the beginning of the tenancy is collected. Normally, this involves collecting the dilapidations deposit, or bond, and the initial rent.
Deposit
The purpose of the dilapidations deposit is to act as security in case the tenant leaves the property owing rent or to pay for any damage or unpaid household bills at the end of the tenancy. With the introduction of The Tenant Fees Act 2018, the size of the tenancy deposit has now been regulated to five weeks for the majority of lettings. The complex rules surrounding tenancy deposits have encouraged some landlords and agents to abandon the practice of taking tenancy deposits, or to offer tenants the option to purchase an insurance policy instead which replicates the function of the tenancy deposit.
A major change introduced by the Housing Act 2004 is that most tenancy deposits are now required to be protected by a government-authorised scheme in many prescribed situations - generally when the deposit is accepted under an assured shorthold tenancy. Where applicable, landlords and agents are required to hand over these deposits to the custodial deposit protection scheme, or hold them in a separate account protected by a relevant deposit scheme. Practitioners will also need to follow any deposit scheme rules or guidelines provided by their professional association with regard to the holding of deposit money.
You should state clearly in the tenancy agreement the method in which the deposit is to be held and the circumstances under which part or all of the deposit may be withheld at the end of the tenancy. (For more information, see Chapters 9 and 10).
Rent
Rent will normally be payable either weekly or monthly in advance. Rent for the initial period should also therefore be collected prior to installing the tenants
Payment
All deposit and rent money received prior to occupation should be in cleared funds in order that any cheques cannot be cancelled. There are clearly several methods of payment, some more convenient than others, and the prospective tenant needs to be informed of any stipulations regarding payment with sufficient notice.
Direct Bank Transfer. Current practice for most agents and landlords is to accept the initial rent payments and deposit monies by bank transfer - ideally into a separate client account. The receiving account should then be checked to ensure that the funds are received and secure. Alternatively, payments may be made using a standard payment card or credit card where these facilities are available, with the advantage that the receiving party has immediate confirmation when the transfer is complete.
Cash - many landlords and agents do not like handling large quantities of cash. In addition to the obvious security risks, cash is no longer a totally secure payment method due to forgeries.
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Personal Cheque - cheques run the risk of cancellation or not being honoured by the issuing bank. In order to verify receipt of funds when accepting normal cheques, it will be necessary to wait at least three working days for the cheque to clear. Alternatively, the recipient can ask for an express clearing service for which an extra charge is usually made.
Standing Order - Many landlords and agents now require rents (after the initial payment) to be made by standing order. Using a standard form available from the bank, the tenant will set up an arrangement for a specified amount to be paid to a nominated account on a regular basis. Alternatively, the forms can be completed by the tenant and sent to the tenant’s bank by the landlord.
Direct Debit - This is similar to the standing order except for two important differences. Firstly, direct debits operate on a demand payment system; the payment is demanded by the receiving bank. Secondly, the amounts to be paid may be altered by the recipient.
Bankers Draft. Less commonly these days, the tenant may present the funds using a bankers draft or building society cheque. The cheque is issued in the name of the bank, and made out to a company or individual. The funds are guaranteed as the cheque cannot be cancelled unless it has become lost or stolen.
The check-in
It is usual for the person managing the property to be present when installing the tenants. This allows both parties to sign the inventory and ensure that the property is generally in good condition ready for letting. There are occasionally circumstances where this is not possible (e.g. tenant arriving from abroad on a bank holiday) where alternative arrangements may need to be made.
The inventory should be checked by both parties in detail at the beginning of the tenancy and any discrepancies and observations annotated to the document. It is also useful for the same person to be checking the tenant both into and out of the property so that the condition can be compared and any damage accurately evaluated.
A note of meter readings should also be taken, and added to the inventory.
The operation of the various systems and installations (e.g. central heating, water softener etc.) should be explained to the tenants or a set of written details prepared.
Safety Checks
Any electrical appliances left in the property should be checked prior to occupation. Such checks will either be by visual inspection or by individual testing of the appliances by an electrical engineer. (Further information on safety requirements is given in chapter 8 )
Where there are any gas appliances, copies of the current gas safety certificate(s) must be issued to the tenants.
Safety information or instructions relating to any appliances or other equipment should be explained to tenants, or left in a prominent place.
Tenants should also be made aware of all emergency stopcocks: • Water mains stopcock • Gas mains stopcock / meter box • Electricity main switch and fusebox
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Management Issues
With the tenants installed in the property, the majority of the work will be completed. It will be in the interests of both parties that the level of administration by the landlord diminishes since the tenant will wish to exercise his rights to ‘quiet and peaceful enjoyment’.
The administration during the tenancy falls into three broad headings: • Rent collection • Maintenance issues • Inspections and safety checks
Rent Collection
The rent will generally be payable directly, normally weekly or monthly, to the landlord although an agent is often employed to administer the collection of rents.
Where an agent is employed, the agent is responsible for accounting for all money received, and forwarding on the balance, less the management fees and any other deductions to the landlord within a reasonable timeframe. The exact terms of reference for such payments and deductions should be spelt out in the management agreement.
The date when the rent becomes due will normally be specified in the tenancy agreement. Often, this is simply at the beginning of each rent period (i.e. a month after the commencement of the tenancy for a monthly tenancy). Some landlords (especially when collecting rents for many properties) like to collect all rents on a set day of every month (e.g. 1st day of the month). The advantage of this is that all the work involved with rent payments and collection (the ‘rent roll’) can be done together at one time for ease of administration.
Housing Benefit
Some tenants may be in receipt of housing benefit, and this may add further complications to the rent collection process. The application may cause a delay in the original processing of the tenancy application. Under the earlier Rent Allowance system, it was necessary for the rent officer to determine what level of benefit would be payable on a particular property. With the more recent Local Housing Allowance based system, benefit is payable on the basis of a schedule of local rents determined by the local Rent Officer In this case, the level of housing benefit payable will be determined by the level of housing need assessed by the rent office in relation to a pre-determined set of categories of dwelling size. These local housing benefit levels are published on the internet. The tenant can choose to make up the difference from other sources if the LHA does not match the rent level being demanded by the landlord
The decision of the rent officer for the purposes of assessment of housing benefit does not affect the rental agreed with the tenant. The tenant is obliged to pay the rent specified in the tenancy agreement unless it is varied by reference to the First-tier Tribunal - Property Chamber.
Housing benefit payments are normally made directly to the tenant who is in turn responsible for putting these payments towards the rent. If the rent, however, is paid directly to the landlord, and a tenant is found to be overclaiming (perhaps by making two claims for housing benefit on different properties) then the Housing Benefits office can make a landlord liable for repayment of overpayments. Also, if the tenant is over eight weeks in arrears with rent, a landlord can ask for the housing benefit payments to be received directly.
The administration of rents where tenants receive housing benefit can be complex, and the rules subject to change. More details on Housing Benefit are given in chapter 15.
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Rent arrears
The administration of rent arrears is one of the less pleasant tasks undertaken by landlords and is a classic situation where the experience of an agent can be brought to good effect.
The landlord needs to tread a careful path between being sufficiently assertive with defaulting tenants without being so severe or intimidating that a tenant could make a claim on the landlord for harassment. For example, in a recent case, a landlord was fined for harassing a tenant who had fallen into arrears because the tenant had received abusive faxes at work demanding payment of the outstanding rent.
The tenancy agreement should state exactly when the rent falls due during each rental period. The tenant has until the end of that day before the rent is legally considered to be in arrears. When payments are received by bank transfer, several days delay can also be expected to allow for bank payment delays, bank holidays and weekends.
Many agreements contain the wording that ‘the landlord may re-enter the property if the rent is overdue by more than 14 days’ but this does not actually allow the landlord to take possession or otherwise harass the tenants. A tenant may only be evicted following a court order. Therefore, if the tenant falls badly behind with the rent and does not appear to be in a position to clear the debt, then the landlord will need to start court proceedings in order to recover possession of the property and any arrears.
In order to recover the arrears, it is important to take timely action before the arrears become substantial. Like any bad debt situation, the person in debt will often pay the most pressing demands for payment first so it is important to press for payment early. Starting with an initial reminder letter, it will be necessary to pursue a sequence of steps that are legally required before possession proceedings can be commenced and the person can be evicted.
The management of rent arrears and guidance for starting possession proceedings is covered in more detail in chapter 12.
Maintenance Issues
Unless the tenancy is for a fixed term of more than 7 years, the landlord is responsible for carrying out any repairs for: • the structure and exterior of the property; • baths, sinks, basins and other sanitary installations; • heating and hot water installations; • other parts of the building or installations (especially in the letting of a flat or maisonette) which are owned or controlled by the landlord and whose disrepair would affect the tenant. Similarly, the tenant also has duties both in common law, and as specified in the tenancy agreement, to take care of the property.
Although the rent charged will include a sum to cover the cost of repairs, a landlord may not pass further costs on to the tenant in the form of a separate service charge.
It is important to respond promptly to any items of disrepair. Once the landlord has been notified of the disrepair, provided that the landlord is responsible for the reported items of disrepair, then he is expected to carry out the repairs within a reasonable period of time. What is reasonable will depend on the type of problem and the extent of the remedial works required. Also, where such disrepair could constitute a danger to the tenant, or the tenant’s visitors, once the landlord has received notification of the disrepair, he could become liable for any resultant damage or injury that may occur.
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Gas Safety
The landlord has an on-going duty to ensure that gas installations are safe. The regulations state: ‘it shall be the duty of any person who owns a gas appliance or any installation pipework installed in premises let by him to ensure that such an appliance or installation pipework is maintained in a safe condition so as to prevent risk of injury..’
Thus, landlords should also keep a watchful eye on gas appliances. The dangers of carbon monoxide poisoning are potentially lethal. Gas appliances should burn with a blue flame indicating that the combustion process is operating properly. Appliances which burn with a luminous, yellow or smoky flame should be disconnected and checked before further use. Traces of carbon build-up on the inside or outside of the appliance are warning signs of incorrect combustion and a potentially dangerous situation.
The landlord is also responsible for ensuring that the required gas servicing and checks are completed at least every twelve months by a suitably qualified gas engineer. The landlord should keep a record of all safety checks and issue the safety certificate to the tenant within 28 days of each annual check. At present, only Gas-Safe registered engineers are approved for this work.
If a smell of gas is reported, or there are other reasons to suspect that there may be an escape of gas, then it is the duty of the landlord or person responsible for the premises to take all reasonable steps to ensure that the supply of gas has been shut off at the main stop cock to prevent further escape of gas.
In the meantime, the tenant should be advised: • extinguish any naked flames • open doors and windows to allow gas to escape • if the cause of the leak is not located, or gas continues to escape into the premises, then the person should alert the gas board or gas supplier. Furthermore, if any installation or repair work is carried out at the property, then the installer or fitter must be suitably qualified (see above).
Electricity
A landlord should take similar precautions with regard to the electricity supply and the use of any electrical appliances. Faulty appliances should be withdrawn and repaired. If any other dangers are reported, then if in doubt, disconnect the supply at the mains switch before until the fault is found, or before attempting any repairs.
Appliances
Where the tenancy agreement is silent on who is responsible for repairs of appliances there is generally no duty on the landlord or tenant to repair the appliance. The landlord has a duty to ensure all items supplied at the start of the tenancy are safe. If a particular appliance is known to be nearing the end of its working life, and beyond economical repair, then this should be declared at the outset prior to signing the tenancy agreement. The tenant has a duty to use the property in a tenant like manner and would normally be liable for repairs caused by the tenant’s misuse.
Under the Landlord and Tenant Act 1985 landlords are generally not responsible for the repairs and maintenance of items supplied with the property such as washing machines and other appliances. The implied repairing obligations under s.11 only apply to the structure, exterior and installations for the supply of services.
Where the tenant is paying rent for a property which includes a working washing machine the tenant could argue that there is a contractual obligation on the landlord to continue to provide this. However, this will depend on what was agreed at the start of the tenancy. Where appliances are provided with the tenancy it would be advisable to include a clause within the tenancy agreement to clearly state who is responsible for repairing the appliances. For example one solution would
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be for the landlord to be responsible for genuine breakdowns (e.g. not caused by tenant misuse) within the first three months of the tenancy.
Example: ‘To use appliances in accordance with the manufacturer’s instructions and carry out any minor maintenance that would be expected such as cleaning or changing filters. The Landlord will be responsible for the repair costs during the initial three months of the tenancy for the genuine breakdown (i.e. not caused by misuse) of appliances supplied by the Landlord’
Emergency repairs
It is good practice to provide the tenant with an emergency telephone number so that an appropriate person may be called to attend. Supplying the telephone number of a competent plumber is normally sufficient since the majority of such problems are associated with water leaks, blocked drains etc. It is also better that the tenants use a contact known to the landlord on the basis that such tradesmen are less likely to make an excessive charge which the landlord might become liable to pay.
Inspections and Access
The landlord or agent has the legal right to enter the property at reasonable times of day to carry out the repairs for which the landlord is responsible and to inspect the condition and state of repair. The landlord must give 24 hours’ notice in writing of an inspection except in the case of an emergency (i.e. water flooding out of the property or a report of the property being insecure etc). Although the landlord has a legal right it is good practice to include a clause within the tenancy agreement that allows the landlord to inspect the condition and state of repair. The landlord can then refer the tenant to the clause in any correspondence regarding access for inspections.
In most cases the tenant will oblige but, in those instances where there is a refusal of entry, the landlord cannot just enter the property as the tenant has a right to quiet enjoyment and the landlord may need to apply to the court for an injunction to gain access to the property. See Chapter 11 for more information on disrepair and rights of entry.
It is common practice to inspect a property at intervals throughout the tenancy in order to verify that the tenants are taking care of the property and otherwise check its general condition. Many professional agents will carry out inspections on a quarterly basis but the policy will ultimately depend on the terms of the management agreement and perhaps even the type of tenants in the property. Inspections are also a good way to pick up any unreported maintenance problems, perhaps because the tenant has failed to notice them, or failed to report them. The landlord’s repairing obligations are covered in more detail in chapter 11.
Other management issues
Redirecting Mail
In some cases, out-going tenants will make arrangements directly with the incoming tenants with regard to forwarding on their mail. Alternatively, tenants may discard such mail or forward it on to the landlord if they have no details of previous tenants. Unless there are specific instructions to do so, mail addressed to a previous tenant and received by the landlord or agent in this way should be neither discarded nor stored. If a forwarding address is known, and such arrangements have been made, then the mail should be forwarded. Otherwise, such mail should be clearly marked ‘Not at this address’ and returned to Royal Mail.
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3. Terminating the Tenancy
No tenancy lasts for ever - at some point it will come to an end, perhaps because the tenant wants to move on or move away, or perhaps because the landlord needs to get his property back. There will be a huge variety of different situations that the landlord or agent will encounter when tenancies come to an end. And, sadly, the landlord/tenant relationship sometimes simply ends in acrimony perhaps because of rent arrears or due to a landlord neglecting his repairing duties to maintain the property to a good standard.
In the majority of cases, when a tenancy comes to an end, it does so in a positive manner and so the key focus for all parties must be to manage the process in the most efficient way possible. A landlord or agent who is successful in this approach leaves a happy and satisfied customer which bodes well for the reputation of the property manager and repeat business. By contrast, disputes at the end of the tenancy, whilst relatively common, leave a poor impression and are time-consuming. Customer Focus An experienced landlord will generally be aware that the whole process of moving house is both stressful and expensive for tenants, and may also be combined with the tenant moving jobs to add to the burden. The diligent property manager will aim to make the process as stress-free as possible, with good forward planning and attention to detail so that the tenant’s rights are respected and any damage or deductions outstanding at the end of the tenancy are accurately recorded. In addition to working in close co-operation with the tenant, the agent’s key concern will also be to return the property back to the landlord in good condition and ready for the next letting or occupation. Property Focus The property is the key asset in the equation, and it will be important to the landlord that the property has been properly looked after during the tenancy, both to preserve its value, and also to minimise the amount of repairs and redecoration that needs to be carried out once tenants have departed. Tenants are entitled to fair wear and tear during their occupation but, inevitably, items become damaged, dilapidated or otherwise fail over their lifetime and when tenants have allowed such things to accumulate over the tenancy, it can leave expensive bills for the landlord to repair or replace such items. In a later section of this chapter, we deal with how such dilapidations can be assessed, and who will be responsible for the related costs.
Good maintenance and inspection procedures (see Chapter 2) throughout the tenancy will help to minimise an accumulation of damage and property-related issues at the end of the tenancy.
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Renewal
When a standard assured shorthold tenancy comes to the end of the fixed term, the landlord will normally adopt one of four main choices of action: • agree a replacement fixed term shorthold tenancy • agree a replacement shorthold tenancy on a periodic basis - called a contractual periodic tenancy; • do nothing and allow the shorthold tenancy to run on with the same rent and terms - called a statutory periodic tenancy • end the tenancy - the landlord must have given two months’ notice that he requires possession (see below). Where an agent is managing the property on behalf of a client landlord, he may normally wish to see his client’s instructions before committing the landlord to a further fixed term.
If both landlord and tenant wish for the tenancy to continue, then the parties need to decide between taking a further fixed term, or continuing the tenancy as a periodic tenancy.
Renewal by further fixed term
If both landlord and tenant wish to commit to the future certainty or security offered by a further fixed term, then the parties only need to agree the length of the replacement fixed term and the landlord can prepare a new tenancy taking effect from the expiry of the previous term. If the parties agree the rent may be increased for this new term, then the new rent can be implemented for the new agreement without further formality, and the agreement can even include a rent increase mechanism making provision for the rent to increase along a given index or formula. If the parties agree to the insertion of a break clause in the agreement, then this gives the parties additional flexibility to terminate before the end of the fixed term.
Renewal by periodic tenancy
Renewing the tenancy on a periodic basis, either by a contractual periodic tenancy or by a statutory periodic tenancy, will achieve a similar result. The periodic tenancy is useful if the landlord believes that he may need to regain possession of the property at short notice (by giving the tenant 2 months’ notice) or the tenant wishes only to extend the tenancy for a few weeks or months after the fixed term has ended.
If a contractual periodic tenancy is agreed, then a different rent can be set if both parties agree to the new rent. Again, a rent increase mechanism can be incorporated if agreed.
The statutory periodic tenancy allows the tenancy to run on at the same rent and terms. Even though there is no formal written agreement for the new tenancy, the terms enshrined and agreed in the original tenancy agreement will continue to apply to this renewal. Apart from the lack of certainty offered by a periodic tenancy (the tenant may leave after as little as four weeks’ notice), the other main disadvantage of the periodic AST is that a landlord incurs the additional complication of being required to follow the statutory procedure under the Housing Act 1988 to enforce a rent increase.
In contrast, the lack of flexibility can also have some advantages. If the tenancy is periodic and the tenant defaults, then the landlord may invoke the Accelerated Possession Procedure (APP) - this provides the landlord a faster method of gaining a possession order through the courts.
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Termination of Tenancies
Legal Procedures
The landlord or agent will need to be mindful of the correct legal procedures necessary to bring a tenancy to an end. This may be because the tenant has asked about what notice is required, or where the landlord/tenant relationship has broken down and the landlord has been forced to seek possession from his tenant.
Since this Handbook was originally written, the legal process has now become significantly more complicated. Where a tenancy deposit has been accepted, a landlord or agent will need to arrange for the deposit to be repaid less any deductions. If deductions are to be made from the deposit, then the deductions need to be agreed with the tenant. Ultimately, the tenant may choose to ask an adjudicator to make the final decision and a landlord or agent may be required to furnish evidence to support his claim for damages or dilapidation.
There are a number of common ways in which tenancies typically come to an end: • Tenancy reaches end of its lease date or agreed term • Surrender - the parties mutually agree to end the tenancy • Notice - one of the parties wants to end the tenancy arrangement
End of Term
Often, tenants reach the end of their agreed tenancy term and do not wish to renew the tenancy. This sometimes occurs as the landlord wishes to renew for the new additional fixed term, and the tenants do not want to commit to extending the agreement substantially. The tenancy then naturally comes to an end as per the original agreement and this represents one of the simplest arrangements for bringing the tenancy to an end.
Surrender
Another common approach is that both parties agree to surrender the tenancy. This may happen because the tenant changes job for example, or other change of personal circumstances. The surrender may take place at any time during the tenancy, even during the fixed term provided that both the landlord and tenant agree to the surrender. See Chapter 13 for more detail on surrender.
Abandonment
Where the tenant leaves the property before the end of the tenancy without letting the landlord know, he may have abandoned the property. The landlord should look for signs of abandonment such as whether the tenant has taken their personal belongings, whether there is a build up of post, and talk to the neighbours to see if they are aware of the tenant’s movements etc. However, extreme caution must be taken if the landlord believes that the tenant has abandoned the property. The tenant could simply be away on an extended trip or holiday and entitled to return and remain in possession of the property under the tenancy. The landlord cannot simply change the locks; he needs to be sure that the property is abandoned and, where there is any doubt, he will need to obtain a court order for possession of the property. Abandonment is discussed in more detail in Chapter 13.
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Notice - by the tenant
If the tenancy is a fixed term tenancy, but the tenant wants to move out before the end of the term, he can only do so if the landlord agrees that he can leave early (see ‘surrender’ above) or if the tenancy agreement makes provision for early termination by way of a ‘break clause’ and he has followed any requirements for giving notice specified in the tenancy agreement. If the agreement does not allow the tenant to leave early and the landlord does not agree that he can break the agreement, the tenant will be contractually obliged to pay rent for the entire length of the fixed term.
Where the tenancy is for a fixed term, the tenant can simply vacate on the last day of the tenancy agreement. The tenant need not normally give notice to the landlord that he is leaving; a situation which does not correspond with the duty of the landlord in an equivalent position who is required to give notice to the tenant at all times. The landlord’s seemingly inequitable position here can be better protected by a little planning. Some landlords insert a clause in the tenancy agreement which requires that the tenant shall give the landlord notice if the tenant intends to vacate at the end of the term. Other measures are considered below (see ‘Holding-Over’).
A tenant of a periodic tenancy is required to give his landlord notice to quit in writing. There is no statutory form but the notice must: • be in writing • be given at least four weeks before the date it runs out • expire on the first or last day of a period of a tenancy Where the rent period is monthly or longer, the notice period will follow the common law rules so that where the rent is paid monthly, the tenant may give one month’s written notice once the tenancy has become periodic.
Where there are several tenants, the position on giving notice becomes more complicated, and is discussed in more detail in chapter 12 - ‘Joint Tenants’
Notice - by the landlord
Similarly, if the tenancy is a fixed term tenancy, but the landlord wants possession before the end of the term, he can only do so if the tenant agrees, or if the tenancy agreement makes provision for this by way of a ‘break clause’ and he has followed the statutory and contractual requirements for giving notice. If the tenancy agreement does contain a break clause, the landlord with an assured shorthold tenancy (AST) agreement still cannot normally require possession until six months after the beginning of the agreement except by forfeiture (where the tenant is in breach of the agreement). If the agreement does not allow the landlord to take back the property early and the tenant does not agree that he can break the agreement, the landlord is obliged to allow the tenant to remain for the full length of the fixed term.
Once the fixed term tenancy has ended and been replaced by a periodic tenancy a landlord can generally give notice to quit on his tenant.
For ASTs, the landlord will normally terminate the tenancy by serving on his tenant a notice that he requires possession (s21). If the tenancy is not one of those to which the Housing Act 1988 applies (business tenancies, tenancies at high rent, common law tenancies etc.) then the landlord will need to serve a ‘Notice to Quit’ to bring the tenancy to an end - see Chapter 12 for more details on terminating tenancies.
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Holding over
In holding-over cases, several possibilities may arise. The tenant may hold over as a periodic tenant by operation of the law, or he may have statutory rights of occupation (as with assured tenancies under the Housing Act 1988). For other types of tenancy, the tenant may simply remain in possession with the permission or ‘at the will’ of the landlord (hence the expression ‘tenancy at will’).
The landlord may encounter the situation where the tenant stays on beyond the end of a tenancy without the explicit permission of the landlord, and often against the wishes of the landlord. In management terms, we call this process ‘holding-over’ but it is not a legal term as the legal status of this occupation will depend on the circumstances. In holding-over cases, several possibilities may arise. The tenant may simply hold over at the end of a fixed term tenancy by operation of the law. Or perhaps the landlord has served a notice seeking possession and started possession proceedings. In both these cases, the system of assured tenancies allows the tenant to remain in place until the tenancy has been properly terminated by the execution of a possession order (see s.5(2) Housing Act 1988). For other types of tenancies that do not operate under the Housing Act 1988, holding over may create a more precarious form of occupation such as ‘tenancy at sufferance’ but which still requires a court order to evict.
The act of holding-over clearly becomes problematic if it occurs against the wishes of the landlord. If the tenancy is an AST, and the landlord has already served the appropriate statutory notice under s.21, then the landlord may apply to the court for a possession order once the notice has expired. Until the possession order has been granted and executed (eviction by court bailiff) or the tenant decides to leave of his own accord, there is little more that the landlord can do as the AST tenant has a statutory rights up to this point.
The holding-over can become even more problematic if the landlord had expected the tenant to leave on an agreed end date and has offered a new tenancy to a third party - the incoming tenants may suffer great inconvenience and temporary storage costs. This is always a scenario that must be kept in mind when changing tenant, and is one of the main reasons why any new tenancy should be offered ‘subject to contract’ until the landlord has vacant possession. Very little can be done in order to mitigate this risk in the case of a standard assured shorthold tenancy. Any attempt to prevent holding-over using penalties or additional charges within the tenancy agreement should be avoided - especially in the light of the newly introduced Tenant Fees Act 2019 which now makes such charges illegal. See Letting Factsheet 51 for more information.
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Last Month syndrome One of the most common pitfalls that occurs at the end of tenancies is the so-called ‘last month syndrome’ where the tenant simply stops paying the rent in the last month of the tenancy. The natural implication of this action is that the landlord deducts the rent from the tenancy deposit.
From the tenant’s point of view, the motivation is clear - it is a tactic to protect against retention of the deposit at the end of the tenancy. Yet the situation puts the landlord in difficulty as the bond that has been lodged to cover any damage during the tenancy is no longer available. Further, the tenant often has little motivation to clean properly before vacating and landlords are frequently left with substantial cleaning and dilapidations. There are several measures that can be taken in such cases:
1. The dilapidations deposit or bond should ideally be more than four weeks’ rent so that some money still remains if the tenant stops the final payment but five weeks’ is the maximum as the Tenant Fees Act 2019 restricts a tenancy deposit to a maximum of five weeks’ rent (or six weeks for high rent cases where the annual rent is £50,000 or more).
2. Although it can be difficult to enforce, it is a good idea to put a covenant in the tenancy agreement stating that the tenant may not set-off the rent against the deposit in this way.
3. Once it is clear that the tenant has withheld the last month’s rent, the agent or landlord should act quickly. Communicate with the tenant and make it clear that this situation constitutes a breach of the tenancy agreement. Start legal action early if necessary. Issuing a section 8 notice (Notice of court proceedings - see chapter 12) will often be sufficient to encourage the tenant to settle. Once the tenant has left, it will be more difficult to track down and recover any costs.
Viewings
Prior to the end of the tenancy, the landlord will often wish to be seeking a relet. Alternatively, the landlord may have decided to sell the property. In either case, it will be necessary to conduct viewings of prospective tenants or buyers at the property.
Because of the tenant’s rights to quiet enjoyment, a landlord only has a statutory right of entry (with the proviso of reasonable prior notice) for the carrying out of repairs and generally inspecting the condition. The landlord should therefore add an express provision to the tenancy agreement which allows him to erect a sign stating that the property is to let and allowing prospective tenants or purchasers to be permitted entry to the property in the last month or months of the tenancy. It will still be necessary to give the tenants reasonable prior notice in the same way as gaining access for repairs (see previous chapter).
Tenant Obligations
The tenant has an obligation in common law to use the property in a ‘tenant like manner’ and ‘to do the little jobs about the place which a reasonable tenant would do’ (Warren v Keen [1954]) This includes things such as unblocking drains and cleaning chimneys etc. The tenant will therefore be responsible for ensuring the small jobs are done and the drains etc are left clear at the end of the tenancy.
The property and contents should be left in the same clean state and condition as they were at the start of the tenancy, with fair wear and tear excepted, and all rubbish should be removed from the property. Clauses should be included within the tenancy agreement to require the tenant to return the property and contents in the same clean state and condition as they were at the start of the tenancy (with fair wear and tear excepted), to remove the tenant’s personal effects and any waste or rubbish from the property and to leave the contents in approximately the same places as they were at the start of the tenancy.
A clause should also be included within the tenancy agreement requiring the tenant to provide a forwarding address for end of tenancy so that the landlord can contact the tenant to finalise any end of tenancy issues e.g. any unpaid rent, dilapidations and return of the deposit etc.
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Checking out the tenants
A suitable date will normally have been agreed for the termination of the tenancy. The key issues to be considered when terminating the tenancy are: • the property should be received back in the same condition as it was at the beginning of the tenancy less an allowance for reasonable wear and tear; • that the tenant has settled all rent and other liabilities due by the end of the tenancy.
Advance notification & inspection
It is a good idea to inform the tenant of any procedures in place for conducting the end of tenancy check. This might include: • specific instructions for cleaning and tidying the property and any gardens; • instructions regarding replacement of the inventory items; • instructions with regard to terminating supply of utilities; • instructions with regard to redirection of mail; • procedure for the return of the dilapidations deposit. In some situations, it is also useful to carry out an inspection before the end of the tenancy. This allows the general condition of the property to be evaluated and specific instructions to be given to the tenant regarding any repair, replacement or redecoration work. In this way, the tenant has been given the chance to carry out any remedial work prior to vacating. After vacating, it is generally not practical to allow the tenants access to the property and a landlord will often be obliged to use professional contractors to carry out any works expediently before the arrival of new tenants.
Tenant Checklist
As explained above it is good practice to provide the tenant with a checklist/information sheet setting out useful information to assist the tenant in preparation for end of tenancy. Below is an example checklist that can be sent to tenants in advance of the checkout process.
In advance of your move out date we would like to remind you that the property and contents should be left in the same clean state and condition as it was at the start of the tenancy. You should read the information below which should assist you in preparing for end of tenancy. The property should be left in a clean and tidy condition to include: • Gardens left neat and tidy, lawns mowed and shrubs trimmed; • All rooms left clean and tidy including doors, carpets, laminate, skirtings, work surfaces etc; • Any appliances including fridge/freezer (defrosted), oven/hob, microwave, extractor hoods/fans, left clean and in working order including wire racks, shelving and glass etc; • Bins emptied and any waste, personal items (including your furniture) removed from the property and/or any garages or sheds; • Cupboards (including tops), and drawers etc left clean and empty (except leave any items listed on the inventory); • Sink plugs, taps and drains should be clear and checked as free flowing; • Lights switches, smoke alarms, doorbell and plug points etc left in working order; • Ensure doors/windows all open and close and locks working correctly (including garage and shed); • All windows should be clean, gutters cleared and any chimneys swept.
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Each item should be left where you found it when you moved in. If items are damaged or missing you should contact the landlord or agent to find out how best to replace or repair them.
All appliance manuals (inc instructions for the boiler etc) should be left at the property for the landlord to pass to the next tenant.
Utilities and Correspondence
You should contact the council tax office, utility suppliers (water and sewerage, gas, electricity, telephone, broadband, media services and television licence etc) and other relevant persons who hold your address (e.g. bank, GP etc) to inform them that you will be moving and give them your forwarding address for final bills and correspondence. Any meter readings should be taken and given to the appropriate utility provider at the end of the tenancy. If there is an oil tank this should be topped up to the same level as it was when you moved in.
You should also arrange with the post office for any mail to be sent to your forwarding address and provide us with the address so anything important can be sent onto you.
Viewings
We will be listing the property on various property websites over the next few weeks and when we get some serious interest, we will be in touch to arrange viewings. We will give you notice of viewings as set out in the tenancy agreement but if you can let us know broadly which times/ days are most convenient for you we can try to accommodate this. Please can you keep the property reasonably tidy and clean during these viewings.
Pre-Departure Inspection
We will meet you at the property on
If this date is not convenient then please let us know and we can arrange a convenient date a few days earlier if needed.
Useful Contact Numbers
You may need some assistance with your end of tenancy preparations and here are some local contacts for your information:
Gardener: Name ...... Tel......
Cleaner: Name ...... Tel......
Handyman: Name ...... Tel......
Charity - furniture collection: Name ...... Tel......
Deposit
Once the check out inspection and report have been completed and agreed we will arrange for the return of your deposit less any deductions (if any). Where there is a dispute regarding the deposit which cannot be resolved the undisputed amount will be returned to you and the disputed amount will be referred to
If you have any questions regarding the check out or end of tenancy process please let us know.
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Out-going Inspection Conducted in a similar way to the in-going inspection, it will be necessary to check off all items listed on the inventory. Such inspections are generally performed in the presence of the tenant so that any problems can be raised and highlighted to the tenant, although some landlords prefer to carry out this work alone, without disturbance and when all the tenant’s personal effects have been removed. The advent of Tenancy Deposit Protection (in 2007) has meant that any evidence of damage or dilapidation has to be carefully collected and recorded.
If there is any significant damage or dilapidation, then it is often a good idea to record these with a digital camera. In the event of a TDP adjudication, or a protracted dispute with the case ending up in court, such photographs will be invaluable in assisting the landlord’s claim.
A note should also be taken of any meter readings, again in case there is a dispute or the tenant has not accounted properly for any units consumed.
Since the introduction of the Tenant Fees Act 2019 (TFA 2019) landlords are no longer able to charge tenants for check in or check out services, professional cleaning or third party services such as gardening services (unless included in the rent) as these are now prohibited payments under the TFA 2019.
Schedule of dilapidations
Any dilapidations should be recorded and, if possible, the tenant be given the chance to inspect them before remedial work is undertaken. If the dilapidations are significant, then it will be necessary to draw up a schedule of dilapidations in order to claim deductions from the tenancy deposit. This involves the preparation of a list describing any missing items, damage or other dilapidations together with a cost for each item.
Calculation of dilapidations
The deductions that can be made for each particular item will depend on several factors: • Replacement cost of item • Deduction for fair wear and tear allowable during the tenancy • Reasonable costs incurred by the landlord or agent for the repairs or replacement If the damaged or broken item is of minor value (e.g. glass dish), then it would normally be acceptable to simply charge the tenant for the full replacement cost.
If the item damaged has a large value, then it will be necessary to assess the expected product life of the item when new, and then make an appropriate deduction from the full replacement cost for wear and tear both during the tenancy, and also for years when the items was previously in service.
Example: A carpet was badly damaged and its replacement cost was given as £250. The carpet was expected to last 10 years in total, but had only been in service 5 years (including the term when occupied by the current tenants), then the dilapidations charge made to the tenants would be £125.
Where redecoration is involved, the generally accepted formula is similar. It can be assumed that a typical landlord would be expected to redecorate every three to five years (although there appears to be no hard and fast rule - the expected lifetime can differ depending on individual circumstances). We can, again, calculate any dilapidations charge based on the full redecoration cost less the deduction for existing wear and tear based on the projected lifetime.
Where the damage is significant (e.g. burn mark on carpet) but does not warrant full replacement, then the landlord must try and establish and justify a charge for diminution of value. It is sometimes difficult to arrive at a figure since there is no exact way that the diminution of value
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can be measured. There are several methods that can be used to help arrive at an answer again based on either a notional shortening of the expected life of the item, or by simply trying to assess a reduction in market value if the item were to be sold.
Return of keys & security
As a final step, it will be necessary to accept back any keys issued to the tenant. This is not only important for security reasons, but it also constitutes an important stage in the tenant legally terminating or surrendering the tenancy.
When leaving the property vacant, it is also important to ensure that the property is left secure and all doors and windows firmly closed and locked where possible.
Repayment of Deposit
Once the tenant has returned the keys and the check-out has been completed, it is important that the dilapidations deposit is returned to the tenant with reasonable expedience. Clearly, if there are dilapidations present at the end of the tenancy, it will be necessary to obtain estimates for the work. Again, these estimates should be obtained without delay so that any remaining deposit money can be returned to the tenant.
Where the deposit is held under a government-sponsored tenancy deposit protection scheme, it will be necessary to follow the scheme procedures for the release of the tenancy deposit funds. Where there are deductions, it will normally be necessary to gain the agreement of both the landlord and the tenant(s) regarding these deductions before the deposit can be released. If agreement is not forthcoming, then the dispute can be referred to the scheme dispute resolution process. See Chapter 10 for more information on deposits.
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Section 2:
Legal Section
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4. Basic Principles in Housing Law
To quote from a leading lawyer in this area, ‘Housing law is hard law’. The current law is complex, having resulted from a mixture of Acts of Parliament, regulations and case law grafted onto the existing body of land law dating back to feudal times. Many of the Acts of Parliament are long, complicated, and sometimes poorly drafted. Furthermore, the law or failure of housing law in real life can also act in hard or harsh ways. For tenants, the threat of homelessness can be very disturbing and disrupting to the family unit. To the landlord, a rented property represents a considerable investment and its value can be easily eroded if the property is mistreated by tenants, or a landlord is unable to regain possession of his property.
Land Law
Practitioners involved with housing law will inevitably encounter some of the underlying principles of land law when working with landlords and tenants. Granting a tenancy necessarily involves granting an estate in land and there are special rules that govern estates which date back through the centuries. It is important to understand that the rights and obligations when granting a tenancy can extend far beyond those mere contractual terms that appear on the tenancy agreement. There are certain rules concerning how a tenancy may be granted and, following the grant of a tenancy, many extra terms are implied into the relationship by statute and the common law. These rules need to be well understood in order to safeguard the interests of both parties.
A common example is where the landlord grants a fixed term tenancy - say for six months. Although it may appear from the tenancy agreement that the tenancy does indeed come to an end after the six month period, the law in fact will automatically extend the contractual tenancy at the end of the six month term as a statutory tenancy in order to protect the tenant from immediate eviction. The rules that govern these statutory tenancies are enshrined in the various housing statutes (explained further below). Thus in the case of an assured shorthold tenancy, the relevant statute is the Housing Act 1988 and the statute provides that a statutory periodic tenancy will automatically arise at the end of any assured or assured shorthold tenancy.
Other rules of land law define certain formalities that must be observed in order to grant a legal tenancy or to comply with statutory rules. For example, under English law, a tenancy agreement should always contain an address (in England or Wales) either for the landlord, or the agent at which notices may be served on the tenant. Such formalities, which can have undesirable or costly consequences if ignored, are explained in the later chapters.
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Types of Occupation
A person can occupy land in a variety of ways. Consider the example of a student, John, arriving at his university town looking for accommodation. He might immediately have the following choices open to him:
(1) stay with a friend, sleeping on the sofa (2) squatting in an empty house (3) rent a room in a shared house (4) rent his own self-contained flat for the whole year (5) purchase his own leasehold flat (6) purchase his own freehold flat
In whichever case he chooses, each of the situations falls into one of the following broad types or categories of occupation:
(a) Freehold Owner. The owner of the property sells the whole estate (i.e. the property) to John at an agreed price. John becomes the new freehold owner, the previous owner renouncing any rights that he might have over the property in the future (example 6 above).
(b) Tenant. John wants to have his own property - but only for a given period of time. In re- turn for a sum of money, the landlord hands over possession of the property for a limited period of time, whilst retaining the right to regain possession at some point in the future (examples 3, 4 and 5 above).
(c) Licensee. John does not have possession of his own land - he merely has a licence or permission to use the land for a period of time. The landlord or owner does not hand over possession, but retains the right to use it. (example 1 in the list above).
(d) Trespasser. John simply moves into the property, takes possession, and occupies the property as his home - without permission. He is technically a trespasser (example 2 above).
Estate in Land
Although there are four main types of occupation, only the first two of these gives the occupier significant control or ownership of the land. In English land law a person may ‘own’ land in different ways but the person technically only owns an ‘interest’ in the land, otherwise known as an ‘estate in land’. There are two main types of estate in land that a person may own: • Freehold • ‘Term of years Absolute’ - or leasehold tenancy
Freehold Occupation
Freehold occupation sits at the top of the hierarchy. In legal terms, freehold occupation is de- fined as an estate in fee simple absolute in possession, and is effectively an estate of indefinite or unlimited duration. In other words, the freehold owner holds the land in perpetuity and is the closest thing to absolute ownership of land that is possible under English land law. A holder of freehold land is entitled to carve out a lesser estate out of his or her interest by renting out the land for a fixed period of time.
Tenancy
A person that holds an estate in land under the freeholder is a tenant. The tenant holds his estate as ‘a term of years absolute’ (to use the true legal definition). A term of years absolute exists within a freehold estate in the sense that a shorter fixed term is carved out of the longer in-definite term, thus creating the relationship of landlord and tenant.
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A term of years absolute may have several similar forms. It maybe that the freeholder has granted his tenant a fixed term estate of 99 years - more commonly referred to as a lease or a leasehold estate. Alternatively, the landlord may grant a much shorter fixed term tenancy - such as an assured shorthold tenancy of just one year. The leaseholder tenant holding under a 99 year lease may, in turn, decide to carve out a smaller interest in his property, and grant a lease or tenancy of one year to another person whilst he travels abroad - for example on sabatical. In this case, in one year’s time, the right to occupy the house or flat will revert to the original leaseholder - this called the reversion.
Modern tenancies may be further divided according to the use of the land:
-- Commercial tenancy -- Residential tenancy -- Agricultural tenancies and agricultural holdings The different types of residential tenancy are dealt with in more detail in Chapter 6.
Licensee
Whilst a tenancy creates formal ‘ownership’ or possession of land, under property law, a licence simply means that the occupier or licensee has been granted permission to use the land – and is deemed to be a lower category of occupation than a tenancy.
In terms of housing law, the licence occupies a sort of mid-ground to describe an occupier that has no formal ownership such as an owner-occupier, or a tenant, but above the status of a trespasser who has no permission to occupy. Licence is a term that can be used to describe a multitude of occupation arrangements such as a lodger, family occupation, or casual guests. Occupation of a hotel room, a hostel, or an old people’s home will usually also be considered as occupation under licence rather than a tenancy.
The most common example of licence is a person living in property which is either owned or rented by a member of the family such as a parent. The non-owner, or non-tenant has been allowed to co-occupy the property in the legal status of a licensee. Equally, a friend who comes to stay for a while is not to be considered a tenant, or a trespasser (because his host has invited him to stay) even if he were to pay some sort of contribution towards his food or the rent. However, the contribution to and acceptance of rent could be considered to be one of the hallmarks of a tenancy if the arrangement was to continue beyond a very temporary arrangement – so some care should be taken in such situations. Where two people move into accommodation, but only one named on the tenancy agreement, the other making an indirect contribution towards the rent, and no formal subletting agreement, this is commonly viewed as a house-sharing arrangement under licence. The courts are reluctant to infer a tenancy unless it can be shown that there was an intention to create legal relations of landlord and tenant (Monmouth BC v Marlog, 1994).
Trespasser
A person who occupies or even enters land or premises of another without permission is deemed to be a trespasser. So, quite obviously, a burglar is a trespasser, but so is an old lady who comes into your garden to rescue her dog; neither have your permission to be on your land. A postman, however, has an implied licence to walk up your garden path in order to de-liver letters – he has implied permission just for this purpose. However, the landlord who, having reserved the right to enter his tenant’s property to inspect for repairs becomes a trespasser if he uses the opportunity to harass his tenants or interfere with their belongings. The fact that the landlord holds an estate in the premises does not prevent him from being a trespasser if he has no permission or right to be in the premises.
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Essentials of a tenancy
The Common law contains a bewildering variety of rules and cases to help owners and tenants determine whether the occupation has the characteristics of a tenancy: ie an estate in land granted to a tenant by a landlord, and how the tenancy should be treated in any number of possible situations.
From these cases, the courts have been able to distil a set of rules, which, in effect, outline the essential ingredients, or characteristics of a tenancy. If these are present, then the law will look upon the occupation arrangement as a tenancy together with all the statutory protections that might be available to tenants for this type of letting arrangement.
For example, Jack lets his London flat to Mary (which he holds under a 99-year lease). They agree a monthly rental of £1000 per month, and a start date of January 1st. Jack clears all his stuff out of the flat over the December break and hands over the keys to Mary on the last day of December, and leaves to start his new job in France. The arrangement is prima facie a tenancy as it has all the hallmarks of a tenancy.
Hallmarks of a tenancy
Landlord and Tenant. A tenancy will always consist of two parties who contract to form the tenancy: the landlord and the tenant who must be separate legal persons capable of granting and receiving the tenancy. The tenant need not necessarily be an individual; the tenancy might be granted to a group of individuals as joint tenants and there are special rules discussed later in this chapter that apply to joint tenancies. The tenant might also be a company, but then the tenancy would not enjoy statutory protection as an assured tenancy (see above). A minor (i.e. person under the age of 18) is also not legally allowed to enter into a contract for land although the law may allow him to hold an equitable tenancy - this situation is explained in Chapter 9.
Exclusive Possession. A fundamental requirement of a tenancy that distinguishes it from a mere licence is that the tenant is granted sufficient control over the demised property to be able to lawfully exclude others. If the occupier does not have exclusive possession, perhaps because he shares the accommodation with the landlord, then the arrangement cannot amount to a tenancy. It may be a licence, or some other lesser right of occupation.
Identifiable Land. Whether the letting is for a single room, or for a complete mansion and hundreds of acres of surrounding land, there must be identifiable premises over which the tenant or joint tenants have exclusive occupation. Normally this requirement can be satisfied by stating the house address. If the letting is for a single room, the room can be defined by numbering the room or describing it in some other fashion. If there is no area within the premises over which the tenant or joint tenants have exclusive occupation (e.g. because the tenant shares all the rooms with the landlord), then a tenancy cannot exist.
Definite Period. A tenancy must have a period which defines the length of time for which the tenancy is granted. A periodic tenancy is allowable even though it may continue for an indefinite time, since the period is the duration of the periodic tenancy, e.g. one month (at the end of each definite monthly period, the period is automatically renewed for a further period).
Rent. The payment of rent (or a premium) in return for the opportunity to enjoy exclusive possession of the land is a classic hallmark of a tenancy. In fact the acceptance of rent in return for occupation of a property may, in itself, infer and lead to the grant of a tenancy even though no written agreement has been entered into.
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Other Characteristics of Tenancies
Privity of Estate
In early times, a leasehold or tenancy relationship between the landlord and his tenant was purely contractual. The agreement made formed a contract which directly affected those parties and no others – this is called privity of contract. As the law developed, it became clear that justice and fairness required that the tenant needed more protections – such as protection for the tenancy agreement when a landlord died, sold his interest to another person, or went bankrupt. So tenancy law gradually assimilated elements of land law, and a tenancy now qualifies as an estate in land, and the extra legal protections that this affords the tenant as owner of the estate.
This complex patchwork of legal rules has been variously described as “a tortious and ungodly jumble” (Oliver Cromwell – who was apparently not a man to mince his words!). Lord Templeton speaking in the House of Lords (City of London Corporation v Fell [1994] 1 AC 458 at 465) gave support to a more informative explanation: ‘a lease of land, because it originates in a contract, gives rise to obligations enforceable between the original landlord and the original tenant in contract. But because it also gives a tenant an estate in land, assignable, like the reversion, to others, the obligations … assume a wider influence …. Thus the landlord and tenant stand in one or other of two distinct legal relationships. In the first, it is said that there is privity of contract between them, in the second privity of estate.’ More about this is in Chapter 9 where we discuss setting up tenancy agreements in detail.
Common Law Tenancies
As the law developed, legal decisions were made in the courts which established precedents, or rules about how tenancies could be created, would operate, and could be terminated in the ordinary course of events. This body of historic law became known as the Common Law, and the common law rules still apply to tenancies today – unless they have been modified by statute. Thus the common law rules state, for example, that a tenant may end a periodic tenancy which runs from month to month by giving at least one months’ notice ending on the first or last day of a period of the tenancy.
Today, most modern tenancies are governed by statutory rules drafted and approved by Parliament which take the place of the ancient common law rules. So modern housing law is now governed principally by statute such as the Housing Act 1988 and its creation – the assured shorthold tenancy and many of the common law rules have dropped away. However, the Housing Act 1988 does not apply to all classes of tenancy – certain types of tenancy are excluded – such as the letting of a dwelling to a company or where the tenant is not an individual person, and not deemed to require the statutory protections. These tenancies will simply operate under the common law rules which continue to apply to this day, and operate as so-called common law tenancies.
Quiet Enjoyment
The common law implies a variety of obligations into the landlord-tenant relationship. Closely linked to the right to exclusive possession discussed earlier is one of the most fundamental of the tenant’s rights – the right to quiet enjoyment. In exercising his right to exclusive possession, the tenant has sufficient control over the property to be able to lawfully exclude others, including the landlord (although the landlord retains a restricted right to enter the premises for a specific purpose such as inspecting the state of repair of the property). The covenant of quiet enjoyment goes further in that it includes an undertaking on the landlord that he has sufficient interest in the property to put the tenant in possession.
Quiet enjoyment also means that the landlord (and others) will not do any acts that would deprive the tenant of the full benefit of the right to possession. This may occur through physical or other
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acts that cause substantial interference with the tenant’s ordinary use of the property, whether those acts are done on the premises or not, and from the conduct of the landlord or his agent interfering with the tenant’s freedom of action in exercising his rights as tenant (McCail v Abelesz [1976] 1 All ER 727 at 730-731, CA).
In Kenny v Preen [1963] (1 QB 499, [1962] 3 All ER 814 CA), a landlord sent threatening letters, banged on the door and shouted abuse at the tenant. This was held to be a breach of covenant for quiet enjoyment. A large body of case law exists to show real-life situations and acts which the courts have deemed to interfere with the ‘tenant’s freedom of action in exercising his rights as tenant’. However, the words ‘quiet enjoyment’ used in a legal context do not mean noise-free enjoyment, but enjoyment without interruption of possession.
Whether substantial interference has taken place is a question of fact and degree depending on the individual circumstances of the case. It has been held that acts which cause inconvenience to tenants but which do not actually disturb their enjoyment of possession will not be breaches. For example, where the landlord erected an iron external staircase that passed the tenant’s bedroom window, destroying her privacy (Browne v Flower [1911] 1 Ch 219) or where the landlord made noise and dust from temporary building works which merely inconvenienced the tenant (Kelly v Buttershell [1949] 2 All ER 830, CA).
Quiet enjoyment is the tenant’s key right as a tenant in possession of the premises. A landlord who seeks to intimidate a tenant into leaving the premises clearly is interfering with this right and these rights have been further developed by statute into laws which protect tenants against harassment and unlawful eviction. See Chapter 13 for more information.
Implied Terms
The main written terms of the tenancy will be set down in the tenancy agreement as in any other legal contract - these are commonly known as the explicit terms.
Further terms may be added by statute and the common law - these are known as implied terms. For example, the Landlord and Tenant Act 1985 adds a number of implied terms into certain types of tenancy with regard to the landlord’s repairing obligations. We have also seen above how the common law implies further terms into the landlord tenant relationship – such as the tenant’s implied right to quiet enjoyment.
Implied terms often override or modify any terms in a tenancy agreement that have contrary effect. Thus if the landlord with an assured shorthold tenancy tries to charge an excessive rent, the law provides that, in certain cases, the rent may be reduced. The way that the law may modify or add to these terms will be covered in more detail later in the handbook.
In Chapter 9, we take a detailed look at the nature, purpose and structure of the tenancy agreement and the various commonly implied terms will be studied in greater detail.
Reversion
Because a tenancy is an estate in land that has been carved out of a longer leasehold or freehold interest, a necessary feature of a tenancy is the reversion. A ‘reversion’ refers to something that occurs in the future, and in the case of a tenancy, the reversion describes the interest in land which remains with the landlord, and with the potential for the right to occupy the land to revert back to the landlord at the end of the tenancy.
For a valid lease or tenancy to be created, it is essential that the term or estate held by the tenant is shorter than the term held by the landlord. Where the landlord, for example, is a freeholder, then he holds his interest or estate for an unlimited duration; he is therefore entitled to grant a tenancy for any period he chooses.
A leaseholder too is able to grant a lease or tenancy – again subject to the proviso that the tenancy created is of shorter duration than the term held by the leaseholder. John, for example, owns his flat under leasehold arrangement. He purchased the leasehold flat four years ago on a 99 year
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lease so he currently has a leasehold interest of 95 years, and would be able to grant his friend Peter a shorthold tenancy for two years. Once John has handed over the keys, Peter now has the right to occupy the flat as his home but also the implied obligation to pay rent. John no longer has the right to occupy, but he has the right to collect rent instead. Once the two years are up, and Peter moves out and hands back the keys, the flat will revert back to John. John therefore still currently retains an interest in the flat whilst it is sublet. It is this interest that is called the reversion. And the interest that Peter acquires is known as a sub-lease or sub-tenancy. For the duration of the two years of this whole subletting arrangement, we find that there are three people who possess a legal estate in it. The freeholder – who has the fee simple in possession, John has a lease for 99 years and finally Peter who has a sub-lease or tenancy of the flat for just two years.
Tenancy at will / sufferance
A tenant at will arises where a person occupies land or premises in a residential capacity with the express or implied consent of the owner, under a tenancy of indefinite duration and without any regular payment of rent.
A tenant holding after the expiry of a fixed-term tenancy becomes a tenant at will or on sufferance at common law. If he pays monthly rent, a monthly periodic tenancy may arise on terms largely consistent with the original lease.
A tenancy on sufferance is a more precarious form of occupation, and not really a tenancy at all and at common law attracts very little protection. It arises when a tenant holds over at the end of his or her tenancy without the permission of the landlord. The status of a tenancy on sufferance lies somewhere between a tenant at will and a trespasser, and may well depend on any action that the landlord takes in relation to the occupation. If the landlord actively objected to the occupation, the tenant might become a trespasser whereas a tenancy on sufferance may be converted into an implied periodic tenancy if the landlord accepts rent.
The complication of tenancy at will or sufferance will not arise for the majority of residential tenancies because the Housing Act 1988 will largely prevent them from occurring (an assured shorthold tenant who holds over at the end of his tenancy retains his AST tenancy until the court orders otherwise). However, once a landlord moves into the complexities of common law tenancies, the concepts of tenancy at will and trespasser become more relevant.
Single or Joint Tenancies
Just as it is possible for people to own land jointly, it is also possible for people to ‘own’ or hold their tenancy as joint tenants. There are two different systems for the joint ownership of an estate in land but the one we predominantly come across in residential lettings is where the tenants hold as ‘joint tenants’. This is the one we shall assume will come into operation by default when we set up a joint tenancy.
Where the landlord grants a single tenancy to a group of people in this way, there will generally only be one agreement (albeit several copies perhaps) signed by all the tenants, and only one rent for the whole property. In this way, the rights granted will pass as a unit – that is to say the law will consider the group as a single legal person with the tenancy starting at the same time for each occupant, and all tenants equally entitled to possession of the whole.
The tenancy cannot be subdivided. The tenants hold the whole of the property equally and so if one of the tenants wants to leave, the tenancy must end for all occupiers or not at all. The unity concept leads us onto one of the most important aspects of joint tenancies; that each occupier is jointly and severally liable for the obligations contained in the tenancy. If one of the tenants breaches the contract, then all tenants share the liability and the landlord’s remedy is against all of them. So if one of the tenants absconds or stops paying the rent, the remaining tenants are still liable to the landlord for the whole of the original rent agreed and will have to make up the rest of the rent themselves.
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This does not mean that the joint tenancy is the only way that several individuals can occupy the same property. It is also possible that the landlord will offer each of the individuals a tenancy of an individual room (with the right to share the common areas). The landlord may also consider a licence arrangement for the group – especially where the members of the group arrive and occupy the property at different times and are not otherwise connected. There are pros and cons to each method, and the landlord will need to choose how he wishes to arrange his letting.
Joint tenancies have their own special rules which are explained in more detail in Chapter 9.
Periodic or Fixed Term
Land was, by tradition, let for a fixed term – or to use the language of the Law of Property Act 1925, ‘a term of years absolute’ - the statutory definition for a lease that is to exist as a legal estate. This definition therefore includes leases for a fixed term of years, which may last for any length of time (whether for one year or 99 years) provided it is not in perpetuity. However a tenancy ‘for life’ is deemed not to be a legal lease as the term is not certain, nor is a tenancy ‘for the duration of the war’.
Paradoxically, a tenant who is granted a tenancy in exchange for a monthly rent is deemed to have a legal tenancy even though the overall term of the tenancy is not certain. In a legal sleight of hand, the law gets around this problem by considering each monthly unit of rent as a term that is capable of definition, and is known as a periodic tenancy. Each time a monthly term expires, the term is automatically renewed so at any point in time it is possible to define the duration of the lease. The nature of the periodic tenancy will normally be specified in the tenancy agreement, and will typically exist in a number of common forms; weekly, monthly, quarterly, yearly etc.). Even though the periods automatically renew, the law considers this to be a single tenancy no matter how many periods have elapsed.
The period upon which a tenancy is based may be ascertained mainly by reference to the way in which rent is calculated (on the tenancy agreement). So, where the rent is reserved as so much per week, a weekly tenancy will be implied even though the rent is paid every four weeks.
Implied weekly periodic tenancy – where a tenant for a fixed term at a weekly rent holds over and continues to pay the same weekly rent, the law will infer that a weekly tenancy was intended.
Notice to Quit
It is fundamental to periodic tenancies that both parties should be able to bring the tenancy to an end or withdraw from the tenancy at the end of any particular period of the tenancy. They may do this by service of a notice to quit – which must, by common law tradition, bring the tenancy to a close at the first or last moment of any period of the tenancy. The length of notice required depends on the length of the period, but a yearly tenant must give at least six months, and the monthly tenant, one month. So for a monthly periodic tenancy, the tenant may serve a notice to quit to end on the first day or last day of the rent period, and give notice at least one month before the end of the period.
Modern tenancies such as assured shorthold tenancies use a variation or different procedure to these common law rules. Although the tenant’s notice on a periodic tenancy replicates the common law notice requirement above, a landlord is required to give at least two months’ notice to terminate any periodic tenancy, and this must be given on a special form prescribed by the Housing Act 1988.
Shorthold or Parole Lease
Whilst there is no formal definition of a ‘shorthold’ tenancy, housing law allows the creation of a shorthold tenancy or ‘parole lease’ with a minimum of formality where the lease is for three years or less (s52(2) Law of Property Act 1925). The majority of modern residential private tenancies operate under this provision which exempts the landlord from the requirement to draft the lease as a formal legal deed (where the letting is for more than three years).
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Types of Tenancy
Residential Tenancies
The most common type of modern residential tenancy is the assured shorthold tenancy (now used in about 90% of cases) and these tenancies are governed by the Housing Act 1988. We describe the legal framework which governs these type of tenancies in detail in Chapter 5.
There are certain categories of residential tenancy which are excluded from the jurisdiction of the Housing Act 1988 but which are protected in various ways under other, mostly earlier, sets of legislation. These include holiday lettings, lettings by resident landlords, agricultural holdings etc.
A further category of tenancy exists for those types of tenancies that fall outside the protection of the various housing acts altogether. These tenancies are often called common law tenancies and simply follow the various common law rules that apply to all tenancy agreements and leases. Examples of common law tenancies are: • residential lettings where the tenant is a business or corporate body • residential lettings where the rent is over £100,000 per annum (this was raised from £25,000 on 1 October 2010) These other forms of residential tenancy and the special rules that apply to these less common type of tenancy are explained in Chapter 6.
Commercial
As with residential tenancies, successive governments recognised that business tenants also required measures of protection against rapacious landlords, and a statutory code of law has developed to protect business tenants (principally in the Landlord and Tenant Act 1954). The two codes generally operate separately and exclusively, in that if the occupation is deemed to be of business premises and for business purposes, then its will operate outside the Housing Acts, and the general body of legislation that protects residential occupiers.
Since the letting of business premises is outside the scope of this book, we only deal with this branch of law in passing, and for historical and legal context. Residential landlords and their agents will typically therefore have little need to reference these codes for commercial lettings except in cases of ‘mixed-use’ letting where the occupation includes aspects of both residential and commercial use. In such cases, care must be taken as a tenant may inadvertently gain advantage of protection under Landlord and Tenant Act 1954 if the business use is the primary purpose of the occupation. An example might be a dentist who operates his practice from premises which are also his house. Business and ‘mixed use’ is discussed further in Chapter 6. Agricultural tenancies and holdings A third branch of law developed out of the common law rules for landlords and tenants to protect tenancies of agricultural land. As with commercial or business tenancies (above), these codes largely operate independently of the residential codes so that where land is let principally for agricultural use, residential tenancy rules will not apply. For example, tenancies of agricultural land and agricultural holdings cannot be assured tenancies (Sch. 1, Housing Act 1988).
However, as with commercial lettings, real life does not always respect the artificial boundaries of the legal system, and situations will occasionally crop up where both the residential and agricultural legal codes appear to apply. For example, a residential dwelling let together with agricultural land, or lettings to agricultural workers. It will be important to understand the respective codes in such cases, and any protections that apply. Agricultural tenancies are discussed in more detail in chapter 6.
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Residential Tenancies and the Social Rented Sector
Residential tenancies can be further divided into two main categories, each with their own sets of legal or statutory rules:
• Private sector lettings • Public sector lettings Private tenancies have existed back into the earliest Norman times and the beginnings of our current legal system. They form the main subject matter of this handbook.
Public sector lettings refers to the provision of public housing which was traditionally the housing of the poor or vulnerable. Prior to around 1900, the state had very little involvement in housing or housing policy. The development of the public housing or social rented sector to the scale that it exists today occurred mainly during the 20th century, and until the late 1990’s, the public sector provided the majority of rented accommodation in this country. Houses built for public or social housing were generally built by or for local authorities and known as council houses.
Given the relatively long history of statutory protection for tenants in the private sector, it is surprising that a similar statutory code for public sector tenants did not appear until 1980 – in the form of the Housing Act 1980 and the creation of the ‘secure tenancy’. The prevailing view was that the private sector tenant needed to be safeguarded from exploitation by unscrupulous profit- seeking landlords whereas government and local authorities as social organisations providing housing for the less privileged, could be relied upon to exercise their powers fairly. How wrong they were!
The Conservative government of Margaret Thatcher initiated the transfer of the public housing stock to the private sector with the Right to Buy scheme being introduced in 1979. The claimed intent of Right-to-Buy (RTB) was to provide council tenants with the opportunity to buy their own homes from the state at substantial discount. In execution, the policy was flawed and contained little protection against abuse to the extent that over 40% of the millions of RTB houses sold over this period have now been sold to private sector landlords who rent them back at much higher rents. This absurd outcome extends to the point where councils now have to rent back their own houses to house the homeless and vulnerable. Today the social rented sector exists at a fraction of its previous size, and much of the remaining stock has been transferred into the hands of Housing Associations and similar not-for-profit organisation, and away from local authority control.
The social rented sector is largely outside the scope of this book and the regulatory system of secure tenancies which govern the sector do not generally apply to private sector landlords. However, as usual, there is a small degree of interplay between the sectors so it is useful to know the background and essential characteristics of how public sector operates. Because public sector rents are subsidised and set artificially below market rents, the opportunity exists for abuse. Although it is both illegal and a breach of the terms of their tenancy agreement, some tenants of social housing do attempt to rent out their property for financial gain, and practitioners in the private sector need to guard against social tenants posing as private owners. This is one of the fundamental reasons which agents are advised to check that owners have good title or ownership of their property before it is offered for rent in the open market.
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Characteristics of Shorthold Residential Tenancies
Granting the Tenancy
Modern shorthold tenancies provide a relatively flexible and straightforward form of leasehold tenure, and both the landlord and tenant gain important legal rights. Granting a tenancy creates a legally enforceable interest or estate in land which grants the occupier considerable rights of peaceful enjoyment and security of tenure. Although the tenant does not occupy with the same indefinite security of tenure conferred under a freehold, the tenant is entitled to exclusive possession of the land for an agreed period, without interference.
In granting a tenancy, both parties simply agree the terms of the tenancy. This agreement is usually known as the tenancy agreement, and serves to grant a tenant exclusive possession of the property, for a term and for an agreed rent.
Like any other business transaction, the letting or tenancy agreement establishes a binding con- tract between the parties. The tenant is obliged to pay the agreed rent and is bound by any other terms in the agreement. The landlord has granted the tenant the right of ‘quiet enjoyment’ of the property for the duration of the tenancy.
Legal Requirements
Whilst the Law of Property Act 1925 specifies that all conveyances of land (including leases) must be made in writing by deed, any leases taking effect in possession for a term not exceeding three years may be made without legal formality. Fortunately for most landlords and agents, this exemption means that most private residential lettings can take place without the requirement for a deed, or other types of formal witnessed legal documents. For terms of three years or less, the tenancy may be agreed verbally or by using a simple written agreement.
More recent legislation has imposed many legal requirements on landlords and agents; such as the requirement for Energy Performance and Gas Safety Certificates to be given at start of tenancy (see page 5-4) and various other prescribed information.
Unfair Terms
Because residential lettings are predominantly lettings to private individuals, these types of tenancy are inevitably affected by consumer protection law. Regulations require that consumer contracts such as residential tenancy agreements should be written in plain intelligible language (rather than the legalese traditionally used in legal agreements).
Secondly, there is a general requirement that terms in such agreements should be fair and balanced so that they do not confer unreasonable commercial advantage to the landlord (in the case of lettings). Contracts and associated terms of business supplied to private tenants need to be compliant with these regulations if they are to be enforceable. See Chapter 9 for more information.
Property
The tenancy agreement will identify the property being let. The type of property and the circumstances surrounding its occupation may have an effect on the legal status of the tenancy created. For example, a new letting by a landlord who is not living in the same house as his tenant will normally be an assured shorthold tenancy. However, a tenant sharing accommodation with a resident landlord will not be given the same statutory protection or security of tenure provided to assured shorthold tenants; this is one of the excluded categories of letting defined by the Housing Act 1988. Similarly, different rules will apply to holiday lettings.
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The number of people living in the property may also affect the legal status of the tenancy. Houses which are occupied by separate individuals (rather than a group of individuals) may be classified as HMO’s (Houses in Multiple Occupation) and extra rules will then apply. Most importantly, there are additional rules that relate to fire safety and disrepair and these will be discussed in more detail in Chapter 16.
Specific items contained within the property may also be subject to regulation. Faulty or badly installed gas appliances have over the years caused many fatalities in rented properties and so an increasing number of regulations have been introduced in order to prevent such accidents. Many of these regulations carry the threat of heavy criminal penalties. Regulations cover many aspects relating to the safety of gas installations, furniture, furnishings and electrical appliances. These regulations are explained in further detail in Chapter 8.
Deposits
It is normal practice for landlords to take a deposit as a safeguard against a tenant who defaults on the contract, either by leaving the property with unpaid rent, or as compensation for other forms of damage and default. Again, this area is now subject to regulation both in relation to the size of the deposit (see Letting Factsheet 51 for more information) and how the deposit can be held during the tenancy. Deposits are explained in more detail in Chapter 10.
Rent and rent control
The landlord is entitled to receive rent from the tenant as compensation for allowing the tenant to occupy the demised land. Although most rents are nowadays paid with money, this was not always the case. In previous times, rent was commonly paid by service (i.e. a day’s work or provision of a knight to a local lord) or in other units such as eels or even peppercorns which in former times were valuable commodities (hence the ‘peppercorn’ rent).
Landlords occasionally abused their position by imposing excessive rent increases on tenants knowing that it was inconvenient for them to find alternative accommodation. The legal response was to introduce statutory forms of rent control. Rent control was extended to extreme lengths in the 70’s and early 80’s. Once a tenant and landlord had come to a voluntary agreement on a rent level for a particular property, the tenant could immediately apply to have the rent reduced, often by half the agreed level. The long term result was, however, damaging to the rented sector since many landlords withdrew from the market.
Rent control has been greatly reduced in recent years so that the landlord and tenant are now at liberty to agree a market rent for a tenancy without undue interference. For assured and assured shorthold tenancies, the tenant only has the right to have the rent reduced if it is considered to be significantly higher than similar tenancies in the locality. Similarly, a procedure exists to ensure that rent increases are not excessive. For more information see Chapters 5 and 10.
Term
A tenancy will normally be agreed for a fixed initial period - the term.
The length of the term can influence how the tenancy is affected by housing law. For example, the landlord’s repairing obligations referred to above apply only to tenancies of less than seven years. Oddly, an assured shorthold can now be granted for any length of time (it was originally envisaged that landlords would use this type of tenancy exclusively for short lets) but various other statutes may apply to the tenancy depending on the length of the term. These are detailed further in Chapter 9.
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Termination of Tenancies
According to common law rules, termination of the tenancy will normally occur as a result of: • effluxion of time; • surrender; or • forfeiture. In modern law, the picture is complicated by the fact that legislation now protects residential tenants against eviction. The law provides that a residential tenant may choose to remain in occupation during or at the end of a tenancy. If the landlord wishes to remove the tenant from his property, he is required to apply to the courts for a possession order.
Effluxion of time
This simply means that the tenancy has reached the end of the agreed term. Traditionally, this meant that the tenant had no right to stay on unless he agreed a new tenancy with his landlord. The modern system of assured and assured shorthold tenancies gets around this problem by automatically creating a statutory periodic tenancy at the end of any fixed term tenancy and so this principle no longer applies in such cases. However, a common law tenancy such as the tenant of a resident landlord will still come to an end by effluxion of time.
Surrender
Surrender of a tenancy occurs when both parties agree that the tenancy shall come to an end. Surrender can take place at any time during the tenancy, even during the contractual fixed term provided that both landlord and tenant agree to the surrender.
Forfeiture
Forfeiture refers to a situation where the tenant forfeits his tenancy due to a breach of the terms of the tenancy agreement – such as non-payment of rent. In former times, the law allowed forfeiture or a breach of tenancy to bring a tenancy to an immediate end, allowing the landlord to ‘re-enter the property’ and this wording may still be found on modern leases. In practice, a residential landlord is no longer allowed to take back possession of his property; modern residential tenancies have additional statutory safeguards whereby a court is required to formally end the tenancy.
Whether a landlord simply wishes to get his property back at the end of the agreed term, or because of some default on the part of the tenant, there are set procedures that need to be followed for recovery of possession. These procedures will also vary according to the type of tenancy that has been granted.
The process for termination of tenancies is explained in detail in Chapter 12.
Eviction
A tenant is protected against harassment and eviction by a number of important statutes and there are heavy penalties for landlords that do not respect the correct procedures for repossession. If a tenant refuses to leave, he cannot be evicted without a possession order from the court. Although the delays involved in taking such legal action may be very frustrating, landlords have little alternative in this situation except to reflect on better ways to safeguard themselves against bad tenants in the future (e.g. careful use of references, guarantors for tenants with unreliable income or employment, insurance against unpaid rent etc.). Chapter 13 deals with harassment and illegal eviction and describes these rules in more detail.
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Distinction between a Tenancy and a Licence
We learned earlier in this chapter that an occupation of residential property on payment of rent does not always amount to a tenancy – it can be a licence instead. Occupation under licence means that the occupier simply has the permission or agreement of the owner or freeholder to occupy, but not the same secure status or legal estate in land that a tenancy provides.
The distinction used to be more important, especially to landlords who wished to avoid or evade the onerous tenure and rent control provisions under the Rent Act 1977. Many landlords attempted to let to the tenants under a ‘licence’ arrangement as, generally, licensees enjoy less security of tenure than tenants. Fortunately, landlords have less incentive to use licences under the current legal framework but it is still useful to understand the legal differences between the two styles of occupation.
Pre-Housing Act 1988 licences
Prior to the Housing Act 1988, landlords who wished to avoid or evade the tenure and rent control provisions of the Rent Act 1977 attempted to do so by having those who wished to occupy residential property sign documents purporting to grant licences rather than tenancies.
The licence normally reserved the landlord the right to share occupation so that the tenant did not have exclusive possession. Because the purpose of many of these licences was a ‘sham’ arrangement designed to avoid the provisions of the Rent Act, a number of these arrangements were studied by the courts. The courts came to the conclusion that, in some cases, the occupiers were in fact tenants not licensees (as claimed by their agreements). It was held that whether an occupier holds a licence may be measured (amongst other things) by whether the occupier had exclusive use or possession of the premises, the level of attendance or other services (e.g. provision of bed-linen, window cleaning etc.) and other matters.
Under the current legal framework provided by the Housing Act 1988, the practitioner will find little reason to grant contractual licences. With the guaranteed rights of possession offered under assured shorthold tenancies, there are no significant advantages to be gained from using a contractual licence.
Tenant or licensee
The majority of people who rent residential accommodation are tenants, but a few people are in fact only licensees. Unfortunately, there is not a clear distinction between the two types; the difference is not defined in any legislation. The best way of explaining the difference is by looking at the borderline cases and individual circumstances.
A tenant is someone who has a legally binding right to occupy a property and exclude other people from it. Thus someone who pays rent on a house or flat for their sole occupation is usually a tenant. It is settled law that a tenancy exists where EXCLUSIVE possession is granted for TERM for a RENT.
A licensee is merely someone who has the permission of the owner to be in the property, but does not necessarily have the right to exclude others from the premises, or the right to assign or sublet the accommodation. Typical examples of licensees are: • Lodgers • Persons visiting a household as guests • Children living in the parental home • Visitors staying in a hotel or hostel
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A licence can take one of two main forms; a bare licence or a contractual licence. A bare licence is a licence granted without any valuable consideration and there is no intention to create binding legal relations (e.g. letting a friend sleep on your sofa over a weekend). A fundamental feature of the bare licence is that the licensor can revoke the licence at any time. Once that period has expired, he or she becomes a trespasser.
At the other end of the scale, the contractual licence is a formal arrangement to occupy (e.g. a room or a flat) premises in return for regular payments. This arrangement can give rise to rights and obligations similar to those acquired under a tenancy. The law implies into every notice the term that it will be not be brought to an end without ‘reasonable notice’. In the case of a periodic licence, the law requires a written notice of a minimum of four weeks (except in the case of an excluded licence - see below), which contains specified information as for a notice to quit. Once the licence comes to an end, the licensor is then entitled to possession. In most cases, court proceedings for eviction are also required.
Licence or tenancy?
Whether an arrangement is a tenancy or a licence will depend on a number of things: • Whether any written agreement mentions tenancy or licence. • Whether the occupier has exclusive possession of the accommodation. Unless the tenant has the exclusive right to live in the premises, or at least part of the accommodation, he cannot be a tenant. If the occupier shares accommodation, this could point to a licence. • The true intentions of the owner and occupier when they came to their agreement. The courts have the power to look beyond any artificial label in the written agreement, looking at the true nature of the occupancy to determine the type of tenancy i.e. whether the accommodation was provided as an act of friendship (likely to be a licence) or whether the tenant pays rent and whether the accommodation is self- contained (tenancy). A person whose licence is brought to an end becomes, technically, a trespasser. A person who is a trespasser but who is subsequently given permission, not amounting to a tenancy, to remain on the premises, becomes a licensee.
Protection from Eviction
Although the licensee generally enjoys substantially fewer contractual and statutory rights in comparison to a person who holds a tenancy, the licensee is not without some legal protection. Section 1(2) of the Protection from Eviction Act 1977 provides protection to a ‘residential occupier’ and requires that the licensor or owner of the premises is required to obtain a court order before the occupier can be evicted. The Act prohibits eviction without a court order:
“If any person unlawfully deprives the residential occupier of any premises of his occupation of the premises or any part thereof, or attempts to do so, he shall be guilty of an offence unless he proves that he believed, and had reasonable cause to believe, that the residential occupier had ceased to reside in the premises.”
So licensees have some protection but as soon as the licence is terminated either by events or notice they become a trespasser and can be removed by court order.
The Act defines a number of exclusions (an excluded licence or tenancy) which do not enjoy protection from eviction. These include: • an occupier who shares any accommodation with the landlord or licensor (or a member of the landlord’s or licensor’s family) who lives there as his only or principal home • a licence or tenancy granted for the purposes of a holiday (holiday letting) • a licence or tenancy granted at zero rent, or equivalent money’s worth.
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Lodgers
The question of whether a residential occupier is a tenant or a licensee normally depends on whether he has exclusive possession or not. Exclusive possession means that the occupier exercises sufficient control to exclude others including his landlord from his living space. A lodger is an individual who occupies a room in another person’s home. He or she has shared use of facilities such as the kitchen and bathroom and traditionally is provided with certain services and attendances by the owner such as breakfast and/or supper, clean linen and having the room cleaned regularly. The provision of these services is usually included in the fee paid for the accommodation and generally negates the definition of exclusive possession.
The lodger is often given as the typical example of a licensee but, in reality, the exact status of the occupation, whether tenancy or licence, may depend on the individual arrangement that has been negotiated or takes effect over time. If attendances and services in the room are provided, or the occupier shares most of the essential living spaces with the owner such as the kitchen and bathroom, then this will indicate that the owner retains a degree of control over the premises which is incompatible with exclusive possession.
If, on the other hand, the occupier lived in a granny annex or separate self-contained dwelling in the garden, which has its own front door or only shares a hallway, and the landlord provided no services and reserved no rights to enter into the tenant’s room, then it would likely be a tenancy as the occupier has exclusive possession of his own living space. Equally, if a lodger occupies a room to which the owner has maintained no regular access, and has installed a lock on his door (which only he has the key), then the lodger is able to exclude others from his room. This may constitute exclusive possession and therefore a tenancy.
This may be countered by a landlord who retains a key, and exercises and maintains the right to enter the room from time to time (whilst still respecting the lodger’s privacy) for example to empty the bin once a week. The landlord may also reserve the right to move the lodger to a different room in the property from time to time. In both examples above, provided that the landlord does actually exercise these rights on a regular basis, it is likely that a court would look at the arrangement as a licence as the landlord is exercising a degree of control over the occupation as to negate a tenancy.
Room as a tenancy & Shared Occupation
Although landlords often grant a joint tenancy when letting to a group of people, it is also relatively common for a landlord to grant the tenancy of a single room in a sharing situation. Assuming that the landlord is able or willing to grant each occupier sole occupancy of the room he or she has been allocated, then the tenant can hold a tenancy of an individual room together with a licence or right to share the common areas. The tenant does not need to have exclusive possession of the whole house; the fact that the tenant has exclusive possession of his room and the right to exclude other sharers from this living area is sufficient to qualify the arrangement as a tenancy and the protections that the law affords to tenants.
This arrangement can have advantages to the landlord as the individual tenants can start and leave the tenancy independently of each other – for example by arriving and leaving at different dates. Also, if one tenant fails to pay the rent, it will not affect the other tenants as there is no joint and several liability.
By contrast, a joint tenancy allows the landlord to grant a single tenancy to a group of sharers with the simplicity of only having to negotiate and collect one rent for the whole property. Not only is this less work, but also less liability for the landlord as the joint tenants take on joint responsibility for the whole property.
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Implied and Equitable Tenancies
Mistakes invariably happen when working with the complexities of setting up tenancies. In an earlier section in this chapter, we looked at the basic legal requirements for setting up a tenancy (see page 4-11). In later chapters, we will also look at other more detailed requirements for specific types of tenancy. What happens, then, if the landlord grants an invalid tenancy?
For example, the landlord or his agent might grant a tenancy to a company where the written agreement purports to be an assured shorthold tenancy, or the agreement of a tenancy for five years in writing but not witnessed and not by deed. In both cases, these tenancy agreements would be invalid as they are in breach of the specific technical or statutory requirements. What then is the status of such tenancy arrangements?
Implied tenancy
Fortunately, the law provides a safety net in such situations. Where an invalid tenancy has been created, the common law can imply one. This is called an implied tenancy. Once occupation has taken place which fulfils the basic requirements of a tenancy (a letting of premises under exclusive possession for payment of a regular rent), the common law can imply that a periodic tenancy arrangement exists which is binding on both parties contractually. The tenancy may, for example, operate as a common law tenancy if it does not fulfil the legal requirements for an assured shorthold tenancy (see page 6-3), and the term of the implied periodic tenancy will be determined with reference to the period by which the rent is calculated. So, if the parties had agreed to an invalid 12 month tenancy with a monthly rental payment, then a monthly periodic tenancy might be implied, and being a periodic tenancy, the tenancy will continue from month to month, until it is brought to an end by either the landlord or the tenant.
Implied tenancies can also act as pitfalls for the unwary. Consider the situation where a landlord rents his house to a single individual Miss X. The original tenant Miss X is subsequently joined in the property on a permanent basis by her new partner Mr Y, and Mr Y then proceeds to pay the rent on behalf of the couple. Although the landlord did not give specific permission for Mr Y to occupy, and did not intend to form a legal tenancy with Miss X’s new partner, it is likely that, in law, regular acceptance of rent from a new occupier would imply the existence of a new tenancy. As the landlord has accepted rent from Mr Y it is likely that Mr Y has an implied tenancy and the landlord would be required to follow the statutory notice procedures, and to obtain a court order, if he wanted to evict Mr Y from the property. Equitable tenancy In some situations, the court will regard an invalid lease as an agreement to create a tenancy at a later date when the technical error can be corrected. Such agreements are known as equitable tenancies which can be enforced at the discretion of the court as if the original tenancy agreement was valid.
Typical situations where this might occur are: • letting for more than three years where there is no deed • letting to a minor (person under the age of 18) - see page 9-21 • letting to more than four joint tenants Whereas an implied tenancy can be enforced as of right, the equitable tenancy will only be enforced at the discretion of the courts, and if the tenancy has been conducted according to the principles of fairness and good faith.
Under an equitable tenancy, the tenant may be entitled to statutory protection under the Housing Act 1988. It is implicit from the wording of the Housing Act 1988 that equitable tenancies are not excluded - see para 1 of Schedule 1 to the Act. In particular, section 45 expressly provides that the term ‘tenancy’ includes a ‘sub-tenancy and an agreement for a tenancy or sub-tenancy.’
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Leasehold Property and the Commonhold
The common use of leasehold ownership framework for flats within larger buildings is quite peculiar to English Law. As the trend developed in more modern times, especially in the cities, for people to share buildings in tenement blocks and blocks of flats, landowners refined the leasehold system so that each flat owner could share the common building yet retaining ‘ownership’ of his flat within the building on a long lease.
Leases in such cases are often granted for 99 years, or occasionally for as long as 999 years. Although technically any property held under a lease or tenancy agreement is a leasehold, as far as the law is concerned a ‘leasehold’ property in common parlance is generally understood to refer to the property held under a long lease, at a low rent within a larger building.
Leasehold ownership
Leasehold ownership is an exclusive right to use and occupy a piece of land or property for a fixed term with the right to exclude others including the freeholder. A leasehold interest is granted by the freeholder by way of a lease, creating a relationship of landlord and tenant (as explained earlier in this chapter), for a sum of money, and at the end of the agreed term the property will revert back to the freeholder if not renewed. A lease is a legal interest in land which is longer than a standard assured shorthold tenancy (AST) and unlike an AST, which is a personal right to use the property, a leasehold interest can be sold.
Term
A leasehold interest is a diminishing asset in that as the lease gets shorter the leasehold property will reduce in value. It is therefore important when deciding whether to purchase a leasehold interest to check how long is left on the lease. When an outstanding lease has a term of less than 80 years the cost of renewing the lease increases as a ‘marriage value’ will be payable. It is also just as important when thinking about renewing the lease to ensure that any lease is renewed before the term reaches 80 years or less to avoid payment of the ‘marriage value.’ Mortgage companies will also specify what minimum term must be left on the lease in order that they will grant a mortgage. The minimum term will vary between lenders and where obtaining a mortgage to purchase a leasehold property it is important to check that the term left on the lease will be accepted by the lender.
Lease restrictions
The lease is a contract between the freeholder and the leasehold owner setting out the obligations of the parties (usually known as the head lease). It is important to check any lease to ensure that there are no restrictive covenants particularly if the agent is managing a leasehold property. Some leases may contain covenants which do not allow pets at the property or restrict the use of the property. Agents should check any lease to ensure that they are aware of the restrictive covenants and any covenants where the freeholder’s permission is required so that any permissions given to a tenant renting the leasehold property do not breach the terms of the head lease.
Service charges
The freeholder will charge the leaseholder for services provided to the building, such as maintenance and repair costs, insurance, reserve funds etc and these charges are known as service charges. The lease will set out any service charges that are payable which may be fixed charges or variable charges. Variable charges must be restricted to reasonable costs. Many modern leases provide for the service charges to be paid in advance and any shortfall or surplus will be collected/ refunded at the end of the year. When letting out a leasehold property on an AST agreement the landlord (leaseholder) is usually responsible for paying the service charges for the property.
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Major works
Most leases refer to contributions towards major works by the leaseholder which are in addition to the standard service charge such as redecoration of the whole building. It is important to check the terms of the lease as to when these charges are due so there are no surprises when a bill for major works is received. Where the cost of the major works exceeds the sum of £250 for any one leaseholder the freeholder must consult with the leaseholder under section 20 of the Landlord and Tenant Act 1985. Letting agents may receive notification from their landlord (as leaseholder) that the freeholder is carrying out major works and should inform the tenant in advance of any proposed works being carried out particularly if it is likely to affect their use of the property.
Commonhold
Commonhold was introduced under the Commonhold and Leasehold Reform Act 2002 and is an alternative to the long leasehold system. The detail of Commonhold is outside of the scope of the handbook but we provide a brief overview. Commonhold allows a person to own the freehold of their unit, e.g. a flat, but the common parts of the building (such as the structure of the building, entrance hall, corridors etc) are owned and managed by a Commonhold Association which consists of unit holders.
The advantage of Commonhold is that the unit holders will own the freehold interest of their unit instead of a diminishing leasehold interest and unit holders will benefit from being members of the Commonhold Association as they will have involvement in the repairs and maintenance of the building helping to keep costs down and avoiding high service charges. However, Commonhold has not established itself within the property market and mortgage companies have shown reluctance to provide lending for Commonhold properties due to possibilities of liquidation of Commonhold Associations. More information on Commonhold is available in Letting Factsheet 35 and further information on leasehold property is available from The Leasehold Advisory Service www.lease-advice.org.
Licensing, Planning and HMO Controls
Just when you thought housing law was complicated enough, it will come as no surprise that further levels of complexity are continually being added. In particular, there has been the development of an extensive system of rules and law over the 20th century concerning how a land owner may use and occupy his own land. Prior to this period it was considered that “every man has a right to use his own land by building on it as he thinks most to his interest.”
This is no longer the case, and local authorities now exert considerable control over both what type of buildings can be constructed in a given locality, and also how these buildings may be used and occupied. This control even extends specifically into the rented sector so that a local authority now has the power to set up licensing schemes which control rental properties in the local area, and define a set of additional standards and rules that relate to these lettings.
Of particular concern to regulators is the so-called ‘house in multiple occupation’ or HMO. Typically defined as a house occupied by more than one household, this type of housing has historically been viewed as overcrowded and under-regulated. We aim to explain some of the key rules relating to licensing and HMO’s within Chapter 16 of this handbook.
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The origins of English law
Housing law, in common with other areas of the law, has developed and continues to develop from two main sources. These are:-
Common law and its system of case law
Statutes
Common Law
Common law refers to the part of English law based on rules developed by the royal courts during the first three centuries after the Norman Conquest. The royal judges attempted to apply law that was ‘common’ to the whole country. The rules were unified over the centuries into a set of accepted universal law applicable to the whole country, as opposed to previous reliance on local customs.
From this single body of common law, further depth has been added over the centuries by the mass of subsequent case decisions or case law. In early times, there were few statutes and the bulk of the law was case law, and the essence of the modern English common law is that it is made by judges sitting in courts, applying legal precedent (stare decisis) to the facts before them. Decisions in the higher courts (e.g. Court of Appeal) are binding on every other lower court in deciding similar points of law.
Case law continues to be important to current law. Statutes cannot cater for every eventuality and are often subject to interpretation by the court in applying them to real life cases. Circumstances also arise which were unforeseen in the original legislation, or the legislation may simply be ambiguous. Case law is valuable in helping us understand how courts will interpret a particular point of law, and important cases are frequently reported in property journals for this reason.
Statutes
Statute law refers to the body of law contained in the various Acts of Parliament. Some statutes relate solely to housing matters (such as the Housing Act 1988) and others have more general effect. Since the legal system in England has evolved independently of Scottish law, both regions have their own different sets of statutes. In many cases, however, there are equivalent Scottish statutes to their English counterparts. England now also have various different statutes to the legal system in Wales and as the law develops Wales will be moving independently away from the English legal system but some legal requirements will still apply in both England and Wales.
Supplementing the Acts of Parliament or primary legislation are the various regulations, statu- tory instruments and bye-laws which also have legal force. These are also known as subordinate or secondary legislation. Whereas an Act is often drafted so as to provide a broad frame-work, much of the detail and technical rules are filled in by ministers by means of secondary legislation. These regulations are also subject to parliamentary approval, but in a more concise form, and subsequently become law in their own right.
For example, the Gas Safety (Installation and Use) Regulations 1994 prescribe detailed regulations for persons working with gas appliances or renting property containing gas appliances. Secondary legislation has the advantage to central government that they can be introduced without taking up parliamentary time and some 3000 statutory instruments are brought into effect every year !
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Criminal and Civil Law
Civil law, otherwise known as ‘private law’, is the law that operates between individuals or individual legal entities (for example, a business may be considered as a single legal entity). For example, the Housing Act 1988 is largely civil law. The two branches of the law have different characteristics.
Criminal law defines rules which are in the public or national interest and punishable by criminal proceedings. Enforcement of criminal law is largely by public bodies such as local authorities and the police. Criminal law also has its own separate system of courts and hearings with criminal cases generally being heard in magistrates courts, or crown court.
Several important parts of housing law take effect under criminal law (e.g. protection from eviction). Such proceedings may be brought by the police or the various local and national authority bodies (e.g. trading standards office).
Resources and further reading
Housing law is one of the most extensive subject areas in modern law and there are numerous texts relating to housing law and the law of landlord and tenant. The main legal reference texts are:
Woodfall: Landlord and Tenant (Sweet & Maxwell)
Encyclopaedia of Housing Law (Sweet & Maxwell)
Hill and Redman’s Guide to Landlord and Tenant Law (Butterworths)
Tessa Shepperson’s Landlord Law Blog – for an interesting section on the history and origins of land law, and the operation of tenancies.
The Letting Handbook 4-21 © The Letting Centre 10/2019 Back to contents Letting and the Law CIVIL LAW
Legislation Summary The Tenant Fees Act 2019 Prevents landlords and letting agents from charging certain fees to tenants. Homes (Fitness for Human Habitation) Act Amends the Landlord and Tenant Act 1985 to require that 2018 residential rented accommodation is provided and maintained in a state of fitness for human habitation. The Smoke and Carbon Monoxide Alarm Introduced provisions for landlords to fit smoke and carbon (England) Regulations 2015 monoxide alarms in properties from 1st October 2015. The Consumer Rights Act 2015 Regulates contracts by restricting the operation and legality of some contract terms Deregulation Act 2015 Introduced new section 21 provisions including a prescribed form and retaliatory eviction provisions and clarification on tenancy deposits following Tenancy Deposit Protection case law decisions The Energy Efficiency (Private Rented Regulations to ensure properties meet a minimum energy Property) (England and Wales) Regulations efficiency standard 2015 & 2019 Immigration Act 2014 & 2016 Introduced provisions for checking occupiers have right to rent in the UK. The Localism Act 2011 Introduced amendments to Tenancy Deposit Protection legislation Housing Act 2004 Introduced mandatory HMO licensing, the new Housing Health and Safety Rating System (HHSRS) and Tenancy Deposit Protection (TDP) Housing Act 1996 Updates and simplifies existing legislation. New rights for tenants especially those with long leases. Noise Act 1996 Reinforces the Environmental Protection Act 1990 and provides local authorities with powers to deal with noise disturbances Party Wall Act 1996 Governs situations where a building owner wishes to make alterations to a party wall Disability Discrimination Act 1995 It is illegal to discriminate on grounds of disability.
Finance Acts 1994-95 Liability of agent for assessment and payment of taxes on rental income collected both for residents and overseas landlords.
Water Industry Act 1991 Occupiers of a property liable for payment of water charges unless another specific agreement has been made. Electricity Act 1989 Governs maximum price landlord may charge for resale of electricity and standing charge. Housing Act 1988 Implications; wide and many. The main legal framework used - Section 130, Schedule 15 for current residential tenancies. See main text. Powers for local authorities to enforce repair notices. Local Government Finance Acts 1988-92 Defines the council tax system and liability of occupier to pay the charges, or landlord to pay if empty and redefines the meaning of agricultural land for purposes of assured or non-assured tenancies (Housing Act 1988). Landlord and Tenant Act 1987, s.48 Requires that landlord or agent furnish the tenant address at which notices can be served. Landlord and Tenant Act 1985, s.11&12 Repairing obligations on landlord for short leases (< 7 years); exterior, electric & water supplies, drains etc.
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CIVIL LAW (cont’d)
Legislation Summary
Interpretation Act 1978 Defines a number of standard meanings for common words and expressions used in agreements, leases and statutes. E.g. Act defines standard usage for singular/plural, references to gender, times & dates, and property terms. The Act also provides that the same definitions are to apply in all Acts unless the Act indicates otherwise. Estate Agents Act 1979 Regulates conduct of estate agents in estate agency work. It only concerns buying and selling property; it does not cover the letting of properties. Rent Act 1977 Introduced the Protected (Rent Act) Tenancy and the rules surrounding this type of tenancy Race Relations Act 1976 It is illegal to discriminate on grounds of race.
Sex Discrimination Act 1975 It is illegal to discriminate on grounds of sex.
Defective Premises Act 1972, s.4 Imposes obligation of repair on landlord for relevant defects (and defines relevant defects).
Power of Attorney Act 1971 Sets out rules which powers of attorney must abide by Taxes Management Act 1970, s19 Obligation of an agent to supply Inland Revenue, on request, with details of rent and other payments arising from land.
Recorded Delivery Act 1962 Defines recorded delivery rules.
Cost of Leases Act 1958 No party to a lease, unless parties agree in writing shall be under obligation to pay for cost of drafting the lease.
Occupiers Liability Act 1957 Landlord’s responsibility and duty of care to safely maintain common areas (e.g. entrance to flats). Landlord and Tenant Act 1954 Security of tenure for business, professional and other tenants. Landlord and Tenant Act 1927 Landlord cannot unreasonably withhold consent to assign pursuant to similar condition. Law of Property Act 1925 General principles concerning landlord and tenant law and interpretation of standard terms.
Stamp Act 1891 Defines payment of duty on all residential leases. Building Regulations General principles governing construction of buildings. Contract Law Governs business tenancies, relationship between agent and owner, and secondary agreements with tenants. Law of Agency Governs how agent may act in binding owner of property as the ‘principal’. Common Law - Quiet Enjoyment Implied covenant in every tenancy contract that tenant may have quiet enjoyment of premises. Common Law - Negligence Landlords, managers of property and their contractors have a duty to exercise reasonable skill and care for work done. Common Law - Nuisance Basic principles applying to either landlord or tenant regarding anyting that interferes with enjoyment.
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CRIMINAL LAW Legislation Summary
Local Government and Finance Act 1992 Requirement on agents to supply local authority with information on landlords and lettings
Town and Country Planning Regulations 1992 Controls use of public advertisements and hoardings (including estate agents flag boards)
Smoke Detectors Act 1991 Made provision for the mandatory fitting of (mains-powered) smoke alarms in new residential buildings. The minimum requirement being one smoke alarm on each level of the building. Environmental Protection Act 1990 Landlord or agent may not let premises in a state prejudicial to health & safety
Landlord and Tenant Act 1987 Landlord not permitted to dispose of land (generally blocks of flats) without first serving a notice under section 5 of the Act
Consumer Protection Acts 1987/1988: - The Bunk Beds (Entrapment Hazards) (Safety) Specifies minimum standards for bunk beds Regs 1987 All electrical equipment 50-1000v in rented property must be - Low Voltage Electrical Equipment Regs 1989 ‘safe’
- The Electrical Equipment (Safety) Regs 1994 & 2016 - Gas Cooking Appliances Regulations 1989 New gas appliances: must be safe and instruction books must be provided. All cooking appliances should be regularly checked for safety & instructions supplied. - The Heating Appliances (Fireguards)(Safety) Specifies standards for fireguards on certain gas andoil Regs 1991 heaters. - Furniture and Furnishings (Fire)(Safety) Regs Regulations require all soft furniture in rented property 1993 to comply - new lettings after March 1993 and also for all existing lettings at first new let after Dec 31 1996. - The Plugs and Sockets etc (Safety) Regulations Require that ‘suppliers’ of electrical goods must ensure that 1994 the correct fuse is fitted into any standard plug, according to the manufacturers instructions. Housing Act 1985 Defines minimum housing fitness requirements for human - Fitness Standard habitation - Overcrowding Regulations governing who and how many people may live in dwelling - Registration of HMO’s Requirement to register and comply with local HMO scheme
Landlord and Tenant Act 1985: Agent must furnish tenants with identity of landlord within 21 - s1: Disclosure of landlord’s identity days if requested New landlords are required to give notice in writing to tenant - s3: Duty to inform regarding Assignment within two months Rent books must be provided to tenants who pay weekly - s4 - 6: Duty to Provide Rent Books Provision of reasonable costs and facilities to inspect supporting accounts. - Duty to information on Service Charges
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CRIMINAL LAW (cont’d)
Legislation Summary
Public Health (Control of Diseases) Act 1984 Agent or landlord may be liable where house is let after recent occurrence of disease
Criminal Law Act 1977 Landlord or agent must not use or threaten violence to gain entry to a property where they know that someone is or may be living who opposes the entry Protection from Eviction Act 1977 Act makes it an offence to unlawfully harass or evict the tenant.
Health & Safety at Work Act 1974: HSWA 1974: where landlord puts other’s safety at risk, duty to - Gas Safety (Installation and Use) Regulations inform person(s) of risks. Requirements for the general safety 1994 and regular inspections of gas appliances and installations. European Communities Act 1972: Requires that any product supplied to a consumer in the course - The General Product Safety Regulations 1994 of business must be ‘safe’ Misuse of Drugs Act 1971 Lessor may not knowingly permit drugs to be used, produced or sold from rented premises
Sexual Offences Act 1956 Offence to knowingly let house as a brothel
Accommodation Agencies Acgt 1953 Illegal to charge for supplying a list of properties to let, or for registration of person
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The Letting Handbook 4-26 © The Letting Centre 10/2019 Back to contents Assured and Assured Shorthold tenancies
5. Assured and Assured Shorthold Tenancies
An assured or assured shorthold tenancy is the standard form of letting for tenancies which began on or after 15 January 1989. This arrangement for the letting of houses and flats was introduced by the Housing Act 1988 but important changes were made by the Housing Act 1996.
These tenancies were introduced to encourage lettings by allowing landlords to charge a full market rent, unlike previous forms of tenancy. Shorthold tenancies also allow landlords to let their property for a short period only and to automatically get it back if they wish after 6 months.
In the legislation, the term ‘assured tenancy’ covers both assured tenancies (sometimes called ‘full’ or ‘ordinary’ assured tenancies) and assured shorthold tenancies (AST). For clarity, we shall refer to assured tenancies in this Handbook when we wish to refer to both types.
The Housing Act 1988 defines that atenancy may be assured if: • the tenant is an individual • the tenancy began on or after 15 January 1989; • the house or flat is let as separate accommodation andis the tenant’s main home A tenancy will NOT be assured if: • the tenancy began before 15 January 1989 • it is a letting to a company (since an assured tenant must be an individual) • it is a business or holiday let • no rent or a very low rent is charged • a high rent is charged (currently over £100,000 per annum)* *Revised on 1 October 2010 from previous maximum of £25,000 per annum • the landlord is a ‘resident’ landlord (see chapter 6 for more information) • the dwelling house is let with more than two acres of agricultural land • the tenancy is an agricultural holding or occupancy The table overleaf gives a more detailed list of tenancies which cannot be assured tenancies.
Tenancies (as above) which cannot be assured (or AST) operate outside the control of the Housing Act 1988. Non-assured tenancies are described in Chapter 6.
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Table 2: Tenancies that may not be Assured Tenancies:
(Housing Act 1988, Schedule 1, as amended)
The Housing Act 1988 defines various types of tenancy that cannot be assured (or assured shorthold). These are briefly summarised below:
- A tenancy granted by a resident landlord. A resident landlord is broadly defined as one who lives in the same building as his tenant where the property has been divided into one or more dwellings, unless the two dwellings are contained in a purpose built block of flats. A resident landlord must be living continuously in the property as his only or main home both when he grants the tenancy and also during the tenancy A landlord living in a separate flat or house converted into flats in which his tenant(s) live(s) may be a resident landlord. However, a landlord living in a separate flat in the same purpose-built block of flats as his tenant is not a resident landlord. See Government Guidance: Letting Rooms in Your Home: A Guide for Resident Landlords.’
- A Business tenancy subject to Part II of the Landlord and Tenant Act 1954
- A tenancy allowing the tenant to occupy the property for a holiday
- A tenancy of a property let together with more than two acres of agricultural land. Agricultural land is land used as arable, meadow, pasture, woodland, poultry farming, orchard or as a market garden. Such agricultural land does not include land occupied with a house as a park, or as grounds used mainly for sport or recreation. It may be safely assumed that the land is agricultural for the purposes of the Housing Act 1988 if it has been rated for council tax purposes as agricultural (Local Government Finance Act 1988).
- A tenancy of an agricultural holding
- A tenancy granted by an educational body specified within a list issued by the Secretary of State to a student studying at that same institution.
- A tenancy in which the landlord is the Crown or a Government Department.
- Protected tenancies under the Rent Act 1977 or the Rent (Agriculture) Act 1976.
- A tenancy entered into before 15 January 1989, or arising as a result of a contract entered into before then.
- A tenancy of a licensed premises
- A tenancy where the landlord is a local authority, a housing action trust, certain specified statutory bodies or a fully mutual housing association (unless they are old style assured tenancies that have been converted).
- A tenancy which is rent-free or where the annual rent is less than two thirds the rateable value of the property.
- A tenancy of a property at a high rent. With the introduction of council tax, the Act was amended in 1990, Schedule 1, Section 1, Para 2(1)(b), such that tenancies with an annual rent exceeding £25,000 (due to increase to £100,000 on 1 October 2010) are now excluded.
- A tenancy will not be an assured tenancy if it falls within any of these exceptions or if it fails to meet the definition of an Assured tenancy in the Housing Act 1988. For example, if it is not let as a separate dwelling, or if the tenant does not occupy it as his only or main residence.
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Differences:The Assured Tenancy and the Assured Shorthold
The majority of lettings by private landlords are assured shorthold tenancies.
Assured shorthold tenancy - AST
If the landlord lets a property on an assured shorthold, he has an automatic right to apply for possession at the end of the term subject to the statutory notice requirements: • the landlord must give 2 months’ notice that possession is required • possession will only be awarded after a minimum term of six months The AST tenant may apply to the appropriate tribunal to have the rent reduced if he considers the rent to be significantly higher than the rent for comparable tenancies in the area.
With effect from 28 February 1997, the AST is the default or automatic tenancy, and it is no longer necessary to serve a notice (s20) on the tenant. All assured shorthold tenancies are subject to the requirements of the Tenancy Deposit Protection.
Ordinary Assured
With the ordinary assured form of tenancy, the tenant enjoys greater security of tenure. The tenant has the right to remain in the property indefinitely unless the landlord can prove particular grounds for possession. There are seventeen such grounds provided by the Housing Act 1988. The most common grounds that may be utilised are: • that the landlord wishes to move back into his own home • that the tenant is in arrears with his rent • that the tenant has broken one or more of his obligations under the tenancy • that the tenant or his visitors is guilty of causing a nuisance Unlike the AST, the landlord has no automatic right to apply for possession of the property when the tenancy comes to an end.
Unlike the AST, the ordinary assured tenant has no equivalent right to refer the rent to a tribunal during the initial agreed tenancy.
Tenancies set up before 28 February 1997 were automatically deemed to be ordinary assured unless the landlord served a specific notice (the s.20 notice) on the tenant.
Prior to 1974, there was a clear differentiation between the security of tenure of tenants of unfurnished and furnished tenancies. Furnished tenants were only given limited security. This is no longer the case with assured tenancies; it does not make any difference to the status of the tenancy whether the property is furnished or unfurnished.
Separate Dwelling and Sharers
Where an occupier has an agreement to rent a specific room in a shared house they will have an Assured Shorthold Tenancy (AST) where the tenant will have exclusive occupation of his designated room and shared use of the common parts (e.g. the ktichen, living room and bathroom) of the property with the other tenants. See Chapter 4 for more information on exclusive possession and sharers.
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Setting up an Assured Tenancy
Assured Shorthold
Tenancies starting on or after 28 February 1997 are automatically assured shortholds (ASTs) unless special steps are taken to set up an assured tenancy. For tenancies which started or were agreed before 28 February 1997 these will be an AST only if the landlord served a special notice - a ‘Notice of Assured Shorthold Tenancy’ otherwise known as a ‘Section 20 notice’ that the tenancy was to be an assured shorthold tenancy.
Written agreement
There is no legal requirement that the tenancy agreement must be in writing although a tenant may now request this after the commencement of the tenancy. Agreements are however essential safeguards to the landlord’s interests and there are specific clauses that it should contain in order to comply with various statutory requirements. These are discussed in further detail in chapter 9. For tenancies starting on or after 28 February 1997, the tenant who does not have a written agreement has a right to apply in writing for a statement of any of the following main terms of the tenancy which is to be provided within 28 days: • the date the tenancy began • the amount of rent payable and any rent review arrangements • the dates on which it should be paid • the length of any fixed term which has been agreed Pre-tenancy Document Checks - Assured Shortold Tenancies It is important to ensure that the tenant has been provided with certain information in order that a section 21 notice can be issued in respect of an Assured Shorthold Tenancy.
How to Rent Guide: For assured shorthold tenancies granted in England on or after 1st October 2015 all tenants must be provided with a current version of the Ministry of Housing, Communities and Local Government (MHCLG) ‘How to Rent Guide: Checklist for Renting in England’ either in hard copy or by email as an attachment (paragraph 3 of The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015) at the start of the tenancy. Landlords and agents will only be able to email the How to Rent Guide to the tenant where the tenant has agreed to accept service of documents by email.
Tenancy Deposit Prescribed Information: The tenant must be issued with a copy of the prescribed information and tenancy deposit scheme leaflet/terms and conditions.
Energy Performance Certificates (EPC): An EPC must be provided free of charge to any prospective tenant (s6 The Energy Performance of Buildings (England and Wales) Regulations 2012).
Gas Safety Certificate: A gas safety certificate must be provided within 28 days of completion of the annual check or to new tenants before they move in (s36(6) The Gas Safety (Installation and Use) Regulations 1998). Failure to provide the gas safety certificate to tenants before they move into the property could result in the s21 notice being invalid as in Assured Property Service Ltd v Ooo, County Court at Edmonton, 30 June 2017 and Caridon Property Ltd v Monty Shooltz, Central London County Court, 2 February 2018. In both cases it was found that the landlord was unable to serve a Section 21 notice even though a copy had been provided at a later date.
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Fixed Term and Periodic Tenancies
An assured tenancy (including an AST) may be set up as a fixed term or a periodic tenancy.
Fixed term tenancy
A fixed term tenancy is a tenancy agreed for a definite term. The tenancy will therefore have a pre-established commencement date and termination date. Since a fixed term might subsequently be extended for a further fixed term, the Act distinguishes the two, by referring to the initial term as the ‘original term’.
A fixed term tenancy may include a break clause allowing either or both of the parties (depending on the wording) to terminate the agreement early. If the landlord grants a fixed term tenancy with no break clause, he will only be able to seek possession during the tenancy if one of the grounds for possession 2, 8, 10 to 15 or 17 in the Housing Act 1988 (see Table 3 on page 5-8) apply and if the terms of the tenancy make provision for it to be ended on any of these grounds. Such provision is often called a ‘forfeiture clause’ and may provide the landlord with powers of re-entry, forfeiture or determination by notice.
A fixed term tenancy may also include a clause confirming that the tenancy will become periodic at the end of the term . This creates a so called contractual periodic tenancy. See Chapter 9 for more information on the advantages of setting up the tenancy agreement to include such clause.
The landlord may agree a fixed term for less than six months if the tenant agrees (or alternatively set up a periodic tenancy from the outset) but the tenant has a right to refuse to leave and may stay in the property for a minimum of six months (or six months from the beginning of the original tenancy in the case of a replacement tenancy). However, the landlord can seek possession during this period on one of the grounds listed in the paragraph above.
It is not possible to seek possession from an ordinary assured tenant at the end of the fixed term without grounds. The procedures for seeking possession at the end of an assured or AST tenancy are dealt with in more detail below.
Periodic tenancy
A periodic tenancy is a tenancy that runs on indefinitely on a periodic basis. The length of the period is determined by the rent payment interval. Thus if the rent is payable weekly, the tenancy period will be weekly; if the rent is payable monthly, the tenancy period will be monthly. A periodic tenancy can arise initially or following expiry of a fixed term tenancy.
When a shorthold tenancy comes to the end of the fixed term, s.5 of Housing Act 1988 provides that a new periodic tenancy will be automatically created on similar terms. So, if the parties do not agree a further fixed term tenancy, a new periodic tenancy - called a statutory periodic tenancy - will be created on broadly the same terms as the preceeding fixed term tenancy, and the tenancy will continue to run on this basis until it is replaced by any new agreement, the tenant gives notice, or the landlord seeks possession from the tenant.
Alternatively, the original tenancy agreement may be drafted to provide that the tenancy will continue as a periodic tenancy once the initial fixed term has ended. This extends the original tenancy rather than creating a new replacement tenancy, and the periodic extension will be referred to as a contractual periodic tenancy or CPT. The CPT style of extending the tenancy agreement is dealt with further in Chapter 9.
Prior to 28 February 1997, it was not possible to agree an initial periodic AST. The initial fixed term was required to be a minimum length of six months. Since 28 February 1997, it is possible to agree an AST on a periodic basis initially. If the landlord agrees a tenancy on this basis, he will have an automatic right to possession at any time after the first six months, provided that the statutory requirements for giving notice of possession have been complied with.
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Replacement Tenancies
A replacement tenancy will come into effect at the end of a fixed term tenancy. The type of tenancy created will depend on the nature of the preceding tenancy and what action or agreement is made by the parties.
Assured shorthold tenancies
When a shorthold tenancy comes to the end of the fixed term, any replacement tenancy that the parties agree will automatically be on shorthold terms unless they choose to set up a replacement tenancy on an ordinary assured basis. To do this, the landlord needs to follow the procedure for setting up an ordinary assured tenancy from 28 February 1997. The landlord must give the tenant a notice which says that the tenancy is not an assured shorthold tenancy. The notice must be given before the beginning of the tenancy, or alternatively can be given by including a simple declaration in the tenancy agreement to this effect. If the parties wish to agree to an assured tenancy after the commencement, then such notice can also be served after the tenancy has started. There is no special form for giving this notice.
If the parties do nothing and no further agreement (written or otherwise) is made, the tenancy will automatically run on from one rent period to the next on the same terms as the preceding fixed term shorthold - called astatutory periodic tenancy. The tenancy will continue to run on this basis until it is replaced by any new agreement between the parties, the tenant leaves or the landlord seeks possession from the tenant.
There is no requirement to serve a section 20 notice before the start of the replacement tenancy.
Ordinary assured tenancies
Any replacement tenancy will automatically be on assured terms whatever the tenancy agreement says. However, to avoid any possibility for misunderstanding, it is helpful to state in the replacement tenancy agreement that the tenancy is not an assured shorthold tenancy.
If the parties do nothing and no further agreement is made, the tenancy will automatically run from one rent period to the next on the same terms as the preceding fixed term assured tenancy. In a similar way to the case above, this replacement tenancy is called a statutory periodic tenancy. It will continue to run on this basis until it is replaced by any new agreement between the parties, the tenant leaves, or the landlord seeks possession from the tenant.
Alternatively, the landlord and tenant may agree to a replacement ordinary assured tenancy. They may agree to either: • a replacement fixed term assured tenancy • a replacement assured tenancy on a periodic basis - this is called a contractual periodic tenancy
Replacing assured with assured shortholds
Under the original Housing Act 1988, it was not possible to grant an assured shorthold to a tenant who immediately before held an ordinary assured tenancy.
For tenancies created on or after 28 February 1997, it is only possible for the tenancy to change from ordinary assured to an assured shorthold if both parties agree. The tenant is required to serve on the landlord a notice in the prescribed form, stating that the new tenancy is to be an assured shorthold.
Conversely, if the parties wish to grant an ordinary assured tenancy to an existing assured shorthold tenant, the new agreement must simply include a clause to the effect that the new tenancy is not to be an assured shorthold.
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Ending the Tenancy
There are various statutory requirements for the termination of assured tenancies.
Assured shorthold tenancies - assured shorthold (AST) rule
If the fixed term has ended, or the landlord wishes to get the property back at the end of the fixed term, the landlord must give the tenant at least two months notice requiring possession. Due to the limited security of tenure provided by the assured shorthold tenancy, the landlord is given the guaranteed right to possession - this is often referred to as seeking possession under the ‘assured shorthold (AST) rule’ or under ‘section 21’.
Fixed term tenancy
The landlord can give notice during the fixed term. In this case, the statutory requirements are: • the landlord shall give a minimum of two months’ notice in writing in a prescribed form; • the notice period cannot end before the end of the fixed term; • the notice cannot be given within the first four months of the original fixed term; and • in some cases the landlord must comply with various prescribed requirements e.g. tenancy deposit protection, energy performance certificate, ‘How to Rent’ guide, gas safety regulations etc. More detail in Letting Factsheet 21 (see Section 3). The tenant is not required by law to give notice to end a fixed term tenancy and can simply vacate the property on the last day of the tenancy. See Chapter 12 for more information.
Periodic Tenancy
If the tenancy is periodic (either contractual or statutory periodic) then the requirements are: • the landlord shall give a minimum of two months’ notice in writing in a prescribed form; • the length of the notice period may be longer than two months if the period of the tenancy is longer than monthly (e.g. quarterly); • for contractual periodic tenancies the notice cannot be given within the first four months’ of the original tenancy start date. The tenant is required to give at least four week’s notice in writing to the landlord to end a periodic tenancy. The notice must expire on the first or last day of a period of the tenancy and contain certain prescribed information. See Chapter 12 for more information.
Other cases
The Housing Act 1988 allows the landlord to bring an assured or assured shorthold tenancy to an end using one of 17 grounds defined by the Act (see Table 2 overleaf). The landlord may only seek possession during an assured (or AST) fixed term tenancy if one of the following grounds for possession apply - grounds 2, 8, 10 to 15 or 17 (see Table 2) and the terms of the tenancy make provision for it to be ended on any of these grounds. This is called the ‘section 8 route’ as it is dealt with under section 8 of the Housing Act 1988. See more detail in chapter 12.
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Table 3: Grounds for Seeking Possession under Assured Tenancies:
Schedule 2 of the Housing Act 1988, defines various grounds that may be used for seeking possession of properties let on assured tenancies (including assured shorthold). These are briefly summarised below: (This is a summary - the full wording of each Ground is given in Appendix B).
Part I Grounds on which court must order possession (known as ‘mandatory grounds’) N.B. Grounds 1 to 5 inclusive are prior notice grounds. i.e. not later than the beginning of the tenancy, the landlord must give notice in writing to the tenant that possession might be recovered on this ground. Ground 1: that the landlord used to live, or intends to live in the property as his only or principal home. Ground 2: that the mortgagee is claiming possession. NB this can only be of use where the mortgage predates the tenancy. Ground 3: that the tenancy is let for a period not exceeding eight months and was previously let for the purposes of a holiday within the last 12 months (i.e. an off-season letting). Ground 4: that the tenancy is a letting for 12 months or less which was previously let by a specified educational establishment to students during the previous 12 months. (i.e. an out of term-time letting). Ground 5: that the property is held for use by a minister of religion and is required for this purpose. Ground 6: where the landlord intends to redevelop the property. Ground 7: that the former tenant has died (unless there is a person with a right to succeed). Ground 7A: that the tenant, or a person residing in or visiting the dwelling-house, has been convicted of a serious offence, certain offences under the Anti-Social Behaviour, Crime and Policing Act 2014 or an offence under section 80(4) or 82(8) of the Environmental Protection Act 1990. Ground 7B: that the landlord has received a notice from the Secretary of State that one or more of the occupiers are disqualified from occupying the dwelling-house under the tenancy as a result of their immigration status and the occupiers are disqualified as a result of their immigration status – a mandatory ground. (The court can order that the tenant’s interest is transferred to the remaining tenants for the remainder of the fixed term instead of making a possession order if possession is not being sought on any other grounds). Ground 8: that the tenant owed at least two months’ rent both when the landlord served notice that he wanted possession and still owes two months’ rent at the date of the court hearing.
Part II Grounds on which court may order possession (known as ‘discretionary grounds’) Ground 9: that suitable alternative accommodation is available. Ground 10: that the tenant was behind with his rent when the landlord served notice that he wanted possession, and when he began court proceedings. Ground 11: that, even if the tenant was not behind with his rent when the landlord started possession proceedings, he has been persistently behind with his rent. Ground 12: that the tenant has broken one or more of his obligations under the tenancy agreement. Ground 13: that the condition of the premises or any of the common parts has deteriorated because of the behaviour of the tenant, his subtenant, or any other person living there. Ground 14: that the tenant or someone living in or visiting the property has been guilty of conduct which is, or is likely to cause a nuisance or annoyance to neighbours, the landlord or a person employed in connection with the exercising of the landlord’s management functions. Or that a person residing or visiting the dwelling house has been convicted of using the property, or allowing it to be used, for immoral or illegal purposes or has committed an arrestable offence in or in the locality of the dwelling house. Ground 14ZA: that the tenant or adult residing at the property has been convicted of an indictable offence which took place during, and at the scene of, a riot in the United Kingdom. Ground 15: that the condition of the furniture has deteriorated because it has been ill-treated by the tenant, his subtenant, or someone living there. Ground 16: that the tenant was granted the property in order to properly fulfil her employment duties and is no longer employed by the landlord. Ground 17: that the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by either the tenant or a person acting at the tenant’s instigation.
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Rent Control
The Housing Act 1988 provides various procedures for rent control for assured tenancies. The procedure depends on the type of tenancy, whether ordinary assured or AST, and is operated by the First Tier Tribunal (Property Chamber) in England who will assess the tenancy and determine a market rent for the property and the locality. See Chapter 10 for more information on rent control and rent assessment.
Rent Reduction
Where an AST tenant believes the rent is higher than comparable properties the tenant can make an application to the tribunal at the start of the tenancy to have the rent reduced. See Chapter 10 for further information on rent reduction.
Rent Increase
The rent can be increased by agreement, using a rent review clause, or using the s13 procedure under the Housing Act 1988. The process chosen will depend on different factors.
Rent increase by agreement
Rent can be increased by agreement between the landlord and the tenant. In the first instance it is best to speak to the tenant to inform them of the proposed rent increase to seek their agreement. If the tenant accepts the rent increase then the landlord should send a letter to the tenant confirming the new rent and ask the tenant to sign, date and return a copy to the landlord. If the tenant does not return the letter or does not pay the new rent then the rent has not been agreed and the rent review will not be valid.
Another option would be to include a rent review clause within the tenancy agreement setting out how and when the rent will be reviewed. Whether this clause can be relied upon will depend on the type of tenancy. Fixed term tenancies Where a fixed term tenancy does not include a rent review clause the landlord has no power to increase the rent during the fixed term and will need to wait until the fixed term has expired which may be problematic if the tenant has signed a two year fixed term tenancy and the landlord wants to increase the rent after the first year. For longer fixed term tenancies landlords may want to include a clause setting out details of how and when the rent will increase.
Statutory periodic tenancies
For tenancies which become statutory periodic once the fixed term has expired any rent increase clause included in the original fixed term tenancy will no longer apply and the landlord will need to use the s13 procedure (see Chapter 10 for further information on the s13 procedure) as ruled in London District Properties Management Ltd & others v Goolamy [2009] EWCA 1367. In this case the tenants had a 3 year fixed term assured shorthold tenancy agreement which included a rent review clause. When the fixed term tenancy expired the tenancy continued as a statutory periodic tenancy. The question raised was whether the landlord could increase the rent in accordance with the tenancy agreement or whether they could use the notice procedure under s13 of the Housing Act 1988. The High Court ruled that Section 13(1)(a) applies to statutory periodic tenancies and so once a fixed term assured tenancy has become statutory periodic the s13 procedure must be used for rent review even if there is a rent review provision within the original tenancy agreement.
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For statutory periodic tenancies a rent increase can start as soon as the statutory periodic tenancy begins under s13 and annually thereafter, unless the tribunal has determined the rent already. See Chapter 10 for more information.
Contractual periodic tenancies
Where a tenancy becomes contractual periodic at the end of the fixed term tenancy a landlord may increase the rent in accordance with the rent review clause within the tenancy agreement or where there is no rent review clause the landlord can use the s13 procedure. When using the s13 procedure for contractual periodic tenancies the s13 notice cannot be served until 52 weeks after the tenancy began so if the original fixed term was for six months then the landlord cannot use the s13 procedure at the end of the six month fixed term. Landlords would need to include a rent review provision in fixed term tenancies granted for less than a year, where the tenancy will become contractual periodic upon expiry, if they wish to renew the rent at the end of the fixed term.
See Chapter 10 for further information on rent control and the s13 procedure.
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Varying the Terms of Assured Tenancies
The landlord or tenant may wish to change other terms of the tenancy apart from the rent. (e.g. The landlord may wish to offer the property unfurnished in the replacement tenancy). If the tenancy is a fixed term or contractual periodic tenancy, the landlord can only change the terms of the tenancy if the tenant agrees. If the landlord should agree with the tenant the arrangements for changing the terms, then they should do so in writing.
Housing Act 1988 procedure (section 6(2))
This procedure only applies if the fixed term of an assured or AST has ended and automatically become a statutory periodic tenancy. In this case, it would normally continue on the same terms unless the parties propose new terms. Either party may propose new terms, and any consequent change to the rent, within a year of the statutory periodic tenancy starting, using the procedure specified in s6 of the Housing Act 1988.
The landlord or tenant must propose new terms, and any consequent change to the rent, using the prescribed form (See Appendix C ) entitled ‘Notice proposing different terms for a Statutory Periodic Tenancy’ (the same form may be used for either ordinary assured or AST tenancies). If the terms are agreed, they can be included in, and become part of the tenancy agreement. If the terms are not agreed, the person receiving the form must apply to the tribunal to settle the terms and any consequent change in rent. He should do so within 3 months of receiving the notice using another prescribed form (available from legal stationers).
In reality this procedure is rarely used for ASTs and a new tenancy agreement would be granted setting out the new terms.
Assessment
The tribunal will consider whether the proposed terms might reasonably be found in an assured periodic tenancy of the property in question; or it may substitute its own terms. In making its decision, it will make the following assumptions: • that the tenancy commenced as soon as the former fixed term tenancy ended; • that the tenancy is granted by a willing landlord and all the terms of the tenancy are the same as those of the statutory periodic tenancy, except the particular term the tribunal is looking at. If the tribunal thinks that, due to a new term, the rent should be adjusted, then it will adjust the rent. This will happen whether or not the landlord or the tenant had originally proposed a change in the rent to match a change in the term.
The new terms fixed by the tribunal will become the new terms in the tenancy, and the associated change in the rent, if any, will become the new rent. The new rent and terms cannot apply before the date specified in the notice.
Further changes
Once the new terms have been fixed by the tribunal, the landlord and tenant can only make further changes by mutual agreement.
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Succession and Matrimonial Rights
A spouse, or someone living with the tenant may have the right to succeed to an assured periodic tenancy if the tenant dies. The right (called ‘succession’) depends on the type of tenancy held by the persons and whether the tenant had a fixed term or periodic tenancy.
If the tenancy is a joint tenancy, then if a tenant dies, the remaining joint tenant continues as the sole tenant.
Assured tenancies
If the tenant had a fixed term tenancy and the fixed term tenancy has not expired, the tenancy rights can be passed on to whoever has statutory rights to inherit the tenancy.
If the tenant had a contractual or statutory periodic tenancy, the tenant’s spouse, civil partner or someone living with the tenant as husband or wife, will have the automatic right to succeed to a periodic tenancy unless the tenant who died had already succeeded to the tenancy. The Housing Act 1988 only allows one succession. No one else in the family has an automatic right of succession.
If the tenancy was periodic, or becomes periodic and there is someone living in the property who does not have a right to succeed to the tenancy, the landlord will have a right to possession under Ground 7, provided that possession proceedings are started within a year of the death of the original tenant.
Assured shorthold
If the tenancy is an assured shorthold tenancy, the landlord has an automatic right to possession of the property at the end of any fixed term, even if the tenant had a right to succession, provided that the statutory requirements for notice are fulfilled.
Matrimonial Homes Rights & Separation
When the tenanted property is occupied by husband and wife, only one of whom is tenant, special considerations apply. The tenant who goes away for a time leaving his spouse in occupation will, whether or not there is an intention to return to the house, remain an assured tenant (although technically no longer occupying as ‘only or principal home’). Thus the tenant who abandons his or her spouse nevertheless remains an assured tenant.
The law also provides protection for the remaining partner or cohabitee (Family Law Act 1996) in certain circumstances. The problem arises if the partner was not a tenant initially. The courts now have the power to either grant an occupation order, or order the transfer of the tenancy so that the remaining partner may remain in the property.
Divorce
Similar rules apply on divorce or separation; the court has powers to grant an occupation order or order the transfer the tenancy to the spouse if he or she was not the tenant originally. This order would normally be made in the course of matrimonial proceedings.
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Terms implied by law
Assignment and subletting
In the case of a statutory periodic tenancy, the tenant is not permitted to assign the tenancy (in whole or in part) or sublet or part with possession of the whole or part of the dwelling-house without the landlord’s consent. A similar term will be implied into assured tenancies which are non-statutory (i.e. contractual) periodic tenancies unless the parties have made express provision about assignment and subletting in the lease.
If a covenant against assignment or subletting is implied as above, the tenant will not be able to question the refusal of the landlord to give his consent to a proposed assignment.
However, if the tenant has paid a premium for the property (a sum which is additional to rent or a sum paid as a deposit which is greater than 2 months’ rent), he will be able to assign the tenancy unless there is an express term in the agreement preventing him from doing so.
Access for repairs
It is an implied term of every assured tenancy that the landlord or his agent shall have the legal right to enter the property to carry out the repairs that the landlord is entitled to execute, and to inspect the condition and state of repair of the property.
Under the Landlord and Tenant Act 1985, the landlord is obliged to give his tenant 24 hours notice in writing and enter at reasonable times of the day when exercising such right. It is a good idea to set out the arrangements for access and procedures for getting repairs done in the tenancy agreement.
The repairing obligations will include those items defined by s11(6) of the Landlord and Tenant Act 1985 (structure of property, and services for supply of water, electricity and other utilities etc.) and any further obligations included in or implied by the agreement.
Rent books
If the rent is payable weekly, then the landlord is legally obliged to provide a rent book.
The rent book, if provided, must contain certain prescribed information (s5 Landlord and Tenant Act 1985).
No rent book is required if the tenancy is monthly but it is always advisable to keep a record of rent paid for all tenancies in case of future disagreement.
Deposit Protection for assured shorthold tenancies
It is a statutory requirement that any tenancy deposit money which is accepted on behalf of an assured shorthold tenancy granted on or after 6 April 2007 will be protected under a government authorised tenancy deposit protection scheme (TDP). Existing AST tenancies are not affected until the landord decides to grant a new tenancy to the same or new tenant(s) after this date.
Furthermore, the Housing Act 2004 implies new terms regarding the resolution of any post- tenancy disputes where the deposit is protected by TDP, and authorises onerous penalties if deposits are not properly held (according to the individual TDP scheme rules) or if tenants are not provided with prescribed statutory information regarding their deposits. See chapter 10 for more information on statutory tenancy deposit protection.
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6. Other Residential Tenancy Types
This chapter takes a look at other types of residential tenancies. In the previous chapter, we looked at assured tenancies under the Housing Act 1988; these being the predominant form of tenancy that practitioners will come across when working with private sector letting.
Yet, section 1 of the Act contains two classes of letting that are excluded from the legal framework for assured tenancies established by the Housing Act 1988. These are where: • the tenant is not an individual (e.g. lettings to companies) • the tenant does not occupy as only or principal home In both these cases, considered further below, the tenancies will operate as ‘common law’ tenancies or ‘contractual tenancies’ since they are mainly governed by common law rules.
Also, the second section of this Act refers to a comparatively lengthy list of tenancy types (Schedule 1 of the Housing Act 1988 - see Table 2 on page 5-2 ) that may not be assured tenancies. These include: • Resident landlords • Holiday lettings • Tenancies of agricultural land & agricultural holdings • Tenancies of dwelling-houses with high rent and rateable values • Tenancies at low rent • Business tenancies • Licensed premises • Crown tenancies • Lettings granted by specified educational bodies to students • Local authority tenancies, etc. (full text of the statute is given in Appendix B) In some cases, these tenancies operate simply under the common law rules (‘common law tenancies’) whilst others will operate in conjunction with specific legislation. We consider many of them in detail in the following sections and explain any particular rules that apply.
In addition to the list above, the practitioner may also encounter tenancies set up under previous legal frameworks (e.g. ‘Rent Act’ tenancies ) governed by particular legislation (e.g. ‘Rent Act’), or perhaps less commonly, tenancies operating within a different sector of the market (such as social housing) for which different rules again will apply. Public sector tenancies are, however, outside the main scope of the Handbook and will only be covered briefly later in the chapter.
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Private Sector residential tenancies
Some of the historical types of private sector tenancies no longer operate in current law (being automatically converted by statute to other forms of tenancy); other types may not be formed in current law but continue to operate only for tenants that already hold tenancies set up under these previous frameworks.
Before considering these various types of tenancy in detail, it is useful to look at the legislative background. This is given in outline below.
Legislative background
1915: Introduction of first rent controls but new lettings uncontrolled
1939: Rent control introduced for new furnished lettings
1965: Rent Act 1965 introduced ‘fair rent’ criteria for unfurnished accommodation. Provisions introduced to protect tenants against unlawful eviction defining criminal offences of harassment and illegal eviction.
1974: Rent Act 1974 ‘fair rent’: rent control extended to furnished lettings. Protection for resident landlord. Introduced ‘reasonable’ rent for these tenancies.
1977: Rent Act 1977: consolidated the previous Rent Acts plus minor amendments. Introduced a new class of ‘Protected tenancies’.
1980: Housing Act 1980: introduced two new classes of tenancies:
- protected shorthold tenancy - assured tenancies
In both types of tenancy, the tenant could apply for the rent to be registered.
1989: Private rented sector in complete decline. Housing Act 1988 introduced. Most private landlords had already sold and withdrawn from the market. The Act introduced new forms of tenancy free from rent control: - assured shorthold tenancy (AST) - assured tenancy - assured agricultural occupancy
The AST provided the landlord with a guaranteed right to repossess property.
1997: Housing Act 1996 introduced. Assured shorthold tenancy becomes the default tenancy; also included other various amendments to the operation of assured and AST tenancies.
Having started the 20th century in a position where the private rented sector accounted for 90% of the tenure in Britain, the proportion met its lowest point in 1989 with only about 9% of households living in private rented accommodation.
Until recently, rent control had been increasingly applied to the private sector, culminating with the Rent Act 1977 where the tenant could apply for the rent to be determined - commonly described as a fair rent, generally lower than the prevailing market rent and thereby override the original contract between landlord and tenant. The striking difference with the Housing Act 1988 was the abolition of rent control whilst retaining a similar system for security of tenure.
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Common Law tenancies
The common law relates to the portion of the law that has developed since early times and based on rules developed by the royal courts.
A common law tenancy broadly means a tenancy which follows the common law principles. However, modern usage is to apply this term to a tenancy which conforms to the common law rules but does not enjoy full statutory protection.
For example, a residential tenancy granted to a company might be referred to as a common law tenancy; although it does not benefit from the protection of the Housing Act 1988, it does nonetheless follow the basic common law rules relating to tenancies. Common law tenancies of this variety are also known as ‘contractual tenancies’ (since the respective rights of the parties are largely governed by what is in the contract or tenancy agreement).
Common law tenancies will still be governed by statutory controls. So, for example, section 11 of the Landlord and Tenant Act regarding the landlord’s repairing obligations will still apply unless the term of the tenancy is more than 7 years.
Four elements
There are four key elements to common law tenancies, they are:- • identifiable parties, that is a landlord and a tenant; • identifiable property; • term of the tenancy, either a fixed period, a periodic term, or in rare cases a tenancy at will (occupation without payment of rent); and • exclusive possession of the property.
Important points
There are some important things to remember when dealing with common law tenancies:
1) CIRCUMSTANCES. It is most important to look at the tenancy being granted and the circumstances surrounding the tenancy. There have been several important cases that have passed through the courts in recent years where the landlord granted what, on the surface, was referred to as a simple common law tenancy when in fact the tenancy operated under the Housing Acts with full statutory protection. Even if, for example, the landlord has granted what has been called a ‘holiday letting’, a court may look at the true circumstances behind the letting and declare the tenancy to be assured shorthold if the property is not being genuinely occupied for the purposes of a holiday.
2) TENANCY AGREEMENT. Notwithstanding the points above, a simple common law tenancy agreement will generally require a different form of tenancy agreement to that used for the default assured shorthold tenancy (AST).
3) NOTICE TO QUIT. A common law tenancy may be brought to an end by serving a Notice to Quit in the prescribed form. The section 21 procedure for terminating Housing Act tenancies does not apply to ordinary common law tenancies and will be invalid.
4) POSSESSION PROCEDURE. Some parts of the possession procedure will be different for ordinary common law tenancies. For example, there is no accelerated possession procedure as for AST tenancies. See chapter 12 for more detail on termination of common law tenancies.
5) TENANCY DEPOSIT PROTECTION. At present, common law tenancies are not covered by the statutory requirements for tenancy deposit protection - see chapter 10.
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Company Lettings
Where a residential tenancy is taken by a company, government organisation or other legal entity that is not an individual, the tenancy may not be assured. The property will normally be taken for the use of its employees whose occupation will generally be that of a licence but will depend on the specific circumstances including any terms and restrictions laid down in the lease.
Companies will become tenants of residential property for many reasons, and we shall only here consider the situation where the occupation is for residential purposes. Where the companies occupy a property for business use, the situation is described later under ‘Business Tenancies’.
The rights of tenure under a company letting are less than for assured tenants. Once the agreed period of time has expired, the tenant will have no further statutory tenancy rights and must leave. Furthermore, there are different statutory requirements for serving notices, operating rent increases and terminating the tenancy. Establishing a tenancy is normally very straightforward using a company letting agreement but the practitioner needs to be wary of several potential pitfalls:
- the risk of the company gaining protection under Landlord and Tenant Act 1954; - the financial status of a company may be harder to discover than an individual; - letting to governments and diplomats may confer diplomatic immunity.
The company as tenant may or may not wish to lay down an explicit agreement with its employee(s) in order to define the terms which govern the occupation of the property and protect itself from any claims of tenure by present or past employees.
Landlord and Tenant Act 1954
Under the Landlord and Tenant Act 1954 a tenant may gain protection under the 1954 Act if it is using the premises for business purposes (rather than merely for the convenience of its employee). Although the landlord will be able to recover possession if he intends to occupy the premises as his residence, he might be liable to pay compensation. A tenancy of term not exceeding six months will avoid protection under the 1954 Act.
The company letting agreement should therefore prohibit the use of the property for business purposes and define the terms of occupation of the property by the employees of the company or any other occupiers. When letting to a government department, it is advisable to include an extra clause in the agreement where the parties agree that the 1954 Act does not apply (this requires the sanction of the County Court and payment of a fee of about £30).
Overseas companies
There are obvious risks when conducting any contractual relationship with a company registered overseas. Ensure that the letting agreement specifies that the interpretation of the agreement will be in accordance with English law and disputes decided in an English court.
Check also that the Articles of Association of the foreign company authorise rental for employees and that your instructions are authorised by a Director or other Proper Officer (e.g.. Company Secretary). If necessary, obtain an Opinion from solicitors acting for the company.
Try to obtain a guarantee or co-surety debtor. Most companies are reluctant, or not authorised by their Articles, to enter into guarantees or appoint co-sureties for property rental in respect of company employees. As further security, consider taking a deposit equivalent to three months’ rent, in addition to the usual dilapidations deposit, repayable after (say) three months’ satisfactory tenure. Enforcement of unpaid rent from overseas companies is difficult.
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Main or principal home
Assured tenancies under the Housing Act 1988 require that a tenant must occupy the property as his ‘only or principal home’ (s.1, Housing Act 1988). A letting to an individual who does not occupy the property as his principal home may not be an assured or assured shorthold tenancy - it will need to be granted as an ordinary common law tenancy. Only the principal home of a two- home person can be held under an assured tenancy.
Joint tenancies
What if there are joint tenants ? The Housing Act 1988 simply requires that at least one of the joint tenants occupies the property as his only or principal home. So similarly, if none of the joint tenants occupies as principal home, the tenancy should be granted as a common law tenancy.
Transitional cases
With today’s flexible lifestyles and working practices, it can sometimes be difficult to decide whether a tenant occupies as his only or principle home. For example, a tenancy application might arrive from a travelling salesman. He lives at the weekends with his family in Bristol but wishes to rent a flat which he uses during the week.
There appears to be no clear cut-rule to determine in such cases which property is occupied as the principle residence. The law accepts that a person may have more than one residence at a time and whether the individual occupies a particular property as ‘principal home’ may depend on a number of factors: • physical signs of occupation in the premises, e.g. furniture, belongings • whether other members of the family also occupy • relative time spent between any other properties also occupied as a home • proximity of the property in relation to occupier’s main employment. In each case, it will be important to assess initially the level of occupation and the intention of the parties. Where the tenant clearly occupies more than one residence, the insertion of a clause within the tenancy agreement which declares whether the tenant intends to occupy as his ‘principal home’ will clarify the intentions of the parties and help to avoid doubt as to the legal status of the tenancy.
The importance of such precautions is clear. A tenant might, as a delaying tactic, attempt to prove that his tenancy (perhaps granted as an assured shorthold) does not operate within the Housing Act 1988 as he does not occupy as his principal home. As a consequence, any Housing Act possession notices served on him would be invalid. A common law tenant needs to be served a Notice to Quit rather than the Notice Requiring Possession used for an AST.
Occupation by spouse
Provided that the dwelling was a matrimonial home of the parties, occupation by the tenant’s spouse is treated as occupation by the tenant.
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Resident landlords and Housing Act 1988
The law now provides considerable encouragement to the landlord letting part of his home. This type of landlord is given more protection than the average landlord letting under assured tenancies and there are also beneficial tax breaks that applies in many cases under the Rent-a- Room scheme (see chapter 14 for more details on these tax rules).
The Housing Act requires that a tenancy where there is a ‘resident landlord’ may not be an assured or assured shorthold tenancy - it will need to be granted as an ordinary common law tenancy or as a licence. The main exception to this rule (discussed in more detail below) is where the property is a purpose-built block of flats and the landlord simply lives in one of the flats in the block; this will not qualify for ‘resident landlord’ status; the tenant would occupy as an assured or assured shorthold tenant.
Tenant or lodger
There are, in broad terms, two categories of occupancy that can occur in the situation where there is a degree of communality between the landlord and his occupiers. These are: • lodger • tenant with self-contained accommodation To assist in the distinction, a lodger is an occupier who shares accommodation with the person who has permitted him to enter into occupation. The lodger might be occupying either under licence or a tenancy depending on the arrangements made between the parties; most importantly whether the occupier enjoys exclusive possession of some part of the dwelling. Licences are described in further detail later in this chapter.
In the second case where the landlord and the tenant live in the s ame building but they each have their own “separate dwelling” a tenancy will normally result.
‘Resident landlord’ defined
The term ‘resident landlord’ is defined within Schedule 1 of the Housing Act 1988. In summary, a landlord is considered to be a resident landlord if both at the time of granting the tenancy and during the tenancy he lives in the same building (or in another dwelling which forms part of the same building) as his tenant unless the two dwellings are contained in a purpose-built block of flats. In fact, the resident landlord provisions of the Housing Act 1988 are very similar to those of the preceding Rent Act 1977 and so the previous case law applies as we shall see later.
Thus, the landlord does not need to share any accommodation with the occupier to qualify for resident landlord status. It is enough that both landlord and tenant live in the same building.
Purpose-built
Resident landlords living in purpose-built blocks of flats are exempted from the definition for the purposes of the Housing Act, and are allowed to grant assured or assured shorthold tenancies within the building.
“Purpose-built block of flats” is defined in sch. 1, para 22. It must as constructed contain two or more flats. The date of construction is the relevant time to consider, and a distinction is drawn between conversions of existing buildings (which would only in the most exceptional
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circumstances constitute “purpose-built blocks of flats”) and constructions of new buildings (which if they consist of two or more flats will be within the definition).
Status of landlord
The person who granted the tenancy (and any successive landlords who subsequently owned the property during the tenancy) must have been an individual or individuals (i.e. not a company or institution) and he must have occupied another dwelling-house in the same building as his only or principal home. In the case of joint landlords, each of the landlords must be an individual.
‘Same building’
Whether the dwelling-house let to the tenant forms part of the same building (or flat) as the dwelling-house occupied by the landlord is an issue within the legislation which seems to cause the most confusion to practitioners.
Consider, for example, the case where a landlord wishes to rent out a ‘granny annex’ within his property. Where a granny annex which has been built as a separate building beside the landlord’s house, there will be no resident landlord status and the annex can be let under a standard assured shorthold tenancy as it does not, in any way, form part of the same building as the landlord’s dwelling-house.
But, what if the landlord builds an extension onto his house for use as rental accommodation ? From studying the case law in this area, it is clear that, for borderline cases, the courts will look at the proximity of the tenant’s and the landlord’s accommodation to determine whether to grant resident landlord status. In one case, a landlord rented a self-contained unit attached to the end of his house. Because the two dwellings had their own front doors, their own garden areas and no interconnecting doors, the court felt that there was insufficient commonality to grant resident landlord status. In a similar case a property which had previously been in single occupation, had a centre portion with extensions on both sides and no internal connection with the centre. The landlord lived in the extension in one side, and the tenant in the extension on the other side. They shared a common garden and the landlord had a greenhouse and shed at the back of the tenant’s dwelling. The court decided to view the property as constituting one building and the landlord as a resident landlord.
Whether or not the landlord’s dwelling house and the tenant’s dwelling house are deemed to form part of the same building is a question of fact and degree. But, in coming to an overall decision on this matter, it is likely that a court will pay significant regard to the intention of the statutory provision when the legislation was drafted, which was to allow the landlord to more easily remove a tenant who lives in close proximity to him.
Eviction issues
For agreements made on or after 15th January 1989, except new lettings to the landlord’s existing regulated or assured tenant, the resident landlord always has the right to get his property back from his tenant. If the tenant refuses to go, the resident landlord does, in some cases, have additional protection in that he is not required to go to court to evict the tenant - these are called ‘excluded tenancies’or ‘excluded licences’ because they are excluded from provisions of the Protection from Eviction Act 1977.
The main categories of excluded tenancies and licences are those granted otherwise than for money or money’s worth and those under which the occupier (or a member of his family) shares living accommodation with the landlord who has his only or principal home in accommodation of which the shared accommodation forms part.
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Holiday Lettings
Schedule 1 of the Housing Act 1988 states that ‘a tenancy the purpose of which is to confer the tenant the right to occupy the dwelling-house for a holiday’ cannot be an assured tenancy. Therefore you cannot use a standard assured shorthold letting agreement for holiday lettings.
Holiday lettings can typically range in type and duration from as short as a weekend to as long as several months. In these notes, where we refer to short lettings or ‘short lets’, it is generally understood to be a letting in the range of 1 to 4 weeks. Some information relating specifically to short holiday lets is given on the following page.
From a legal point of view, a holiday letting agreement operates fundamentally under contract law (rather than the more complex housing law which governs most other forms of residential letting). Thus, the tenant of a holiday letting has few rights of tenure and the possession procedure is much simpler than for a standard residential tenancy. All that is necessary is that the landlord is satisfied that the purpose of the letting is genuinely for the purpose of a holiday so that there should be no possibility of an occupier remaining in possession and claiming residential tenancy rights.
Do I need a letting agreement for holiday lettings ?
It is recommended that all lettings are covered by a formal agreement that defines the terms agreed between the parties. Whilst it is true that many private lettings are conducted in a satisfactory way in the absence of any written agreement, a verbal agreement provides little protection when problems do arise.
Equally, an alternative but more complex approach is to create a contract by ‘offer and acceptance’; firms specialising in the provision of holiday accommodation will create a carefully designed brochure, booking form and accompanying terms of business. This is of similar effect to signing a holiday letting agreement in that it creates a binding legal contract between the parties.
There will be differences in the content of the holiday letting agreement depending on the duration of the let. For example, shorter lets generally dispense with the requirement for a dilapidations deposit and the main services (e.g. water, electricity and heating) will all be included in the rental fee. However, for longer lettings (e.g. academic staff on sabbatical) of several months, the nature of the letting is more akin to a standard Housing Act tenancy and the contractual provisions in the tenancy agreement will be similar to those in a standard residential letting.
Regaining possession at the end of the tenancy
Tenants of holiday lettings have minimal security of tenure. Unlike assured and AST tenants, at the end of the fixed term tenancy, no automatic statutory periodic tenancy is created and tenants will have no further legal rights of tenure. They must leave at the end of the tenancy.
Furthermore, the landlord does not need a court order to evict. Tenants have no protection under the Protection from Eviction Act 1977.
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Holiday Lettings - Other Issues
Booking Deposit. For short lettings, it is common to require a booking deposit to be paid a set period in advance of the start date of the letting. The purpose of this deposit is to protect the firm or landlord against late cancellation (and consequent loss of income where the unit cannot be relet at short notice). Where a booking deposit is accepted in this way, it will be important that your literature describes the procedure for return of the deposit (if any in the event of cancellation).
Rental Payment. Your literature should also state when you require payment of the rental for the holiday period. For short lets, the rental is commonly required in full and several weeks in advance of the holiday period. Thus if the holidaymaker books the accommodation near to the commencement date, it would be normal to insist on payment of the full holiday charge.
Cancellation. Where an advance booking deposit has been accepted, some thought should be given to the procedure in event of late cancellation since the property may be difficult to re- let at short notice and the landlord may have gone to some considerable time and expense to prepare the property for a holiday letting (cleaning of rooms, provision of bed linen, cutlery etc.). Example of cancellation clause to be inserted in your literature relating to holiday lettings:
‘In all cases of cancellation, the deposit is forfeited. We will endeavour to re-let the holiday home on the same hire terms but unless such re-let is obtained, you will remain responsible for the payment of the full balance of hire unless your notice of cancellation is received in writing more than 28 days before your holiday start date.’
Arrival and Departure. On short holiday lettings, it will be important to state the time of occupation and departure in addition to the respective commencement and departure dates. This information should either be stated on the letting agreement or given to the client as part of the booking information. For example, the booking information might state that the normal time of occupation is after 4pm on the holiday start date, and the accommodation must be vacated by 10.00 am on the last day. This makes provision for general cleaning to be carried out between lets. Also give some thought to arrangements for handover of keys; the procedure for a particular property should be made clear in the booking information. You may wish to reserve the right to make an extra charge for late arrivals or other situations where clients have to be met out of normal office hours.
Hire of Linen. Where bed linen or other optional extras may be provided, information on the costs and availability should be included in the literature provided by the firm.
Insurance. Where a firm carries out a significant number of holiday lettings, you may wish to consider the provision of cancellation insurance for client’s bookings. This can be obtained from a specialist broker and the cost built into the hire charge of the accommodation. Cancellation insurance provides for refund of the holidaymaker’s full rental charge in certain pre-specified circumstances such as illness, disablement, death, redundancy etc. where it might be difficult to refuse a refund on cancellation.
Ground 3: The Housing Act 1988 provided indirect support for holiday letting. Ground 3 may be used as valid grounds of possession for a property previously let for a holiday within 12 months of the start of the tenancy - useful for lettings out of season. Prior notice must be given to the tenants before the letting using an appropriate form or words.
Tax Rules: Special tax rules also apply for holiday lettings - see Chapter 14 for information.
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Lettings to Employees
Non-Agricultural
A letting to an employee of the landlord does not necessarily prevent the tenancy from being an assured tenancy. Yet, there are some special issues and provisions that need to be considered.
The employer who wishes to provide accommodation to an employee will generally wish to avoid providing the tenant with security of tenure. The accommodation is provided as part of the employment; and will often be needed after the employment ends for future employees.
The employer will have several options: • grant an assured shorthold tenancy; or • let the premises at no rent or at a low rent (less than two-thirds of the rateable value for tenancies entered into on or prior to 1 April 1990; or less than £250 a year (£1000 a year in Greater London) for tenancies entered into after this date); or • provide the accommodation by way of a licence (and not a tenancy). If an assured tenancy is granted, the landlord may recover possession under Ground 16 of Schedule 2 to the Housing Act 1988. An order for possession under this ground is discretionary and will depend on the court being satisfied that it is reasonable to make such an order. If the tenancy is granted at full market rent and the landlord does not require the premises for occupation by another employee, or the tenant can prove that personal hardship might result, the court may be reluctant to grant possession.
The tenancy can either be granted on a periodic basis, or as a fixed term. If a fixed term is granted, then it would be reasonable to include a break clause whereby the landlord has the power to determine the tenancy in the event of the employment ceasing. Where the tenancy is set up as an assured shorthold, it will not be possible to apply this power within the first six months. If there is a possibility that possession may be required within this initial period of employment, the safest solution is to ensure that no rent or other payment is made by the employee and provide the accommodation to the employee as a licensee.
Where a licence is more appropriate, it would generally be necessary to show that the employee is required to live there for the proper performance of his duties. Otherwise, some other requirement would have to be present to show that the occupier does not hold as a tenant (e.g. non-exclusive use of the demised accommodation). See the section on Licences below for more information.
Agricultural occupancies
The statutes for agricultural occupiers provide statutory protection for agricultural employees in tied cottages. The Housing Act 1988 provides security of tenure for agricultural workers, whilst phasing out the earlier statutory scheme of the Rent (Agriculture) Act 1976, and allowing the landlord to charge a market rent.
Earlier lettings for agricultural workers operated under the Rent (Agriculture) Act 1976 which conferred a security of tenure and rent protection with respect to their tied cottages, and was largely modelled on the provisions of the Rent Act 1977. The law relating to agricultural occupiers prior to 15 January 1989 is now rarely encountered and outside the scope of this Handbook.
For tenancies created on or after 15 January 1989, the Housing Act created a type of tenure called the assured agricultural occupancy (AAO). This is a form of assured tenancy and
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replaced protected occupancies from 15 January 1989, but still enables both tenants and licensees to gain security of tenure. Small changes were also introduced by the Housing Act 1996 to exclude agricultural holdings and farm business tenancies from these provisions.
Under the Housing Act 1988, landlords of assured agricultural occupiers are able to recover market rents, although the Agricultural Wages Order limits the amount that can be deducted from wages as rent. In order to have an assured agricultural tenancy, the occupation condition and the employment condition (known together as the ‘agricultural worker condition’) must be satisfied.
Agricultural occupancies - the Occupation Condition
This is fulfilled if: • The tenancy is an assured but not assured shorthold tenancy. • The tenancy is only excluded from being an assured tenancy because of the provisions in the Housing Act relating to tenancies at no or a low rent. • The occupier has a licence with exclusive occupation of a dwelling house as a separate dwelling and if that licence was a tenancy it would satisfy one of the above conditions.
Agricultural occupancies - the Employment Condition
This is fulfilled if: • The property is or has been in qualifying ownership at any time during the licence or tenancy and the occupier is, or has been a qualifying worker at any time during the tenancy or licence, or the tenant is incapable of agriculture work because of injury or disease. Qualifying ownership applies where the occupier’s employer has let the premises to the tenant or arranged for the tenant to be housed. A ‘qualifying worker’ is generally defined as a person who has worked full time in agriculture for 91 weeks out of the 104 immediately preceding weeks. The full definitions for ‘qualified ownership’ and ‘qualified worker are given in the Rent (Agriculture) Act 1976. • The conditions in 1 above were satisfied but the previous occupier has died and the current occupier is the spouse/cohabitee or a member of the deceased occupier’s family. • The tenancy or licence was given when an occupier gave up a previous dwelling house which was an assured agricultural occupancy. Where an AAO comes to an end, a statutory periodic tenancy comes into existence which will be an AAO as long as the agricultural worker condition is satisfied.
Agricultural occupancies - grounds for possession
All the grounds for possession for assured tenancies apply to assured agricultural tenancies except ground 16 which is where a property has been let to a tenant in consequence of the tenant’s employment and that employment has ceased. If a landlord wants the property for another worker, he must arrange alternative accommodation or if not able to do so, should apply to the local authority to do so. In certain circumstances, a local authority may be required to re- house assured agricultural occupants.
Agricultural occupiers occupying after 15 January 1989 who do not qualify as assured agricultural occupants only have minimal security of tenure (as provided under the Protection from Eviction Act 1977).
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Lettings of Agricultural Land and Agricultural Holdings
A tenancy of agricultural land or holding is excluded from the Housing Act 1988 and thus it may not be an assured or an assured shorthold tenancy.
Agricultural restrictions
Some practitioners may be familiar with lettings where the landlord is required to include suitable clauses in the lease whereby the occupancy of the property is restricted to a ‘tenant who is working in agriculture, did work in agriculture or is the widow or widower of a person who used to be employed in this capacity’.
Such agricultural restrictions are generally applied by a local authority for the occupancy of farm buildings. The restrictions are applied in the first instance by the planning department where planning permission has been granted on the basis of buildings destined to be used for the accommodation of agricultural workers. Although it is technically possible to let such properties under assured and assured shorthold tenancies, the use restriction is a clear indication that the landlord is expected to grant an agricultural occupancy (as described in the preceding sections). Breach of such conditions will leave the landlord open to prosecution by the local authority.
Agricultural land
Where agricultural land exceeding two acres, as defined by the General Rate Act 1967, s26(3)(a) is let together with the dwelling-house, the tenancy cannot be an assured tenancy (sch. 1, para 6). The tenant will not be able to argue that the dwelling-house alone has assured status: the statute clearly infers that one cannot arbitrarily divide up the property let. The tenancy as a whole must stand or fall within the definition.
N.B. The definition of ‘agricultural land’ is the same as that used for rating purposes and has since been amended by the Local Government Finance Act 1988:
(1) Agricultural land is:
(a) land used as arable, meadow, or pasture only,
(b) land used for plantation or a wood or for the growth of saleable underwood,
(c) land exceeding 0.10 hectare and used for the purposes of poultry farming,
(d) anything which consists of a market garden, nursery garden, orchard or allotment (which here includes an allotment garden within the meaning of the Allotments Act 1922), or
(e) land occupied with, and used solely in connection with the use of, a building which (or buildings each of which) is an agricultural building by virtue of paragraph 4, 5, 6, or 7 below.
(2) But agricultural land does not include -
(a) land occupied together with a house as a park,
(b) gardens (other than market gardens),
(c) pleasure grounds,
(d) land used mainly or exclusively for purposes of sport or recreation, or
(e) land used as a racecourse.
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Agricultural holdings
Agricultural holdings are contracts for an agricultural lease or tenancy of land where the tenant is not an employee of the landlord when the tenancy is granted (i.e. a tenant farmer who is not employed by his landlord). A tenancy under which the dwelling-house is comprised in an agricultural holding cannot be an assured tenancy where the dwelling-house is occupied by the person responsible for the control of the farming of the holding.
A tenancy of an agricultural holding used to fall under the protection of the Agricultural Holdings Act 1986 (an Act consolidating the earlier law), and conferred lifetime security of tenure to both the tenant and any successor (although this right of succession was later repealed for tenancies granted after July 11 1984).
However, tenancies for a fixed term of between one and two years fall outside the protection of Agricultural Holdings Act 1986. For this reason, landlords frequently used these shorter tenancies (sometimes known as Gladstone v Bower tenancies) to avoid giving statutory security to short-term tenants.
The Agricultural Holdings Act 1986 has now been superseded by the Agricultural Tenancies Act 1995 (ATA) which took effect on September 1 1995, although the Agricultural Holdings Act will continue to apply to agricultural lettings which commenced before this time. ATA creates a new class of ‘farm business tenancy’ and security of tenure no longer applies to these new tenancies. But these tenancies will endure on a year-to-year basis until terminated by at least 12 months’ prior written notice.
Tenancies with High and Low Rental Values
High rents
Under the Housing Act 1988, tenancies where the annual rent is greater than £100,000* cannot be assured (or AST). It is to be noted that the £100,000 figure is annualised and therefore if the proportional monthly rent is more than £8333.33 per month for a shorter term (e.g. only six months), the letting is still outside the Housing Act 1988.
Generally, these tenancies operate primarily under the common law rules. They have little statutory security of tenure and consequently at the end of the tenancy, no Section 21 notice or indeed any other notice is required. The tenancy will simply be of a contractual nature between landlord and tenant with few statutory provisions.
The original ‘high rent’ provision in the Housing Act 1988 related to rateable values. Following the introduction of council tax in 1990, the Act was amended to a £100,000 pa rent limit.
*Prior to 1 October 2010, a lower annual threshold of £25,000 applied
Low rents
Similarly, a tenancy cannot be an assured tenancy if either no rent is payable, or if the rent is below a certain threshold (Sched. 1, part 1, s3). Low rents are defined either as:
where the rent is less than £250 a year (£1000 a year in Greater London) for tenancies entered into after 1st April 1990, or
where rent is less than two-thirds of the rateable value of the dwelling-house (see full text of Act) for tenancies entered into on or prior to 1 April 1990.
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Business Tenancies
A person or entity will be a business tenant if: • possession of the premises is held under a tenancy; and • the tenant occupies at least part of the premises • the premises or that part of the premises are occupied for the purposes of carrying on a business. Business tenants are protected under the Landlord and Tenant Act 1954. Like the statutory codes applying to residential tenancies, there are two main effects to the statute; security of tenure and rent control.
Business tenancies have the general right to have their tenancies renewed. A business trading from a particular location will come to be known in the locality over time, building up goodwill and reputation. This goodwill together with the high costs that can be associated with fitting out commercial properties needed protection. A business tenant will also be entitled to compensation for improvements.
Rent control is provided under the 1954 Act to prevent landlords forcing rent rises on tenants significantly over the market rate. Tenancies under the Landlord and Tenant Act 1954 will be continued automatically and the landlord will need to follow a procedure specified in the Act before the tenancy can be brought to an end.
These rights are similar to those available to tenants occupying under residential tenancies, yet there are important differences between the codes. The codes are mutually exclusive. They provide different security of tenure and procedures for ending the tenancy. A tenant holding a business tenancy under the Landlord and Tenant Act 1954 will generally have greater security than the tenant holding an assured shorthold tenancy under the Housing Act 1988.
Position regarding mixed use
The Landlord and Tenant Act 1954 provides that a tenancy will come under the protection of the 1954 Act if the premises are occupied for the purposes of a business carried on by the tenant ‘or for those and other purposes’. Where those ‘other purposes’ are residential, then there will be an inevitable conflict between the two statutes. The landlord may want to argue that the letting falls under the residential statutes whereas the tenant, in order to gain greater security of tenure, or simply to complicate matters for the landlord, may claim protection under a business tenancy.
In law, the two sets of statutes are mutually exclusive. If a tenancy falls within the 1954 Act, then it will be excluded from being an assured or AST tenancy. Where there is mixed residential and business use, it will be important to determine which statute will apply.
Under the Landlord and Tenant Act 1954, the business use of a premises must be a significant purpose of the tenant’s occupation of the premises. Considering such cases is not easy, but it will be a question of fact and degree. At one end of the scale is the tenant who is perhaps employed, merely bringing work home in the evenings. At the other end is the tenant who runs his business entirely from home. There are plenty of cases of partial business use that fall between the two above examples.
It is generally accepted that a residential tenant may wish to bring home papers or other work to complete after work, and this would not normally lead to an assumption of business use. When considering the borderline cases, it is often useful to look at the case law on the subject.
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Mixed use business/residential tenancies - case law
The intersection between business tenancies and assured tenancies was examined by the courts in the case of, Brewer and another v Andrews [1997]. The tenants rented an eight bedroom house in Newquay on an assured shorthold tenancy in May 1993. The agreement contained a clause that limited its use to a single private dwelling. The tenants then used the property as a guest house, (this is how it had been used previously) and in September 1994 the tenants stopped paying rent as they were aggrieved about certain items of disrepair. The landlords gave two months’ notice that they required possession, later issuing proceedings for possession and recovery of rent arrears of £3,150. The tenants claimed protection on the basis that their tenancy was a business, and not a residential tenancy.
The Court of Appeal held that possession was correctly awarded. Firstly, the tenants could not deny that the house was let on an assured shorthold tenancy. The purpose of the original tenancy agreement was clear to all parties and the surrounding circumstances, like the fact that the property had been previously used as a guest house, would only be relevant where the purpose of the tenancy was not clear. The restriction contained in the lease made it impossible to infer an intention to let for business purposes from the history and setting of the premises, its assessment for rating purposes or the presence of so many bedrooms.
In an earlier case, Cheryl Investments Ltd v Saldanha [1978], a tenant ran his importation business from his rented flat in Knightsbridge. He installed a telephone, typewriter, files etc. in the flat. No other business premises was used by the tenant in this case, and the company notepaper gave the telephone number of the flat, and the address as a PO Box in Knightsbridge. The court held that the business use was a significant purpose for which he was occupying the flat and that he was a business tenant.
Solutions
There are no simple solutions for the landlord attempting to grant a tenancy in this situation. The laws for residential and business tenancies have been formulated as independent sets of rules that were never designed to be used together. The rules are mutually exclusive so that a business tenancy is excluded category under the Housing Act 1988. Equally, residential tenancies are excluded under the Landlord and Tenant Act 1954 (the primary framework under which business tenancies operate).
It is likely that this boundary between residential and business tenancies will become increasingly relevant in the future as more and more people work from home. Indeed, many rental properties, particularly in urban areas are specifically marketed as ‘mixed use’. In these cases, it is common to use a business tenancy which excludes the Landlord and Tenant Act 1954. This is permitted under s38A of the Act and Schedules 1 and 2 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, but for such an agreement to be valid, the landlord must serve on the prospective tenant a ‘health warning’ at least 14 days before the parties are committed to the lease and the tenant must sign a declaration agreeing to contract out of the Act. If the 14 day period is not possible, then the tenant would have to sign a statutory declaration before a solicitor that they had not received and read the ‘health warning’ and accepted its consequences.
Sections 35 and 36 of the Small Business, Enterprise and Employment Act 2015 establishes a new concept of a ‘home business tenancy.’ This allows landlords to permit residential tenants to run a home business without the tenancy falling within the protection of Part 2 of the Landlord and Tenant Act 1954 (so long as tenants are not permitted to run any other kind of business from home). A home business is a business of a kind that might reasonably be carried out at home, for example, this could include an internet business, a financial consultancy, an advertising, copywriting or translation service. The landlord’s consent to a home business must be provided either through the terms of the tenancy agreement or by the landlord’s subsequent consent or agreement to such a home business.
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Protected Tenancies and The Rent Act 1977
The Rent Act 1977 introduced a new form of tenancy - the ‘protected tenancy’. This was a contractual tenancy in which the tenant had the right to a fair rent and security of tenure. Protected tenancies have been replaced by assured tenancies under the Housing Act 1988 and, consequently, the Rent Act will generally only apply to tenancies created before 15 January 1989. Protected tenancies already in existence continue to have protection. Once the contractual tenancy has come to an end, the tenant gains security of tenure as a statutory tenant, on basically the same terms as the prior contractual tenancy and with an absolute right to continue living in the premises indefinitely.
The types of tenancy that were excluded from Rent Act protection are similar to those categories under the Housing Act 1988. Categories excluded from protection included resident landlords, tenancies at no rent, properties with high rateable value, furnished lettings (prior to 14 August 1974), holiday lettings etc.
Rent control was achieved through the tenant being able to register a fair rent for the tenancy. This was a rent set by the rent officer, taking in the various circumstances, but disregarding any scarcity factor. The resulting fair rent became the maximum rent payable, overriding any prior agreement and the operation of market forces (normally lowering the rent significantly).
Consequently, many landlords were left with sitting tenants paying low rents. The introduction of the protected shorthold in 1980 was an unsuccessful measure to revive the market by providing a tenure with only limited security, before being replaced by the assured shorthold tenancy under the Housing Act 1988.
Public sector & ‘quasi public sector’ lettings
Public sector housing deals predominantly with lettings by local authorities and housing associations (these are now knows as ‘Registered Social Landlords’ - RSLs). Lettings in the public sector are known as ‘secure tenancies’ because they generally provide the tenant with a high degree of security of tenure compared with private sector tenancies.
Registered Social Landlords remain one of the main providers of rented housing despite the fact that government policy, in recent years, actively encourages tenants to purchase their properties at greatly discounted values (the Right to Buy scheme).
Until comparatively recently (1980) such public tenants were outside all forms of statutory regulation on the basis that public sector landlords had no profit motive and therefore their tenants did not need legal protection. ‘Secure’ tenancies have since been introduced by the Housing Act 1980 although the provisions have subsequently been consolidated into the 1985 Act. Many local authorities have transferred their housing into housing associations. These are non profit-making trusts governed by the Housing Corporation which form a so-called ‘quasi-public sector’ also known as ‘registered social landlords’. In 1980, registered housing associations were brought within the concept of the ‘secure tenancy’. From 1989, with the introduction of provisions within the Housing Act 1988, their tenants are placed within the same framework as private sector tenants, as assured tenants.
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7. Housing Law: Key Statutes
Statute law
Statute law refers to the body of law contained in the various Acts of Parliament and is commonly referred to as primary legislation. This contrasts with other legislation such as the safety regulations which we shall consider in the next chapter. These also have legal force and are known as subordinate or secondary legislation. Since the legal system in England and Wales has evolved independently of Scottish law, both regions have their own different sets of statutes and regulations.
Government policy
Since the introduction of new statute is controlled by government, statutes inevitably follow the political policies of the party holding power at any time. In housing law, this pattern is no different. In fact, the private rented sector has suffered the extremes of such effects as successive governments regulated and then deregulated aspects of housing law.
Significant regulation was imposed on private sector housing culminating in the famous Rent Acts of 1965 and 1974. Rent controls caused rents to drop, properties started to fall into disrepair, and landlords sought to sell up, evicting tenants in the process. This in turn encouraged further regulation and landlords withdrew even more quickly from the market. On average, some 200,000 dwellings were lost from the rental sector each year between 1950 and 1960.
Current and future policy
Despite a return to Labour government, the government has confirmed that there are no plans to dismantle the current system of assured and assured shorthold tenancies. The government is satisfied that the current framework operates well and considers the private rented sector as a suitable supply for short and medium term accommodation.
The government does intend to continue with plans to introduce a code of practice for houses in multiple occupation (HMOs) together with implementation of the new duty on HMO landlords to keep properties up to the standard of fitness for the number of occupants.
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Housing Act 2004
Background
This Act contains a wide range of provisions that affect housing, not all of which were in the original Bill. This Act received the Royal Assent on 18th November 2004.
For the private rented sector, the Act fulfilled a long-standing election manifesto for the mandatory licensing of houses in multiple occupation (HMO). Equally important are the introduction of new measures for the protection of tenancy deposits, and a new housing fitness rating system (HHSRS)
Key Provisions
Housing, Health & Safety Rating System (HHSRS)
Part 1 of the new Act contains provisions to replace the housing fitness regime set out in the Housing Act 1985. The separate Houses in Multiple Occupation (HMO) fitness test will also be repealed. The test of fitness is to be replaced with an evidence-based risk assessment process, carried out using the Housing Health and Safety Rating System (HHSRS). Action by authorities will be based on a three-stage consideration: (a) the hazard rating determined under HHSRS; (b) whether the authority has a duty or power to act, determined by the presence of a hazard above or below a threshold prescribed by Regulations (Category 1 and Category 2 hazards); and (c) the authority’s judgement as to the most appropriate course of action to deal with the hazard.
Licensing of Houses in Multiple Occupation (HMOs)
Part 2 of the Act introduces a mandatory scheme to licence HMOs of a description contained in regulations. Initially this only applied to larger higher risk HMOs of 3 or more storeys occupied by 5 or more people forming two or more households who share facilities but from 1st October 2018 the ‘3 or more storey’ requirement will be removed. Local Housing Authorities (LHAs) are given power to extend licensing in their districts to other categories of HMOs to address particular problems that may exist in these smaller properties (‘additional’ and ‘selective’ licensing) This power is subject to carrying out consultation and with the approval of the appropriate national authority.
The Act also provides for a new definition of HMO, and limits the scope of licensing and enforcement action (other than in relation to Housing, Health and Safety Rating System action) to certain types of HMOs within that definition.
Tenancy deposits
Part 6 of the Act introduces new legislation with the intention of safeguarding deposits paid by tenants who have assured shorthold tenancies. The provisions come into force in April 2007 and apply to all new tenancy deposits taken in connection with assured shorthold tenancies. Tenancy deposit scheme are established which will have two main purposes:
- to safeguard tenancy deposits paid in connection with assured shorthold tenancies; and
- to facilitate the resolution of disputes arising in connection with such deposits.
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Housing Act 1996
Background
The Housing Act 1996 is broad ranging, containing provisions relating to both the private and social housing sectors. The statute received its Royal Assent on 24th July 1996.
For the private rented sector, the Act contains some significant new provisions which help to simplify and improve the operation of the assured and assured shorthold tenancies (AST) introduced by the Housing Act 1988. In general, the changes introduced by the Housing Act 1996 operate by amending the provisions in the original Housing Act 1988 so that all the statute and any changes are consolidated within the same Act.
The key provisions and changes are summarised in the sections below
Main Provisions
Assured shorthold as default tenancy
Probably the most important changes introduced by the Housing Act 1996 are the new rules for setting-up an assured shorthold tenancy. To set up an AST with a new tenant on or after 28 February 1997 (otherwise than as a consequence of a contract made before that day), the landlord is no longer required to serve a Section 20 Notice on the tenant before the tenancy starts saying that the tenancy will be on shorthold terms. All new tenancies are automatically ASTs unless the landlord and tenant agree on an assured tenancy and the landlord serves the appropriate notice, or the agreement includes a provision to this effect.
There are some other minor exceptions to this ‘automatic AST’ rule: • a tenancy granted to a person who was previously an ordinary assured tenant • a tenancy arising by succession on the death of a Rent Act 1977 protected or statutory tenant (unless s39(7) Housing Act 1988 applies). • an assured tenancy which is created on ceasing to be a secure tenancy (applies only to Housing Associations) • assured tenancies arising on the ending of long leases (under Sch 10, Local Government and Housing Act 1989) To set up an assured tenancy with a new tenant on or after 28 February 1997 the landlord must either serve a notice on the tenant saying that the tenancy is not a shorthold tenancy or include a statement to that effect in the tenancy agreement. The notice does not have to be given on a special form.
‘Six month’ provisions
Prior to 28 February 1997, it was required that the original term of an assured shorthold tenancy was to be for a fixed term of not less than six months duration (s. 20(1)(a)).
For tenancies created after 28 February 1997, there is no longer this requirement, although section 21(5) Housing Act 1988 restricts the landlord’s right to recover possession within 6 months of the commencement of the shorthold (see Recovery of Possession, below).
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Recovery of possession
Prior to February 28 1997, the landlord was required to give the tenant two months’ notice to recover possession; this notice now has to be written, as a result of amendments to section 21(1) (b) and section 21(4)(a) and a prescribed section 21 notice is now available for ASTs in England. See Letting Factsheet 21 for more information.
For tenancies set up after 28 February 1997, an order for possession of premises let under such a shorthold may not take effect within 6 months of the beginning of the tenancy, or , if the tenancy is a replacement tenancy, within 6 months of the beginning of the original tenancy (section 21(5) Housing Act 1988).
Written statement of terms
Section 90 of the 1996 Act places a new duty upon the landlord of assured shorthold tenancies. Tenants with shorthold tenancies starting on or after 28 February 1997 have a right to ask the landlord to provide a written statement of the main details of the tenancy agreement if they have no existing written agreement or statement. (see Chapter 5 for further details)
Rent control
Under the original Housing Act 1988 legislation, less than 1,500 applications were made to the former Rent Assessment Committee each year. Government wished to reduce rent control on assured shorthold tenancies still further and support the contract between landlord and tenant.
A new s. 22(2) (aa) is inserted into the Housing Act 1988 by s. 100 of the 1996 Act. For tenancies agreed on or after 28 February 1997, the assured shorthold tenant is limited to applying to the tribunal for a determination of his rent only once during the initial six months of the tenancy. Furthermore, the tenant must apply for a determination before this period has elapsed. The terms ‘original tenancy’ and ‘replacement tenancy’ have the same meaning as in section. 21 of the Housing Act 1988.
Grounds for possession
Changes introduced by the Act make it easier for landlords to bring a tenancy to an end in cases of rent arrears, nuisance or deception. The changes are effective on February 28 1997.
Ground 8 (schedule 2) is amended. The court must make an order for possession, if at the date of the service of the s.8 notice seeking possession and at the hearing, there was at least eight weeks rent arrears if the rent is payable weekly or fortnightly, or at least two months rent arrears if the rent is payable monthly. The old thresholds were thirteen weeks and three months respectively.
Ground 14 is amended. This discretionary ground deals with tenants conduct which causes a nuisance to neighbours. The tenant can now be evicted not simply because of his own conduct or that of persons living with him, but also because of the conduct of his visitors. The conduct need only be ‘likely’ to cause nuisance or annoyance. Furthermore the amended ground extends protection to neighbouring residents, visitors or others engaged in lawful activity such as postmen, ambulance and fire personnel, social workers (and, of course, letting agents) who might be affected by the nuisance. The amended ground allows possession proceedings to be started immediately (previously two weeks’ notice).
The final change is the addition of a new Ground 17. This is a discretionary ground which allows the landlord to apply for possession where a tenancy has been granted on the basis of false or misleading information.
Further details on these grounds and their operation is given in Chapter 12.
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Housing Act 1988 See Appendix B for a copy of the Housing Act 1988
Background
The Housing Act 1988 received royal assent on 15th November 1988 after considerable debate, keeping Parliament occupied for a total of over 250 hours. The issues were at times bitterly contested by the opposition parties as the provisions laid down in the Act were far-reaching.
Until 1988, the linkage between rent control and the tenant’s security of tenure was an established feature of statutory landlord and tenant law. The 1988 Act sought to stimulate private lettings by allowing landlords to charge a market rent and reducing the court’s discretion to allow tenants to remain in rented accommodation, which it accomplished by increasing the number of mandatory grounds for possession.
Assured and Assured Shorthold tenancies
The Housing Act 1988 created a new type of tenancy, the assured tenancy which allowed landlords to charge their tenants a market rent.
A further radical departure was the creation of the assured shorthold tenancy, (AST) which is a type of assured tenancy that where the landlord has a certain right to repossess his property at the end of the tenancy. About 70% of private residential lettings are now ASTs.
The assured and assured shorthold tenancies introduced by the Act have restored a significant degree of control to landlords and improved confidence to investors in the sector generally. Both types of tenancy are dealt with in greater detail in the following chapter on Tenancies and Tenancy Agreements
The Key Sections
s1: Definition of an assured tenancy s5: Security of tenure provisions. Only courts can order possession s7: Grounds for possession s8: Provisions for serving notice of proceedings for possession s13: Procedure for rent increases s20: Procedures for AST’s s21: Recovery of possession on expiry of AST s27& 28: Damages for unlawful eviction s29 - 33: Changes to the Protection from Eviction Act 1977 s45 - Notice must be given to all tenants. Schedule 1: Tenancies that cannot be assured Schedule 2: Grounds for possession Schedule 2A: Provisions relating to new Housing Act 1996 ASTs
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Definition of an Assured Tenancy
An assured tenancy must be a tenancy (i.e. there must be a grant of exclusive possession for a term at a rent). There are no express limitations on the length of the term of the lease, although the Act does provide for a ceiling on rent levels above which the tenancy may not be assured, and thus the provisions of the Act will not apply. The Housing Act 1988 defines an assured tenancy as one where a dwelling is let as a separate entity and the tenant (or at least one of them if there are joint tenants) occupies the dwelling as his only, or principal home. Thus companies and other institutions may not become assured tenants.
Additionally, a tenancy will not be assured if it falls into one of the excluded categories. The main ones are: • Tenancies entered into before commencement of the Act (15 January 1989) • Tenancies at high rent (currently over £100,000 pa), low rent or no rent. • Business or holiday lettings • Tenancies of agricultural land and agricultural holdings • Tenancies with resident landlords
Protection from Eviction
The Housing Act 1988 adopted a similar framework for security of tenure as the Rent Act 1977. Whilst the Rent Act had 20 ‘Cases’ or grounds for possession, the Housing Act 1988 adopted 16 ‘grounds’ initially. These grounds have been subsequently strengthened, amended, and added to in later legislation so that there are now 17 grounds.
An assured tenancy cannot be brought to an end by the landlord except by obtaining an order of the court. The tenant is entitled to remain in possession until such time. Where the tenancy is for a fixed term, and the fixed term has ended, the Act provides that a periodic tenancy automatically arises - the statutory periodic tenancy.
The Housing Act 1988 also served to strengthen the existing laws against unlawful eviction and makes the prospect of a civil action for damages more of a deterrent than it has been in the past. Section 28 sets out a new measure for damages to be awarded to any evicted occupier based on the difference in value of the property occupied or with vacant possession. Such awards can be considerable.
Rent Control
The Housing Act 1988 was a radical departure from the approach adopted by the Rent Act 1977 in that the powers of rent control were severely curtailed.
Unlike ordinary assured tenants who had no power to refer rents initially, the AST tenant could refer the rent to the rent assessment committee during the initial fixed term (later reduced to the first six months).
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Landlord and Tenant Act 1985 See Appendix B for wording s.11
Background
With the provisions introduced by the Rent Act 1977, landlords found their rental incomes cut, and were increasingly finding loopholes in the legislation in order to avoid their obligations or exit from the market. The Landlord and Tenant Act (LTA) 1985 was an Act to consolidate and strengthen the existing law of landlord and tenant formerly found in the Housing Acts, and the Landlord and Tenant Act 1962.
Key Provisions
Landlord information
Section 1 of the Act also imposes a duty on any person controlling property to furnish a tenant with the landlord’s identity within 21 days (upon written request by the tenant). A similar duty is also provided under s3 where the landlord is obliged to inform the tenant where the landlord’s interest in the property is assigned to another party.
s1: Disclosure of landlord’s identity (must furnish within 21 days)
s3: Duty to inform tenant regarding assignment
Repair
The Act defines important repairing provisions which imply a repairing into all short leases (defined as less than seven years). The main provisions are contained in sections 11 to 16 of the Act. Section 11 LTA 1985 states that the landlord must:
a) keep in repair the structure and exterior of the dwelling, including drains, gutters and external pipes,
b) keep in repair and proper working order the installations in the dwelling for the supply of water, gas, electricity and for sanitation (including basins, sinks, baths and sanitary conveniences but not other fixtures, fittings and appliances for making use of the supply of water, gasor electricity), and
c) keep in repair and proper working order the installation in the dwelling for space heating and heating water.
This provision is implied into all tenancies entered into after 24 October, 1961 and imposes an obligation on landlords to effect basic repairs which is absolute. Section 11 cannot be excluded from any residential tenancy and a landlord cannot negotiate with the tenant that section 11 will not apply to the tenancy.
Other sections
s8: Condition that property is fit for human habitation (very low rents only)
s18-25: duty to give information about service charges
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Housing Act 1985
Background
As well as being an important consolidating Act (i.e. an Act to bring the existing statutory provisions together into a single Act ) this Act had some important new provisions with respect to Houses in Multiple Occupation (HMO), and the definition and enforcement of fitness standards for residential property.
The definition for a ‘house in multiple occupation’ (in section 345, see below) remains fundamental to the application of housing law in this area and is still in force. See Chapter 16 for more information on HMOs.
Key provisions
Many of the provisions cited below empower local authorities to serve notice or take other appropriate action to enforce housing standards in HMOs. The local authority officer can then serve the notice, citing the appropriate section of the Act. Some key sections relating to private residential lettings within the Act are:
s189: Repair notice in respect of unfit house (for human habitation)
s190: Houses and flats that are not unfit for human habitation may still be in a state of disrepair and a section 190 notice can be served to require a landlord to execute works specified.
s264(1): ability of local authority (LA) to make closing order on dwelling
s276: tenants can be awarded damages for loss of tenancy (on closing)
s345: defines HMO: ‘house occupied by persons who do not form single household’.
Comment: This definition is examined in greater detail in the Chapter relating to HMO’s.
s346 - enables LA to set up HMO Registration schemes
Comment: Many local authorities have now set such schemes. For more detail, see HMO Chapter.
s352 - Standard of fitness for number of occupants (HMO’s Fitness Standard)
Comment: More detail in HMO Chapter.
s354 - Power to limit number of occupants in HMO
s358-364. Overcrowding. LAs are under a duty to enforce the law on overcrowding in all dwellings contained in Part X of the Housing Act 1985 (s 339(1))
s365 - gives local authorities additional powers to ensure an adequate means of escape from fire. May request landlord to give an undertaking to make property fit, not use part, or issue closing order.
s372 - authority for Secretary of State to issue Management regulations for HMOs
s379-394 - Control Orders - LA may take possession of an HMO
s604: defines the ‘Fitness standard’ for human habitation.
Comment: See Disrepair Chapter (Chapter 11) for more details on ‘Fitness Standards’.
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Housing Act 1980 - Protected Shorthold Tenancies
This Act established a new type of tenancy; the protected shorthold tenancy and this was the main provision in the Act of interest to private sector landlords. The legal framework of the protected shorthold tenancies was later replaced by the assured shorthold tenancies created by the Housing Act 1988.
The basic concept of the protected shorthold is a tenancy under which the landlord has the right to recover possession, but which otherwise has all the attributes of a protected tenancy which is governed by provisions in the Rent Act 1977.
By reason of Housing Act 1988, no protected shorthold tenancies can be created after 15th January 1989. An assured tenancy created on or after that date between the same landlord and tenant would be an assured shorthold.
The Act also provided a ‘Right to buy’ for public sector tenants.
Rent Act 1977
The Rent Act 1977 was a very damaging statute for the private rented sector. Not only did it consolidate the previous Rent Acts (1968 & 1974) and other statute, but more importantly, it introduced onerous rent control protection. The Act heralded the mass withdrawal of private landlords and the subsequent decay and decline of the private rented sector until the position was reversed by the Housing Act 1988.
Definition
The Act introduced the concept of the ‘protected tenancy’. The Rent Act uses the same general framework as that subsequently adopted by the Housing Act 1988 with respect to excluded classes of occupier. Thus, it is only tenants that can enjoy full Rent Act protection, not trespassers or licensees. Neither do tenants of resident landlords, holiday lettings, company lettings, student lettings and tenancies at low or no rent enjoy protection.
Rent control
Under the Rent Act, a tenant was permitted to apply to have the agreed rent reduced - to register a ‘fair rent’. The application was made to the rent officer who assessed the property. The rent officer was required to set a fair rent taking into account all the circumstances of the letting including the age, condition and character of the property, the locality etc. Importantly, the Rent Officer was required to disregard ‘scarcity value’ with the effect that registered rents became significantly discounted from market rents.
In recent years, with large increases in comparable public sector rents and recent cases demonstrating that there is little scarcity, it has been possible for landlords to gain significant increases in the ‘fair rent’.
Security of tenure
The Rent Act 1977 provided considerable security of tenure. For possession to be granted, the landlord had to prove one of 20 ‘cases’ or grounds. Further, the Act provided for two statutory successions where the tenancy could be ‘transmitted’ to the tenant’s family on death
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Protection from Eviction Act 1977
The private landlord had become increasingly regulated by the Rent Acts and other legislation which provided tenants with security of tenure and rent control. Many landlords sought to avoid the effects of the regulation by trying to circumvent the legislation (e.g. use of licences) whilst others simply resorted to brute force and other more crude devices to get rid of their occupiers at will. In the early 1960s, use of such tactics rose to a worrying level. The name ‘Rachman’ still remains in our vocabulary to remind us of the notorious landlord and the dubious eviction and harassment methods that were employed to evict tenants.
The Protection from Eviction Act 1977 consolidated and strengthened legislation originally introduced in the Rent Act 1965. The Act created three offences: one of unlawfully depriving the occupier of occupation of the premises, and two of harassment.
The law makes it an offence to: • do acts likely to interfere with the peace or comfort of a tenant or anyone living with him; or • persistently withdraw or withhold services for which the tenant has a reasonable need to live in the premises as a home. It is an offence to do any of the things described above intending, knowing, or having reasonable cause to believe, that they would cause the tenant to leave his home, or stop using part of it, or stop doing the things a tenant should normally expect to be able to do. It is also an offence to recover possession at the end of a tenancy or licence otherwise than by an order of the court.
Lastly, where a landlord seeks to terminate the occupancy by means of a notice to quit, the Act provides that the notice must be in the correct form and give at least 4 weeks’ notice.
More information on these offences is given in Chapter 13. The requirements of a notice to quit are described in more detail in Chapter 12.
Excluded tenancies and licences
The Act defines categories of occupancy which do not have protection from eviction: • a tenancy granted as temporary expedient to someone entering as trespasser • where the tenant shares accommodation with the landlord or with a member of the landlord’s family • a holiday letting • a tenancy granted other than for money or money’s worth • where the tenancy is part of a hostel provided by specified public body or housing association etc • tenancies within the meaning of Chapter 1 Part 3 of the Immigration Act 2014 and where section 33D(2) applies.
Criminal Law Act 1977
This Act states that any person who uses or threatens violence against either people or property in order to gain entry into premises, commits an offence if, but only if, the person seeking entry knows that there is someone present on the premises at the time of attempted entry, and that that person is opposed to the entry (Criminal Law Act 1977, s6).
The offence is, of course, not committed if the person seeking entry has lawful authority to do so, i.e. a court bailiff. See Chapter 12 for more details.
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Health and Safety at Work Act 1974
The Health and Safety at Work Act 1974 (HSWA) sets out some general provisions which require landlords to protect their tenants’ safety, and also allows regulations to be made with regard to specific business activities where there are special safety issues (e.g. gas appliances). This Act imposes responsibilities on both landlords and agents. Landlords may make arrangements, e.g. by contract, with managing agents to carry out the performance of their duties. In these circumstances, the agent may be liable to legal action where a breach of the landlord’s duties is shown to arise from the act or default of the agent.
There is also a duty on any employer or self-employed person to make an assessment of any risks to other people as a result of business activities. For landlords, this might include an assessment of gas safety, carbon monoxide safety and electrical safety risks in rented property. For employers with 5 or more employees, a written record of the assessment is required.
Comment: HSWA is a criminal statute which confers no right of action in civil proceedings. Enforcement in normal domestic accommodation is by the Health & Safety Executive (HSE).
Risks resulting from business activities
The HSWA states that ‘employers or self-employed persons who conduct an undertaking of a prescribed description must do so in such a way as to ensure, so far as is reasonably practicable, that they themselves and other persons (not being their employees) who may be affected by their work activities are not exposed to risks to their health and safety.’ The HSWA (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015 sets out the prescribed description of undertakings which includes working with asbestos, any work carried out on a construction site, any activity to which the Gas Safety (Installation and Use) Regulations 1998 apply and the carrying out of any activity which may pose a risk to the health and safety of another person (other than the self-employed person carrying it out or their employees).
For the purposes of this Act, landlords and their agents are normally considered to be engaged in the business of letting property, acting either as employers or self-employed persons. Accordingly, they are required to ensure that they themselves, their employees or any other people who may be affected are not exposed to risks to their health and safety. HSE guidance suggests that this also extends the normal protection afforded to business employees to tenants and other members of the general public (including outside contractors and workers employed by them) who may come into contact with health and safety risks at a particular property.
Where a landlord or agent employs an outside contractor or worker to carry out works in a residential property they must make sure that the contractor is a suitable and competent worker to ensure their safety and safety of others. It is important to assess the risks of the work with the contractor and discuss any potential hazards, including notifying the contractor of any known risks. Failure to comply may result in a breach of s.3 (1) of the HSWA as shown below.
Health and Safety Executive v Morris, Marshall & Poole 2011 (Crown Court) - An estate agent was fined after an elderly maintenance contractor was killed when he fell from a roof. The contractor had been carrying out repairs to a carport and gutter of a rented property when the plastic roof panel gave way and the contractor fell around two metres from the roof to the ground. The Health and Safety Executive (HSE) investigation found that the agent had failed to carry out checks to ensure the contractor was competent to carry out the work and to ensure the work was properly planned and organised. The agent was in breach of s.3 (1) HSWA, fined £75,000 and ordered to pay costs.
Health and Safety Executive v Rochefort Schugar Ltd 2011 ( Magistrates Court) - A self employed handyman, who regularly carried out maintenance on properties for a letting agent, was employed to fix a leaking porch roof at a residential property. Upon removing a sheet of material from the underside of the leaking roof he realised that it was an insulation board containing asbestos. The board was broken during removal and the surrounding area contaminated with asbestos
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debris. The HSE investigation found that the handyman had not been informed that there was any asbestos present in the property, the agent had not carried out a risk assessment or compiled a method statement and nor had there been any attempt to ensure the handyman was competent to work with or identify asbestos. The agent was in breach of s.3 (1) HSWA, fined £1,500 and ordered to pay costs.
A helpful guide called ‘Using Contractors’ is published by the HSE (see www.hse.gov.uk).
Risk at the workplace
Section 4 of the Act applies to parts of premises used as a workplace and imposes responsibilities on any person in control of such premises. These include a responsibility for safety in relation to any plant on the premises (e.g. a heating system) and design (e.g. safety of access).
Many provisions in the Act refer to safety within the workplace (i.e. non-domestic premises used as a place of work) and therefore do not affect residential property. However, in some situations, portions of a rented property which are not in the exclusive occupation of the occupants of a private dwelling, such as lifts and electrical installations serving the common parts of a block of flats, are ‘non-domestic premises’ and are made available as a place of work or as a place where plant is provided for the use of persons who come to repair and maintain the premises, and so this section of the Act applies to these parts.
Gas Appliances
HSWA is also the enabling legislation for the Gas Safety (Installation and Use) Regulations 1998 (and the related earlier gas safety legislation) which make specific duties on landlords of rented property, and for the installation and safety of gas appliances generally. These important duties apply to all landlords - see Chapter 8 for more details.
Risk of Legionella in Water Systems
Legionella is a ‘pneumonia-like’ illness caused by bacteria in water systems where the temperature of the water encourages growth of bacteria. The Approved Code of Practice: ‘Legionaires’ disease: The control of legionella bacteria in water systems’ (available from www.hse.gov.uk) has been revised by the HSE and now specifically considers the case of private sector residential landlords. The HSE state that the control of Legionella in domestic property is primarily covered by the HSWA which imposes an obligation on anyone who is in control of a premises to identify and assess the risk of exposure to Legionella.
The HSE state that the person responsible for repairing a boiler, tap or shower head when it breaks or leaks needs to be aware of the requirements and ensure compliance. It also advises that a risk assessment must be carried out by a competent person, which may include a landlord or agent, to assess whether the conditions are right for bacteria to grow, for example; in temperatures between 20 and 45 degrees celcius, where there is stagnant water, infrequently used outlets or debris in the system and consider whether there are any tenants who are likely to be vulnerable to infection such as older people or chronically ill people when carrying out the assessment.
According to the HSE guidance, the law requires simple, proportionate and practical actions to be taken including identifying and assessing sources of risk, managing the risk, preventing or controlling the risk and periodically checking that any control measures are effective. All water systems require a risk assessment, but not all systems require elaborate control measures. The guidance acknowledges that a risk assessment in most residential settings may show the risks are low, in which case no further action may be necessary. The frequency of inspection and maintenance will depend on the system and the risks it presents, but for most residential lettings a simple assessment when carrying out other routine inspections should suffice. The guidance also states that tenants should be provided with advice about any risks identified, the action being taken and any precautions they can take themselves, such as flushing through showers and taps following a period of non-use.
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Example Health and Safety Risk Assessment
Hazard Who might Measures Risks Action to By By Date be harmed already in identified be taken Whom When Completed place
Example Hazards • Gas and Flue Safety e.g. install carbon monxide alarms where required • Fire Safety e.g. install smoke alarms and check fire doors etc • Electrical Safety e.g. pat testing and electrical installation inspection • Furniture Safety e.g. safety labels and regulation compliance • Slips, trips and falls e.g. loose handrails etc • Hazardous substances e.g. asbestos containing materials • Hazards for young children e.g. swimming pools, ponds, curtain/blind cords etc • Legionella e.g. high risk tenants and HMO properties • Hygiene and Pest Infestations e.g. rubbish build up outside property Chapters 7 and 8 provide more detailed information on the regulations and safety compliance. Who might be harmed? Consider who might be harmed by the hazard e.g. tenants, visitors, children, contractors etc.
What measures are already in place? Gas and Flue Safety - Gas safety certificate available and periodic inspections are in place.
Fire Safety - Fire risk assessment available from previous inspection, fire doors self closing, emergency lighting installed (where required), extinguishers serviced and inspected, clearly marked fire exits etc.
Electrical Safety - regular inspections of fixed electrical installations and PAT testing of appliances supplied by the landlord and tenants advised to inspect appliances.
Furniture Safety - all furniture supplied by the landlord has been checked for appropriate safety labels as compliant with safety regulations.
Slips, trips and falls - Checked at start of tenancy for trip hazards including loose carpets, defects in garden paths and steps. Periodic inspections are in place.
Hazardous substances - Asbestos containing materials present, management plan in place identifying where asbestos is, noting the condition of the materials, annual checks by licensed asbestos contractor to ensure condition not deteriorated, management plan advises on legal requirements for disposal etc.
Legionella - Simple risk assessment carried out at start of tenancy and information passed to tenant advising them no legionella present and given information on prevention of legionella.
Any risks identified? Slips, trips and falls - loose handrail on stairs could cause a falling hazard. Fire safety - no smoke alarm at the property, fire exit blocked.
What further action is necessary? Where there is no hazard present diarise for the next inspection. Where a hazard has been identified record how the hazard will be resolved or prevented and what measures need to be put in place e.g. replace handrail or install smoke alarm. Record when the action should be completed and when it is actually completed.
Example risk assessments are available at www.hse.gov.uk/risk/casestudies/index.htm
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Defective Premises Act 1972
We have seen how the Landlord and Tenant Act 1985 imposes further contractual obligations or covenants into the tenancy agreement.
The statutory provisions introduced by the Defective Premises Act 1972 provide that in some circumstances, a duty of care may be imposed on the landlord. The difference between the duty of care under this Act and any contractual duties in the lease (e.g. Landlord and Tenant Act 1985) is that any claimant does not have to be a party to the contract; the duty of care can generally extend to the tenant’s visitors, neighbours etc.
Sections 1-3 of the Act imposes a duty on persons (including builders, developers, architects etc.) who undertake work on the dwelling: • to do the work in a professional or workmanlike manner • to use proper materials • to ensure with regard to that work that the dwelling will be fit for habitation when completed. Section 4 is an important provision from the point of view of the landlord. Where premises are let under a tenancy which includes a repairing obligation for the maintenance or repair of the premises, it imposes on the landlord a duty to all persons who might be expected to be affected by defects in the state of the premises that they are kept reasonably safe from personal injury or damage to their property caused by a relevant defect.
Knowledge of defect
The landlord does not need to have knowledge of the defect.
The Defective Premises Act 1972, s 4(2) provides:
(2) The said duty is owed if the landlord knows (whether as a result of being notified by the tenant or otherwise) or if he ought in the circumstances to have known of the relevant defect.
Meaning of ‘relevant defect’
The duty of care will arise under section 4 only when the defect in question is a ‘relevant defect’. This is defined in the Act, by s4(3) as:
a defect in the state of the premises existing at or after the material time and arising from, or continuing because of, an act or omission by the landlord which constitutes or would if he had had notice of the defect, have constituted a failure by him to carry out his obligation to the tenant for the maintenance or repair of the premises ...
The material time is 1 January 1974 for a tenancy which was in existence before the commencement of the Act. In all other cases it will be the earliest of the following times:
(i) the time when the tenancy commences;
(ii) the time when the tenancy agreement is entered into;
(iii) the time when possession is taken of the premises in contemplation of the letting.
The provisions of this Act are explained in greater detail in chapter 11 on Disrepair.
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Accommodation Agencies Act 1953
Background
The Accommodation Agencies Act 1953 was originally passed as a short-term measure following a period of severe housing shortage, being due to expire on December 31, 1957. The Act was designed to prevent certain abuses by accommodation agencies during this shortage, including charging prospective tenants to register their requirements, and supplying lists of addresses which might be totally worthless.
The Act enjoyed a series of annual renewals before being made permanent by the Expiring Laws Continuance Act 1969. Amongst the debate prior to the introduction of the Housing Act 1996, proposals were mooted to withdraw the Act but it still remains on the statute books.
This Act prohibits the taking of certain commissions in dealings with persons seeking houses or flats to let.
Key provisions in Act
1. The Act states that a person shall be guilty of an offence under this Act if he:
(a) demands or accepts payment of any sum of money in consideration of registering or undertaking to register the name or requirements of any person seeking the tenancy of a house;
(b) demands or accepts payment of any sum of money in consideration (a) of supplying, or undertaking to supply, to any person addresses (b) or other particulars of houses to let; or
(c) issues any advertisement, list or other document describing any house as being to let without the authority of the owner of the house or his agent,
2. However, the Act allows an agent to be paid for such services if the payment is demanded or accepted from the owner of a house.
3. Section 1(3) provides an exemption for solicitors.
4. A person shall not be guilty of an offence by reason of his demanding or accepting any payment in consideration of the display in a shop, or of the publication in a newspaper, of any advertisement or notice, or by reason of the display or publication as aforesaid of an advertisement or notice received for the purpose in the ordinary course of business.
Letting and estate agents, especially should take care to be clearly aware of the provisions of this Act since almost any situation where a charge is made to a tenant prior to granting a tenancy could imply a breach. Interestingly, there have been several recent prosecutions by trading standards officers under this Act.
In a recent case, an agent was found guilty under the provision detailed in 1(c) above. The agent had advertised and let an ex-council house. The tenant was subsequently required to give up possession because the landlord did not own the property and could not legally grant a tenancy on the property. The agent was prosecuted despite being misled by the client landlord originally. The implications arising from this prosecution are significant. The agent needs to take reasonable steps to check that the landlord holds good title to a property before it can be offered for let.
For more details, see Letting Factsheet 16 in the Appendix.
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Law of Property Act 1925
This is generally considered to be one of the most important consolidating Acts relating to the law of property. It consolidates many of the main provisions relating to both residential and commercial tenancies. It also helps to reduce the possibility for ambiguity and misunderstanding in such leases by providing standard definitions for many of the common terms.
Some of the key provisions which still apply are:
s1: Defines that estates in land may only be held in one of two main forms: • an estate in fee simple absolute in possession - commonly known as freehold • an estate comprising a term of years absolute - known as a lease or tenancy s52/54: All tenancies over three years must be created by deed.
s61: In leases and conveyances, the Act defines a standard meaning for some common expressions used in agreements and contracts. Thus: • ‘Month’ means calendar month • ‘Person’ includes a corporation • The singular includes the plural and vice versa • The masculine includes the feminine and vice versa. s62: A conveyance (includes leases) of land shall be deemed to include all buildings, outbuildings, fixtures, commons, fences, hedges, easements etc. that pass with that land.
s152: This important provision allows a lease to be invalidated by reason of non-compliance with terms of powers under which they are granted. Thus a mortgagee may recover possession of a property where it can be proved that agreement has not been given to the letting.
s196: Service of Notices - the Act defines what conditions are to be satisfied so that a statutory notice may be deemed to be ‘sufficiently served’. These provisions are explained in more detail in the section relating to service of notices in Chapter 12.
s205: General Definitions. This section includes definitions for many standard words or titles incorporated in leases; Conveyance, Land, Rent etc.
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8. Safety Regulations
This section covers the main product safety legislation which is defined by regulations (or secondary legislation) introduced under the following Acts of Parliament (or primary legislation): • Health and Safety at Work Act 1974 (more detail in previous chapter) • Consumer Protection Act 1987
The regulations covered in this section are:
Gas Safety: • The Gas Safety (Installation and Use) Regulations 1998 • Gas Appliances (Safety) Regulations 1995 • The Gas Cooking Appliances (Safety) Regulations 1989 • Heating Appliances (Fireguard)(Safety) Regulations 1991
Furniture Safety: • Furniture & Furnishings (Fire)(Safety) Regulations 1988 (as amended)
Electrical Safety: • Electrical Equipment (Safety) Regulations 1994 • Plugs and Sockets etc. (Safety) Regulations 1994 • Construction (Design and Management) Regulations 2015
Other Safety Regulations: • General Product Safety Regulations • Bunk Bed (Entrapment Hazards)(Safety) Regulations 1987 • Regulations for paraffin heaters • Regulations for Catalytic Gas Heaters • Regulations for Smoke Detectors • Regulations for safety glass, fireguards and fire blankets Criminal penalties
All the regulations may incur criminal penalties where there is an infringement.
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The Gas Safety (Installation and Use) Regulations 1998
Background
Badly installed or maintained gas appliances in properties can pose a significant danger to the occupants. Each year between 30 and 40 people die of carbon monoxide (CO) poisoning with the most vulnerable people being those who live in rented housing and houses in multiple occupation (HMOs). If the flue becomes blocked, or there is inadequate ventilation for the appliance, then this can cause carbon monoxide to be released into the room. Where there is a significant build- up of carbon monoxide, it takes only 30 minutes for the toxic gases to kill the occupants.
The Legislation
1. The Health and Safety at Work Act 1974 is the governing legislation 2. The Gas Safety (Installation and Use) Regulations 1998 3. The Gas Cooking Appliances (Safety) Regulations 1989 (includes second hand appliances) Legislative history
The original regulations were introduced in 1994. There have subsequently been four main amendments or changes:
- Gas Safety (Installation and Use) (Amendment) Regulations 2018. These regulations make changes to the timings of when gas safety checks can be carried out and also clarify that ‘gas safety’ defects are required to be recorded on the gas safety certificate.
- Gas Safety (Installation and Use) (Amendment) Regulations 1996. These regulations amended the original regulations and introduced several new provisions. The new provisions included a limitation of the scope of the regulations to short leases, a definition of excluded appliances, inclusion of the flue within the regulations, and a definition of what checks need to be carried out. These amendments came into force on April 1 1996.
- Gas Safety (Installation and Use) (Amendment No. 2) Regulations 1996. This amendment came into force on October 31 1996, placing on landlords a positive duty to supply tenants a copy of the gas safety report.
- Gas Safety (Installation and Use) Regulations 1998. These are the current regulations which came into force on 31 October 1998 and supersede the previous 1994 regulations and their amendments (1996 above).
Penalties and Enforcement
Failure to maintain gas appliances could result in a penalty of imprisonment or a fine of up to £20,000, or both for each offence.
Enforcement is by the Health and Safety Executive (HSE)
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Gas Safety (Installation and Use) Regulations - Main Provisions
Scope
The Regulations apply to all gas appliances in the property (other than any specifically excluded by the regulations), any associated gas pipework leading to the appliances, and any flue leading from the appliance. The Regulations include portable heaters and other gas appliances fed by bottled gas, or from an external gas storage vessel (e.g. LPG / propane gas) at the property. The Regulations apply to tenanted properties in both the private and public sector.
Annual testing
Statutory Requirement: The Regulations require that an annual check is carried out in all rented properties. The amended regulations now also specify the nature of the tests to be carried out during such checks. The 2018 Regulations provide that the annual check can now be carried out within two months before the due date and retain the existing 12 month expiry date. A check may also be carried out up to two months after the 12 month expiry date but only once in relation to each appliance or flue and only in order to align the expiry date with another appliance check so that both appliances have the same expiry date.
Comment: The engineer will normally carry out the following tests :
- General operation & safety devices - Inspection of combustion - Pressure Test (or ‘Drop Test’) - Vent Check - Flue test
The engineer will verify the correct operation of the appliance, taking the device though an ignition cycle, and checking that any safety devices are working correctly. The inspection of combustion can either be carried out visually or with an instrument. The colour of the flame will normally determine whether a gas appliance is burning correctly. The flame should be blue with no traces of luminescent. Some engineers are now performing combustion testing with the aid of a probe which provides a very accurate measure of the combustion characteristics.
A pressure test (sometimes known as the ‘drop test’) is to check for leakage of gas within the appliance or supply pipework. The pressure is typically checked over a three minute interval. The vent check is designed to verify that there is an adequate supply of air to the appliance. The regulations now specify what size of vents will be necessary for a particular size of gas appliance and in some cases, the engineer will check that vents are provided and unobstructed.
Finally, the engineer will inspect the flue or chimney leading from an appliance. This needs to be tested to ensure that the products of combustion are carried away safely and efficiently. This may be done with the help of the ‘smoke test’.
Maintenance provisions
Requirement: The Regulations state that: ‘Every landlord shall ensure that there is maintained in safe condition: (a) any relevant gas fitting; and (b) any flue which serves any relevant gas fitting, so as to prevent the risk of injury to any person in lawful occupation of relevant premises.’
N.B.: 1.The Regulations were amended so as to include the flue on or afterApril 1 1996. 2. A ‘relevant gas fitting’ includes any installation pipework installed in the premises.
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Requirements of safety check
Requirement: The Regulations define the content of the safety check as including an examination of: ‘(a) the effectiveness of any flue, (b) the supply of combustion air, (c) the appliance operating pressure or heat input or, where necessary, both; (ca) if it is not reasonably practicable to examine its operating pressure or heat input (or, where necessary, both), its combustion performance; (d) its operation so as to ensure its safe functioning’
Comment: mainly of interest to the gas engineer who will be responsible for compliance with this provision.
Competent persons
Requirement: Any work done on gas appliances, including new installations, repairs and maintenance and the safety check specified above shall be done by a competent and suitably qualified engineer. This person, or his employer must be Gas-Safe registered. Regulations introduced in 1998 require that gas operatives or installers have passed standards of competence for specified types of gas appliance. Gas-Safe is now the official government-appointed accreditation body - previously CORGI. Comment: The Regulations specify that the gas engineer or his employer must be a member of an organisation approved by the Health and Safety Executive (HSE). At present, only one organisation, Gas-Safe, is approved in this way. In order to check that the gas fitter or engineer is competent to carry out the required work, ask to inspect the gas engineer’s Gas-Safe ID card. In addition to identifying the individual engineer and verifying Gas-Safe registration, the ID card certifies which types of appliance the engineer is qualified to work on, and the expiry dates of the respective certifications.
Record keeping
Requirement: It shall be the duty of the owner, or person responsible for the premises to keep a record of the gas appliances in the property, dates of inspection, the safety defects identified and any remedial action taken. These records must be made available on request for the inspection of any tenant who may be affected by the use or operation of any appliance, and should include: • date of inspection of appliance or flue • the address of the premises at which the appliance or flue is installed • the name and address of the landlord of the premises (or agent) • a description of the location of each appliance or flue checked; • any safety defects found (if any) • remedial action taken (if any) • confirmation that the check meets the current requirements of the Regulations • Name and signature of gas engineer, and Gas-Safe registration number. The Regulations also require that the safety check and inspection records are kept until there have been two further checks of the appliance or flue or, in respect of an appliance or flue that is removed from the premises, for a period of 2 years from the date of the last check of that appliance or flue. Comment: Forms issued by Gas-Safe gas engineers will (if appropriately completed) contain all this information. The form should be inspected to ensure that it has been fully completed and the specified appliances have been checked; and then securely filed.
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Gas safety record or certificate
Requirement: Amended Regulations introduced on 31 October 1996 state that the landlord must provide a copy of the record to any new tenants before they move into the property to which the record relates. If the period of letting is for 28 days or less, then a copy of the record may instead be prominently displayed at the premises.
Also, a copy of any subsequent gas safety check or record should be given to each existing tenant in the property within 28 days of the date of the check.
Comment: Thus all tenants must receive an individual copy of the subsequent gas safety record within 28 days of the check being completed, and it can be presumed that a similar interpretation should be applied to the provisions relating to new tenants. The report should be completed by the Gas-Safe registered engineer and include details of the gas appliances or flues in the property, the dates of inspection, any defects identified and any remedial action taken.
Contracting out
A landlord may not ‘contract out’ of his obligations under the Regulations by making an agreement or stipulation on the tenant under the lease that the tenant must arrange for servicing of gas appliances.
Repairs and alterations
Regulation 8 requires that any person who is considered to be in control of works that affect existing gas fittings must take all reasonable precautions and actions to ensure that thegas fittings are not brought out of line with the regulations. This includes not only checking after works where it seems obvious that gas appliances may be affected, but also in circumstances where the dangers are less apparent such as the installation of double glazing which may include the removal or replacement of air bricks.
Prohibited appliances
Certain categories of gas appliance may no longer be installed in certain parts of the living accommodation of a dwelling-house under the Gas Safety (Installation and Use) Regulations 1998. A gas appliance with no flue or open flues (non ‘room-sealed appliances’) should not be installed in a bathroom or shower room. (Reg 30)
Also, open flue appliances (i.e. non ‘room-sealed appliances’) may not be installed in a bedroom (or any room used as sleeping accommodation) unless they are under 14 kW heat input and fitted with a safety device which turns off the gas supply if the air becomes contaminated with carbon monoxide.
General provisions
- A person responsible for a premises shall not use or permit to be used a gas appliance that is suspected or known to be faulty or incorrectly installed.
- Where there is an escape of gas, the person responsible for the premises must take reasonable steps to prevent further escape, and is obliged to inform the gas supplier immediately if the gas continues to escape after the supply has been cut off or the smell of gas persists.
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Exclusions
Long leases
Tenancies on leases of 7 years or more are excluded from the Regulations. A lease comes within the Regulations when it is:
(a) a lease for a term of less than 7 years; (or determinable within 7 years) (b) a tenancy for a periodic term, or (c) any statutory tenancy arising from (a) or (b).
Comment: This provision follows the repairing provisions of the Landlord and Tenant Act 1985 - tenancies longer than 7 years being excluded from statutory control.
Tenant’s appliances
Neither landlord nor agent will be responsible for gas appliances installed or owned by the tenant(s)
‘relevant gas fitting’ means-
‘any gas appliance (other than an appliance which the tenant is entitled to remove from the relevant premises) or any installation pipework installed in any relevant premises;’
Defence against contraventions
The regulations allow a defence for some specified regulations where a person can show that he took all reasonable steps to prevent that contravention.
Other Provisions
Many of the provisions in the Regulations apply exclusively to the gas installer. Where the provisions may be of interest to landlords and agents, they are listed below:
- where the gas meter is installed in a meter box, the installer should supply the consumer with a suitably labelled key to the box.
- the installer or engineer must perform a defined series of safety checks and tests after carrying out any work on a gas appliance.
- Any person who installs a gas appliance in a property shall leave instructions for the occupier of the premises.
The HSE issued a safety notice in December 2010 informing homeowners and landlords that, by 31 December 2012, they are required to have inspection hatches installed in properties that contain concealed flue systems (‘room-sealed fanned draught’). This will mainly, but not ex- clusively, affect flats and apartments built since around 2000.
If a landlord is unsure as to whether their property contains concealed gas flues and is therefore required to install inspection hatches or not, they must contact a Gas Safe registered engineer, who will be able to advise if the HSE Safety Notice applies to their property.
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Gas Safety (Installation and Use) Regulations - Special situations
The primary responsibility for compliance with these regulations lies with the landlord or owner of the property. Where the property is being let or managed by an agent on behalf of the landlord, there are some additional considerations that need to be clearly understood.
Agent’s responsibilities
The HSE guidance states that:
‘Landlords who use agents to manage their properties should ensure that the management agreement contract specifies who is responsible for the maintenance of gas appliances and for keeping records to indicate when such maintenance has been carried out. Where it can be shown that a breach of these Regulations by a landlord is due to the act or default of a managing agent, then that managing agent will be guilty of the offence under section 36(1) of the Health and Safety at Work Act 1974 and may be prosecuted regardless of whether or not proceedings are taken against the landlord’.
Thus, great care needs to be taken by any managing agent. Firstly, although the guidance is not mandatory, agents should indicate in the management agreement who is responsible for the maintenance and record keeping duties as suggested above. Even if there is no written agreement, particular actions of the agent may be sufficient to imply that the responsibility lies with the agent. In a recent case, an agent took it upon herself to have appliances checked prior to a letting because the landlord had omitted to arrange this. When there were subsequent problems at the property, the agent was implicated (although no prosecution resulted in this case).
Secondly, the agent is expected to be familiar with the safety requirements in exercising his normal professional expertise. On this basis, it can be argued that the agent has a duty of care to inform landlords of any relevant safety legislation that may apply, and could be held negligent if he failed to do so.
‘Let-only’ or ‘find tenant only’ situations
In some cases, the agent merely acts to find or introduce the tenant for the landlord, and plays no further part in the management of the property.
In this situation, it is the landlord’s responsibility to ensure that a safety check has been carried out and also to issue the gas safety record or certificate. However, the landlord may be ignorant of the law (although this is no defence) and so the agent has a duty to inform the landlord of his obligations. The agent should insert a paragraph into his agreement for ‘let only’ situations which explains the obligations of the Regulations to the landlord.
Where an agent is aware that the required safety check has not been carried out with respect to the gas appliances at a property, or the landlord refuses to supply a valid safety report, it would be wise to refuse to act for this client. Although the agent might have no direct responsibility for the contravention, it could be claimed that the agent may be assisting in the committal of a criminal offence if he continued to act with such knowledge.
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Gas Cooking Appliances (Safety) Regulations 1989
Requirement: These regulations came into force on March 1 1989 and apply to all gas cooking equipment ‘supplied’ in the course of business. The regulations require that any gas cooker, whether new or second-hand is working correctly and is not damaged. Furthermore, the supplier is also liable where there is a risk of injury arising from escape of gas, the stability of the appliance, or the lack of appropriate English instructions.
Comment: Since the introduction of the Gas Safety (Installation and Use) Regulations (GSIU), this legislation is less significant since the GSIU regulations exceed the requirements of the Gas Cooking Appliances Regulations in almost all areas. It can be safely assumed that the required safety checks will highlight any safety problems sufficiently.
Care should be taken that any safety instructions (in English) are provided.
Heating Appliances (Fireguard)(Safety) Regulations 1991
Requirement: These regulations apply to the supply or hire of heating appliances in the course of business. Regulations introduced in 1991 made it a requirement that all such appliances are fitted with fireguards that comply with the current British Standard specification.
Comment: In practice, this relates to the design of the fireguard protecting any heating element, burner or wicks etc. The fireguard must be constructed so that any gaps in the guard are small enough to prevent small children being able to insert fingers through the grill.
Gas Appliances (Safety) Regulations 1995
These regulations make provision for the CE mark to be fixed to any new gas appliance. These regulations consolidate and make minor amendments to the previous Gas Appliances (Safety) Regulations 1992.
The 1995 regulations apply to gas appliances placed on the market after 1 January 1997 and second hand appliances continue to be covered by the Gas Cooking Appliances (Safety) Regulations 1989.
Comment: Only of interest when purchasing new equipment.
Further Information
- Letting Factsheet No.7
- Gas Safety Action Line: Tel: 0800 300363
- Local authority Health and Safety officer
- HSE Guidance Notes: Safety in the Installation and use of gas systems and appliances. (available from HSE books on 01787 881165
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Gas Safety Glossary
Appliances and problems
The most dangerous gas appliance still in use is the ‘open-flue’ boiler. The unit is not sealed so that burnt gases or CO can escape into the room very easily if the appliance is not monitored carefully. The Gas Safety (Installation and Use) Regulations state that no open flued heating appliance may be installed in a room used or intended to be used as a bathroom or a shower room. Similarly, such appliances shall not be installed in accommodation designed for sleeping purposes such as bedrooms and bed-sitting rooms unless they are rated at less than 14 kW and incorporate a safety cut out which operates when the air is contaminated by CO.
The most efficient and safe form of heater or boiler is one which is ‘room-sealed’ so that air comes in, mixes with the gas and the waste products are sent directly out again so that no reburn occurs.
If, when using gas fires the flue becomes blocked, the waste products are not escaping. This waste contaminates the air intake and is being reburnt and expelled into the room.
Typical incidents
In fatal and non-fatal incidents three things usually occur:
1. The flue becomes blocked, for example by a bird’s nest, and is therefore ineffective. The blockage cannot be seen at ground level but the indicator is sooting or brown staining on the appliance or on the decoration around the appliance. Every flue outlet should have an approved terminal on it to stop wind blowing against it. If it has none the wind blows waste products back into the room. The terminal should be above the eaves and not below.
2. Ventilation becomes blocked or ineffective, for example where cling film has been put over the vent to prevent draughts. Fly screens are not allowed over ventilators and the ventilators should be non closing. If a blocked ventilator is combined with two of the others the result will be lethal.
3. Maintenance has been inadequate, although sometimes there can be a manufacturer’s design fault despite regular servicing.
Nothing should be put on top of any water heater. It takes 30 minutes for enough CO to build up to kill the occupants. Boilers should not be boxed in as carbon build-up on the appliance would not be immediately apparent.
Gas safety report
The Regulations require that tenants are furnished with a record showing that a gas safety check has been carried out (the gas safety record), and specify what information must be contained within the record. No special form is required although Gas-Safe installers generally supply the information using the standard Gas-Safe CP12 form.
The form comes in 3 parts; 1 part is retained by the gas engineer and the other 2 parts by the agent or the landlord. The third copy must be passed onto the tenant. Photocopies can be taken if further copies need to be supplied.
NB. Under the Regulations the tenant can, upon reasonable notice, require to see copies of the gas safety records relating to the respective premises.
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Gas Safety Glossary - continued
Carbon monoxide
Carbon Monoxide (CO) is a gas which is highly poisonous to people and animals. It is colourless and odourless and the body takes it in at 300 times the rate it takes in oxygen. Faster breathing because of lack of oxygen leads to faster intake of CO.
Gas appliances need plenty of air to burn safely. With enough air, burning domestic fuels produce carbon dioxide and water in safe amounts. These products are normally carried away by a chimney or flue. However, if there is too little air, carbon monoxide can be produced. This can also happen if the chimney or flue is blocked or obstructed. Similar dangers exist with heaters burning other fuels. A reported fatality (in 1994) concerned a solid fuel burner in a living room of a rented property.
CO Detection and CO Detectors
There are two immediate warning signs that can identify a faulty or dangerous appliance. Either the flame colour, or evidence of carbon residues, indicates incomplete combustion.
A gas appliance should burn with a luminous blue flame. A yellow flame, or a strange smell when it is turned on, indicates that something is wrong. Other signs to look for are a brown or sooty build up on the canopy of the fire or on any part of the boiler. Carbon builds up because of the reburnt waste. This can also be seen on the burners of a gas fire. If the fire is glass fronted the carbon builds up at the back and so may be missed, but a further sign is that condensation builds up more readily on the glass doors.
Anyone using an appliance with a brown or sooty build up, or which has a yellow flame, should be told to stop using it immediately. British Gas should be called out on the emergency number. They will, if satisfied there is CO coming from the appliance, switch it off. It must not be used until it has been serviced, cleaned and made safe for use. This must be done by a registered Gas-Safe engineer. If the gas engineer condemns the appliance, he will put a warning sticker on the front and disconnect the appliance from the supply. The tenant should inform the landlord or agent who should attend immediately and rectify the situation. Alternatively, (especially for non-gas fuelled installations) your local environmental health officer may be prepared to visit and check CO levels around a suspect appliance.
From 1st October 2015 landlords will be required to install a carbon monoxide alarm in any room of the property which is used wholly or partly as living accommodation and which contains a solid fuel burning combustion appliance. Each alarm must be tested at the start of a new tenancy granted on or after 1st October. This provision has been brought in under the Smoke and Carbon Monoxide Alarm (England) Regulations 2015. See page 8-25 for further information .
Ventilation
All gas appliances must have plenty of ventilation: • To provide air for the appliance to burn safely. • To carry away waste gases produced by the appliance. An air brick or vent is essential (except for balanced flue appliances). These vents should never be blocked. When doing any insulating or building work, take care not to restrict ventilation.
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Flues
Gas appliances also need to get rid of the waste gases effectively. The ‘flue’ is a passage for conveying the products of combustion from a gas appliance to the external air. Most modern gas appliances must have a flue or chimney although there are some minor exceptions as we shall see below.
In relation to flues, there are several types of appliance: • Flueless. This type of appliance has no flue (E.g. cooker, sink water heater). Combustion products are vented directly into the room. Only low heat output devices are now allowed to operate in this way. • Open Flue appliance. This type of appliance has a flue which is not sealed and relies on convection of the hot waste gases and ‘adventitious’ ventilation. The danger with this design is that with a blocked flue, bad flue siting, or adverse wind direction, the fumes can be easily forced back into the room. Since the mid ‘70s open flued appliances have not generally been put in bathrooms and since 1984 it has been illegal to do so. The result of this is that by 1993 there were no recorded deaths by CO in bathrooms and 2 in 1994. • Balanced Flue. The preferred type of flue on modern gas appliances is the balanced flue or ‘room-sealed’ appliance’. Here the combustion system is sealed from the room in which the appliance is located. The appliance normally obtains air for combustion directly from the open air, and also vents the products of combustion to open air outside the premises. The vent and flue are often combined and share the same aperture through the outside wall. The balanced flue appliance thus has no requirement for separate ventilation or air bricks in the room. Balanced flue appliances can be fan assisted - the ‘fanned balanced flue’.
Room-sealed Appliances
A ‘room-sealed appliance’ means an appliance whose combustion system is sealed from the room in which the appliance is located and which obtains air for combustion from a ventilated uninhabited space within the premises or directly from the open air outside the premises and which vents the products of combustion directly to open air outside the premises.
The requirement with regard to room-sealed appliances in bathrooms / shower rooms does not apply retrospectively to appliances installed before 31 October 1994. The restrictions on appliances in sleeping accommodation do not apply to appliances installed before 1 January 1996. A competent gas fitter will be able to advise landlords who are unsure whether specific appliances are affected in specific situations (i.e. when converting accommodation).
Second-hand Appliances
Landlords should avoid buying second-hand gas appliances wherever possible. If you have to buy second-hand, then the appliance must be recently serviced and installed by a Gas-Safe fitter.
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Furniture & Furnishings (Fire)(Safety) Regulations 1988 (as amended)
Background
Many domestic fires start with soft furnishings catching fire and many deaths are attributed to the highly poisonous fumes that are given off by the man-made foams and coverings. The regulations specify improved levels of fire resistance of materials used in the construction of domestic upholstered furniture, furnishings and other products containing upholstery.
Due to a test case, the Regulations were amended in 1993 to draw specific attention to the responsibilities of letting agents and those engaged in the ‘letting of accommodation’. Landlords and letting agents are also included under the scope of the Regulations and have to ensure that any furniture supplied with rental accommodation is compliant. The Regulations refer to the ‘supply’ of furniture and furnishings and it has been established that in many cases, a letting agent or commercial landlord is deemed to be ‘supplying in the course of business’ when these types of items are included within a property.
The Legislation
1. The Consumer Protection Act 1987 is the governing legislation.
2. Furniture & Furnishings (Fire)(Safety) Regulations 1988, SI 1988 No. 1324
3. Amendment Regulations 1989, SI 1989/ 2358 & Amendment Regulations SI 1993 / 207
Amendments
The Furniture and Furnishings (Fire)(Safety) (Amendment) Regulations 1993. These regulations amended the 1988 regulations. They introduced a transition period for furniture and furnishings included in properties let prior to March 1 1993 and provide that any applicable furnishings shall comply to the new standards with the first new let after 31st December 1996. A renewal of the same tenancy or substantially the same tenancy does not constitute a new let. Therefore non-compliant furniture can remain in these properties, provided it was included in the original let, until there is a change of tenancy after this date. All additional or replacement furniture must be compliant regardless of when the tenancy began.
Previous Regulations
The regulations revoke the Upholstered Furniture (Safety) Regulations 1980 and the Upholstered Furniture (Safety) (Amendment) Regulations 1983.
Penalties and Enforcement
The maximum penalty for non-compliance with the regulations is a substantial fine set at Level 5 of the standard scale (currently £20,000) and six months imprisonment in serious cases Enforcement is by the local trading standards office (TSO)
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Furniture & Furnishings (Fire)(Safety) Regulations - Main Provisions
The bulk of the Regulations deal with the duties of manufacturers (and importers if manufactured abroad) in producing and supplying domestic furniture and furnishings to the required standards for fire resistance. These standards include two tests; the match test and the cigarette test. For new furniture, the net effect of the Regulations is that any such products manufactured after 1st March 1989 or sold by a retailer after 1st March 1990 shall be to the specified standards and will be labelled accordingly (see section entitled ‘Identification’).
However, in the case of letting agents or landlords letting in the course of business, the furniture ‘supplied’ will invariably be second-hand and in many cases manufactured and purchased prior to 1989. Effective 1st March 1993, landlords letting residential property for the first time will be expected to ensure that any soft furniture complies with the Regulations. There is an exemption period for properties already being let at this date - for further information, see section headed ‘Legislation - Amendments’ above.
The main provisions are: • relevant upholstered articles (i.e. beds, sofas, armchairs etc.) must have fire resistant filling material • new upholstered articles are required to be appropriately labelled with the prescribed fire safety warning labels • upholstered articles must have passed a match resistance test or, if of certain kinds (such as cotton or silk) be used with a fire resistant interliner. • the combination of the cover fabric and the filling material must have passed a cigarette resistance test. Scope
The regulations apply to: (broadly anything which is upholstered or has filling material) • Beds, headboards of beds and mattresses • Sofa-beds, futons and other convertibles • Nursery furniture • Garden furniture which is suitable for use in dwelling • Scatter cushions and seat pads • Pillows • Loose and stretch covers for furniture • Extra or replacement furniture purchased for rented accommodation
The regulations do not apply to: • Antique furniture or any furniture made before 01 January 1950 • Bed-clothes (including duvets) • Loose covers for mattresses • Pillowcases and sleeping-bags • Curtains and carpets
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Furniture & Furnishings (Fire)(Safety) Regulations - (continued)
Identification
Compliant furniture can be identified by display labels. These labels will be supplied on purchase, and permanent labels are also normally attached to the furniture itself. It is important that any permanent safety labels (generally sewn into or onto the upholstery) are not removed since these are an invaluable aid to landlords and agents.
There are two types of labels:
DISPLAY LABELS: - furniture will carry the appropriate display label at point of sale.
PERMANENT LABELS: - all new furniture (except mattresses and bed-bases) and covers for furniture must carry a permanent and non-detachable label.
Examples and more information regarding the prescribed labels is given in the DTI’s Guide to the Furniture and Furnishings Regulations.
Compliance checking
Clearly a landlord or agent will need to check all furniture and furnishings in a property carefully before letting, and in most cases, the presence of the required safety labels will be the prime method to ascertain compliance.
Where there are no safety labels present, it can happen that these have been inadvertently removed (perhaps by a previous tenant or owner), yet the construction of the article is nonetheless compliant and manufactured with appropriate fire retardant foams and coverings. Advice from trading standards officers has indicated that in practice, lack of labels on such furniture will be overlooked provided that the landlord or agent can supply reasonably conclusive proof that a particular item of furniture is compliant. This might comprise of a copy of the receipt giving date and place of purchase and the name of the supplier (since furnished articles sold by a retailer after 1st March 1990 were required to conform to the Regulations), or similar information that will indicate that the article is compliant. For this reason, it is important that all receipts are retained for any furniture and furnishings purchased by or on behalf of landlords for rented property. Difficulties are also commonly encountered with furniture made before 1950 (which is exempt from the Regulations) since it is likely that the receipts or similar records of purchase have long been destroyed.
If neither label, nor receipt is present or available, then it is generally inadvisable to proceed with the supply of the articles in the absence of any other reliable indicators of compliance (or firm indication that the item was manufactured prior to 1950). It is sometimes possible to contact manufacturers or similar experts who may be able to identify whether a particular item (perhaps by a batch code or similar reference number) was compliant with the Regulations when manufactured. In the case of antique furniture, a letter from a respected antique dealer or a similar expert identifying the item(s) of furniture to be pre-1950 in origin or manufacture would be an excellent safeguard. Otherwise, furniture of uncertain origin will either need to be re-upholstered or discarded (or perhaps given to the tenant - see note 5 overleaf).
To add to the confusion caused by these Regulations, certain items (mattresses, bed-bases, pillows, scatter cushions and seat pads) are excluded from the labelling requirement (although some manufacturers still attach the permanent labels voluntarily) and therefore purchase receipts will be the principle method of compliance checking for such items.
When buying new or second-hand furniture for a rental property, it is important to always check to see that there is an appropriate label.
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Exclusions and Indemnity
1. PRIVATE LANDLORDS. It is the view of the DTI (Department of Trade and Industry) that a private landlord or owner (e.g. letting a single dwelling) who lets his property on a one- off short-term basis (whilst, for example, he is temporarily working away from home) is not a commercial landlord and therefore not a ‘supplier in the course of business’. On the other hand, a much longer let or series of lets, where the landlord views the property’s primary purpose as a source of income rather than his residence, is likely to be classified as a businesssupply and such lettings would then come under the Regulations.
Private landlords who let a second home, or own one or more properties specifically for the purpose of letting must comply with the Regulations. A Limited company acting as a landlords will also be required to comply.
An agent when acting for a private landlord is subject to the Regulations, even if the landlord is not; this is a seemingly unfair distinction that arises in the Regulations.
2. PRE-1950 FURNITURE. Furniture produced prior to 1950 is exempt from the regulations.
3. DUE DILIGENCE. Section 39 of the Act provides a defence of ‘due diligence’. That section provides that it shall be a defence to show that a person took all reasonable steps and exercised all due diligence to avoid committing the offence. Merely asking the landlord to sign a statement that there is no non-compliant furniture is not considered to be sufficient in this respect. Counsel’s opinion has been taken. Asking for proof of the date of purchase (i.e. receipts) would be good verification. Alternatively the agent could ask the manufacturer (or ask the landlord to do so) whether the furniture in question complies or not and, if still unclear, the landlord should be advised to get further technical advice.
4. ‘LET-ONLY’ OR ‘FIND-TENANT-ONLY’ AGENCY SITUATIONS:
The DTI has suggested that an agent acting only in the capacity of introducing suitable tenants to a landlord (and taking no part in the preparation of an inventory or day-to-day management) is not carrying out a ‘supply’ and is thus exempted from the Regulations. Where agents wish to gain relief from the Regulations in this way, it is important that there is no inference of ‘supply’ on the part of the agent and so any tenancy agreement (or other contract for the letting of the property, including the furniture) should be drawn directly between the client landlord and the tenant.
5. TENANT’S FURNITURE. These regulations do not apply to any furniture that is not supplied with the accommodation. Thus, a tenant may bring his own non-compliant furniture into the property.
Advice given by trading standards officers suggests that a private landlord may pass any non- compliant furniture to a tenant as a one-off transaction. But a landlord should not do this on a repeated basis to successive tenants at the same property, or otherwise leave such furniture at the property in a way that can be ‘found’ by the tenant.
6. PRIOR LETTING PROVISIONS. Following an amendment to the Regulations made in 1993, landlords who were already letting residential property prior to 1 March 1993 were granted an exemption from the Regulations up to 31 December 1996. The effect of this exemption is that non-compliant furniture can remain in these properties, provided it was included in the original let, until there is a change of tenancy after this date. For the purposes of this exemption, a renewal of the same tenancy or substantially the same tenancy does not constitute a new let. However, any additional or replacement furniture supplied to tenants during this exemption period does need to be compliant regardless of when the tenancy began.
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Furniture & Furnishings (Fire)(Safety) Regulations - Agency situations
The primary responsibility for compliance with these Regulations lies with the person ‘supplying’ the furniture. Where the property is being let or managed by an agent on behalf of the landlord, then the Regulations will normally apply to the agent since the agent is letting or ‘supplying’ the property in the course of business. Some additional considerations are highlighted below.
Agent’s Responsibilities
It is important that an agent informs any landlords of the requirements of the Regulations. The agent is expected to be familiar with the safety requirements in exercising his normal professional expertise. On this basis, it can be argued that the agent has a duty of care to inform landlords of any relevant safety legislation that may apply, and could be held negligent if he failed to do so.
Tenancy agreement
Some advisers take the view that managing agents can avoid the compliance requirements under the Regulations by not signing the tenancy agreement (as agent) on behalf of their client landlord, and simply asking the landlord to sign instead.
It is the author’s view that this approach is incorrect and inadvisable. Whether a landlord is conducting a supply in the course of business will depend on the full facts of the particular case, and not merely on whether or not the agent has signed the tenancy agreement. The ‘let-only’ exemption advice given by the DTI (see below) appears to be sound if the agent’s involvement is minimal and the caveats supplied in the advice are followed. However, there is no reason to believe that the scope of this exemption can be extended with any certainty or legal basis where an agent has a closer involvement in the letting and management of the property. A more authoritative interpretation will only follow when there is case law on this particular issue.
‘Let-only’ or ‘find tenant only’ situations
In some cases, an agent merely acts to find or introduce the tenant for the landlord, and plays no further part in the management of the property. This is often referred to as a ‘let-only’ type of letting service.
In this situation, the agent is normally considered to be exempt from the Regulations since he is merely acting to introduce the parties and not taking a significant part in the supply. However, the landlord (who may be subject to the Regulations) may be ignorant of the legal requirements in this respect (although this is no defence) and so the agent still has a duty to inform the landlord of his obligations. The agent should insert a paragraph into his agreement for ‘let only’ situations which explains the obligations of the Regulations to the landlord.
Where an agent is aware that the furniture in a particular property is non-compliant and the landlord refuses to replace the offending items, it would still be wise to refuse to act for this client, even on a ‘let-only’ basis. Although the agent could claim to have no direct responsibility for the contravention, an agent might still be implicated and liable to prosecution on the basis that the agent was assisting in the committal of a criminal offence.
Sale of Furniture
Advice received from Trading Standards departments suggests that it is possible for a landlord to pass on any non-compliant furniture to his tenant as a one-off private transaction. An agent should however take no part in such transactions (especially where money is exchanged) since it could be inferred that a ‘business supply’ had taken place. Agents should leave any such arrangements entirely to the private landlord and tenant involved.
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It should be stressed that such a transfer should take place once only. If an artificial arrangement was contrived so that the furniture passed between successive tenants at the same property, such arrangements could be construed as a circumvention of the legislation and it is likely that a court would interpret such action as a continued ‘supply’ and thus a contravention under the Regulations.
Other Issues
Fire retardant treatments
Some firms are offering to spray or otherwise treat non-compliant furniture and furnishings with a fire-retardant treatment in order to make it fire-proof and therefore compliant. The DTI have stated that it is their opinion, that in most cases, such treatments will be ineffective as the spray serves to treat the covering fabric and surface upholstery but not the foam filling.
We are not currently aware of any after-market treatments that have been approved for use in this way. Landlords and agents would be advised to take advice from their local trading standards department if considering such treatments.
Blinds and cord safety
Internal window blinds must comply with the child safety requirements of British Standard EN 13120. The requirements apply to all dwellings and locations where children (aged between 0 and 42 months) are likely to have access. It can be assumed (due to visitors) that children will potentially have acess to almost all types of dwellings. The main requirements to ensure safety are as follows: • the bottom loop of the chain or cord must be 150cms from the floor and secured with a compliant safety device. Without this device the product is not compliant and should not be fitted. If the operating chain/cord has a safety breakaway device then the bottom loop of the cord/chain can be 60cms from the floor and the safety device mentioned above is not needed; • Low level blinds: if the installation height of the blind is less than or around 150cms off the floor, then an operating chain with a maximum loop of 20cms can be used as this is deemed not to be a choking hazard; • any hazardous cords, chains and loops should be removed or made safe and new compliant blinds or control rods (instead of loops) should be fitted. The above is a summary of the requirements, for more detailed information you should seek specialist advice in this area.
Further Information
-- Letting FactSheet No.3 - The Letting Centre -- Local Trading Standards department or the British Standards Institution -- DTI Guide: A Guide to the Furniture & Furnishings (Fire)(Safety) Regulations 1988.
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The Electrical Equipment (Safety) Regulations 1994 & 2016
Background
The Health & Safety Executive (HSE) have estimated that, in one year alone, some 2000 fires were caused by faulty electrical appliances. With the large number of electrical appliances now found in a typical household and an increasing demand for consumer safety, the Government has introduced various legislation in recent years relating to electrical safety of household appliances.
Where a landlord or letting agent is supplying property ‘in the course of business’, the electrical safety regulations will apply since that person or organisation is deemed to be a ‘supplier’ (1994 Regulations) or a ‘distributor’ (2016 Regulations) of the equipment in the legal sense. The Regulations require that all appliances or equipment supplied or distributed must be safe.
The Legislation
The Consumer Protection Act 1987 is the governing legislation.
The main regulations that apply are:
- Electrical Equipment (Safety) Regulations 1994 & 2016.
- Plugs and Sockets etc. (Safety) Regulations 1994 (see section below)
Previous Regulations
Electricity at Work Regulations 1989 Low Voltage Electrical Equipment Regulations 1980 & 1989 The Electrical Equipment (Safety) Regulations 1975 The Electric Blanket (Safety) Regulations 1971
Penalties and Enforcement
The maximum penalty for non-compliance with the regulations is a substantial fine set at Level 5 of the standard scale (currently £20,000) and imprisonment in serious cases.
Enforcement is by the local trading standards office (TSO)
Definition of ‘supply’
The same definition of ‘supply’ applies for these regulations in the same way as for the Furniture and Furnishings (Fire)(Safety) Regulations.
Thus, landlords supplying in the’ course of business’ will need to comply. Letting agents will also need to comply unless they only provide a ‘let-only’ service and take no part in the preparation of the inventory, signing of the letting agreement or day-to-day management.
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Electrical Equipment (Safety) Regulations - Main Provisions
General Safety
Both sets of regulations require that all electrical equipment supplied is safe. The 1994 Regulations apply to equipment placed on the market prior to 8th December 2016 and the 2016 Regulations apply to equipment placed on the market on or after this date.
In measuring safety, the ‘supplier’ or ‘distributor’ needs to ascertain whether the product will comply with the current UK requirements for safety of domestic electrical products. Without detailed technical knowledge, there is no simple way to define which electrical products conform and which do not.
In practice, the only effective way to ensure that any equipment is safe is by employing a competent person to test the equipment before a property is let. In contrast to the gas safety regulations, there is no requirement under the Regulations for a certificate of testing to be provided and neither do the Regulations require the use of a registered electrician.
Instructions
Under the 1994 Regulations where the safe use of the equipment relies upon the user being aware of any particular characteristic, suitable information or instruction booklets should be provided in English. Under the 2016 Regulations all equipment must be accompanied by instructions and safety information given in English.
Scope
Both sets of Regulations relate to the supply of electrical equipment designed with a working voltage of between 50 & 1000 volts a.c. (or between 75 & 1500 d.c.), and act as secondary legislation under the Consumer Protection Act 1987 (the ‘Act’). Because the 1994 Regulations operate with the same definition of ‘supplier’ as the Consumer Protection Act, then letting agents and landlords letting in the ‘course of business’ are liable as suppliers. The 2016 Regulations apply to landlords and agents who are known as the ‘distributor’ adn the duties arise when electrical equipment is made available on the market (see Lfacts 4 for more detailed information). Both sets of Regulations impose the obligation on the supplier or distributor of such goods to ensure that they are ‘safe’ so that there is no risk of injury or death to humans or pets, or risk of damage to property.
The Regulations cover all mains voltage household electric goods including cookers, kettles, toasters, electric blankets, washing machines, immersion heaters, etc. Under the Consumer Protection Act 1987, s11 the Regulations do not apply to items attached to land. This is generally considered to mean that the fixed electrical wiring and built-in appliances (e.g. central heating systems) are excluded from the Regulations. However, fixed electrical wiring should be tested nonetheless since there is a general requirement that all installations at the property shall be safe (see General Product Safety Regulations below)
Second hand appliances do not need to have a CE mark if purchased prior to 8th December 2016 but equipment supplied must be safe. Under the 2016 regulations a CE mark is required for appliances first purchased on or after 8th December 2016 even if the appliance is second-hand.
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Electrical Equipment (Safety) Regulations - Compliance
NB. Unlike the Gas safety regulations, there is no specific requirement for regular testing under the Regulations. However, in order for the agent to ensure compliance, some ongoing checks should be scheduled. Best practice recommendations are: • Have appliances checked by a qualified electrical engineer prior to letting, and annually (or other appropriate period advised by your electrician) thereafter. • If no inspection or testing has been conducted, it is possible to carry out a visual check of electrical appliances in all managed properties in the interim. Many defects can be identified without specialised equipment (e.g. frayed wiring, missing insulation, badly fitted plugs, etc.). Visual checks can also be carried out during regular inspections since higher risk items such as irons and vacuum cleaners are more prone to such defects. Remove any unsafe items. • Maintain records of the checks carried out for appliances in each property. • Ensure that instruction booklets are available at the property for all appliances and that any necessary safety warnings are given to tenants. • Microwave doors and door seals should be clean, free from corrosion and effective. • Tenants should be advised to always use a residual current device (RCD) circuit breaker to BS 7071 standard when operating electrical garden equipment outdoors.
Due Diligence
Section 39 of the Act provides a defence of ‘due diligence’. This section states that it shall be a defence where it can be shown that a person took all reasonable steps and exercised all due diligence to avoid committing the offence. Merely asking the landlord to sign a statement that there are no non-compliant items is not considered to be sufficient in this respect.
Electrical Equipment (Safety) Regulations - agency situations
In agency situations, similar provisions and exclusions apply as with the furniture safety regulations: • Inform landlords of the Regulations and their obligations. • Avoid purchasing second-hand electrical appliances for rented properties and advise owners likewise. If used appliances are installed, it is necessary to have them checked by a qualified engineer.
Further Information
- Letting Factsheet No.4 - The Letting Centre
- Letting FactSheet No.9 - The Letting Centre
- Local Trading Standards department
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The Plugs and Sockets Regulations 1994
Background
The Health & Safety Executive (HSE) have estimated that, in one year alone, some 2000 fires were caused by faulty electrical appliances of which a percentage of these are caused by plugs being incorrectly wired or incorrectly fused.
The Regulations, acting as secondary legislation under the Consumer Protection Act 1987 (the ‘Act’), relate to the supply of any plugs, sockets, adapters or fuses intended for domestic use, with a working voltage of not less than 200 volts, and also the supply of any appliance which has a plug fitted.
Main Provisions
Where any plug, socket or adapter is supplied which is intended for domestic use, then: • it must comply with the appropriate current standard (i.e. BS1363); and • it must be correctly fused.
British Standard BS1363: This standard covers 13 Amp fused plugs, switched and unswitched sockets. The standard now requires that the live and neutral pins on plugs are part insulated so as to prevent shocks when removing plugs from sockets. The presence of this insulation on the pins and a ‘BS1363’ marking on the plug are the main ways to check whether the plug complies with current standards.
BS1363/A: Plugs to a more resilient standard, BS1363/A, should be used where heavier wear and tear is met, for example on vacuum cleaners where plugs may be dropped onto the floor.
Fuses - plugs must be fitted with a fuse that conforms to BS1362, i.e. the standard for general purpose fuses for domestic or similar purposes. The fuses also need to be rated correctly either in accordance with the appliance manufacturers instructions or to BS1362 (for 220-240 volt equipment, typical fuse ratings are: up to 750 watts - 3 amp; up to 1,250 watts - 5 amp; above 1,250 watts - 13 amp).
Excluded products
Certain plugs or sockets which are incorporated in some electrical equipment, luminaires, ceiling- rose connectors and wall or ceiling lights are excluded from the Regulations
Supply
Because the Regulations operate with the same definition of ‘supplier’ as the Consumer Protection Act 1987, then letting agents and landlords are liable as suppliers in the same way as for the furniture and electrical safety regulations described in the previous sections.
The Regulations impose the obligation on the supplier of such goods to ensure that they are ‘safe’, so that there is no risk of death or personal injury to humans or pets, or risk of damage to property.
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Construction (Design and Management) Regulations 2015
Background
The Construction (Design and Management) Regulations 2015 (CDM Regs) came into effect on 6th April 2015 and replace the Construction (Design and Management) Regulations 2007. The CDM Regs set out responsibilities for parties involved in construction work; the client, the designer and the contractor. Under the CDM Regs landlords and agents are non-domestic clients e.g. a person or company for whom a project is being carried out which is in the course of business.
Definition of ‘Construction Work’
Construction work includes ‘the construction, alteration, conversion, fitting out, commissioning, renovation, repair, upkeep, redecoration or other maintenance (including cleaning which involves the use of water or an abrasive at high pressure, or the use of corrosive or toxic substances), de-commissioning, demolition or dismantling of a structure.’
Responsibilities
Under the CDM Regs landlords and letting agents are required to carry out the following where there are one or more contractors:
• inform the HSE of any notifiable projects (defined below); • provide pre-construction information to the contractor; • ensure that a construction phase plan is drawn up by the contractor. The construction phase plan must set out the health and safety arrangements and site rules; • ensure that health and safety standards including providing welfare facilities are maintained on site and reviewed throughout the project; • take reasonable steps to ensure that any contractor or designer has the skills, knowledge and experience necessary to undertake the works and ensure that any contractor or designer complies with their duties under the regulations. Where there is more than one contractor, landlords and agents will also need to ensure that they appoint in writing a principal designer and a principal contractor. The principal designer must prepare a health and safety file for the project. Where the landlord or agent fails to appoint a principal designer or a principal contractor the landlord or agent must fulfil their duties under the regulations.
Notifiable projects
A project is notifiable to the HSE if the construction work is scheduled to last longer than 30 working days and have more than 20 workers working simultaneously at any point in the project,
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or exceed 500 person days. Where a project is notifiable landlords and agents must give notice in writing to HSE as soon as is practicable before the construction phase begins. The notice must contain specified information, be clearly displayed in the construction site office and where necessary be periodically updated.
Pre-construction information
Pre-construction information is information which is already in the landlord or agent’s possession e.g. information in any existing health and safety file; asbestos survey, structural drawings etc or information which is reasonable to obtain through sensible enquiry. The information must be relevant to the project, have an appropriate level of detail and be proportionate to the nature of the risks.
Landlords and agents must provide contractors with details of any known risks and ensure that the contractor is suitable and competent to carry out the works and ensure the health and safety of others. See page 7-11 for case examples under the Health and Safety at Work Act 1974.
Construction Phase Plan
A Construction Phase Plan is required from the contractor for all construction projects including a builder, plumber or other tradesman carrying out small-scale routine works. The plan does not need to be complicated and a simple plan before the work starts to show that the contractor has thought about health and safety should be sufficient. Where the works are notifiable to the HSE a more detailed plan may be required. See http://www.hse.gov.uk/pubns/cis80.pdf for example Construction Phase Plan.
Transitional arrangements
Transitional arrangements have been brought in, but for landlords and agents instructing a single maintenance contractor where the works have already started, the requirement is that the contractor must produce a construction phase plan as soon as practicable after 6th April 2015. Where there is more than one contractor a principal contractor must be appointed as soon as practicable after this date and the principal contractor must prepare and review a health and safety file.
Further Information
Agents and landlords should refer to the HSE Guidance L153 ‘Managing health and safety in construction, Construction (Design and Management) Regulations 2015’ for more detailed information. http://www.hse.gov.uk/pubns/priced/l153.pdf.
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Other Safety Regulations
General Product Safety Regulations 2005
The General Product Safety Regulations 2005 impose two main requirements:
The first requirement is that any product supplied must be safe. The Regulations applyto products supplied in the course of commercial activity and thus includes landlords and agents when letting property. Similar rules apply as for the Furniture and Furnishings Regulations in determining whether a particular landlord or agent is letting in the ‘course of business’ (e.g. exclusion of landlords letting on a one-off basis etc.).
E.g. Oil-fired central heating boiler - must be regularly maintained and checked. (poorly maintained/fitted appliances pose similar CO risks as gas boilers)
Secondly, the Regulations also require that consumers are provided with relevant information regarding the risks inherent in any product, where such risks are not immediately obvious without adequate warnings; and that a supplier should take steps to be aware of the risks associated with the use of supplied products.
E.g. Advise tenants of the dangers of using supplied electrical appliances outside (e.g electric lawnmowers) especially in damp conditions. It is recommended good practice that where such items are supplied, to provide and recommend the use of a RCD-protected safety plug / lead when using such appliances.
For further details on the Regulations, see Letting FactSheet No. 9.
Bunk Bed (Entrapment Hazards)(Safety) Regulations 1987
These Regulations are intended to reduce the risk of injury or death to young children who use bunk beds.
Commencement: The Regulations came into force on 1st September 1987.
Bunk beds are defined in the Regulations and include any raised sleeping surface above 800 millimetres. They specify maximum permissible gaps in any part of the structure of the bed. In relation to the sleeping surface, the maximum permissible gap is 75mm; in relation to any other gap in the structure of a bunk bed, the permissible gap shall be not less than 60 mm nor more than 75mm. Landlords and agents should check that any bunk beds or similar raised sleeping surface complies with these Regulations and be especially careful in situations where bunk or ‘cabin’ type beds have been built into a room.
Any bunk bed that has been purchased new in the UK after the commencement date (see above) should comply, and therefore purchase receipts will be a useful way of determining compliance. The prohibition on supply extends to beds supplied in kit form.
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Paraffin Heaters
All paraffin fuelled space heaters must have an automatic ‘snuffing’ or self-extinguishing device which operates whenever the heater is tipped or knocked over.
Any such heaters must also be marked with safety warnings.
Comment: Best to avoid using these in rented properties.
Catalytic Gas Heaters
Catalytic gas heaters or ‘Black Heat’ heaters have not been sold for several years. It is no longer legal to sell or otherwise supply such heaters but some second-hand appliances could still remain in rented properties. They are unsafe due to the risks posed from the asbestos-based catalyst used within the heater which can release particles into the surrounding air. They should not be supplied or used.
These heaters operate on bottled gas in a similar way to the portable gas heaters that are still available on the market except that there is no radiant element or grill since the burner is internal and fully enclosed. If in doubt, check with your local trading standards department.
Smoke and Carbon Monoxide Detectors and Alarms
Following the introduction of The Building Regulations 1991 all new properties built since June 1992 must be fitted with mains-powered, inter-linked smoke detectors / alarms. There has been no legal requirement on properties built before this date to be fitted with an alarm, however; the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 now require landlords to provide smoke and carbon monoxide alarms in certain rented accommodation in England from 1st October 2015. See Letting Factsheet No. 50 for more information.
The regulations require that when a property is occupied under a tenancy: • a smoke alarm is installed on each storey of the property on which there is a room used wholly or partly as living accommodation; • a carbon monoxide alarm is installed in any room of the property which is used wholly or partly as living accommodation and which contains a solid fuel burning combustion appliance; and • each alarm must be tested at the start of a new tenancy granted on or after 1st October 2015. New tenancies do not include a tenancy granted on an agreement entered into prior to 1st October, a statutory periodic tenancy or where the landlord and tenant are the same as under the earlier tenancy and the property let is the same or substantially the same as that let under the earlier tenancy. The regulations do not require landlords to test the alarms during the tenancy and tenants should be advised to test the alarms on a regular basis according to the manufacturer’s instructions. It is advisable to insert a standard clause into the tenancy agreement requiring the tenant to be responsible for replacement of any batteries and carrying out regular testing of the alarms.
The regulations do not apply to certain situations but the ones relevant to private landlords are where the accommodation is shared with the landlord or the landlord’s family and where the tenancy grants a right of occupation for a term of 7 years or more.
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Houses in Multiple Occupation
A residential property which is let as a ‘house in multiple occupation’ (generally where a house is let to several different and unrelated individuals) is subject to stricter control with regard to fire safety and building regulations. Landlords can be required to make substantial alterations to such buildings to satisfy both health and safety departments and the local fire officer, including the installation of fire-resistant doors, interlinked alarms, etc.
These requirements are explained and discussed in further detail in Chapter 16 which deals specifically with this type of housing.
Other Products and Risks
Safety glass
The current Building Regulations contain, for the first time, requirements for controlling the use of fixed glass in buildings. They were introduced to try and reduce serious injuries resulting from glazing-relating accidents in residential dwellings.
The Building Regulations require that safety glass must be installed in certain critical locations in any new building or extension. Because of consumer protection legislation, landlords would be expected to follow the requirements under the Regulations when carrying out repairs to glazing in these same critical areas by virtue of the landlord’s general duty of care to ensure that a property is safe.
The Regulations require safety glass to be fitted in critical areas: • in doors and in glazed side panels next to doors, up to a height of 1500 mm above floor level and up to a distance of 300 mm from the edges of the door opening. • in all glass panels in internal walls, partitions and windows where any part of the panel is within 800mm above the finished floor level. • in mirrored doors and panels To be safe, these areas must be glazed with toughened or laminated glass or with robust glazing materials such as polycarbonate or, for screens, glass blocks. Suitable flat glass and plastic sheet should be made to British Standard BS6206. Small panes in doors and glazed panels can be of ordinary glass so long as it is at least 6mm thick, is held in place by glazing beads, has a maximum width of 250mm and a maximum area of 0.5 sq m.
Fireguards
Fireguards are fitted to all types of open flame or other heating appliances where there is a danger of touching a hot element or surface.
Any such fireguards should meet BS 3248
Fire blankets
Fire blankets (often fitted in kitchens to smother cooking-related fires) should meet BS 6575 1985.
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9. The Tenancy Agreement
In the earlier chapters, we looked at the legal definition of a tenancy and the different types of tenancy that exist. In this chapter, we will analyse the basic requirements of a tenancy including a detailed anatomy of the tenancy agreement itself, with some notes on how a secure agreement can be drafted and what precautions need to be taken in practice when it is executed.
Definition of a tenancy
In chapter 4, we looked at the basic ingredients of a tenancy:-
- where the landlord agrees to grant the tenant an estate in land which comprises of exclusive possession of the specified property, for a term, at an agreed rent.
The main written terms of the tenancy will be set down in the tenancy agreement or lease as in any other legal contract - these are commonly known as the express terms. Further terms may be added by statute - these are known as implied terms.
N.b. The terms ‘tenancy’ and ‘lease’ are interchangeable - they mean the same thing
Purpose
A tenancy agreement or lease is one of the most important documents in the letting process. It is required for a number of reasons. Firstly, it will lay down the terms of the letting in advance for both parties to agree. Secondly, the tenancy agreement is a contractually binding agreement between the parties, and acts as a safety net (to either party) in case of problems or a dispute. A verbal understanding is subject to ambiguity and a significant proportion of verbal tenancy agreements end up in the courts for this reason. The agreement also serves other important functions:
- often required by mortgagee for inspection before granting permission to let
- required for inspection by the housing benefit office before housing benefit can be paid
- statute now provides that the tenant may request a written tenancy agreement
- required when using certain procedures (e.g. Accelerated Possession Procedure - APP)
- informs parties of any statutory obligations
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A Tenancy - the Essential Characteristics
For a tenancy to exist, the following basic requirements must be satisfied: • there must be a landlord and a tenant • there must be exclusive possession • there must be identifiable land or property • there must be a definite period of tenancy There are further requirements if the tenancy is to gain statutory protection as an assured tenancy under the Housing Acts. Therefore, it is important to know which type of tenancy has been created in order to fully understand the implied rights and terms under that tenancy. For example, in order to create an assured, or assured shorthold tenancy, the Housing Act specifies other essential requirements: • the tenant (or joint tenants) must be an individual (i.e. not a business) • the tenant must occupy the dwelling as his/her only or principal home • a minimum amount of rent must be payable There are of course other, more detailed, requirements for an assured tenancy (see Chap 5) but the above list provides a simple overview.
Creation of Tenancies
A tenancy is a leasehold estate in land giving the tenant the right to exclusive possession of the property for an agreed period of time. The landlord will grant this right using a tenancy agreement which is a form of contract between the landlord and tenant setting out the rights and responsibilities of both parties.
Although the tenancy agreement is a form of contract there is a distinction between a contractual relationship and an estate or interest in land. A contract is enforceable against specified persons namely those who are party to the contract whereas an estate or interest in land is enforceable against successors in title not just the parties to the contract.
A tenancy agreement can be oral or written but, where it is granted for more than three years, it must be executed as a deed. Most modern tenancies are created in writing. An agreement in writing is useful to provide evidence of what has been agreed between the parties in the event of a dispute later down the line. Oral agreements are difficult to enforce as there is no proof of what has been agreed. It is therefore in both the landlord and tenant’s best interests to have a written agreement.
The tenancy agreement will consist of a mixture of terms implied by common law/statute and contractual terms which have been specifically agreed between the landlord and tenant (usually known as express terms). A landlord and tenant both have rights implied by law and the tenancy agreement cannot give either party less than their statutory rights. Where a term within the tenancy agreement gives either the landlord or tenant less than their statutory rights then that term may be unenforceable e.g. a clause requiring the tenant to give one month’s notice to end a fixed term tenancy.
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Glossary of Tenancy Terms Tenancy An interest in land (as opposed to a “licence” which is a personal permission to occupy) whereby a person(s) enjoys exclusive possession of a property over a period of time usually in return for rent. (see ‘Exclusive Possession’)
Break A break clause is a term in a fixed term tenancy agreement which allows either or clause both parties the right to terminate the agreement prior to the end of the term.
Covenant A covenant is a type of obligation in the tenancy agreement
Deed A formal written legal document which must make it clear on its face that it is intended to be a deed. It was a requirement that all deeds bore a seal before 31 July 1990. Now, the requirements are that it must be signed by its maker in the presence of a witness, or at the maker’s direction in the presence of two witnesses. A deed normally takes effect on delivery, which consists of presenting it to the other party.
Deposit Sum of money requested by a landlord at the beginning of a tenancy as security against non-payment of rent, damage to or removal of property.
Exclusive The right of exclusive possession of land means the right to control of the land and to exclude all other persons from it. Where a person is granted the right to use the possession premises without the right to exclusive possession, then the occupier will not be a tenant and the grant is a licence. Thus for example, if a landlord rents out beds in a hostel, then the occupier does not have exclusive possession of either his room or the entire property and he occupies under licence. (see Licence below).
Forfeiture This clause, usually included in the tenancy agreement, allows the landlord to Clause forfeit (also called ‘re-enter’) the agreement and end the tenancy in the event of the tenant failing to pay the rent, or otherwise breaching one of his obligations.
Licence A permission to occupy without having a tenancy, for example where the occupier does not have exclusive possession of the premises.
Premium A sum of money (non-refundable) paid to a landlord for initial occupation of accommodation or for the grant or renewal of the tenancy. Strictly, a sum will only be considered as a premium if it exceeds one sixth of the annual rent.
Recital The recitals are those (general introductory) parts of a tenancy agreement or deed which declare facts but do not affect otherwise the substance of the transaction.
Stamp Duty A duty which is payable on some leases and conveyances of land.
Surety A surety is established where a person offers security for another (e.g. Guarantor)
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Implied & Express Obligations
At the beginning of this chapter, we discussed how the tenancy agreement essentially consists of a series of obligations that are binding on both the landlord and the tenant. The obligations may be divided essentially into two types: • Express obligations (i.e. promises made by the landlord and tenant) • Implied obligations (i.e. obligations implied by statute or common law) If there is an express provision or agreement regarding a particular obligation in the tenancy agreement, the general rule is that the express agreement takes priority, overriding the common law obligations. However, many of the implied statutory obligations have ultimate force since they provide that the parties cannot contract out of the legal obligation.
Express obligations
Many of the obligations in the tenancy agreement will arise as a result of promises or an express agreement between the parties (generally enshrined within the words of the tenancy agreement). These are generally known as the express or contractual obligations, or the express covenants.
For example, the landlord may include a covenant in the agreement to return any rent payable during any period where the property has been rendered uninhabitable by fire.
Implied obligations
In addition to these in the tenancy agreement, there are many obligations implied into every residential lease, both by the common law and by statute.
These implied obligations arise by two routes: • Obligations implied by statute (e.g. landlord’s repairing obligations) • Obligations implied by the common law. (e.g. the landlord’s covenant for ‘quiet enjoyment’ - one of the oldest common law tenant’s rights) In the case of assured tenancies, the Housing Act 1988 adds two important obligations:
1) Tenant cannot assign a statutory periodic tenancy. (Housing Act 1988, section 15)
2) Tenant must allow the landlord access for repairs. (Housing Act 1988, section 16)
Usual covenants
These are a particular class of obligations or covenants that are implied by the common law into a contract for a lease. Where the parties fail to specify what terms the actual lease should contain, then the common law provides that the lease or tenancy agreement will contain the ‘usual covenants’ when the tenancy is granted.
Where the ‘usual covenants’ are implied, certain basic covenants will apply in every case (e.g. the tenant’s covenant to pay rent and any taxes (expenses or services consumed) on the property).
The nature of the ‘usual covenants’ may also depend on any local conveyancing customs, the nature of the premises and the purpose of the letting.
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Landlord’s Implied Obligations and Terms
The landlord’s main implied obligations, both in common law and implied by statute are given below: Quiet enjoyment
This means that the landlord undertakes that the tenant shall be free from disturbance by adverse claims or physical interference by the landlord, or any person claiming rights under the landlord (e.g. the landlord’s agent). This covenant is implied unless specifically excluded.
Repairing obligations
Firstly, statute implies a repairing obligation on all dwelling houses let for less than seven years (ss 11-16 Landlord and Tenant Act 1985). This covenant is binding and may not be specifically excluded from the lease. These statutory repairing obligations are dealt with in greater detail in the Chapter on Disrepair. Essentially, they state that the landlord is normally responsible for: - the structure and exterior of the dwelling - basins, sinks, baths, and other sanitary installations - installations for the heating of water and space heating - installations for the supply of gas, water and electricity
Secondly, there is an implied condition in the letting of a furnished dwelling house (Smith v Marrable 1843 11 M & WS) that it should be reasonably fit for human habitation at the beginning of the tenancy.
Blocks of Flats. There is an implied condition in every lease of a flat in a block of flats that the landlord will take reasonable steps to keep the common parts (lifts, staircases etc.) and the structure of the building retained by him, in repair and proper working order.
Defective Premises Act 1972. The landlord may also be under an obligation under s4 of the Act to all persons who might be affected by defects in the premises to take reasonable care to see that they and their property are reasonably safe from injury or damage.
Homes (Fitness for Human Habitation) Act 2018. Since 20th March 2019 it is an implied term of a tenancy agreement that a landlord (or an agent acting on their behalf) in England provides the property as fit for human habitation at the beginning of the tenancy and that it will remain fit for human habitation during the tenancy. See Chapter 11 for more information. Not to derogate from the grant This prevents the landlord doing anything or permitting anything to be done which would render the premises unsuitable for the purpose for which they were let. In the majority of cases, the covenant not to derogate from the grant is exactly the same as the covenant for quiet enjoyment. The most common situation where they might apply is with regard to easements. If, for example the tenant is granted a right of way over the landlord’s land to reach his property, then the landlord must not do anything which prevents the tenant from exercising these rights (e.g. erecting a fence). These provisions were originally implied by common law but are now mostly provided by statutory harassment provisions in the Protection from Eviction Act 1977.
Immigration Act 2014
It is an implied term of a tenancy agreement which is not a residential tenancy agreement within the meaning of the Housing Act 1988 that the landlord may terminate the tenancy if the property is occupied by an adult who is disqualified as a result of their immigration status from occupying the premises (s33E Immigration Act 2014).
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Tenant’s Implied Obligations
The tenant’s main implied obligations, both in common law and implied by statute are given below:
1. To pay the rent. Under common law, a landowner has a right to recover from any person occupying his land as a tenant, a reasonable sum for use and occupation.
2. To pay rates and taxes. The tenant is obliged to pay any rates or related charges assessed in respect of the premises except those for which the landlord is liable. These obligations are generally supplemented by specific statutory obligations on the ‘occupier’ to pay council tax, water and electric charges etc. unless the tenancy agreement provides otherwise.
3. Repairing obligations. A tenant is under an implied obligation to use the property in a responsible way and a tenant-like manner. Warren v Keen, (1954) is one of the key case law decisions in this respect, and the judge (Denning LJ) stated this obligation:
‘The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys, when necessary, and also the windows. He must mend the electric light when it fuses. He must unstop the sink when it is blocked by his waste. In short, he must do all the little jobs about the place which a reasonable tenant would do. In addition, he must, of course, not damage the house wilfully or negligently; and he must see that his family and guests do not damage it; and if they do, he must repair it. But apart from such things, if the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him, then the tenant is not liable to repair it.’
4. Waste. The tenant also has an obligation not to commit waste. The tenant commits ‘waste’ if he causes any alteration or damage to the property. The tenant should not damage the property and should make sure that his family or visitors do not do so.
5. Enter and View. The tenant is obliged to permit the landlord to enter and view the premises in order to carry out repair works associated with the landlord’s obligations.
6. Improvements. A tenant may not generally make any improvement or addition to the property without the consent of the landlord. One exception to this rule is that by virtue of s81 of the Housing Act 1980, it is a term of every protected tenancy and statutory tenancy that the tenant is given a qualified right to carry out improvements. The tenant must ask for written consent by the landlord, but such consent is not to be unreasonably withheld.
7. Title. The tenant may not deny the landlord’s title to the land. This might occur for example in possession proceedings where the tenant requests the landlord to prove that he holds proper title to the land.
This request is denied on the basis that if the tenant was able to deny the landlord’s good title to the property, then it would also deny the existence of the tenancy in the first place.
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The Tenancy Agreement
When the landlord and tenant enter into a tenancy, they are creating a legally binding relationship which will consist of a series of obligations, and these will normally be enshrined within a written tenancy agreement. It is vitally important that practitioners (and their tenants) clearly understand the nature of this agreement. In this section, we shall consider the structure of the tenancy agreement, the purpose of each part and the general principles that apply.
General principles
The purpose of the tenancy agreement or lease, then, is to lay down the exact terms of the tenancy in advance, for both parties to agree. As with any other legal document, the agreement should clearly set out the various rights and obligations of the tenancy. These obligations will range from the most important (often called the core terms - such as the requirement to pay rent) to the seemingly trivial (such as the requirement that the tenant cleans his own windows on a regular basis). The various obligations and issues that would normally be resolved within the tenancy agreement are: • The name and address of the landlord • The name of the tenant (the inclusion of the tenant’s address is optional) • The address of the property being let • The amount of rent payable • The timing and manner of payment • What happens if the rent is not paid or other obligations broken • The commencement date of the tenancy • The term or duration of the tenancy • Whether the parties can terminate the contract before the end of the term • Who is responsible for the bills • Who is responsible for insurance • Who is responsible for repair (externally or internally) • Whether the tenant can sublet, assign the lease, or have a lodger • Restrictions on how the tenant can use the property • Whether pets can be kept at the property • What alterations the tenant can make to the property • How any statutory notices shall be served. If the landlord is letting the property furnished, then an inventory and a schedule of condition should be attached. Otherwise, only a schedule of condition needs be provided.
The first rule is that the agreement should be legal; it is important to include everything in the agreement that should legally be there or the agreement may be declared invalid. Secondly, it should be comprehensive; it should try to make provision for all possible disputes or events that may end in dispute between the parties. The general rule is that, if the tenancy agreement is silent on some matter, then there is no obligation on the parties to the agreement. If it fails to say who is responsible for maintaining or repairing the television aerial, then no-one is responsible for maintaining the aerial. If it fails to say that the tenant cannot keep alligators on the premises, then (provided they do not cause a nuisance or danger, or fall foul of some other law), the tenant may legally keep alligators (and yes, it really has happened).
The third important principle is to use straightforward and clear language so that no possible doubt can arise as to its meaning. There are also rules of interpretation which will be utilised
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by the court in order to interpret the intentions of the parties. For example, if any part of the agreement is ambiguous or not completed, and a court is called upon to interpret the agreement, it would apply the ‘contra proferentem’ rule where ambiguity is resolved against the party preparing the agreement. The law also allows the courts to ignore any part of the agreement that is not written in plain and intelligible language.
Finally, in a move towards clarity and fair trading, a tenancy agreement must now comply with legislation regarding unfair terms in consumer contracts (described in more detail in Letting Factsheet No. 10). This also requires ‘the use of plain and intelligible language’ even if it prevents the use of previously accepted legal terms and phrases in tenancy agreements.
Types of agreement
If the landlord or agent is likely to encounter different types of tenancies, then it is likely that different types of agreements will need to be obtained. E.g: -- Assured shorthold tenancy agreement - for standard residential lettings -- General or common law tenancy agreement - for high rents (over £100,000 p.a) and lettings to companies Unless the landlord or agent instructs lawyers to prepare each tenancy agreement individually, then it is likely that practitioners will obtain a professionally prepared standard agreement for each type of tenancy likely to be encountered.
It will also be necessary, on occasion, to amend a standard agreement in order to incorporate any special provisions or obligations required by the landlord. A common situation, for example, for properties in rural locations is for sewerage services to be provided by a septic tank which will require occasional emptying. In such circumstances, the tenancy agreement might contain a special provision making the tenant responsible for emptying the tank at prescribed intervals, or at the end of the tenancy. Equally, occupiers of blocks of flats are often subject to sets of conditions typically stated in the headlease (e.g. not to hang washing from the windows etc.) and these conditions will need to be incorporated into any letting.
Keep it simple
Whilst being comprehensive, written agreements should strive to be succinct. The practice of using long rambling agreements whose meaning can only be understood with a law degree is now discredited and consumer law demands that agreements should be presented in plain English. Given that the agreement is a central working document to the tenancy, shorter documents make it easier to understand, maintain and amend. A concise agreement is also more likely to be read by the tenant than a long one.
Definitions and labels
Commonly, many agreements define the parties (e.g. Landlord and the Tenant) and thekey terms of the tenancy (e.g. length of term, commencement date, rent etc.) at an early stage in the agreement.
Often, these definitions also serve to create labels for commonly or frequently recurring words phrases or concepts. Once the labels have been defined, they can serve throughout the agreement in place of the longer expressions which would otherwise be necessary. Thus for the Landlord and Tenant, once defined in the initial section, it will be unnecessary to refer to the parties by name again.
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Legal Requirements
Whilst it is perfectly legal, at present, to create a short residential tenancy purely by oral agreement, it would not be good practice for the reasons stated in earlier sections. There is no standard or statutory form that the agreement must take and, for this reason, tenancy agreements come in all shapes and sizes; many lawyers, letting agents and landlords have their own preferred drafting styles and standard clauses. The main legal requirements in creating short leases are summarised below: • Whilst there is little formality required for creating shorthold residential tenancies, assured shorthold tenants under the Housing Act 1988 are entitled to demand a written statement of the terms of their tenancy. (HA88, s.20A) • An agreement for a term of more than three years must be in writing and by deed. (ss.52-54 Law of Property Act 1925). • Neither party to a lease is permitted to charge the other party for any solicitor’s costs for preparing the tenancy agreement unless the parties agree otherwise in writing (Cost of Leases Act 1958). • The terms of the tenancy must be fair, and written in plain and intelligible language. • In some cases, it will be necessary to serve certain notices on the tenant prior to signing the tenancy agreement. See section entitled ‘Notices’ below.
Additional Requirements
* How to Rent Guide - Checklist for Renting in England. All AST tenants in England must be provided with the current government How to Rent Guide at the start of the tenancy (where the tenancy was granted on or after 1st October 2015) either in hard copy or by email as an attachment where they have agreed to accept documents by email. See Lfacts 21.
* Energy Performance Certificates (EPC). Since 2008, it has been a legal requirement that the landlord shall furnish the tenant(s) with an EPC and since April 2012 an EPC must be commissioned before the property is made available for rent.
* Tenancy Deposit Protection (TDP) Any tenancy deposit accepted in connection with an assured shorthold tenancy must be protected within one of three statutory schemes (for all new tenancies commencing on or after 6 April 2007). See chapter 10 for more information.
*Gas Safety Certificates. Since October 1998 a gas safety certificate (where applicable) must be provided within 28 days of completion of the annual check or to new tenants before they move in. See chapter 8 for more information.
* Section 47 & 48, Landlord and Tenant Act 1987. Sections 47 and 48 make statutory requirements that apply to all types of residential tenancy agreement.
Under section 47, a landlord is required to supply his/her name & address on any rent demand or other demand for payment (service charge etc.). If this is not supplied, the law states that any portion of the amount due which includes a service charge is not payable. Whilst this is a grey area, many lawyers choose to interpret the tenancy agreement as a form of rent demand and take the view that the landlord must supply his actual address on the tenancy agreement (in addition to the address of the letting agent). Other lawyers take a more pragmatic view and say that there is no recent case law to support this interpretation, and that the landlord and his family are entitled to their privacy and safety, and that the agent’s address is sufficient. Non compliance with section 47 has only very minor repercussions for private rented sector landlords - any service charges payable under the lease will not be collectible until the section has been complied with.
Under section 48, the landlord is required to supply an address in England and Wales at which notices can be served. Unlike section 47, the case law is clearer and supplying the agent’s address is sufficient for compliance with section 48. Landlords living overseas should take particular care to provide the tenant with such service address as a tenant may legally refuse to pay any rent due until compliance with section 48 has taken place.
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Unfair terms in consumer contracts
At the time of writing, tenancy agreements, as with other types of consumer contract, are subject to Part 2 of the Consumer Rights Act 2015 which replaced the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) on 1st October 2015. The UTCCR made a significant impact on the style and content of modern tenancy agreements. Tenancy agreements which had, for generations, contained obscure legal terms and phrases with established meanings can now be declared invalid because they are not intelligible to the layman. Other tenancy terms with onerous implications for the tenant could also be declared unfair and thus invalid. The impact of these regulations on modern tenancy agreements has been very significant, and the benefit for the consumer has been positive.
Agency agreements can also be caught by the Consumer Rights Act where the landlord is a consumer, for example, if the landlord rents out one property but has another job which pays their main income. The unfair terms will not apply where the landlord rents out a large number of properties and the rent provides the main income as the landlord is likely to be a business consumer. Anything that is said or written to the landlord by or on behalf of the agent about the agent or service will be treated as a term within the contract where the landlord has taken this into account when deciding whether to enter into the contract. This requirement is subject to anything that qualified the term, was said or written to the landlord on the same occasion and any change to it that has been expressly agreed between the parties before entering into the contract.
The Consumer Rights Act sets out the following requirements: • agreements and notices must be prominent and expressed in plain and intelligible language • agreements and notices must be fair so as not to prejudice the balance of rights against the consumer • contracts for services must be perfomed with reasonable care and skill and within a reasonable time
Fairness
The unfair terms under the Consumer Rights Act apply a test of fairness to notices and most standard terms in tenancy agreements. The regulations state that any notice or term declared to be unfair will not be binding, with the exception of the ‘core’ terms of the agreement (which set the price or describe the main subject matter of the agreement). A notice or a term in a consumer contract will fail the test of fairness ‘if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.’
Contractual imbalance is created where a term or notice gives powers to the landlord that he would not otherwise have, or protects him in a way that puts the tenant at a disadvantage. The requirement of good faith in this context is one of fair and open dealing. Openness requires that any written notice or terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that the supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any factor listed or analogous to those listed in Schedule 2 of the Regulations.
A consumer notice (which includes an announcement, whether or not in writing, and any other communication or purported communication) is a notice that relates to the rights or obligations between a trader and a consumer or excludes or restricts a trader’s liability to a consumer. A notice does not have to expressly apply to a consumer but it must be reasonable to assume that it is intended to be seen or heard by them.
If a term in an agreement or a notice could have different meanings then the meaning that is most favourable to the consumer will prevail. Under the previous regulations the test of fairness did
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not apply to individually negotiated terms but the Consumer Rights Act does not include this provision, only the core terms are exempt.
Plain Language
The Regulations require the use of plain and intelligible language. Contracts must be intelligible to ordinary tenants without legal advice. This means using normal words in their usual sense in short sentences, and avoiding legal jargon, statutory references, elaborate definitions and extensive cross referencing. If there is any doubt about the meaning of a written term, the interpretation most favourable to the consumer shall prevail.
Examples:
The examples below are tenancy agreement terms that are likely to be declared as either unfair or unintelligible to the consumer.
Plain English
It is agreed that the Tenant will indemnify the Landlord against any costs or debts resulting from non-payment of electricity, gas or other outgoings related to the Property.
The Competition and Markets Authority (CMA) regard the term ‘indemnify’ to be a legal term whose meaning is not readily understood.
Break Clause
It is agreed that the landlord may terminate the tenancy agreement on giving two months’ written notice.
The CMA would regard the above break clause in a tenancy agreement as unfair as it creates unfair rights in favour of the landlord (i.e. tenant is not allowed an equal right to terminate).
Penalty for late rent payment
The Tenant will pay £5 per day when the rent is in arrears
This type of clause would be considered by the CMA as a financial penalty. Fixed amount penalty clauses are not generally allowed unless they truly reflect the likely loss or costs incurred by the landlord as a result of the breach.
Enforcement
Traders are encouraged to resolve matters out of court and use Alternative Dispute Resolution (ADR) in the first instance such as negotiation, mediation, ombudsman scheme etc. Enforcement of these regulations takes place directly through the courts. A tenant or a landlord may challenge the fairness and legality of any particular clause and the judge may decide to remove the clause in its entirety from the agreement. A similar process also occurs regularly during the ADR process in tenancy dispute resolution; adjudicators often refuse to support portions of a landlord deposit deduction on principles of fairness under these regulations. Finally, the tenant may refer an agreement to their local trading standards department who hold powers (via the CMA) to ask a business to stop using offending standard terms or agreements.
Further Guidance
A guide to the application of these regulations entitled ‘Unfair Contract Terms Guidance’ is published by the CMA and available online. A summary of the guidance and information on the unfair terms provisions is given in Letting Factsheets 10 & 10a (see Section 3).
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Term of the tenancy
The ‘term’ refers to the length or duration of the tenancy.
There are several issues to be considered:
1) Minimum term. There is generally no minimum term that can be granted. Thus in practice, a tenancy can granted for any term from one or two days upwards. Alternatively, there may be no fixed term at all if the tenancy is granted as a periodic tenancy from the outset.
2) Maximum term. There is no maximum term for assured tenancies under either statutory or common law.
3) Length of term considerations. There are various rules and provision with respect to the length of the tenancy term: • 6 Months. Where an assured shorthold tenancy was granted under the original Housing Act 1988, there was a restriction that the tenancy had to be granted for a minimum initial term of six months. Where this restriction was invalidated (perhaps even by inclusion of a break clause which could allow the tenancy to be determined before the initial six months had elapsed), the tenancy would become an ordinary assured tenancy.For new-style assured shorthold tenancies granted after February 28 1997, there is no statutory restriction on the length of the initial term. This is replaced by a similar restriction which prevents a court granting a possession order for such tenancies before the initial six months has elapsed. • 8 months. This is the maximum length of term that may be granted under the Housing Act 1988 for an assured tenancy which was previously let under a holiday letting, and where the landlord requires to use this ground to recover possession at the end of the tenancy - Ground 3. • 12 months. For furnished lettings of less than 12 months or more, a tenancy agreement used to attract stamp duty at a reduced rate. This is no longer the case since the new SDLT stamp duty system was introduced in 2002, but some landlords and agents have adopted the habit of drafting leases for a term of ‘one year less one day’ for this reason. • 12 months. This is the maximum length of term that may be granted under the Housing Act 1988 for an assured tenancy which was previously let as a student letting (by specified education establishment landlords), and where the landlord requires to use this ground to recover possession at the end of the tenancy - Ground 4. • 3 years. If the term exceeds three years, the agreement should be re-drawn as a deed and executed under seal (Law of Property Act 1925 sections 52 and 54). • 7 years. If the agreement is for seven years or more, then the statutory repairing obligations (provided under the Landlord and Tenant Act 1985) will no longer apply. 4) Rent Increase Mechanism. If the term is to exceed one year, the landlord would be well- advised to consider including a provision for rent increase within the tenancy agreement. See ‘Rent Increase’ section below.
Property
The tenancy agreement should clearly and unambiguously describe the property, or section of the property, to which the tenant has been granted possession. An inventory of the property will generally be included which describes the fixtures and fittings, and any furniture that is also provided. It may also include a schedule of condition. Both devices help the parties to determine whether the property has been restored to the same condition at the end of the tenancy.
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Rent
Rent is regarded in law as a contractual sum payable by the tenant as compensation for the tenant’s right to possession of the property.
N.B. HOUSING ACT 1988. A tenancy with an annual rent of more than £100,000 cannot be assured or assured shorthold. See chapter 5 for further information.
Rent must be certain
One important requirement of the tenancy agreement is that rent payable under the tenancy must be either certain, or capable of being calculated with certainty. The rent would normally be expressed in UK currency, but there is no reason why it cannot be denominated in other currencies. This is indeed a strong possibility with the introduction of the Euro, the single European currency. Also, the rent does not need to be in money terms at all; a tenancy can also be paid for example in the form of services rendered in kind.
Rent period
Generally the tenancy agreement will specify the rent as a regular periodic payment, such as £100 per week, or £500 per month for an ongoing tenancy. The length of time between rent payments is known as the rent period, or the period of the tenancy. Thus, in the former example, the period will be weekly, and in the second example, monthly.
It can be important to be able to ascertain both the length of the period and the start and end dates of any period for the service of certain notices which require the notice to expire on specific period days (e.g. a notice under s21(4)(a) of the Housing Act 1988 must expire on the last day of a period).
Payment date and terms
The tenancy agreement should specify both the timing of the rent payments together with any other requirements. Residential tenancies often require that the rent is paid in advance at the beginning of each rent period. Alternatively, many landlords and agents prefer to collect the rents for all their properties at the same time throughout the month for ease of administration. Thus, for example, the rent might be payable ‘monthly, in advance, on the first day of every month’. Clearly, in such cases, unless all tenancies are timed to start at the beginning of the month, the period of the tenancy becomes dis-synchronous from the rent payment dates. If the rent payment date is not specified, then in common law, the rent becomes payable at the end of each tenancy period.
Landlords often prefer particular rent payment methods. The use of standing orders set up directly from the tenant’s bank account is becoming increasingly common since it is an efficient way of accepting payment and allows defaults to be more clearly identified. Where the landlord wishes to make this a requirement of the tenancy, an appropriate term should be inserted in the tenancy agreement.
Rent - included services
The tenancy agreement should specify any services or charges which are to be included in the rent (e.g. ‘Rent includes water rates’ ). Otherwise such services (e.g. water, electricity, gas etc.) consumed will naturally fall to the tenant for payment.
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Rent Increase and Rent Review
In times of lower inflation, regular rent increase is a less important and emotive issue. However, it should be noted that the rent cannot be raised during a fixed term unless provision has been made in the tenancy agreement. At the end of the term, the parties will be free to agree a new rent before agreeing to a renewal tenancy.
The Housing Act 1988 provides a statutory procedure for rent control which offers some protection to assured shorthold tenancies. For example, if a periodic tenancy is created automatically at the end of the fixed term (if the parties cannot agree on a new rent) or is created as a contractual periodic tenancy from the outset, then the parties will need to use the rent increase mechanism specified in section 13 of the Housing Act unless the terms of the periodic tenancy make provision for a specified increase. For more details on rent increases and the statutory procedure and notices required, see chapter 10 on Rents and Deposits
Rent Increase Clauses
Provisions for rent increase have been relatively uncommon in recent years with the increasing adoption of the assured shorthold tenancy as the default type of letting. Since this type of letting has encouraged relatively short fixed terms and a certain right for the landlord to recover possession, landlords have had little interest in complicating their negotiations and tenancy agreements with rent review clauses. With slowing market conditions and rising management costs, it is possible that we may see a move towards longer tenancies and clauses that make provision for regular rent increases within the tenancy.
There are few controls on how such increases should operate. At its simplest, the tenancy agreement may provide for an increase to a particular sum or sums after a particular time or times.
A more sophisticated method is to link the rent to a specified index so that it will rise automatically with inflation. The ‘index-linked’ clause provides for an increase at specified intervals (often annually) in proportion to the increase in the selected index. For example:
The Rent shall be reviewed on [January 1st 2014] [and annually thereafter] and that the Rent shall increase by a proportion equal to the most recently published UK CPI (Consumer Price Index) annual percentage change which applies at that time
Rental Deposits and Dilapidation Deposits
The landlord will normally require that the tenant pays a dilapidation deposit at the beginning of the tenancy. The purpose of this deposit is to provide the landlord with security against any default in rent payments, damage or loss to the property, or other costs that might arise due to other defaults on the part of the tenant.
The Tenant Fees Act 2019 now limits a tenancy deposit to five weeks’ rent (six weeks where annual rent is £50,000 or more). See Letting Factsheet 51 for more information.
Deductions can only be made from the dilapidations deposit in the manner or circumstances specified in the agreement. It is therefore vital that the clauses relating to the acceptance and repayment of the deposit are correctly worded. The tenancy agreement should state that the deposit is accepted as ‘security for the performance of the Tenant’s obligations and to compensate
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the Landlord for any breach of these obligations.
The rules regarding acceptance and repayment of such deposits and the recent TDP rules are discussed in more detail in chapter 10 (Rent and Deposits) and chapter 17 (Law of Agency).
Tenancy Deposit Protection (TDP) - ASTs
The introduction of statutory tenancy deposit protection (TDP) in April 2007 has had significant effects on how subsequent tenancy agreements should be drafted, and how they operate. TDP rules only apply to default tenancies - the assured shorthold tenancies.
At the time of writing, there are four deposit schemes; MyDeposits, The Dispute Service, The Deposit Protection Service and Capital Plc.
Under any of the four TDP schemes, it is a requirement that the tenant(s) are provided with certain prescribed information about the deposit, how it is held, and the arrangements for repayment at the end of the tenancy. All the schemes provide standard proforma documents to assist with this compliance.
In some cases, revisions may also be necessary to the clauses within the tenancy agreement that refer to the tenancy deposit, and what deductions may be made from the deposit at the end of the tenancy. With an increasing number of tenancy deposit disputes now being resolved by the statutory adjudication process Alternative Dispute Resolution it is important that any tenancy agreement makes lawful provision for appropriate deductions and charges to be made from the tenancy deposit.
Deposits Held by Agents
Manner held: stakeholder or agent
Where a dilapidations deposit or bond is held by an agent acting for the landlord, it is important that the tenancy agreement specifies the manner in which it is held. The money would generally be held either as ‘stakeholder’ or ‘agent’. See Chapter 10 for further details on the holding of deposit money.
For tenancies that operate under the statutory TDP scheme (i.e. all assured shorthold tenancies that came into effect on or after 6 April 2007), the law requires that all such deposits should be protected under one of the three statutory schemes and the money held by the landlord, his agent, or the respective custodial scheme as stakeholder. This means that the law regards that money as belonging to the tenant, but being held as security for the performance of the covenants under the lease or tenancy agreement.
Interest
The agreement should specify whether interest is payable on any deposit money held. This money is held, strictly speaking, in trust on behalf of the tenant during the term of the tenancy. The RICS Code* states that, by default, interest is payable unless agreed otherwise.
*RICS Code of Practice - Rent Only ‘Residential Management’
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User Covenants
The user covenants refer to any restrictions that the landlord makes on the manner in which the property will be occupied or used. This is important for several reasons: • the type of use can change the legal position of a tenancy considerably • certain types of activity may cause a nuisance to surrounding occupiers • the building may not be suitable or support certain types of use • there may be other restrictions imposed by the head lease or other third parties. In the absence of any express covenants the general position of the tenant at common law is that he is entitled to carry out any lawful activity at the property.
Nuisance, damage or annoyance
It is common for tenancy agreements to contain a general covenant prohibiting the tenant from ‘doing or permitting to be done at the property, any act which may be a nuisance, damage or annoyance to the landlord or to the occupiers of any of the neighbouring premises’. This is a common wide-ranging provision that covers a variety of ills.
Pets are a frequent source of damage in rented property and tenancy agreements will often contain a clause restricting the tenant from keeping pets at the property without permission. See Letting Factsheet 47 for more information on pets.
Business use
Residential tenancies fall under the protection of the various Housing or Rent Acts as appropriate. As we saw from the chapter on assured tenancies, business tenancies are generally excluded from these statutes, and they come under a separate framework (predominantly the Landlord and Tenant Act 1954). This may provide a tenant with additional security of tenure and rent control and, for such reason, it is advantageous to exclude any possibility of the tenant gaining further protection in this way.
It is therefore common for tenancy agreements to contain a general covenant requiring the tenant to ‘use the property only as a private dwelling-house and not to carry on or permit to be carried on any trade, profession or business use at the property’.
Holiday lettings
Where a property is let for the purposes of a holiday (a holiday letting), the reverse effect applies. The landlord will want to gain from the lack of protection provided to tenants under holiday lettings which are, for example, excluded from the Protection from Eviction Act 1977 (see Chapter 6 for more information). A holiday letting agreement will therefore commonly include a covenant requiring the tenant ‘to use the dwelling-house for the purposes of a holiday dwelling’ so that there is no doubt as to the status of the tenancy.
Other user covenants
Where the rented property is held on a long lease (e.g. a flat within a block), it may also be important to refer to and reflect any user covenants and other restrictions specified in the head lease.
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Subletting & Assignment
In common law, a tenant has the right to sublet or to assign the lease to another person but it is clearly not always in the landlord’s interest to allow the tenant to exercise this right. The landlord will have taken care to select and restrict the number of tenants in the property according to various criteria when granting the tenancy. Such precautions are of little value if the tenant is allowed to sublet or assign the lease to other persons outside the landlord’s control. The landlord will have no chance to vet the new tenant, or take references before the person, a complete stranger, acquires statutory protection.
For this reason, it is generally necessary to include suitable covenants in the tenancy agreement which prevent subletting or assignment.
Assured tenancies
It is an implied term of every assured tenancy (including ASTs) which is a periodic tenancy that, except with the consent of the landlord, the tenant shall not: aa assign the tenancy (in whole or in part); or bb sublet or part with possession of the whole or any part of the dwelling house let on the tenancy. This term is, however, not implied into fixed term assured tenancies or tenancies where a premium is required to be paid on the grant or renewal of the tenancy. The CMA consider that a clause which imposes an absolute ban on assignment and subletting is considered unfair and a fairer balance would be to add that consent would not be unreasonably refused or to prohibit subletting but allow the tenant to assign freely. The writer believes that a landlord is justified in a prohibition on assignment and subletting particularly in light of right to rent checks which need to be carried out for all adult occupiers.
Guests and lodgers
In addition to including covenants prohibiting subletting and assignment, the landlord is well- advised to extend these covenants to prohibit any other persons to live at the property (as per example in previous paragraph).
This is necessary to prevent lodgers being entitled to stay since even this class of occupier gains some limited rights of occupation under the Protection From Eviction Act 1977. Such occupiers present problems where they remain in occupation. If the tenant is not permitted to grant them any rights of occupation, then the risk to the landlord is reduced; the legal status of such unlawful occupiers becomes simply that of a trespasser.
Repairs and Alterations Clauses
It is common sense that the residential landlord will not generally wish tenants to make any alterations or additions to the property without prior permission. The tenancy agreement should impose the condition ‘not to damage, make any alteration or addition, or redecorate without the prior written consent of the Landlord’. The covenant can be so worded as to extend the obligation to any gardens.
If the tenant is required to repair and maintain any items not implied by statute, (e.g. domestic appliances listed in the inventory), then this should be specified in the agreement.
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Other Clauses
Re-entry clause
A re-entry or forfeiture clause should be included in the tenancy agreement. This allows the landlord to re-enter (also called ‘forfeiture’) the lease and end the tenancy in the event of the tenant failing to pay the rent, or otherwise breaching one of his obligations under the agreement.
It should be noted that the landlord’s power to ‘forfeit the lease and re-enter the Property if the rent remains unpaid for more than 14 days’ is not an open passport for the landlord to take possession from the defaulting tenant. The landlord is legally obliged to respect the procedural requirements (which normally involve applying to the court for a possession order) before possession can be returned to the landlord. The procedural rules for terminating tenancies in this way are covered in detail in chapter 12.
N.B. ASSURED TENANCIES. A fixed-term assured or assured shorthold tenancy agreement should contain a re-entry clause. A court will not be permitted to forfeit a tenancy and award possession (using any of the 17 available grounds) unless the terms of the tenancy agreement make provision for it to be brought to an end in this way (whether by use of a provision for re- entry, forfeiture, determination by notice etc. (Housing Act s.7(6)).
Break clause
A fixed-term tenancy agreement may incorporate abreak clause. This allows either party or both parties the ability to terminate the tenancy before the end of the fixed term (normally by giving written notice to the other party). The break clause will usually specify the period of notice required and any restrictions upon when the right may be exerciseable. Thus:
“It is agreed that either party may give two months written notice to terminate this agreement (subject to a minimum term of six months)”
Termination and rollover provisions
In addition to the break clause, the agreement may contain other clauses that make provisions for the termination of the tenancy. The landlord or tenant may also require that a provision be added which offers the tenant a right to renew the tenancy at the end of the term. More information on termination is given later in this chapter.
Assured tenancy
A landlord wishing to grant an ordinary assured tenancy must now say so before granting the tenancy as, since 1997, this is no longer the default form of tenancy. This is done by serving an appropriate notice on the tenant stating that the assured tenancy to which it relates is not to be an assured shorthold tenancy. A similar clause can be inserted in the tenancy agreement.
Special conditions
Many agreements are supplied in a standard format; yet landlords or agents may wish to amend or add new terms, especially where there are issues that affect the individual property or tenancy granted. (E.g. special provisions for the break clause, maintenance issues etc.).
The tenancy agreement will often contain a section where these conditions can be added. Alternatively, the agreement should refer to a schedule, and any special conditions can then be attached to the main agreement on separate pages titled with the schedule name.
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Joint Occupancy
Lettings to sharers are not always straight-forward. Some tenants occupy rented property as individuals but many more occupy as joint tenants, tenants in common or licensees. Married or cohabiting couples are frequently joint tenants, but so, also, are groups of friends. Whether they occupy as tenants or licensees, it is important to understand the differences between them, since each has its own set of characteristics and rules which will apply when it comes to granting renewal or termination.
Joint tenants or tenants in common
In a joint tenancy, a tenancy is granted to partners, or a group of sharers under a single agreement or transaction, with common start and end dates, so that all tenants occupy under a single tenancy. Tenants in common, by comparison, also may live within a single building, but simply hold separate tenancies for the particular parts of the property that they occupy and often share other parts (e.g. bathrooms, kitchens etc.) - the common areas. An example of tenants in common might be a student house in which the individual rooms have been let to different students on a separate tenancy agreements.
Joint Tenancies
The principle behind the joint tenancy is that, although the rights granted by the landlord are, in fact, granted to a group of people, this group is treated by the law in many respects as if it was a single person.
For a joint tenancy to exist there are 4 elements which must be satisfied:
- TIME - start and end dates of the tenancy must all be at the same time;
- TITLE - joint tenants must hold under one document;
- INTEREST - tenants must have the same joint & equal interest in the tenancy;
- POSSESSION - all tenants must be entitled to possession of the whole of the property.
Individuals holding under a joint tenancy hold jointly and several, so if one individual surrenders then it will be a surrender on behalf of them all.
Joint interests and joint liabilities
Joint tenants take the tenancy of the property as a group at a single rent for the whole property and the interests of each sharer must be of the same nature, duration and extent - they will, therefore, have a joint and equal interest in the tenancy.
Most important and usefully from the landlord’s perspective, this joint interest also extends to the liabilities or obligations under the tenancy agreement. Thus, under a joint tenancy, if one occupier breaches the terms of the agreement, or each denies individual responsibility for damage to the property, the landlord can either claim against all of them jointly, or against one of them individually - this is the concept of “joint and several liability”. Equally, if one of them absconds leaving rent arrears, the landlord can make the remaining tenants responsible for making up the shortfall in rent.
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Joint tenancies: advantages and disadvantages
The joint tenancy is an obvious and straightforward way for the landlord to rent out his property to a group of sharers and provides advantages to both the landlord and the tenant.
Firstly, the arrangement has the benefit of simplicity; the landlord lets his property to the tenants as a single transaction, using a single tenancy agreement, specifying a single rent for the whole property. The tenants all hold the property equally and can organise their living arrangements between themselves; and decide who is to occupy which room.
Secondly, the landlord gains some security in that, unless the agreement states to the contrary, each occupier is jointly and severally liable for the rent and any of the other obligations contained in the tenancy.
Equally, the concept of unity can also bring disadvantages. If the landlord falls out with just one of the occupiers and wishes to remove that individual, there is no way of terminating that individual’s tenancy in isolation (from the joint tenancy). The landlord would first need to terminate the tenancy for all occupiers before re-granting a new tenancy (see ‘Variation’ below)
Notices to tenants
Under a joint tenancy, it is important to remember that any legal notices to terminate the tenancy should be served to each and every tenant (Housing Act s.8(1)). It is not sufficient to serve a single notice on just one of the joint tenants.
Notice from tenants
A periodic joint tenancy held by two or more joint tenants may be determined by a notice to quit given by one of the joint tenants without the concurrence of the others unless the terms of the tenancy provide otherwise. However, a notice served pursuant to a break clause in a lease must be served by all the joint tenants unless the lease expressly provides for it to be determined by one of them.
Variation
A common problem with joint tenants is that members of the group comprising the joint tenancy may change over time. Often, one of the joint tenants wishes to leave, whether or not his place is taken by a replacement joint tenant. When there is an agreement (verbal or otherwise) to substitute or amend the tenancy in this way, this act will, in law, operate to surrender the original tenancy and, by the same process, grant a new tenancy to the reconstituted group (often referred to as “surrender and re-grant”).
The parties may decide to formally enter into a new written agreement, or more simply to record the change in composition of tenancy by an agreement or deed of variation (signed by all parties). Both methods are equally valid and will serve to confirm the existence of a new joint tenancy. The exception to this rule is where there is an agreement adding a new person as a joint tenant - this may simply be treated as an agreement to vary the existing contract, although, clearly, the safest course is, as in the other cases, to enter into a new written agreement that includes all the parties in the new tenancy.
Four tenants or more
Section 34(2) Law of Property Act 1925 limits the number of persons to whom a legal joint tenancy can be granted to four. That, however, does not mean that you cannot have joint tenancies for more than that number. The Law Commission takes the view that the first four are
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legal tenants, and that the remainder simply have an equitable interest in the property. A Court is entitled to infer that remaining occupiers do have a tenancy, but they have equitable tenancies. See page 4-17 for more information on equitable tenancies.
For practical purposes, this legal complexity has no significant consequence for the rights and duties of the parties, provided that they are all named on the tenancy agreement, and all contribute to payment of the rent. All tenants, even if more than four, should, therefore, be named on the tenancy agreement, and all asked to sign the document.
Joint tenancies and guarantees
Joint tenancies can pose problems to guarantors. Since, by default, each individual tenant will be jointly and severally liable for the obligations under the tenancy, the guarantor can, in turn, become liable, not just for the individual whose obligations he presumes to be underwriting, but for any default of any of the other joint tenants living in the property.
The prudent guarantor will not normally wish to extend his liability beyond the specified individual tenant. Commonly adopted solutions are for the guarantor to limit the guarantee to a pre-agreed limit, or to a set proportion of the total rent arrears (or damage claim). An elegant solution, recently encountered, aimed to limit the guarantor’s liability to a particular individual’s share of any rent arrears plus an equitable share of any other claim arising from the tenancy; i.e. those damages, losses or expenses attributable to the specified individual.
Granting the tenancy
When granting a joint tenancy, the tenancy agreement should contain the names of all tenants living in the property. This may include emancipated minors who jointly share the tenancy but where the occupiers are a family, this would not include children under the age of 18 (minors) who would normally be treated as licensees. The legal position regarding the granting of tenancies to minors is discussed in the section below.
All joint tenants should sign the tenancy agreement although, in exceptional situations, it is possible for one of the co-habitees to obtain legal authority (by an appropriately worded letter of authority) to sign on behalf of the absent tenant.
Lettings to Minors
In law, a person under the age of 18 is termed a ‘minor’. Generally, minors cannot enter into and be legally bound by a contract, or hold an estate in land. Thus, with regard to tenancies, their ability to enter into tenancy agreements is very restricted.
When letting to a family with children, any children under 18 would not normally be included on the agreement (they would merely remain in the property as licensees). They could be added on the renewal of the tenancy once they reach the age of majority (i.e. 18 years old).
Lettings to minors can take place on the basis of necessity since the law recognises that minors can become ‘emancipated’ from their parents or guardians. If the minor lives away from his parents and carries on his trade apart from them, then there is a strong presumption of emancipation. The Trusts of Land and Appointment of Trustees Act 1996 allows land to be held in trust for a minor. Landlords can therefore grant a tenancy to a parent or guardian as trustee on behalf of the minor. Once the tenant reaches 18, notice can be served on the trustee to end the tenancy and a new tenancy can be granted in the tenant’s name. It would be sensible to grant such tenancies so that the tenancy becomes due for renewal on or soon after the tenant’s 18th birthday.
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The Agreement in Use - Practical Considerations
Preparing the agreement:
For a standard letting between landlord and tenant, it is usual practice to prepare two duplicate copies of the agreement ready for signing; these are called the Original and Counterpart. Where there is an agent acting on behalf of the landlord, then a further copy may be required, but to save complication, a photocopy of the completed and signed agreement can be made after the event.
The tenancy agreement would normally be prepared on a word processor, or by completion of a standard pre-printed form. When completing a standard form, all details, signatures and dates must be completed on both documents in ink (not pencil)
The Original would generally be issued to the tenant and the Counterpart would be either retained by the agent or issued to the landlord. Prior to 1st December 2003, copies of the agreement should have been sent for stamping within 30 days of execution, and this is covered in the section below - entitled ‘Stamp Duty’.
Names (joint tenants)
The full name(s) and addresses of the tenant(s) should be completed on the agreement. Where there is a joint tenancy, all joint tenants should be listed on the tenancy agreement. The address given shall be the current address at the time the parties entered into the agreement.
The full name and address of the landlord(s) should also be completed. Where the landlord is represented by an agent, it is sufficient that the agent’s address may be completed onthe agreement in place of the landlord’s. Thus
Mr & Mrs L Lord c/o ABC Lettings, 194 High Street, Anytown, Wessex, WE0 7AA.
If the property is owned jointly, the names of both landlords should be supplied.
Tenant Fees Act 2019
It is important to check that tenancy terms are compliant with the Tenant Fees Act 2019 (TFA 2019) in order to avoid financial penalties. The TFA 2019 prohibits landlords and agents from charging certain fees to tenants. See Letting Factsheet 51 for more information.
Inventory
For residential property, an inventory and schedule of condition would generally be provided. It is useful to include this as an attachment to the tenancy agreement, but there is no legal requirement to do so.
The purpose of this document is to accurately record the condition of the property at the commencement of the tenancy, and list any contents (and condition) supplied in the property.
The inventory can also serve as a record of : • any special instructions or precautions in relation to any items supplied • dates of purchase of any nearly-new items and any warranties in force • the meter readings prior to occupation • any keys supplied • instruction booklets supplied • receipt of the gas safety certificates and evidence of any other inspections
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Commencement and Termination dates
Strictly, a tenancy which is said to commence ‘on’ say January 1st will in fact commence the very first moment of January 1st (i.e. that well-celebrated moment as the clock strikes midnight on New Year’s eve).
A tenancy expressed to commence ‘from’ a certain date generally commences on the first moment of the day following (i.e. midnight on January 1/2). However, case law has shown that, where there are other indications that the tenancy was intended to commence on that same day, then this will be accepted in law as the true start date.
Where a tenancy has been granted for a term in months, the ‘corresponding date’ rule applies. i.e. six months beginning at midnight 28/9 March expires at midnight 28/9 September. Thus:
Commencement Time and day of Term Time of provision commencement expiry
on January 1st midnight 31st Dec/ 1st Jan 12 mnths midnight 31st Dec/ 1st Jan
from January 1st midnight 1/2 January 12 mnths midnight 1/2 January
Where there is no corresponding date (because the lease is granted on the 31st of a month to expire in a thirty day month or on 29th, 30th or 31st of a month to expire in February) the term expires at midnight on the last night of the month.
Commencement Time and day of Term Time of provision commencement expiry
on 31 March midnight 30/31 March 6 months midnight 30 Sept / 1 October
from 31 March midnight 31 March / 6 months midnight 30 Sept / 1 April 1 October
Short let method
In practice, many landlords and agents adopt the ‘short let’ method where, as in a holiday let, it is assumed that a tenancy starts midway through a particular day and will therefore end midway through the corresponding day at the end of the tenancy. Thus a six month tenancy starting say on the 9th March would be expected to end on 9th September.
Although this method does not concur with the strict legal definition, the differences are not generally important and it appears to work well in most cases. This method is also fairer for the tenant (since it would be unusual for a tenant to be allowed into occupation at midnight at the beginning of his/her tenancy) and makes the issue of calculating corresponding dates on both notice and agreement a little simpler.
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Notices
There are various statutory requirements for service of notices on the tenant related to the tenancy agreement. Where statute requires that the notice is served ‘prior’ to the tenancy, it is important that the notice is served or issued to the tenant prior to agreeing and signing the tenancy. Many landlords take the wise precaution of including space at the bottom of the form which the tenant is asked to sign to indicate notice has been served.
AST Notice
Prior to February 28 1997, it was a requirement that the landlord served a Notice of Assured Shorthold (s20) in the prescribed form, and completed with the correct dates, on the tenant before granting an assured shorthold tenancy. This notice is no longer necessary for tenancies commencing on or after this date.
Notice under Grounds 1 & 2
Banks and building societies often request that the tenant is given a prior notice under Grounds 1 & 2 of Schedule 2 of the Housing Act 1988. Such notice can either be served separately, or incorporated into the tenancy agreement.
Notice under s.48 of the Landlord and Tenant Act 1987
There is a legal requirement that a landlord shall furnish a tenant with an address in England or Wales at which notices may be served on him (section 48 of the Landlord and Tenant Act 1987). It is sufficient to incorporate such notice within the body of the tenancy agreement.
Notices requiring possession (s21)
Notices served under s. 21 (Housing Act 1988) are required as the first step to obtain possession of a property let on an assured shorthold tenancy agreement. The notice may be invalid if served within the first four months of the tenancy start date for ASTs in England. SeeLetting Factsheet 21 for more information.
Tenancy Agreements - obligation to provide AST agreement on request
There is no legal requirement that the tenancy agreement must be in writing although a tenant may now request this after the commencement of the tenancy. For tenancies starting on or after 28 February 1997, the AST tenant who does not have a written agreement has a right to ask for a statement of any of the following main terms of the tenancy: • the date the tenancy began • the amount of rent payable and any rent review arrangements • the dates on which it should be paid • the length of any fixed term which has been agreed The tenant must apply in writing for this statement which is to be provided within 28 days.
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Granting the Tenancy
Negotiating & Tenant Vetting
Prospective tenants Mr & Mrs T see a property that they would like to rent. They complete the application form, supply their personal details and apply for the tenancy. They may also wish to negotiate the amount of the rent and the terms of the tenancy. At this stage, there is no contract - this is the pre-tenancy stage where the landlord is evaluating the application, taking credit checks, immigration status checks (if applicable) and references before deciding to offer the tenancy. Care should therefore be taken to add ‘subject to contract’ to all correspondence with respect to the prospective tenancy at this stage to demonstrate that the documentation does not constitute the formation of a contract through offer and acceptance. A holding fee may be taken from the tenants when they apply for the property (which may be retained or returned according to the conditions under which it is accepted) but again it does not bind the landlord to grant the tenancy.
Agreement for a Tenancy
Creating the tenancy can be considered as a two-stage process. Once the various pre-tenancy checks are complete, the tenants will be offered the tenancy of the property at an agreed rent, and often with an agreed occupation date. If accepted, this effectively constitutes an informal agreement for a tenancy - in other words, an agreement to create a tenancy at some future date. The tenancy agreement itself would not generally be signed until near or on the day of occupation in order to give the tenants a chance to study or amend the tenancy agreement before signing, and so that the landlord can be sure that he has vacant possession of the property on the day of occupation. Any offer letter confirming the tenancy details to the incoming tenant would normally be qualified with the words ‘subject to contract’ to confirm that the parties do not intend to be bound legally and formally at this stage.
In some situations, such as student lettings, where it can be useful and necessary to arrange the new tenancy well in advance of occupation, it is possible to formalise this intermediate stage and create a legally binding ‘Agreement for a Tenancy’ which effectively reserves the property for a future tenancy.
Tenancy Agreement
All tenants should be given ample opportunity to study the tenancy agreement before signing. Generally speaking, ordinary tenancy agreements for three years or less ‘take effect in possession’ (s.54, LPA 1925) which means that they should be signed and executed on the start date of the tenancy and not before. It would be unwise for a landlord to ask for the tenancy agreement to be signed by the parties well in advance unless he has vacant possession of the property. Occasionally, it might be appropriate to insert a term which makes the agreement conditional on having vacant possession, or some other condition or authority. Once the tenancy agreement itself has been signed by both parties, this constitutes a binding legal agreement to let the property. If one party then reneges on his or her obligations, the other party will have a contractual remedy and the possibility to claim for damages.
Traditionally, this tenancy process is completed with each party signing their respective physical copies of the agreement. The agent will, with appropriate authority, often sign on behalf of the landlord. The agent would then exchange the documents and complete them by dating the agreements. With the advent of email and internet, it is now equally possible for the agreement to be signed electronically and validly completed without the inconvenience of physically exchanging and producing multiple paper copies.
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Completing and Signing the Agreement
Signatures
The signatures at the end of the agreement are reliable evidence of the fact that the signatory approves and adopts the contents of the written agreement . You should then ask the tenants to sign the agreement (ideally on the day of occupation rather than several days or even weeks in advance). There is no legal requirement to sign each individual page of the tenancy agreement. This is a matter of individual choice, and we see no significant benefit to this style or practice.
You will need to ask all tenants listed on the tenancy agreement to sign the agreement(s). Where the landlord has instructed an agent to let the property and draw up the tenancy agreements, the agent may wish to sign the tenancy agreement on behalf of the landlord. In this situation, the agent is advised to check that such instructions or management agreement give the agent express authority to sign the agreement on behalf of the landlord. Typically, the date field (execution date) on a tenancy agreement is completed after signing, with the date that the agreement was concluded and agreements exchanged.
Traditionally, the main copy (or Original) agreement is signed by both parties and should be given to the tenant(s). The counterpart is also signed and is held by the agent or landlord.
A situation where tenants have already moved in before signing the agreement is to be avoided and pre-tenancy information provided to tenants needs to spell out that all tenants must sign the agreement prior to occupation. The only exception (where for example one of the tenants is out of the country when the agreement is to be signed) is for the absent tenant to provide one of the other tenants a power of attorney or equivalent formal letter of authority to sign on his/her behalf. Otherwise, the original agreement should be made with the tenants available at the time and a new agreement entered into when the rest of the group is present.
Any last minute additions, deletions or amendments to the agreement (other than the standard completed fields) should also be avoided. Where changes are required, both the tenants and the landlord (or his representative) should initial them.
Electronic Communications
For many years, the law has allowed legal agreements to be signed in person, and then exchanged electronically by fax or by email. In these cases, the document is still signed with a proper (physical) signature even if an electronic communication method is adopted to send a copy of the signed document. However, in recent years, the capabilities of the internet and information technology have been moving fast and the law was struggling to catch up
As companies increasingly rely on email and websites to conclude contractual agreements, the law has gradually evolved to make this possible. The Electronic Communications Act 2000 came into force in 2002 to give legal certainty to electronic signatures, and web-based services such as Adobe Sign, DocuSign and RightSignature now provide the technology to support this process.
If you decide to use electronic signatures for your agreements, then you should still ensure that you store a copy of the signed agreement in a safe place either on your computer server or in your paper files. Any system will need to be able to satisfy the court that there is a valid signature, in order to create a binding tenancy. Your referencing procedures should be capable of proving a person’s identity, and linking this to any signature supplied.
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Company lettings
When granting a tenancy to a company, care should be taken to obtain valid signatories. The tenancy agreement should be signed by a director or other ‘proper officer’ of the company (normally the Company Secretary) by putting his/her signing capacity under the signature. If not signed by the Company Secretary , the director should ideally furnish evidence of his official capacity to sign the agreement on behalf of the company (Companies House documentation, or a letter signed by the Company Secretary should suffice).
Witnessing the Agreement
A witness is a person who observes the signing of a legal document in case it is subsequently necessary to verify the authenticity of the signature. Under English conveyancing law, it is not compulsory to use a witness when signing a tenancy agreement, unless the agreement is executed as a deed (i.e. term is over three years).
However, letting agreements often make provision for a witness to sign the agreement since this is a reasonable safeguard against the situation where a person denies ever signing or being shown the agreement in the first place. A witness could be a colleague or some other third party who is present during the signing of the tenancy agreement.
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Stamp Duty
Until 1st December 2003, stamp duty was payable on all leases (although an unstamped tenancy agreement will still give effect to a legally valid tenancy). Letting agreements and leases were sent to the Stamp Office and this duty was collected by the Stamp Office on behalf of the Inland Revenue.
Although it was not compulsory to have a tenancy agreement stamped, a letting agreement must have been stamped before it could be presented or accepted in court as a valid document. Many landlords and agents did not bother to stamp tenancy agreements except where it is likely that the agreement needs to be produced in court (e.g. following rent arrears).
Stamp Duty - position prior to 1st December 2003
Original and counterpart copies
For the purposes of stamping, the Stamp Office assumed that you have prepared two duplicate copies of the agreement for signing; these are called the Original and Counterpart. The Original would generally be issued to the tenant (having been signed by the landlord or agent) and the Counterpart would be either retained by the agent or issued to the landlord (having been signed by the tenant). It was possible to forward the Counterpart only for stamping at a charge of £5.00.
Duty payable
The standard rate of stamp duty for short tenancies and leases (i.e. less than 7 years) was 1% of the total rent payable under the tenancy agreement, subject to a £5 minimum duty, and rounded up to the nearest multiple of £5.
However, the following types of tenancy documents were excluded from the 1% rate (i.e. they only attract the minimum £5 stamp duty) :- • tenancies of furnished dwellings (i.e. a flat or house) let for less than a year; • the counterpart (provided that the counterpart of the agreement is signed by the tenant only); • a duplicate copy (provided that there is evidence that duty has been paid on the original agreement). No stamp duty was payable if all the following conditions apply :- • the agreement is for not more than 7 years; and • the average annual rent, or total rent for the period, if under a year, is £5000 or less, • and the premium (if any) is less than £60,000. For more information regarding Stamp Duty prior to 1st December 2003 see our Letting Factsheet No. 32 (in section 3 of this handbook).
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Stamp Duty: Position after 1st December 2003
Changes effective on or after 1st December 2003 will mean that most tenancy agreements will not attract attention from the Stamp Office. Stamp Duty has been abolished for leases both residential and commercial and has been replaced by the Stamp Duty Land Tax.
In summary, the new system introduces a replacement tax for stamp duty called Stamp Duty Land Tax (SDLT) which, for residential tenancies, will only need to be paid where the lease value exceeds £125,000, or, strictly speaking, £125,000 at net present value (NPV - explained further below). Below this threshold, for the vast majority of private tenancies, no tax will be payable and so this change will be a welcome simplification for landlords. Premium leases, where there is a sizeable up-front rent payment exceeding £125,000, will attract SDLT.
Transition Provisions
The new rules will apply to all land transactions executed after 1 December 2003. In the context of shorthold residential tenancies, this means that the new system will apply to all new tenancies granted or with commencement dates after this date. Transition rules will apply to existing tenancies where the tenancy is extended after 1 December 2003.
It is presumed that tenancies commencing prior to 1 December 2003 will still require to be stamped to guarantee acceptance by a court and those after will not require any further documentation from the Stamp Office.
Net Present Value (NPV)
The Finance Act charges Stamp Duty Land Tax on the ‘Net Present Value’ (‘NPV’) of rent payable under a lease or tenancy. NPV simply applies a discount to allow for inflation. For short tenancies (i.e. 1 to 2 years), the difference between the total rental value and the NPV rental value will be small enough that, in most cases, the total rental value will be a close approximation for deciding whether SDLT will be payable (see examples below). A temporal or discount rate of 3.5% currently applies to the NPV calculation.
Example: John rents a house for his family for twelve months. The rent is £1,000 per month; therefore the rental value over the year’s duration of the lease will be £12,000. The net present value of the rental over this rental period is £11,594. Because the NPV rental value is less than £125,000, no SDLT is payable. Calculation:
NPV (year 1) = 12,000 / 1.035 = £11,594.20
Who pays the SDLT ?
For tenancies, it is the lessee or the person to whom the lease is granted (i.e. the tenant) who is liable for payment of the SDLT (where applicable), and when there are joint tenants, they become jointly liable for the SDLT charge. The Finance Act 2003 introduced a penalty for late notification and payment of SDLT and the tenant will be liable for fixed penalties where the return is delivered later than the filing date.
More information on SDLT
For more information see our Letting Factsheet No. 32.
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Renewing and Rollover
Where the landlord has granted a fixed term tenancy and wishes the tenancy to continue, there will generally be two main options at the end of the initial fixed term: • Renewing the agreement for a new or further fixed term • Allowing the agreement to ‘roll-over’ on a periodic basis Whichever method is used, the landlord must still follow the statutory requirements for notice (e.g. a minimum of two months for assured tenancies). Clearly, if the tenancy has been established as a contractual periodic tenancy from the outset, then the issue of renewals does not occur.
Renewal by further fixed term
The initial fixed term tenancy may be renewed or extended by the preparation ofanew agreement, signed by both landlord (or his agent) and tenant(s) and dated to take effect from the day immediately following the expiry of the previous tenancy.
During the fixed term, the landlord will have no power to put up the rent unless there is provision for rent increase within the agreement. At the end of the agreed term, the landlord and tenant are free to agree another fixed term and a new rent. However, if the tenancy is periodic the landlord may only propose a rent increase under the formal procedure in the Housing Act 1988 (s 13) or risk it being declared invalid by a court.
Inclusion of an agreed notice period within the renewal agreement allows the landlord to set an optimum period of notice (e.g. 2 months notice by either party). However, a simple periodic tenancy (in the absence of any references to the notice period) makes no similar restriction on the tenant and the landlord is left in the rather inequitable position of having to give 2 months notice whilst the tenant need only give four weeks.
Advantages to renewal under new fixed term
The majority of professional landlords and agents prefer to renew the agreement with a new fixed term, and this is the approach generally recommended. There are a number of advantages in this method: • Certainty. Both parties have the security of knowing that the tenancy is going to continue for a specified period into the future. • Terms. By drawing up a new agreement, the terms of the letting for the extended term are clearer to both parties, being specified in the agreement. • Rent Increase. Provisions for rent increase can be included in the agreement or re- negotiated at each renewal. With the periodic method, the landlord must follow the statutory procedure (Housing Act 1988, s13) and serve the appropriate notice etc. • Drafting Fee. Some agents charge a fee to draw up the new agreement. • Tenancies requiring a guarantor. As previously indicated it may be appropriate to use a new fixed term in this situation.
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Renewing the Tenancy using a Periodic Tenancy
If the landlord does nothing when the original fixed term ends, a statutory periodic tenancy will normally arise under the same terms as the previous tenancy. In the case of an assured or AST, the law defines that a new tenancy is automatically created in this situation - the so-called periodic tenancy. Where nothing is explicitly agreed between the parties, this tenancy is known as a statutory periodic tenancy and will carry on indefinitely (until brought to an end by either party). Where both parties agree that the tenancy is to continue by way of a clause within the tenancy agreement, a contractual periodic tenancy is created.
Terms of periodic tenancy
Unless anything is stated and agreed to the contrary, any extension of an existing tenancy will be deemed to be subject to the general terms contained within the original agreement.
Advantages of renewal under periodic tenancy
There are however situations which favour the use of periodic tenancies.
Possession of the property can sometimes be obtained more quickly from a statutory periodic tenancy than from an additional fixed term tenancy. The accelerated possession procedure (APP) can be freely used with periodic tenancies provided the statutory period of notice has been given to the tenant (whereas it can only be used with fixed term tenancies under limited grounds).
A periodic tenancy is useful at the end of a fixed term tenancy where the tenant has asked to stay on for a short but undefined period. The comments from the paragraph above apply equally in this case if the tenant does not leave when agreed.
Statutory periodic vs Contractual periodic
Tenant’s right to remain in the property. Under a statutory periodic tenancy landlords may not be able to claim legal costs following possession action because s5(2) of the Housing Act 1988 gives a tenant the right to remain in possession of the property let under a statutory periodic tenancy until possession is ordered by the court (unless the tenancy is surrendered or notice is given under section 33D of the Immigration Act 2014). This does not apply to contractual periodic tenancies as these are not covered under s5(2).
Council Tax. If the tenancy is for a whole property for a fixed term of at least 6 months then the tenant is liable for council tax until the end of that term even if they move out without giving notice and this rule applies if the tenancy continues as a contractual periodic tenancy as it is classed as a continuation of the tenancy. However, if a tenant leaves during a statutory periodic tenancy without notice then the landlord will be liable for the council tax as a statutory periodic tenancy is a new tenancy and the 6 month fixed term rule is not met - see Leeds City Council v Broadly [2016] EWHC 1839 for more information in Chapter 14.
Government Guide ‘How to Rent: Checklist for renting in England.’ This guide needs to be served on the tenant at the start of the tenancy and any subsequent tenancy where it has been updated. This will include statutory periodic tenancies but not contractual periodic tenancies following on from a fixed term as they are not classed as new or subsequent tenancies.
Deposits. Where a tenancy deposit has been protected late during the original fixed term tenancy a landlord will need to return it before serving a section 21 notice if it has continued as a contractual periodic tenancy. However, with a statutory periodic tenancy as this is a ‘new’ tenancy the deposit will need to be protected correctly when the fixed term comes to an end and the landlord will be able to serve a section 21 notice during the statutory periodic tenancy. It is also understood that contractual periodic tenancies will only be subject to 1-3 times the deposit
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penalty as the fixed term and contractual periodic act as one tenancy but the penalty will be higher for statutory periodic tenancies where there has been non compliance in both the fixed term and statutory periodic tenancies as these are classed as two tenancies.
Rent Increases. A rent increase for a statutory periodic tenancy can be served as soon as the fixed term is over by way of s13 Housing Act 1988 but with a contractual periodic tenancy which does not contain a rent review clause the landlord will have to wait until 12 months from the start of the fixed term. However, a rent review clause can be inserted into a contractual periodic tenancy setting out how and when the rent will be reviewed to avoid the s13 process.
New Legislation. Legislation brought in by the Government usually refers to ‘new’ tenancies which often includes statutory periodic tenancies so there is some argument towards using a contractual periodic tenancy with a rent review clause as standard. The Letting Centre provide a contractual periodic clause that can be added to the standard AST agreement to allow it to become contractual periodic for landlords who wish to create these tenancies. A rent review clause is also available. Provision to renew Some tenants request that a right to renew be included in the AST tenancy agreement, and this might be a reasonable request in some circumstances given the lack of security conferred to the AST tenant. Care should be taken; including such a provision will in effect commit the landlord to let for at least two terms and the term should be correctly worded (by reference to the original tenancy dates) in order to avoid creating a perpetually renewable tenancy.
Notice Period
Whichever method you use, it is important to note that an AST tenant is entitled (s.21) to a minimum of 2 months’ notice of termination (even if your agreement specifies that a shorter period may be given). The landlord can require a similar notice clause from the tenant by including a provision that the ‘tenant shall provide the landlord with one month’s notice where the Tenant wishes to leave at the end of the tenancy’, or by stating the required period of notice in any break clause in the agreement. N.B. Although such clauses are open to challenge under Unfair Terms legislation, there is currently no binding case law which supports that such clauses are unfair.
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Termination
A residential tenancy may only be brought to an end in a limited number of ways. The most important are: • forfeiture • notice to quit (in the case of a periodic tenancy) • effluxion of time (tenancy reaches end of term) • surrender (a mutual agreement between landlord and tenant) • court order. N.B. The position is further complicated for assured and assured shorthold tenancies under the Housing Act 1988, since the common law concepts of forfeiture and notice to quit no longer apply.
Re-entry and forfeiture
Traditionally, a tenancy agreement will contain a forfeiture clause which entitles the landlord to re-enter the property let and to thus forfeit the lease (in other words put an end to the lease). Such heavy-handed rights have been eroded over the years most notably with the passing of the Protection from Eviction Act 1977, and such wordings are at worst, incorrect, or at the least, very misleading. The Housing Act 1988 introduced further protection which makes the common law forfeiture process redundant, as a periodic assured tenancy can only be brought to an end by obtaining a court order. The tenancy agreement may contain a provision which allows the landlord to end a fixed term tenancy in certain circumstances but, even if he does so, the tenant is entitled to remain in possession of the property under a periodic tenancy which automatically arises at this point. (Housing Act 1988, section 5(1) & (3)).
So for the default AST tenancy which operates under the Housing Act, forfeiture is at best only a theoretical concept, and such clauses are more correctly referred to as a power of re-entry, or re-entry clause. The re-entry clause remains a critical part of the assured and assured shorthold tenancy agreement. In order for the court to grant possession for a breach of covenant, or any of the grounds for possession listed in the Housing Act 1988, it is essential that the tenancy agreement contains appropriate wording allowing the agreement to be brought to an end on the ground in question (Housing Act 1988, s.7(6)b).
In practice, an assured shorthold tenancy may also be terminated by the landlord giving notice under the provisions of s.21 of the Housing Act 1988. Alternatively, the tenancy agreement may contain a break clause which allows either the landlord or the tenant or both to bring the tenancy to an end before the end of the fixed term. The termination of all types of residential tenancy is discussed in further detail in Chapter 12.
Frustration
Where a property is rendered uninhabitable by fire, flood or similar natural disaster, the status of the tenancy can be unclear for all parties. At common law, the destruction of the buildings at the demised property does not automatically bring the tenancy to an end, and a tenant could be legally held to the contract and the obligation to pay rent. By contrast, under Australian law for example, the law provides that the tenancy agreement is automatically frustrated if a property becomes uninhabitable. Until the Law Commission’s recommendations have been acted upon, this situation remains a grey area within current law. It causes anxiety as a tenant cannot ‘move on’ if they are still committed to the existing tenancy.
To protect all parties, the solution is to include a ‘frustration clause’ so that the tenancy or rent payments under the tenancy will automatically be suspended ‘should the Property be damaged or destroyed and become uninhabitable’ - or equivalent wording.
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Court Order
For modern tenancies under the Housing Act 1988, a tenancy does not necessarily end when a termination clause (forfeiture, frustration, break clause etc.) is invoked. It merely causes the agreed or contractual fixed term to come to an end, leaving the tenant in occupation under a periodic tenancy which can be ended at the discretion of the court. Therefore, unless the termination operates with the consent of both parties (as a mutual agreement to surrender) a landlord will be forced to apply to the court to remove a tenant who is reluctant to leave. For assured and assured shorthold tenancies (AST), the tenancy does not officially end until the execution of the court order (typically by the court bailiff).
Break clauses
A break clause may be added to the tenancy agreement, which allows either of the parties to bring the tenancy to an end before the end of the agreed term. There are a variety of different types and styles of break clause depending on what is required. Brief discussion and an example is provided on page 9-18.
Tenant’s notice to leave
Because of a slight imbalance in the current law, the tenant occupying under a standard AST is entitled to leave without notice on the last day of the tenancy whereas the landlord is required to give at least two months’ notice if he requires the property back at the same point.
Some tenancy agreements attempt to remedy this situation by requiring the tenant to ‘give at least one month’s notice to the Landlord if the Tenant does not wish to remain in the Property at the end of the tenancy’. Although such clauses are open to challenge under Unfair Terms legislation, there is currently no binding case law that supports that such clauses are unfair. In the writer’s view such clauses may be used with appropriate caution and have proved to be upheld by tenancy deposit adjudicators and in the lower courts.
Other Situations
Change of landlord
A tenant must be notified of a change of landlord in writing not later than the next rent day, or within two months from the date of assignment if the next rent day lies within this period. Responsibility for breaches of any covenants, conditions or agreements remains with the old landlord until notice is given. Failure to comply with this requirement without reasonable cause is a criminal offence and can result in a fine up to £2500. (Landlord and Tenant Act 1985, s3).
Where a tenancy deposit has been protected under tenancy deposit legsislation it will be necessary to contact the relevant deposit protection scheme and follow their procedure to transfer the deposit into the name of the new landlord. It may also be necessary to re-issue the prescribed information in the name of the new landlord. Divorce The break-up of a relationship can act as a trigger for statutory intervention. The law makes provision that the tenant’s spouse or partner can gain rights to occupy for the remainder of a tenancy, or that the court can order the transfer of the remainder of a tenancy under the Family Law Act 1996. However, the transitory nature of modern lettings makes this a rare occurence for the private sector landlord.
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Death of tenant
The death of a tenant does not determine a tenancy held by him. A tenancy is a property which vests on death in the tenant’s executor or personal representatives in the same way as his other property, and decisions concerning the tenancy (or notices to be served on the tenancy) will then be taken by them. The deceased’s estate will be liable to pay the rent and other obligations on the tenancy until the tenancy is surrendered or otherwise transferred or disposed of. If the tenancy is near the end of the fixed term or has become periodic the landlord could serve a s21 notice on the tenant’s executor or personal representative to end an assured shorthold tenancy if a surrender cannot be agreed. The landlord also has the option of serving a section 8 notice during a fixed term or periodic tenancy citing Ground 7.
If the tenancy is vested in more than one person, the surviving joint tenant(s) may remain in occupation by a process known as survivorship. For the remainder of the fixed term, the estate of the deceased tenant will then be jointly liable with the remaining tenant(s) for the payment of rent and other liabilities. Alternatively, the parties can all agree to draw up a new tenancy which will then terminate the old tenancy by the process of surrender and regrant.
Succession to the tenancy is governed by the wishes of the tenant (if any - in his will) but statutory rules now also govern this process depending on the type of tenancy that was originally granted - so that family members who live with the tenant (but not officially listed on the tenancy agreement) may succeed to the tenancy.
However, for most modern private sector tenancies, there is unlikely to be any assignable value in the remaining tenancy and so the common practice is that the landlord and the executor (of the deceased’s estate) will agree a mutual surrender. Because the landlord has a duty to mitigate his loss, he cannot normally insist on full payment of the rent from the tenant’s estate for the remainder of the contractual term (unless the remaining term is so short that it is not practical to find a new tenant). The specific rules relating to succession and matrimonial rights for assured and AST tenancies are rarely invoked. They are briefly discussed in Chapter 5.
Where the tenant does not have an executor or a will, the tenancy will be transferred temporarily to the Public Trustee and the landlord should contact the Public Trustee regarding any surrender or notice to end the tenancy. Details of the Public Trustee are available on the government website: www.gov.uk. Death of landlord As with the case of the demise of a tenant above, the death of the landlord will not end the tenancy - whoever ends up owning the property will be bound by the terms of tenancy. On death, the landlord’s interest in the property may either be sold or inherited by the landlord’s next of kin (or other beneficiaries of the deceased person’s will). An executor will generally be appointed to act on behalf of the deceased person’s estate.
If there is no direct inheritance, the executor can recover possession of the property at the end of the tenancy so that the property can be sold. Once the estate has been settled, the new landlord is required to notify the tenant of his name and address within two months of the change of ownership (s3 Landlord and Tenant Act 1985).
Where a tenancy deposit has been taken under the original tenancy, provision must also be made for the tenancy deposit to be transferred to the new landlord. Where the deposit has been protected under the statutory tenancy deposit protection (TDP) rules, it will be important to inform the deposit protection provider and follow the scheme rules that apply in this situation.
It may be necessary to re-issue the TDP prescribed information in the name of the new landlord, and failure to do so could render the new landlord open to a penalty, or make it impossible for the new landlord to issue a s21 notice of possession at the end of the tenancy.
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Where can I obtain a suitable form of agreement ?
The agreement is one of the landlord’s and agent’s key documents. It is the primary safeguard when a dispute occurs and great care should be taken with its preparation.
The landlord should obtain the agreement from an up-to-date and reputable source. Copying someone else’s agreement is a common occurrence but fraught with pitfalls (it may be the incorrect form of agreement, or simply out of date) and can constitute breach of copyright. Further, it is important that the agreement has been drafted after consideration of the CMA’s Unfair Contract Terms Guidance (see Letting Factsheets 10 & 10a).
Pre-printed forms
Landlords have for a long time relied on the standard pre-printed legal forms available from legal stationers and similar suppliers (e.g. Oyez, Letting Centre, Stat-Plus etc.). Many different versions are available depending on the type of tenancy required (AST, holiday letting etc.) and the type of dwelling being let (Furnished, unfurnished, flat, shop etc.). The advantage of these forms is that they provide a simple and effective form of agreement at low cost, suitable for the typical direct landlord/tenant letting. For agency work, a more comprehensive and secure format is advisable, citing the agent’s full rights in the agreement.
NB. It should be noted that all standard pre-printed forms are copyright and cannot legally be copied or re-typed and re-produced on word processor.
Professional agreements
Letting professionals need to rely on watertight legal documents since the provision of a suitable letting agreement normally represents a key part of the service provided. Were an incorrect, or out of date, agreement to be used, then the firm or agent could be held liable for negligence if problems arose.
It is now possible to purchase agreements intended for professional agency situations which are comprehensive and secure. Furthermore, the agreements are normally provided on an annual licence basis so that the licence holder can reproduce them on a word processor (rather than having to complete individual pre-printed forms by hand). The advantage of the licence arrangement is that any updates are automatically received. If you intend to use the document on your computer or word processor, then you should check that the supplier can provide the documents on disk in computer-readable format.
Alternatively, the agent or landlord can contact a solicitor or other specialist housing advisers to obtain an individually drafted tenancy agreement. The main advantage here is the assurance that any standard agreement can be drafted to the individual landlord, firm or property’s requirements. Many landlords obtain such agreements on each letting but an agent setting up many tenancies each month, the cost of doing so becomes significant and such firms would be advised to establish an arrangement whereby the agreement could be reproduced on a multiple use basis.
A list of known suppliers and sources of tenancy agreements and related forms is given in Appendix A.
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Rent Guarantees and Guarantors
The landlord may require a rent guarantee in order safeguard the payment of the rent or the tenant’s other obligations under the lease.
A rent guarantee or surety is generally used whenever the tenant’s ability to pay the rent is in question. Typical cases will be where the tenant is: • A company. In this case, the director or, if the company is a subsidiary of a large and financially sound company, the parent company should be required to act as surety. Note that where the tenant is a private company a surety should always be sought. • A student or unemployed person. Such persons have no current earnings and often little in the way of previous earnings history to rely upon. Often they generally have poor a financial status and this is a classic situation where a surety would be appropriate. • A divorced or separated spouse. Where the separated person is solely dependent on maintenance payments for income, the ‘paying’ spouse or ex-spouse should be required as surety.
Guarantor
It will first be necessary to find an appropriate guarantor. Similar credit checks and references should be taken on the guarantor as would normally be taken for a tenant in order to establish the guarantor’s ability to meet any defaulted rent payments or other costs.
Guarantor agreement
It is recommended that the surety is set up using a separate guarantor’s agreement. This will be a written legal agreement between the guarantor and the landlord. Standard agreements can be obtained from suppliers of legal forms, or individually drafted by a solicitor. It is important that the agreement is correctly drafted; there are several important recent legal precedents in this area and the agreement should include these changes.
A surety will prima facie be construed as applying only to the (contractual) fixed term and not to any statutory extension, or to any period where the tenant simply holds over paying rent. Any agreement should, therefore, be drafted to provide for the continuance of liability under any extension or renewal, although best practice suggests that a new guarantor agreement should be signed for each new fixed term where a tenancy is extended.
Setting up the guarantor agreement
It is good practice to send the guarantor copies of the relevant tenancy and guarantor agreement prior to signing along with a letter confirming that he/she has been asked to stand as guarantor for a specified tenant and an explanation of the financial implications of providing such a guarantee. The reasons for this are, firstly, that the guarantor should be given time to peruse the document, understand the commitment and take advice. Secondly, it provides a means of verifying both the validity of the guarantor agreement and the guarantor’s address.
Ideally, the guarantor should be present when the agreement is signed (preferably at the same time as signing the tenancy agreement) rather than by exchange of signed forms because of Distance Selling Regulations, and also because such agreements can be signed fraudulently (i.e. not by the bona fide guarantor) and thus declared worthless.
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Cancellation of contracts
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 replace the Distance Selling Regulations 2000 and Cancellation of Contracts Made in a Consumer’s Home or Place of Work Etc Regulations 2008 on 13th June 2014. Any contracts entered into prior to this date will be govermed by the previous regulations which have similar requirements except the cooling off period will be seven days (this is now fourteen days under the new regulations) and the Distance Selling Regulations will apply to tenancy agreements until 13th June 2014. See Letting Factsheet No. 39 for more information.
Having reviewed the new Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, the prevailing view is that they do not apply to guarantor agreements. The Regulations apply to contracts governing or involving the supply of ‘goods or services’ to consumers and, since a rent guarantee is neither ‘goods’ nor a service, it follows that these types of contract are not governed by the Regulations. The 2013 Regulations also exclude contracts for services of insurance which may include guarantor agreements.
Equally, contracts ‘for rental of accommodation for residential purposes’ are specifically excluded under section 6(1)(c) so tenancy agreements are not subject to these cancellation provisions. The Regulations, however, will apply to agency agreements as explained in Chapter 17.
The Law of Guarantees
In writing
As for contracts for the sale or lease of land, contracts of guarantee are required to be in writing (Statute of Frauds, 1677). Thus a verbal agreement to provide a guarantee will be unenforceable. The words of the guarantee should be unambiguous and make it clear exactly what payments and obligations are being guaranteed.
Effect of variations
Where the terms of the primary contract are subject to variation, the basic rule is that a guarantor is released from liability by any change in the principal contract between the landlord and the tenant, unless the guarantor expressly agrees to the variation.
Good practice suggests that, whenever there is a significant variation in the tenancy agreement (e.g. a rent increase, or change of tenants within a joint tenancy), then the landlord asks the guarantor to sign a new guarantee agreement.
Revocation
A contract of guarantee or indemnity may expressly state that it may be terminated by the guarantor on the giving of notice, (normally expressed to be in writing).
In the case of a guarantee for rent, if the tenancy is for a fixed period of a number of months or years, then prima facie the guarantee may not be revoked. If, on the other hand, the parties agree to a continuing guarantee (for example, to protect a periodic tenancy, or a tenancy which has become periodic), the law considers that the right of cancellation is an inherent characteristic of a continuing guarantee. Therefore, care should be taken when using guarantees with periodic tenancies.
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10. Rent and Deposits
Introduction
One of the most important obligations of the tenant under the tenancy is the obligation to pay rent. In this chapter, we shall look at the various rules concerning rent, including the effect of the rent on the type of tenancy that may be granted, and the statutory procedures for rent increase.
The payment of a dilapidations deposit, or bond is one of the main safeguards against default in payment of rent and damage to the property. Since government decided to introduce legislation in the Housing Act 2004 to protect tenants’ deposits, the statutory rules and other issues concerning deposits need to be carefully understood. They are described later in this chapter.
Definition of rent
Rent is generally defined as a contractual sum payable by the tenant as compensation for the tenant’s right to possession of the property for the term of the tenancy. The obligation to pay rent is implied in all leases.
Money payable to the landlord for services supplied to or consumed at the property (e.g. water, gas, electricity etc.) do not, at common law, count as rent.
Capital sums payable at the commencement of the tenancy are not rent. Where the sum is intended to be held as security against non-payment of rent, or damage to the property etc., returnable at the end of the tenancy less any allowable deductions, then this sum is generally known as a ‘dilapidation deposit’ or ‘bond’. Where the sum of money taken prior to granting the tenancy is non-refundable, this is generally referred to as a ‘premium’.
Rent must be certain
One important requirement of the tenancy agreement is that rent payable under the tenancy must be either certain, or capable of being calculated with certainty. The rent would normally be expressed in UK currency, but there is no reason why it cannot be denominated in other currencies. This is indeed a strong possibility with the introduction of the Euro, the single European currency. Also, the rent does not need to be in money terms at all; a tenancy can also be paid for example in the form of services rendered in kind.
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Minimum rent
Despite the fact that payment rent is considered to be a key ingredient in establishing a tenancy, it is not strictly necessary to pay rent - although there should be an intention to create legal relations and payment might be provided by some other consideration.
N.B. Housing Act 1988. A tenancy may not be an assured or assured shorthold if the rent payable is equal or below certain thresholds. The current thresholds are £1000 per annum in Greater London, and £250 per annum elsewhere.
Maximum rent
There is no maximum rent level that can be charged for residential tenancies. However, rent increases (see below) may be subject to statutory control.
N.B. Housing Act 1988. A tenancy may not be an assured or assured shorthold if the rent payable is above £100,000 per year (or the equivalent pro-rata rent per month). In this case, the tenancy must be set up as a simple contractual or common law tenancy.
Rent period
Generally the tenancy agreement will specify the rent as a regular periodic payment, such as £100 per week, or £500 per month for an ongoing tenancy. The length of time between rent payments is known as the rent period, or the period of the tenancy. Thus, in the former example, the period will be weekly, and in the second example, monthly.
Occasionally, it is necessary to ascertain exactly both the length of the period and the start and end dates of any period for the service of certain notices which are required to expire on specific period days (e.g. a notice under s21(4)a must expire on the last day of a period).
Payment date and terms
Landlords commonly require that the rent is paid ‘in advance’ at the beginning of each rent period. This condition should be stated in the tenancy agreement and the timing of the rent payments should also be specified.
Many landlords and agents now prefer to collect the rents for all their properties at the same time throughout the month for ease of administration. Therefore, in this case, the rent payment day would often not concur with the beginning of a period of the tenancy.
Example: A tenancy commences on 11th March, with regular payment days on the 1st day of every month. On the day of occupation, the tenant will be asked for the initial rent payment representing the period (twenty days or so) up to the end of the month. The next rent then becomes payable on 1st April, and ‘on the first day of every month’ thereafter. Clearly, in such cases, unless all tenancies are timed to start at the beginning of the month, the period of the tenancy becomes dis-synchronous from the rent payment dates.
In common law, the rent payment date is not specified, then in common law, the rent becomes payable on the last day of each tenancy period.
Payment method
Within reasonable bounds, the tenancy agreement may specify a payment method. Many professional firms find it more efficient to collect rents by standing order and thispayment method can be made a term of the tenancy agreement.
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Rent due
The rent is lawfully due according to the date specified in the tenancy agreement. If the date is not specified, then the common law rule applies (rent due on last day of period).
Technically, the rent is due on the morning of the day specified but tenant has until midnight on the day specified to pay the rent. If the rent is unpaid by midnight, then it becomes overdue or owing. The importance of such technicalities becomes evident later on when we consider grounds for possession following rent arrears and the exact timing of when the landlord is permitted to commence proceedings.
Non-rent payments
It is the general rule that the tenant is normally responsible for all the services supplied to the property (e.g. Gas, water, electricity, telephone etc.) unless the tenancy agreement makes provision for them to be included in the rental.
Prior to the introduction of council tax in 1993, it was common for the landlord to pay the general rates on the property and any water charges or rates. This situation has now largely reversed since the occupiers are normally responsible for payment of the council tax (with the exceptions discussed below) and their own water charges.
There is a strong justification for staying with the common law rule rather than making rents inclusive of these services. If the rent includes services, and the landlord pays for all bills, then the landlord will incur significant loss whenever there is a default in the rent payment. Whereas, if the tenant is billed as an individual, it is the supplier that is responsible for any shortfall and the recovery of any money owing.
Council tax
Where the property is used for holiday lettings, or where a dwelling is occupied (or adapted) as a house in multiple occupation, liability for council tax charges falls on the owner of the property rather than the occupier.
In other cases, the Council tax liability rests directly with the occupier.
Rent & Housing Benefit
For some tenancies, the rent may be payable by the local authority under the housing benefit system. The parties generally have the choice as to whether the rent is paid directly to the tenant or landlord. If more than two months’ rent is unpaid, then the landlord may apply to have the rent received directly.
There are also provisions in the housing benefit rules for the recovery of over-payments or fraudulent claims. The housing benefit office has the authority to require a landlord to repay rents received in such circumstances.
More information in chapter 15 on Housing Benefit.
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Rent Control
Rent control constitutes interference or regulation by government to prevent unscrupulous landlords charging excessive rents in times of shortage, or forcing unfair rent increases on existing tenants (sometimes with the conscious intention of evicting the tenant). Rent control has had a chequered history in the private rented sector. Rent control was first introduced in 1915 and relaxed and reinforced during successive governments. The Rent Act 1977 consolidated some of the strongest regulation of rents with the system of registration of ‘fair rents’. The system allowed tenants to apply for rents to be reduced significantly below market levels and heralded a mass withdrawal of investment from the sector.
The rent control system under the Housing Act 1988 replaces the previous system of fair rents. It is a more restrained system which allows the landlord to charge a reasonable market rent for his property, yet prevents the imposition of unreasonable rent levels and rent increases on the tenant. In practice, it has been very successful and the number of rents referred to the rent officer is minimal. Subject to the restrictions for maximum and minimum rents under assured tenancies, the landlord and tenant are free to decide on a suitable rent for the dwelling. Rent Assessment Since 1st July 2013 rent assessment committees have been abolished in England with its functions now being exercised by the First-tier Tribunal (Property Chamber) and disputes regarding rent should be referred to the First-tier Tribunal.
The tribunal is usually made up of 2 or 3 people - generally a lawyer, a property valuer and a lay person. There is a fee to lodge an application and a further fee payable if there is a hearing. The tribunal can make a decision by considering the relevant papers although the landlord or the tenant can ask for an informal hearing, which both may attend. The tribunal will decide what rent the landlord could reasonably expect for the property if it were let on the open market under a new tenancy on the same terms. It does not take into account any increase in the value of the property due to voluntary improvements by the tenant or any reduction in the value caused by the tenant not looking after the property. The tribunal may agree the proposed rent or set a higher or lower rent.
The rent fixed by the tribunal is the legal maximum that the landlord can charge. The new rent will be payable from the date specified in the notice of rent increase unless the tribunal considers this would cause the tenant undue hardship in which case it may specify a later date. The tribunal will send their decision in writing to all parties. The decision can only be appealed to the Upper Tribunal in England on a point of law.
Rent Reduction
Under s22 of the Housing Act 1988 an AST tenant can apply to the tribunal at the start of the tenancy to have the rent reduced if he considers the rent to be significantly higher than the rent for comparable properties. If successful in having the rent determined, he may not apply again.
For tenancies starting on or after 28 February 1997, the tenant may only apply to the tribunal once within 6 months of the beginning of the original tenancy. An application cannot be made if the original tenancy has ended, been subsequently replaced, and more than 6 months have elapsed since the date the original tenancy started.
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For tenancies which started or were agreed before 28 February 1997, the tenant may apply to the tribunal at any point during the initial fixed term of the original tenancy.
For ordinary assured tenancies, there is no equivalent rent control mechanism available for the initial agreed term. A tenant cannot refer the agreed rent to the tribunal for a reduction.
Rent Increase Procedure - Assured and assured shorthold tenancies
Rent increase by agreement
Ideally the landlord should agree with the tenant the arrangements for rent increase prior to granting the tenancy, and these details should be laid down within the tenancy agreement (otherwise the landlord will have no power to increase the rent during the fixed term). Any rent review clause will not apply once the fixed term has come to an end unless the tenancy continues as a contractual periodic tenancy. Where the tenancy becomes statutory periodic landlords should use the s13 procedure to increase the rent (London District Properties Management Ltd & others v Goolamy [2009] EWCA 1367 - see Chapter 5 for more information). If there is no rent increase provision, then the landlord will be held to the agreed rent (by the contract entered into) until the end of the fixed term and can then use the s13 procedure during any periodic tenancy to increase the rent as explained below.
Rent increase by Housing Act 1988 procedure (section 13)
If the parties cannot agree, then it is only possible to vary the rent using the s13 procedure for periodic assured and assured shorthold tenancies. The landlord should notify the tenant of the proposed rent increase using the prescribed form (see Appendix C).
The landlord must give the tenant at least one month’s notice of the proposed rent increase if the rent is paid on a weekly or monthly basis (more if the rent period is longer) and to take effect at the beginning of a period of the tenancy. If the tenant does not agree with the proposed increase, he must apply to the tribunal who will decide what the rent should be. He must do so before the date on which the new rent would be due.
If the tenancy is a contractual periodic tenancy, the landlord may propose a rent increase under section 13 which will take effect one year after the tenancy began, and then at yearly intervals after the first increase.
If the tenancy is a statutory periodic tenancy, the landlord may propose a rent increase under section 13 which will begin as soon as the statutory tenancy comes into being, and at yearly intervals after the first increase. However, if the tribunal has already made a determination of the rent of an assured shorthold under s22, the landlord will have to wait 12 months before he can make a proposal.
Further increases
Once the landlord has served the notice of rent increase, and the rent has been increased as a result, the landlord is not permitted to propose a further rent increase to take effect earlier than one year after the date on which the increased rent took effect.
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Rent Recovery
Requirement for notice under Landlord & Tenant Act, s. 48
Under Landlord and Tenant Act 1987, s.48, landlords must provide the tenant by notice with an address in England or Wales at which the tenants’ notices may be served on him. Until this condition is complied with, rent is not lawfully due. The notice must be served in writing, and may be provided by inclusion in the tenancy agreement, by separate notice, or in a rent book. Where the rent is collected on behalf of the landlord by an agent, it is sufficient that the address of the landlord’s agent is supplied in this notice.
Possession proceedings
Although at one time, the landlord had the common law right of ‘distress’ (essentially seizure of the tenant’s possessions) to recover rent arrears, such rights have now been curtailed by the Protection from Eviction Act 1977. The landlord’s general recourse should be via legal proceedings in the county court. The rent arrears can either be included in the general claim for possession of land (where the tenant is still in possession of the property) or brought as a separate action (normally in the Small Claims Court if the amount is less than £10,000).
The procedure for starting proceedings for possession and rent arrears is described in detail in chapter 12.
Small Claims
Although possession actions cannot be conducted in the Small Claims Court, a landlord may use the Small Claims court to bring an action for any rent arrears and other financial damages. The Small Claims procedure is very straightforward. The required forms together with an excellent set of explanatory booklets is available from the local county court.
Limitation Act
6 year rule: The landlord must bring any action for the recovery of rent arrears, or damages within six years of the arrears falling due (Limitation Act 1980, s.19).
12 year rule: If a tenant does not pay the rent for twelve years and a day, the landlord may lose his title to the property and the right to claim for recovery of possession.
Rent Repayment Orders
Landlords may be required to repay rent to a tenant or local housing authority (up to a maximum of 12 months) under a rent repayment order where a First-tier Tribunal is satisfied beyond reasonable doubt that the landlord has committed an offence such as renting an unlicensed property, failing to comply with a housing improvement notice or a prohibition order, using violence to secure entry to a property or illegal eviction or harassment of occupiers.
Other statutory requirements
Where the tenancy is a weekly tenancy, there is a legal requirement that the landlord shall provide the tenant with a rent book which contains various statutory information. A rent book in the correct format can be obtained from legal stationers.
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Deposits
In order to protect the landlord, it is usual for the tenant to pay a dilapidations or tenancy deposit at the beginning of the tenancy to cover damage to the property and shortfalls to the rent. The deposit will be returned at the end of the lease to the tenant, provided all the covenants contained in the lease have been observed. With the introduction of Tenant Fees Act 2019, the size of the tenancy deposit has now been regulated to five weeks for the majority of lettings. Tenancy Deposit Protection Tenancy deposits have always been a bone of contention between landlords and tenants, and although relatively rare, the problem is further compounded by rogue agents who mis-appropriate deposit money or simply disappear.
Tenancy Deposit Protection (TDP) was introduced in April 2007 by legislation within the Housing Act 2004. Addressing concerns that many deposits were being unfairly withheld, delayed or even stolen by both landlords and agents, all new deposits taken after that date in connection with the granting of an assured shorthold tenancy are required by law to be protected under a Government appointed tenancy deposit scheme. For tenancy deposits held under the statutory TDP protection schemes, a dispute resolution process is available to the parties where there is disagreement over the amount of deposit withheld at the end of the tenancy.
The requirements of the tenancy deposit legislation are explained in more detail on the following pages, and powerful sanctions are available in cases of non-compliance.
Maximum deposit
For assured shorthold tenancies the Tenant Fees Act 2019 limits a tenancy deposit to a maximum of five weeks’ rent (or six weeks for high rent cases where the annual rent is £50,000 or more). For regulated tenancies under the Rent Act 1977, the deposit is limited to two months’ rent.
Holding deposit
Many tenants will be required to provide a holding deposit for their desired property in order to ‘reserve’ the property whilst a tenancy agreement is being drawn up, and credit references are taken. It is important to set out in writing to the tenant the conditions on which the holding deposit will be forfeited prior to taking it, for example, where the tenant reneges, as this will save endless time later. It is also good practice to provide the tenant with a copy of the tenancy agreement either on or ideally prior to the tenant paying the holding deposit.
The holding deposit is now limited to a maximum of one week’s rent and must be returned to the tenant within 14 days (an alternative deadline may be agreed between the parties) of receipt if no agreement has been entered into except in certain circumstances e.g. where the tenant has failed a right to rent check. See Letting Factsheet 51 for more information on the exceptions.
Landlords must set out in writing, within 7 days of deciding not to return the holding deposit to the tenant, the reasons whey they are retaining it. If this is not done the landlord will forfeit their right to retain the holding deposit and must return it to the tenant. Where a landlord is entitled to retain the holding deposit they should also consider whether retaining part of the deposit will be sufficient to cover costs incurred and return the remaining part to the tenant. Evidence of costs incurred must be provided to show that they are reasonable.
At the time of writing government guidance states that holding deposits are not subject to statutory tenancy deposit protection. If they are included in the dilapidations deposit once the tenancy has been agreed, they will need to be protected in a government-authorised scheme at this point.
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Tenancy Deposit Protection
Tenancy Deposit Protection (TDP) was introduced by Government following sustained lobbying from organisations such as Shelter and the Association of Residential Letting Agents. Although there was some prior evidence of deposits being unfairly withheld at the end of tenancies by both landlord and agents, the legislation has been controversial and earlier Government reports had shown poor support for an earlier pilot scheme, and concluded that there was no clear evidence to suggest that the actual incidence of tenants losing their deposits is so high as to require legislative intervention.
The Law
The tenancy deposit legislation was introduced within Part 6 of the Housing Act 2004. The main legislative provisions are contained within sections 212 to 215 and Schedule 10 of the Act. The Act was followed by a number of Statutory Instruments and has most recently been amended by the Localism Act 2011. The changes made by the Act and how these will be applied in practice are set out in more detail later in this chapter under the heading ‘The Localism Act 2011.’
Legal requirements
TDP applies to all new assured shorthold tenancies (ASTs) in England and Wales, where a deposit is taken, and the tenancy starts on or after 6 April 2007.
Under the tenancy deposit provisions a landlord is required to protect any deposit taken in respect of an assured shorthold tenancy in accordance with an approved tenancy deposit scheme (TDS).
From 6th April 2012 a landlord will have to carry out the following within 30 days of receiving the deposit: • pay the deposit into an authorised scheme • comply with the initial requirements of a scheme • give the tenant the appropriate statutory information relating to the deposit (the prescribed information)
Sanctions
TDP legislation contains onerous sanctions for non-compliance. Where the landlord or other person receiving the deposit has not complied with the legislation the following sanctions are available: • the tenant will be able to apply directly for a court order, from 31 days after the deposit payment, for the landlord to repay the deposit to that person or pay it into a custodial scheme. • the court must order the landlord to also pay a penalty of between one and three times the deposit. • the landlord will be unable to regain possession of the property using the usual ground for possession under Section 21 of the Housing Act 1988 unless he has first returned the deposit to the tenant and provided the tenant with the appropriate prescribed information or until any court proceedings brought by the tenant have been concluded, withdrawn or settled.
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Deposits
A tenancy deposit is defined by Section 212(8) of the Housing Act 2004 as being:
‘...any money intended to be held (by the landlord or otherwise) as security for a) the performance of any obligations of the tenant; or b) the discharge of any liability of his; arising under or in connection with the tenancy’. This means that any form of money that is taken at the beginning of a tenancy on the understanding that it will be returned to the tenant at the end of the tenancy needs to be safeguarded, whether it is called a ‘deposit’ or not. The Act only applies where money, either cash or its associated forms, such as a cheque or a banker’s draft, is passed to the landlord or his agent from either the tenant or a third party.
Exemptions
1. Non-Assured Shorthold Tenancies. TDP legislation only applies to new assured shorthold tenancies after the introduction date. Landlords commonly grant other forms of tenancy that are not ASTs, and these will be excluded from the legislation. Examples are: • Tenancies where the rent exceeds £100,000 per annum • Tenancies with a resident landlord • Holiday lettings and lettings to a company • Rooms in a hall of residence controlled by specified educational institutions
2. Holding Deposits. It is unclear whether the TDP legislation applies to holding deposits. At the time of writing current goverment guidance states that a holding deposit accepted before the commencement of the tenancy is not a tenancy deposit for the purposes of section 212 of the Housing Act 2004. However, where a landlord is holding a holding deposit in respect of a person who subsequently becomes his tenant, then the landlord must either return it to the tenant or retain it, and protect it in a scheme within 30 days of the tenant agreeing to enter into a tenancy.
3. No deposit (or rent in advance). Landlords can avoid TDP legislation by simply not accepting tenancy deposits, or taking two or three months rent in advance at the commencement of the tenancy. Rent paid in advance is not a deposit (unless it is accepted with the condition that part of this rent will be repaid at the end of the tenancy). However, these solutions open the landlord to extra risks if there is damage or rent arrears at the end of the tenancy. An alternative solution is to take out an insurance policy which provides equivalent protection against rent default and damage.
4. Existing tenancies. Deposits for tenancies where the deposits were received before 6 April 2007 are not required to be protected under the TDP legislation until they are renewed or become a new tenancy after 6th April 2007. However, if a deposit has not been protected within an authorised scheme prior to issuing the section 21 notice the notice cannot be given to the tenant at a time when the deposit is not being held in accordance with an authorised scheme. See page 10-21 for more information.
Where a pre-April 2007 tenancy comes up for renewal at the end of its fixed term, either: • the landlord grants a new or replacement tenancy. In this case, a new tenancy has been granted and TDP will apply. The deposit previously paid under the earlier tenancy should now be protected under a TDP scheme, or returned to the tenant. • the tenancy becomes statutory periodic or contractual periodic. In the case of statutory periodic tenancies, a new tenancy has been granted and TDP will apply but where a contractual periodic tenancy occurs TDP will not apply.
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Tenancy Deposit Protection (TDP) Schemes
TDP legislation provides for two types of deposit protection schemes; a custodial scheme and an insurance-based scheme.
Custodial scheme
The essential characteristic of the TDP custodial scheme is that the landlord or agent hands over the deposit money to a government authorised deposit taker. It works as follows: • The tenant pays the tenancy deposit to the landlord; • The landlord then pays the deposit into the scheme within 30 days of receipt; • Within 30 days of receiving a deposit, the landlord must give the tenant certain prescribed TDP information about the deposit, and how it is held; • At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the scheme will pay out in accordance with that agreement; • If there is a dispute, the scheme will repay any undisputed amount with interest to the person entitled to it, and hold the disputed amount until the dispute is resolved; • The interest earned by deposits in the scheme will be used to pay for the running of the scheme. A proportion of the interest earned will be added to the deposit amount when it is returned to the person entitled to it.
Insurance-based scheme
Alternatively, the deposits can continue to be held as before, but are protected by insurance: • The tenant pays the deposit to the landlord (or the landlord’s agent); • The agent/landlord retains the deposit but pays a fee to the scheme and the scheme will insure against the landlord unlawfully retaining the deposit at the end of the tenancy; • Within 30 days of receiving a deposit, the agent/landlord must give the tenant certain prescribed TDP information about the deposit, and how it is held; • At the end of the tenancy, the agent/landlord pays the tenant any part of the deposit that is not disputed; • If there is a dispute over the repayment of any part of the deposit, the agent/ landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved. Any interest earned on such disputed deposits shall be retained by the scheme.
Disputes
Both custodial and insurance-based schemes contain a statutory mechanism to protect the deposits at the end of the tenancy and to help resolve tenancy disputes. For example, a tenant has paid a deposit of £1200. At the end of the tenancy, the landlord (or his agent) says he wishes to keep £400 to pay for replacing a damaged cooker. The remaining £800 will be returned to the tenant.
The tenant disagrees, claiming the cooker was faulty when he moved in. Both agree to use the scheme’s Alternative Dispute Resolution (ADR), so the disputed £400 will be held by the scheme, and distributed accordingly when the dispute is resolved.
Choosing a TDP scheme to use
Cost will be a key factor of choice for many landlords and agents, and only the DPS custodial scheme is available to use free of charge. The other three insurance-based schemes generally charge either on an annual membership basis or on a per-transaction charge. All the schemes are
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designed to operate through a web-based interface, and a full list of the charges and scheme rules are available on the various scheme web sites listed below.
For larger landlords and agents, the benefits of earning substantial interest income on the bonded deposit money will make the insurance-based schemes attractive despite the cost of the membership and insurance charges. Many other practitioners will elect to hand over deposits to the custodial scheme, or use some other form of security to avoid taking deposits. See Letting Factsheet 24a for a fuller discussion of the choices and issues.
Authorised TDP Schemes
At the time of writing the Government have awarded contracts to four service providers to run tenancy deposit schemes:
The Deposit Protection Service (DPS)
DPS originally ran the only custodial deposit protection scheme which is free to use and open to all landlords and letting agents. The service is funded entirely from the interest earned from deposits held. The scheme is supported by a dedicated call centre and an independent dispute resolution service. DPS now also provide an insurance based scheme funded by the landlord or agent paying a charge on a per deposit basis. Agents will need to be a member of one of the professional bodies listed on the DPS website. For more information, visit www. depositprotection.com.
Tenancy Deposit Solutions Ltd trading as My Deposits
My Deposits originally only provided an insurance based scheme sponsored by the National Landlords’ Association and administered by Hamilton Fraser Insurance Services. It is open to all landlords and letting agents. A fee is payable to insure the scheme against any misappropriation of the deposit. The scheme is supported by a dedicated call centre and an independent dispute resolution service. At the time of writing My Deposits also provide a custodial scheme which is free to use and funded from the interest earned from deposits held. For more information, visit www.mydeposits.co.uk.
The Tenancy Deposit Scheme (TDS)
TDS originally provided an insurance based deposit and dispute resolution scheme. It is open to all landlords and letting agents. A fee is payable to insure the scheme against any misappropriation of the deposit. The scheme is supported by a dedicated call centre and an independent dispute resolution service. At the time of writing TDS have also advised that they will be providing a custodial scheme for landlords and agents. For more information, visit www.tds.gb.com.
Capita Plc
Capita plc provided an insurance based scheme between April 2013 and September 2013 but they no longer provide this service.
Scheme rules
Whichever scheme is adopted by landlord or agent, it is vital that the practitioner familiarises himself with the scheme rules. TDP legislation makes it a condition that any deposit is accepted within the rules of the particular TDP scheme adopted. If a tenant can prove that the landlord has not substantially followed the scheme rules, the landlord will be liable for the onerous penalties discussed earlier in this section.
In all schemes, penalty charges will apply in prescribed situations - e.g. bounced cheques, payments to overseas accounts etc.
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TDP - Statutory information requirements
One of the key aspects of the TDP legislation is that the landlord or ‘person accepting the deposit’ shall furnish the tenant with certain prescribed information within 30 days of receiving the deposit. This information must be provided. Failure to provide the information will mean that the TDP penalties (described earlier) will apply to the tenancy.
The general requirement to supply information is contained within section 213 of the Housing Act 2004 and detailed further within the Housing (Tenancy Deposits)(Prescribed Information) Order 2007 (SI 2007, No.797) as amended by the Localism Act 2011 and the Deregulation Act 2015. This Statutory Instrument is available to download from the following website: www. legislation.gov.uk. The Statutory Instrument requires that the landlord or agent provides certain information to the tenant(s) and any other relevant persons. This information shall:
1. identify the deposit which has been paid, the address of the property to which the tenancy relates, and
2. provide the name address, telephone number and any e-mail address or fax number of the landlord(s) or initial agent, the tenant(s) (including details for contacting the tenant at the end of the tenancy) and any other ‘relevant person’ to the deposit (i.e. a person who contributes towards, or pays the deposit on behalf of the tenant)
3. define the circumstances when all or part of the deposit shall be retained by the landlord or initial agent by reference to the terms of the tenancy
4. provide confirmation (in the form of a certificate signed by the landlord or initial agent) that the information provided is correct, and that the tenant has been given the opportunity to sign any document containing this information
5. include details of the tenancy deposit scheme being used for protecting the tenancy deposit. These details should include any information contained in a leaflet supplied by the scheme which explains the operation of the tenancy deposit protection provisions under the Housing Act 2004, and details of various procedures that will apply to repaying the money, contacting the parties, and resolving any dispute that may result in relation to repayment of the deposit. (SI 797, Article 2, paras(1)a to (1)f)
(this is only a summary, see the Statutory Instrument for the full detailed list of requirements)
Compliance with information requirements
There are two main ways to ensure compliance with the tenancy deposit information requirements: • by supplying the tenant and any relevant person (RP) with a Deposit Information Certificate • by incorporating the prescribed information within the tenancy agreement Your scheme provider can advise you as to the best approach to adopt in order to comply with the TDP legislation and the TDP scheme rules. The TDS scheme have drafted ‘prescribed pages’ which can be completed and attached to the tenancy agreement - which ensure compliance. The other schemes have made arrangements so that some of the prescribed information is sent directly to the tenants by the scheme provider, with the remainder being supplied directly from the landlord.
The unwieldy and complex nature of the TDP information requirements, and the disproportionate nature of the penalties attached has led to the legislation being reviewed and the amendments introduced by the Localism Act 2011 and the Deregulation Act 2015. See ‘The Localism Act 2011’ and ‘The Deregulation Act 2015’ later in this chapter and Letting Factsheets No. 24 and 24b for more detail on the TDP statutory information requirements.
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Joint tenants
The TDP legislation does not make detailed provision for joint tenants in a tenancy; it is left to the individual TDP schemes to decide on arrangements for handling the receipt of deposits separately from joint tenants. Practitioners will need to refer to the scheme rules for the particular scheme they wish to use for precise details on the handling the deposit in such situations.
Lead tenant
The DPS custodial scheme and the TDSL scheme both make provision for the appointment of a person referred to as the ‘Lead Tenant’ who is deemed to have authority to make decisions regarding the return and final decision of the deposit at the end of the tenancy. The role of the joint tenant is to be the sole point of contact for the schemes in relation to the deposit.
The lead tenant should ideally be the chosen by mutual agreement amongst the tenants rather than simply appointed at will by the landlord. This is because each of the tenants has a right to share in any decision regarding the agreement of any deductions at the end of the tenancy. The unilateral appointment of the lead tenant by the landlord could lead to one of the other joint tenants claiming that the landlord has unfairly deprived the tenant of his rights. Good practice suggests that joint tenants should be asked to sign a Lead Tenant Declaration (see below).
The custodial scheme (DPS) scheme rules require that the role be explained to the joint tenants (and this could include a married couple) and for all the joint tenants to agree to the appointment of the Lead Tenant. Under the DPS, this Lead Tenant has the sole power to authorise the deposit release and deal with any disputes. Other ‘relevant persons’ (explained below) are also involved in the Lead Tenant arrangement and they too will be expected to assist in the appointment of the single individual acting as Lead Tenant (or the ‘relevant person’ could even be nominated to fulfil this role).
The TDSL insurance-based scheme suggests that the landlord “makes provision” for a lead tenant to be appointed, but does not discuss how this result should be obtained. For reasons discussed above, landlords and agents should ideally ensure that this decision is reached by agreement amongst the tenants.
Lead tenant declaration
Compliance with the TDP requirement for a lead tenant is typically achieved by asking all tenants to sign a Lead Tenant Declaration - a simple written agreement (see Letting Centre website for an example form - www.letlink.co.uk)
Relevant persons
The TDP legislation introduces the concept of the ‘relevant person’ in relation to the payment of the deposit. The relevant person simply means anyone who provides or contributes towards a deposit on behalf of a tenant. Consider, for example, the situation where there are five students sharing a property as joint tenants, and the deposit is provided by one of the parents of each of the students. In this letting, there will then be five joint tenants, and five relevant persons.
The TDP legislation requires that the details of each of the joint tenants and relevant persons are supplied to TDP scheme. Also copies of the prescribed tenancy deposit information need to be provided to each joint tenant, and also to each relevant person.
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TDP - Arranging for the return of the deposit at end of tenancy
At the end of the tenancy, it is hoped that the landlord and tenant will agree on any deductions that need to be made from the deposit to cover damage, cleaning or rent arrears. The landlord or agent then arranges for the balance of the deposit to be returned to the tenant(s).
If the deposit is held within the custodial tenancy deposit scheme, then the landlord and tenant will simply complete an appropriate form which identifies the deposit and provides information on how the deposit is to be divided. The scheme will pay out in accordance with that agreement.
The TDP legislation and the various TDP schemes prescribe time limits governing the resolution of tenancy deposit disputes and the return of the deposit money.
Deposit disputes
If there is a dispute, then the agent or landlord should complete the relevant form supplied by the scheme specifying the disputed amount, and outlining the nature of the dispute. The parties in dispute then have the option of using the TDP dispute resolution process, or asking the court to resolve the dispute instead. If both parties agree to use the TDP dispute resolution process, then a file containing details of the tenancy and the disputed deposit amount will need to be assembled and passed to an adjudicator.
Whilst the dispute is being resolved, any undisputed portion of the deposit will be repaid to the person entitled to it.
Abandoned tenancies and uncontactable parties
Occasionally the tenant(s) will abandon the tenancy on a property - perhaps because they have incurred difficulties paying the rent, or simply moved away at short notice. If just the lead tenant has abandoned the tenancy, then it should be possible for the remaining joint tenants to agree and appoint a new lead tenant. If, however, all tenants have left the property, then it will not be possible for the tenants to agree to the release of the deposit in the normal way. Equally, it is possible that the landlord or agent could disappear or otherwise become uncontactable.
The TDP legislation has provided a solution to these seemingly intractable situations. The solution is that the landlord, agent, or tenant can make a single claim application to the scheme for the return of all or part of the deposit in these circumstances.
The party claiming must make a statutory declaration in which he has to provide certain information to the scheme about the tenancy and the steps he has taken, unsuccessfully, to try to contact the other party. He must also indicate whether or not he agrees to the ADR service being used (in case the other party turns out to be contactable and contests the claim).
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TDP: Dispute Resolution Process
Disputes inevitably occur at the end of a tenancy regarding the return of the tenancy deposit and a dispute resolution process has been incorporated within the TDP legislation with the aim of promoting a solution to the problem of unfairly withheld deposits. All the TDP schemes provide an alternative dispute resolution (ADR) service free of charge to assist in resolving disputes.
The ADR process is a paper-based process relying on submitted evidence. There will be no inspection of the property by the ADR adjudicator. As a consequence, many landlords and their agents will need to review and improve their procedures and paperwork. Under ADR, any landlord who cannot provide good tenancy condition documentation will have little chance of winning a deposit dispute claim. Practitioners are well-advised to read the scheme rules for their adopted TDP scheme at an early stage before any dispute occurs - the rules outline the scheme’s ADR procedure and what documentation will be requested.
Invoking dispute resolution
Once it is clear that a dispute has arisen over a deposit held under the ADR scheme, either the landlord/agent or the tenant will be required to notify the scheme of the dispute. There is generally a time limit to do this - in the case of the TDS scheme, for example, dispute paperwork should be sent to the scheme within 10 working days of a dispute being registered.
Both the landlord and tenant must let the scheme know whether or not they agree to using the ADR service. Where both parties consent to use the ADR, the decision made by the adjudicator will be binding. Disputes relating to the deposit may go to the courts if either the landlord or tenant does not agree to use the ADR service, or in the case where there is a dispute in respect of a deposit held under an insurance based scheme and the landlord is uncontactable.
ADR Process
The following gives a simplified outline of the adjudication process:
1. Notification. Either the landlord (or landlord’s agent) or the tenant notifies the ADR scheme of the dispute. The landlord or his agent is then expected to forward that part of the deposit in dispute to the adjudicator (if held under an insured scheme). The remainder of the deposit that is not in dispute can be returned to either the tenant or the landlord as agreed.
2. Evidence. The ADR process is evidence-based, ex-parte service (unlike court, no one attends the hearing). Following notification, the landlord/agent will be required to supply the ADR scheme with a file of evidence to support the landlord’s claim. This file should contain items such as the tenancy agreement, inventory, vacating instructions, and check-out inventory report. Success at ADR relies on the landlord being able to prove his claim - a poorly prepared inventory or check-out report will mean that the claim is unlikely to succeed. Equally, if there are missing documents from the submitted evidence file, the adjudicator may exercise his discretion to reject the claim completely.
3. Adjudication. The dispute is assigned to an adjudicator - from a panel drawn from relevant professions: lawyers, inventory clerks, surveyors, rent officers, architects, etc. The adjudicator will write to the other party asking whether they want to contest the dispute and, if so, will ask them to submit their own response or version of the events leading to the dispute.
4. Final Report. The adjudicator then submits a report. This decision is then sent out to the parties, and the deposit is paid out as directed by the adjudicator.
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The Localism Act 2011
The Localism Act received Royal Assent on 15 November 2011 and the changes to tenancy deposit protection come into effect on 6th April 2012. Any new tenancies created on or after 6th April 2012 will be covered by the new requirements and any tenancies already in existence will have 30 days to comply. The new requirements will only apply to court proceedings for a breach of the Housing Act 2004 which started on or after 6th April 2012.
What does this mean for the private rented sector?
Deposit protection and prescribed information An agent or landlord must protect the deposit and provide the prescribed information within 30 days of receipt of the deposit. Previously the time period was 14 days so agents and landlords are now allowed more time. The new time limit is a must and any failure to comply will result in a penalty (as set out below) even if compliance occurs prior to the date of the court hearing. Tenants are now also able to make an application to the court after the tenancy has ended under the new legislation.
If the landlord or agent has failed to protect the deposit and/or provide correct prescribed information within 30 days the tenant can make an application to the court from day 31. Where the tenancy is ongoing the court will order the landlord or agent to pay a penalty, return the deposit or protect it and provide the tenant with the correct prescribed information. Where the tenancy has come to an end the landlord or agent will be ordered to pay a penalty and return the deposit to the tenant, less any deductions as agreed.
Section 21 A landlord can now serve a section 21 notice where he has failed to comply with the legislation but only where the following have occurred: • the landlord or agent has returned the deposit to the tenant either in full, or with any deductions, as agreed with the tenant. • any court proceedings have been concluded, withdrawn or settled. • the landlord has provided the tenant with the correct prescribed information (even if it is after the 30 day period). Penalties Where a landlord or agent fails to protect the deposit within the 30 day period or provide the prescribed information to the tenant within 30 days a penalty is payable. The courts now have the discretion to award a penalty of between one and three times the deposit instead of the previous fixed penalty of three times deposit. There is no longer an option to avoid a penalty if the deposit is protected and prescribed information is provided before the court hearing although the courts will take this into account when deciding what level of penalty to impose. A tenant will be able to make an application to the court 31 days after the deposit has been paid if the landlord or agent has not complied with the legislation.
The effect of the changes The changes to the legislation override previous court judgments so it is difficult to predict how the law will be interpreted until new cases reach the courts but the position for landlords and agents appears to be more onerous than under the original legislation. There is no avoiding the penalty if the deposit is protected late or the prescribed information is not completed correctly within the 30 day period. It is therefore very important for agents and landlords to ensure compliance especially with the prescribed information requirements so as to avoid a penalty. Even minor technical errors could invite a penalty.
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Tenancy Deposit Money - General Rules
Although many tenancy deposits will now receive protection under TDP legislation, it remains important to understand the common law rules for deposits. This section explains the situation for tenancy deposits which are not protected by TDP legislation
The simplest way of dealing with deposits is to provide, in the agreement between landlord and tenant, that the landlord will hold the deposit and be accountable to the tenant for the return at the end of the tenancy. Any deposit paid by the tenant remains the tenant’s money and can only be utilised or appropriated, without consent, if there has been a breach of covenant contained in the lease.
If an agent is dealing only with the initial letting of the property (a ‘let-only’), then the agent will commonly hand over any dilapidations deposit taken, and make this a condition of accepting instructions from the landlord client in writing (normally termed ‘Conditions of Engagement’). He avoids any necessity for a separate clients account, bonding, disputes over dilapidations, interest and all manner of squabbles that bedevil management. If there is a dispute at the end of the tenancy and a landlord refuses to return the money held, a tenant can take legal action directly against the landlord.
Interest
There is no legal requirement to pay interest to the tenant on his deposits unless the agent so agrees.
Deposit held as ‘agent for landlord’
While this appears to be the most obvious way in which to take a deposit, it has the double disadvantage that the landlord may require that the deposit be paid over to him, which the agent cannot resist, and that it can only be repaid to the tenant if the landlord agrees. This can often be an unsatisfactory and uncomfortable situation.
If the agent does not specify the arrangements for holding or returning the deposit in the tenancy agreement, then it will be assumed that the agent is holding the money ‘as agent’.
Deposit held as ‘stakeholder’
The agent holds it in trust for the tenant and if the tenant complies with all the covenants, returning possession of the property to the agent, then the deposit should be returned to the tenant without delay. Some reservation may be agreed for accruals such as utility bills if not immediately paid on the tenant’s departure.
If the deposit is held as ‘stakeholder’, then the agent is obliged to act as an independent third party in the arrangement, and aims to deal with both parties fairly and correctly. The agent may only make deductions from the deposit in respect of dilapidations, rent arrears or in other situations specified in the tenancy agreement.
The advantage to this method is that the agent, being on hand and closest to the situation, (and presumably most expert at assessing and costing any dilapidations) will have the freedom to act in the manner which is fairest to the parties.
The disadvantage is that the agent is open to being sued if either party considers that the outcome is incorrect, or that the agent has been negligent in assessing the deductions.
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Deposits and the Tenancy Agreement
Any deposit paid by the tenant, whether by way of rent paid in advance, dilapidations, or any other reason, clearly remains the tenant’s money and can only be utilised or appropriated, without consent, if there has been a breach of the covenant contained in the lease. It is therefore essential that the tenancy agreement contains a clause which allows the landlord or letting agent to utilise the tenant’s deposit if there has been a breach of covenant contained in the lease.
If the deposit is held solely ‘against dilapidations’, then it may not be used for any other purpose other than to fairly compensate the landlord for dilapidations that have occurred.
If the deposit is stated to be held as ‘security for the performance of the tenant’s obligations and to compensate the landlord for any breach of these obligations’, this wording allows the deposit to be more widely appropriated.
Interest
It is recommended that the tenancy agreement also states the position with regard to the interest earned from the deposit held (i.e. whether it is payable to the tenant or retained by the landlord).
Special clauses
Where the tenancy deposit is protected by TDP legislation, it is important to study the respective scheme rules carefully regarding any requirements as to the form and content of the tenancy agreement. The TDS scheme, for example, provides certain prescribed information and about the tenancy deposit, and requires that these clauses to be included in the tenancy agreement. It is vitally important that these requirements are followed exactly. Non-compliance with such requirements could lead to the tenant being able to apply the statutory sanctions under the TDP legislation.
Where the tenancy deposit is not protected by TDP legislation, and the dilapidations deposit is held by the agent, then there should be a clause in the agreement stating the manner in which the deposit is to be held. (either ‘as agent for the landlord’ or ‘as stakeholder’ - see previous section).
Last Month Default Syndrome
It is not uncommon for tenants to withhold payment of the final month’s rent at the end of a tenancy. Many tenants use this tactic in order to avoid any end of tenancy cleaning and repair costs, and also to help them raise sufficient funds to afford to pay the tenancy deposit for their next property.
Provided that the deposit clause in the tenancy agreement is correctly worded, the tenant has no right to use this money to offset the rent payment. It can be helpful and clearer to include explicit wording in the agreement to this effect so that it is clear that such action will constitute a breach of the tenancy agreement. TDP legislation provides no additional protection to the landlord to prevent this occurring.
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Clients Accounts and Other Requirements for Money Held by Agents
Many of the professional associations for the letting industry (including RICS, ARLA, UKALA, NAEA) have professional rules relating to the holding of tenancy deposits, rents received and other client money. These organisations, and also many landlord associations, require their members to pay all client money into a clients’ account. It is a breach of the professional rules, punished by expulsion from membership in a serious case, not to comply. Equally, the RICS Management Code of Practice, introduced in 1997 and approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 makes similar requirements. Although non-compliance does not strictly constitute an offence, the Code may be used in evidence and taken into account, if relevant, in court or tribunal proceedings (for example in a dispute over deposit money).
It is essential, as well as being a breach of the professional rules, that all money received is correctly receipted and appropriated in the books or computer records of account. Non-returnable deposits paid by intending tenants to secure a tenancy upon which they renege, must be clearly endorsed upon the receipt as non-returnable. This is additional to any agreement, in writing, indicating beyond doubt that if the intending tenant does not enter into the tenancy due to his failure, for whatever reason, the deposit will be forfeited as liquidated damages.
Since 1st April 2019 letting agents in England who hold money on behalf of a client in the course of letting agency work or property management work must belong to an approved designated client money protection scheme. See Chapter 17 for more information.
Received rents
Payment of rent received to the landlord’s credit is often a source of complaint. The received payments are accountable to the landlord and should not therefore be retained unreasonably (e.g. more than a month) unless by prior agreement. The agent will, of course, deduct commission and other agreed charges from the tenant’s payment in accordance with the mandate agreed between client and agent.
Some agents take their total commission from the initial rent payment for the entire let; others on a periodic basis as rent is paid. It is a matter that should agreed in the terms of business and appointment of the agent. Apart from being common sense, the RICS Code and the rules of the professional bodies require the terms of business between agent and client to be in writing
Deductions for repairs and other expenses
The agent will also deduct any costs for repairs or other expenses (insurances, gas service costs etc. ) incurred on behalf of the landlord. These payments will be within the amount authorised by the landlord in the management agreement and must be supported if required by the corresponding invoice. Most landlords will authorise the agent to incur, without reference, repairs or replacements to an agreed figure. Any expenditure above that sum requires the express authority of the landlord which shall, save in dire circumstances, be in writing. Where significant expenditures are to be incurred by the agent, it is sensible for the agent to request to hold funds on account for payment of these maintenance and general expenses.
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Returning the Deposit
Provided the tenant has looked after the property in a ‘tenant like’ manner, observing all the covenants contained in the lease and restored the property to the landlord in a clean and undamaged condition, fair wear and tear excepted, then the dilapidations deposit should be promptly returned to the tenant.
Generally, there are two key conditions - Firstly, the tenancy must have ended; Secondly, there are no arrears of rent, damage, loss of contents or any other breach of the agreement.
Until those two conditions are satisfied the tenant is not entitled to the return of his money. Neither is the landlord entitled to uplift the money held by the letting agent until the loss has been quantified and agreed by the tenant and landlord. In the absence of any agreement, the letting agent (or the Deposit Protection Scheme - in the case of custodial deposits under TDP) must continue to hold the deposit money in trust for the tenant.
Assessment of dilapidations
Arrears of rent are normally easily ascertained. A great deal of argument, time and expense can, and often is, generated over damage to the property and/or contents, loss of items and replacement value, or compensation for other breaches of the agreement.
The letting, or managing agent, has to exercise the Wisdom of Solomon. He or she must be objective in assessing loss. The agent will rely on the inventory and, hopefully, photographs taken immediately before occupation. Apart from vital use as evidence, it serves to jog the letting agents memory of condition especially of the garden if one of the covenants relates to keeping it well maintained, weeded and grass cut.
Using all his experience and guile, the letting agent will view any loss or damage objectively and independently. He will exercise his trust as a trustee of the tenants money as if it were his own. He or she must assess the loss as an arbiter, drawing on the experience and written reports of loss assessors if circumstances so demand. If all else fails and either the landlord or tenant, or both, will not agree to the agent’s finding, then the agent will continue to hold the tenants deposit in trust pending the decision of the Court or a TDP adjudicator.
Tenancy deposits not subject to TDP legislation
Where a landlord holds the tenancy deposit, and the tenancy deposit is not protected by TDP legislation (e.g. rent above £100,000 per annum), then the landlord (or his agent) is free to make his own assessment of any dilapidations, and impose the decision on the tenant. If the tenant does not agree, then the tenant’s only recourse is to take action in the local county court.
However, if a non-TDP tenancy deposit is held by an agent ‘as stakeholder’, it is essential to get agreement of both parties before releasing the deposit. Otherwise, if there is no agreement, the money should be held in trust until the parties reach agreement, or pending the decision of a court.
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Tenancy Deposit Case Law
Two Court of Appeal cases have caused some uncertainty within the private rented sector regarding tenancy deposit legislation which have now been clarified in the Deregulation Act 2015. Details of the cases are set out below:
Case Law Example: In this case the tenant was granted a one year fixed term assured shorthold tenancy in January 2007 and a tenancy deposit was taken. The deposit was not required to be protected as the tenancy began prior to the introduction of the tenancy deposit legislation. In January 2008 the fixed term tenancy expired and the tenant remained in occupation under a statutory periodic tenancy. The landlord later sought possession using a section 21 notice in June 2011. However, the tenant claimed that the section 21 notice was invalid as the deposit had not been protected in accordance with the tenancy deposit legislation under the Housing Act 2004 when the tenancy became statutory periodic. After considering the language in section 5 of the Housing Act 1988 the Court of Appeal decided that the statutory periodic tenancy was a new tenancy, albeit on the same terms and conditions as the fixed term tenancy, and not a continuation of the existing tenancy. The deposit held by the landlord at the end of the fixed term was deemed to have been received in relation to the statutory periodic tenancy in January 2008 and should have been protected in accordance with deposit protection legislation. Failure to protect the deposit resulted in the landlord being unable to rely on section 21 as he was in breach of section 213 of the Housing Act 2004. The ruling in Superstrike meant that deposits taken on assured shorthold tenancies before 6th April 2007 should have been protected and prescribed information issued when the tenancy became statutory periodic or a new fixed term tenancy occurred after 6thApril 2007.
(Superstrike Ltd v Marino Rodrigues [2013] EWCA Civ 669)
Case Law Example: In this case the tenants were granted a one year fixed term tenancy in 2002 which was subsequently renewed and then became statutory periodic in 2005. A tenancy deposit was taken in relation to the original tenancy which was carried over to subsequent tenancies. In 2012 the landlord served a Section 21 notice requiring possession of the property. The question of this case is whether the Section 21 Notice is valid. The tenants argued that the notice was invalid as the deposit had not been protected within one of the statutory deposit schemes. The Court of Appeal held: The first condition of section 215(1) states that ‘a tenancy deposit has been paid in connection with a shorthold tenancy’ which looks at a past event. It was held that this condition is satisfied in this case and the Court of Appeal Judge held that it does not say only a deposit paid after 6th April 2007. The second requirement is that either ‘the deposit is not being held in accordance with an authorised scheme’ or ‘section 213(3) has not been complied with.’ The Court of Appeal Judge stated that the first statement is in present tense. The decision made by the Court of Appeal Judge was that all tenancy deposits paid in connection with a shorthold tenancy which is not being held in accordance with a statutory scheme at the time the Section 21 Notice is served will render the Section 21 Notice invalid. With regard to penalties in relation to non-compliance the Court of Appeal Judge held that the landlords were not required to comply with Section 213(3) at the time the deposit was received in connection with the fixed term tenancy and the statutory periodic tenancy as these pre-dated the April 2007 legislation.
(Charalambous & Anor v Maureen Rosairie Ng & Anor [2014] EWCA Civ 1604)
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Deregulation Act 2015
The Deregulation Act 2015 (the Act) received Royal Assent on 26th March 2015. The Act clarifies the issues raised in the cases of Superstrike v Rodrigues 2013 and Charalambous vs Ng 2014.
Deposits received prior to 6th April 2007
Any deposits received prior to 6th April 2007 where the tenancy becomes a statutory periodic tenancy before 6th April 2007 do not need to be protected under TDP legislation at the time of receipt. However, in order to gain possession of the property using section 21 the deposit must be held in accordance with an authorised scheme at the time the section 21 notice is given. No financial penalties will be payable for non-protection of the deposit but to ensure valid service of a section 21 notice the deposit (whether received before or after 6th April) would need to be protected in an authorised scheme prior to serving the section 21 notice. Alternatively, landlords could consider returning the deposit to the tenant thus avoiding the provisions completely.
Where a landlord has taken a deposit before 6th April 2007 which continues to be held for a statutory periodic tenancy which commenced after 6th April 2007 that deposit must be protected in an authorised scheme and the prescribed information issued to the tenant on whichever of these dates is the earliest: • 23rd June 2015; • before the date on which a court determines an application or an appeal against a determination under section 214 Housing Act 2004; or • before the date on which a court makes a determination as to whether to make an order for possession in proceedings under section 21 of the Housing Act 1988; or decides an appeal against such determination. If a landlord has taken a deposit before 6th April 2007 which continued to be held for a statutory periodic tenancy, which commenced after 6th April 2007, where the periodic tenancy is no longer in existence as at 26th March 2015 and the landlord is no longer holding the deposit the deposit protection initial requirements will be treated as if they had been complied with.
Deposits received after 6th April 2007
Deposits received after 6th April 2007 are still required to be protected and prescribed information issued to the tenant within 30 days of receipt of the deposit. The Act confirms that, where the landlord protected the deposit and issued the tenant with the prescribed information in relation to the initial fixed term tenancy, there is no need to re-protect or re-issue when the tenancy is renewed or becomes statutory periodic where the tenancy details are the same and the deposit continues to be protected.
Where a tenancy deposit has been paid on or after 6th April 2007 no section 21 notice may be given where the deposit is not being held in accordance with an authorised scheme or where the initial requirements (i.e. prescribed information) have not been complied with in relation to the deposit.
The Act also clarifies that, where an agent has protected a deposit on behalf of a landlord, the agent’s contact details can be provided within the Prescribed Information in place of the landlord’s details.
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11. Disrepair and Fitness
Disrepair is an important subject for landlords and agents to understand fully since tenants frequently report breakages and maintenance problems. It is vital that the landlord is aware of the statutory or agreed repairing obligations for a particular tenancy. As we can see from the case examples below, reasonable expedience is vital once disrepair has been reported; significant liability can accrue to the landlord if such disrepair is not acted on and subsequently causes serious injury to the tenants. Furthermore, landlords in many cases will not want to incur unnecessary expense in maintaining or improving the rented property at the whim of an individual tenant’s complaints if there is no contractual or legal obligation to do so.
As we shall see, in what appears to be a very grey area, it is generally possible to make a clear decision when the legal rules relating to disrepair are combined with some basic technical knowledge of the common disrepair problems.
Landlord’s responsibilities
The main repairing obligations of landlords have now been defined by statute, making it impossible for landlords to avoid their responsibilities relating to disrepair. There are still many areas that are not covered by statute, however, and in these areas it is often difficult for landlords and tenants to discover who is responsible for which repairs. The basic principle in these unspecified cases is that, in the absence of any express agreement between the parties, neither party is legally responsible for any items of disrepair outside these main statutory obligations.
Generally speaking, in leases of less than seven years, or a periodic tenancy, the landlord will be responsible for the repair of the following: • the structure and exterior of the dwelling • basins, sinks, baths and other sanitary installations in the dwelling; and • installations for heating water and space heating in the dwelling. N.B. The obligations are set up in full in s11 of the Landlord and Tenant Act 1985 (LTA), and discussed in detail later in this chapter.
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The landlord must keep the installations in the dwelling in proper working order, but will not be responsible for repairs arising from damage caused by the tenant, or for rebuilding the property in the case of damage by fire, flood or other inevitable accident (although in practice, the prudent landlord would generally carry insurance to guard against such perils). Nor does the landlord have to repair anything which the tenant has a right to take away unless, in some circumstances, the damage was caused as a result of the landlord’s failure to carry out his repairing obligations.
As a result of more recent legislation (Gas Safety Regulations 1994), the landlord is required to ensure that all gas appliances are maintained in good order and that an annual safety check is carried out. This obligations are discussed further in Chapter 8.
Outside the main repairing obligations implied by statute (these are called the ‘implied’ terms or obligations), the landlord’s repairing obligations will be governed by any relevant terms in the tenancy agreement (these are known as the ‘express’ terms) and the common law rights of occupiers. Clearly, the landlord cannot insert terms which conflict with the statutory obligations, but for example, there is nothing to prevent the landlord inserting a term to make the tenants responsible for maintaining the internal decoration at the property. Where the tenancy is for a substantial period (say a term of more than three years), the landlord may wish to require the tenants to decorate the property in the last three months of the term. For shorter terms, such requirements are less common.
Where the landlord has not carried out his repairing obligations, then the tenant is entitled to take legal action against the landlord. The court can award damages, and order repairs to be done. If the item of disrepair (e.g. a leaking roof) has resulted in damage to the tenant’s property, then the tenant may be able to claim for the cost of repairing or replacing the damaged items.
As we shall explain further below, the general rule is that the landlord is only liable to carry out repairs to defects he should have known about. Once he finds out about them, either by direct notification from the tenant, or someone else telling him, or as a result of his own inspection, the duty to repair will arise. He must remedy the defect(s) within a reasonable time.
Landlords of flats and houses in multiple occupation (HMO) will have additional responsibilities and these are discussed in summary at the end of this chapter (and in more detail in later chapters).
Tenant’s responsibilities
Less well understood is the fact that the tenant also has repairing responsibilities: • the implied term to maintain the property in a ‘tenant-like’ manner • the express terms contained within the tenancy agreement Under common law, a tenant must use the property in a responsible way. He must take proper care of it. For example, he should turn off the water if there is a risk of burst pipes when he is going away and unblock the sink when it is clogged up by his waste. He should not damage the property and should make sure that his family and guests do not do so. If they do, he may be responsible for the damage. Under the Rent Act 1977, the Housing Act 1985 and the Housing Act 1988, the landlord can seek possession where a tenant or someone living with him has damaged the property (Housing Act 1988: Grounds 13 & 15).
The tenant’s obligations are discussed in further detail in a later section in this chapter.
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Disrepair - the law of disrepair
The law of disrepair is scattered across various statutes and common law, and these repairing obligations will also be affected by any explicit terms in the tenancy agreement.
The law of disrepair can be neatly divided into three main branches: • Contract. These obligations are concerned with the express and implied terms of the tenancy agreement. The contractual obligations affect only the parties to the agreement (i.e. the landlord and tenant(s) ) and will in most cases be the branch of the law that is most relevant when determining the parties rights following a dispute. The landlords main statutory repairing obligations are defined in: - Landlord and Tenant Act 1985, ss.11-15 - Gas Safety (Installation and Use) Regulations 1994 • Tort. Tortuous liability can arise as a result of negligence or nuisance. In law, ‘negligence’ is founded on the common law duty of care a landlord owes to any occupier in his property. The duty extends to cover any person upon the premises such as the tenant’s visitors or family. Thus, to pursue an action in tort against the landlord, the claimant does not have to be a party to the contract - one of the fundamental differences to the contractual obligations above. The landlord’s main duties of care are defined in: - Defective Premises Act 1972 - Occupiers’ Liability Act 1957 • Local Authority Powers. There are a number of powers created by statute that allow public or local authorities to enforce repairing obligations on landlords, and allows these public bodies to bring action. These obligations which are principally concerned with ensuring that properties are ‘fit for habitation’ and free from disrepair or a state which is ‘prejudicial to health or a nuisance’. If the local authority visits a property and find it is unfit, or finds the existence of a statutory nuisance (e.g. vermin infestation ) then it has a duty to take action. The key statutes used by local authorities are: - Environmental Protection Act 1990 - defining a ‘statutory nuisance’. - Health and Safety at Work Act 1974 (includes gas safety provisions) - Consumer Protection Act 1987 (product safety provisions) - Health and Housing Safety Rating System (HHSRS) - used to assess key hazards
Related law
Further legal obligations will apply to landlords and managers of houses in multiple occupation (HMO) and other special categories of housing such as hostels, hotels and boarding houses. These rules mainly relate to fire safety and the maintenance of the associated detection systems and escape routes. The main rules and obligations relating to HMOs are discussed in Chapter 16. The other categories, being less relevant to private residential landlords are outside the scope of this handbook (for guidance on standards for repair and fire safety in these categories, landlords should contact their local authority’s fire officer).
Building regulations may also apply to much building and repair work, especially where there is an extension of an existing building or other substantial works.
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What is Disrepair ?
Disrepair is defined in the dictionary as ‘the condition of being worn out or in poor working order; a condition requiring repairs’. It is important to note the difference between repair and improvement. Disrepair only occurs when something that is already in existence is damaged or requires repair. Therefore, a repairing covenant- whether implied or express - would not normally include the installation of new windows in a Victorian house simply because the original sash windows were inherently draughty. Similarly, a landlord would have no obligation to lag bare pipes if the property had never previously had lagged pipes, as this would be an ‘improvement’ and not a repair.
Case Law Example: Rising Damp - no disrepair
The house in which the tenant resided suffered from rising damp and did not have a damp- proof course. The tenant claimed that the landlord was in breach of his repairing obligations under s11 of the Landlord and Tenant Act 1985 as he had failed to install a damp-proof course to remedy the rising damp. The Court of Appeal held that there was no disrepair. The house had been built without a damp-proof course, the tenant had rented it in that condition. In fact what the tenant was seeking was something completely different than that which he had agreed to rent - a house with a damp-proof course. ( Wainwright v Leeds City Council 19841 - Court of Appeal)
Standard of repair The standard of repair required will vary and is determined by the age, prospective life, character and location of the premises. Age is important because a 200-year old house could not be expected to be in the same condition as a new one. Thus, draughty windows might be considered as in ‘reasonable repair’ in a Victorian property, but in poor condition if present in a new flat. Good tenantable repair is such repair as, having regard to the age character, and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it.
Case Law Example: Standard of repair
A tenant was unsuccessful in a claim that the landlords had failed to keep in repair a stone tile and wooden peg roof (probably 150 years old). Although, by 1989, the roof was in need of complete repair, the landlords had simply undertaken ‘running repairs’ by replacing any rotten pegs and slipped tiles as required. The judge held that, by patching up the old roof on a piecemeal basis as necessary, having regard to the age, character and prospective life of the dwelling (s11(3)), the landlords were not in breach of the repairing covenant. (Dame Margaret Hungerford Charity Trustees v Beazeley, [1993])
Character is also an important factor because a palace would demand a different standard of repair from a cottage; and location because a house in a back-street in a depressed area in London would not be expected to be kept to the same standard as a property in Grosvenor Square.
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The Contractual Repairing Obligations
In the section below, we will look at the contractual rights of the landlord and tenant with respect to their repairing obligations. The obligation will arise from two main sources: • Express terms - i.e. the written (or verbal) terms agreed in the tenancy agreement • Implied terms - terms implied into the agreement by statute or common law
Express Terms
The tenancy agreement will normally contain details of the repairing obligations of the landlord (e.g. structural and exterior repairs) and repairs that are the responsibility of the tenant (e.g. decorating and damage caused by the tenant). These terms are called express terms. However, no matter what provisions the tenancy agreement does or does not make, where the repairing obligations are covered by statute the landlord cannot transfer these responsibilities to the tenant by including a covenant in the agreement to that effect.
Repairing covenants
In any lease of residential property for a term of less than seven years, the repairing obligations will be implied by s.11 of the Landlord and Tenant Act 1985 (LTA) which is discussed in detail below. In most cases, this is used as the basis for the express repairing obligation term in the tenancy agreement, and the tenancy agreement simply contains a clause stating that the repairing obligations are those as defined in section 11 of the Landlord and Tenant Act 1985. For many lettings, landlords do not wish to undertake any further repairing obligations than those specified in s.11, and in shorter lettings, the landlord will not generally wish the tenant to interfere with the internal decorations or do anything that might detract from the value and good order of the property (in contrast to longer residential leases where it is common practice to require the tenant to maintain the internal decorations in good repair).
Care must be taken when preparing a tenancy agreement with repairing covenants. It is important to note that an express provision to ‘repair and maintain’ which has been added to a tenancy agreement confers additional repairing duties on the landlord over and above those contained within s11 of the Landlord and Tenant Act 1985.
The covenant to ‘maintain’ infers that the landlord ought to have known about any disrepair (i.e. via a regular maintenance programme) and a covenant to ‘keep in good repair’ creates an obligation on the landlord to not allow the premises to fall in to disrepair. In these cases a notice of disrepair will not need to be given before a tenant can claim breach of duty, thus increasing the liability of the landlord.
In the case of Houses in Multiple Occupation and flats or maisonettes that include common areas, agreements may contain express repairing obligations dealing with these areas and the overall structure of the building, on both landlords and tenants.
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Covenants Implied by Statute
Regardless of what the express terms of the tenancy agreement may contain - there are certain statutory obligations to repair placed on landlords (in particular those with short or periodic tenancies) that are implied into tenancy agreements.
The Landlord and Tenant Act (LTA) 1985 makes it impossible for landlords to avoid repairing obligations and it is one of the few pieces of legislation which had retrospective effect because it applies to tenancies entered into after 1961. The Housing Act 1985 sets out the principal definition of unfitness for human habitation and puts the burden on local authorities and not on the tenant, to deal with the matter. The Defective Premises Act 1974 allows people other than tenants to sue for disrepair. The common law actions of nuisance and negligence have also proved to be of application in the area of disrepair. The Environmental Protection Act 1990 has defined what will amount to a statutory nuisance which is now a criminal offence dealt with in the Magistrates Court. These are the major provisions in respect to disrepair in residential property.
The Landlord and Tenant Act 1985 s11 (for text of s11 LTA 1985 see Appendix B)
Section 11 of the Landlord and Tenant Act 1985 is implied into all tenancies of less than seven years entered into after 24 October 1961 and it implies an absolute and non-excludable obligation on landlords to effect basic repairs. Section 11 cannot be excluded from any residential tenancy and a landlord cannot negotiate with the tenant that section 11 will not apply to the tenancy. If the landlord did this and the tenant then chose to pursue a section 11 disrepair the court would not recognise that agreement. If there is an express term in the tenancy agreement to repair and it falls short of section 11, the whole of section 11 will be implied into the agreement. Section 11 also applies to longer tenancies in certain circumstances.
Section 11 LTA 1985 states that a covenant is implied into a lease by the landlord:
a) to keep in repair the structure and exterior of the dwelling, including drains, gutters and external pipes, b) to keep in repair and proper working order the installations in the dwelling for the supply of water, gas, electricity and for sanitation (including basins, sinks, baths and sanitary conveniences) but not other fixtures, fittings and appliances for making use of the supply of water, gasor electricity, and c) to keep in repair and proper working order the installation in the dwelling for space heating and heating water.
‘Keep in repair’ means that the landlord must keep up the standard of repair from the start of the tenancy. The landlord must also ensure that the premises are put into repair even if they were not in good repair at the start of the tenancy. ‘Repair’ does not include any duty to effect improvements. If there is a defect in construction this will not be actionable under s11 as the property will not be in disrepair.
If the tenant is in breach of his duty to behave in a tenant-like manner the landlord will not be responsible for any works or repairs because of that breach. For example if the tenant decides to put in central heating without permission and damages any existing plumbing or the structure of the building, the landlord will not be responsible for putting the matter right. The landlord will also not be responsible for rebuilding or reinstating the premises if destroyed by fire, tempest, flood or other inevitable accident, or be responsible for keeping in repair or maintaining anything which belongs to the tenant.
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Structure and exterior
Section 11, LTA 1985 makes provision for disrepair to the structure or exterior. ‘Exterior’, for the purposes of s11, is the outside or external parts of a dwelling but does not normally include items such as separate outbuildings, garden fences and gates etc. While ‘structure’ covers more than structural defects, in the sense of those which hold the dwelling together, it does not include purely decorative items nor generally those such as internal plaster, skirting boards, internal doors etc. although these may well be affected by other items of disrepair and, if so, will be caught by the duty to make good.
Furthermore, the landlord is clearly not responsible for a breakage by the tenant (e.g. broken window), for that would be the tenant’s responsibility as part of his duty to use the premises in a tenant-like manner.
Case Law Example: Condensation - but no disrepair The house in which the tenants lived suffered from severe condensation which caused appalling living conditions for the tenants including wood rot, fungus and mould growth. The house was virtually unfit for human habitation. The Court of Appeal found that there was no disrepair under s32 of the Housing Act 1961 (now s11 of the Landlord and Tenant Act 1985) as the condensation causing the damp did not relate to disrepair to the structure or exterior; the problem lay in the original design of the building. (Quick v Taff Ely BC 1986 2- Court of Appeal)
Installations
LTA, section 11 states that the landlord must keep in repair and working order all the installations for the supply of water, gas and electricity, and for sanitation; and also installations for space heating and heating water. Section 11 will therefore apply to the cisterns, water tanks, radiators, boilers, heating ducts and all gas and water pipework in the property. It also includes an obligation to keep in good repair the fixed electrical wiring and associated sockets.
Notice
The landlord’s obligations under section 11 will not normally arise until he has been given notice of the defect. Notice, for the purposes of this section, does not need to be in any specific form. It may be written or oral, although it is easier to prove that notice was given if it is in written format, and it may be given to an agent for the landlord. This requirement for notice does not extend to common parts, or facilities which are mentioned in section 11 but which are outside the premises, for example a faulty step in an entrance hall of a block of flats.
A tenant will have to prove they have given notice of disrepair if they decide to pursue a claim. Usually copy letters or if verbal notice was given, copy letters from the landlord agreeing to execute works. Notice can also be shown if a surveyor or other agent of the landlord has been employed to inspect the premises following verbal notification of disrepair.
Case Law Example: Notice of Disrepair The tenant and his wife were in bed one night when the bedroom ceiling collapsed on them. The fall was caused by a latent defect. Neither the tenant nor the landlord was aware of the defect until the collapse occured. The House of Lords held that no liability arose until the landlord had information about the existence of the defect in the premises which would put a reasonable person on enquiry as to whether works of repair were needed. (O’Brien v Robinson, [1973] AC 912)
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Rights of entry
It is an implied term of all Housing Act assured tenancies (and also of Rent Act protected tenancies prior to this) that the tenant will afford the landlord all reasonable facilities for access and the execution of any repairs which the landlord is entitled to carry out (Housing Act 1988, s.16). When the landlord is under an implied covenant to repair the property, he or any person authorised by him in writing may at reasonable times of the day and on giving 24 hours notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair. Where the tenant refuses access the landlord cannot just enter the property as the tenant has a right to quiet enjoyment under s3 of the Protection from Eviction Act 1977. Equally, as found in the case of New Crane Wharf Freehold Ltd v Dovener [2019] UKUT 98 (LC), silence does not amount to refusal of access. Where the tenant does not respond to a request to access the property the landlord should still attend the property to attempt access. If the tenant then refuses access the landlord may need to apply to court for an injunction. Reasonable time Once the landlord has received notice of the disrepair, the repairs must then be done within a reasonable time. ‘Reasonable time’ will be judged by the type and extent of the disrepair. The bigger and more expensive the repair necessary the longer the time period would probably be. Note however that where the repair necessarily is in the nature of an emergency (e.g. where the fault is a broken pipe or a total electrical failure) then ‘reasonable time’ may be very short indeed regardless of any other considerations. Even where it is something less urgent, such as missing roof tiles, the landlord should use reasonable expedience and a delay of a week or two should be achievable. Where the disrepair involves major structural works, these take time to arrange and co-ordinate and the landlord would be justified in taking longer.
Case Law Example: What is ‘reasonable time’? A housing estate was provided with hot water and heating services through a central system. Most repairs were attended to within 24 to 48 hours. Modest damages were awarded against the landlord for a delay of four weeks in attending to a single defective radiator. (Collins v Northern Ireland Housing Executive, (1987) CA (NI)) A landlord was informed of defects in flat which included severe damp penetration which caused damage to the plasterwork. The court held that two months was a reasonable time to carry out replastering work to the affected areas. (Lloyd v Rees Pontypridd County Court [1996])
The Homes (Fitness for Human Habitation) Act 2018
The Homes (Fitness for Human Habitation) Act 2018 amends the Landlord and Tenant Act 1985 which now implies a term into a tenancy agreement that a property in England is fit for human habitation at the time the tenancy is granted and during the term of the tenancy (s.1 (3)). The implied term allows the landlord or a person authorised by him in writing to enter the property for the purpose of viewing its condition and state of repair at reasonable times of the day and on giving at least 24 hours notice in writing. See Page 11-17 for more detail on fitness standards.
Common Law Obligations on Landlords
Where there is a lack of statutory or express terms in a tenancy agreement, there are certain terms which are implied by common law, although normally only if it can be seen to be the natural thing to do in the particular situation. For instance if the premises are in a block of flats containing staircases and lifts and other common parts, it would be natural to expect that the
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landlord should have responsibility for the repair and maintenance of these parts in order that his tenants may have safe access to their place of residence (see ‘Common Parts’ below).
In some circumstances where the terms of the tenancy agreement are lacking, the court will use the common law to help define the contract for the involved parties as they had not fully expressed the terms of the contract themselves.
Common parts
The common law may imply certain repairing obligations for common parts: • where the landlord retains control of a part of a building and lets another part, he must maintain that first part so as to prevent injury to the tenant or damage to the property e.g. maintaining a common roof to prevent damp entering flat. • where the tenant is given a contractual right to use another part of a building other than that let, e.g. a shared bathroom, the landlord is under an obligation to maintain that part for use by the tenant. • the landlord must maintain facilities necessary for use by the tenant, e.g. lifts, rubbish chutes etc. Because the common parts and areas that a landlord has a right to use are considered to remain within the landlord’s control, tenants are not required to give the landlord notice of disrepair before the obligation to repair arises within the common part.
In leases entered into on or after 15th January 1989, the structure and exterior of a building in which a flat or room is situated, or a part of it, and any common facilities within it, have also to be kept in repair. This is even when such facilities are not within the flat or room itself. This is only the case however where the defect is such as to affect the tenant’s enjoyment of the premises or of the common parts such as they are entitled to use, for example an entracnce path, hallway or stairs.
Case Law Examples: Notice of Disrepair Common Parts Water pipes in the roof over a block of flats burst during freezing weather which flooded the tenant’s flat. The council attended to the burst pipe and carried out the repairs promptly. The tenant claimed compensation for the damage caused by the flooding. The Court of Appeal held that the disrepair was not unforeseeable in the weather conditions and the landlord was therefore liable for failing to ‘keep in repair.’ The liability in this case did not require prior notice of the disrepair as the roof was a common part however the decision here will not extend to defects within a property where the tenant is required to give notice of the defect.. (Passley v Wandsworth Borough Council, [1998] HLR 165) Mr Edwards rented a flat from Mr Kumarasamy who was the leaseholder of the flat. Mr Kumarasamy did not own any other part of the property but the lease gave him a legal right to use other parts. The tenant was injured when he tripped on an uneven paving stone on the path leading to the communal bins and car park and sued the landlord for damages. The Court of Appeal held that section 11 itself does not actually say that notice is required but case law has implied that notice would be required where the disrepair is inside the demised premises O’Brien v Robinson [1973]. In the current case the path was outside of the demised premises and the lease gave the landlord a right to use it. In first instance the Court of Appeal held that the landlord had the right to use the path and the common law position that liability for lack of repair commenced as soon as the defect arose irrespective of notice. However, on referral to the Supreme Court, it was found that, although Mr Kumarasamy had a sufficient “interest” in the front hallway and paved area for the purposes of section 11(1A) (a), he was not liable for the disrepair which caused Mr Edwards’s injury, as (i) he could only be liable if the paved area was “part of the exterior of the front hall” and it was not, and (ii) he could only be liable if he had had notice of the disrepair before the accident and he did not. (Edwards v Kumarasamy, [2016] UKSC 40)
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If remedial works necessitate access to parts of the building or installation over which the landlord does not have a sufficient right to gain access, it is a defence to an action for breach of section 11 to show that s/he made all reasonable efforts to gain access but has been unable to do so.
Case Law Example: Common Parts The flat in which Irwin lived was contained in a tower block containing 70 flats in total. The common parts comprised of a staircase and two lifts and rubbish chutes. The disrepair related to the continual failure of the lifts, lack of adequate lighting on the stairs and blockage of the rubbish chutes. The House of Lords found that as the stairs, lifts and rubbish chutes were necessary to all the tenants who occupied the block, there was an implied obligation on the landlord’s part to take reasonable care to maintain the common parts. (Liverpool City Council v Irwin, 1976 AC 239)
Quiet enjoyment
This is implied into all tenancy agreements and anything at all which breaches quiet enjoyment is actionable in damages. If a disrepair matter does not come within any of the above provisions but which is enough in itself to have caused inconvenience or disturbance and it is something which has occurred because of any act or omission of the landlord, the landlord can be sued for this breach. It is highly unusual to find that this is the only cause of action. It is often added to the pleadings in a disrepair action as a matter of course since disrepair of itself will be a breach of quiet enjoyment.
Tenant displacement
The tenant must, by law, allow access to the landlord to carry out repairs that he is obligated to do, although the landlord must give the tenant prior warning of the time that he proposes to enter to undertake the repairs. While repairs are being undertaken, the tenant retains his right to occupy the property, and it is only possible to require him to vacate temporarily if the repairs cannot be conducted with the tenant present. The fact that the repairs would cost more with the tenant in situ does not entitle the landlord to compel him to vacate while the works are undertaken. In conducting the repairs, the landlord must keep to a minimum the interference with the comfort and enjoyment of the tenant.
The tenant for his part must not interfere with the performance of the repairs and he has no right to be re-housed while the repairs are being undertaken (although landlords do, in practice, often provide temporary alternative accommodation). The tenant is merely entitled to special damages for the cost of alternative accommodation during any extra time out of the property caused by the landlord’s delay in commencing repairs. During the period of repair, the tenant’s obligation to pay rent will continue. It is because the law provides little protection to the tenant in such situations, that explicit terms are often inserted into the tenancy agreement whereby the tenant’s obligation to pay rent does not continue whilst the property is ‘rendered uninhabitable by fire’ or similar risks.
However, if the landlord is in breach of repairing obligations and because of this breach the property falls into such a state that the tenant cannot live at the property, the landlord will be liable for damages. These might include the cost of alternative accommodation, removal expenses, and compensation for inconvenience (as well as any other damages that the tenant can prove as a result of the unfitness of the property).
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Tenant displacement - grounds 6 & 9
For various reasons, there are situations where, despite it being possible to carry out repairs with the tenant in situ, a landlord will find it more convenient or economical to take possession of the property to carry out repair or general building works. Alternatively, a landlord may wish to carry out repairs or other works (e.g. improvement works) over and above those which he is required to perform by law.
For assured tenancies, the Housing Act 1988 provides two grounds which can be invoked so that the landlord can gain possession for this purpose. Ground 6 is a mandatory ground for possession whereby the landlord can gain possession providing he can prove that the necessary works are substantial (under the requirements of Ground 6) and cannot possibly be carried out with the tenants in residence. In this case, at least two months’ notice would need to be provided to the tenant and the tenant’s reasonable removal expenses would have to be paid. If the requirements of Ground 6 are met, then the landlord has no responsibility to provide alternative accommodation to the tenant.
Alternatively, the landlord may use Ground 9 which is a discretionary ground and requires that the suitable alternative accommodation is made available. Again, the landlord would be liable for the tenant’s reasonable removal expenses.
Damage during repair work
If damage is caused by the landlord (or those who are carrying out the works) during repair or improvements works, the tenant should seek further repair work from the landlord to remedy the situation. Landlords have a general duty to take reasonable care when carrying out work to a property so as to avoid defects or damage to the property and danger of injury to the occupier. Where damage is caused to decorations due to repairs carried out by the landlord he or she will be under an obligation to make good any damages caused. He will not, however, be responsible for making good any damages caused for improvements to the property, unless there is provision for this in the tenancy agreement.
Damage by third parties
Unfortunately, criminal damage and burglary is increasingly common in the modern age. Unlawful entry on to the property is made easier by its dilapidated state and landlords can represent potential targets for tenants to pin their losses (especially since it is often difficult to obtain insurance cover in high risk locations).
Although landlords are not generally liable for the actions of third parties, they will inevitably be obliged to repair the damage where such damage affects the structure and exterior of the property. Thus the landlord is obliged to repair any doors, windows, glazing, or related fixtures damaged, for example, during a burglary.
Consequences of disrepair
If neglect or delay on the part of the landlord in carrying out repairs to relevant defects causes further loss to the tenant, then the landlord can also be held liable for such losses.
In Morris v Liverpool City Council [1988] 1 EGLR 47, the tenant’s door was broken down by the fire brigade while dealing with a fire in another part of the block. The landlord was under a statutory obligation to repair, and boarded up the doorway with plywood. The Court in this instance disallowed the tenant’s claim for loss caused by the burglary, but held that if the landlord had failed to replace the door within a reasonable time, then losses caused by burglary would have been foreseeable, and the landlord would be liable.
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A similar issue has been considered more recently in Marshall v Rubypoint Ltd (1997). Here the tenant occupied a flat within a block of flats. The landlords were under an express obligation to repair the common parts including the front door. In April 1993, the lock on that door was loose, the door was insecure and it remained so for five months. In September, the tenant’s flat was burgled three times and personal property stolen. The landlords admitted breach of the repairing covenant. The Court held that the risk of burglary was foreseeable as a result of the front door being insecure, and that although the landlords were not responsible for the acts of the burglar, they were responsible for the repair of the main front door and thus partially responsible for the tenant’s resulting losses.
The landlord will, however, not generally be responsible for consequential loss resulting from third party damage to parts of the property which are not covered by explicit or implied repairing obligations. The general rule is that a landlord is excluded from liability for the acts of independent third parties (King v Liverpool CC, 1986).
Furniture and appliances
The law is not entirely clear as to who is responsible for repairs and maintenance of appliances. Although tenants expect landlords to be responsible for repair or replacement of appliances supplied with the property landlords are not automatically responsible in law for maintaining any furniture, appliances or other items supplied as part of the ‘package’ for the benefit of the tenant. See Chapter 2 for more information.
Furniture in the strictest sense requires little maintenance, whereas cookers, washing machines and general electrical appliances will require occasional maintenance and repair. Where the failure or damage has occurred through the tenant’s negligence or other misuse the tenant would be responsible for the repair.
It is always best to agree who is responsible at the start of the tenancy and include this in the tenancy agreement. The solution being adopted by some landlords and agents is to cover the costs of maintenance and repairs on such items during the first three months of the tenancy. From a liability point of view, landlords are now well advised to minimise the number of appliances included in rented property.
Dampness and condensation
Many defects of the structure (inherent defects) resulting from bad design, such as condensation dampness caused by a design defect, will not be covered under the landlord’s contractual repairing obligations.
Case Law Example: Design Defect The front door of the dwelling house concerned had, over a period of thirty years, caused many problems. The tenant complained that water was constantly blown under or through the door causing puddles and damage to the carpets. The local authority had tried to remedy the problem by twice replacing the door and at other times replacing parts of the door. The problem was eventually solved by replacing the door with a purpose built weatherproof aluminium door. The Judge in this case made it clear that had the only defect been that the door did not perform as it should have then the landlord would not be in breach of his covenant to repair. In this case however, the original door had also actually rotted away and had thus fallen into disrepair. (Stent v Monmouth DC 1987- Court of Appeal)
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Common Law Obligations on Tenants
Tenants’ responsibilities
Like the landlord, the tenant has repairing responsibilities which are found in the express and implied terms of the tenancy.
Under common law, a tenant must take proper care of the property and use it in a responsible way. For example, a tenant is expected to turn off the water if there is a risk of burst pipes when he is going away, and unblock the sink when it is clogged up by waste. The duty does not cover fair wear and tear which is the landlord’s responsibility.
The tenant should not damage the property and should make sure that his family and guests do not so. If they do, he may be responsible for the damage. Under the Rent Act 1977, the Housing Act 1985 and the Housing Act 1988, the landlord can seek possession where a tenant or someone living with him has damaged the property. But, the tenant is not responsible for carrying out those obligations that are the duty of the landlord.
Case Law Example: Design Defect A landlord sued his tenant for deterioration in the state of the demised premises. Although there was no covenant on the part of the tenant to do repairs, the landlord sought to put this obligation on the tenant, claiming the tenant had a duty to keep the premises wind- and-water-tight and to make general repairs. This was an important case in defining the parties’ respective repairing obligations. The court held that the tenant was not under any general implied obligation to repair, but only to use the premises in a ‘tenant-like’ manner. In this judgement, Denning LJ defined this as: ‘The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys, when necessary and also the windows. He must mend the electic light when it fuses. He must unstop the sink when it is blocked by his waste. In short, he must do those little jobs about the place which a reasonable tenant would do. In addition, he must, of course, not damage the house wilfully or negligently; and he must see that his family and guests do not damage it; and if they do, he must repair it. But apart from such things, if the house falls out of repair owing to fair wear and tear, lapse of time or for any reason not caused by him, then he will not be liable to repair it.’ Yet, if the house fell in such disrepair through fair wear and tear or lapse of time, or for any reason not caused by the tenant, he would not be liable to repair the property. (Warren v Keen [1954] - Court of Appeal)
Frost damage
The tenant is responsible for taking precautions to guard against frost damage to the water pipes when going away for the winter. Such damage is potentially catastrophic due to the risk of subsequent flooding when the pipes do eventually thaw whilst the property is still unoccupied. Clearly, to help the tenant perform this duty, it is important that the landlord informs the tenant of the position of any stopcocks and relevant instructions concerning their use.
Yet, landlords owe a duty of care to any tenant once informed that a pipe is frozen to inform or assist the tenant to abate resulting hazard.
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Remedies
There are various actions that can be taken by tenants to remedy disrepair. The primary remedy lies in damages. Substantial amounts can be paid out where there has been serious disrepair over a long period. Tenants can claim for distress and inconvenience and an amount for diminution in value or loss of amenity. This is calculated as a percentage loss in the whole premises. For example the total loss of use of one bedroom in a four bedroom house could be assessed as 25% of the rent over the period of the disrepair.
There are two forms of damages that may be claimed by the tenant for a failure to maintain or repair: • The tenant can claim for damage to possessions such as clothing and furniture and also for dining out in the case of damaged cooking facilities or alternative accommodation in the case of the repairs rendering the premises uninhabitable. For items that cannot be repaired the cost of second hand replacement will be awarded. These damages are specific damages. • General damages can be also awarded for loss of the tenancy to the tenant and are calculated by taking into consideration the diminished value of the premises and also any inconvenience and distress caused. If the tenant is in breach of any of his repairing covenants the landlord can either sue the tenant for breach of covenant, or for damages, although more commonly, the landlord would simply forfeit the tenancy (provided the tenancy agreement allows for this).
Specific Performance
The tenant can sue in the County Court for breach of contract for damages and/or to obtain orders compelling the landlord to fulfil his obligations (this is called ‘specific performance’). Section 17 of the Landlord and Tenant Act 1985 provides that in any proceeding where a tenant alleges that there has been a breach of a repairing covenant, the court, at its discretion, can order specific performance of that covenant. An interim injunction can also be sought in the case of disrepair threatening immediate damage to health or property that requires the landlord to perform the works before the case is heard.
Self-help and set-off
Tenants sometimes withhold rent on the basis of using the rent to pay for repairs that the tenant claims the landlord should have carried out, but generally the tenant has no legal right to set-off in this way. However in certain circumstances, a tenant may use the rent to pay for repairs or offset rent arrears where the landlord has clearly breached a repairing obligation and has failed or refused to carry out the repairs. This right is provided under common law and may only be taken in very specific circumstances and according to a clearly defined procedure. The tenant must inform his landlord that he intends to carry out the repairs himself and submit any estimates, in order to allow the landlord a chance to carry out the works himself. He can only withhold the amount of the repair and not an amount for recouping damages or generally withhold rent pending completion of the works.
In cases involving possession for rent arrears, the tenant may off set some or all of the arrears against a breach of repairing obligation provided the arrears did not accrue prior to the breach. A tenant must bring an action in breach of any express or implied term within 6 years. (Limitation Act 1980).
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Law of Disrepair: Obligations Arising in Tort
Tortuous liability generally arises as a result of negligence or nuisance. In law, ‘negligence’ is founded on the common law ‘duty of care’ a landlord owes to any occupier in his property.
Unlike the contractual obligations discussed previously, the duty of care extends to cover any person upon the premises such as the tenant’s visitors or family. Thus, to pursue an action in tort against the landlord, the claimant does not have to be a party to the contract.
A second important difference between the law of tort and contract is that under tort, there is no equivalent requirement for the landlord to be given notice of the defect by the tenant. The landlord’s liability arises if negligence has arisen and the problem has been reasonably foreseeable, or if there is a breach of duty under the Defective Premises Act 1972.
Negligence
Negligence occurs when work may have been done but has been done so badly as to render the repair ineffective or to have made the matter worse, and/or has damaged the tenant’s possessions. Firstly, it will be necessary to establish that a ‘duty of care’ was owed to the tenant and secondly that there has been a breach of that duty resulting in damage to the tenant. An action for negligence will only normally be used for pre - 1989 tenancies or in cases where the landlord has been responsible for the construction or design of the property.
Nuisance
At common law there are two types of nuisance - a public nuisance and a private nuisance. A nuisance occurs when a person’s quality of life is adversely affected by another person’s act or omission. A public nuisance is when an act or omission affects the general public and will rarely be used with regard to residential property. A private nuisance occurs when the act or omission of a person or persons adversely interferes with those in a neighbouring property. Nuisance is most likely to occur in common parts or in property that is nearby and is owned by the landlord.
Nuisance at common law allows one occupier to sue another if there was anything happening in the first property which affected the second, for example, water leaking from one flat into another or noise. The occupier of the second flat could sue the occupier of the first. The principle still applies and must be satisfied in order to found a statutory nuisance claim.
Defective Premises Act 1972
Section 4 of the Defective Premises Act 1972 imposes on landlords a duty of care to “all persons who might reasonably be expected to be affected by defects in the premises” and extends to damages for personal injury or damage to their property. Therefore, damages under this section can be recovered not only by the tenant but by any visitors to the property.
A lessor is responsible for damage caused by a “relevant” defect which s/he is responsible for and has failed to repair or maintain. “A relevant defect is one arising from or continuing because of an act or omission by the landlord which actually constitutes a breach of his repairing obligation or which would have done so if he had been given notice of it”. The duty arises at the date the property is let and therefore the tenant is not required to give notice of the defect - liability may be established in respect of defects of whose existence he knew or ought to have known.
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Law of Disrepair: Local Authority Powers
There are a number of powers created by statute that allow public or local authorities to enforce repairing obligations on landlords, and allows these public bodies to bring action. The most notable and well-enforced, are those in relation to gas safety in rented property. There are other obligations which are principally concerned with ensuring that properties are ‘fit for habitation’ and free from disrepair or a state which is ‘prejudicial to health or a nuisance’. If the local authority visits a property and find it is unfit, or finds the existence of astatutory nuisance (e.g. vermin infestation ) then it has a duty to take action. The key statutes used by local authorities are: -- Housing Act 1985 - s604 - the ‘fitness standard’ -- Environmental Protection Act 1990 - defining a ‘statutory nuisance’ -- Health and Safety at Work Act 1974 (includes gas safety provisions) -- Consumer Protection Act 1987 (product safety provisions)
Environmental Protection Act 1990
Part III of the Environmental Protection Act 1990 contains provisions relating to statutory nuisance. A statutory nuisance means “any premises in such a state as to be prejudicial to health or a nuisance.” Prejudicial to health is defined as ‘injurious or likely to cause injury to health’ (s79(7)) and is determined by Environmental Health officers and doctors.
These provisions relate to both private and public sector housing and require that premises are kept in a condition so as not to be prejudicial to health or a nuisance, whether or not the premises are occupied. It is up to the local authority rather than the tenant to force the landlord to execute repairs under section 79. This includes actual and potential ill health, and mental as well as physical health. However, mere interference with comfort is not enough. Serious dampness or condensation is recognised as being capable of being prejudicial to health.
For these purposes a ‘nuisance’ can either be a public nuisance - affecting quality of life for the public generally - or a private nuisance where the actions of the owner or occupier interferes with a neighbouring property. Section 82 allows any ‘person aggrieved’ to commence proceedings directly against his landlord. This would normally be the tenant, family members or lodgers. Proceedings are brought against the person responsible for the nuisance or against the owner if the person responsible cannot be found.
The tort of nuisance and Environmental Protection Act 1990 is of assistance to a very limited degree. It can be used in cases where the express or implied repair covenants will not give rise to any cause of action.
The local authority, once satisfied there is a statutory nuisance, will issue an abatement notice saying what must be done and when it should be done by. There is a right of appeal. If an appeal is lost and such a notice is not complied with, criminal prosecution follows or the local authority can enter and do the works themselves.
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Fitness Standard
The Homes (Fitness for Human Habitation) Act 2018 amends the Landlord and Tenant Act 1985 to require all landlords to ensure that their properties are fit for human habitation at the beginning of the tenancy and throughout the tenancy. The Act applies to new tenancies (including renewals) granted on or after 20th March 2019. Existing tenancies (including periodic tenancies arising from a fixed term granted prior to 20th March 2019) will need to comply from 20th March 2020. In order to decide whether a property (including common areas) is fit for human habitation the court will consider the following: • whether the property has been neglected and is in serious disrepair - this is a matter of fact and degree and typical problem areas include damaged staircases or masonry which may fall off causing injury; • whether the property is structurally stable and the layout of the property is safe; • whether the property is free from damp prejudicial to the health of the occupants. Dampness will only constitute unfitness if it is serious and prejudicial to health. Condensation can constitute unfitness where it is persistent and caused through design or construction defects; • whether the property has adequate provision for lighting, heating and ventilation - this does not mean that a heater must be provided - merely that the dwelling must be capable of being heated - a suitably located gas or electric point will be sufficient; • whether the property has an adequate supply of hot and cold water and a suitably situated WC for the exclusive use of the occupants - this should be indoors. The property should have suitably fixed baths or showers and wash hand basins with hot and cold water and have an effective system for the drainage; • whether the property has satisfactory facilities for preparing and cooking food (including a sink with hot and cold water) - this does not mean that a cooker or work top has to be provided, simply that there is suitable space and an electric/gas point for them to be installed; • whether the property contains a hazard under the Housing Health and Safety Rating System (England) Regulations 2005. See page 11-19 for more information. The implied term does not require the landlord to: • keep in repair or maintain anything which the tenant is entitled to remove from the property or carry out works or repairs for which the tenant is responsible e.g. the tenant’s duty to use the property in a tenant like manner or where the property is deemed unfit for human habitation as a result of the tenant’s own breach of covenant; • rebuild or reinstate the property in the case of destruction or damage by fire, storm, flood or other inevitable accident or to carry out works or repairs which would put the landlord in breach of any obligation imposed by legislation; • carry out works or repairs requiring the consent of a superior landlord or other third party in circumstances where consent has not been obtained following reasonable endeavours to obtain it. Where a landlord fails to provide a property fit for human habitation the tenant can take action through the courts for breach of contract. The court may order the landlord to take action to remedy the hazard and to pay damages to the tenant. Further guidance is available on the Government website ‘Guide for landlords: Homes (Fitness for Human Habitation) Act 2018.’
Gas Safety Regulations
The Gas Safety (Installation & Use) Regulations 1998 place additional repairing obligations on landlords to ensure gas appliances, fittings and chimneys/flues provided are safe . The regulations are dealt with in detail in Chapter 8.
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Disrepair and Houses in Multiple Occupation (HMOs)
The landlord has additional responsibilities with respect to maintenance and repairing obligations in flats or other dwellings which form part of a larger building (e.g. flats and houses in multiple occupation). In these cases, the landlord will be responsible for maintenance and repair of any common parts the tenant is entitled to use, and for repair of any part of the exterior, structure or other damage in the building owned by the same landlord which is interfering with the tenant’s enjoyment of the property.
These duties are defined by the Housing (Management of Houses in Multiple Occupation) Regulations 1990 and are covered in further detail in Chapter 16. In summary the duties are as follows:
The regulations require the person managing the property with common parts and shared facilities to maintain it and ensure everything is in good working order. Some of the key provisions are listed below: • Water supply and drainage. Should be in good working order and protected from risk of frost. • Supply of gas and electricity. Should not be unreasonably interrupted. • Installations in common use. All installations including power supplies, lighting, refrigerators, intercoms etc. should be in good working order. • Means of escape from fire. Apparatus and systems should function correctly. All escape routes should be free from obstruction. Wardrobes, furniture, heaters etc. should not be stored on landings. • Duty to display notices. The name, address and telephone number of the manager of the property should be displayed at all times in a suitable position. • Duties of residents. Tenants must co-operate with the landlord. i.e. allow access to carry out duties. They must also take care not to damage anything, dispose of litter properly and not to obstruct means of escape from fire. The duties apply to both managers and residents of HMO’s and either could be prosecuted if found in breach of duty to maintain the dwelling in good and safe working order.
NB. More information regarding the Housing (Management of Houses in Multiple Occupation) Regulations 1990 is given in the Letting Factsheet No. 11.
Pre-Action Protocol: Housing Disrepair
The Pre-Action Protocol for Housing Disrepair Cases provides certain steps which need to be carried out before court proceedings are issued in a housing disrepair case. The protocol covers claims in England and Wales and is intended to encourage the exchange of early information between the landlord and tenant before the commencement of proceedings to achieve an early resolution of issues. The protocol also encourages all parties to avoid litigation, where possible, and attempt Alternative Dispute Resolution procedures. Alternative Dispute Resolution should be considered as an alternative to court proceedings and litigation should be a last resort.
All parties must follow the procedures set out in the protocol. The Pre-Action Protocol for Housing Disrepair Cases is available to view on the government website: www.justice.gov.uk and sets out detailed guidance, example letters and prescribed information to be included.
If the tenant’s claim is settled without litigation on terms which justify bringing the claim, the landlord will pay the tenant’s reasonable costs and out of pocket expenses. Where a tenant’s claim proceeds to litigation, the court will expect all parties to have complied with the protocol as far as possible. The court has power to order parties who have failed to comply to pay costs or be subject to other sanctions.
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Housing, Health and Safety Rating System (HHSRS)
The Housing Health and Safety Rating System (HHSRS) is a housing condition rating system for residential properties which took effect on the 6 April 2006 in England, and in Wales later that year. It replaces the previous housing fitness regime under section 604 of the Housing Act 1985 (and equivalent provisions in earlier legislation) which provided landlords with an objective set of fitness standards for over eighty years.
In its place, we have a new system which will assess housing conditions using a risk assessment approach. The HHSRS does not set out minimum standards, but attempts to make an assessment of potential hazards. As a tool, to help measure housing condition, HHSRS can be useful in helping housing professionals identify safety risks in a property, and assign a value to these risks. However, as a regulatory system with powerful enforcement provisions and criminal penalties attached, it is of questionable merit. HHSRS is poor regulation as it does not allow a landlord to clearly understand his legal obligations in advance and the method of risk assessment can produce subjective and inconsistent results. At worst, the system provides a forceful weapon for a dissatisfied tenant, or belligerent local health official, and the threat of a fine up to £5,000.
Scope
The Housing Health and Safety Rating System applies to all dwellings in both the public and private housing sectors. In practice, HHSRS is unlikely to affect owner-occupiers, but, for the rented sector, local authorities are obliged to respond to complaints from tenants. This will, in many cases, will lead to a safety inspection and assessment and, as appropriate, enforcement action to carry out improvements. HHSRS is also used to assess all properties subject to HMO licensing; an application for a HMO licence will result in a safety rating assessment and, as applicable, a schedule of works which are necessary (in the view of the local authority officer), and should be carried out as soon as is reasonably practicable.
Public sector landlords will also be required to carry out HHSRS inspections as part of their stock condition surveys. Decent homes should be free of all category 1 hazards.
Operation
The principle of the HHSRS system is that any residential premises should provide a safe and healthy environment for any potential occupier or visitor. When local authority officers inspect a dwelling, they will look for any risk of harm to an actual or potential occupier. They will judge the severity of the risk by thinking about the likelihood of an occurrence that could cause harm over the next twelve months, and the range of harms that could result.
The system looks at 29 hazards arranged in four groups (see table on next page). The calculation of a hazard score determines the banding of each hazard which in turn determines whether the hazard falls into Category 1 or Category 2. If the inspecting officer finds a serious hazard (i.e. called a Category 1 hazard in the Act) this means that there is a significant risk of an occupant sustaining a serious or fatal accident or injury, and the local authority will be under a duty to take enforcement action (see section below). Category 2 hazards will be ones that the officer judges are not as serious and, therefore, not life-threatening. For these less severe hazards, local authorities will still be able to take action if they think necessary.
The Department for Communities has produced a guidance booklet: ‘Guidance for Landlords and Property Related Professionals’ which provides an introduction to the HHSRS system1.
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Hazards based on most vulnerable persons
One anachronism of the system is that the local authority officer will make the risk assessment and judgement under HHSRS in reference to those persons who, mostly based on age, would be most vulnerable to the hazard, even if people in these age groups may not actually be living at the property at the time.
In one reported case, the local authority inspected a three-storey dwelling using HHSRS. As a result of the inspection the local authority judged that the steep stairs leading to the attic rooms were potential hazardous when assessed in the context of an older person, and therefore dangerous. The local authority required that the landlord stop using the rooms on the upper floor for living accommodation even though there had been no record of accident or injury at the property, and the rooms were only normally let to younger tenants in any case. On appeal, the court overturned the local authority closure order and made an equally interesting decision - that the landlord could continue to let the rooms, but not to an older person! (a decision that is both impractical to implement and also discriminatory!)
Categories of Hazards
Under HHSRS, the physical survey will include the identification and assessment of any hazards found in the following categories:
Damp / mould Radiation Noise Fire Excess heat / cold* Uncombusted gas Hygiene* Hot surfaces Asbestos Volatile organic Food safety Entrapment compounds Biocide chemicals Crowding and Water supply Explosions space Poisonous gases Intruders Falls* Ergonomics Lead Lighting Electrical Structural
*Categories marked with an asterisk include multiple subcategories. For example, four type of falling hazard are defined in the regulations; falls in baths, falls on the level, falls on stairs and falls between levels.
Hazard scoring
After identifying relevant hazards, a Hazard Score is derived based on three factors: • Class of Harm. The hazard is assessed in terms of the degree of incapacity which might arise to the victim. Each Class of Harm is given a numerical weighting. • Likelihood. Each hazard is assessed in terms of the likelihood of an ‘occurrence’ happening to someone in the most vulnerable group of persons in the next 12 months. E.g. an inspector might judge the likelihood of a major fall on a particular flight of stairs to be 1 in 1000 - indicating that statistically, using the stairs, there is a 1 in 1000 chance that a person might sustain a major fall over the 12 months • Spread of Outcomes. The spread of possible harms resulting from an occurrence, expressed by percentage for each of the four Classes of Harm
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Generating the Hazard Score
The Government has helpfully produced an extensive guidance manual2 to help explain the many complexities and elegant statistical methodologies behind the HHSRS. The guidance comprises some 185 pages, and so it is outside the scope of this manual to replicate this information. We provide here a highly simplified example from this guidance to demonstrate how the hazard score is generated using the HHSRS methodology. Example At the front door of a house, there are four steps of smooth concrete. The bottom step is higher than the others, and there is a steel tube handrail to one side.
At the front gate to the house, there are a further two steps. These steps are in brick construction and have high risers. There is a very basic and loose handrail to one side.
The HHSRS inspector judges that both these steps represent a potential hazard. The state and condition of the steps at the gate and to the front door could be dangerous in icy weather and at night, and is judged to substantially increase the overall probability that, in the next 12 months, an elderly person (60 years or more) will have a fall that could result in some injury. The likelihood that a member of the vulnerable age group falling in the next twelve months when using either set of steps is judged to be 1 in 18.
The inspector then makes a second judgement; that of the possible harm outcomes for the vulnerable age group which could result from such an occurrence. This is done by assessing the range of outcomes, under the four classes of harm. Statistical tables are available that help the inspector understand typical national average spreads of harm outcomes for common hazards such as falls on steps and stairs. In this case, the inspector judges the outcomes to be 4.6%, 10%, 25.5% and 63.8% for Classes 1, II, III and IV respectively.
These numbers are then used to generate a Hazard Score:
Class of Harm / Weighting Likelihood Spread of Harm
I 10,000 x 1/18 x 4.6% = 2,556
II 1,000 x 1/18 x 10.0 = 556
III 300 x 1/18 x 21.5 = 358
IV 10 x 1/18 x 63.8 = 35
Hazard Score = 3,505
Overall hazard banding
By multiplying the likelihood of each harm happening with the seriousness of the harm, a total score for each hazard can be generated. The individual scores for each hazard can then be totalled up in order achieve the overall hazard score for the dwelling.
The overall hazard score for any individual hazard can be allocated a banding. There are a total of 10 bands which represent the theoretical overall hazard range for the dwelling from 1 to 1,000,000, with Band A being the most hazardous (representing hazard scores of 5,000 or more) and Band J being the safest (hazard scores of 9 or less). The hazard score of 3,505 above would be band B (2,000 to 4,900). See the HHSRS guidance for full list of the bands.
Hazards which have hazard scores in bands A to C are also known as Category 1 hazards and the law requires the local authority to take action in relation to the hazard. Scores in bands D to J are known as Category 2 hazards. Although there is no mandatory requirement for the local authority to take action in Category 2, officers may also take enforcement action on such hazards when they believe it is necessary.
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HHSRS Enforcement
Once a local authority has completed its HHSRS assessment, it will need to consider what, if any, enforcement action is necessary. The local authority will be guided by three main points when making an enforcement decision:
a) The HHSRS hazard rating
b) Whether the local authority has a power or duty under the Act to take action depending on how serious the hazard risk is, and
c) The best way of dealing with the hazard having regard to the enforcement guidance3.
Unless there is an immediate risk to the health, safety or welfare of any occupant, an informal approach will be made to the relevant person prior to any formal action (below).
Category 1 hazards
Category 1 hazards are the most serious, and the local authority has a statutory duty to take appropriate enforcement action. The options are: • Hazard Awareness Notice • Improvement Notice • Prohibition Order • Emergency Remedial Action • Emergency Prohibition Order • Demolition Order • Clearance Order
Category 2 hazards
Category 2 hazards are less serious, and the local authority has the power to appropriate enforcement action. The options are: • Hazard Awareness Notice • Improvement Notice • Prohibition Order • Demolition Order • Clearance Order
Improvement and Hazard Awareness Notices
The most usual outcomes are that the local authority serves an Improvement Notice (requiring the stated improvements to be carried out) or a Hazard Awareness Notice (improvements will not be required, but the notice is advisory and the authority wants to draw attention to the need for improvements).
Failure to carry out the required works in the Improvement Notice within the specified time frame is a criminal offence. Where an owner is in default of an improvement notice, local authorities have the power to enter the premises and carry out the required works directly, and charge the property owner accordingly. Improvement notices and such improvement works can also result in a legal charge being registered against the property.
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Enforcement and improvement costs
Local authorities have the power to make a reasonable charge as a means of recovering expenses incurred in taking enforcement action. There is no statutory limit but the charge needs to be reasonable. Government has published separate guidance which describes the enforcement options, and the treatment of costs3.
Residential Property Tribunals (RPT)
There is an appeal procedure under HHSRS. Landlords and others affected by an Improvement Notice, or other enforcement action may appeal against it to the local Residential Property Tribunal (RPT) Service. RPTs operate in a similar way to Rent Assessment Panels. They are a more informal way of considering appeals. The RPT appeals panels consist of three people, a legal expert, a technical expert and a lay member. The panel is always chaired by either the legal or technical expert (the latter will often be a surveyor).
RPTs are informal bodies and do not operate like courts - they hear cases presented by each side. Parties to an appeal to an RPT do not need to be represented by lawyers. RPTs may make site visits to properties which are subject to an appeal but generally will not challenge the scores arrived at through the application of the Housing, Health and Safety Rating System assessment.
Part of the first steps in considering an appeal is a case management conference between all the parties. RPTs are also prepared to mediate by facilitating informal discussions between the Council and owners who appeal; this is in an effort to filter out appeals that are routine or misguided.
RPTs can rule in favour of the owner, dismiss an appeal or vary the requirements of a notice, order or licence. They also have the power to consider and award costs for issuing of notices and appealing against local authority HHSRS decisions.
Appeals against a decision of an RPT can, with the permission of the RPT, be made to a Lands Tribunal or, if the RPT does not give permission, an application for permission to appeal can be made direct to the Lands Tribunal.
Criticisms of HHSRS
The complexity of the HHSRS system is causing problems both with landlords understanding the legislation, and trying to oppose excessive local authority enforcement action. A study by the National Landlords Association in 2006 revealed that only one in 10 landlords had a good understanding of the new system, and a worrying 38% of landlords have no knowledge of the new rules. During the introduction of the HHSRS system, one of the main problems has been the inconsistency of the hazard scores between individual inspectors on an identical property. Variations in the hazard scoring of up to ten times were achieved - reflecting the very real difficulty of non-experts in assigning meaningful estimates of risk to potential hazards.
Controversy also exists regarding the calculation of property risk for the most vulnerable age group for that particular hazard. The private rented sector is typically occupied by younger people, yet HHSRS seeks to make property safe for elderly people who are acknowledged to have a higher risk of falls, and often need special safety railings to be made available.
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Pests
Generally, there is no obligation on the landlord to ensure that the property does not become infested with pests unless the infestation is as a direct result of the landlord’s failure to repair or if it can be proven that the infestation arose from any common area under the landlord’s control.
Case Law Example: Disrepair A large number of mice entered the property through holes in the floor which had arisen due to disrepair. The tenant reported this in 1991, but the landlord refused to take any action and told him that the problem was his own responsibility. In 2005, the tenant fitted a new carpet to cover up the holes. This did not resolve the problem, so the following month the tenant fitted new laminate flooring. The tenant later fell into rent arrears, and when the landlord commenced possession proceedings the tenant counterclaimed for damages for the mouse infestation. The landlord again contended that this was the tenant’s responsibility. and alleged that in fitting the laminate flooring the tenant had breached his tenancy agreement, as written consent of the landlord was required to make alterations to the property. The court, however, found this assertion to be unreasonable, and as the infestation resulted from the disrepair of the property, it was the responsibility of the landlord. The tenant was awarded damages of £5,500 for the 14 years of the problem and the cost of the flooring. (London and Quadrant Housing Trust v Riemy [2008], Mayors and City County Court)
There is an exception to this rule. Where a property is furnished and is found to be infested prior to the tenant’s occupation, then the tenant has the right to reasonable enjoyment of the property, and this would include expecting the landlord to take steps to remove the pests, or allow the tenant to give early notice. The courts justified this exception in Smith v Marable [1845] on the basis that a prospective tenant of furnished premises did not have unimpeded freedom to inspect those premises to see the nature and quality of everything that he was getting. In this case the property was let furnished but the decision is likely to apply to all properties if the infestation is found early on in the tenancy and it can be proved that it was present prior to occupation.
Where a pest infestation occurs during the tenancy the landlord will not automatically be required to remove the pests unless it can be shown that he was in some way directly responsible.
Case Law Example: Pests during the tenancy The flat in which the tenant lived was one of three stacked vertically in a single block. There was an infestation of cockroaches a few months following the time that she moved in. The local council undertook some temporary pest control and later served a notice on the landlords to abate the nuisance and eradicate the cockroaches after which the landlords began a block treatment programme which eradicated the cockroaches. The Court of Appeal dismissed the tenants claim for compensation as there was no implied term that the landlord should be responsible for abating infestation and there was no liability in nuisance as there were no common parts retained by the landlords and no conclusive evidence with regard to the source of the infestation. Also the control that the landlords had over the other tenanted flats did not give the landlords sufficient rights of entry for treatment of infestations and further there is no obligation on the part of lessors to block treat infestations where there are no legal means for the lessors to force others on the estate to participate. (Habinteg Housing Association v James [1994] EGCS 166)
The tenant is also required to use the property in a tenant like manner (as illustrated in the case of Warren v Keen [1954]) meaning they must take care of the property and do the jobs that a reasonable tenant would do. Therefore if the property becomes infested due to poor hygiene or damage by the tenant then this will not be the responsibility of the landlord. Local authorities can take action under the Environmental Protection Act 1990 and the Prevention of Damage by Pests Act 1949 to safeguard public health. Action can also be taken under the Housing Health and Safety Rating System following report of a health and safety hazard. See Letting Factsheet 48 for more information on pests.
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Energy Efficiency
The Green Deal
The original green deal scheme which was provided by the Green Deal Finance Company, who lent money to Green Deal providers, and funded by the government closed on 23rd July 2015. A re-launch is proposed in 2018 by The Green Deal Finance Company which is now backed by private investors.
The green deal encourages home owners and occupiers to introduce energy efficiency improvements into properties allowing the bill payer to pay for the improvements through savings on their energy bills. The green deal provisions are set out in the Green Deal Framework (Disclosure, Acknowledgement, Redress etc.) Regulations 2012 and the Energy Act 2011 (EA 2011).
The key principle used to decide whether improvements are financed through the green deal is the ‘Golden Rule’ which provides that the green deal repayments should not exceed the savings made on a typical household’s energy bills. The charge is attached to the property and repaid through the electricity bill so if a tenant moves out the new tenant becomes liable. The landlord will be held liable for the charges where the property is vacant or where the landlord is responsible for paying the energy bills.
Funding may also be available through The Energy Company Obligation which gives grants to low-income households and people living in older properties.
Acknowledgement
Where there is a green deal plan in place the tenant or licensee must acknowledge that the bill payer at the property will be liable to make payments under the green deal plan and that certain terms of that plan are binding on the bill payer. The acknowledgement must be placed in a prominent position within the tenancy or licence agreement and provided in substantially the same form set out in section 4 of the Green Deal (Acknowledgement) Regulations 2012 (see Appendic C for example form). An acknowledgement is not required where, at the time the green deal plan at the property was entered into, the tenant or licensee gave confirmation that they would be the bill payer in respect of the green deal plan.
Sanctions
Where the landlord or agent is in breach of the regulations the Secretary of State may cancel the green deal plan and impose compensation on them where: • the landlord/agent fails to disclose to the tenant the EPC/green deal plan relating to the green deal property in accordance with the regulations; • the landlord/agent has not obtained an acknowledgement from the tenant; • the landlord/agent fails to obtain the appropriate consent from the tenant to pay the green deal plan through the electricity bill. It is important to ensure that the necessary consent is obtained by the improver before any green deal plan is attached to the property and where a green deal plan is already in place the bill payer must acknowledge that they will be responsible for making the payments under the green deal plan.
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The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015
These regulations were made on 26th March 2015 and introduce minimum energy efficiency standards for the private rented sector. The regulations fulfil a duty in the Energy Act 2011 to improve the energy efficiency of privately rented properties.
From April 2016 private residential landlords will not be able to unreasonably refuse consent to a tenant’s request to make energy efficiency improvements where financial support is available to the landlord or other funding is available to pay for them or can be wholly funded by the tenant. The landlord will only be required to carry out cost effective improvements.
From April 2018 private residential landlords will need to ensure that their properties reach at least an E energy performance rating. Where a property has an F or G rating landlords are required to install relevant energy efficiency improvements to bring the property up to at least an E rating, unless they qualify for an exemption, before granting a new lease or renewing or extending a lease. A new lease includes a statutory periodic tenancy but it is understood that contractual periodic tenancies will not be subject to the regulations until April 2020. Where an exemption applies the landlord must register the exemption on the National PRS Exemptions Register. Existing leases will be required to comply from April 2020.
Existing non-domestic properties (i.e. situated in England and Wales, let under a tenancy and which are not a dwelling) will be required to comply from April 2023.
Since 1st April 2019 private residential landlords are required to wholly or partly finance energy efficiency improvements up to the cost of £3,500 (inclusive of VAT) to bring the property up to at least an E energy performance rating. Previously improvements were only required to be made where they could be made at no cost to the landlord. The capped amount can consist of part funding from a third party and part funding from the landlord. Where the cost of making the improvement exceeds the cost of £3,500 landlords can register an exemption where they are able to provide three quotations from different installers confirming this. Landlords should make some of the improvements up to the £3,500 cap before registering the exemption. Where a landlord has registered an exemption due to no funding being available prior to 1st April 2019 the exemption will expire on 31st March 2020 and from this date landlords will be required to make improvements under ‘the cost cap’ provision to bring the property up to at least an E rating.
See Letting Factsheet No. 38 for more detailed information.
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Japanese Knotweed
Japanese knotweed, or Fallopia japonica, is a large, fast growing plant native in Eastern Asia which has spread into most parts of the UK. The plant spreads rapidly and can pass through the smallest of gaps. It can grow from fragments of rhizomes (a network of roots and stems underground) and can cause damage to buildings, drainage and retaining walls etc including to neighbouring properties.
The presence of japanese knotweed can affect the value of a property and render it unsaleable. Some mortgage companies are unwilling to lend funds if japanese knotweed is present within 7 metres of the property and some require evidence of treatment of the plant to eradicate it where it is present or near the property before they will mortgage the property. Most buildings insurance policies do not cover damage and problems caused by japanese knotweed.
Landlords are not required to remove japanese knotweed from the property but a landlord could be prosecuted or given a community protection notice for causing a nuisance if the plant is allowed to spread to a neighbouring property.
Case Law Example: Mr Williams and Mr Waistell both made claims against Network Rail where japanese knotweed was present on their properties from the growth of rhizomes under the surface which had come from neighbouring land owned by Network Rail. After unsuccessful attempts to eradicate the problem the claimants brought an action against Network Rail. The claimants applied for an injunction for National Rail to treat and eliminate the knotweed on their land and to pay damages. It was claimed that japanese knotweed had encroached onto the claimants’ properties which resulted in unreasonable interference with their quiet enjoyment and amenity value of the properties which constituted an actionable nuisance as its presence affected the ability to sell the properties at market value. It was held that the claimants could not claim in private nuisance for diminution in the properties’ market values but could claim for the encroachment of japanese knotweed rhizomes because they had diminished the claimants’ ability to sell the property at market value. Both claimants were awarded general damages to cover the cost incurred in undertaking treatment with insurance backed guarantees and damages for diminution in value for encroachment. Costs were awarded to one claimant for a survey produced and damages for loss of amenity and interference with quiet enjoyment were awarded to one claimant. (Network Rail Infrastructure Ltd v Williams & Anor (2018) EWCA Civ 1514)
Although the Anti-Social behaviour, Crime and Policing Act 2014 (ASBCP Act 2014) does not specifically refer to japanese knotweed the Home Office advise that local authorities can issue a notice under the ASBCP Act 2014 requiring a person to control or prevent the growth of the plant where section 43 applies. Under section 43 an authorised person may issue a community protection notice if they are satisfied that the conduct (which includes ‘a failure to act’ (s57)) of the individual is having a detrimental effect of a persistent or continuing nature on the quality of life of those in the locality, and that the conduct is unreasonable.
Where japanese knotweed is present steps should be taken to eradicate the problem to prevent the plant spreading to neighbouring properties. This may include spraying the plant with approved pesticides or arranging for treatment or disposal of it. Japanese knotweed is a controlled waste under the Environmental Protection Act 1990 and any plant or soil that is likely to contain japanese knotweed must be disposed of correctly. A registered waste carrier must be used to remove japanese knotweed from a property and a suitable disposal site that has a permit to accept invasive plants must be used.
Further information on japanese knotweed is available on the government website: www.gov.uk/ prevent-japanese-knotweed-from-spreading.
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Notes and Further Information
Notes:
1. Housing Health and Safety Rating System: Guidance for Landlords and Property Related Professionals. Published 2006, this 72 page guidance booklet gives an introduction to the HHSRS, and the assessment of hazards in residential property. Available from the Communities website at: www.gov.uk
2. Housing Health and Safety Rating System: Operating Guidance. Published Feb 2006. This guidance manual is available from the Department for Communities and Local Government website at: www.gov.uk
3. Housing Health and Safety Rating System: Enforcement Guidance. Published 2006. This guidance is now out of print, but may be downloaded from the Government website above
4. The Green Deal Framework (Disclosure, Acknowledgement, Redress etc.) Regulations 2012, the Energy Act 2011 (EA 2011) and the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 available at www.legislation.gov.uk
Further Information
Letting Factsheet No. 11: Landlord’s Repairing Obligations (see Appendix)
Letting Factsheet No. 28: Housing Health and Safety Rating System (see Appendix)
Letting Factsheet No. 38: Energy Performance Certificates and the Private Rented Sector (see Appendix)
Letting Factsheet No. 48: Dealing with Pests (See Appendix)
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12. Termination of Tenancies
A residential tenancy may only be brought to an end in a limited number of ways. The most common are by forfeiture, notice to quit (or Notice Requiring Possession for ASTs), end of term, and surrender. Ultimately, it is not possible for a landlord to enforce these rights except by an order of the court and, until such time, a tenant may remain in possession.
When a tenancy is successfully terminated, it brings to an end a number of important rights and obligations that were previously held by the parties to the tenancy. The consequences on both sides can be serious; particularly for tenants who are normally reliant on the property as a home for themselves and their families, and who may be rendered suddenly homeless. For this reason, the law provides a range of protective measures for the parties in the form of the common law obligations and the various statutory provisions for the termination of tenancies. The statutory requirements are particularly strict when the tenancy is not brought to an end by mutual agreement, but unilaterally by the act of one party.
Thus, when looking at the termination of tenancies, it is important to look at the requirements in two ways; one must consider both the contractual provisions and the statutory provisions. When terminating the contractual aspects of the tenancy, the requirements of the contract must be followed. Further, it is likely that the termination of a tenancy will trigger a number of statutory provisions which limit the ways that the parties can act. The landlord needs to be careful to understand and act according to both types of requirements and provisions.
In some instances, for example where the occupiers are trespassers or ‘squatters’, additional provisions will apply and these will be considered at the end of the Chapter.
Protection from Eviction
The picture is further complicated by the various statutory provisions against eviction. The provisions are such that if the correct procedures are not followed, a landlord may even unlawfully evict his tenant unknowingly. In a recent example, a landlord who assumed that his tenants had done a ‘runner’ and deserted the flat (there were substantial arrears owing) entered the property and changed the locks ready for re-letting. The landlord was charged with unlawful eviction when the tenants returned three days later, unable to gain access.
Under the current legislation tenants are given a broad degree of protection to their rights of ‘quiet enjoyment’. The courts do not treat the process of the eviction of tenants lightly and only the courts have the authority to enforce the landlord’s right to get his property back from a residential tenant. The Protection from Eviction Act 1977 makes it a criminal offence for the landlord or his agent to assume these powers.
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Furthermore, the Housing Act 1988 states:
‘If an assured tenancy which is a fixed term tenancy comes to an end otherwise than by virtue of: - an order of the court, or - surrender or other action on the part of the tenant then ... the tenant is entitled to remain in possession of the dwelling-house ...’.
A tenant has similar protection under periodic tenancies. At this point, it should be noted that many tenancies, on the face of it, allow the landlord ‘to re-enter the Property should the rent be in arrears by more than 14 days’ (or similar wording). This is often referred to as a forfeiture clause. It is important to understand that, in practice, a landlord may not exercise this power without the order of the court.
The Termination Process
We shall briefly consider the three ways by which a tenancy can be brought to an end by either the landlord or the tenant. These are: • Unilaterally - by giving of notice (either party), or by forfeiture (landlord) • Surrender - by the voluntary agreement of both parties • End of term - by the natural effluxion of time
Unilateral Termination
The main ways that a landlord can terminate the tenancy are by forfeiture or by notice. Forfeiture is only available to the landlord (e.g. following rent arrears), and not to the tenant. The tenancy can only be brought to an end by notice by either party if the tenancy allows for this (i.e. where the tenancy is periodic, or by inclusion of a break clause within a fixed term tenancy).
Surrender
If the landlord and tenant have agreed a fixed term tenancy with no break clause or other provision in the agreement providing for early termination, then the parties will generally be contractually bound by the agreement; the tenancy will come to an end only when it has run its course and expires by effluxion of time. However, provided that both parties agree, the tenancy can be terminated early by mutual agreement - this is called surrender.
Importantly, surrender can only occur by mutual agreement which can be explicit or implied. If both parties do not agree to the surrender, then surrender cannot occur. Similarly, if one of a number of joint tenants offers to surrender the lease, the surrender will not be effective. Once surrender has taken place, all obligations and rights under the tenancy end.
End of Term
It used to be the case in common law that a fixed term terminates automatically when the term comes to an end. This position has now been substantially modified by statute so that for tenancies covered by the Housing Act 1988, a statutory periodic tenancy is automatically created at the end of the fixed term unless surrender has taken place or been ordered by the court.
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Termination of Assured (and Assured Shorthold) Tenancies
Housing Act 1988: the main statutory provisions
Private sector landlords are for the most part dealing with assured and assured shorthold tenancies under the Housing Act 1988. The general provisions for termination of these types of tenancies were discussed briefly in Chapter 5.
In summary, the key provisions are:
i) Termination only by order of court or by surrender. A fixed term tenancy may not be brought to an end unless there is surrender, or by order of the court.
ii) Replacement Tenancies. At the end of a fixed term, the parties may agree a replacement tenancy. This tenancy can be either fixed term, or periodic.
iii) Statutory Periodic Tenancies. At the end of a fixed term assured tenancy, a statutory periodic tenancy automatically arises if the tenancy is not brought to an end as in (i) or replaced as in (ii) and the tenant is entitled to remain in possession.
iv) Notice by landlord. If the landlord wishes to terminate the tenancy at the end of the fixed term and recover possession, he or she must serve a notice on the tenants in writing stating that he requires possession of the dwelling. The length of the notice will depend on whether the tenancy is fixed term or periodic, but at least two months’ notice is required.
v) Notice by tenant. There are no special provisions for termination by the tenant in the Housing Act 1988. The common law requirements for notice will therefore apply (see section below - Contractual and Common Law provisions).
vi) Court Proceedings. Possession proceedings would normally be instigated by the landlord who is required to serve a prior notice on the tenant in the required form before the proceedings are begun.
vii) AST Possession. If the tenancy is AST, then the court is obliged to award possession if the tenancy requirements for setting up an AST and the notice requirements (above) have been complied with.
viii) Possession on other Grounds. Otherwise, a court shall only make an order for possession for a dwelling let on an assured tenancy on one or more of the 17 grounds set out in Schedule 2 of the Housing Act 1988.
It should be noted that these statutory provisions generally operate in conjunction with the contractual or common law provisions within the tenancy agreement.
Example:
John rents his flat to Andrew. The tenancy agreement contains a forfeiture clause such that the tenancy is forfeited if the rent remains unpaid for more than 14 days. After several months, Andrews loses his job and is unable to pay the rent that month. On the 15th day after the rent was due, the original tenancy is brought to an end under the terms of the forfeiture clause (a contractual provision in the agreement). Yet, the statutory provisions state that immediately on ending of the fixed term, a periodic tenancy takes effect. John cannot recover possession of his flat until he has brought this statutory periodic tenancy to an end.
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Early Termination
If the tenancy is a fixed term tenancy, and either party wishes to terminate the tenancy before the end of the term, they may only do so if the tenancy agreement makes provision for this by way of a ‘break clause’ and the landlord has followed any requirements for giving notice specified in the tenancy agreement. Even if the tenancy does contain a break clause, the Housing Act 1988 does not support the landlord who wishes to recover possession within the first six months whose tenant decides to remain in the property - the court cannot award possession until six months after the beginning of the agreement unless the landlord is using one of the 17 grounds (i.e. the mandatory AST ground is not available in the first six months).
If there is no break clause, then both parties will need to agree to surrender the tenancy in order to terminate. If the landlord does not agree to the surrender, then the tenant will be contractually obliged to pay rent for the entire length of the fixed term. If it is the landlord that wishes to have the property back, the tenant is entitled to remain in ‘quiet enjoyment’ of the property and the landlord is obliged to follow the statutory termination provisions at the end of the term.
Notice given by tenant
Where the tenancy is for a fixed term, the tenant can simply vacate on the last day ofthe tenancy agreement. The tenant need not normally give notice to the landlord that he is leaving; a situation which does not correspond with the duty of the landlord in an equivalent position. The landlord is required to give the tenant at least two months’ notice under s21 of the Housing Act 1988 and must obtain a court order before he can regain possession of the property. The landlord’s seemingly inequitable position here can be better protected by a little planning and some landlords insert a clause in the tenancy agreement which requires that the tenant shall give the landlord notice if the tenant intends to vacate at the end of the term. Other measures are considered elsewhere (see ‘Holding over’ in Chapter 3).
Where the tenancy is periodic the tenant is required to give notice by serving the landlord with a notice to quit (s5(1) Protection from Eviction Act 1977). There is no statutory form but the notice must: • be in writing and contain certain prescribed information (detailed later in chapter 12) • be given at least four weeks before the date it runs out. There are further rules implied by the common law. The common law requirement is that the periodic tenant should give the landlord notice to quit which is as long as the period of the tenancy subject to a minimum notice period of four weeks. Thus, for a weekly tenancy the notice period would be four weeks and for a monthly tenancy the notice period would be one month. The notice must bring the tenancy to an end on the first or last day of a period of the tenancy.
Example: A monthly periodic tenancy starts on 4th January 2015 and the tenant gives notice on 22nd July 2015. The earliest the notice could expire would be 3rd September 2015 as one month’s notice would be 21st August 2015 which is not the the first day of a period of the tenancy (e.g. 4th of the month) or the last day of a period of the tenancy (e.g. 3rd of the month).
Where a tenant freely surrenders his tenancy or gives the landlord a notice to quit (presumably a valid one) the fixed term comes to an end and is not replaced by a statutory periodic tenancy.
Joint Tenants
Where there are joint tenants, the position of the respective tenants with regard to giving notice to quit becomes slightly more complex.
The courts have determined that, where the joint tenants hold the tenancy as a periodic tenancy, it may be determined by a notice to quit given by one of the joint tenants without the concurrence of the others unless the terms of the tenancy provide otherwise.
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However, a notice served pursuant to a break clause in a fixed term tenancy must be served by all the joint tenants unless the tenancy agreement expressly provides for it to be determined by one of them. If all the tenants give notice but the notice is signed by one only, it may still be effective if that tenant has the other tenants’ authority to give notice as their agent.
In this event, the landlord is advised to enquire directly of the other joint tenants to determine whether such authority existed. In view of this, it is generally easier to insist that such notice is received from all joint tenants.
Withdrawal of notice to quit
Once the tenant has given a valid notice to quit, this operates as surrender and the tenant is not at liberty to extend his occupation, or ‘hold over’ without the prior agreement of the landlord. However, the landlord will still have to take court proceedings to evict the tenant, if the tenant does not vacate voluntarily.
Withdrawal will only be effective if both parties consent to it and it will result in a new tenancy commencing from the expiry of the notice; the old tenancy does not continue.
Notice by landlord
For ASTs, the landlord will normally terminate the tenancy by serving on his tenant a notice that he requires possession (s21). If the tenancy is not one of those to which the Housing Act 1988 applies (business tenancies, tenancies at high rent, common law tenancies etc.) then the landlord will need to serve a ‘Notice to Quit’ to bring the tenancy to an end - see below.
Service of a ‘notice requiring possession’ (Housing Act 1988, s21) will be required before the landlord can enforce his rights to possession whether during a periodic term or at the end of the fixed term. Whereas the tenant is only required to give at least four weeks’ notice during a periodic tenancy, the landlord will need to give at least two months’ notice in order to determine an assured or AST tenancy.
A landlord may not determine a fixed term tenancy before the end of the term in this way unless the tenancy agreement contains an express provision (commonly known as a ‘break clause’). When invoking a break clause in this way the landlord is still required to comply with the requirements of s21 by giving the tenant at least two months’ notice in writing of his intention to gain possession. The notice cannot be given to the tenant within the first four months of the original tenancy.
Where there are joint landlords, the notice must be given by at least one of them; and where there are joint tenants, the notice must be given to all of them. The only exception to this latter rule is that, when serving notice to a married couple, the notice should still be addressed to both tenants but need only be given to one partner since it can be assumed the recipient will bring the notice to the attention of his/her spouse.
The process whereby the landlord of an assured or assured shorthold tenancy takes possession (via possession proceedings) is discussed in further detail in the following pages.
Notice to Quit
In common law tenancies, a landlord may use a Notice to Quit to terminate a tenancy and there are various common law rules which govern how such notices are served. For assured and assured shorthold tenancies, the landlord is required to serve a notice requiring possession under the statutory rules defined in s21 of the Housing Act 1988 and a Notice to Quit will have no effect.
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Termination of Assured (and AST) Tenancies: contractual provisions
The parties may include various contractual provisions in the tenancy agreement that allow the tenancy to be terminated early. The following section explains the nature of these contractual provisions.
Break clause
Depending upon individual circumstances, both landlords and tenants are sometimes reluctant to commit to a fixed term tenancy unless it includes a provision that allows the tenancy to be terminated before the expiry of the original fixed term. This type of provision is called a break clause or an option to determine. For assured and assured shorthold tenancies, the landlord may not use the break clause to override the statutory provisions, and so the landlord will be required to provide at least two months’ notice to determine otherwise the break clause could be declared void. There are no corresponding obligations on the tenant, on the other hand, for assured tenancies, the common law requirement being that at least four weeks’ notice is given.
When a break clause is included in the tenancy agreement, it is therefore common that both parties are required to give two months’ written notice to the other party to terminate the fixed term. This has the advantage of a more equitable notice arrangement; both parties are bound to give the same length of notice (unlike the common law requirement for monthly periodic tenancies where just one month is required).
N.B. It was necessary, when including a break clause in an assured shorthold tenancy agreement created prior to February 28, 1997 that the break clause gave no power to the landlord to bring the tenancy to an end before a minimum term of six months. Where the break clause allowed this possibility, the courts might view such a tenancy as an ordinary assured tenancy with the corresponding loss of rights for the landlord. This restriction no longer applies to tenancies created on or after this date.
Condition
A contractual provision is sometimes inserted into a tenancy agreement which makes the continuation of the tenancy conditional upon the tenant performing (or not performing) some act. Commonly, such conditions are used in serviced tenancies which are conditional on the tenant remaining in the landlord’s employment. Similar provisions are sometimes included making the tenancy conditional on the tenant remaining in occupation of the property (i.e. the tenancy automatically comes to an end if the tenant abandons the property for more than 28 days) or conditional on the tenant not becoming bankrupt. If the tenant breaches a condition, the tenancy will terminate automatically at common law.
Unfair contract terms
Consumer legislation now requires that, where a tenancy agreement is granted to a consumer, any terms contained with the agreement must be fair such that they do not cause a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer (i.e. the tenant). These rules (now incorporated within the Consumer Rights Act 2015) mean that the provisions for termination of the tenancy within the tenancy agreement must be both carefully drafted and fairly exercised. Failure to do so could lead to the situation where the court rules that the provision is unfair and struck out. More information on these important rules is given in chapter 9.
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Holding Over
A particularly troublesome situation for landlords is where a tenant decides to remain in possession of the property after the expiry of the tenancy. This is called ‘holding over’ but it is not a legal term as the legal status of this occupation will depend on the circumstances. In holding-over cases, several possibilities may arise. The tenant may simply hold over at the end of a fixed term tenancy by operation of the law. Or perhaps the landlord has served a notice seeking possession and started possession proceedings. In both these cases, the system of assured tenancies allows the tenant to remain in place until the tenancy has been properly terminated by the execution of a possession order (see s.5(2) Housing Act 1988). For other types of tenancies that do not operate under the Housing Act 1988, holding over may create a more precarious form of occupation such as ‘tenancy at sufferance’ but which still require a court order to evict.
The act of holding-over clearly becomes problematic if it occurs against the wishes of the landlord. If the tenancy is an AST, and the landlord has already served the appropriate statutory notice under s.21, then the landlord may apply to the court for a possession order once the notice has expired. Until the possession order has been granted and executed (eviction by court bailiff) or the tenant decides to leave of his own accord, there is little more that the landlord can do as the AST tenant has statutory rights up to this point.
The holding-over can become even more problematic if the landlord had expected the tenant to leave on an agreed end date and has offered a new tenancy to a third party - the incoming tenants may suffer great inconvenience and temporary storage costs. This is always a scenario that must be kept in mind when changing tenant, and is one of the main reasons why any new tenancy should be offered ‘subject to contract’ until the landlord has vacant possession. Very little can be done in order to mitigate this risk in the case of a standard assured shorthold tenancy. Any attempt to prevent holding-over using penalties or additional charges within the tenancy agreement should be avoided - especially in the light of the newly introduced Tenant Fees Act 2019 which now makes such charges illegal. See Letting Factsheet 51 for more information. Some practical solutions The inherent difficulty with holding over is that it is often used as a short-term measure by the tenant to gain a few days where there is a delay in availability of the subsequent tenancy or house purchase. Yet, the Housing Act does not cater for changes at short notice - because of the statutory requirement for two months’ notice, it demands that all transactions need to be planned at least two months’ ahead. If no forward planning is undertaken, then the tenant is within his rights to either quit on the termination date or request to stay on at the property. The commonly used method to protect the landlord’s position is to ask tenants to indicate their intentions in writing concerning renewal of the tenancy. If done with sufficient notice (i.e. about 2.5 or 3 months from the end of the tenancy) then the landlord will still have time to administer the correspondence and serve any notices requiring possession.
If the tenant wishes to renew the tenancy, then the terms can be negotiated or agreed with the landlord. Where the tenant states that he intends to give up the tenancy on the termination date, then new tenants can be found ‘subject to contract.’ The third (and not uncommon outcome) is that the tenant does not respond. In this case, the landlord can simply serve the requisite Notice Requiring Possession and indicate to the tenant that, in the absence of other indications, s/he is duty bound to serve notice requiring the tenant to leave on the expiry of the tenancy.
What then if the tenant asks to extend the tenancy? Agreeing to another term of say three months normally does not present a problem but what if the tenant merely requires a few extra days or weeks? If such changes are agreed at least two months out, then the landlord can continue to protect his position by serving a new s.21 notice corresponding to the revised termination date. Changes at shorter notice can often be accommodated by mutual agreement but they will ultimately be done at the landlord’s expense and rights of possession. Equally any payment of rent by the tenant after the formal termination date should be accepted with care. It could again imply a new tenancy coming into effect.
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Forfeiture
Forfeiture of a tenancy refers to a landlord terminating a tenancy because of a breach of the agreement. This can only normally be used if the tenancy agreement allows for it and the landlord follows a set procedure.
Forfeiture clause
A tenancy agreement will normally contain a clause which enables the landlord, in certain specified circumstances, to terminate the tenancy and ‘re-enter’ the demised premises. This is called a forfeiture clause or a proviso for re-entry. ‘Re-entry’ is a term that has historic connotations from when a landlord could physically take back possession of a residential property; but, in modern law, only the court has the power to award possession.
The specified circumstances will normally be where the tenant is in breach of any ofhis obligations under the tenancy and in this situation the landlord can serve a section 8 notice on the tenant setting out the grounds for possession. Section 8 requirements are detailed later in this chapter. The forfeiture clause may, however, be drafted so as to cover other matters, e.g. the bankruptcy of the tenant. If there is no express provision for re-entry in a lease, the law will not imply one. Even if there is no express proviso the landlord may still be able to ‘re-enter’ if the tenant is in breach of a condition of his tenancy as explained earlier in chapter 12.
Housing Act 1988 requirements
It is important to check that any tenancy agreement being used contains a correctly worded forfeiture clause. A forfeiture clause entitles a landlord to forfeit a lease (i.e. bring it to an end) and re-enter the property where the tenant has defaulted on his obligations as specified by the tenancy agreement (e.g. non-payment of rent).
Under the Housing Act 1988, it is necessary that the tenancy agreement contains a forfeiture clause or similar provision if the landlord wishes to retain the right to forfeit the tenancy upon breach of the agreement by the tenant.
Waiver
If, instead of exercising his right to re-entry, the landlord with knowledge of the breach does some act which acknowledges the continuance of the tenancy, he will be taken to have elected not to forfeit the tenancy. The landlord is said to have waived the forfeiture.
Mesne profits
Once the landlord has elected to forfeit the lease and start proceedings for possession, further receipt of rent may give rise to an inference that a new tenancy has been created. In this situation, money should only be accepted as ‘mesne profits’ (damages for occupation) to show that there is no intention to create a new tenancy.
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Surrender
Surrender is an important concept to understand for housing practitioners since it is actually the most common method by which modern residential tenancies are terminated.
In law, a tenancy is brought to an end by surrender when the landlord and tenant both agree that the tenant should yield up possession of the property to the landlord.
Express surrender
Surrender may be express and this can be done for short leases (less than three years) simply by a written document or a ‘declaration of surrender’. More commonly, however surrenders are implied or operate as a matter of circumstances - also called ‘surrender by operation of law’.
Where a tenant ‘holds over’ despite an express surrender, it will still be necessary for the landlord to obtain a court order to recover possession unless the tenancy is an excluded tenancy (see glossary :- ‘Excluded tenancies - PEA 1977’).
Surrender by operation of law
For a surrender by operation of law to be implied from the conduct of the parties to a tenancy, their conduct has to be unequivocal, such as returning the keys to the LL, or removing from the premises all signs of occupation, including furniture, belongings and any family or friends - or animals - who were living with him (Chamberlan v Scully, 1992). It is also important that the actions of both parties show that they consider the tenancy to be at an end.
Thus, there is no surrender when the landlord accepts the key ‘without prejudice’ to see if he can re-let the premises (Re Panther Lead Co [1896] 1 Ch 978); or where, after the tenant has left the property vacant, he changes the locks in order to render the property secure rather than to exclude the tenant (Revlock Properties Ltd v Dixon (1973) )
Belief must be both genuine and reasonable before the landlord takes back the property. Unless the evidence of surrender is unequivocal, any landlord doing so takes a risk. Proceedings for unlawful eviction could be brought by the displaced tenant unless the landlord can be certain that the tenant has ceased to reside in the premises.
The situation where the tenant(s) simply vacate the property, either at the end of the term or even during the term, perhaps with rent owing, and no return of keys or other notification of moving away presents an occasional and troublesome problem for landlords - technically this is known as abandonment. For further information on abandonment, see chapter 13.
Joint tenancies
If the tenancy is a joint tenancy, all the joint tenants must agree to the surrender for it to be effective.
Liability to pay rent
The tenant’s liability to pay rent will continue until the landlord accepts the surrender (subject to the natural expiry of the tenancy agreement) and this principle may assist the landlord in obtaining express surrender from a departed tenant who may be motivated to return keys and formally surrender the tenancy rather than incur further debt.
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Termination of Assured and AST tenancies - the landlord’s options
There are two main routes that the landlord may use to unilaterally force termination of an assured shorthold tenancy (and one route - section 8, for terminating an ordinary assured tenancy): • Section 21 Route (ASTs only). This method is the normal route if there are is no dispute or problems with the tenancy; and uses the ‘AST Rule’ in s21 of the Housing Act which is only available for assured shorthold tenancies. Provided that the various standard requirements of setting up and terminating an AST have been complied with, this rule gives the landlord a right to regain possession of the property once any fixed term has expired.
Notice Requirement: The landlord is required to serve a notice requiring possession on tenant under s21 prior to starting possession proceedings. Since February 28 1997, there is a statutory requirement for the notice to be in writing. In the case of joint landlords, the notice must be given by one of them (s21); and where there are joint tenants the notice must be given to all of them (s45(3)). Since 1st October 2015 a prescribed form has been drafted. See Letting Factsheet 21 for more information.
• Section 8 Route (Forfeiture). This method is generally used if the tenant has defaulted on the tenancy agreement (e.g. failure to pay rent). This allows the landlord to bring the tenancy to an end (forfeiture) provided that the landlord can prove one of the 17 grounds specified in the Housing Act 1988 (see Appendix B).
Notice Requirement: The landlord is required to serve on the tenant a notice of his intention to seek possession in the prescribed form prior to starting possession proceedings. The notice must specify particulars of the grounds under which the possession is being sought and served according to the time-limits required by the Act (the completion and service of the s8 notice is covered in more detail later).
Also, where there is forfeiture, other than non-payment of rent, a notice under s146 of the Law of Property Act should be served by the landlord prior to service of the s8 notice and commencing proceedings. Service of the s8 notice is detailed later in this chapter.
Fig 1: Routes to Possession Comment
-- normal route if no problems/disputes -- can only be used for ASTs AST Rule (s21) -- court has to award possession if requirements are met ? Possession under -- useful for tenant default -- also used for possession of ordinary one of the 17 grounds (s8) assured tenancies
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Choosing the Correct Possession Route and Procedure
In the previous section, we briefly considered the main routes available for possession of residential land held under assured and assured shorthold tenancies. The landlord needs to clearly decide which possession route is appropriate for the situation and type of tenancy before taking action, since the alternative routes require different notices and court forms.
It is possible that more than one possession route or procedure is available to the landlord and, in this case, the final choice will depend on a number of factors including how quickly possession is required and whether the possession action will also include a claim for rent arrears.
Choice of route Choice of court procedure
Possession Possession Procedure Route
s8 Standard procedure
s21 APP
Common Law
Depends on: types of tenancy choice of possession route reason for termination how quickly possession is required whether there are rent arrears
Action: Issue appropriate notice Issue court forms
Fig 2: The Possession Process - initial steps
Choice of Route
There are generally three main alternative routes to terminating residential tenancies. In practice, we will normally only encounter the first two of these routes (s8 & s21) since the majority of lettings are assured tenancies conducted under the Housing Act 1988. The third route relates to common law tenancies which are considered in a separate section later in this chapter.
It is first necessary to decide which route is applicable in order to determine the appropriate notice to issue. If both routes can be used, then it will be important to then decide which court procedure is the most appropriate. In some cases, only one of the court procedures will apply (e.g. Accelerated Possession Procedure, APP cannot be used to recover possession of a tenancy on grounds of rent arrears during the fixed term - only the standard procedure can be used) whereas in other cases, both procedures could be used. If both court procedures are available, then the choice will generally be made on the basis of expedience (this is discussed further below - see ‘Choice of Procedure’).
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The characteristics of the two main routes are:
route requirements
Section 8 route Can only be used in conjunction with the 17 defined grounds (grounds are listed in Sched. 2 to the Housing Act 1988). E.g. Ground 8: when there are 2 months rent arrears Landlord must be able to prove at least one of the grounds Can be invoked during the fixed term or periodic tenancy Notice is required before proceedings (length of notice varies according to the ground used)
Section 21 route Applies to assured shorthold tenancies only Possession obtainable once fixed term has expired Landlord is required to give at least two month’s notice
Choice of Court Procedures
In the previous chapter, we briefly considered the two main procedures available for possession of residential land held under assured and assured shorthold tenancies.
These are:
1) Standard possession procedure
2) Accelerated possession procedure
The purpose of this section is not to explain the detailed operation of each procedure, but purely to provide an outline of the choices available, and the relative merits of using each according to the specific circumstances of the case.
Standard Possession Procedure
In the standard procedure, the landlord (claimant) will generally ask the court to issue a summons on the tenant (defendant). The court will list the case for hearing (can take up to 1 - 2 months for the case to be heard) and issue the summons. The case is heard in open court where both the landlord and tenant will have the opportunity to present their case in front of the judge.
After hearing the case, (provided that no further information is required by the court) a judgement will normally be given. If successful, possession will be awarded at the end of a 28 day period. The claimant will also be able to claim for rent arrears, and if agreed, the judgement will also order the defendant to pay the arrears.
The standard procedure may be used for all three possession routes (i.e. the s8 & s21 routes for Housing Act 1988 tenancies, and also the route applicable to common law tenancies)
Accelerated Possession Procedure (APP)
The APP procedure was introduced in order to speed up the possession process for simple claims, generally under assured shorthold tenancies. The landlord (claimant) submits the claim to the court in a similar way to the standard procedure. Normally, the case will be listedmore quickly than with the standard procedure (typically 1 month) and the judge will attempt to consider the case on the basis of submission of forms provided that the tenant does not enter a valid defence, and the paperwork is in order.
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The APP procedure generally provides a quicker possession route, although the local court can advise of its current processing delays when timings are critical.
The APP has several important restrictions: • The APP procedure cannot be used to recover rent arrears. If a landlord requires possession quickly, the outcome of a successful APP claim is to provide the claimant with possession. A claim for rent arrears must be brought using a separate action (e.g. Small Claims Court) • The APP procedure is generally only of use when the property is let on an AST and the fixed term has come to an end. In this case, the court will normally require that the respective notice under s21 has been served on the tenant. Thus, this procedure does not assist the landlord where the tenant has defaulted during the fixed term (unless the termination date is sufficiently close). • Changes to the APP process following the introduction of the Human Rights Act mean that from October 2000, it can no longer be used to recover possession of assured (including AST) tenancies when relying on any of the 18 grounds listed in Part 1 of Sch. 2 of the Housing Act 1988. (Previously allowed on specified grounds) • The APP procedure cannot be used to recover possession of ordinary assured tenancies. • The agreement must be in writing.
Delays are expensive
Speed of possession is often fundamental to housing possession cases. Where a tenant has stopped paying the rent and the chances of recovering the shortfall are low, then every day that the tenant remains in the property represents actual financial loss to the landlord. Therefore in rent arrears cases, it may be more cost effective to choose the quicker APP procedure in order to stem the loss of rental income and pursue the rent arrears under a separate claim.
Factors affecting the choice of procedure
From the above, it becomes clear that in many situations, the APP cannot be used (e.g. recovery of possession due to rent arrears during the fixed term). There are however some situations where the landlord may have the choice of using either procedure: • A landlord may have the choice of terminating the tenancy by service of notice under s21 (AST rule) or under s8 (tenant default or other grounds). The s21 notice requires at least two months’ notice. The s8 can require as little as two weeks’ notice. Thus, where the tenant is in arrears, the tenancy is near or at the end of the fixed term, or has become periodic, and the required notice under s21 has already been served, the landlord needs to consider which procedure is most suitable bearing in mind the delays involved with each prospective procedure and the necessity of recovering any rent arrears within the same action.
Thus, the choice of procedure will depend on several factors: • Whether the tenant has defaulted, or the fixed term tenancy has expired. • Type of tenancy. APP may only be used for possession claims under an assured shorthold tenancy. • Timing - whether the s21 statutory notices have already been served. • Whether a court is willing to allow an agent to present the case on the landlord’s behalf (see ‘Rights of Audience’ below). Where a court does not allow an agent the right of audience, the APP may be the best alternative.
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Pre-Action Protocol for Debt Claims
Since 1st October 2017 the Pre-Action Protocol for Debt Claims must be followed prior to issuing court proceedings. If the rent remains outstanding after the first or second reminder a letter of claim must be sent to the tenant setting out specific information about the debt before court proceedings are started. The aim of the protocol is to encourage early engagement and communication between parties to try and resolve the matter without the need to start court proceedings. The letter must contain the amount of the debt and whether interest or charges are continuing, the date of the agreement and the parties to it, where the debt has been assigned (if applicable), details of how the debtor should proceed if they want to discuss payment options and the address to which the Reply Form should be sent. If regular instalments are being offered the letter must also include why this offer is not acceptable and details of how the debt can be paid.
The letter of claim must enclose an up to date statement of account, an Information Sheet, a Reply Form and also a Financial Statement form. An example letter is available in our Management Forms pack. If the Tenant does not reply to the letter of claim within 30 days from the date of the letter court proceedings may be started. Where the tenant responds to the claim the parties should try to agree a resolution outside of court. Where an agreement cannot be reached the tenant should be given at least 14 days’ notice of their intention to start court proceedings.
Possession Examples
Example 1: Possession under Section 21 AST rule
Problem: Mr David Smith is the landlord of a house situated at 9 Park Terrace, Islington, London NW2. Mr Smith recently obtained a new job which provides him with accommodation and the house has become surplus to requirements. The house was let out under a twelve month tenancy starting on 1st July 2014 with no break clause. The rent is £1000 per month. He decides to sell the property and receives an acceptable offer in January 2015, and requires possession as soon as possible. The tenants are Mr Alan Black and Mrs Betty Black.
Action required to terminate the tenancy: The property was let on a fixed term tenancy and so the landlord is obliged to honour the term unless the tenants agree to surrender early. Possession will be available immediately after the end of the fixed term (i.e. 1st July 2015) under the s21 AST rule. Possession would also be available via the s8 route under Ground 1 if the landlord had served the appropriate prior Ground 1 notice before granting the tenancy. Where both options are available, the s21 route is generally used in preference.
The landlord should therefore serve a ‘Notice Requiring Possession’ on the tenant under s21. Since the tenancy is still within the initial term, then the section 21 notice is served under s21(1) b - which relates to recovery of possession during the fixed term (see next chapter for more information on completion of the notice). The requirements of s21 (1) (b) are: • that at least two months’ notice in writing must be given by the landlord • for ASTs granted in England notice cannot be given within the first four months of the original tenancy and certain other information must be provided to the tenant. See Letting Factsheet 21 for further information. • that possession will only be made when the original tenancy has come to an end. If the tenants do not vacate the property on the required date, then the landlord can commence proceedings for possession using either the (faster) APP or the standard procedure. To ensure valid service of a s.21 notice the landlord should make sure that any tenancy deposit has been protected and, where a property requires a licence e.g. an HMO, that it is licensed.
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Example 2: Possession following rent arrears
Problem: Elizabeth Taylor rents her retirement flat in Bognor Regis to two male friends from San Francisco, USA for a rent of about £2000 a month. Ignorant of the procedures for letting property in the UK, the tenancy was created as a result of a verbal agreement and there is no formal tenancy agreement. The tenancy began on June 15th 2001. Both tenants work full time in a theatre company (ABC Productions Ltd).
The arrangement has not been successful. The tenants, Mr Mel Smith and Mr Griff Rhys Jones keep strange hours, and there have been several complaints about noise late at night by neighbours in the block. Compounding these problems, you are informed that there is an additional occupier in the flat who moved in about two months ago according to reports by Mrs Watchful, the next- door neighbour. This was further evidenced by the fact that you find several letters inside the front door addressed for Mr Peter Lightfoot and the guest bedroom now appears to be occupied by this third person. The rent has always been received late since and the rent is now almost three months in arrears. You have already written two reminder letters (setting out the arrears in each case) and a letter of claim.
Action required to terminate the tenancy:
1. TYPE OF TENANCY. Since the tenancy was granted after February 28th 1997 (the date when the new AST provisions under the Housing Act 1996 came into force) the tenancy will be an assured shorthold by default, and since no fixed term was agreed, a contractual periodic tenancy has become established.
The high value of the rent in this case is also a potential issue. We have now verified that the rent is exactly £2000 (effectively £24,000 per annum). If the rent had been over £100,000 per annum (either over the year as a whole, or on a pro-rated monthly basis), then a periodic common law tenancy would exist instead, with the need to adopt a correspondingly different route to terminate the tenancy (under the common law rules).
2. POSSESSION ROUTE. Mrs Taylor, the landlord of the flat, should terminate the tenancy using the route provided under s8 of the Housing Act 1988 (forfeiture of the tenancy due to the tenant’s failure to pay the rent due - Ground 8 applies since the rent is now over two months in arrears).
3. SERVICE OF NOTICE. The landlord should serve a ‘Notice Seeking Possession’ on the tenant under s8 in the prescribed form (using grounds 8,10 & 11). If the tenant does not pay all the arrears, or leave the property, then the landlord can commence proceedings for possession and recovery of the rent arrears using the standard possession procedure. The proceedings can be commenced two weeks after service of the s8 notice.
4. ALTERNATIVE ROUTES. The alternative route to terminate the tenancy by serving notice under s21 is available since the tenancy is a contractual periodic (if a fixed term tenancy had been granted instead, the landlord would have had to wait until the end of the term if using s21). This is however the inferior option in this case since the landlord is obliged to give the tenant two months’ notice ending on the last day of a period (effectively up to three months in the worst case) before possession proceedings could be started. However, if the tenancy had been granted on or after 1st October 2015 the requirement for notice to end on the last day of a period would not apply to tenancies in England.
Sometimes it is beneficial to consider the s21 route for the type of case above where there are mounting rent arrears (especially if notice under s21 has already been served previously) simply because it then allows the landlord to use the Accelerated Possession Procedure (APP) which can substantially decrease the delay in obtaining a possession order. Although, the APP has the disadvantage that the rent arrears would have to be pursued under a separate action, the financial gain of recovering the property at the earliest opportunity will often outweigh these disadvantages. In this slightly unusual case example, the APP is not available to the landlord because the requirement of a written tenancy agreement is not fulfilled.
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Notice Requiring Possession under section 21, Housing Act 1988
Where possession is sought at the end of a fixed term AST tenancy, during a periodic tenancy, or where a break clause has been invoked, the landlord can serve notice under s21 of the Housing Act. Since 28 February 1997, there is a statutory requirement for the s21 notice to be in writing and since 1st October 2015 a prescribed form must be used. See Appendix C for example notices and Letting Factsheet No.21 for further information.
In the case of joint landlords, the notice must be given by one of them (s21); and where there are joint tenants the notice must be given to all of them (s45(3)). N.B. It is not necessary to serve a s8 notice in addition to the s21 notice. Where the notice of possession is properly served, the court must award possession. Fixed term tenancies
Where the landlord wants to end a fixed term AST tenancy in England he must serve a notice on the tenant in the prescribed form (Form 6A). The landlord must give the tenant at least two months’ notice and the notice cannot be served within the first four months of the tenancy start date unless it is a replacement tenancy where the landlord and tenant are the same as under the earlier tenancy, and the property let is the same or substantially the same as the property let on the earlier tenancy (s21(4B ) and s21(7) Housing Act 1988).
The notice may be given before or on the day on which the tenancy comes to an end. This is the case even if the two months notice ends after the tenancy agreement has expired. For example, if notice requiring possession is served on the last day of the tenancy agreement, the tenant does not have to give up possession of the dwelling-house until two months after the date that the notice was served or until the date written in the notice if it is further than two months away.
Periodic Tenancies
For periodic AST tenancies in England landlords will need to serve notice on the tenant in the prescribed form (Form 6A).
Statutory Periodic Tenancies - Where the tenancy has come to an end and continues under section 5(2) of the Housing Act 1988 the landlord is required to give a minimum of two months’ notice to end a statutory periodic tenancy. Contractual Periodic Tenancies - Where the tenant has agreed with the landlord at the start of the tenancy that it is periodic, or will continue as a contractual periodic tenancy once the fixed term has come to an end (usually with a clause included in the tenancy agreement), the landlord is required to give a minimum of two months’ notice to end the tenancy. For tenancies in England the notice cannot be served within the first four months of the original tenancy start date unless it is a replacement tenancy (see above for definition of replacement tenancy).
Service Requirements
Landlords must comply with certain requirements before a s21 notice can be served.
Tenancy Deposits. A landlord cannot serve a section 21 notice if he is in breach of tenancy deposit legislation (s215 Housing Act 2004) unless he has returned the deposit or any court proceedings have been concluded, withdrawn or settled. House in Multiple Occupation. A section 21 notice may not be given to a tenant where any part of the tenancy is an unlicensed HMO (s75 Housing Act 2004). Service of Documents. Landlords must ensure that the tenant has been given a copy of the gas safety certificate (prior to occupation of the property), the Government How to Rent Guide and a copy of the energy performance certificate before serving a section 21 notice. See Letting Factsheet No. 21 for more information.
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Retaliatory Eviction. S33 of the Deregulation Act 2015 prevents a landlord in England from serving a s21 notice where the tenant has made a complaint in writing to the landlord or his agent regarding the condition of the dwelling-house and: • the landlord has not provided an adequate response to the complaint within 14 days (e.g. a description of the action that the landlord proposes to take to address the complaint and a reasonable timescale within which the action will be taken); • the tenant then made a complaint to the local authority about the same subject matter as the complaint; and • the local housing authority served a relevant notice (a notice served under s11, s12 or s40(7) of the Housing Act 2004) on the landlord in relation to the complaint. The tenant is not required to make a complaint in writing where the tenant does not know the postal address or email for the landlord and has made reasonable efforts to contact the landlord to complain about the condition. Where a ‘relevant notice’ is served on the landlord, a section 21 notice may not be given in relation to an AST: • within six months from the date of service of the relevant notice; or • where the operation of the relevant notice has been suspended, within six months from the day on which the suspension ends. ‘Relevant notice’ means notices served under s11 or s12 (improvement notices relating to category 1 and 2 hazards) or s40(7) (emergency remedial action) of the Housing Act 2004.
Tenant Fees. Where the landlord is in breach of the requirements of the Tenant Fees Act 2019 he will be unable to serve a section 21 notice until he has returned any prohibited payments.
For more information on serving a section 21 notice in England see Letting Factsheet No. 21. Rent Repayment S40 DRA 2015 (which at the time of writing applies to tenancies in England) states that ‘where, as a result of the service of a notice under s21, the tenancy is brought to an end before the end of a period of the tenancy, the tenant has paid rent in advance for that period and the tenant was not in occupation of the dwelling-house for one or more whole days of that period the tenant is entitled to a repayment of rent from the landlord.’ It is not clear as to what is meant by s40 as a s21 notice does not end a tenancy it is the bailiff executing a possession order after service of the notice that ends the tenancy. We would guess that this section has been introduced for periodic tenancies where the notice given expires before the end of a rent period and the tenant would be entitled to a refund for the rent paid in advance for the period that they were not in occupation but as stated it is not clear. Possession After the notice has been issued under s21, and the period of notice has expired, possession proceedings may be commenced and where two months’ notice is required for AST tenancies in England the landlord has six months from the date of issue of the s21 notice to commence possession proceedings. Where more than two months’ notice is required for a periodic tenancy in England the landlord has four months from the date of expiry of the s21 notice to commence possession proceedings.
An order for possession may not be made earlier than six months after the beginning of the original tenancy. Notice of Intention to seek possession (s8 notice) Where a landlord wishes to get possession from an assured (or assured shorthold) tenant before the fixed term has come to an end (e.g. due to default by non payment of rent), and there is no break clause, s21 will not apply and he must serve notice of his intention to seek possession, specifying on the notice particulars of the grounds under which possession is being sought (s8 of the Housing Act 1988 as amended), and served according to the time-limits required by the Act (the completion and service of the s8 notice is covered in more detail later).
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Service of Notices
When completed, a notice may be ‘served’ on the tenant or tenants either in person or by post. If there is more than one tenant, the notice must be addressed to all tenants.
Mode of Service
At common law, a notice is validly served when served on the tenant personally, or by otherwise proving that the notice reached the tenant. Because either option can entail insurmountable obstacles, provisions were introduced by s.196 of the Law of Property Act 1925 in order to provide alternative conclusive means of service - for example, by sending the notice by recorded delivery (provided that the letter is not returned undelivered) or by leaving it at the premises. It is important that the tenancy agreement makes provision for these terms to apply.
N.B.
1. When serving by post, it is recommended that the notice is sent using recorded delivery post. The receipt issued by the post office will then provide proof of posting unless the letter is returned. The disadvantage with using this method is that tenants can simply refuse delivery of the letter. In this case, it is best to resort to personal service at the property itself.
2. Take a copy - you will be required by the court to produce a copy of the notice served and state the date when the notice was served or sent by post. The person actually effecting service should endorse the retained copy with details of time, date and method of service.
3. Time of Service. When served by post, service shall be deemed to have been made at a time when it would, in the ordinary course, have been delivered. Therefore, it is always a good idea to allow a few days for postal service when calculating dates on notices.
4. Witness. It is a good idea to ask a colleague to examine the notice before posting. Not only does this serve as a check that the notice is correctly completed, but provides a witness that the notice was actually enclosed in the letter posted to the tenant (since individuals are known to deny that notices were actually received).
5. Notices may be served by email, but it is not a robust method of service as it is open to rebuttal by the tenant that the notice was not received.
Service of a Notice Seeking Possession under s8
A landlord seeking possession of an assured (or assured shorthold) tenant under the Housing Act 1988 as amended, must tell the tenant that it is his intention to start court proceedings by serving a notice on him. The Notice of Seeking Possession is issued under Section 8 of the Housing Act 1988 as amended and must be served in the prescribed form - often referred to as a ‘section 8’ or ‘s8’ form. The notice could be included within your second reminder letter. NB. Where the tenant(s) is in arrears of rent, it is important that a brief schedule or a copy of the rent account is included specifying the amount claimed to be in arrears to show when and how the arrears have arisen. The notes on the following pages will explain how the notice should be correctly completed and served.
NB. You will also notice that the s8 form states that the form is not to be used if ‘possession is sought from an AST under s21 of the Housing Act 1988’. Some landlords have misunderstood this note as meaning that the s8 form cannot be used for recovery of possession for an assured shorthold tenancy. Section 21 deals with recovery of possession of AST’s at the end of the term as discussed earlier, and the note on the form is simply to alert landlords that possession under the s21 route requires a different notice.
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Finally, it costs nothing to issue the section 8 notice and so getting the notice out at the earliest opportunity wins time for the landlord. The notice can always be withdrawn should the rent be subsequently forthcoming. If it is withdrawn this should be in writing.
Grounds for Possession
Landlords need to refer to the appropriate grounds for possession as laid down in Schedule 2 of the Act. (see Appendix B for more detail and a full list of the grounds in the Act).
Some of the grounds are mandatory, which means that if a landlord proves that one of the grounds applies the court has no choice but to award him possession. The other grounds are discretionary, and the court will only award possession if it is reasonable to do so. Some of the mandatory grounds, called ‘prior notice’ grounds, can only be used if the landlord informed the tenant in writing before the tenancy started that he intended one day to ask for his property back using those grounds. NB. Possession grounds for rent arrears are not prior notice grounds.
a. Non Payment of Rent.
For rent arrears, the landlord is relying on either one or a combination of grounds 8, 10 and 11. • Ground 8: that the tenant owed at least two months’ rent both when the landlord served notice that he wanted possession and still owes two months’ rent at the date of the court hearing. • Ground 10: that the tenant was behind with his rent when the landlord served notice that he wanted possession, and when he began court proceedings • Ground 11: that, even if the tenant was not behind with his rent when the landlord started possession proceedings, he has been persistently behind with his rent. (This is a summary - the full wording of each Ground is given in Appendix B). Ground 8 is a mandatory ground and thus the most powerful ground to use; the court must grant possession if this ground is proved. However, the drawback with relying on this ground alone is that the tenant can pay off part of the arrears shortly before the hearing, which means the ground can no longer be proved and thus the possession proceedings will have to be abandoned. It is therefore common practice to cite multiple grounds of possession for rent arrears (i.e. grounds 8, 10 & 11) if applicable. In many cases, it will not be possible to rely on ground 8 as the rent arrears have not accrued to a sufficient extent when the notice was served. The landlord will then have to make a decision between immediate possession proceedings under Grounds 10 & 11 where the court may order possession if it is ‘reasonable’ to do so, or a further delay until Ground 8 will apply. In many cases of genuine rent default, landlords have been successful in relying on grounds 10 & 11 alone.
b. Other breach of Contract
There are four other discretionary Grounds which deal with situations of misconduct on the part of the tenant. These are: • Ground 12: that the tenant has broken one or more of his obligations under the tenancy agreement. • Ground 13: that the condition of the premises or any of the common parts has deteriorated because of the behaviour of the tenant, his subtenant, or any other person living there. • Ground 14 & 14ZA: that the tenant or someone living in or visiting the property has been guilty of conduct which is, or is likely to cause a nuisance or annoyance to neighbours, the landlord or a person employed in connection with the exercising of the landlord’s management functions. Or that a person residing or visiting the dwelling house has been convicted of using the property, or allowing it to be used, for immoral or illegal purposes or has been convicted of an indictable offence which took place during, and at the scene of a riot, or has committed an arrestable offence in or in the locality of the dwelling house. • Ground 15: that the condition of the furniture has deteriorated because it has been ill-treated by the tenant, his subtenant, or someone living there. (this is a summary - the full wording of the Grounds is given in Appendix B).
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c. Other Mandatory Grounds (Prior Notice)
The Act also makes provision for possession to be granted on the following grounds: • Ground 1: that the landlord used to live, or intends to live in the property as his only or principal home. • Ground 2: that the mortgagee is claiming possession. NB this can only be of use where the mortgage predates the tenancy. • Ground 3: that the tenancy not exceeding 8 months and was previously let for a holiday • Ground 4: that the tenancy is a student let and was previously let by an educational establishment to students • Ground 5: that the property is held for use by a minister of religion In the above cases a court will generally require that the landlord has served notice of the respective ground on the tenant prior to or at the beginning of the tenancy. However, for grounds 1 & 2, a court has a discretion to dispense with this requirement if it considers it just and equitable to do so.
d. Other Grounds
A number of other grounds are also open to the landlord: • Ground 6: where the landlord intends to redevelop the property but not where the present landlord has purchased the property after the creation of the tenancy - a mandatory ground • Ground 7: that the former tenant has died (unless there is a person with a right to succeed) - a mandatory ground. • Ground 7A: that the tenant, or a person residing in or visiting the dwelling-house, has been convicted of a serious offence, certain offences under the Anti-Social Behaviour, Crime and Policing Act 2014 or an offence under section 80(4) or 82(8) of the Environmental Protection Act 1990 - a mandatory ground. • Ground 7B: that the landlord has received a notice from the Secretary of State that one or more of the occupiers are disqualified from occupying the dwelling-house under the tenancy as a result of their immigration status and the occupiers are disqualified as a result of their immigration status – a mandatory ground. (The court can order that the tenant’s interest is transferred to the remaining tenants for the remainder of the fixed term instead of making a possession order if possession is not being sought on any other grounds). • Ground 9: that suitable alternative accommodation is available - a discretionary ground • Ground 16: that the tenant was granted the property in order to properly fulfil her employment duties and is no longer employed by the landlord - a discretionary ground • Ground 17: that the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by either the tenant or a person acting at the tenant’s instigation.
Period of Notice
Grounds 3, 4, 8 & 10-13, 15 & 17: Where the landlord is relying on grounds 3, 4, 8, 10-13, 15 or 17 he or she must give at least two week’s notice.
Ground 7A: the landlord is required to give one month’s notice for a fixed term tenancy and for periodic tenancies the notice period is the earliest date that the tenancy could be brought to an end by a notice to quit.
Ground 7B: The notice period is 14 days notice of intended possession proceedings.
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Ground 14: No notice period is required if the landlord is seeking possession using ground 14. Proceedings can begin immediately following the service of the notice.
Other grounds: If a landlord is seeking possession on any of the other grounds, the landlord must give at least two month’s notice. If the tenancy is statutory periodic and the period of the tenancy is longer than two months, then the notice period under s.21(4)(a) is equal to the period of the tenancy up to a period of one year. For yearly tenancies, six month’s notice is required.
N.B.
1. Once the notice has been served, the landlord has twelve months to commence proceedings.
2. In the some cases, the failure to issue a written notice will be overlooked by the court. A court may still allow possession proceedings if the court considers it just and equitable to dispense with the requirement of such a notice. However, the court cannot dispense with the requirement of a proper notice if the landlord seeks to recover possession on Ground 8 (the mandatory ground for non-payment).
Completing the Notice of Seeking Possession form (s8 notice)
1. Name of Tenant. If there is more than one tenant, the notice should be addressed to all tenants jointly.
2. Address of Premises. Enter here the full address of the premises including flat number and any other information that identifies the premises in an unambiguous manner.
3. Grounds. It is an absolute requirement that you enter the grounds under which you are seeking possession on the form at this point. NB. The Act states that the Notice of Proceedings must specify the ground and any particulars of it. It is vitally important that you should
use the full and exact wording of the grounds for possession to be found in the Act when citing them on the section 8 notice. A recent possession case (Mountain v Hastings, 1993) was lost in court as the section 8 notice was defective as this section on the form was not completed correctly. In specifying ground 8, the landlord only included a brief description of that ground and this was not acceptable to the court.
4. Particulars. Specify the reasons why each ground is being relied on. For example, for rent arrears, explain the amount and nature of the arrears. A copy of the rent account can be attached.
5. Proceedings Date. You must specify the date when the notice expires. For rent arrears, this would generally be two weeks from the date of the notice.
6. Name and Address of Landlord. The full name and address of the landlord should be given. Where an agent represents the landlord an address such as that given below would be sufficient for the purposes of this form.
‘Mr & Mrs R A Brown c/o Smiths & Co Estate Agents, 8 High Street, Anytown, Wessex.’
Where there are joint landlords not all of them need serve the notice. It is validly served so long as it is served by at least one of them (s8(1)(a)).
7. Agent’s Details. If an agent acts for the landlord, this section should also be completed.
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Possession Proceedings
Can be carried out by: • Landlord as ‘litigant in person’ • Agent on behalf of the landlord (at discretion of the court) • Solicitor on behalf of the landlord
Standard Possession Procedure
Claims for possession of land are generally heard in the county court local to the defendant, or the person against whom the possession proceedings are being brought. To start proceedings, you need to complete the relevant forms (two copies for the court and an extra copy for each defendant) and send them together with the appropriate court fee to the county court . The court may decide to refer the case to another court nearer to the defendant, and in this case, you would be notified accordingly. To obtain the correct forms, and details of the fees payable, you can call your local county court - under ‘Courts’ in the telephone directory. The forms are also available on the Court Service web site at: www.gov.uk/government/organisations/hm-courts-and- tribunals-service.
At this stage, it is worth noting the importance of completing the forms correctly and the many traps open to those unfamiliar with the process. There are many delays in the process - from waiting for a hearing date to be set to actually waiting for the hearing itself. Nothing can be more frustrating than having the claim or forms rejected at a later stage because of some technicality. Therefore, it is advisable to check and double check. Call the court before starting your claim to check that you have the most up-to-date forms, and the correct court fee. It is possible that both could change at short notice. Also, ask the court staff to help you as much as possible in bringing your claim - they are generally quite helpful. Delays can cost money - especially in possession cases where rent arrears are mounting up. You can start proceedings as soon as the s8 notice has expired. The procedure for this type of possession last changed in October 2001 to make it easier for people to initiate their own claims. Proceedings are commenced by preparing and filing the summons together with the particulars of claim. The prescribed forms are:
a) Summons for possession of property, Form N5 b) Particulars of claim for possession in cases of non-payment of rent, Form N119 (from 15th October 2001 form N119 covers all claims for possession and not just for rent arrears).
Completing the forms:
At the head of each form is a space for the claimant’s name; you should enter the name of the person bringing the claim (normally the landlord). Underneath, a similar space for the defendant(s); or the person who the claim is brought against (the tenant(s) ). Where there are joint tenants, all tenants named on the tenancy agreement should be listed on the court forms as defendants.
Summons for possession
You should complete one copy of the summons for the court and one for each defendant. Complete the claimant’s and defendant’s name and address details in full. Where an agent is acting for the claimant landlord, the agent’s details can be entered in the box entitled: ‘Name and address for service and payment’.
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Particulars of claim The Particulars of Claim are used by the claimant to set out the reason for and details of the claim. The form contains a limited amount of space; further information can be supplied on a separate continuation sheet. The Particulars of Claim should be served at the same time as the summons. Again, you should complete one copy of the Particulars of Claim for the court and one for each defendant. Completion of this form is self-explanatory and notes are given in form N119a to assist in this respect.
The present form allows for all claims. The previous version of the forms had only covered rent arrears cases. The form asks for details of the rent arrears and what previous action has been taken to try and recover them. If possession is awarded to the landlord, the court will also give judgement concerning the arrears so full information about these to be supplied on the form.
Possession claims online (PCOL)
Since October 2006 landlords can also make a claim online using PCOL: www.possessionclaim. gov.uk. It is a less costly and a more convenient way of recovering possession of property. PCOL cannot be used for all claims. A suitable claim must: • be brought under Section I of Part 55 of the Civil Procedure Rules (CPR), which governs the issue of electronic claim forms; • be a possession claim for residential property by a landlord against a tenant, solely on the ground of arrears of rent (but not a claim for forfeiture of a lease); or a mortgagee against a mortgagor, solely on the ground of default in the payment of sums due under a mortgage; • not include a claim for any other remedy except for payment of arrears of rent or money due under a mortgage, interest and costs. In order to use PCOL the claimant must have an address in England or Wales where documents can be delivered, all defendants must have an address for service in England and Wales, the claimant must be able to provide a postcode for the property to be recovered and an e-mail address. If the claim meets the requirements for PCOL, there are many advantages to its use. Due to significant administration savings compared to manual paper claims, the price of carrying out a possession claim online is slightly lower than the normal cost. As the system is available every day, 24 hours a day, you are unrestricted to when you can issue a claim, and you are also no longer required to visit court in order to commence proceedings. For more information on PCOL, guidance can be found at www.justice.gov.uk.
Interest
The claimant or landlord is entitled to claim interest on the rent overdue (s69, County Courts Act 1984) at the prevailing bank base rate from the date that the shortfall occurred. This claim should be included in the total claimed on the summons and also included in or attached to the Particulars of Claim.
Issue Procedure
On receiving the completed summons form and particulars of claim, the court staff will: • prepare a ‘notice of issue’ which includes the case number and hearing date • endorse the case number and hearing date on the summonses, and add to them a form of reply and a list of advice agencies • effect service of the summons by post or • hand you back both copies if you are serving the documents yourself, together with form N215 Certificate of Service
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In normal circumstances, the minimum requirement between issue and hearing will be 28 days. A defendant has 14 days from the date of service to file a reply but, in practice, can do so at any time before the hearing.
Liaison with the Courts
Establishing contact with the court can be helpful in understanding the sequence of events and helping to avoid unnecessary delay. Your initial contact should be with the court manager, although he or she may later refer you to, for example, the person in charge of the issue section or the listing officer. The court normally has a target of 5 working days turnaround on issue of proceedings. If you have a particular priority case, or are suffering delays significantly in excess of these time-scales, then these are matters you can discuss with the court manager.
Hearing dates
The availability of early hearing dates is a matter of frequent concern, especially in rent arrears cases where the shortfall is causing a landlord financial hardship, or the inability to meet mortgage payments.
Listing of cases is a judicial function; officially it is the judge who ultimately decides which cases should be given priority, not the court manager or the listing officer. However, in practice, much of the daily administration is carried out by the court staff and the application of a little pressure may occasionally prove helpful in getting an earlier hearing date in priority cases.You may be able to reduce the overall period between issue and the hearing by: • opting for personal service of the summons rather than letting the court serve it by post. Seven days is allowed for service by post; you could serve personally on the day of issue; • applying for the period of 21 days between service and hearing to be shortened (abridged); and • applying for a fast track hearing allocation
Agents and Rights of Audience
Where an agent wishes to bring possession proceedings on behalf of a client landlord, it is common practice for agents to be allowed to represent their landlords in such possession cases (the landlord may, for example, be living overseas). Yet, it is in fact at the discretion of the court to allow the agent the right to represent the claimant landlord - this is called a ‘right of audience’. Only the claimant in person, or certain categories of people (e.g. solicitors, and barristers) have a certain right of audience in court. If the judge refuses to allow the agent to appear on behalf of the landlord in court, the landlord will either need to appear in court in person, or instruct a solicitor. In such cases, the agent should ask for adjournment to the earliest open date. If you are unsure whether a particular court will accept the agent to represent a landlord’s case, then a letter or call to the county court concerned, addressed to the Court Manager, informing him or her that you are about to start possession proceedings and requesting permission to represent your landlord may be a possible way to avoid the problem and associated delays.
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Accelerated Possession Procedure
The accelerated possession procedure (APP) was introduced in 1993. The accelerated possession rules and procedure have been designed to provide a more streamlined way for landlords to recover possession of their property. when let under an assured shorthold tenancy. Unlike the standard possession procedure, it should be noted that the procedures cover a claim for possession of the property and your costs of making the application only. The accelerated procedure does not allow for recovery of rent arrears and this would have to be made under a separate debt action in the county court. Also, this procedure cannot be used for any breach of the tenancy agreement. The court will normally make its decision by looking at the documents submitted. For this reason, it is essential that the paperwork is complete.
Limitations
The accelerated procedure has certain requirements and limitations in that: • it may only be used for ASTs (made on or after 15th January 1989) • it is available only where the tenancy has been brought to an end or where the tenancy is statutory periodic • the APP form includes an affidavit which must be signed by the landlord - it cannot be signed on behalf of the claimant landlord by an agent • It also has to be a tenancy agreement that was The tenancy agreement and all notices must have been given and have been in writing Advantages
Despite the above limitations, the APP has several advantages: • Possession has been brought about more quickly than under the standard procedure, typically taking only 28 days between sending completed forms to the court and the issue of the possession order. • There is normally no hearing. This saves attendance costs in time and travel, and reduces the possibility that the case may be further delayed by adjournment. • For agents, since there is no hearing, issues concerning the rights of audience in court will have no effect (see ‘rights of audience’ in previous section - ‘Liaison with the Courts’ for more information).
Observations
From experience to date, the following observations have been made: • Despite being quicker in most cases, the time taken for the landlord to gain possession is still very dependent on how quickly the particular local court is taking to process the forms (and this is currently highly variable). • Tenants can still contest the possession action, and demand a hearing in certain situation. This will have the effect of delaying the ‘accelerated’ process significantly.
Implications
Several important implications arise (often unappreciated at time of introduction of the new rules) from the new procedure: • RENEWAL. Because the accelerated possession procedures only apply to tenancies where the tenancy has ended, landlords and agents will need to reconsider their policy for renewal of tenancies. Where there is any doubt as to granting an additional fixed term, it will be preferable to allow the tenancy to continue as a statutory periodic tenancy.
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• ARREARS. Arrears of rent will need to be pursued as a separate action. • FAIRNESS. There is some concern that unscrupulous landlords may use the procedure rules to gain possession under false grounds, and without a hearing. This concern has yet to bear fruit in experience for possession of AST’s.
Commencing Proceedings
The APP procedures were last changed in October 2001. Prior to this time, there were two forms for completion by the claimant. Under the amended rules, there is now just one form that needs to be submitted. This is form N5B - APP summons form: AST tenancies only (possession under s21). The APP form and guidance leaflet is available from the local county court, or via HM Courts and Tribunals Service (www.hmctsformfinder.justice.gov.uk/HMCTS/FormFinder.do) or you can complete the form online via www.gov.uk/possession-claim-online-recover-property and print it out.
The claimant should complete the appropriate form (one copy for the court and an extra copy for each defendant) and send it to the court together with the appropriate court fee. The claimant should take a further copy to keep for his/her own records. The form is lengthy but self- explanatory. Copies of the following documents must be attached to the application: • the current (or most recent) written tenancy agreement; • in the case of an assured shorthold tenancy, -- the written notice served in accordance with s20 of the Housing Act 1988 (unless the tenancy was set up after February 28th 1997). -- copies of the required notice served under s.21 of the Act. -- any other documents necessary to prove the claim for possession.
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Accelerated Possession Sequence
Send Possession Notice (under s.21, Housing Act 1988)
Complete Form N5B and send to county court with copies of all forms etc
~ 1 week
Court sends to landlord: Notice of Issue
Court sends to tenant: Form of Reply: Form N11B
2 weeks
If no reply from tenant: Landlord completes Request for Possession
~ 1 week
JUDGEMENT If all documents are correct judge orders possession
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Affidavit in support
The APP rules state that the statements made in the application and any documents attached to the application must be verified by oath. The prescribed court forms are therefore in the form of an affidavit; this is simply a sworn, written statement of evidence which, subject to the rules of the court, can be used in evidence in legal proceedings. The application must therefore be ‘sworn’ in front of a solicitor, commissioner for oaths, or officer of the court who will endorse the form accordingly.
There is no charge for swearing an affidavit in front of a court officer. Solicitors will charge a fee for swearing the affidavit plus an additional sum for each document attached.
Service of the application and of the attachments to it is effected by the court by sending them by first class post to the defendant at the address stated in the application and the usual rules that relate to service apply.
Opposing the application
The defendant has 14 days to return the reply form to the court.
The court will tell the claimant when the defendant receives the application (called ‘service’). The 14 days begin on the day after this date. The date of service will be shown on the Notice of Issue which the court sends to the claimant.
If the defendant wishes to oppose the application, he will fill in the form of reply and send it to the court. The claimant will also be sent a copy.
When the defendant’s reply is received, the judge will then examine the file and decide what to do next.
No reply from defendant
If the tenant does not reply or you do not receive a copy of the tenant’s reply, the claimant should then ask the court to make a possession order. The claimant simply detaches the lower section of the Notice of Issue of application (N206A) received previously, and returns it to the court.
This can only be done after the 14 days the defendant has to complete the form have passed.
Judgement
The judge can: • make an order for possession immediately and order the defendant to pay costs (which will include your court fee). • If the judge makes an order, you and the defendant will be sent a copy. The order will tell the defendant when to leave the property, what costs must be paid, when and to whom. If an order for possession is made, the defendant will normally be told to leave the property within 14 days. • decide that more information is required. In such situations, the judge would make an appointment to see both parties in person before reaching a final decision. If the judge wishes to see the parties, the court will send a notice giving the time, date and place of the hearing.
Setting aside
If an order for possession is made, then either party can subsequently ask the court to set aside or vary that order by completing form N244 (Notice of application) and returning it to the court. In this case, it is likely that the judge will again make an appointment to see the parties in person.
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Postponement and Suspension
Where an order for possession has been made relying on one of the mandatory grounds contained in Part 1 of Schedule 2 to the Housing Act 1988, the court has no discretion to postpone or suspend execution of the possession order for more than 14 days (six weeks in cases of exceptional hardship).
When the landlord is relying upon any of the discretionary grounds for possession (i.e. Grounds 9 to 16 of Sched 2) the court may, on the making of an order for possession or at any time before execution of such an order, stay or suspend the execution of the order or postpone the date for possession for such period as the court thinks just. If any suspension or postponement is ordered, the court must (unless it considers that to do so would cause exceptional hardship or be unreasonable) impose conditions with regard to payment in respect of occupation after the termination of the tenancy (mesne profits) and impose other conditions as it considers fit. If these other conditions are complied with, the court may, if it thinks fit, discharge or rescind the order for possession.
Warrant or Writ of Possession
If the defendant tenant does not leave the property as the court has ordered, the tenancy will continue and the tenant is entitled to remain in occupation of the property until s/he voluntarily vacates, or is evicted by a court bailiff. Whilst the tenant remains in situ, the tenancy continues pending eviction. Care must be taken as the tenant’s rights remain fully protected under the Protection from Eviction Act 1977. A landlord should not attempt to evict the tenant himself, remove any of the tenant’s belongings, or disconnect services to hasten the departure process.
In many cases, the tenant will leave voluntarily as s/he will be liable for paying all necessary court and legal costs associated with the possession order and (if required) the eviction process. Pre-2008, a tenant was expected to leave the property upon the expiry of the possession order. However, if the tenant now fails to leave as directed by the possession order, the landlord will be required to obtain a warrant or writ of possession. This is a request for the Court bailiff to attend in order to evict the tenant. A further fee is payable for this service, and the Court Bailiff will set a date for the eviction process to take place, and serve any necessary further notice on the tenant.
A warrant is used where the order for possession is enforceable in the County Court and form N325 must be completed. The court will allocate a warrant number, draw up a warrant and pass it to the bailiff and send notice of the eviction date. The landlord will be required to secure the property against re-entry on the eviction date.
A writ is applicable where proceedings have been transferred to the High Court for enforcement. Under Section 42 of the County Court Act 1984 a landlord may ask a judge for permission to transfer a possession order to the High Court using a High Court Enforcement Officer (HCEO) either after the possession order has been issued or at the same time as the application for a possession order. The decision is at the discretion of the Judge and permission is not always granted.
The notice requirements for the issue of a writ and a warrant are different. No notice is required to be given to the tenant where an application for a warrant for possession is made unless the court orders otherwise. Notice is required to be given to the tenant where an application for a writ for possession is made and it must be shown that every person in actual possession has received sufficient notice ‘of the proceedings as appears to the court sufficient to enable the occupant to apply to the court for any relief to which the occupant may be entitled.’
The Civil Procedure Rules require permission of the court for the issue of a warrant for possession except where a possession order is suspended on terms where the breach of a suspended possession order is failure to pay rent and/or arrears instalments. Permission is also required for a writ for possession except in the case of a possession claim against trespassers with issue of the writ within three months of the order or certain mortgage possession claims.
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Termination of Common Law Tenancies
Fixed term tenancies
At common law, a fixed-term tenancy terminates automatically when the term comes to an end. Unlike the situation for assured (and AST) tenancies, there is no need for either the landlord or the tenant to do anything in order to end the tenancy (this is the effluxion of time principle that was described earlier). No notice to quit will be required.
If the tenant does not vacate the property at the end of the tenancy, the landlord may commence possession proceedings. However, it is considered good practice to remind tenants of their termination date in writing a month or two before the end date.
If the tenant remains in occupation after the fixed term with the consent of the landlord, then the tenancy becomes a ‘tenancy at will’. The landlord must demand possession from a tenant at will before he commences proceedings for possession (as a ‘letter before action’).
If the tenant remains in occupation without the landlord’s consent, the tenant becomes a ‘tenant at sufferance’ and there is no requirement to serve notice to terminate such a tenancy. The landlord may commence immediate proceedings for possession.
Where the fixed term tenancy contains a break clause the law, at the time of writing, is unclear as to whether the notice should be in the form of a notice to quit. Industry professionals offer differing opinions and following research The Letting Centre are not aware of any definitive case law. To avoid all doubt it is therefore advisable to issue a notice to quit which meets the requirements of the Notice to Quit etc. (Prescribed Information) Regulations 1988 (see ‘notice to quit’ below).
Periodic tenancies
Unlike the fixed-term tenancy, a periodic tenancy will not come to an end by itself by theeffluxion of time. The tenancy will continue to roll-on from period to period until brought to an end. To terminate a periodic tenancy, it is necessary for either the landlord or the tenant to serve a notice to quit or for both to voluntarily agree to surrender the tenancy.
Notice to Quit
A Notice to Quit is a formal and technical document, used to terminate ordinary contractual tenancies and for situations where there are no statutory provisions (e.g. termination of an assured tenancy by the tenant). There are various common law rules to the service of a Notice to Quit and some of these are highlighted in the paragraphs below. The common law rules have subsequently been amended by statute and all notices to quit residential tenancies, other than excluded tenancies which began after Jan 15, 1989, must now be in writing, must be of a minimum length of four weeks and must expire on either the last day or first day of a period of the tenancy.
Expiry and length of notice
A Notice to Quit must expire on either the last day or the first day of a period of the tenancy. The notice must be of a minimum length of four weeks, or equal to the length of the period of tenancy whichever is longer. So that a four week notice to quit a monthly tenancy would be invalid as a month is slightly longer than four weeks. However, only six months’ notice is required to terminate a yearly periodic tenancy. The length of the notice may include the day of service or the day of expiry.
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A periodic tenant should give the landlord notice to quit which is as long as the period of the tenancy. Thus, for a monthly tenancy, one month’s notice will be required. The notice must bring the tenancy to an end at the end of a complete period of the tenancy.
Prescribed information
In addition, a notice to quit from a landlord to a tenant must contain certain specified written information to be valid. For this reason, it is advisable to use a standard form which includes the prescribed information. The prescribed information is set out below:
NOTICES TO QUIT - PRESCRIBED INFORMATION
1. If the tenant or licensee does not leave the dwelling, the landlord or licensor must get an order for possession from the court before the tenant or licensee can lawfully be evicted. The landlord or licensor cannot apply for such an order before the notice to quit or notice to determine has run out. 2. A tenant or licensee who does not know if he has any right to remain in possession after a notice to quit or a notice to determine runs out can obtain advice from a solicitor. Help with all or part of the cost of legal advice and assistance may be available under the Legal Aid Scheme. He should also be able to obtain information from a Citizens’ Advice Bureau, a Housing Aid Centre or a rent officer.
Notices to Quit (Prescribed Information) Regulations 1988 (SI 1988/2201)
Withdrawal of notice to quit
Withdrawal will only be effective if both parties consent to it and it will result in a new tenancy commencing from the expiry of the notice; the old tenancy does not continue. If the withdrawal is ineffective, the Notice to Quit will terminate the tenancy in due course.
Notice given by agents
Firstly, the law provides that a person who has been given a general authority to deal with a property (e.g. a managing agent) on behalf of a landlord, may give a tenant a notice to quit in his own name without having to show specific authority to determine the tenancy. The notice is even valid if it is given by the agent as if he were the landlord and fails to disclose his own agency.
Secondly, all other persons (rent collectors, solicitors, landlord’s spouse) may only validly give a notice to quit on behalf of the landlord if they have the landlord’s actual authority to do so at the time the notice is given. The fact of the agency should be expressed on the notice which should be expressly given on behalf of the landlord, who should be named or otherwise identified.
Position of licensees and sub-tenants
Provided that the tenancy agreement forbids the tenant to sublet, then any extra persons lodging in the property without the permission of the landlord are trespassers. There is no requirement to give notice to a trespasser but court proceedings may still have to be taken to evict.
A person who is a trespasser but who is subsequently given permission, not amounting to a tenancy, to remain on the premises, becomes a licensee. Once a licensee, the landlord is required to serve a notice to quit.
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If the landlord accepts rent from a person living at the property who holds no tenancy, then it is possible that a tenancy will be implied by the landlord’s actions. This used to be a particularly hazardous trap for the landlord since it created an assured tenancy by default, and the associated security of tenure. Since February 28 1997, such tenancies only become ASTs.
Payment of rent after Notice to Quit (mesne profits)
Likewise, care should be taken when accepting rent after the expiry of a tenant’s notice to quit. In order to ensure that no intention to create a new tenancy is found, a landlord requiring rent after service of the notice to quit should demand payment of mesne profits (equal to the rental sum) without prejudice to the effect of the notice. In the circumstances, a court will probably hold that there has been no tenancy created on the basis that there was no intention to create legal relations.
Forfeiture
Forfeiture can occur when the tenancy comes to an end as a result of a breach of the agreement. Forfeiture will normally operate when one of the terms of the tenancy has been broken and the tenancy includes a forfeiture clause which allows the landlord to terminate the tenancy for this reason.
Forfeiture operates more directly with common law tenancies. The act ot breach will in itself bring the tenancy to an end (provided that the breach can be proved) and no new tenancy will arise (unlike Housing Act 1988 tenancies, where a statutory tenancy comes into effect in such circumstances). Where forfeiture is not caused by rent arrears, the landlord will be required to serve a notice under section 146 of the Law of Property Act 1925. After serving the required notice (see below) the landlord can start possession proceedings.
Forfeiture and the Law of Property Act 1925, s.146
All breaches of covenant other than non-payment of rent are governed by s. 146 of the LPA 1925 and the landlord must comply with these procedural rules. Section 146 demands that before a landlord can commence possession proceedings, he must serve on the tenant a s.146 notice. Forfeiture arising through non-payment of rent does not require that a section 146 notice is issued before court proceedings.
Possession actions
Common law tenancies are not covered by many of the detailed rules required by statutory tenancies but the correct court proceedures to obtain possession need to be followed where a tenant declines to vacate the property. An ordinary possession action in the local county court will need to be started and there will be a hearing before a judge. The forms required for this action are the same as those used for statutory tenancies, namely form N5, claim form for possession of property and N119, particulars of claim (rented residential premises) Copies of these forms can be obtained from your local county court or from the Court service we site at www.gov.uk
The landlord should attend the hearing or be represented by a solicitor (see ‘rights of audience’ described earlier in this chapter). It will be necessary to establish that the tenancy has been brought to an end. this will either be at the end of a fixed term or with a periodic tenancy that the required notice has been given. Unlike statutory tenancies it is not necessary to establish a ground for possession. Neither does he have to show that it is reasonable to grant possession. The Judge does not have any discretion in this matter.
A landlord will need to give evidence of and produce a copy of the tenancy agreement and, if necessary a copy of any notice to quit. Proof of service will have to be provided in any situation other than where service has been made by the court itself.
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The tenant will be entitled to attend and may make representations to the court. This might occur, for example, where the tenant believed that a new fixed term had been granted to him by the landlord or where he believes that he has an assured shorthold tenancy rather than a common law tenancy.
Where the judge believes that the landlord is entitled to possession he will give an order that the tenant give up possession within a particular time, usually 28 days. If he is not satisfied he may adjourn the hearing to another time for the parties to consider the issues raised at the hearing.
Enforcement of a possession order against a tenant that is unwilling to comply with the court order will be by way of the court bailiff and a landlord will need to apply for a warrant or writ for possession in the usual way.
Squatters and the Rules for Obtaining Possession
‘Squatter’ is not a legal term, the correct term being ‘trespasser’ and this is the term used in the present rules. The rules were introduced in 1995 and amended in 2001. They attempt to protect ordinary homeowners whose property was empty and broken into by squatters.
The court procedures and the introduction of the Interim Possession Order (IPO) allowed for a fast track eviction process in specific circumstances.
Prior to 1st September 2012 squatting itself was not a criminal offence and, in order to become a criminal offence, squatting had to take place alongside other criminal acts such as criminal damage or abusive behaviour. Section 144 of the Legal Aid Sentencing and Punishment of Offenders Act 2012 now makes squatting in residential property a criminal offence. The intention of Section 144 is that residential homeowners will not need to use the civil court system to regain possession of their property as they can now notify the police. However, much will depend on the willingness of the police to intervene and, where the police are not willing to make arrests, landlords will need to follow the civil law rules which are still in force.
For further information on the procedure for evicting squatters, you are referred to Letting Factsheet No.14 (see section 3 to this handbook).
Further Information
For further information, see: • Possession and Rent Arrears Procedures, published by the Letting Centre. • Residential Possession Proceedings, Gary Webber & Daniel Dovar, Sweet and Maxwell. • Civil Procedure Rules, as amended. • s144 Legal Aid, Sentencing and Punishment of Offenders Act 2012
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13. Illegal Eviction, Harassment and Abandonment
Background
Successive governments have sought to address the problem of landlords harassing and unlawfully evicting tenants. Although it has long been law that residential tenants could not be evicted except by an order of the court, landlords have resorted to a variety of devices to persuade an established tenant household to depart. Sometimes the methods have been obviously unlawful such as the removal of doors and even roofs. Other methods have been less obvious in their effect such as the attempts to grant tenants licences as opposed to leases (thus removing their statutory protection) and even cutting off supplies of gas and electricity to the property, or the introduction of noisy neighbours into an adjacent property.
Both rent control and relaxation of rent control gave landlords an incentive to speed up the process of vacant possession - either so that they could relet under decontrolled rent levels or sell off the property. At its peak in the 1960s, landlords such as the notorious Peter Rachman were using physical intimidation and other unsavoury methods to persuade tenants to give up their homes. Such was the sentiment against these rogue landlords that emergency protective measures were introduced through Parliament as a result, and the term ‘Rachmanism’ joined the English language. New measures gave better protection for tenants by introducing criminal sanctions against unlawful eviction and harassment and a statutory method for calculating the quantum of damages that may be awarded to a tenant for unlawful eviction. The detailed provisions of the legislation will be explained in more detail later in this chapter.
Unlawful Eviction
In the previous chapter, we examined how the law requires a landlord to obtain a court order before he can remove his tenant. If a landlord attempts to remove a tenant without first giving the required notice and obtaining a court order, then he may at common law be liable to the tenant in damages. Common law has been strengthened by statute so that it is a criminal offence under the Protection from Eviction Act 1977 to unlawfully remove or harass a tenant without obtaining a court order, although under the English law, there are certain exceptions such as a person who entered the house as a trespasser, or a person who shares accommodation with the landlord.
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Harassment
Harassment in the context of housing law is deemed to occur where somebody is trying to drive the occupier out of their home, or relinquish any of his rights in connection with it.
Harassment is a very broad term, used loosely to define a wide range of activities. It can take many forms although it may not always be apparent to outsiders that particular sorts of activity are intended to drive the tenant from the property or stop him doing something. For example, these could include: • Withdrawal of essential services (e.g. electricity supply) • Intimidating or threatening behaviour towards the tenant On the other hand, there may be cases where a landlord has good reasons for doing the things he is doing (e.g. a landlord dealing with persistent rent arrears). In the following sections, we will consider which actions are permitted and which are not.
Abandonment
Unfortunately, real life does not always respect and conform to the stricter boundaries of the law. The most difficult aspect of applying the law of illegal eviction takes place when a tenant simply disappears from a rented property - a situation known as Abandonment.
The landlord does not always know whether the tenant intends to return, and especially where there is rent outstanding, does not know whether the tenant has done a ‘moonlight flit’ or if he or she is on an extended holiday or perhaps working away for a short time in order to earn sufficient income to pay the rent. Consider the example below:
Case Example
In R v London Borough of Croydon, tenant moved out, taking her belongings at end of Aug 1983. The LA was informed by neighbours in Sept 83 that the occupants had moved out. LA inspected the property and found this to be correct. The locks were changed and it was assumed that the premises were abandoned. The premises were re-let in Oct 83. Applicant subsequently claimed that she never intended to give up her tenancy and had moved out temporarily.
Court held that the requirements of a surrender of the tenancy by operation of law by the tenant were satisfied in this case. The tenant gave possession to the LL who takes possession and changed the locks. There could be no doubt that the LL took possession once locks were changed and property relet. The evidence that the tenant had surrendered was overwhelming despite assertion by tenant that she had no intention of leaving permanently.
The landlord who wrongly interprets a tenant’s actions as surrender may find himself accused of committing the offence of unlawful eviction.
In the final section of this chapter, we shall examine how the law of illegal eviction applies to the abandonment situation, and what steps the landlord should take before he can recover possession of his property in such cases.
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Unlawful Eviction
Originally introduced as the Protection from Eviction Act 1964 as a protection against the rogue landlords described earlier, the statutory measures to protect against unlawful eviction have been considerably amended firstly by the Protection from Eviction Act 1977, and further by the Housing Act 1988.
In enacting the Housing Act 1988, Parliament was at pains to ensure, as far as possible, that deregulation of the private rental sector would not be accompanied by a generation of harassed and evicted tenants. The abolition of rent control to assured shorthold tenancies required stringent control for landlords attempting to repossess properties let to tenants protected by the Rent Acts. Chapter IV of the Act (sections 27-33), provided extra protection for tenants by enacting statutory damages for illegal eviction, adding
Unusually, the legislation had retrospective effect as from the first day on the Report Stage of the Bill in the Commons, i.e., 9 June, 1988.
Criminal Offence
The statutory provisions of the Protection from Eviction Act 1977 creates three main offences; one for unlawful eviction and two relating to harassment. The offence of unlawful eviction may be committed by any person who deprives, or attempts to deprive, a ‘residential occupier’ of any premises of his occupation whether such occupation was by contract (i.e. agreement) or statutory. Deprivation of part only of the premises (for example, by locking a lavatory door) is sufficient.
It is considered that an offence is still committed even if the eviction or action depriving the tenant of his occupation is not permanent. It simply must have the character of an eviction.
Exclusions
Certain defined categories of occupation are excluded from the requirement on the landlord to obtain a court order in order to evict the occupier. Referred to as ‘excluded tenancies’ in the legislation, these essentially are: • occupiers who share accommodation with a resident landlord or a member of the landlord’s family provided that it is the landlord’s only or principal home. (n.b. ‘accommodation’ in this context does not include storage areas, staircases, passages or other means of access). • where occupation has only been granted as a temporary expedient. This might include rights of occupation granted to a trespasser, or licences or tenancies granted to people occupying a property for the purposes of a holiday, or to people living in hostels owned by local authorities. • where occupation is not granted for money or money’s worth. Although it is not necessary to get a court order to evict someone in the excluded categories, he must still be given reasonable notice that the landlord wishes him to leave.
Any premises
Unlawful eviction can occur in relation to ‘any premises’ which clearly includes all types of residential premises. A single room with shared use of a kitchen and bathroom is ‘premises’ for these purposes.
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Harassment
Harassment in the context of housing law is deemed to occur where somebody is trying to drive the occupier out of their home, or relinquish any of his rights in connection with it.
Harassment is a very broad term, used loosely to define a wide range of activities. It can take many forms although it may not always be apparent to outsiders that particular sorts of activity are intended to drive the tenant from the property or stop him doing something. On the other hand, there may be cases where a landlord has good reasons for doing the things he is doing (e.g. a landlord will need to show a certain degree of firmness and tenacity in dealing with persistent rent arrears). Therefore, someone accused of harassment may have a defence if they have good reason for acting in a particular way, or for thinking that the tenant had left the property - the defences are explained in more detail below - see section entitled ‘Defences’.
Section 1(3) of the Protection from Eviction Act 1977 creates the statutory offence of unlawful harassment. The offence of harassment is defined in the Act as where:
‘any person intends to cause the residential occupier to give up the occupation of the premises, or any part, or intends to cause the occupier to refrain from exercising any right, or pursuing any remedy, in respect of the occupied premises, or any part of them’
then that person will be guilty of any offence if:
‘he has done any acts likely to interfere with the peace or comfort of the residential occupier, or members of his household, or persistently withdraws or withholds services reasonably required for occupation.’
By section 3A, the landlord or agent shall be guilty of an offence in either case if he knows, or has reasonable cause to believe, that the conduct is likely to cause the residential occupier to give up the occupation of the whole or part of the premises, or to cause the occupier to refrain from exercising any right, or pursuing any remedy, in respect of the whole or part of the premises. The same penalties apply as for a section 1(3) offence.
Intention to cause tenant to leave
The accused must have intended to cause the tenant to give up occupation permanently - Schon v Camden London Borough Council (1986) - or to refrain from exercising any right, or pursuing any remedy. It is a defence for the accused to prove, on a balance of probabilities, that he had reasonable cause to believe that the tenant had ceased to reside, or that those he had harassed were not legal occupiers e.g. squatters - R v Phekoo (1981).
Examples of harassing conduct
‘Interfering with the peace and comfort of a residential occupier’ is a broad term that encompasses a wide range of activities that may constitute harassment. It might include verbal threats and other forms of intimidation. Equally, it might include milder forms of anti-social behaviour such as excessive noise, removing fittings, knocking holes in walls and ceilings and leaving rubble about (R v Bokhari, 1974) which, mounting over time, constituted harassment.
Even activities such as rent demands if conducted unfairly or maliciously can result in harassing conduct. In one recent case (Molyneux-Child v Coe), a tenant of a joint tenancy was in arrears to the sum of £400. The landlord faxed the tenant letters at her work demanding that she leave the property within four days and alleging that she owed him £4,807 (the balance of the rent up to the end of the tenancy) even though he was aware that he was not entitled to immediate possession and that he was not owed the amount of money he claimed. The court found that the letters had been sent with the intention of embarrassing the tenant who was awarded damages for the humiliation suffered, and for the breach of her rights to quiet enjoyment.
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Criminal Penalties
On conviction, a court may impose a fine not exceeding level 5 on the standard scale (currently £5,000) and/or six months imprisonment for summary jurisdiction and, on indictment, an unlimited fine and/or two years’ imprisonment.
Civil liability
While the remedies of breach of contract, or injunction and/ or damages in tort, for unlawful eviction or harassment still remain, sections 27 and 28 of the Housing Act provide statutory damages which are often substantial. This remedy is available instead or, or in addition to, criminal liability or penalties described above. The double action remedy available to the tenant should deter all but the foolhardy landlord and/or letting agent. Damages under Section 28 are punitive and intended to be so as the following examples will indicate.
Measure of damages under ss.27 & 28 of the Housing Act 1988
Potentially, a claim for damages under the Housing Act 1988 provisions can be the most significant element of any unlawful eviction claim, although this remedy is only available if eviction has taken place.
The measure of damages is calculated as the difference in value between the landlord’s interest determined on the basis of the tenant continuing to remain in occupation (i.e. as a sitting tenant) and the value of the landlord’s interest without the tenant in occupation (i.e. the market value of the property sold with vacant possession). The measure of damages is therefore calculated so as to balance any profit that the landlord is likely to gain from evicting the tenant.
N.B. The courts have held that the presence of an assured shorthold tenant or a tenant who has only a few days of the tenancy remaining will have no effect on the value of the property.
Example damages awarded
Mr Kaur v Gill (1995), £500 was awarded for breach of covenant for quiet enjoyment at common law and £15,000 for unlawful eviction under sections 27 and 28 of the Housing Act.
In Murray v Aslam (1994), the landlord had changed the locks and put the tenants possessions in the street. She was allowed back into the premises after a few hours. Plaintiff was awarded special damages of £5,703 and £34,560 under sections 27 and 28. On appeal the Court held that although it would not interfere with the discretion of the judge, there was doubt that the claim fell within section 27 and set aside the award of £34,560. The award of special damages stood and the tenant was awarded cost of the appeal.
In Rinselka v Vi and Rashid (1994), the landlord changed the lock on the tenant’s house as payment of housing benefit was in arrears. Some items of personal property belonging to the tenant were never recovered, and other items only after an injunction had been served. Damages of £11,000 were awarded under Section 28 representing the difference between vacant possession and tenanted value; special damages of £900 for the missing personal items; £450 for the temporary loss of use and £500 for distress. Total £12,850 plus interest of £150 and costs.
There are dozens of examples where the courts have awarded punitive damages. The moral is never try to obtain possession, other than by court order, unless there has been, beyond doubt, unequivocal surrender by the tenant of the premises.
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Determining Harassment
During the course of a tenancy, things may be done which are distressing to the tenant and undermine his sense of security; these activities may or may not amount to harassment.
Alternatively, it may be that certain things, such as essential repairs, are not done either wilfully, to force the tenant to leave, or from simple neglect. The following examples help to clarify the extent that these actions could be regarded as harassment.
Repairs
Example 1: The landlord has allowed the property to fall into severe disrepair and it seems that he wants to encourage the tenants to leave by a wilful policy of neglect.
For most urban tenancies, the landlord is required to keep the dwelling in a tenantable and habitable condition. This includes, but is not confined to, an obligation on the landlord’s part to maintain the structure and the exterior so as to be proof against ordinary attacks of the elements (see chapter 11 on Disrepair and Fitness). The landlord that fails to carry out the repairs and maintenance required of him after he has been notified of the relevant defects by the tenant will be in breach of his statutory obligations. Where such failure can be deemed to interfere with the peace and comfort of the occupier, and who, as a result, is forced to give up his occupation of the premises as a residence, then it is likely that the landlord’s actions would constitute harassment.
Example 2: The landlord started to do repairs and left them incomplete. The place is unfit to live in.
A landlord normally has the right to gain access to his property and to carry out essential repairs. If the work is started and left unfinished, the disruption and possibly the disconnection of services involved, may cause considerable inconvenience to the tenant. However, such failure to complete may not be the landlord’s responsibility, and it may be due to circumstances outside his control - in which case, it is unlikely that the disruption and distress caused by the tenant would constitute harassment.
Demand for excessive repairs
Example 3: The landlord has asked the tenant to carry out thousands of pounds of work.
Where the tenancy agreement makes the tenant responsible for repairs of the dwelling and a landlord presents his tenant with a list of work for repairs which are either unreasonable, unnecessary, or are not his responsibility (perhaps because they include repairs that the landlord is obliged by law to carry out), then such action could constitute harassment if, as a result, the occupier gives up his occupation.
Anti-social behaviour
Example 4: A person who is a friend of the landlord has moved into the adjacent building and is causing trouble towards the other tenants.
Such behaviour does, on occasion, make life unpleasant and intolerable for other tenants. If either the landlord or an agent or friend of the landlord uses threatening or anti-social behaviour directly against the tenant, and if the behaviour is so severe that it succeeds in driving the tenants out of their homes, a criminal offence may be being committed.
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Letting Agents
One source of hope for letting agents subject to allegations of harassment or illegal eviction is Sampson v Wilson (1995) The Times, 19 April, CA. In the absence of the landlord overseas, his agent managed the property. A sub-agent harassed and threatened the tenants, issuing a notice to quit and the tenants left. They subsequently sued for damages under Sections 27 and 28 of the Housing Act. It was held by the Court of Appeal that the sections impose liability on the landlord only. No claim for damages can be brought against the landlord’s agent. Section 27(B) makes it clear that ‘the landlord in default shall be liable for damages’ assessed in terms of section 28 calculated by the landlords value between occupation by the tenant and vacant possession.
This crumb of comfort to letting agents may be short lived - it only removes his liability in a civil damages claim. An agent can still be liable for the criminal offences of unlawful eviction and harassment described earlier. Furthermore, the landlord mulcted in punitive damages for the actions of his agent, will no doubt exact retribution from his agent for professional negligence.
Defences
Section 27 (8) of the Housing Act 1988 provides a defence to the landlord, virtually identical to section (3B) of the Protection from Eviction Act 1977. The landlord must believe and have reasonable cause to believe that the occupier had ceased to reside in the premises (a critical issue when examining situations where a property appears to be abandoned as we shall examine later), or that he had reasonable grounds for withdrawing or withholding services.
Also, a mistake of fact by the defendant that a person was not a residential occupier is a defence to a charge of harassment. The burden of proof follows the general rule where this is upon the defence, viz., on the balance of probabilities.
If the tenant succeeds in obtaining statutory damages, he cannot obtain common law damages for the same loss - e.g. trespass or breach of contract. However, he may be able to bring an action for assault or other personal injury.
The second defence open to the landlord lies in section 27(6). He may offer to re-instate the tenant in the premises from which he has been evicted, so that he again becomes the residential occupier, before the hearing is finally concluded. In that event, the landlord is relieved from any liability. If the offer is made before the proceedings are commenced and the tenant refuses unreasonably, then damages may be reduced. Not surprisingly, the effect of this legislation has been for the well-informed tenant not to accept re-instatement in the majority of cases, but to issue summons as soon as possible against the landlord. Any offer of reinstatement by the landlord is refused after issue of summons and notwithstanding the refusal is unreasonable, the court may not reduce the award of damages. However, the court does have a discretion to reduce the award if the conduct of the tenant, or any person living with him in the premises, was such as to ‘mitigate’ the damages payable - see section 27(7)(a).
It must be remembered that the statutory provision is final. The purpose, as we have seen from the cases cited above, is to punish the landlord and not compensate the tenant for actual loss. Damages for actual loss - e.g. possessions - will form a separate head of the award.
Summary
At the risk of repetition, it is stressed that landlords and their agents should never resort to self help. Only when it is clear, beyond a shadow of doubt, that the tenant, or occupier, has surrendered the premises should possession be obtained without leave of the court.
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Surrender and Abandonment
Sometimes a tenant will simply disappear during or at the end of a tenancy, often leaving rent arrears. This chapter aims to assist the landlord or practitioner to understand the legal rules concerning surrender and abandonment. These need to be clearly understood so that the landlord can safely take back possession of the property without risk of the tenant returning with a claim of unlawful eviction or harassment.
Case Example
A landlord has been chasing his tenant for rent arrears for some time. The tenant had frequently been behind with the rent and was now three months in arrears. On two previous occasions, the landlord had called at the property and the tenant had been unable to pay.
On the next occasion, the flat appeared to be deserted. The landlord, found the back door to the property open and the lock damaged. Inside, there was no sign of the tenant and with the exception of a few discarded old clothes, his belongings had been removed. The flat was very messy and some old food remained in the cupboards. The tenant had left no forwarding address and the landlord suspected that the tenant has done a ‘moonlight flit’.
Many landlords, facing the situation described in the case example above, would treat the rent arrears as irrecoverable, change the locks and try and get the property cleaned and re-let as soon as possible. Yet despite being already seriously out-of-pocket, the landlord who wrongly interprets a tenant’s actions as surrender may find himself accused of committing the offence of unlawful eviction.
A Birmingham landlord facing a similar situation to the example above did just this in 1992. His tenant however returned after being excluded from the property for three days, obtained a mandatory injunction and was able to return to the dwelling. The landlord was also fined £1600 for evicting his tenant illegally. (O’Reilly v Webb, 1992).
In the following section, we examine how the law of unlawful eviction and related statutes apply to this situation, and what steps a landlord is able to take to recover possession.
Surrender and the Housing Act 1988
We saw in the previous chapter that a tenancy can come to an end by several means including ‘surrender or other action on the part of the tenant’. If it is clear that if a tenant has ‘surrendered or given up the tenancy, the landlord is entitled to possession (section 5(3), Housing Act 1988). Equally, if a tenant holding under a periodic tenancy has served a valid notice to quit on the landlord, this will act to bring the tenancy to an end at the expiry of the notice.
Where the act of surrender is less obvious or equivocal, such as in the above example, then care needs to be taken before the landlord takes back or re-lets the property. As we can see from the above example, where a landlord takes possession and it turns out that the tenant is still occupying the property, the landlord runs the risk of proceedings for unlawful eviction.
Surrender can take place expressly (i.e. by way of a written document or ‘declaration of surrender’ signed by the tenant), or by operation of the law (i.e. implied by the conduct of the parties to a tenancy).
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Surrender by operation of the law
The essence of a surrender by operation of law is the consensual giving up of possession of the premises to the landlord by the tenant. It is normally important that the landlord does some act in accepting the surrender. Thus where the tenant returns the keys to the landlord with the intention of giving up possession of the premises and the landlord accepts them with the intention of accepting possession, there is surrender by operation of law. Equally, surrender can take place (of the old tenancy) when the landlord and tenant enter into a new agreement during the currency of an existing agreement.
For a surrender by operation of law to be implied from the conduct of the parties to a tenancy, their conduct has to be unequivocal, such as returning the keys to the landlord, or removing from the premises signs of occupation, including furniture, belongings and any family or friends - or animals - who were living with him. It is important that the actions of both parties show that they consider the tenancy to be at an end.
Abandonment
Finally, surrender may also operate when the tenant has abandoned the premises. The landlord may accept the surrender by changing the locks and re-letting the premises, yet great care must be taken; the act of surrender must be unequivocal. It would not be safe for the landlord to always assume that the tenant has abandoned the tenancy; it is possible that the tenant could be in hospital, in prison for a short period, or on an extended holiday.
The outcome hinges around the issue of unequivocal conduct; for surrender to take place or be implied by the actions of the parties, the conduct must be unequivocal in showing that the tenant has given up occupation. ‘Unequivocal conduct’ means conduct on the part of both the landlord and the tenant which was inconsistent with the continuance of a tenancy (Chamberlain v Scalley, 1992). Much will clearly depend on the individual facts in a particular situation. Faced with a tenant who appears to have abandoned a property, the landlord will need to make sufficient enquiries so that he can prove that he believed and had reasonable cause to believe that the tenant had ceased to reside in the property.
There are no finite rules; evidence in the form of tenant’s belongings remaining (or absence of), the tenant’s conversations with neighbours, or other regular callers to the property must all contribute to give the landlord reasonable cause to believe that the tenant has ceased to reside there. These are discussed in more detail below.
Belief must be both genuine and reasonable before the landlord takes back the property. Unless the evidence of abandonment is unequivocal, any landlord doing so takes a risk. Proceedings for unlawful eviction could be brought by the displaced tenant unless the landlord can be certain that the tenant has ceased to reside in the premises.
Where there is reasonable doubt as to whether a tenant has permanently vacated the premises and it is impossible to obtain express surrender, the safest solution is to terminate the tenancy by some other method, such as notice requiring possession (if applicable) and commence possession proceedings.
Liability to pay rent
The tenant’s liability to pay rent will continue until the landlord accepts the surrender (subject to the natural expiry of the tenancy agreement) and this principle may assist the landlord in obtaining express surrender from a departed tenant who may be motivated to return keys and formally surrender the tenancy rather than incur further debt.
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Evidence of Surrender or Abandonment
There are many factors that may point to the fact that a tenancy has been surrendered or that the property has been abandoned. Any evidence collected should be carefully documented in case the action has to be defended. Some of the factors are quite conclusive (e.g. return of keys) whilst others will hold little weight.
Keys
Where the keys are returned by the tenant (and the landlord accepts these back with a view to ending the tenancy) then the tenancy will normally come to an end by surrender.
Personal effects
The presence of the tenant’s belongings or personal effects is probably one of the most important indicators of continuing occupation. An occupier would normally store personal effects (clothes, furniture etc.) at the property. Where a tenant had removed all personal effects at the end of a tenancy, this would generally constitute good evidence that an occupier has ceased to reside.
Rent
The non-payment of rent is not particularly compelling evidence of abandonment. The courts have generally only deemed abandonment to be conclusive on this factor alone when a tenant had disappeared and was in rent arrears for over six months. On the basis of rent arrears alone, normal possession proceedings using the rent arrears grounds would be more effective.
Services
The presence or absence of the various services supplying the property can be very useful pointers as to whether the property is occupied:
Mail - is there unopened mail at the property. Is it being collected?
Telephone - has the telephone service been terminated?
Electricity - has the local supply company been asked to terminate the supply?
The landlord could also rely upon evidence given by milkmen and other delivery services who might have been informed by the previous occupiers that they were leaving the property and that further deliveries were required.
Refuse
Once useful source of evidence of occupation (or lack of occupation) is that modern households typically generate significant amounts of refuse. Checking that dustbins (which for example were emptied say 4 weeks previously) have not been used between several successive visits to a property are a good indicator of whether a property is being occupied.
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Neighbours and other tenants
Neighbours and other tenants (in a property in multiple occupation) are often well aware of the movements of adjacent occupiers and landlord can rely on evidence gathered from such sources. A neighbour may have been on good terms with the departed tenants and have knowledge of their whereabouts (in which case, it may be possible to verify with the tenant directly that he or she has ceased to reside at the property). Such conversations should be carefully noted and documented. If possible, obtain written corroboration from other tenants in the property that the tenant has departed.
Housing benefit
Where rent is paid by Housing Benefit, they will often write to inform the landlord or agent that the tenant is now living at another address. On the face of it, this also seems sufficient evidence for the landlord to take possession (unless there are contrary indications) but this situation has not been tested in the courts. It should be noted that the landlord also runs the risk of a repayment claim if housing benefits have been overpaid (for this reason, it is also advisable to inform the local housing benefit office of any change in circumstances).
Notice of Abandoned Property
Where enquiries lead the landlord to believe that the property has been abandoned and the tenant has ceased to reside in the premises, it is important to make any necessary enquiries and take appropriate precautions to verify this beyond reasonable doubt.
Once completed, it is a sensible precaution to leave a notice at the property alerting any occupants of the landlord’s intention to take back possession of the property. This is not an officially prescribed notice but the action is useful nonetheless since it provides further evidence that the landlord has taken all possible steps to ascertain the whereabouts of the tenant and inform any occupier of his intention to re-enter the property.
A written notice can be put on the tenant’s door headed ‘Notice of Intention to take Over a Flat/ House’. It should be prominently displayed and contain the following information: • a declaration by the landlord stating his belief that the property has been abandoned - include dates • the landlord’s name and address • the name of the tenant(s) and the address of the property • if affixed in the presence of a witness, their name should be added i.e. This notice affixed in the presence of ...... on (date) • a paragraph asking anyone who knows the whereabouts of the tenant(s) to contact the landlord • a paragraph stating that if the tenant(s) does not contact the landlords within specific period of time, it will be assumed that the tenant has surrendered the tenancy • advising the tenant to seek legal advice i.e. “You are advised to seek legal advice immediately as you are in danger of losing your home. “
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If the fixing of the notice was witnessed, that person can swear a short affidavit to that effect as evidence where such information needs to be presented in court. Alternatively, take photographs of the notice (ideally with a date recording facility) displayed at the premises.
It has also been suggested that the notice should refer to the locks on the property being changed, pointing out that it may be unlawful for anyone to try to break back in, but to contact the landlord or agent if the tenants wish to reclaim occupancy. The fact that the tenants have not contacted the landlord is then further evidence of abandonment.
Abandonment clauses in tenancy agreement
One useful safeguard (defence) against the problems discussed above relating to abandonment is for the landlord to have included a suitable clause in the tenancy agreement related to ‘deemed abandonment’ to the effect that if the tenant shall have left the property unoccupied for say, 28 days, without having given any explanation of his whereabouts, the landlord can re-enter on the assumption that the property has been abandoned.
It should however, be stressed that great care should still be exercised when relying on such clauses - such clauses will not indemnify the landlord totally from risk of conviction if it subsequently transpired that the tenant is still in occupation. A landlord must still have reasonable cause to believe that the tenant has ceased to live in the property.
Abandoned Property - Rights to Enter, Inspect and Secure
It is an implied right that the landlord may enter the premises to view the condition and state of repair of the property provided that the tenant has been given 24 hours notice in writing of the intention to do so. Even where there is doubt, it should be assumed that a tenant may be in occupation, and a notice posted or put through the letterbox unless there is unequivocal evidence that the property is empty.
Where an abandoned property has been left unsecured (i.e. doors left unlocked) or there is evidence of physical damage to the property which renders it vulnerable to trespass or criminal activity, it would be reasonable for the landlord to take steps to secure the property. However, whilst the landlord is unsure as to whether or not the tenant is still in occupation, the landlord should ensure that the tenant is informed in writing about the action taken and the reasons for it and is provided with directions on how to gain access to the property if the tenant does not have alternative means of access. In this case, the landlord becomes an agent of necessity. A suitable notice should be affixed to the door with information as to how the tenant could obtain new keys.
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Abandoned Property - Tenant’s Personal Effects
Tenants often leave personal effects behind in a property, and this can cause problems for a number of reasons. Firstly, as stated earlier, evidence of personal effects left behind at a property is relied upon by the courts as an indicator as to whether a tenant is still in possession of a property (and whether the landlord would have reasonable cause to believe that this was the case) and thus may prevent re-entry by the landlord without a court order.
Secondly, the landlord should not immediately discard such possessions. He has a common law duty to hold them for a reasonable time in case they are reclaimed by the tenant, but he would be entitled to make an appropriate charge for storage. There is no statutory guidance on what constitutes a reasonable time. Common sense would suggest that they should be safely held for at least 1 month to give the tenant sufficient opportunity to reclaim, and that reasonable attempts should be made to contact the tenant both when they are removed from the property and before disposal.
A landlord has statutory rights and powers of sale under the Torts (Interference with Goods) Act 1977 which allow him to dispose of uncollected or abandoned goods. The Act gives a landlord a statutory power of sale in relation to the tenant’s goods. Under s.12 of the Act, the landlord must give the tenant notice in the prescribed form (see Appendix C) to collect the goods within a reasonable time e.g. 1 month. If the tenant does not collect, or otherwise give directions for redelivery, then the landlord is entitled to sell the goods. He must account to the tenant for the sale proceeds but is entitled to deduct reasonable associated costs and expenses. Where an amount is payable in respect of the goods by the tenant to the landlord, and becomes due before giving of the notice to sell, the said period shall be not less than three months.
Notice Requirements
A landlord must observe the following statutory requirements when giving notice to a tenant to collect the goods. The notice shall: • be in writing; • be delivered to the tenant, left at his proper address, or sent by post; • specify the name and address of the landlord and give sufficient particulars of the goods and the address or place where they are held; • state that the goods are ready for delivery to the tenant; and • specify the amount, if any, which is payable by the tenant in respect of the goods, and which became due before giving of the notice. Where the goods are to be sold, the notice must also specify: • the date on or after which the landlord proposes to sell the goods • the notice shall be sent by registered or recorded delivery post Money received from the sale or disposal of abandoned property should, strictly speaking, be forwarded to HM Treasury unless provisions in the tenancy agreement provide otherwise.
The landlord’s powers can be strengthened by adding an appropriate clause to the tenancy agreement allowing the landlord to dispose of the goods (after keeping them for a reasonable time), keeping the proceeds to defray any costs (e.g. storage, selling or disposal costs) or in satisfaction of any rent arrears or other debts arising out of the tenancy.
Such provisions need to be carefully drafted so as not to fall foul of the unfair terms provisions which allow the courts to declare void any such unfair terms. There is unlikely to be objection to a term indicating that belongings left behind may be sold and the landlord’s reasonable costs will be deducted from the proceeds of sale, where written notice has been given to the tenant, or where the tenant cannot be found, reasonable steps have been taken to trace the tenant.
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14. Taxation of Rents and Property
In this chapter, we shall look at the various taxation aspects of residential letting with respect to the activities of landlords and their agents. Rental income and other gains from rental property, as with most other sources of income are subject to taxation. Other taxes affect landlords and managers of residential property and these are also listed below.
The taxation issues are also important to letting agents and other property professionals since in some cases, liability for collection of the tax becomes the responsibility of the agent and it is important to fully understand the collection rules to avoid undue liability.
Many areas of taxation affect landlords and their agents: • Income tax (including Non Resident Landlord provisions) • Council Tax • Value Added Tax • Capital Gains tax • Inheritance tax • Stamp Duty
Scope
British tax law has historically been applicable to the whole of the United Kingdom, and so the information in this chapter is relevant for Scotland, in the same way as it applies to England and Wales. At present, Scotland has no independent tax-raising powers and there is no separate tax law for Scotland. The establishment of the new Scottish Parliament suggests that this situation may change in the future, with the possibility of separate tax law for Scotland.
This chapter intended to make practitioners aware of the general taxation system and how it affects landlords, rather than to give detailed tax advice. Practitioners are advised to take specialist tax advice before taking important decisions in individual situations. A list of useful publications and sources of guidance is given at the end of this chapter.
Important Note
The tax rates and rules presented in this text are liable to change (many tax rates and thresholds change yearly in the Budget). Readers are, therefore, advised to check with the Inland Revenue for the current rates (see ‘Sources of Further Information’ at end of this chapter).
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Income Tax on Rental Income
Background
Like all aspects of lettings and tax, the rules for the taxation of rental income from property lettings change relatively frequently. In this handbook, we shall concentrate on the current tax rules (post 1996) but landlords who are arranging their tax affairs for tax years prior to 1996 may need to take further advice with regard to the earlier rules (which are very similar).
For example, under the old system, rental income from property was taxed under two methods; the ‘Schedule A’ for unfurnished, and ‘Schedule D’ for furnished lettings. Yet under the current system, the two types of property are largely treated alike under the same set of rules (the new Schedule A rules). In the old system, landlords and agents negotiated ad-hoc dispensations and exemptions from the Inland Revenue* for the deduction of tax and for the collection of income under the Taxes Management Act 1970 with the local tax office. In the current system, there is a clearer, better defined, and standardised system across all tax offices
Differences
Most rental income is taxed under Schedule A, and is normally treated for tax purposes as investment income as opposed to income from employment or trade. This means, for example, that many of the capital allowances (e.g. investment in new plant and machinery) which are normally available to businesses to offset against taxable income are not available to private landlords (however, other specified allowances are available instead - see below).
However, rental income is not taxed like all other investment income such as deposit interest, share dividends etc. For tax purposes, rental income is treated as extra income on top of any earned income (from employment, self-employment etc.) and consequently, landlords will be taxed on rental income at their top rate of income tax.
Schedule A vs schedule D
Certain (less common) categories of income from land and property will continue to be taxed under schedule D. For example, if you own a guest house, or receive income from property overseas, then this would probably be treated as trading income from a business and be taxed under schedule D (consult your tax office if you are unsure which applies to your situation).
Both schedule A and schedule D income is taxed on an accruals basis. For the 2008-09 tax year, a landlord will pay tax on schedule A rental income earned during the tax year (6 April 2008 to 5 April 2009) whereas under schedule D, tax is paid on income earned during the firm’s accounting year (which may have a different start and end date to the tax year).
Other important differences are: • schedule D losses can be offset against other (non-rental) income or capital gains, whereas schedule A rental losses can only be offset against other rental income • capital gains tax rollover and retirement relief are available under some circumstances on schedule D income • there are different rules regarding what may be claimed as capital allowances under schedules A and D (schedule D is generally more generous).
* we refer to the UK tax collecting authority here as Inland Revenue, but recent re-organisations have led to ‘re-branding’ as ‘Revenue & Customs’ or ‘HMRC’
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Schedule A: the current system
The general principle is that an individual is liable to tax if his or her total income including any profit from lettings is more than the individual’s total tax allowances for the year.
Under the new regime for individuals etc., all income from property is pooled together. Gone is the need to distinguish between furnished and unfurnished lettings and also the need for landlords to segregate tenant and landlord-repairing leases. Gone also are the rather enigmatic rules for setting off mortgage interest. The Inland Revenue* will apply the same treatment that it applies to all businesses and this may open up the possibility of a landlord claiming certain additional expenses. For instance, a landlord may incur expenses of travelling, etc., to inspect his or her properties and, if it can be justified as wholly and exclusively for the purpose of running the letting business, it should be allowable. However, it should be noted that rental income will still be considered as investment income by the Inland Revenue and the landlord will not be able to treat the income as earnings for personal pension arrangement or offset any losses against general income.
The key features of the current Schedule A income tax system for rents from UK properties (which started on 6 April 1995) are: • The first tax year is 1995-96. It runs from 6 April 1995 to 5 April 1996. • The Finance Act of 1998 introduced a new Schedule A for companies from 1 April, 1998. Income of a company is calculated in the same way as that of an income tax payer, but the rules for giving relief for interest and losses are different. The Schedule A system applies to both furnished and unfurnished lettings, including furnished holiday lettings and Rent a Room.
Separate charges under Case VI of Schedule D on furnished lettings have been abolished (except for certain trust cases). However, ‘wear and tear’ allowance remains available for furnished lettings within Schedule A (discussed further in following sections).
Profits and losses are computed using trading principles. Accounts are drawn up in accordance with correct accountancy principles. Receipts and expenses of the rental business are recognised on the earnings basis.
Losses
Any losses from either furnished or unfurnished letting brought forward at the 6th April 1995 are pooled together and carried forward to set against future letting business income. Likewise specific legislation has been introduced to convert excess mortgage interest available at the 6th April 1995 to a deemed property business loss which can be carried forward. Definition of Rental Business Profits from land or property situated in the United Kingdom are treated as arising from a business. Rented business profits are calculated using the same principles as for trades, notwithstanding you are not actually treated as if you were trading. Thus, capital gains tax reliefs for traders are not available.
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Standard accounting principles
The computation of the landlords rental income and profits is based on commercial accounts drawn up in accordance with correct accounting principles, generally on an ‘earnings’ basis, but for certain ‘small’ cases, where total gross receipts do not exceed £15,000, the ‘cash’ basis may be accepted (explained in greater detail in following section ‘Preparing Accounts’).
Who carries on a Rental Business ?
Any person, or body of persons, carries on a rental business if : • they own, or have an interest in, land or property in the UK; and • they enter into transactions which produce rents or other receipts liable to income tax from that land or property. A person will carry on a rental business even if they engage an agent to handle it for them. The person carries on the business through the agent.
Single taxable entity
In most cases, all various types of income from land and property in the UK are treated as parts of the same single rental business. The number of properties and different types of income does not matter. All rental income and expenditure can be lumped together and thus expenses on one property can be deducted from income of another.
There are special rules for activities carried on in different capacities; jointly owned property and partnerships; trusts and trustees; properties which are not let on commercial terms; agricultural land; Rent-a-Room scheme; furnished holiday lettings and rents from properties outside the UK. Some of these special rules are dealt with later in this chapter.
Who is charged tax ?
The charge falls on the ‘persons receiving or entitled to the income’. In most cases, the person entitled to the income will also receive it, often through the engaged letting agent. In the case of a non-resident landlord, Inland Revenue may collect tax due from the agent, or tenant, if no agent is employed.
Jointly owned property
Where property is owned jointly by two or more persons, tax on the rental income depends on whether the letting is carried on in partnership. Joint letting does not, in itself, make the activity a partnership. Usually, there is no partnership and the income share will be included in the personal tax of each joint owner. Joint owners can agree a different division of profits and losses which will be different from the ownership share. For tax purposes, the share must be the same as that actually agreed unless the joint owners are husband and wife where the profit and losses are treated as arising in equal shares unless :- • both entitlement to the income and property are in unequal shares; and • both spouses ask their respective tax offices for their share of profits and losses to match the share each owns in the property.
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Partnership
Jointly owned properties may be let as part of a partnership business. For example, a trading or professional partnership which lets some of its land or buildings, or a partnership which runs an investment business which does not amount to a trade and which includes, or consists of, the letting of property.
Income within a rental business
The concept of profits from a rental business is broad. All rents and similar receipts are brought in. Business expenses incurred in earning the income, but not normally capital expenditure, are deductible. Some capital expenditure, such as wear and tear and renewals, as well as purchases of some plant and machinery, attract allowances.
Receipts, other than rents, can also form part of the rental business income. For example :-
* rent charges, ground rents and feu duties;
* premiums and other similar lump sum payments received on the grant of leases;
* income from the grant of sporting rights, such as fishing and shooting permits.
Single transactions and other property income
Rents or other receipts arising from a single transaction for the exploitation of rights over UK land are treated as if they arose in Schedule A business. This includes ‘one-off’, or casual lettings, that would not be normally associated with a ‘business’. For a landlord, income derived from property in the UK is unlikely to be trading income (within Case 1, Schedule D), except in a hotel or guest house business. The fact that the landlord spends a lot, or all his time, working on the letting business, does not convert Schedule A letting income into Schedule D trading income.
Special cases
There are two special cases involving furnished lettings which enjoy special tax treatment under Schedule A, and are described in further detail in later sections. These are:
* Accommodation let under the ‘Rent-a-Room’ scheme, and
* Furnished holiday letting.
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Preparing Accounts
Landlords should ideally prepare accounts on a fiscal year basis 6th April to the 5th April and adopt normal commercial accounting principles using accruals of income and expenditure, although there will be some flexibility in a very small number of cases.
Accounting principles
There are broadly two alternative methods which a taxpayer or a business can use when drawing up accounts. These are by reporting using either • an ‘earnings basis’, or • a ‘cash basis’
EARNINGS BASIS: With the ‘earnings’ method, income and expenditure are recognised in accordance with standard accounting principles. This means that the accounts are computed to include all earnings earned in the tax year regardless of whether they are due or when they are received. Thus, using this method, rent would normally be recorded as ‘earned’ if the tenant is in occupation and liable to pay rent, and regardless of whether or not the landlord has actually received the rent from the tenant (i.e. the tenant may have defaulted on rent payments).
CASH BASIS: Using this method, the accounts are drawn up and business profits calculated based on cash received and paid in the tax year. For many landlords, rental business accounts and profits computed using the cash basis may not be materially different from the strict earnings basis profits, especially if rental income is regular and expenses are paid soon after they fall due.
Under the current rules, accounts and profit from a landlord’s letting business should be reported in accordance with normal accountancy principles (i.e. using the ‘earnings basis’). Thus, all incomings earned in the tax year are included, regardless of when they are due, or when they are received. For a trading or professional partnership, incomings of the accounting period ending in the tax year, not the year ended 5 April, are included.
However, in practice, the tax authorities are prepared to accept the use of ‘cash basis’ type accounts where the scale of the landlord’s overall rental income is small (i.e. gross rental income less than £15,000 p.a.), the cash basis method is applied consistently, and the result is reasonable and does not differ substantially from the strict ‘earning basis’.
Expenses incurred before rental business begins
Expenses may be incurred for the purposes of the rental business before the business starts. A deduction may be claimed once the business begins. Relief is only due where the expenditure: • is incurred within seven years before the start of the rental business; • is not otherwise allowable as a deduction for tax purposes; • would have been allowed as a deduction if it had been incurred after the rental business started; • the expenditure must have been incurred ‘wholly and exclusively’ for the rental business and must not be capital expenditure. Such pre-letting expenditure may be be deducted from the the profits of the rental business only in the first taxable year of the letting business.
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Allowances for capital expenditure
In arriving at the profit and loss for the rental business for income tax purposes, care must be taken when making deductions for capital expenses. These are generally not allowable as deductions except for the replacement cost of furnishings in a revised tax code to offset replacement costs through wear & tear. Thus no income tax deduction is normally allowed for the initial cost of buying, installing or improving fixed assets used directly in the residential rental business, or depreciation of a capital asset.
However, landlords may be able to claim special tax allowances to take account of the depreciation of some capital assets (excluding land) used for rental purposes. There are three main allowances: • ‘wear and tear’ allowance • renewals allowance • capital allowances
‘Wear and tear’ allowance
It is currently possible for landlords to claim an annual wear and tear allowance in the case of furnished lettings equating to 10% of the net rent - to cover wear and tear costs. This allowance is designed to cover depreciation of equipment, such as refrigerators, washing machines, furniture etc. supplied with the accommodation.
At the time of writing the Government have announced a proposal that the 10% allowance will be withdrawn in 2016 but tax relief will still be available for the actual cost of replacing any items of furnishings provided for the tenant’s use - such as beds and other moveable furniture, carpets and curtains, cookers, fridges and other domestic appliances. The initial capital cost of purchasing these furnishings is not generally an allowable expense for income tax purposes.
Renewals allowance
Prior to 6th April 2013 landlords could claim a renewals allowance which covered the same kind of free-standing assets as the wear and tear allowance (i.e. furniture, carpets, cookers etc.) and represented the net cost of replacing a particular item (but not the cost of the original purchase). Unlike the ‘wear and tear’ allowance, the renewal allowance was also available for unfurnished property. Renewals allowance is no longer available. Capital allowances Only some types of capital expenditure qualify for the allowance. Briefly, these are :- • purchase of plant and machinery for non-residential property, such as vehicles, tools, ladders, computers, business furniture, furnishings and fittings, lifts, central heating and air conditioning which are used, or let, in the rental business. The allowance is a 25 per cent reducing balance write down. • expenditure on industrial, or agricultural buildings, structures and works, or hotels. The allowance is a four per cent straight line writing-down allowance. • expenditure related to furnished holiday lettings. Furnished holiday lettings are different because some capital allowances can be claimed (see section below).
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Income Tax on Residential Letting: A Worked Example
The Browns’ cottage
Mr and Mrs Brown own a house (35 Limetree Grove) near Cambridge, which they let out furnished under an assured shorthold tenancy for a rent of £375 per month.
At the beginning of the tax year (6 April), they are sent their tax return, and their accountant asks them to complete a schedule of their letting income from the previous tax year. Their letting agent provides them with a blank form (Letting Income Schedule) which allows them to list income and expenditure and reminds them of any costs they may have forgotten, or allowances they may be able to claim. NB. There is no required standard form but the format used in the example below is convenient for the purpose.
Apart from the main expenses of repairs and insurance, their records also reveal a number of miscellaneous expenses incurred over the year. They made two visits to the property between lettings (each visit a 40 mile round trip) which they charged as travel expenses at 25p per mile. During the first trip, they had to thoroughly clean the property spending £10 on cleaning materials, and £80 on the services of a professional carpet cleaning company. On the second visit, they employed a gardener to tidy the garden at a cost of £50. They also spent about £20 on phone calls over the year which related to the letting of 35 Limetree Grove.
Income Tax Example: 35 Limetree Grove, Cambridge
LETTING INCOME SCHEDULE Property: 35 Limetree Grove, Cambridge ______
Rental Income for the Year ended 5th April ...... 20... £ 4500. EXPENDITURE: Water and Other Rates .....210 .....210 ______Rents (net of rates) ...4290 Insurance .....190 Repairs & Maintenance .....310 Motor Expenses ...... 20 Cleaning Materials ...... 10 Sundry Expenses (phone, post etc) ...... 20 Gardener’s Wages ...... 50 Other ..(Carpet Cleaning)...... 80 ...... Management Fees .....500 Accountancy Fees ...... 50 Wear & Tear (allow 10% of rents net of rates) .....429 ...1659 ______
Net Rents 2631 LESS Interest paid on mortgage/loan ...1800 ______TAXABLE INCOME £ ....831
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Allowable deductions
Broadly, in calculating rental business profits, business expenses can be deducted provided :- • they are incurred wholly and exclusively for business purposes; • they are not of a capital nature. The previous schedule and following notes below demonstrate how the taxable income may be calculated in our example letting.
WATER AND OTHER RATES. The landlord may deduct the full amount of water, sewerage and any other rates paid on the property if these are not paid by the tenants. In the case of 35 Limetree Grove, the landlord has opted to pay the water rates charge directly, so this expense can be deducted from the rental income.
In certain circumstances, a landlord may also be liable for council tax, ground rents or feu duties and these could then be deducted provided they are wholly incurred in connection with that portion of the property which is let.
INSURANCE. Expenses connected with the premises or land being let will normally be allowed as a deduction - such expenses may include all insurance (buildings, contents, rent and mortgage protection etc.) policies in connection with the property.
REPAIRS & MAINTENANCE. This may include any expenses that are for repairs and general maintenance of the property. ‘Repair’ means restoration by replacing parts of the whole asset, e.g., replacing roof tiles blown off by a storm. It will not be a ‘repair’ if a significant improvement of the asset beyond its original condition results. Costs for improvements to the property cannot be fully set off against tax as this is capital expenditure. Common repairs which are normally deductible as a ‘revenue expense’ include :- • exterior and interior painting and decorating; • stone cleaning and repointing; • damp and rot treatment; • mending broken windows, doors, furniture and machines such as cookers, lifts etc.; • replacing tiles, roof slates, flashing and gutters, or wooden beams with steel girders; • replacing lead pipes with copper or plastic pipes; and • replacing single glazed softwood windows with single glazed PVC windows (it would be a capital improvement if double glazing was used to replace old single glazed units). PROFESSIONAL FEES. An agent’s or accountant’s fees may be set against the letting income for tax purposes, provided they are incurred wholly and exclusively for the rental business. Generally the fees are capital expenditure if they relate to a capital matter, such as the purchase of property.
However, expenses incurred in connection with the first letting or subletting of a property for more than one year are deemed to be capital expenditure and not allowable, e.g. legal expenses such as drawing up the lease, agent’s and surveyor’s fees and commission. Expenses for a let of a year or less can be deducted.
The normal legal and professional fees incurred on the renewal of a lease are allowable if the lease is less than fifty years. But any proportion of the costs which relate to the payment of a premium on the lease renewal are not deductible. Where the replacement lease is similar to the previous one, a change of tenant will not normally make the associated legal and professional costs disallowable. If the property is put to some substantial use other than letting, such as occupation by the owner between lettings, or a short lease is replaced by a long lease, the legal and professional costs will be capital expenditure.
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Other allowable and professional costs incurred include :- • obtaining a valuation for insurance purposes; • normal accountancy expenses incurred in preparing rental business accounts and agreeing taxation liabilities; • subscriptions to associations representing the interests of landlords; • costs of arbitration to determine rent; • the costs of evicting an unsatisfactory tenant in order to re-let the property.
WEAR & TEAR. For property let furnished, you may claim an allowance for the wear and tear of furnishings. At the time of writing this is calculated by taking 10% of the rental income for the year (less water rates and council tax if paid by the tax payer). The government have proposed changes for 2016 which will mean that tax relief will only be available for the actual cost of replacing any items of furnishing provided for the tenant’s use.
TRAVELLING EXPENSES. The revenue costs of travelling between different properties, solely for the purposes of rental business, are an allowable deduction. The cost of travelling from your home to the let property and back will only be allowable if the purpose in making the journey is exclusively a business one. By ‘revenue’ costs is meant running costs such as fuel, road tax, etc., as opposed to the capital costs outlayed for the purchase of the vehicle. Travelling expenses will not be deductible if the journey is partly private, for example, purchasing weekly groceries. If, however, any personal benefit is only incidental, such as purchasing a newspaper en route, then the revenue cost is still deductible.
OWNER OCCUPIED PROPERTY. Expenditure on a property which you occupy yourself is not normally allowed as a deduction in computing rental profits. Where you genuinely run a rental business from your home, extra business costs, which are incurred, may be claimed, such as lighting and heating. Likewise, where a specific part of your home is used exclusively for running the rental business for a significant amount of time, whether continuously or at particular times, then a proportion of all fixed expenses incurred may be deducted. These will be lighting and heating, but could include repairs and property insurance or even rent paid to a head landlord. The commercial use deduction has to be reflected in a fair and reasonable way.
MORTGAGE INTEREST. Landlords can offset mortgage interest against their letting income for tax purposes the same as any other letting expense. The government propose introducing changes gradually from 2017 which will mean that landlords will not be able to deduct all of their finance costs from their property income to reach their profit figure and will instead receive a basic rate reduction from their income tax liability for their finance costs.
MIRAS. Previously, tax relief was available to homebuyers on their mortgage interest - this was called MIRAS (Mortgage Interest Relief at Source). However, this subsidy was withdrawn in April 2000 so the scheme is no longer an issue for landlords. Since this time, landlords can offset mortgage interest against their letting income for tax purposes the same as any other letting expense.
Previously, if a property upon which MIRAS was being claimed, was let, then the landlord had the choice of whether to keep his mortgage in the MIRAS scheme or come out of the MIRAS scheme and set interest against the property letting business.
BAD AND DOUBTFUL DEBTS. Receipts as rent, etc., which are earned in the year have to be declared, even if they were not paid until after the year ended. However, the following may be deducted :- • a debt which is clearly irrecoverable; • a doubtful debt to the extent estimated to be irrecoverable; the deduction is the full amount of the debt less any amount expected to be recovered.
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The deduction can only be made where all reasonable steps have been taken to recover the debt.
ENTERTAINMENT EXPENSES AND GIFTS. Deduction for expenditure on business entertainment, or gifts, is not permitted.
Income excluded from a rental business
There are certain receipts from the use of land which are specifically excluded by statute from a rental business. These include :- • yearly interest; • income from woodlands managed on a commercial basis in cutting and selling timber. (Income from letting woodlands is included); • income from :- mines and quarries (including gravel pits, sand pits and brickfields), ironworks, gasworks, salt springs or works, and water works and streams of water;
rights of markets and fairs, tolls, bridges and ferries, and lettings of tied premises by traders;
farming and market gardening.
Premium and sale price of lease
A premium is a sum of money paid for the grant of a lease. A reverse premium is a sum of money paid to the lessor, or rent free period, for taking the lease. The person paying the premium may be entitled to tax relief, or where a lease is acquired where an earlier tenant paid a premium. The sale price of a lease is a capital gains tax matter, unless you are carrying on a property dealing trade.
Capital expenditure
Purchase of land and any buildings on it is capital expenditure and is non-deductible in computing the profits of the rental business. So is the cost of erecting new buildings or other improvements. No deduction is allowed for depreciation, (except wear and tear for furnished properties), or loss on disposal of capital assets. Examples of capital expenditure include :- • expenditure which adds to or improves land or property; e.g., converting a disused barn to a holiday home; • the cost of refurbishing or repairing a property bought in a derelict or run-down state; • expenditure in demolishing an existing building to clear space for a new one; • the cost of a new building; • the cost of building a car park; • expenditure on a new access road to the property; • the cost of a new piece of land next to the let property.
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Repairs to acquired property
Repairs to reinstate a worn or dilapidated asset are usually deductible as revenue expenditure. Buying the asset a short while before repairs are made does not, in itself, make the repair a capital expense. But a change of ownership coupled with additional factors may be held as capital expenditure if :- • when the property was acquired, it was not in a fit state for use until repairs had been carried out, or could not continue to be let without making repairs shortly after acquisition; • the price paid for the property was substantially reduced because of its dilapidated state. A deduction is not denied where the purchase price reflects the reduced value due to normal wear and tear, even if repairs are made just after acquiring the asset. • if an agreement is made to re-instate the property to a good state of repair.
Expenses of providing services
The costs of providing services are an allowable deduction provided the receipts are also included as part of the rental business income.
Example 1 :
A property is let for £800 pcm. The landlord is responsible for cleaning the house and maintaining the garden. A cleaning agency and gardener are engaged by the landlord at a total cost of £100 per month. The annual rent of £9,600 is assessable as a rental business receipt, but £1,200 is an allowable deduction for cleaning and gardening in assessing profits of the Schedule A rental business. The cleaning and gardening does not amount to a distinct trade as they are ordinary incidents of letting .
Example 2 :
Furnished flats, in the same building, are let to tenants on three year leases at an annual rent. A separate charge is made, depending on the size of the flat, to provide for electricity, gas, hot water and central heating to each flat. The provision of linen and laundry facilities is available in the basement and there is weekly cleaning of each flat and the common parts. A 24 hour reception and porterage is provided, as well as general maintenance of all machinery in each flat.
The provision of these extra services, but not the flats themselves, is agreed with the tax office to amount to a trade. Thus, only the rental income need be included in the rental business. The separate charges for services is excluded, but so are the costs of those services. The service charge and service expenses will be charged to tax using the rules for trades.
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Rent-a-Room scheme
The Rent-a-Room scheme was introduced in 1992 to encourage those that have spare furnished rooms to rent them out in their own home. As long as the total rent received, before expenses, by the homeowner is no more than the exemption limit (currently £7,500 per year), no tax will be payable on the income.
Receipts over the £7,500 exemption limit can be taxed on an alternative basis which may produce a lower tax bill. The excess of the gross receipts over the exemption limit is treated as taxable rental income instead of actual profit, but no claim is allowed for the letting expenses.
There are two ways of working out tax when the receipts are above the exemption limit :
A. paying tax on the profit worked out in the normal way for a rental business, i.e., rents received less expenses; or
B. paying tax on the gross amount of receipts, including amounts for any related services provided, less the £7,500 exemption limit (or £3,750 if income shared with someone else for the same property for the same period).
Example :
Florence lets out a room in her own home for £150 a week. Her gross receipts for the year are £7,800. She has expenses of £1,000, so her profit is £6,800. The excess of her receipts over the exemption of £7,500 is £300 (£7,800 less £7,500 = £300).
* Using method A, she pays tax on the actual profit of £6,800.
* Using method B, she pays tax on a profit of £300 which is beneficial and should be elected.
Method A applies automatically unless you advise your tax office within the time limit that you want your tax assessed under method B.
Gross receipts include not only rent, but also payments made for the provision of other goods or services, such as meals, cleaning, laundry etc., in connection with the letting.
If the room, or rooms, are let jointly (e.g. house owned by a couple), the whole exemption will go either to the person actually renting the room or be shared between any co-owners of the property as appropriate, in accordance with the proportion of rent received.
The scheme applies to ordinary letting of living accommodation in your own home. It does not apply to rooms let as an office or for other business purposes. It does apply to genuine lodgers who study in your home, or who do some of their business work in your home in the evenings or at weekends.
The scheme also applies to people who let a room in a home they rent (provided the lease allows you to take in a lodger) as well as to people who own their homes. Owners should ensure that the lender agrees to a lodger if they have a mortgage and that the owners insurance company has been informed. The lodger should be asked to insure own personal possessions.
Special Rules
1. The Rent-a-Room scheme applies to furnished accommodation only.
2. The scheme applies to ordinary lettings of living accommodation in the landlord’s own home. It does not apply to rooms let as an office or for other business purposes.
3. If the landlord lets his home in the UK whilst living abroad, he will not normally be within Rent a Room. This is because the let property will not usually be the landlord’s normal residence at any time during the basis period for the letting.
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Furnished holiday lettings
Furnished holiday lettings have some tax advantages over other lettings, including a particular relief for losses on the same basis as traders and the ability to benefit from capital gains tax reliefs for trader - business asset roll-over, gift hold-over and entrepreneur reliefs may be especially important.
From 6th April 2012 a letting is regarded as a furnished holiday letting where the property is furnished and meets all of the qualifying tests below:- • it must be in the UK or European Economic Area (EEA) • it must be available for holiday letting to the public on a commercial basis for 210 days (previously 140 days) or more; and • it must be ‘actually let’ commercially for 105 days (previously 70 days) or more; and • must not be occupied for more than 31 days by the same person in any period of seven months. Where the property does not qualify as a furnished holiday letting you will be taxed under the residential property lettings rule. A ‘period of grace’ will apply for one or two years to allow businesses that do not continue to meet the ‘actually let’ requirement to elect to continue to qualify for furnished holiday letting for 2011/2012 and subsequent tax years.
Letting profit calculated separately
The major advantages under the special rules are :- • entitlement to plant and machinery capital allowances on furniture, furnishings, etc. in the let property, as well as on machinery and plant used outside the property, such as vans and tools. There are no capital allowances for the cost of the property or the land on which it stands; • capital gains tax reliefs such as business asset roll over, gift hold-over and entrepreneur’s relief are available for furnished holiday lettings.
Rental business losses
As from April 2011 losses in rental businesses can only be set against income from the same rental business, it cannot be used against income from other businesses. Previously losses could be set against total income and were not restricted to the rental business.
Losses in one rental business cannot be carried across to any other rental business you carry on at the same time in a different legal capacity. For example as executor in a deceased estate in one instance and as partner in your own business in another.
Losses against future business profits
The general rule is that any rental business loss is automatically carried forward and set off against rental business profits of the following year. Rental business losses cannot be carried forward against any other income. No special claim is required and, if appropriate, you must deduct any losses brought forward from the previous year when calculating your rental business profit for the current year.
See HMRC helpsheet 253 for more information on furnished holiday lettings, which can be accessed on the HMRC website.
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Overseas Landlords - Agent’s obligations
General principles
Special rules apply to the UK rental income of non-resident landlords (NRL) or landlords who live abroad (usually more than a six month period). The new NRL scheme being introduced in parallel with Self-Assessment operates for rental income paid on or after 6 April 1996 and replaces the old rules under Taxes Management Act 1970.
Non-resident landlords (NRL) scheme
Agents with overseas or non-resident landlords must register with HM Revenue and Customs (HMRC) and operate the non-resident landlords (NRL) scheme. Agents should register within 30 days from when the agent becomes liable to operate the scheme.
The agent is responsible for operating the NRL Scheme and deducting tax from the rental income, unless written notification to the contrary is received from the Inland Revenue. In simple terms, the Agent will either :- • If authorised by the Revenue, pay the rental income to their non-resident client GROSS, or • Deduct tax at the basic rate on net income subject to certain allowable expenses and deductions.
Exemptions from NRL scheme
If a tenant pays the rent directly into a landlord’s bank account, the tenant must operate the NRL Scheme and deduct tax, unless the rent is less than £100 per week or they receive written notification from HMRC to the contrary.
If an exemption certificate is not received from HMRC, then tax at the basic rate (currently 20%) must be deducted from rental income after deducting allowable expenses. If expenses exceed rent received, then they can be carried back to previous quarters, as long as these quarters fall into the same year to 31st March. Surpluses can also be carried forward but in this case without restriction.
Payments of tax must be made within 30 days of the end of each quarter (30th June, 30th September, 31st December and 31st March) and at the same time a form is required to be submitted showing the total tax due for the quarter for all non-resident landlords.
By 5th July following the end of each tax year, an annual ‘information’ return must be submitted showing income, expenses and tax deducted for landlords for whom an exemption certificate has not been received, and for those where it has, details of income only. Also for ‘non-approved landlords’ a tax certificate will have to be issued.
Administration
The NRL scheme is operated by HMRC offices in Liverpool and Cardiff. Contact details are given at the end of this chapter.
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Non-resident landlords or their agents can apply to HMRC for approval to receive their rental income with no tax deducted (an ‘approval’). If the application is successful, HMRC will issue a notice and the agent will not be required to deduct tax.
Landlords with poor tax histories may be refused an approval, and in these cases agents will be obliged to continue to withhold tax at the basic rate on their net rental income.
It is important that a landlord informs the Revenue if his or her tax situation changes (e.g. returning to live in the UK) or if the property becomes let through another letting agent.
How do I obtain an approval to receive rental income with no tax deducted?
An approval will allow the landlord to receive all rental income due without deductions to cover tax liabilities. The forms are available from HMRC.
Approval is generally granted if: • a landlord’s UK tax affairs are up-to-date • the landlord has never had any UK tax obligations or • the landlord does not expect to be liable to UK tax Many people are entitled to set personal allowances against their income. If the landlord’s UK income after allowable expenses is less than the available personal allowances, then a landlord will not be liable for tax.
Landlords and agents will be notified simultaneously of decisions to grant or withdraw approval. Approvals can be cancelled by the Inland Revenue if Returns are filed late or tax is not paid on time.
What happens if a landlord has no approval ?
The Agent will be required to withhold and pay the tax due on behalf of a landlord if the landlord is non-resident and non-exempt within 30 days of each quarter. Quarters end on:
30th June 30th September
31st December 31st March
Tax will be deducted at the basic rate as a percentage of the quarterly rental income taking into account only money received and money paid by the agent. The agent will issue a Certificate of tax paid which the landlord may then use when preparing his tax return for the Inland Revenue. Any overpaid tax can be reclaimed via the tax return.
New Landlords
It is essential that new clients apply for approval immediately. Only tax deductions made in a particular quarter can be refunded by the agent. The Inland Revenue have confirmed that exemptions cannot be backdated.
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Council Tax
History
In 1974, the Conservative Party promised, in an election manifesto, to replace domestic rates with a more broadly based tax relating to an ability to pay on the majority of adults. Following the report of the Layfield Committee in 1976, various proposals were considered culminating with the repeal of the 1967 General Rate Act and the introduction of the uniform business rate for non-domestic property and the community charge for individuals.
Notwithstanding the hostility in Scotland to the personal ‘poll tax’, it was introduced into England and Wales a year later. This resulted in riots and widespread civil disobedience. In 1991 the community charge was abandoned and replaced on 1 April 1993 by council tax.
Local authorities which collected the old domestic rates and the community charge would bill each household in accordance with a ‘tariff’ based on the broad valuation of the accommodation within eight bands. 21 million properties needed to be valued by valuers and estate agents to reflect the estimated sale price on 1 April, 1991, taking account of any significant change between that date and 1 April, 1993 which would affect the valuation such as an extension or other substantial improvement. Any increase or decrease in the general market price between those dates would have no effect on the banding.
Bands
The valuation bands are: Valuation Band Range of values (value as at 1.4.91) A Up to £40,000
B Over £40,000 and up to £52,000
C Over £52,000 and up to £68,000
D Over £68,000 and up to £88,000
E Over £88,000 and up to £120,000
F Over £120,000 and up to £160,000
G Over £160,000 and up to £320,000
H Over £320,000
In Wales band A is up to £44,000 and their highest band I is £424,000 and above. In Scotland, band A is up to £27,000 and band H over £212,000.
Liability
Council tax is assessed on dwellings. For these purposes, a dwelling is a unit of self-contained accommodation e.g. a house or flat. A house which consists of a number of non self-contained properties, which have shared facilities (e.g. bedsits with shared w.c.’s or bathrooms) is still one unit.
The liability for payment of the council tax is on anyone who is a resident or has a freehold or leasehold interest. For owner occupied property, the owner will be liable for council tax. A resident leaseholder, including assured and assured shorthold tenants under the HousingActs1988 as amended by the 1996 Act will be liable. A resident statutory or secure tenant and a licensee is also liable.
The liability to pay council tax in the case of ordinary dwellings (i.e.. dwellings which are not HMO’s) depends upon a person having a legal interest in the property coupled with residence.
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There is a table (see 1-5 below) and it is the first person in this list who is liable:
1. A resident with a freehold interest in the dwelling 2. A resident with a leasehold interest or a tenancy 3. A resident who is a statutory tenant under the 1977 Rent Act 4. A resident who has a contractual licence 5. A resident In the absence of anyone else the non-resident owner is liable. A ‘resident’ is defined as a person of 18 years of age or over who occupies the dwelling as their only or main home and is not exempt. Where the tenant vacates the property before a periodic tenancy has been formally ended the landlord may be liable to pay the council tax for a statutory periodic tenancy where it is found that the tenant does not have a leasehold interest that was granted for a term of six months or more. The landlord will not be liable for council tax for a contractual periodic tenancy, where the tenant leaves before the tenancy is formally ended, as this is a continuation of the fixed term and the tenant will have a material interest in the property as set out in the case below.
Case Law Example: Mr Broadley was the landlord of a number of properties, all let on assured shorthold tenancies which were for 6 or 12 month fixed terms followed by monthly contractual periodic terms. Leeds City Council had sought Council Tax for the properties from Mr Broadley for periods when the tenants had left the properties but the tenancies had not been formally ended by either party. The council claimed that Mr Broadley was responsible for the council tax whilst the property was vacant because the tenants did not have a ‘material interest’ in the properties, determined as “a leasehold interest which was granted for a term of six months or more” as set out in Section 6 of the Local Government Finance Act 1992. The First Tier Tribunal concluded that the landlord was not responsible for the council tax and disagreed with the council. The council appealed the decision and the Court of Appeal concluded that the fixed term and periodic tenancies constituted a single grant and not two tenancies meaning the tenants had a material interest in the land and were liable for the council tax. (Leeds City Council v Broadley [2016] EWHC 1839 )
Houses in multiple occupation (HMOs)
Where a dwelling is classified as a house in multiple occupation, liability for council tax charges falls on the owner of the property rather than the residents if the dwelling meets the definition of a ‘house in multiple occupation’ as defined in the council tax regulations and explained below. NB. The tax rules in this respect determine who the local authority may make legally liable for the council tax payments, and this does not prevent the landlord passing these additional charges onto the tenants by a separate contractual agreement provided that the tenancy agreement contains the appropriate wording.
The rules for deciding whether the property is an HMO (for council tax purposes) changed on 1st April 1995. Prior to that date, two conditions had to be met if the landlord was to pay.
Firstly the dwelling had to be either originally built or later adapted to be lived in by persons who do not constitute a single household. Note that it is the construction or adaptation as an HMO, rather than its actual use, which is the test. Secondly, the occupants must only have a tenancy (or licence) of part of the dwelling. If instead, there are licences with the right to occupy the whole of the premises, then they must only be legally obliged to pay on an individual basis. They must not be jointly liable for the whole licence fee.
The effect of the current rule is that the landlord will have to pay the council tax if either of these conditions apply rather than both. The landlord is left to recoup the payment from the tenants. Now shared houses could be caught. To avoid this happening, the property must be let as a whole and all of the residents need to be joint tenants. Further, there must be nothing done to the premises to make them suitable for use as an HMO as opposed to a private dwelling.
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Exempt Dwellings
Some types of dwelling and occupation are exempt from council tax: • Dwellings occupied entirely by students (or their dependants). NB. This exemption only applies if all the tenants (with the exception of dependants) in occupation are students - so if one student leaves and another non-student tenant joins the group, the property becomes assessable immediately for council tax. ‘Dependants’ in this case applies to a spouse or dependant who is not a British citizen and is prevented by the terms of his/her entry visa from taking paid employment or claiming benefit. • Prior to April 2013 some empty properties were exempt from council tax for certain periods of time but these exemptions have now been removed.
Empty Property Discounts are available to the landlord or owner in specified circumstances. Local authorities have discretion to alter these exemptions to fit local conditions - therefore the owner should contact the local authority where the property is situated for the actual position in each case.
If the property is unfurnished, it is no longer exempt from council tax for up to six months and will be subject to a discount of between 0% and 100% of the council tax rate.
If the property is furnished, but not used as a main home, the council are now able to charge the full rate of council tax instead of the previous maximum of 90%.
If the property is undergoing or requires major works or structural alteration which makes it uninhabitable, the property is no longer exempt from council tax and will be subject to a discount of between 0% and 100% of the council tax rate for up to 12 months.
Since April 2013 councils are now able to charge 150% of the usual council tax liablity on properties which are empty for more than two years. These amendments have been introduced to encourage home owners to keep their properties in use.
Although discounts are available for empty properties the amount of discount applied will be calculated at the discretion of the council. Furnished There appears to be no strict definition of ‘furnished’ in the council tax regulations and so it is likely that common sense and local discretion will prevail. Common practice appears to be that carpets, curtains and fixed units are permitted. However, if there is any extra unfitted furniture (e.g. chairs, settee etc. - i.e. furniture which can be moved) then the inspector would normally deem the property to be furnished.
Other Discounts The full council tax assumes that there are two or more adults in a dwelling. A 25% discount is available for single residents.
Certain people will not be counted when assessing the number of adults in a dwelling. These include people who are: -- in detention -- in prison or on remand (except those imprisoned for non-payment of a fine or non- payment of council tax !) -- severely mentally impaired; -- over 18, but still at school; -- students, student nurses, apprentices and other trainees; -- resident in hospital, or who live in a residential care home, nursing home or hostel in order to receive care; -- care workers; and -- those of no fixed abode.
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Leasehold homes and flats
All houses are valued as if they were freehold and all flats are valued as if they were sold with a 99 year lease. Low prices for short leases do not affect council tax.
Caravans and houseboats
When used as permanent homes, caravans and houseboats are subject to council tax like any other home.
Second homes
People who own a second home pay council tax on both homes. Discounts are available if there are less than two residents in each property. People who own two homes temporarily through circumstances, will not pay council tax on the second home. For example, someone may inherit a home which they will sell.
Lodgers
Where a landlord and a lodger share accommodation, only the landlord is responsible for the council tax
Asylum seekers
Where tenants are asylum seekers and housed under the Home Office’s National Asylum Support Scheme (NASS), council tax will be payable by the landlord.
Appeals
Since November 1993, appeals may only be lodged against the banding if part of the accommodation has been demolished which has significantly reduced its value, or the home has recently been purchased and the Listing Officer has changed the banding. In non-banding instances, the appeal may be lodged if the council is sending the bill to the wrong person, the accommodation should be exempt, or the amount of tax is wrong. The appeal should be lodged with the council who have two months to make a decision. If the council has not replied within two months, or the decision is unacceptable, an appeal can be lodged with the Valuation Tribunal.
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Value Added Tax (VAT)
Letting of land is as a general rule, exempt from VAT, but the regulations specifically provide that the provision (or ‘supply’ to use the correct tax terminology) of holiday accommodation in the form of a house, cottage, flat, caravan & houseboat is liable toVAT.
Holiday accommodation
‘Holiday Accommodation’ includes, but is not restricted to, any house, flat, chalet, villa, beach hut, tent, caravan or houseboat which is advertised or held out as such, or as suitable for holiday or leisure use. Residential accommodation which happens to be situated at a holiday resort is not necessarily holiday accommodation.
Off-season letting
The letting of furnished accommodation for out of season lettings, in recognised holiday resorts for more than four weeks at a time, may be exempted from VAT. It must be: • let to a person for normal residential use only, and • let for more than four weeks, and • where holiday trade in the area is clearly seasonal. The out of season rent must also be lower that the rent received during the season. For more details of the VAT rules on holiday accommodation, visit the HM Revenue & Customs website.
VAT turnover threshold and applicable rules
Even where the landlord’s supply may be liable to VAT, the VAT is only chargeable by the landlord on the lettings if the landlord’s annual turnover exceeds the current VAT turnover threshold* (based on the previous 12 months’ turnover).
Several special rules apply to the operation of this rental income or turnover threshold. If the landlord is self-employed as a sole trader, and is registered for VAT, the income from his holiday lettings will still be liable to VAT as both ‘businesses’ are owned by the same proprietor. If, however, the holiday cottage was owned jointly with his wife, this would represent a partnership between the couple, and, therefore, under separate ownership for VAT purposes; if the income from the holiday cottage and any related source under joint ownership does not exceed the VAT threshold, then no VAT is either chargeable or payable.
Agents
Letting fees, management fees, credit referencing and other business services supplied by a letting and managing agent will be liable to VAT at the standard rate.
Thus, letting agents involved in the letting and management of residential property, like any other business will be liable to charge and register for VAT if their fee turnover exceeds the VAT turnover threshold in the previous 12 months of trading. It will be important to distinguish between rental and fee turnover in this case.
*The current VAT registration threshold is £82,000 (effective 01.2016, changes annually).
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Capital Gains Tax
Principles
Under UK tax law Capital Gains Tax (CGT) is payable on gains realised by individuals, trustees and personal representatives of deceased persons. Where the gain is realised by a company or similar corporate body, there is no CGT liability as capital gains are taxed by way of corporation tax. The CGT system currently applies UK-wide but Scottish and Welsh devolved powers may alter this in future.
A capital gain arises when something is sold, exchanged, given away or disposed of in any other way, and its value has increased since it was acquired. The difference between the sales proceeds and its acquisition cost , less any allowable expenses, is known as the capital gain.
However, CGT is only payable on significant disposals - i.e. possessions worth £6,000 or more. Some disposals are NOT subject to CGT at all, such as the sale of a person’s main home. Gifts, ISAs and PEPs, and winnings such as betting and lottery winnings are also exempt from CGT. Some CGT reliefs are also available - for example where the proceeds are invested in a new business. You only have to pay Capital Gains Tax on your total gains above an annual tax-free allowance. At the time of writing (2016), each person has an annual CGT allowance of £11,100 but you should check online for the latest rates and rules in every case.
Private residence relief and letting relief Disposal of property assets probably represents the largest source of CGT for the tax authorities and this will also be the area of most relevance to landlords. We shall look briefly at the main rules here.
The general rule is that CGT is payable on most types of property. Tax will be payable when a property is sold that isn’t your main home, or where all or part of the property has been used for business or residential lettings, or it is very large. Also, you may have to pay CGT when you sell your home if you have let all or part of it out (although having a single lodger doesn’t count). Where only part of the house is let, only a corresponding proportion of the capital gain may attract CGT. You may also be entitled to Letting Relief on the part of the property which has been used for residential lettings. This is a complex area of tax law where the rules are frequently changing so it is best to seek tax advice on every individual situation. Other reliefs and rates may apply to disposals in previous tax years. See page 14-24 for more information.
Gain - how is it calculated? The capital gain is usually calculated as the difference between the sale price and its acquisition cost, less any allowable expenses. For CGT purposes, allowable expenses could include dealing costs, stamp duty and advertising. They also include the cost of improving the asset, provided the improvement is reflected in the item’s value - but not costs that have already been claimed against rental income such as general maintenance expenditure. Therefore, it is important to keep good records and all receipts/invoices when undertaking major improvement works so that this expenditure can be set against your future CGT tax liability
Entrepreneurs Relief
Entrepreneurs’ Relief is only given for ‘relevant business assets’. So, a disposal of furnished holiday lettings will be eligible for Entrepreneurs’ Relief, but a disposal of general let properties (residential dwellings, commercial investment property etc) will not qualify.
The CGT system is currently unified across the UK but the tax systems in Scotland and Wales are likely to split away in future under their devolved powers.
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CGT rules regarding property disposal
Gains arising from the disposal of private homes will be exempt from CGT (see Private Residence Relief - on the following page).
Property that is used for letting will be liable to CGT on the ‘gain’ arising when the property is disposed of. The ‘gain’ is the difference between the sale proceeds, after deduction of selling costs and the ‘base cost’ as increased by an indexation allowance, and less any applicable reliefs.
For disposals after 5 April 1988, the ‘base cost’ is the cost of the property (i.e. the amount you paid for it) and any improvements; or the market value at 31 March 1982, if owned on that date, and the cost of any subsequent improvements. You will use the market value of the property instead of the sale price if for example: • You owned the property at 31st March 1982 (use this date) • It was a gift after 31st March 1982 (use the market value when it was given to you) • You received a gift from your spouse/civil partner (use the amount they paid for the property) unless they owned it at 31 March 1982 • You inherited it after 31 March 1982 (use the market value on the date of their death) Generally the resident of one country is exempt from taxes imposed by another on capital gains arising in that other country. However, capital gains on immovable property are normally taxable in the country where the property is situated.
Example
Mr Jones owns a flat in Croydon which he inherited in 1980 and sells in April 2019. In 1987 he made substantial improvements to the property at a cost of £10,000 (consisting of adding an extension). The base cost is calculated as the value at 31 March 1982 plus the cost of improvements.
£ £
Gross Sale proceeds 120,000 Less Sale costs - legal expenses 2,100 117,900 Less Base Cost: Value at 31.3.82 35,000 Extension cost 10,000 45,000 Gain 72,900
Less annual exemption (April 2019) 12,000 Gain subject to C.G.T. 60,900 CGT at 28%* £17,052
*As the gain is over the basic income tax band for 2019 to 2020 tax year (£50,000) Mr Jones will fall into the higher CGT rate and liable to pay 28% CGT.
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Private residence relief
Private residence relief ensures that when a person disposes of his or her private home, he or she will not, with some exceptions set out below, pay Capital Gains Tax on any gain. It follows that any losses made on the disposal of a private home will not be allowable losses which can be set against gains in the current or future tax years. If an individual owns more than one home, tax relief may only be available on the main residence although he or she may choose which is to be deemed as the ‘main residence’.
Some periods of absence when the owner was not using the house as his or her only or main residence will qualify for relief. For example, if an owner does not occupy the new home directly after purchase because he is unable to sell the old home, then it is possible to treat the first 12 months as if the house had been the only or main residence. Certain other periods of absence may be treated as periods of residence if, during the period, that person has no other dwelling eligible for relief, and, both before and after the period, there is a time where the house is or was the only or main residence. Also, the final 18 months (36 months prior to 6th April 2014) of a person’s period of ownership of his home always qualify for relief, regardless of how the property is used in that time, if the dwelling-house has ever been his or her only or main residence. These private residence rules are described in more detail in the Inland Revenue’s leaflets (see ‘Sources of Further Information’ - last page of this chapter).
If part of a person’s dwelling-house is used exclusively for a trade or business, that part will not qualify for CGT relief. For example, if the owner of the dwelling-house has a lodger, the rooms occupied by the lodger qualify for relief. If there is more than one lodger, or a part of the dwelling is let, then these rooms will not qualify for private residence relief (but there may be further relief which is available - see below).
Also, subject to meeting various conditions set by the Inland Revenue, a person may be exempt from CGT on gains made from the disposal of a home provided for a dependent relative.
Relief for letting of residential accommodation
Where a personal residence has been used wholly or partly for letting as residential accommodation, it can qualify for further relief (up to £40,000 reduction) in the gain applicable to the proportion of the building which was let.
This further relief is due where: • the property being sold is the person’s only or main residence, and • part or all of it has at some time in the period of ownership been let as residential accommodation The amount of relief is the lowest of: • the amount of private residence relief already calculated, or • £40,000, or • the amount of any chargeable gain made because of the letting.
The maximum relief of £40,000 should be applied to each disposal where private residence relief is due.
Example:
Mr Jones let out rooms in his home. 60% of the house was used for letting while 40% was used as his main home. Mr Jones made a gain of £60,000 when he disposed of the property. He is entitled to private residence relief for 40% of the gain - £24,000. The remaining gain was £36,000 and it all results from the part of the property allocated for letting. The lowest of the three limits set out above is the amount of private residence relief and so Mr Jones is entitled to further letting relief of £24,000. The chargeable gain will be £12,000.
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Inheritance Tax
Inheritance tax is a tax on the value of an individual’s estate after death; and on ‘chargeable transfers’ made during a person’s lifetime.
Inheritance tax may be an important consideration for older landlords and those holding or accumulating substantial property portfolios where inheritance tax or ‘death duties’ can substantially reduce the amount of the individual’s estate that can be passed onto the next generation. This brief section is intended merely to draw attention to the issue and explain the basic concepts rather than to give advice on individual cases where, if required, professional tax advice is recommended.
In simple terms, inheritance tax is payable on the value of the estate on death where the value exceeds the inheritance tax threshold*.
Currently, inheritance tax is payable at a flat rate of 40% (and only on the amount by which the value exceeds the threshold). • There are however some important exemptions: • anything bequeathed to a surviving partner domiciled in the UK will be completely free of inheritance tax • Gifts made more than seven years prior to death • Gifts made within seven years of death for specified purposes (e.g. wedding gifts) and up to specified limits • other gifts up to a value of £3,000 in any one tax year, plus any unused balance of £3,000 from the previous tax year • Transfers of some types of settled property (agricultural and business purposes)
*The current inheritance tax threshold is £325,000 (Jan 2016)
Stamp Duty
Until 1st December 2003 stamp duty was payable on all leases. Prior to this date letting agreements and leases were sent to the Stamp Office and duty was collected by the office on behalf of the Inland Revenue. It was not compulsory to have the agreement stamped but a letting agreement had to be stamped before it could be presented or accepted in court as a valid document. Stamp duty has now been abolished for both residential and commercial leases and has been replaced by the Stamp Duty Land Tax. The new system requires Stamp Duty Land Tax to be paid on all land transactions executed after 1 December 2003. The rules concerning payment of Stamp Duty Land Tax and compliance are contained in chapter 9.
In the Autumn Statement 2015, it was announced that an additional 3% in stamp duty will be charged on property purchased for buy-to-let purposes. This change is in effect from 1st April 2016.
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Sources of Further Information
Responsibility for the publication of tax rules, and the administration of the UK taxation system now rests with a single government body - HM Revenue and Customs (HMRC).
HMRC was formed by the merger of the Inland Revenue and Her Majesty’s Customs and Excise which took effect in 2005. Whereas previously, much information was published in the form of printed leaflets and guidance, many of these have now been withdrawn or revised as tax rates and tax law is constantly changing. We recommend that the most reliable and up-to-date sources of information are to be found on the HMRC website at www.gov.uk
Income tax and taxation of rents
- Property Income Manual - HM Revenue & Customs
- Web link: www.gov.uk/hmrc-internal-manuals/property-income-manual
Capital gains tax
- Capital Gains Tax - An Introduction. Web link: www.gov.uk/topic/personal-tax/capital-gains- tax
- Capital Gains Tax - Private Residence Relief - Help Sheet HS283 available at www.gov.uk
Stamp duty
- Information on stamp duty and stamp duty land tax (SDLT) can be found at: www.gov.uk/ topic/business-tax/stamp-taxes
Inheritance tax
- Information on Inheritance Tax is available at: www.gov.uk/topic/personal-tax/inheritance- tax
Web links
The main web site for HM Revenue & Customs is: www.gov.uk
Helplines
(a full list of the various HMRC helplines is given on their website)
- HMRC Tax General Enquiries - 0300 200 3300
- Self-Assessment helpline - 0300 200 3310
- Inheritance tax helpline - 0300 123 1072
- Stamp Duty helpline - 0300 200 3510
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15. Housing Benefit
Vastly complicated and ever changing, housing benefit provides a state-funded rent allowance to many millions of tenants in both public sector housing, and also in the private rented sector. However, the complexity and potential risks are significant and, for this reason, many landlords and agents choose not to let properties to those who are in receipt of housing benefit. The right of a local authority to recover overpayments or withhold rent from direct payments has led to further problems and confusion for landlords and agents.
From April 2008 the introduction of the Local Housing Allowance nationally will require claimants, landlords and local authorities to operate two slightly different housing benefit systems. Rent Allowance (RA), the correct technical term for housing benefit prior to April 2008 and which is still paid to claimants whose claim was made before April 2008. Rent Allowance will also continue to be paid to housing association tenants and other claimants who live in social housing. Local Housing Allowance (LHA) will be paid on all claims since April 2008 where the landlord is in private sector housing. Before April 2008 there were 18 pathfinder areas testing LHA, and so in some areas the changeover date may have been before April 2008.
In this chapter, where rules are specific to Rent Allowance we will talk about Rent Allowance (RA). Where rules are specific to Local Housing Allowance, we will talk about Local Housing Allowance (LHA). Where the rules are the same for both schemes, as they are for most of the rule, we will simply talk about ‘housing benefit’ indicating it applies to both.
Background
The original housing benefit scheme was introduced in the early 1980s and revised in 2006 with the introduction of the Housing Benefit Regulations 2006. The scheme is provided by central Government, administered locally and is designed to help those on benefits or low income by paying all or some of their housing costs. The housing benefit system has developed a reputation for being over-complex, poorly administered, and ripe for exploitation by landlords and tenants submitting fraudulent claims. Following its introduction in the 1980s, the Times described it as the ‘biggest administrative fiasco in the history of the welfare state’. Some two decades later, there is every indication that little has changed in this regard.
Scope
The housing benefit system and legislation is generally implemented in a uniform manner across the UK. Accordingly, the information in this chapter normally applies across England, Wales, Scotland and Northern Ireland, with a few exceptions.
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What is housing benefit?
‘Housing benefit’ is in fact a generic term because it is not a benefit at all in the true sense of the word - it is actually an allowance1. A benefit is given to someone as a right, which can be spent in any way the person desires, whereas an ‘allowance’ is paid and is legally required to be used for a specific purpose.
In April 2013 the Government introduced a benefits cap limiting the total amount of benefits received by an ‘out of work’ household to ensure that the majority of families do not receive an income of more than the average working family. At the time of writing the Government have also announced that certain benefits, including housing benefit, will be gradually consolidated into one single payment called Universal Credit. The benefits cap and Universal Credit are discussed in more detail on page 15-23.
What is Local Housing Allowance?
Local Housing Allowance (LHA) is the new system for working out housing benefit entitlement for tenants renting accommodation from a private landlord, and has been implemented nationally starting on 7 April 2008.
The LHA system is designed to provide a fairer and simpler system to pay housing costs for private sector lettings by standardising the housing allowance that is payable within the same local area. Under the earlier Rent Allowance (RA) system, tenants with similar housing needs received different rent levels within the same local area - and often different standards of accommodation depending on the quality or size of the accommodation.
There are two main differences between RA and LHA. Firstly, the LHA system simplifies the calculation of the rent allowance payable. The old RA system involved assessing each individual property and calculating the rent payable according to a complex set of rent levels (they basically always paid the lowest). LHA simply looks at the size of the household to be accommodated and gives a fixed amount of LHA regardless of the property they rent. For example, a single mum with a child would be entitled to a two bed flat.
Secondly, under LHA, the benefit will normally be paid directly to the claimant and there is no facility to pay it directly to the landlord or agent just because they request this. Direct payments to the landlord are available at the discretion of the local authority, and this is discussed in more detail in the relevant section of this chapter.
Finally, the LHA system will not affect tenants who rent from a local authoritiy, or a registered social landlord (RSL) Transition into the Local Housing Allowance In order to allow an orderly transition between the new LHA system and claimants under the existing RA system, the two systems will operate in parallel initially.
The new LHA system will apply to: • any private tenant making a new claim for housing benefit on or after 7April 2008 • any change of address claim on or after 7 April 2008 • any claim where there is a break in entitlement of a week or more on or after 7 April 2008. LHA will not apply to: • tenancies which started before 1989, or where rent is registered as a ‘fair rent’ • tenancies and occupiers of caravans, house boats or hostels • tenancies where a substantial part of the rent is for meals, board and attendance (e.g. bed and breakfast type accommodation)
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Housing benefit legislation and guidance
The principal legislation for Housing Benefit is: • The Social Security Administration Act 1992; • The Social Security Contributions and Benefits Act 1992; • The Child Support, Pensions and Social Security Act 2000 • The Housing Benefit (Decision Making and Appeals) Regulations 2001 • The Housing Benefit (General) Regulations 20062 • The Housing Benefit (Amendment) Regulations 2010 & 20113 The main bulk of the legislation which affects landlords and agents is contained in the Housing Benefit Regulations 2006 and were amended by the Housing Benefit (Amendment) Regulations 2010 & 2011. At the time of going to press, these currently comprise 122 separate regulations but the regulations change with such frequency that many of the various books and guidance on the subject (see ‘Sources of Further Information’ at end of this chapter) are revised and republished annually. Of these, the housing benefit guide published by CPAG and the online guidance manuals published by the Department for Work and Pensions (DWP) are probably the most comprehensive and accurate sources of guidance in this area.
Local Housing Allowance was introduced under the Welfare Reform Act 2007. Government then introduced further legislation which amends the Housing Benefit Regulations 2006. At the time of writing, the key provisions are made within: • The Housing Benefit (Local Housing Allowance and Information Sharing) Amendment Regulations 2008, SI 2007 No. 586 • The Housing Benefit (Amendment) Regulations 2010 & 2011
For those landlords and agents that deal frequently with housing benefit applicants, an intimate knowledge of the Regulations will be particularly useful. Local authorities have a habit of formulating their own individual rules and systems to administer the payment of benefits when in fact many parts of the process and procedures are closely controlled and defined by the Regulations. Good knowledge of the Regulations will help landlords understand their rights when receiving and working with housing benefit payments, and the correct procedures that need to be followed for many of the processes such as clawback and appeals.
Eligibility
A housing benefit allowance is available, to those who meet theeligibility requirements, to assist in the payment of rent or charges for the dwelling that is normally occupied as the claimant’s home. In some rare circumstances benefit may be payable on two homes and this is dealt with later under the heading ‘Liability to pay rent on two homes’. A person will be eligible to apply for housing benefit where: • they are liable to pay charges in respect of their home; and • they are on a low income (normally because they are unemployed) • their savings and other capital assets are not worth more than £16,000
In most cases, to qualify for housing benefit, the person who is liable for payment of rent will be the person with the entitlement to receive the benefit.
Some people may not be entitled to housing benefit even if their income is low enough to qualify. For example, where the claimant lives with the landlord and the landlord is a close relative, the claimant will not, under certain circumstances, be entitled to receive housing benefit (see Entitlement Rules in next section).
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Housing Benefit - General Rules
Applying for housing benefit
The person who is liable for the rent, usually the tenant or the prospective tenant, is normally the person who must apply to their local authority for housing benefit. Where a couple (either married or unmarried couples may apply) are applying for housing benefit, only one of them may apply. The local authority will, in certain, but rare, circumstances allow an appointee to apply for benefit on behalf of the claimant. This would only occur where the claimant was unable to act because of incapacity. An appointee must be someone who is acting in the best interests of the claimant and because of a potential conflict of interest, it would not normally be possible for the landlord of a claimant to act as an appointee.
The housing benefit claim
It is a basic requirement that all claims for housing benefit must be made in writing. This may be in the form of a letter to the local authority or by completing a claim form provided by the authority. Some authorities now collect the information by phone and then post out a form that simply needs checking and signing. The receipt of the written claim by the local authority is, in itself, significant as it determines the dates from which benefit can normally be claimed. It is, therefore, sometimes advantageous for the claimant to lodge a brief (and incomplete) claim simply by way of a letter addressed to the local authority which can be supported at a later date by a more complete application.
However, written applications that do not contain all the required information will be treated as incomplete (and thus defective) claims and may cause delays in receiving the benefit payments (although they do not fundamentally affect the start date and eligibility of the claim provided that the required information is supplied in due course).
Where a person is making an application for income support or jobseeker’s allowance they will automatically be invited to claim housing benefit at the same time by the Job Centre or benefits agency (using form NHB1). For tenants of privately rented property it is adviseable and more expedient to apply separately and directly for housing benefit to the local authority, whether or not they are applying for more than one type of benefit, as delays in reaching a decision regarding other types of benefit will result in delays of housing benefit payments. Also the form NHB1 does not provide enough information for the local authority to decide the claim so, at best, it will only count as a defective claim.
What is entitlement?
A person is entitled to claim benefit if they meet the eligibility requirements and have a legal liability to pay charges on the dwelling in which they live as their main home. This does not mean that there must be a written tenancy agreement, but merely that the claimant’s liability to pay is legally enforceable.
Entitlement Rules
Entitlement to housing benefit usually begins on the Monday at the start of thefirst benefit week that follows the day of the claim (even if the claim day is a Monday). This assumes rent is payable weekly or a multiple of weekly, e.g. fortnightly or four weekly.
However, if someone becomes liable for housing costs for the first time (e.g. where a claimant starts a new tenancy) for which there is an eligibility for housing benefit, the entitlement starts in the same week as the liability begins provided that the claim for housing benefit is made in that same benefit week as the commencement of the liability if a claim is submitted in the same week. This means that, if rent is due weekly or at intervals of a multiple of a week, the
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housing benefit starts at the beginning of the week in which the liability starts, i.e. a full week’s benefit for the first week, even if the tenancy did not start until part way through the week. If the rent is due at some other interval, the housing benefit starts on the same day as the liability actually begins. In practice, this is not always what happens, and the local authority may wrongly determine the claim from the following Monday, thus unnecessarily creating a period of one to two week’s arrears at the very start of the tenancy.
If the tenancy is monthly the claimant’s entitlement will be calculated on a daily basis and multiplied by the number of days of liability in the week.
In most cases, to qualify for housing benefit, the person who is liable for payment of rent will be the person with the entitlement to receive the benefit. However, in certain rare circumstances, this will not be the case. This may occur temporarily when a landlord waives the rent in compensation for repairs or redecoration carried out by the tenant, or where the person liable has left the property and abandoned his partner and is no longer paying the rent.
‘Close relative’ and ‘non-commercial basis’ exclusions
Some people may not be entitled to housing benefit even if their income is low enough to qualify. A person who lives with a close relative, who is their landlord, is not entitled to receive housing benefit4. A close relative is deemed to include a: • parent or step-parent • brother or sister • son or daughter (or step-son or step-daughter) • parent-in-law, son-in-law, daughter-in-law • partner of any of the preceding list of people
Since this exception only applies if the tenant resides with the relative, a tenant receiving housing benefit may rent a house from a close relative if they do not reside together; and it is not uncommon for a parent to purchase a property for use by a son or daughter (but other exclusions may still apply here).
Secondly, housing benefit is not payable where the tenancy is not conducted on a commercial basis. This would apply where the tenant was a close friend of the landlord and was charged only a nominal rent, perhaps an amount small enough to cover the claimant’s keep. Housing benefit is normally only payable to tenants under a commercial arrangement. Even if it is commercial, if it was set up specifically to utilise the benefit system this can make it ineligible.
Liability to pay rent on two homes
Housing benefit is normally only payable on the dwelling that the eligible claimant lives in as his or her main home. In some circumstances housing benefit may be available on two homes for up to, but not longer than fifty-two weeks5.
Dual liability occurs where a move by a tenant to another home without providing the requisite notice to the landlord is unavoidable. The local authority will decide whether or not the claimant could reasonably have foreseen the dual liability. For more information on the exact situations which are covered by this rule, you are referred to the more detailed text of the regulations.
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Entitlement for Young Persons
Claimants who are under 35 years old and single are normally only entitled to a reduced rate of housing benefit. This is called the single room rent (SRR) which limits housing benefit payments to the average local cost of non self-contained accommodation (typically bedsit type accommodation). See section entitled ‘Single Room Rents’ below. Local authorities also have the power to pay above the single room rent to young individuals who, in the authority’s opinion, are suffering exceptional hardship. Following changes brought in in 2001 the single room rent now includes accommodation with a shared living room within the rents used to calculate the SRR.
Joint tenancies
In some cases, there will be tenancies where the tenants are jointly and severally liable but not all in receipt of housing benefit.
In such cases, the rent will be asssumed to be equally divided between the number of tenants and the housing benefit assessed accordingly. For tenants receiving LHA, they will simply receive the appropriate housing rate for the accommodation they are entitled to, but capped according to the LHA capping formula.
Temporary periods of absence
Housing benefit may be paid under certain circumstances for a period of up to either 13 or 52 weeks where the claimant/tenant is temporarily absent from the property they normally occupy as their home and they intend to return to it within that time period.
Typical examples of such periods of absence (for the shorter period) might be where the claimant is detained in custody pending sentence, or under a short prison sentence. A claimant may also be detained in custody on remand pending trial or undergoing an extended period of hospitalisation, and still be treated as eligible to receive housing benefit for his dwelling for up to 52 weeks. These examples demonstrate only some situations where the claimant might be ‘temporarily absent’ but are an indication of the scope of this regulation.
Confidentiality
Local authorities are expected to regard all information about individuals (including the fact that they have made a claim for benefit) as being held in strict confidence. As a general rule, information should not be disclosed to anyone without the written consent of the person concerned. An exception is where the rent is being paid direct to the landlord when some information about the claim start and end dates and amounts being paid may be disclosed.
It is, therefore, entirely possible that a person can rent a property, and be a housing benefit claimant without the landlord’s knowledge. Where the authority is required to check certain facts with a third party, such enquiries should only normally be made with the claimant’s written agreement. For this reason, it helpful to include an additional clause within the tenancy agreement whereby the tenant gives the landlord authority to liaise with the local authority with regard to housing benefit and for the local authority to release such information. A number of exceptions are given of circumstances where it might be appropriate to give out confidential information, being where information may reasonably be required by another public body (e.g. the DWP, Inland Revenue, the Police etc.).
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Rules relating to timing of claims and payments
When to claim
Clearly, the simple answer is that the applicant should file a housing benefit claim as soon as possible for a number of reasons relating to eligibility and timing of payments. Many claimants lose entitlement and thus money because the claim is not submitted in time.
A housing benefit claim can be made up to 13 weeks in advance of the expected eligibility date even though the actual payments will not be made until the person becomes eligible. This option can, however, be useful in some situations such as redundancy where an employee has been given several weeks’ advance notice of change in circumstances.
Effective date of claim
The effective date of a claim will vary depending on the circumstances of the claimant and whether or not they are claiming other benefits but, in most cases, it will be the day on which the claim is received by the relevant office. For claimants who claim Income Support (IS) or Job Seekers Allowance (JSA), the effective claim date for housing benefit can be put back (by up to 4 weeks) to the beginning of the claim for IS or JSA (or the date the claimant first becomes liable to pay rent, if this is later).
Backdating a claim
A claim for housing benefit can be backdated for up to a maximum of between 3 and 6 months (6 months for working age claimants and 3 months for those who have reached the qualifying age for the state pension). This only applies to weeks where the claimant can show that they had continuous good cause for not making a claim. The ‘continuous good cause’ test is interpreted strictly - for example, it cannot be invoked simply because the claimant ‘did not get around to it’.
A good reason for not making the claim may be because: • they were waiting for a decision about another benefit • the claimant was unwell, and had no-one to act on their behalf (and illness was continuous). Merely intermittent bouts of illness will not be sufficient • the claimant was otherwise not capable of making a claim (e.g. language or learning disability) or had been given wrong advice about their eligibility
Time limits to process claim
The regulations state that the decision on the claim should be made within 14 days (or as soon as practical thereafter). The first payment of housing benefit should be paid to the claimant within 14 days of the completed claim being received (see section below entitled ‘Housing Benefit Payments’ ).
When does the housing benefit start from?
Housing benefit is generally paid from the following Monday (for weekly) tenancies, or on the precise day of the month that eligibility starts (for monthly tenancies).
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Local Housing Allowance
Local Housing Allowance (LHA) is a new way of working out housing benefit entitlement for tenants renting accommodation from a private landlord. Trials of the LHA system started as a pilot project in 2003 in nine ‘pathfinder’ areas6. This was subsequently extended to 17 areas in 2004. The LHA system has now been implemented nationally with effect from 7 April 2008.
Allowance based
Unlike the existing Rent Allowance (RA) housing benefit system which is specific to an individual property, the LHA is a general allowance rate based on an average rent level for the locality. Under this simpler set of calculations, the needs of the claimant are assessed according to pre-defined categories (principally being the number of bedrooms required), and the LHA is paid according to the local rent levels based on the area where the claim originates, or where the claimant intends to live.
The rent levels are researched and maintained by the Rent Service who are responsible for dividing the jurisdiction of each local authority into areas known as Broad Rental Market Areas (BRMA). There might be several different BRMAs for each local authority - each having its own characteristic rental levels, and representing an area where a person could be expected to live. The LHA rates for each area are determined by calculating the 30th percentile of market rents within every BRMA.
LHA Room Rate Examples:
A man and wife couple with two children aged 11 and 17 are entitled to the three bedroomed LHA rate.
A single parent with a five-year old daughter is entitled to the two bedroom LHA rate.
Example: Local Housing Allowance Rates - BRMA: Exeter Central
Room Need: LHA Rate applicable: (Source: Exeter City Council April 2013)
Shared room rate weekly: £ 70.77 monthly: £306.67 1 Bedroom weekly: £114.23 monthly: £495.00 2 Bedroom weekly: £138.46 monthly: £599.99 3 Bedroom weekly: £161.54 monthly: £700.01 4 Bedroom weekly: £219.23 monthly: £950.00
This means that tenants in the same circumstances and living in the same BRMA will be entitled to the same rate of LHA. Under the earlier Rent Allowance (RA) system, tenants with similar housing needs received different rent levels within the same local area - and often different standards of accommodation depending on the quality or size of the accommodation.
LHA rates are now published annually (each April) and the rates are calculated using either the existing LHA rate plus the Consumer Price Index or the 30th percentile of market rents whichever is the lowest.
LHA Capping
Under the old rules, claimants were allowed to keep the first £15 per week of any surplus LHA over and above the actual rent. If the surplus is more than this, then the amount of LHA is reduced. This allowed claimants to choose to rent a smaller property than prescribed by their circumstances, and keep some of the surplus allowance for other purposes. This was removed from 1st April 2011 and people who receive excess payments will lose them on the anniversary of their claim, or sooner if there is a change in their household circumstances.
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New caps on weekly local housing allowance rates have been introduced and for new claims made from 1st April 2011 a maximum weekly rent of local housing allowance in any area now applies. This is based on the number of bedrooms the household qualifies for and the rates are as follows; £250 for a one bedroom property, £290 for a two bedroom property, £340 for a three bedroom property and £400 for a four bedroom property. The local housing allowance will reduce any weekly amounts above these caps up to nine months after the anniversary of a claim, or sooner if the household circumstances change.
Broad Rental Market Area (BRMA)
The average rent levels within the relevant Broad Rental Market Area are central to defining the amount of housing benefit that a claimant is likely to receive under the LHA system.
The legislation defines a BRMA as an area ‘within which a person could reasonably be expected to live having regard to facilities and services for the purposes of health, education, recreation, personal banking and shopping, taking account of the distance of travel, by public and private transport, to and from facilities and services of the same type and similar standard.’ It must contain a variety of residential property types held on a variety of tenancies. It must also consist of ‘distinct areas of residential accommodation.’
For simplicity, and ease of administration, a BRMA will be postcode defineable, and must not overlap with another BRMA. The BRMA is broadly equivalent to the ‘localities’ defined under the previous RA legislation for claims made before 7 April 2008
Rent officers are required to monitor BRMAs/Localities, to review them if necessary and, when appropriate, to set new ones. Information about BRMAs and local rent levels is published on the internet by the Rent Service on its LHA-Direct website (see Links at end of chapter).
For example, there are two BRMAs within the local authority area of Kensington and Chelsea:
- Inner North and West London 1 Bed Shared = £92.35
- Central London 1 Bed Shared = £123.50
Direct Payments
Under the LHA system, direct payments to landlords are discouraged and no longer available at the option of the landlord or tenant. The intention is to discourage welfare dependency and the opportunity for overpayment by making tenants take responsibility for budgeting for, and paying, their own rent.
However, the system recognises that some people will be unable to manage their own affairs (e.g. people with drug dependencies and similar medical conditions), or simply not sufficiently trustworthy and appropriate safeguards have been built into the LHA procedures.
In certain circumstances, it will be possible to apply to the local authority to make LHA payments directly to the landlord. These include7: • where the claimant is likely to have difficulty managing his/her affairs • if the claimant has built up rent arrears of eight weeks or more • if the claimant is having deductions from their Income support or Jobseeker’s Allowance to pay off rent arrears Local authorities have discretion to make the final decision as to whether direct payments will be made to a landlord, relying on a set of guidelines and criteria published by the Department for Work and Pensions (DWP). The 2010 regulations state that direct payment may be used when: “the relevant authority considers that it will assist the claimant in securing or retaining a tenancy.” This implies that a local authority may choose to offer direct payment as an incentive to encourage landlords to accept the new lower rates of LHA.
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Calculation of LHA Entitlement
The amount of LHA that a claimant can receive depends on: • the area in which the claimant lives • the number of people who live in the claimant’s family (size criteria) • the financial circumstances (including income, savings etc.) of the claimant
The size criteria
One bedroom is allowed for8: • every adult couple • any other adult aged 16 or over • any two children of the same sex • any two children regardless of sex under age 10 • any other child These size criteria will determine the rate of allowance that a claimant will qualify for.
For example, Mr and Mrs Smith and their 10 year old son Tom would be entitled to the LHA rate for a two bedroom property up to a maximum of £290. If their contractual rent is £350 per week, they would need to find the shortfall of £60 as they would only be entitled to a maximum LHA rate of £290. However, if the rent was £280 per week they would receive £280 as they cannot claim any excess rent under the new rules.
Single Claimants aged under 35 years
Single claimants aged under 35 years, ie young individuals, who do not have a non-dependant person living or treated as living with them will be entitled to the standard rate for a bedroom in shared accommodation - the so-called ‘shared room rate’. However, this will be based on a different definition than the existing Single Room Rent (SRR), which limits HB entitlement for this group of claimants to the rate for a room in shared accommodation9. This shared rate will be based on properties where the tenant has the exclusive use of only one bedroom and where the tenancy provides for him to share the use of one or more of a kitchen, bathroom, toilet or living room.
A person sharing their home with an adult who is not dependent on them i.e. adult son or daughter may receive a reduced LHA rate under the new rules as it is assumed that the non-dependent should pay something towards the rent, unless the adult is under 35 and claiming jobseeker’s allowance, a full-time student, or a pensioner claiming pension credit. The new rules also state that a disabled claimant (or their disabled partner) who needs an overnight carer that does not normally live with them may be entitled to payment for an extra bedroom. The claimant must show that they have an extra bedroom available for the carer to use,and that care is required and provided for.
Appeal rights
There is no right to appeal or redetermination about the amount of LHA payable, or the respective Broad Rental Market Area on which they are based as these levels are set by the rent officer and affect all tenants in the same locality. However, a claimant or person affected by a decision to award LHA, or not, may appeal the decision. Appeals should be made in writing and submitted to the Tribunal Service who will examine the claim. Appeals should be made within one month of the LHA decision.
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Housing Benefit - payments under the Rent Allowance system
Although all new housing benefit claims for the majority of private sector lettings willbe processed under the new Local Housing Allowance (LHA) system, existing claims started prior to the introduction date of 7th April 2008 will continue to run on under the previous Rent Allowance (RA) based system.
The RA housing benefit system will continue to run on in parallel with LHA for a transitional period. At the time of writing, the Department for Work and Pensions has not defined how long the older RA system will continue to operate, but it is reasonable to assume that existing RA claimants will eventually be integrated into a single LHA system for both fairness and ease of administration.
For the benefit of the many landlords and agents that will continue to work with claimants under the previous RA system, we present an outline of the workings of this system.
Rent Officer determinations
Housing benefit will not always meet the full cost of the rent, for example where the rent is deemed to exceed the market rent, or where the proposed accommodation is substantially larger than the tenant/claimant’s needs within housing benefit regulations.
When assessing a housing benefit claim under the previous RA system, local authorities had to refer all claims (after 15th January 1989) to the Rent Officer who would use local knowledge or visit the property and determine the appropriate level of RA payment to the claimant. By contrast, Rent Officer determinations are unnecessary under LHA as the standard rents payable are all pre-defined within each Broad Rental Market Area.
Only one referral per year is normally allowed, but a further referral must be made to the Rent Officer when: ●● there is a renewal claim and the last decision did not take place within the last twelve months ●● there are certain changes in the claimant’s circumstances that may affect their entitlement to benefit A relevant change of circumstances may be one of the following: • a change in the number of occupiers (except in a hostel) • a child reaches the age of 10 or 16 • if the composition of the household changes • a change in the condition of the property that is substantial • a substantial change in the terms of the tenancy, but not just a change in rent
Pre-Tenancy Determinations
The Rent Service was required to provide prospective RA housing benefit claimants who are thinking of moving, and existing housing benefit claimants who are thinking of renewing their tenancies, with an indication of the maximum rent that would be paid for a particular property under the housing benefit scheme. This is called aPre-Tenancy Determination.
A Pre-Tenancy Determination (PTD) does not exist under the newer Local Housing Allowance scheme as the local LHA levels are pre-defined by the Rent Officer.
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Calculating the amount of Rent Allowance payable
In order to determine the amount of Rent Allowance (RA) payable on the particular property, the Rent Officer will consider such things as: • the rent being sought, and what services are included in the rent, • the number of rooms in the dwelling, • the local rent levels, • how many persons comprise the household, and • the length and terms of the tenancy.
The Rent Officer will firstly decide how much the property is worth in the rental market on the assumption that no-one entitled to housing benefit had sought or is seeking the tenancy (this is the Market Rent Determination). Account will be taken of the Government’s size criteria regulations, which specify the number of living rooms and bedrooms that are appropriate to the claimant’s household. If the property is too large, a rent for the appropriate sized property will be determined as the claimant will be considered to be ‘over accommodated’. The rules are strictly laid down and the Rent Officer has no discretion to vary them no matter what the circumstances are. The rules allow one bedroom* or other room that could be used as a bedroom for each of the following: • a married couple or an unmarried couple living together as man and wife • a person who is 16 or over • two children of the same sex, or two children who are less than 10 years old • a child (defined as a person under 16 years of age)
*A household is also allowed to have one other room if it comprises one, two or three persons or two other rooms if there are four, five or six persons or three other rooms if there are more than six persons.
The Rent Officer may still consider the rent to be exceptionally high for housing benefit purposes (e.g. a luxury flat) and will in that event determine a rent which is not exceptionally high and is appropriate for housing benefit purposes. This is called theAppropriate Rent.
The Rent Officer is also required to decide, in all cases, how much is generally paid in the area for a property with the correct number of rooms suitable for living in, for the prospective tenant’s circumstances. This is termed the Local Reference Rent (LRR).
Should the prospective tenant be under 35 years old, the Rent Officer will (except in exceptional cases e.g. a claimant under 16 years old) also be required to determine how much is generally paid in the locality for a single room with shared kitchen and toilet, with or without a shared lounge, and ignoring any food provided. This is the Single Room Rent.
In making the final determination, the Rent Officer may make a number of decisions, before advising the local authority of the maximum eligible rent payable for benefit purposes. The maximum eligible rent for housing benefit will be calculated by the local authority as follows: ●● Where the appropriate rent is at or below the local reference rent, the maximum eligible rent for housing benefit will be the appropriate rent. (Note: In this case, the Rent Officer will not advise the local reference rent) ●● Where the appropriate rent exceeds the local reference rent, the maximum eligible rent for housing benefit will be the local reference rent Claimants can ask the local authority for a statement of reasons to explain their housing benefit determination. If the claimant disagrees with the benefit decision, the local authority can be asked to look at it again. A leaflet detailing this appeal or reconsideration process is available from the local authority housing benefit office.
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Housing Benefit Payments
Tenants in the private sector normally have their housing benefit paid to them. The benefit payment can, in certain circumstances, be paid directly to the landlord or agent and in some circumstances the payment must be made directly to the landlord or agent (see ‘Direct Payments’ below).
As part of the Government’s welfare reform housing benefit payments have been capped and at the time of writing it is undertstood that it will be replaced over a transitional period by Universal Credit. See page 15-23 for more information.
Initial payment
The decision on a claim should be made within fourteen days of the completed claim10. If the authority is not able to make a decision within that time they must make a ‘payment on account’ provided the reason for not making the decision was not due to the claimant’s failure to provide information or evidence ‘without good cause’.11 In other words, provided that the claimant has provided the local authority with all the information required on the benefit application form, the claimant is entitled to receive interim payments until the claim can be properly decided. The local authority should do this automatically; it should not require the claimant to request payment.
Tenants should get the benefit application receipted to prove the date the claim was received.
Frequency and timing of payments
Authorities should take into consideration the needs of the claimant when deciding on the frequency of payments and payments will normally be paid every two weeks, four weeks or monthly. Payments can be paid weekly if the rent is payable weekly and it is considered by the authority to reduce the likelihood of overpayment or it is in best interests of the claimant.
The normal payment frequency is 4 weekly, although some local authorities are more flexible in this respect than others, and are able to provide weekly, biweekly or monthly payments to suit the tenancy payment terms. The first cheque paid will include any arrears of entitlement.
Following the first payment (whether on account or not), payments of benefit will be made at the end of the period to which they relate.
Direct payments
Under the older RA system, landlords and tenants could choose to have the housing benefit paid to them, and where there were rent arrears of eight weeks or more, the local authority was obliged to make these payments to the landlord.
When LHA was first introduced direct payments to the landlord were discouraged unless it could be shown that the tenant was not able to manage his/her own financial affairs. LHA can be paid directly if the claimant is vulnerable or there is other money owed to the landlord (8 weeks rent arrears or an Income Support payment deduction)12. The 2010 regulations allow local authorities slightly more discretion about whether to pay LHA directly to landlords if they consider it will assist the claimant in securing the tenancy. Because of the risk of recovery of overpayment (see below), there is significant risk attached to receiving housing benefit payments directly.
Landlord’s duty to report change of circumstances
Landlords and agents in receipt of direct payments should be aware that they are under a duty to report any changes of circumstances that may affect their claimants entitlement in writing to the local authority13. This requirement was imposed on landlords in an attempt to reduce the
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amount of housing benefit fraud. This regulation imposes a general duty on the claimant and anyone by whom, or on whose behalf, housing benefit may be received, to report any change of circumstances which are relevant to the authority. There is a further rule which states that landlords and agents must, on demand, supply information relevant to the circumstances of the letting and their interests in the property.
Landlords and agents should, therefore, notify the local authority if a tenant for whom they are receiving direct payments vacates one of their properties, if there is a change of rent, if someone moves in or out of the property or any other change of circumstance of which they are aware and that may affect the tenant’s entitlement. Notification must be in writing - telephoning the authority will not suffice and is considered to be bad practice as it does not provide a permanent record (for either party).
Recovery of overpayments
Overpayments of housing benefit generally occur either as the result of an error on behalf of the local authority or benefits agency, change in circumstances, or because of an erroneous or fraudulent claim. Local authorities are under increasing pressure to reduce the level of these overpayments, and recover them from the claimants, landlords or agent to whom they were paid. The housing benefit legislation allows overpayments to be recovered from the person to whom they were paid. This means that where a landlord or agent receives, or has received housing benefit payments directly, the local authority may decide to recover the overpayment from the person who received the payment originally. Recovery can take the form of a statutory demand, or may even be recovered from payments being made to the same landlord or agent on behalf of a different claimant.
In order to determine whether or not the overpayment is recoverable by the authority and from whom it may be recovered, it is necessary for the local authority to determine the cause or causes of the overpayment. An overpayment caused by an official error is not normally recoverable14. An ‘official error’ is a mistake made by the authority, benefit agency, or employment service and where the fact that a payment was an overpayment could not reasonably have been known. For tenants in the private rented sector, this is the only occasion when an overpayment is not recoverable. An example here would be notifying the local authority that the tenant has left. If further payments are received the landlord or agent “ought reasonably” to have known they were overpayments as they had told the local authority the tenant had gone. Such a payment would therefore be recoverable. If the overpayment is a result of a mistake in calculating the benefit then it may not be obvious as an error and so not be recoverable.
Where an overpayment is made due to erroneous information from the claimant or other third party the overpayment will be recoverable. Where an overpayment is not legally recoverable, the local authority may still request a repayment from the claimant although in these circumstances there is no legal obligation on the claimant to make the repayment.
The rules regarding recovery of overpayments are prescribed within sections 99-107 of the Housing Benefit Regulations. These have been revised several times, most recently in 2001 and 2006. The current position is that the recovery of overpayment can occur: • where overpayment arose in consequence of a misrepresentation of or a failure to disclose a material fact ... in which case repayment should be sought from the person who misrepresented or failed to disclose that material fact. • where overpayment arose in consequence of an official error, ... in which case repayment should be sought from the claimant or person receiving the payment if he/ she could reasonably have been expected to realise that it was an overpayment. N.B. Recovery of overpayments can also occur in agency situations, against an agent who collects rent on a property (and passes the rent onto the landlord) even where the agent no longer manages or has any ongoing business relationship with that landlord or property.
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Notice of determination of recoverable overpayment
The notice requires specific details, information and rights to be included. If this information is not given within the notice, then the notice is not valid and any subsequent recovery claimmay be rendered invalid15. The simple issue of an invoice, without any determination is not sufficient. Following a case involving Haringey Council it was decided that the notices do not have to include all the items listed in the regulations provided the person does not suffer any hardship as a result of their omission.
The notice of determination should provide: • a statement that there is a recoverable overpayment • the reason why there is a recoverable overpayment • the amount of the recoverable overpayment • how the recoverable overpayment was calculated • the period to which the overpayment relates • where recovery is to be made by deduction from a rent allowance or rebate, the fact and the amount of the deduction. The notifications should also tell the person affected of the person’s right to apply fora written statement of reasons. The notice must also tell the person affected that he can seek a reconsideration by applying within one month of the notice (covered in more detail in the following section).
Guidance issued to local authorities regarding recovery of overpayments require the authorities to send a minimum of two letters requesting payment be sent within fourteen days and the letters should contain full details of the overpayment calculations. Proceedings for recovery should not commence until the person’s right of appeal has lapsed (minimum one month).
Time limit
There are no specific restrictions contained within the regulations regarding the length of time that an overpayment may be recovered by the local authority. In practice, the legal time limit to recover such debts is six years (five years in Scotland)16.
Recovery from payments of other claimants
Local authorities not only have the power to recover overpayments from a directly paid landlord of a particular claimant but may also reclaim from payments made on behalf of other claimants if the person to whom the benefit is paid is the same. Section 16 of the Social Security Administration (Fraud) Act 1997 provides that overpayments may be recovered from payments made direct to a third party, normally a landlord or agent, to be recovered from other benefit paid to the third party. As well as including other housing benefit claimants this also includes deduction from the landlord’s own housing benefit allowance.
If the recovery is from the benefit the agent would have received from another tenant, that other tenant is considered to have paid their rent by the amount the payment was reduced. Thus, where overpayments are recovered from another tenant’s benefit payments, that other tenant’s rental liability will have been deemed to have been met. The effect of these measures is that rent arrears will not accrue and it will not be possible for landlords to use that part of the rent arrears as a ground to obtain possession from the other tenant.
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Rights of Appeal and the Appeal process
Many decisions made by the local authority regarding housing benefit may be appealed by a person affected by the decision - the ‘affected person’. Where a landlord or agent is receiving direct payments they will be an affected person and will be, therefore, entitled to use the appeal process. As an ‘affected person’, the local authority must inform the landlord or agent regarding any matter that relates to direct payment or recovery of overpayment sought from the landlord or agent. Appeals are commonly made in this way about whether there is an overpayment, whether or not it is recoverable and, if so, whether it should be recovered from the landlord or agent or recovered at all. If a deduction is being made from the tenant’s housing benefit allowance and not sought from the landlord or agent, only the tenant can appeal.
Appeal process
An affected person is entitled to request a written statement from the authority detailing the reason for the decision. The authority should respond within two weeks, or as soon as reasonably practical. Having received a written statement the affected person can request a reconsideration or an appeal. Requests have to be made within one month of the initial notification. If a statement of reasons is requested, the one month stops for however long the local authority takes to provide a statement of reasons. At the reconsideration the authority will have to take into consideration what the affected person has written in their letter, and will make further contact if they require more information and decide whether or not they think that the decision should be reversed or changed. Each affected person will then be notified of the decision within fourteen days. At this point the authority will again inform affected people of their right to appeal against the decision.
Where a person affected is not satisfied with the result of the reconsideration a request can be made for an appeal before the Appeals Service. The Appeals Service should hear the case where the request was in writing and: ●● gives the ground for the appeal, and ●● is received within one month of the notification of the result of the reconsideration. The request must be signed by an affected person. The ‘standard’ appeal will be dealt with by paperwork, something like the accelerated possession procedure. However any party has the right to request an oral hearing. Each party should be provided with 14 days notice of the oral hearing date. At an oral hearing each party can present their side of the story, can bring somebody with them for moral support, can be represented by a solicitor, can call witnesses and may question each other’s witnesses. The Appeals Service is made up of legally qualified people whose whole job is dealing with benefit appeals.
If satisfaction is still not reached, the affected person can apply for the Appeals Service to set aside its decision but only if a relevant document was not received by a person affected, an affected person was absent from the hearing or the interests of justice require it. This request must be made within 13 weeks. Finally, an Appeals Service decision may be appealed to the Social Security Commissioners on a point of law.
Maladministration
Where a party (tenant, landlord or agent) feels that the administration of housing benefit is being poorly or incorrectly carried out, or the appeal / reconsideration process has not been fairly or properly administered, there is a separate procedure provided by the Local Government Ombudsman. The Ombudsman can review the case and, if necessary, direct the local authority to pay damages to the injured party (contact address given in Appendix A).
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Administration of housing benefit by landlords and agents
The administration of housing benefit claimants by landlords and agents is becoming increasingly problematic for a number of reasons: • Risk of recovery of overpayments from the landlord or agent • Restrictions in the level of housing benefit paid (especially for the under-35s) • Poor administration of housing benefit by many local authorities It is vital that the landlord or agent who wishes to accept housing benefit claimants as tenants is well-briefed as to the risks and how to avoid or reduce them.
These issues even affect those landlords and agents who normally would not choose to deal with housing benefit claimants; the tenant may involuntarily become a housing benefit claimant if he loses his regular employment. Also, in some cases, a tenant will not volunteer the information and a landlord may not be aware that a particular tenant is receiving housing benefit until some later stage.
Claim Procedure
Since housing benefit and other social security benefits are administered by the local authority, or by a private sector contractor on behalf of the local authority, the general claims procedures can vary between local authorities. It can be useful to contact your local authority in order to understand how benefit claims will be processed, which forms and other information tenants will require, and how long it will typically take to process the claim.
Most local authorities will also have a housing benefit information section on their website and landlords should be aware of the local LHA rent levels when setting rents for claimants.
Bear in mind that the housing benefit department will not generally discuss a claimant’s claim with the landlord or agent for data protection reasons unless a data protection consent form has been signed by the claimant.
Speed and accuracy are important factors to all parties when the applicant prepares his housing benefit claim; the right to payment on account only commences once a valid claim together with all the required information has been lodged. According to statistics released by the DWP; on average, over 60% of all housing benefit claim forms are defective.
Evidence required
The housing benefit application will generally require the tenant to furnish certain evidence in support of his claim. Typically, this might include evidence of the rent and it may be necessary to supply the tenant with a copy of the tenancy agreement or rent book.
Management Agreement
Where the letting is managed by an agent, the agent is advised to include a suitable clause in the management agreement or terms of business making provision for recovery of overpayment of housing benefit from the landlord, in situations where recovery is being sought from or imposed on the agent. Since a claim for repayment may occur up to six years after the date of the original housing benefit payment, it is important that this recovery provision or clause ‘survives’ the termination of the original management agreement.
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Risk Reduction
There are several steps that the landlord and agent can take when renting to housing benefit claimants:
1) TENANT SELECTION. Like any other letting, tenants on housing benefit need to be carefully vetted. Despite being on low income, it is important that the tenant is considered to be sufficiently trustworthy that rent payments will be received on time, that the property will be well cared for, and that the general obligations of the tenancy agreement will be honoured.
Insurance policies covering the property and rents received will normally have stipulations with regard to tenant vetting (often with additional provisions for housing benefit applicants) and these stipulations need to be carefully read and followed. Tenants with County Court Judgements - CCJs (Sheriff Court Judgements - SCJs in Scotland) entered on the CCJ (SCJ) register are to be treated with extreme caution since this suggests a poor payment history.
2) DIRECT PAYMENTS OF HOUSING BENEFIT. Many landlords of housing benefit claimants automatically request that payments are made directly to the landlord from the housing benefit office. However, as discussed above (Risk - recovery of overpayments), this policy can turn out to be a mixed blessing. Landlords risk substantial recoveries of overpayments for claimant fraud of which they are often totally unaware.
Many advisers (including the National Landlords Association) are now recommending that direct payment of housing benefit from a local authority is to be avoided (except as a temporary expedient). Tenants should be relied upon to make their contractual rent payments from the housing benefit received, or other tenants selected who are a better credit risk.
An example situation where it might be advisable to accept direct payments is when the rent falls into arrears. Direct payment provides a method for the landlord to obtain payment but this method should be regarded merely as a temporary expedient. If the landlord continues to accept direct payments as a long term arrangement, the financial risks posed by the housing benefit recovery provisions will increase accordingly.
3) DEPOSITS. Due to the incidence of tenants simply disappearing (often leaving rent arrears) or moving without notice, landlords may wish to carry a deposit to balance this risk. The amount of deposit that can be taken is limited to five weeks’ rent under the Tenant Fees Act 2019. See Letting Factsheet 51 for more information.
4) GUARANTOR AGREEMENT. Many landlords now insist that the housing benefit claimant provides a guarantor to underwrite the rent and the other obligations under the tenancy agreement due to the difficulty of recovery of any such outstanding balances at the end of the tenancy. The dilapidation deposit is often not sufficient to cover these balances.
A guarantor or surety with a good financial history is used to underpin the tenant’s financial obligations. As a last resort, debts can then be recovered from the guarantor by legal action if necessary. Most bona fide tenants are able to find a suitable person (normally a relative or close friend) who is willing to stand as guarantor.
The guarantor agreement should be carefully drafted to include any extensions or renewal of the tenancy. The agreement should also contain a clause allowing the landlord or agent to recover any overpayments of housing benefit, either during the currency of the tenancy or up to six years thereafter. The financial obligations should be carefully explained to the guarantor.
5) INSURANCE. Alternatively, the landlord can take out appropriate insurance which can guarantee the rent payments should the tenant default. Read any policy terms carefully.
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Protecting Against ‘Clawback’
Although most of the housing benefit regulations are felt to be fair and equitable, it is widely acknowledged that the powers of a local authority to demand repayment of overpayments often make unfair demands on landlords and agents in situations where the tenant is clearly responsible for the overpayments (by not notifying the local authority of a change in circumstances).
It is therefore entirely justifiable in such situations that landlords and agents will seek means to protect themselves against abuse of these powers by the local authority and some possible solutions are discussed below. These measures are protective and not to be confused with other creative solutions designed to deceive or defraud a local authority into making false benefit payments.
The following measures are suggested: • Avoid direct payments altogether (i.e. tenants receive housing benefit) • Set up a separate limited company purely to receive, process and then pay out again rent payments from housing benefit claimants. In the event of a receiving a significantly high repayment claim from the local authority, the company, having no significant assets would be unable to pay and could be wound up at minimal loss to the parties concerned. The local authority would be obliged to pursue the claimant for the arrears. • Use a trustworthy third party to receive the rent (e.g. a grandparent or the tenant’s guarantor). The local authority may, instead of making payments to the claimant, make the payments instead to a person assigned for this purpose by the claimant. • In the case of an agent, the agent could reduce his liability by arranging to have all direct payments to be paid directly to the landlord. In this case, it would be necessary to explain the risk of clawback to the landlord.
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Common Problems and Solutions
Delays in receiving housing benefit
One of the most frequent problems is the delay in getting the housing benefit claims processed and receiving the payments. Though the delays are typically less with LHA than RA, both can be affected. The delay can be caused by many different problems: • Defective housing benefit claims. Nationally, on average, 60% of housing benefit claims are defective (i.e. forms incomplete, local authority does not have the required information to process the claim etc.) • General inefficiency and delay in administration by the local authority.
Solutions:
• If necessary, assist the tenant to complete the housing benefit form and check the completed application and supporting paperwork before the claim is lodged. The landlord or agent then profits by understanding better the tenant’s circumstances and knowing that the application was properly completed. • Maintain close contact with your housing benefit office. If necessary, follow up the application periodically. • Insist on an interim payment on account within 14 days of lodging a complete and valid claim (see previous section entitled ‘Housing Benefit Payments’).
Tenant’s circumstances change
A change in the tenant’s circumstances can, in some cases, alter the tenant’s eligibility to receive housing benefit. The first that the landlord or agent may know of this is when the housing benefit payments stop arriving.
Furthermore, landlords are under a legal duty to report change of circumstances that may affect their claimant’s entitlement in writing to the local authority.
Solutions:
Landlords must be extremely vigilant and aware of their tenant’s circumstances so as to avoid any liability under these provisions. The revised wording of Regulation 101 should remove the problem of the landlord not wanting to report fraud for fear of a recovery action. Now if there are grounds for fraud and the landlord was not involved it is unlikely they can approach the landlord even if payments were made directly to the landlord.
Disclosure of information regarding the tenant’s claim
Frustrating though it may be, the local authority will not normally discuss the housing benefit claim without the written authority of the claimant.
Solutions:
The solution is straightforward; prepare a separate form of authority, signed in advance by the tenant which authorises the local authority to discuss details of the specified individual’s benefit claim with the landlord or agent. Alternatively, such a provision can be included as a clause within the tenancy agreement.
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Tenant does not pay the housing benefit on to the landlord It is not uncommon for the tenant, following receipt of the initial, and often sizeable, rent cheque, to abscond with the rent so that it never reaches the landlord.
Solutions:
• If the tenant is clearly unable to manage his/her own financial affairs, it is possible to ask the local authority to make the initial rent cheque payable to the landlord or agent. A local authority has the discretion to make this initial payment payable direct to the landlord or agent (see section above entitled ‘Direct Payments’). • Ensure that any lettings to housing benefit claimants are underpinned by a guarantor - this tends to make the tenant more wary of defaulting on the rent payments. • Since housing benefit is intended as an allowance to be used by the claimant to pay his rent, it is in theory possible to take action against a defaulting tenant for fraud. To date, however, landlords have not been successful in winning such actions.
Rent reduced by the Rent Officer
Rules introduced in 1996 (the so-called ‘single room rent’ rules) mean that the housing benefit payable to young people under the age of 25 is restricted to the single room rate. This is the average rate, determined by Rent Officers, for non self-contained accommodation in the area. The problem is that bedsits, traditionally occupied by young people of limited means, generally command slightly higher rents than a single room in a shared house, leaving either tenant or landlord or both with a shortfall. Other types of claimant may also suffer shortfalls in the benefit payable if the rent determination by the rent officer results in a benefit level lower than the rent payable (see section entitled ‘Referrals and Determinations’).
Solutions:
The solutions are: • Be aware of the local single room rents • The tenant makes up the shortfall from his own means or negotiates a lower rent with the landlord. • Encourage the claimant to appeal the rent determination, or to apply for a Discretionary Hardship Payment.
Lost Records
The local authority claims to have no record of claim or form.
Solution:
Ask for receipts when handing over any form, and keep copies of all written correspondence.
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Other Obligations for Landlords and Anti-Fraud Measures
The Social Security Administration (Fraud) Act 1997 which came into force in 1997 is aimed at tightening up procedures so that it is more difficult for both landlords and tenants to defraud the benefit system.
Provision of information
Powers to obtain certain information from landlords have been granted to local authorities. The Housing Benefit (Information from Landlords and Agents) Regulations 1997, requires that, where requested, the landlord or agent must provide information relating to all properties owned by the same landlord where the landlord is receiving direct payment and where the authority is suspicious. This information can then be checked against information already held. Failure to comply attracts a fine of up to £1,000.
The Housing Benefit and Council Tax Benefit (General Amendment (No. 2) Regulations 1997 and also came into force on 3rd November, 1997 reinforce the responsibility on landlords to report any change in circumstance to the authorities. The Regulations also require that the local authority only permit direct payment to be made to a landlord who is a ‘fit and proper’ landlord. Authorities now have the power to suspend payment of housing benefit ‘where it appears to the authority that a question has arisen as to whether the conditions of entitlement to housing benefit are fulfilled’. This may mean that landlords could face periods where no rent is forthcoming pending an investigation into the tenant’s claim.
Redirection of mail
In an attempt to reduce the occurrence of fraudulent overpayments, regulations now require that post offices and Royal Mail do not redirect mail that is sent by the Benefits Agency or housing benefits office. Such correspondence must be returned to the benefits office concerned.
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Universal Credit
The UK benefits system has grown into a complex mis-mash comprising of six different benefits (income support, income-based jobseeker’s allowance, income-related employment and support allowance, housing benefit, child tax credit and working tax credit) that has been running in different forms for over 50 years. Administered by three distinct bodies; local Councils, DWP (Department for Work and Pensions) and HMRC (HM Revenue and Customs), the benefit system was considered ‘broken’ and in need of radical overhaul. In addition, such a segmented and complex system was open to abuse and fraud which was taking place on an endemic scale.
In 2008, losses caused by benefit fraud and other errors amounted to £900 million with a rising trend. By 2016, figures released by the DWP show that in 2016/17 the total amount of money lost to “overpayments” – which counts both fraud and errors by staff – stood at £3.6 billion, up £300 million from the previous year. Although some of the losses were recovered (around 1.1 billion) it left net losses of £2.5 billion - an estimated 2.1% of the benefits budget. The old benefits system also had high running costs, depending on large armies of staff to administer the payments within local authorities and various other government departments.
Universal Credit was introduced under the Welfare Reform Act 2012 and has been streamlined to run under a single centralised computer system administered by DWP with local officers holding responsibility for each regional area. Universal Credit, billed as representing the biggest change to the welfare system since the 1940s, merges this old system of six benefits into one. It was designed to make claiming benefits simpler. A single payment is paid directly into claimants’ bank accounts to cover whichever level of award they are entitled to. Claimants then must pay costs, such as rent, out of their Universal Credit payment. The new benefit can be claimed by people whether they are unemployed, sick, disabled, single parents, members of a couple etc. Any income (from other benefits, pensions, earnings) they have is considered against their potential entitlement and offset where appropriate.
Universal Credit has not been without its problems. Such a radical change has required whole new teams of people to be trained and the implementation of an online system so that claimants, administrators and other persons affected can manage the new system. Governments are notoriously poor at implementing IT infrastructure, so there have been numerous complaints about the new software and delayed or missed payments. Universal Credit is not immune to fraud - at the time of writing, Universal Credit fraud amounts to some £50 million annually, but DWP estimate that Universal Credit will reduce fraud and error by 1.5 billion when fully rolled out. Whether that claim materialises remains to be seen.
Management Approaches
In a similar way to the old benefit system that it replaces, agents and landlords will need to take care when dealing with Universal Credit claimants, as many of these individuals will have poor financial management skills and low or irregular income.
In many areas, landlords and agents who deal with a significant percentage of tenants who are in receipt of benefits and allowances will be well advised to familiarise themselves with the new procedures and rules for Universal Credit and seek out reliable sources of information, advice and support, as there will surely be problems during the early years of the Universal Credit implementation. There are a considerable number of landlords and agents who have specialised in this sector and developed close contact with local housing benefit officers who can help them iron out problems and help tenants navigate the system. The Universal Credit system is equally complex with its own new sets of rules and structures and landlords will benefit from developing good procedures at an early stage. Some landlords have specialised in this sector to such a degree that they have been able to maximise rent receipts and structure their lettings accordingly. For example, a landlord who lets a property to multiple households is currently, in some situations, able to charge a higher overall rent than letting to a single household -even within the new Universal Credit structure - so some landlords are exploiting these loopholes, and being a complex system, such aberrations are likely to remain.
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An alternative style will exist for landlords or agents who do not generally accept benefit claimants as tenants due to diverse reasons such as lack of suitable properties, aversion to risk, or lack of time or knowledge of this market. This sector may still encounter issues with Universal Credit (for example where the tenant loses his/her job) and may need to deal with the system on an adhoc basis. Issues such as recovery of overpayments have exposed agents and landlords to considerable risk under the old housing benefit system and similar liabilities will occur under Universal Credit. In such cases, a safer approach would be to ensure that a reliable guarantor is in place as soon as possible which will alleviate the landlord from having to deal with the intricacies of the tenant’s poor financial situation.
Universal Credit Implementation
The implementation of Universal Credit started back in 2012 with the introduction of the Welfare Reform Act 2012 and the implementation of the new Universal Credit system was expected to be finalised by 2017. In practice, there have been many delays in the rollout, and the new target date (at the time of writing) for full implementation is now December 2023. By this time, some 7/8 million claimants are expected to be on the system.
1. Firstly, there is currently no automatic transfer from existing benefits to Universal Credit. The transition onto Universal Credit will, in many cases, be triggered by a new claim, or a change in circumstances to an existing claim. DWP calls this Natural Migration. The long-term aim is to replace all existing “legacy claims” with Universal Credit for “working age” claimants. “Working age” is currently 65 but will change to 66 in 2020 and 67 by 2025 with the result that more & more people will be forced to claim Universal Credit rather than claiming the much more generous Pension Credit. At the basic level Pension Credit is over £500 pcm more generous. 2. Starting in July/August 2019 there will be a pilot of 10,000 cases which will be used as another “test & learn” exercise for the DWP. Whatever the outcome, the “Managed Migration” stage will start 1 year later, when DWP will issue “Migration Notices” to all remaining “legacy benefit” claimants. The notices will spell out that, within 3 months, the claimant will have transferred over to Universal Credit. A deadline date will be given e.g. 30th September. By that date the new claim for Universal Credit Full Service (the full online implementation of Universal Credit) should have been made. If it’s not, the legacy benefit still ceases on the 29th of September. DWP will give a “grace period” of 1 more month, during which the Universal Credit claim should be made. If it is, it will be paid from 30th September. If there’s a further delay beyond the 1 month, Universal Credit will only be paid from the date of the new claim and will not be backdated. So, it’s imperative claimants and their landlords are alerted to these issues and act accordingly. 3. ID Checks. Before making a new Universal Credit claim, the claimant will need to register and open a new online account with DWP. It will be necessary to furnish proof of identity using a driving licence or passport etc. 4. Starting Claims. Whereas the old benefits system was often administered by visits to the Council office or Job Centre, Universal Credit will be largely handled by an online system. Claimants may receive some initial assistance by attending an interview at a Job Centre Plus office and will be given access to a telephone helpline to speak directly to DWP case officers. However, they will be expected to make their online claim and afterwards make an appointment to see their Work Coach. During that interview they’ll be expected to make what is known as their “claimant commitment”. In the case of couples, both partners are expected to claim and make a commitment, although, if there’s young children the primary carer’s commitment might be limited to hours within school times. 5. Payments. The Universal Credit scheme will, at present, only be paid monthly in arrears to a single recipient in each household. Previously, benefits were paid weekly, fortnightly or four-weekly to individual claimants. There will generally be a single lump sum payment, including the “housing costs element” calculated in similar fashion to Local Housing Allowance, although there are some differences.
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6. Complex Claims. Universal Credit was initially only used for claimants with simple and straightforward circumstances. As the rollout continues and expands, Universal Credit will start to encompass claimants with disabilities, dependants and other more complex situations. 7. Benefit Cap. Government introduced a cap for anyone receiving benefits. In London, a cap or ceiling of £23,000 will apply, and £20,000 for all other areas (£1116 per month for a single person with children). There are various exemptions to this cap - e.g. People on Personal Independence Payments (PIP), Disability Living Allowance (Care) etc.
The Claim
Now that every area in the UK is covered by Full Service delivery, the aim, over the next 4 years, is to make everyone claim, and manage their claim, using the DWP’s online system. Claimants will create their own online account with a username, password and other validation characters. Universal Credit is a new combined benefit for working age claimants (currently defined as anyone aged between 18 and 65 years), paid to households. Importantly, jobless claimants will need to certify that they are available for work (claimant commitment) except in exempted cases (e.g. receiving PIP, disability allowances, primary carers etc.).
It will replace the various existing legacy benefits, such as housing benefit, Income Support, Job Seekers Allowance, Employment Support Allowance and Tax Credits administered by HMRC. Universal Credit will be calculated using a number of different components, including basic personal allowance, allowances for children and disability, caring duties; and importantly, for PRS landlords, housing costs towards the contractual rent.
Because it is a means-tested benefit, claimants will be required to declare their current sources of income, and savings, in addition to household and family circumstances and other relevant financial commitments. Although Universal Credit will replace housing benefit and local housing allowance (LHA), claimants will still be required to furnish evidence of any existing tenancy agreement and rent charge, where their claim includes housing costs. How much Universal Credit is received will also depend on a person’s current income. Under Universal Credit a claimant’s circumstances will be automatically assessed every month and payments, received during the month, will be considered and offset, either in part or in full, against the initial benefit entitlement. If income varies every month e.g. due to changing earnings, the claimant’s Universal Credit award will alter to reflect this.
Awards will normally be continuous so long as the claimant is eligible to receive Universal Credit. So, unlike housing benefit and LHA, a change of property in itself should not trigger a new claim; it will simply be treated as change in circumstances.
Digital by Design
The intention is, eventually Universal Credit will be operated under an online service called Universal Credit Full Service (UCFS). Claimants will be asked to set up an online account which they can access using a password. This account will be used both to set up the new Universal Credit claim, and notify the DWP of any change of circumstance or other material fact, associated with their claim or account. The online Universal Credit account also includes a ‘journal’ feature, which the claimant can use to give permission for the DWP to discuss details of the claim with other ‘affected parties’ such as the landlord/letting agent of his/her property. The journal will also be used by claimants to converse with their Work Coach or Account Manager. Complaints and Appeals can also be lodged via the journal.
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Timing and ‘Whole Month’ Rule
Under Universal Credit, most payments will be processed and paid on a monthly basis, rather than on a weekly, two or four-weekly basis, as occurred previously. Each claim under Universal Credit will have a Benefit Assessment Period (BAP) which will be related to the date of the original claim. For example, if someone claims Universal Credit for the first time on 4th March 2019 their BAP will run from the 4th of March to 3rd April. Payment will usually be made 7 days later on the 10th . Once the BAP and “payment date” are established they remain the same every month.
It usually takes around five weeks after making the initial claim, to receive the first payment. But, if the tenant needs financial assistance to help with living costs whilst waiting for the first payment, the claimant can apply for an advance payment which is now assessed on 100% of the claimant’s notional award. The payment however takes the form of a loan, which DWP sets out to recover within 12 months, by making monthly deductions from the claimant’s benefit award. The wait before the first payment is made up of a one-month assessment period and up to 7 days for the payment to reach the claimant’s account.
Example: The claimant makes a new Universal Credit claim on 1st September. The first assessment period runs for one month to 30th September, with a new BAP beginning on 1st October. The claimant gets paid on 7th October and on the 7th of each month after that. Any income received during the BAP is applied to effectively reduce the award of Universal Credit. If on the 20th October the tenant vacates the property, the change is applied from the first day in that BAP i.e. 1st October meaning no housing costs will be paid for that period. Contrastingly, if the claimant moved to a new property on the 20th of October the change would equally be applied from 1st October applying what’s known as the “whole month rule.”
Transition Payments
Transitional Payment Protection can be applied, if during the transition from “legacy claim” to Universal Credit Full Service there exists the possibility of the claimant receiving less money. During the past 5 years, many tenants transferring have lost out, sometimes substantial sums with no protection available. Payments were introduced in April 2018 as a sweetener to help claimants with the transition into Universal Credit and additional delays that the claimant may incur as they move from weekly to monthly in arrears. Claimants will continue to be paid Housing Benefit by their local authority for the first two weeks of their Universal Credit claim. The payment is intended to soften the financial impact of waiting for that initial first payment. It’s also disregarded by DWP when assessing Universal Credit, even though it is received, in addition, to their normal monthly entitlement, and does not have to be repaid.
Advance Payments
Introduced in early 2018, claimants can receive additional support whilst they wait for their first payment. Whilst waiting (around 5 weeks) for their initial Universal Credit claim to process, claimants can apply for an advance payment to help with living costs. Claimants will receive the advance payment as a loan. It is intended that only one advance payment should be allowed, and recouped from the claimant’s benefit payments over the next twelve months. The most you can get as an advance is the amount of the first estimated payment. The decision to make the advance payment will normally be made on the same day Universal Credit is first applied for.
Household Rule
A ‘household’ is a fundamental unit of claim under Universal Credit, and couples living together must therefore claim jointly, and will be paid jointly. Any dependent children they may have are included in their assessment. Children over the age of 18 and having left education can claim Universal Credit. Other adults in a household will be paid separately.
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Change of Circumstances
All Universal Credit claimants are required to report changes in circumstances so the right amount of entitlements can be paid to ensure the claimant is getting the correct amount each month. A claim can be stopped or reduced if the claimant does not report a change of income or circumstances straight away. Since all these changes can lead to a change of entitlement, this can also directly affect the landlord’s rental income - especially if the landlord is in receipt of direct payments (known as Alternative Payment Arrangement (APA) in the new system). Changes can include: • finding or finishing a job • having a child • moving in with a partner (or break-up or change of partner) • starting to care for a child • moving to a new address • changing bank details • the claimant’s rent going up or down • changes to the claimant’s health condition • a clamaint becoming too ill to work or meet their work coach • changes to the claimant’s earnings (only if you’re self-employed) Under the Universal Credit ‘whole month’ rule, a change in circumstances will affect payments in the BAP the change occurs. The change should also be reported during the BAP or as soon as possible thereafter. If the change is reported before the end of a particular BAP, the new circumstances will be applied during the whole of that benefit period, and the amount payable will be adjusted accordingly.
Example 1: John and Susan are a couple, and also joint tenants under a tenancy. They claim Universal Credit and have a Benefit Assessment Period (BAP) which runs from 6th to the 5th of each month. They are paid on the 12th of each month. Susan gives birth to a baby on 1st September and informs the DWP. The revised claim would be effective from 6th August as long as she reports the birth no later than 5th September (ie within the current BAP), otherwise the revised claim would be effective from the beginning of the BAP when she reports the birth. The couple are entitled to an extra £231.67 allowance (being the additional allowance for a child at the time of writing) and they should then receive the full extra amount on their next Universal Credit payment date even though the change only applied in the last five days of the period.
The same principle will apply to any change in circumstances. Where the change leads to an increase in benefits, the Universal Credit system will produce additional pro-rated benefit during the transition month. Conversely, where the change results in a reduction of the total benefits payable, this will operate negatively.
Example 2: Ann and Belinda are a couple receiving Universal Credit, renting a small house, and in receipt of housing payments to cover the rent of £800 per month. Ann needs to live closer to work and they find a new flat which is cheaper and whose rent is also covered under Universal Credit housing payments. They decide to move on the 1st March. Their BAP runs from 15th to the 14th . Under the ‘whole month’ rule, their UC will be paid at the lower rent figure from 15th February, so on the next payment date (21st March) the new lower rent is paid - even though their outgoing landlord will still expect payments on the old house at the higher rent during the period of notice. Ann and Belinda will, in this case, suffer a shortfall as the Feb/March BAP is paid at the lower figure.
Housing Costs
Claimants can claim for money to help pay housing costs. The amount paid depends on age and circumstances. The payment can cover rent and some service charges in the case of Social Rented property.
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Rent Limits. For private sector tenants, their Universal Credit additional amount for housing costs will be whichever is lower out of their actual contractual costs or the Local Housing Allowance rate.
Earnings and Benefits Calculators
There are various online calculators that can be used to help claimants decide what payments they are entitled to. At the time of writing, these sites include ‘Entitledto’ and ‘Policy in Practice.’
Universal Credit payment will reduce gradually as claimants earn more (to provide positive incentive to look for and stay in work) - for every £1 earned payment reduces by 63p. There are numerous helpful examples of how earnings and allowances are affected - see the Government Universal Credit website www.gov.uk for more information.
Claimant Commitment and Sanctions
There will be more conditionality and tougher sanctions for Universal Credit than for existing benefits. All claimants must accept a “claimant commitment” as a condition of receiving Universal Credit. There are four categories of claimant commitment depending largely on the claimant’s capability for work or work-related activity. In the default case (no disabilities and includes claimants who are lone parents and couples with children over the age of five) claimants will be subject to a training or work search requirement (including writing a cv, attending a training course, making applications and registering with employment agencies) and a work availability requirement. Additionally, there is a concept of “in-work conditionality” where working claimants are required to look for work unless they are working at least 35 hours a week - unless a reduced availability for work has been agreed. The claimant commitment also requires the claimant to: • pay their rent and other housing costs • report any changes in circumstances Sanctions may be imposed on claimants subject to all work-related requirements. This may result in a reduction of the standard award, for a period up to a maximum of three years, depending on the number and regularity of such failures. Generally, sanction reductions will apply to the value of the adult personal allowance, and will not affect payments for housing costs or child allowance.
Rights of Appeal
There is a right of appeal against decisions concerning entitlement to Universal Credit, as with the current benefits and tax credits system. Claimants have the right to request that a previous decision can be reviewed. DWP decision makers can revise retrospectively a decision which is later shown as erroneous.
Stage 1: Claimant will need to ask for ‘mandatory reconsideration’ - this means the DWP will look at the decision again. The claimant will need to contact them - ideally within 1 month of the date of the decision or this can be extended in specific extenuating circumstances to 13 months. At the initial stage, the appeal will be considered by the Universal Credit District Manager.
Stage 2: The claimant can then take the challenge to an independent tribunal if they still disagree with the DWP or if the DWP won’t let them make a late mandatory reconsideration request.
Data Protection
The DWP has incorporated a strict approach on data protection and disclosure of information so that few people outside the DWP will have regular access to the claimant’s online account under Universal Credit. Since a claimant tenant will have access to their own information via their online account, they can share the information from their account with their landlord if they
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wish, and this will contain information about housing payments made. In practice, vulnerable people may not have the necessary smartphone or other computer equipment, nor the ability to retain their account and password information, so the claimant can also ask, via the journal, face-to-face or telephone, the Service Centre to provide explicit consent to share their personal information with the landlord (or other representative).
At present, such consent to share information with a third party is not enduring under Universal Credit, (as it was with the previous benefits system) - the consent will remain active purely for up to two claim periods (the current claim period and the subsequent one) and will have to be renewed for any access in any future claim period. The Universal Credit philosophy is that, in the first instance, the landlord should liaise with the tenant about any aspect of their claim, rather than having full and direct access to the tenant’s Universal Credit account. There is no general system of notifying private landlords that their tenants have made a claim, or the status of any payments under the claim - except where an APA is in place under which direct payment is made to the landlord. The DWP will not share any data about the claim unless they have the tenant’s consent.
Universal Credit Payments
Payment Frequency - by default, payments are made to the claimant, monthly in arrears. But DWP will allow exceptions in specific circumstances (called APA) and these are discussed further below.
As explained earlier in this section, it usually takes around five weeks to receive the first payment as the wait for the first payment is made up of a one month assessment period and up to 7 days for the payment to reach the claimant’s account. The original thinking under Universal Credit was that the tenant should be responsible for his/her own finances and that direct payments to landlords (as under the previous Housing Benefit system) would be withdrawn. This proved to be unworkable and met with significant resistance from landlords, so a more flexible system was introduced at end of 2017.
Alternative Payment Arrangements (APAs)
This scheme is now available for a private sector (PRS) tenant providing that the APA criteria have been met. This can firstly apply in situations where a similar arrangement was in place under an earlier Housing Benefit claim and these direct payments can be re-introduced at the discretion of the claimant’s work coach.
Alternatively, APA can be requested by either landlord or tenant. If the tenant is having financial difficulties or is behind on the rent, the tenant or the landlord may be able to apply for an Alternative Payment Arrangement (APA). The decision will be made by the work coach and a claimant has seven days to challenge this arrangement. Direct payments to landlords are discussed in more detail in the section below. Depending on the claimant’s circumstances, the claimant could get an APA to: • get their rent paid directly to the landlord • get paid more frequently than once a month • receive split payments, if the claimant is part of a couple
Housing and Private Landlord Issues
Most private sector landlords will see little change with the introduction of Universal Credit if they only deal with benefit claimants on an occasional and indirect basis and do not receive direct or managed rent payments.
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Landlords specialising in dealing with tenants receiving benefits, or having vulnerable tenants are more likely to be receiving the benefits directly from DWP and will be more greatly affected by the change to the new Universal Credit benefits system as this will necessarily require more liaison with DWP and case workers. An excellent starting point for agents and landlords to familiarise themselves with the new Universal Credit system is the online guidance pages on the www.gov.uk website: ‘Universal Credit and rented housing: guide for landlords.’
Applying for Direct Payments
The DWP had needed to make significant changes to Universal Credit to allow direct payments to landlords. The original intention to pay Universal Credit exclusively to claimants proved unpopular and unworkable. In most cases, the landlord needs to be kept informed of the status of the tenant’s Universal Credit claim and this will impact on what payments the landlord will receive.
Form UC47 - Managed Payment to Landlord
Currently, care must be taken under Universal Credit rules with regard to data protection. When making an APA request, landlords are directed to complete a Managed Payment to Landlord Form (form UC47). There are different versions of this form, and different methods for returning the information to DWP, and the process can be problematic. At the time of writing, APA requests using form UC47 cannot be sent by unsecure or ordinary email as it is likely that they will be deleted without acknowledgement for security reasons so the form currently needs to be posted. Landlords who want to know more about how the system works or who have any other non- case specific question, should contact their local Jobcentre Plus engagement team or Partnership Manager. A list of current Universal Credit district or partnership managers is published on the government website - see Sources of Further Information below.
A managed payment may be made direct to a landlord where a tenant has rent arrears of two months or more or the tenant has continually underpaid their rent over a period of time and has accrued arrears amounting to one month’s rent or more. Each case is considered and discussed with the claimant and the DWP will look at individual circumstances. If a claimant tenant declares a change in circumstances, e.g. change in address, income etc, the managed payment to the landlord would be automatically reviewed. Where there is an address change the managed payment will be stopped automatically and a notification issued to the landlord and the claimant.
The Future
Despite many legislative changes and a booming UK economy for the last ten years, housing benefit remains the source of rent payments for a significant number of landlords. However, the system has not been efficiently administered over these years and many landlords and letting agents refuse to accept housing benefit applicants. Many landlords have endured payment delays and substantial rent loss as a result of housing benefit fraud and the subsequent recovery of overpayments. A tightening economic climate means that future restrictions in housing benefit levels are imminent, as Government looks to reduce expenditure. The introduction of the Universal Credit system aims to simplify the current system and help claimants to become more independent. Universal Credit will be paid directly to the tenant and it is understood that, although direct payment to the landlord will not be completely abolished, any request by the landlord or the tenant will need to go through a review process to ensure certain requirements are met. Reducing the amount of housing benefit available to tenants will make it more difficult for them to meet their rent payments. Concerns have been raised with regard to rent arrears increasing as a result of benefit payments being made to tenants and whether landlords will be willing to rent property to benefit tenants following the introduction of Universal Credit.
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References
1. Social Security Administration Act 1992, c5, s.134 - the legislation makes it clear that housing benefit is now to be considered as an allowance (or a rent rebate in the case of local authority tenants) to assist the claimant to pay his rent.
2. The Housing Benefit (General) Regulations 2006, SI 2006 No. 213. The text of these regulations is on the government information website at www.legislation.gov.uk
3. The Housing Benefit (Amendment) Regulations 2010, SI No.2835 and 2011, SI No.1736. The text of these regulations is on the government information website at www.legislation.gov.uk
4. Housing Benefit Regulations 2006, Regulation 9(1)b
5. Housing Benefit Regulations 2006, Regulation 7(6) & Schedule 7, Part 2
6. Local Housing Allowance (LHA) was introduced in nine ‘Pathfinder’ areas in 2003/4: Blackpool, Brighton & Hove, Conwy, Coventry, Edinburgh, Leeds, Lewisham, North East Lincolnshire and Teignbridge. In 2004 a further eight pilot areas were added in Lewisham, Teignbridge, Coventry, Brighton and Hove, NE Lincolnshire, Edinburgh, Conwy and Leeds. From April 2005 a further nine councils started to implement the LHA, starting with Wandsworth, followed by East Riding, St Helens, Argyll and Bute, South Norfolk, Norwich, Pembrokeshire, Guildford and Salford.
7. Housing Benefit Regulations 2006, Regulation 96 (3A)
8. The Rent Officer (Housing Benefit Functions) Order 1997 Schedule 2 Size Criteria
9. HB Reg 13D(2), and Schedule 3B paragraph 1(1)(a) of the Rent Officers (HB Functions) Order 1997
10. Housing Benefit Regulations 2006, Reg. 91(3)
11. Housing Benefit Regulations 2006, Reg. 93
12. Housing Benefit Regulations 2006, Regs. 95 & 96
13. Housing Benefit Regulations 2006, Regs. 88
14. Housing Benefit Regulations 2006, Reg. 100
15. Warwick D.C. v Freeman, 1994
16. Limitation Act 1980 In Scotland: Prescription and Limitation (Scotland) Act 1973
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Sources of Further Information
• Local authority / local housing benefit administration office • Housing Benefit and Council Tax Reduction Legislation. Provides a full text of the main housing benefit regulations and contains guidance on the interpretation of the regulations. - Published by the Child Poverty Action Group (CPAG). Revised annually. (www.cpag.org.uk) • Housing Benefit, Universal Credit and Local Housing Allowance Regulations available from the Goverment legislation website at: www.legislation.gov.uk • Housing Benefit and Council Tax Benefit Guidance Manual - available online at: www. gov.uk/government/collections/housing-benefit-and-council-tax-benefit-manual • Local Housing Allowance Guidance Manual - available online at: www.gov.uk/ government/collections/local-housing-allowance-information-for-local-authorities • Guide to Housing Benefit and Council Tax Benefit by John Zebedee and Martin Ward. ISBN 978-1-903595-93-0 (2011/12 edition) - published by Shelter. Revised annually. • Universal Credit Guidance: -- Advance First Payments - www.gov.uk/universal-credit/get-an-advance-first- payment -- Housing Costs and Universal Credit - www.gov.uk/housing-and-universal- credit -- Universal Credit Rent Limits - www.gov.uk/government/publications/ universal-credit-and-rented-housing--2/universal-credit-and-rented-housing- guide-for-landlords -- Universal Credit Landlord information on housing costs for 18 to 21 year olds- www.gov.uk/government/publications/universal-credit-and-rented-housing- -2/universal-credit-housing-costs-for-18-to-21-year-olds -- Change of Circumstances - www.gov.uk/universal-credit/changes-of- circumstances -- Rights of Appeal - www.citizensadvice.org.uk/benefits/universal-credit/ problems-with-your-payment/challenging-a-universal-credit-decision- mandatory-consideration/ -- Rights of Appeal Tribunal - www.citizensadvice.org.uk/benefits/universal- credit/problems-with-your-payment/appealing-a-universal-credit-decision-at- a-tribunal/ -- List of Partnership Managers - www.gov.uk/government/publications/dwp- partnerships -- RLA Guidance on Universal Credit - www.rla.org.uk/guides/universal-credit. shtml
• Universal Credit Websites and Books: -- Universal Credit Advice - www.universalcreditadvice.com -- CPAG Book - Guide to Universal Credit ISBN: 978 1 910715 33 8
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16. Houses in Multiple Occupation
Introduction
There are special rules that apply to the letting of houses where there are a number of individual occupiers who do not form members of the same family or household - these are known as houses in multiple occupation or ‘HMOs’. HMOs typically include houses converted for bedsits, flats or as a hostel but, since the introduction of the provisions of the Housing Act 2004, other properties not conventionally thought of as HMOs will be included. Estimates suggest that around 640,000 homes in England (excluding self-contained flats) are HMOs.
Government surveys have revealed that the risk of deaths or injury from fires in HMOs is often higher than average (especially in the larger multi-storey properties). Special rules have, therefore, been introduced to control this type of housing. Local authorities have powers to require landlords to bring HMOs up to a standard which is fit for the number of people living in the property. They may require the landlord to provide extra sanitary fittings, heating installations, facilities for storing, preparing and cooking food. There are also fire safety provisions that require there to be adequate fire precautions and means of escape.
When managing, converting or acquiring an HMO (or potential HMO), there will be a number of issues to consider:
- HMO Definition - a landlord will need to firstly decide whether particular safety or planning legislation applies to the property.
- HMO Licensing and Registration Schemes - all local authorities have now implemented HMO licensing schemes which require landlords to licence certain types of houses in multiple occupation. A fee will normally be payable and the authority may require that certain safety improvements are carried out or are already in place. An inspection will normally be carried out under the Housing Health and Safety Rating System (HHSRS) which may require improvement works to be carried out as a condition of the licence.
- HMO Management Regulations - special rules apply to the management of HMOs. These put particular duties on both the landlord (or person managing the property) and the tenants. These new rules derive from regulations under the Housing Act 2004.
- HMO Planning - new rules introduced in 2010 require landlords to apply for planning permission for new shared housing where three or more people live.
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HMO Registration and Licensing Schemes: an overview
The rules concerning the management of HMOs by landlords, agents and the local authority (LA) with respect to health and safety, and licensing, have been completely rewritten with the provisions introduced by the Housing Act 2004.
These provisions introduced:
- a revised legal definition of ‘house in multiple occupation’ for safety and registration purposes - the introduction of mandatory licensing of certain types of HMOs across all LAs - the introduction of a system of additional HMO licensing (discretionary) - a new set of enforcement and control provisions relating to HMOs - a set of minimum amenity standards for HMOs which must be met - a new method of assessing fitness and safety in HMOs - the HHSRS system - a powerful set of penalties on landlords including ‘rent repayment orders’ etc.
High enforcement penalties and other heavy-handed rights and powers granted to both tenants and local authorities under the HMO legislation will mean that many landlords and agents should approach ownership and management of HMOs with great caution. Also, improvement works required by HMO amenity standards and following HHSRS audit could prove prohibitively expensive for certain properties. The operation of the Housing Health and Safety Rating System (HHSRS) is explained in more detail in chapter 11.
HMO Definitions
Broadly speaking, a house in multiple occupation (HMO) exists where there are 3 or more occupiers living in the same property who are not members of the same household, and are sharing basic amenities within the living accommodation. The full definition of ‘house in multiple occupation’ within the Housing Act 2004 is considerably more complex and is explained in more detail on page 16-5. A set of management regulations applies to these landlords and their properties (see page 16-12).
MANDATORY LICENSING. ‘Higher risk’ HMOs (i.e. any HMO which is on 3 or more storeys with 5 or more occupiers who form two or more households and share facilities) are required to be licensed with the local authority starting from 6th April 2006 - the mandatory licensing scheme. From 1st October 2018 the ‘3 or more storey’ requirement will be removed and mandatory licensing will apply to any HMO with 5 or more occupiers. The local authority is required to carry out a fitness rating assessment (HHSRS) of all such properties within 5 years of issuing the licence stipulating any improvement works that are required under either national standards or local standards (i.e. in the opinion of the local authority inspector). The system is explained below.
ADDITIONAL LICENSING. Powers under the Housing Act 2004 allow the definition for HMO licensing to be further extended to other categories of HMO if the local authority can show that there is a local need. Certain conditions on the local authority have to be met.
Scotland and Wales
Scotland and Wales now have their own legislative bodies and have decided to adopt their own forms of HMO control and licensing. Mandatory HMO licensing was introduced in Scotland on a progressive basis starting in 2000 with quite different rules. Wales has followed a broadly similar legislative framework to the English system but amenity standards, forms, management procedures and starting dates are all different. Practitioners should consult their own local authorities in these areas for more information.
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Licensing Schemes
The Housing Act 2004 introduced three forms of licensing:
- mandatory licensing of HMOs for properties with 5 or more people forming two or more households who share facilities AND with 3 or more storeys up to 1st October 2018. From this date ‘the 3 or more storey’ requirement will be removed. - additional licensing of other categories of HMOs at the discretion of the local authority. - selective licensing of all privately rented properties in designated local areas. This type of licensing is envisaged for areas of low demand and areas which have particular problems with anti-social behaviour. This latter category does not require the property to be an HMO, and is included in this chapter simply for reason of completeness.
Mandatory licensing
The Labour Government made a manifesto commitment to introduce mandatory HMO licensing to the private rented sector in order to protect tenants, and raise both health and safety and management levels in the sector. Part 2 of the Housing Act 2004 introduced these provisions.
From April 2006, HMO landlords of certain properties will be required to apply to the local authority for a licence. Government initially decided to limit mandatory licensing to higher risk properties - i.e. HMOs with three or more storeys. From 1st October 2018 mandatory licensing will apply to all HMOs with five or more occupiers forming two or more households who share facilties such as toilet, bathroom or kitchen.
Additional licensing
A local authority may introduce an additional HMO licensing scheme giving local authorities the right to license other categories of HMO. The local authority may exercise this discretion if they feel that there is a particular problem with those types of HMO in the locality, or particular circumstances which justify additional licensing. For example, the local authority may have a large student and HMO population in low level properties, and decide to impose a HMO licensing requirement on all types of HMOs occupied by four or more people.
Certain conditions have to be met, such as consulting affected parties and notifying them once a decision has been taken. Regulations prescribe certain categories of properties and other conditions (Housing Act 2004, section 56) under which the Government will automatically approve additional HMO licensing schemes. In all other cases, local authorities are required to consult with affected parties for a minimum of 10 weeks and demonstrate that additional licensing will assist in dealing with the specific problem.
A local authority is then required to give three months’ notice prior to the introduction of any additional licensing scheme. Additional licensing schemes will be time-limited to five years. If the specific local housing conditions are resolved, schemes can be revoked. If problems continue, then a local authority must seek further approval before extending the scheme.
HMO licences
• will run for a maximum of 5 years although they can be for a shorter period • relate to a particular single property, owned by a specified landlord. A new licence application is required if the property changes ownership. • HMOs owned by public bodies and educational institutions will be exempted from licensing.
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The HMO Licence
What is in a licence?
The following, mandatory, conditions must be applied to all licences: • the licence will specify minimum room sizes and the maximum number of people who may live in the HMO - see Letting Factsheet 40 for more information; • a valid current gas safety certificate, which is renewed annually, must be provided and electrical appliances and furniture supplied must be kept in a safe condition; • to ensure that smoke alarms are installed in the house for properties in Wales or on each storey of a house in England on which there is a room used wholly or partly as living accommodation and keep them in proper working order; • to ensure that carbon monoxide alarms are installed in any room used as living accommodation in a house in England which contains a solid fuel burning combustion appliance and to keep such alarm in proper working order; • each occupier must have a written statement of the terms on which they occupy the property, for example, a tenancy agreement; • an inspection of the property will be required under the Housing Health and Safety Rating System (HHSRS). Following the inspection, the local authority may specify a schedule of improvement works that are required to be carried out to ensure that the property is fit for the number of people expected to be living there. Local housing authorities may also apply the following additional conditions: • restrictions or prohibitions on the use of parts of the HMO by occupants; • a requirement that the condition of the property, its contents, and all facilities and amenities, bathroom and toilets for example, are in good working order; • proof that all electrical appliances and furniture are kept in a safe condition and proof that all smoke and carbon monoxide alarms are correctly positioned and installed; • a requirement for specified works or repairs to be carried out within a particular timeframe; • a requirement that the responsible person attends an approved training course.
Penalties for non-compliance
It is an offence if the landlord or person in control of the property fails to apply for a licence for a licensable property or allows a property to be occupied by more people than are permitted under the licence.
A fine of up to £20,000 may be imposed. In addition, breaking any of the licence conditions can result in fines of up to £5,000.
Rent repayment orders
A tenant living in a property that should have been licensed, but was not, can apply to the Residential Property Tribunal to claim back any rent they have paid during the unlicensed period - up to a limit of 12 months. Councils can also reclaim any housing benefit that has been paid during the time the property was without a licence.
Eviction protection
A tenant living in a property that should have been licensed, but was not, receives extra security of tenure. The landlord cannot serve a valid section 21 notice (to regain possession of the property) until a licence has been applied for (although the landlord may still apply for possession for other tenancy breaches under section 8 of the Housing Act 1988).
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Definition of ‘house in multiple occupation’
There are four different definitions for an HMO - each relating to a different set of legislation involving HMOs:
- Housing Act 2004: The definition of a ‘house in multiple occupation’ or HMO in section 254 of the Act (see below) is complex involving “the standard test”, “the self-contained flat test” and “the converted building test”. In addition local authorities may make declarations as to the HMO status under section 255 of the new Act. This definition remains unclear and unhelpful but a more detailed interpretation is given in the section below.
- Housing Act 1985: The previous definition of HMO was given in the Housing Act 1985 but this definition has now been replaced by the newer Housing Act 2004 above. Under s.345 of the Housing Act 1985, a ‘house in multiple occupation’ was simply defined as ‘a house (or flat) occupied by persons who do not form a single household’.
- Planning: For planning purposes, an HMO is defined as a house which is occupied by a group of three or more people who constitute more than one household, or by any number of people who do not live together communally as a single household. Where there is a change of use, planning permission will be required prior to the change. See section entitled: ‘HMO Planning Control’ on page 16-16 for more detail.
- Council Tax: Special rules apply to HMOs when determining who is responsible for payment of the council tax on a particular property. See chapter 14 (Tax issues) for more information on the HMO council tax rules .
Definition of HMO
Under the Housing Act 2004, a ‘House in Multiple Occupation’ means a building, or part of a building (e.g. a flat): ●● a shared house or a shared individual flat which is occupied by three or more people from more than one household and in which more than one household shares an amenity (or the building lacks an amenity) such as a bathroom, toilet or cooking facilities; or, ●● a house in bedsits which is occupied by more than one household and which is a converted building which does not entirely comprise self contained flats (whether or not there is also a sharing or lack of amenities ); or ●● a building which comprises entirely of converted self-contained flats and the standard of conversion does not meet, at a minimum, that required by the 1991 Building Regulation and more than one third of the flats are occupied under short tenancies (s.257 of the Act). And is ‘occupied’ by more than one household: • as their only or main residence , or, • as a refuge by persons escaping domestic violence, or, • during term time by students, or, • for some other purpose that is prescribed in regulations. And the households comprise: • families (including single persons and co-habiting couples (whether or not of the opposite sex), or, any other prescribed relationship (see ‘Household’ below) • more than two single persons (or any other exemptions in the Act - see below)
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Exemptions
Some buildings will not be HMOs for licensing purposes even if they meet the requirements of the HMO definition. These include: • Any building which is occupied by only two persons who form two households (e.g. two unrelated persons sharing a flat). • A building managed or owned by a public body (such as the police or the NHS) or an LHA or a Registered Social Landlord. • Where the residential accommodation is ancillary to the principal use of the building e.g. religious establishments, conference centres etc. • Student halls of residence, where the universities are specified as exempt by order. • Buildings regulated otherwise than under the Act, such as care homes, bail hostels etc., and the description of which are specified in regulations. • Buildings entirely occupied by freeholders or long leaseholders. • Buildings occupied by a resident landlord with up to 2 tenants N.B. These exemptions do not apply to Part 1 of the Act (HHSRS).
Household
The term ‘household’ is defined in s.258 of the Housing Act 2004. It includes situations where: • persons in the property are all members of the same family. This will include people who are married, or living together, and relatives such a child, step-child, foster-child, grandchild, parent, step-parent, foster-parent, grandparent, brother, half-brother, sister, half-sister, aunt, uncle, niece, nephew, and cousin. • relationships such as fostering, carers and domestic staff (and other relationships that may be prescribed by regulations).
Amenities
One of the requirements for an HMO which is a shared house or flat, is that the persons occupying the living accommodation share one or more basic amenities (or the living accommodation is lacking in one or more basic amenities). Also if you have to go outside your front door to get to the amenity, even if for your exclusive use, it will not count as self contained, potentially making the whole building an HMO.
‘Basic amenities’ is defined as: • a toilet, • personal washing facilities (i.e. a handbasin, shower or bath) • cooking facilities
Storeys
Current legislation states that licensing will apply to HMOs comprising three storeys or more (and occupied by five or more people). In this context, ‘storey’ will include any basement or attic used wholly or partly as living accommodation, or as an integral part of the HMO (i.e. as an entrance). A mezzanine floor used wholly or mainly for living accommodation will also count.
Also, where the accommodation is situated above (or below) business premises, then the extra storeys comprising the business premises will be included when counting storeys.
From 1st October 2018 the ‘3 or more storeys’ requirement will be removed widening the scope of properties subject to mandatory licensing and landlords will need to apply for licences by 1st October 2018 to be compliant.
N.B. For more detail on the definition of an HMO, please refer toLetting Factsheet No. 40
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HMO Definition: - examples
Example 1
A three storey Victorian house is rented to six unrelated sharers.
Comment. This is an HMO under the Housing Act 2004 definition. Furthermore, mandatory licensing will apply.
Example 2
A single tenant rents a bed-sit in a converted 4 storey house. The house has been converted into self-contained accommodation for the landlord, and three bedsits in the upper floors (which are all occupied). There are five occupiers in the building (including the landlord).
Comment. The individual bedsit will not be an HMO, but the whole building qualifies as an HMO and will require a licence under mandatory licensing.
Example 3
Two single people (a man and a woman) live in a two-bedroomed self-contained flat in a newly- built block of flats. The two people are simply flat mates and not co-habiting. The woman is pregnant.
Comment: The flat is not occupied as a HMO for two reasons: -- there are only two people sharing -- the flat is newly built. (i.e. it meets the 1991 Building Regulations) However, in this example, the building will become an HMO once the pregnant woman gives birth to her child. This is because, at this point, there will be more than two persons living in the flat, and two separate households. At this level, mandatory licensing will not be required, but the HMO management regulations will apply to this flat.
Interesting (purely from the legal point of view), this house would cease to be a HMO if a relationship were to develop between the two tenants and they were to become co-habitees (co- habitees are part of the same household). This situation demonstrates the difficulty of working with this legislation - a landlord is expected to be aware of the intimate details of his tenants’ relationships in order to determine whether HMO legislation applies to a particular property. Equally, the arrival of newly born children can also alter the status of the property for the purposes of the HMO definition.
Example 4
A landlord lets two flats in a two-storey Victorian terrace property. The property (originally a single house) was converted into two self-contained flats in the 1980s. Both flats are currently occupied by single people.
Comment: The individual flats themselves will not be HMOs, but the whole building could potentially be an HMO under the category ‘building comprising self-contained flats’ where the conversion does not meet the 1991 building regulations (s.257 of the Act). At the time of writing, section 257 is not covered by mandatory licensing.
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Licensing Procedure
Applying for a licence
For HMOs where licensing is required, either the owner or manager of the HMO will need to apply to the local authority for a licence. Typically, HMO licensing will be the responsibility of the Housing Standards team, or the Environmental Health department within the local authority.
The landlord is required to complete an HMO licensing application form. This is generally a lengthy document (typically 15-30 pages) which asks all sorts of details about the property, its facilities, the owners and (if different) the manager of the HMO. Often sketch plans or scale plans of the property will need to accompany the licence application, plus a copy of the tenancy agreement, electrical and gas safety checks, test reports relating to the fire detection system, and lastly but definitely not least, advance payment of the licensing fee.
Licence Fee
One of the more controversial aspects of HMO licensing is that the local authorities have been allowed to set their own levels of licensing fees. Understandably, the variation between local authorities has been enormous with fees ranging from £100 to £1700. The local authority is also permitted to make additional charges for ‘fit and proper person’ checks, inspection visits, additional correspondence etc. However, the local authority is not permitted to set a fee level so high that the local authority produces a significant ‘profit’ from its licence fee income.
Granting the licence
The local authority must give a licence if it is satisfied that: • the HMO is reasonably suitable for occupation by the number of people allowed under the licence • the proposed licence holder is a ‘fit and proper person’ • the proposed licence holder is the most appropriate person to hold the licence • the proposed manager, if there is one, is a ‘fit and proper person’ • the proposed management arrangements are satisfactory • the person involved in the management of the HMO is competent • the financial structures for the management are suitable. The licence can be granted for any period of time up to five years. Once granted, the licence will specify the maximum number of people that may live in the HMO. It will also include conditions such as the carrying out of regular annual gas safety checks, and periodic tests to any fire detection or alarm system. If any of the conditions are disregarded, then the local authority is entitled to revoke the licence.
Suitable for occupation
The local authority is required to check that the property meets certain standards, and will carry out an inspection of the property under the Housing Healh and Safety Rating System (HHSRS). The local authority must be satisfied that the property is suitable for occupation by the number of people specified by the landlord on the licence application. The property must also meet national prescribed standards (see Amenity Standards on page 16-10) which set standards for the number, type and quality of bathrooms, toilets, washbasins, showers, food storage, cooking facilities etc. The local authority may also set its own more stringent standards for ‘suitability for occupation’.
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‘Fit and proper person’ checks
The council will carry out checks to make sure that the person applying for the licence is a fit and proper person. In deciding whether someone is fit and proper, the council must take into account: • any previous convictions relating to violence, sexual offences, drugs and fraud • whether the proposed licence holder has broken any laws relating to housing or landlord and tenant issues • whether the person has been found guilty of unlawful discrimination • whether the person has previously managed HMOs that have broken any approved code of practice in existence under s.233 of the Act (not yet in existence at time of writing). The local authority can also impose further conditions such as a requirement that the responsible person attends an approved training course.
Temporary Exemption Notices (TENs)
If a landlord or person in control of a property wishes to carry out conversion works (e.g. convert the HMO accommodation to self-contained flats), reduce the number of occupants, or otherwise stop operating it as an HMO, then he or she can apply for a Temporary Exemption Notice (TEN). This lasts for a maximum of three months, and ensures that a property in the process of being converted from an HMO does not need to be licensed. The local authority may only grant a TEN if it satisfied that the applicant is, or will shortly be, taking steps to ensure the HMO ceases to be subject to licensing. If the situation is not resolved at the expiry of the first TEN notice, then a second Temporary Exemption Notice can be issued.
When this runs out, the property must be licensed, become subject to an Interim Management Order, or cease to be an HMO. If an LHA refuses to grant a TEN the applicant may appeal to the Residential Property Tribunal, which can either uphold the LHA decision or reverse it.
Passporting registered HMOs into licensing
Regulations provide that where an HMO is registered under a previous local authority Registration Scheme with Control Provisions the property may be passported into licensing. A licence will be granted for the residual period of registration and at no cost to the grantee.
Code of practice
Government plans to publish a code of practice for the management of HMOs under section 233 of the Housing Act 2004.
A local authority may impose conditions requiring a landlord to attend a training course in relation to this code of practice. An HMO licence could also be revoked by the LHA if the owner or manager of the HMO breaches any part of the HMO code of practice.
Management Orders
The Housing Act 2004 introduces a set of management orders in a similar way to those existing previously within the Housing Act 1985. Effectively, these allow the local authority to take over the management of a property to protect the health, safety or welfare of persons occupying the house, or persons living in the vicinity. They can take effect for up to five years in order to effect improvements in order to bring the property up to the required standard. These management orders can be granted as either an Interim Management Order (IMO) or Final Management Order (FMO). Under these orders, the LHA is entitled to act as a landlord, collect the rent, pay bills and generally manage the property. For more information on these management orders, see Part 4 of the Housing Act 2004.
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Minimum Amenity Standards in Licensed HMOs
The Act provides minimum standards which local authorities are required to follow in order that the local authority may be satisfied that the house is reasonably suitable for occupation by a particular number of households or persons, before granting an HMO licence.
These are intended as national minimum standards but local schemes may provide higher requirements for shared facilities. Landlords or agents should check with their local authorities. Adjacent authorities have been urged to co-operate in maintaining comparable standards but differences are bound to occur. In brief the current requirements are as follows:-
Heating
The Regulations require that each unit in an HMO must be equipped with adequate means of space heating. This could take the form of radiators (as part of a central heating system), storage heaters, electric convector heaters etc. (the Regulations simply specify ‘adequate’).
Baths & toilets
Where all or some of the accommodation does not contain its own bath or toilet facilities, there will need to be at least, for all sharers:- ●● where there are up to four sharers, there must be at least one bathroom with a fixed bath or shower and a toilet (which may be situated in the bathroom) ●● where practical, one separate toilet with a wash basin with appropriate (e.g. tiled) splashback per 5 occupiers; ●● 1 bathroom with a bath or shower supplying cold and constant hot water per 5 occupiers; ●● all baths and washhand basins should be equipped with fixed taps providing a satisfactory supply of hot and cold water and ●● bathrooms should be adequately heated and ventilated. Where the above standards are not presently met the LA shall require them to be met within 3 years. Furthermore: ●● all bathrooms and toilets are to be of adequate size & layout; ●● all baths, toilets and wash hand basins are to be fit for the purpose and ●● all bathrooms and toilets are to be suitably located in relation to the living accommodation in the property. Where there are more than five occupiers in an HMO, then every unit of living accommodation must contain a wash handbasin with appropriate splashback.
Kitchens
Where some or all of the accommodation does not contain cooking facilities exclusive to each household, there shall be at least the following:- (other rules apply for accommodation with exclusive facilities) • a suitably located kitchen of such layout, size and equipment so as to adequately enable the occupants of the property to store, prepare and cook food; • the kitchen will be equipped with the following minimum equipment which is fit for the purpose: sinks with hot and cold water and draining boards, cookers, electrical sockets, kettles, food preparation work surfaces, cupboards, fridges with freezer compartments and refuse disposal facilities; • kitchens are to be fitted with extractor fans, fire blankets and, if necessary, appropriate fire doors.
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Fire precautions
Fire precaution equipment should be provided in communal areas in HMOs including kitchens, hallways and landings as considered appropriate. This, in practice, will mean to the satisfaction of the local fire service.
The Smoke and Carbon Monoxide (England) Regulations 2015 amend the requirement for smoke alarms in England and from 1st October 2015 landlords must ensure that properties in England have smoke alarms installed on each storey of the house on which there is a room used wholly or partly as living accommodation and carbon monoxide alarms must be installed in any room in the house which contains a solid fuel burning combustion appliance. The alarms should be checked prior to each new tenancy. Landlords of a licensed HMO in England must keep such alarms in proper working order and supply to the authority, on demand, a declaration as to the condition and position of such alarms.
Bedsits
These should have washing facilities, facilities for storing, preparing and cooking food including a kettle and a fridge, space heating and reasonable access to adequate toilet and bathing facilities.
Schedule of Amenity Standards in Relation to Number of Persons
1 - 4 persons At least 1 bathroom and 1 WC (the bathroom and WC may be combined) Wash hand basin (WHB) not required in bedrooms
5 persons 1 wash hand basin required in each unit of accommodation, plus 1 bathroom AND 1 separate WC with wash hand basin (but the WC can be contained within a second bathroom)
6 - 10 persons 1 wash hand basin required in each unit of accommodation, plus 2 bathrooms AND 2 WCs with wash hand basins (but one of the WCs can be contained within one of the bathrooms)
11 - 15 persons 1 wash hand basin required in each unit of accommodation, plus 3 bathrooms AND 3 WCs with wash hand basins (but two of the WCs can be contained within 2 of the bathrooms)
N.B. The current standards are set out in SI 2006 No.373. The standards are prescribed in regulations and may therefore be altered at will by Government.
Local authority standards
The Housing Act 2004 allows local authorities to prescribe local standards which are higher than those prescribed in the regulations (above). Under these powers, local authorities may prescribe standards for such amenities as: • the requirement for a cooker (or equivalent microwave oven) • storage sizes and characteristics of refrigerator and freezer space • space size standards for bedrooms, living rooms and kitchens • requirements that facilities for preparation, cooking and serving of food must comply with the requirements of the current Food Hygiene Regulations.
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HMO Management Regulations
The HMO Management Regulations are probably the most significant part of all the HMO legislation in terms of their impact on the majority of landlords and managing agents. Whereas licensing will, in most cases, only affect a small portion of all HMOs with three or more storeys, the Management Regulations apply in all HMO situations where there are more than two people living in a property (i.e. where the Housing Act 2004 HMO definition applies).
The Management of Houses in Multiple Occupation (England) Regulations 2006 (SI 372) came into force in April 2006 and replace earlier legislation which governed the management of Houses in Multiple Occupation (HMO) - The Housing (Management of Houses in Multiple Occupation) Regulations 1990. The Regulations include penalties of up to £5,000 for non-compliance. The Regulations require: ●● that any part of the house occupied by a resident is kept in good repair; ●● that there are adequate facilities for the number of occupants; ●● that fire alarms, fire safety equipment is properly maintained and regularly checked; ●● that all means of escape from fire are kept free from obstruction.
Scope and enforcement
The Regulations cover all categories of HMO defined in the Act with the exception of converted blocks of flats where the conversion was not compliant with the 1991 Building Regulations and less than two thirds are owner occupied (s257 Housing Act 2004).
Duty to maintain common parts etc.
The manager must ensure that all common parts of the property are maintained in good and clean decorative repair and safe and working condition and kept reasonably clear from obstruction. Particularly the manager should ensure that: ●● all handrails and banisters are at all times kept in good repair, and such additional handrails or banisters as are necessary for the safety of occupiers are provided; ●● any stair coverings are safely fixed and kept in good repair; ●● all windows and other means of ventilation within the common parts are kept in good repair; ●● the common parts are fitted with adequate light fittings that are available for use at all times by every occupier of the HMO; and ●● fixtures, fittings or appliances used in common by two or more households within the HMO are maintained in good and safe repair and in clean working order. The manager must also ensure that: ●● any garden belonging to the HMO is kept in a safe and tidy condition; and that outbuildings, yards and forecourts which are used in common by two or more households living within the HMO are maintained in repair, clean condition and good order; ●● boundary walls, fences and railings, in so far as they belong to the HMO, are kept and maintained in good and safe repair so as not to constitute a danger to occupiers. ●● If any part of the HMO is not in use, the manager shall ensure that such part, including any passage and staircase directly giving access to it, is kept reasonably clean and free from refuse and litter.
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Other landlord / manager duties
- CONTACT INFORMATION. The manager of the HMO must ensure that contact details (name, address and telephone contact number) are made available, and clearly and prominently displayed within the HMO.
- SAFETY MEASURES. The manager must ensure that all means of escape from fire in the property are kept free from obstruction and maintained in good order as should all fire alarms and equipment. The manager should ensure that the structure is designed and maintained in a safe condition, and also take all such measures to protect the occupiers from injury. Particularly the manager should ensure that any accessible roof, balcony or low windows are suitably protected.
- ESCAPE NOTICES. In properties with more than four occupants, the Regulations provide that fire escape notices should be clearly displayed.
- WATER SUPPLY AND DRAINAGE. The manager must ensure that the water supply and drainage system serving the property are maintained in a good, clean and working condition. More specifically all water fittings should be protected from frost and all water storage tanks should be provided with covers. The manager must not unreasonably cause either the water or drainage provision to be interrupted to any occupant.
- GAS AND ELECTRICITY. The manager must supply the local housing authority (LHA) within 7 days of receiving a written request with the latest gas safety certificate. Similarly, he/she must ensure every fixed electrical installation is inspected and tested at least every 5 years by a suitably qualified electrician and supply this to the LHA within 7 days of a written request. As with water and drainage, the supply of gas and electricity should not be unreasonably interrupted.
- DUTY TO MAINTAIN LIVING ACCOMMODATION. The manager must ensure that each unit of living accommodation within the HMO and any furniture supplied with it are in clean condition at the beginning of a person’s occupation of it. Also he/she must ensure, in relation to each part of the HMO that is used as living accommodation, that the internal structure is maintained in good repair; that any fixtures, fittings or appliances within the part are maintained in good repair and in clean working order; and that every window and other means of ventilation are kept in good repair.
- DUTY TO PROVIDE WASTE DISPOSAL FACILITIES. The manager must ensure that sufficient bins or other suitable receptacles are provided for the storage of refuse and litter pending their disposal; and that these are adequate for the requirements of each household occupying the HMO. Managers should make such further arrangements for the disposal of refuse and litter from the HMO as may be necessary, having regard to any service for such disposal provided by the local authority.
The ‘manager’ in relation to an HMO means the owner, or his agent; both can be held liable.
Tenant duties
HMO tenants have duties under the Regulations so that the landlord or his manager are not frustrated in performing their duties. In particular, HMO occupiers are required to: • allow the manager to enter and inspect the property at all reasonable times • take reasonable care to avoid causing damage to anything which the manager is under a duty to supply, maintain or repair under these Regulations; • store and dispose of litter in accordance with the arrangements made by the manager; and • comply with the reasonable instructions of the manager in respect of any means of escape from fire, the prevention of fire and the use of fire equipment. N.B. For more information on the HMO Management Regulations, see Letting Factsheet no. 41
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Management Issues
The HMO trap No.1
Many landlords do not fully understand the complex legislation surrounding HMOs, and are unaware that expenditure under the HMO legislation does not stop with the payments of the HMO licence fee. In fact, this is, in many cases, just the start of the process. Local authorities have the right to make extra charges for any extra correspondence, or inspections that they might wish or require to make. Furthermore, at some point following the landlord’s application for the HMO licence, the property may be inspected under the Housing Health Safety Rating System (HHSRS) system - this could conceivably happen up to five years following issue of the licence.
As a result of the HHSRS inspection, the landlord can be served with a document outlining any improvement works that the local authority may require under either national standards, or its own locally-made amenity standards. There are several recent cases where improvement works costing over £20,000 have been required on properties with four to six units of accommodation. Once served, the HMO improvement works are effectively mandatory, and the local authority has the powers, if necessary, to take over the management of the property and execute the works itself. Once licensed, the landlord does not necessarily have the right to evict tenants and choose to sell or redevelop the property into non-HMO accommodation - these actions can all be opposed by the local authority.
HMO trap No.2
In applying for HMO licensing and the various improvements required by the LHA housing standards team, certain types of building (seven or more occupiers) will require planning approval in order to operate the building as an HMO. This will incur further expense for the landlord, plus the problem of use registration. Once the building is registered for use as an HMO, the local authority can refuse a subsequent application to return the building to normal residential use. This has happened on occasion on some of the London boroughs where there is deemed to be a shortage of affordable accommodation for young people. Consequently, the building becomes trapped into HMO designation - which will affect resale values. There are anecdotal cases where buildings have decreased in value by 30-40% once landlords attempt to sell the property - a significant capital loss in today’s market.
Register of Licences (see SI 2006 373, para 11)
The Local Authority has a requirement to operate a register of licences which can be examined upon request. Some landlords and letting agents are finding that HMOs and HMO landlords are becoming targets of crime due to public nature of this register.
Person having control
Liability for licensing and the adherence to the various HMO Management regulations does not simply attach to the owner of the property.
Many parts of the legislation also apply to ‘person having control’ or ‘person managing’ the premises. Agents should therefore approach HMOs with great caution - they may become liable and subject to control orders and criminal penalties for infringements that they are not, or could not reasonably be aware of without detail inspection of the property and HMO legislation.
Agents should check whether the property requires a licence and, if so, that a suitable licence is in place when arranging the tenancy even if the agent is not collecting the rent or managing
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the property. The agent may still be liable even if the terms of business state that the landlord is responsible for licensing the property as the agent will have a duty where they meet the statutory definition of ‘person having control’ or ‘person managing’ the property under the Housing Act 2004 which includes receiving the rent on behalf of the landlord.
In a Magistrates court case London Borough of Camden prosecuted an agent for not having a licence for the property where they had only received the initial month’s rent prior to the start of the tenancy (but were not collecting the rents during the tenancy). Camden argued that the receipt of the first month’s rent made the agent a ‘person managing’ the property for the whole of the term of the tenancy. The agent argued that one receipt of rent before the start of the tenancy (October 2016) did not make the agent a ‘person managing’ the property later on (August 2017) and was not responsible for the breach. The District Judge, however, ruled in favour of Camden. The definition given to ‘person managing’ by the courts is very broad and it is not clear how long after a receipt of a single payment of rent an agent could continue to be ‘a person managing.’ The safest option would be for agents, including let only agents, to ensure a property that requires a licence has a licence before it is let to a tenant.
HHSRS and Amenity Standards
The Act allows a local authority to set higher HMO amenity and safety standards (suitability for number of persons) than those prescribed by central government. For example, some local authorities are asking for fire doors to be fitted to FM30 standards (30 minute fire resistance) to all internal doors in all types of HMO, plus a requirement for a fully-wired fire alarm system. It is likely that a landlord of a small two bedroomed flat or bungalow (let to three sharers) will find the costs of such fire measures excessive. He will either be unable to proceed with the letting, or if already let, will have such costs imposed. NB. This example assumes that the LHA have adopted extended licensing.
Similarly, under the recently introduced Housing Health and Safety Rating System (HHSRS), it is impossible in advance for property owners to know what safety and space standards will be required of the property (unlike the previous system of Fitness Standards which were more prescriptive). Only following the HHSRS inspection will the local authority inform the owner or manager what safety improvements are required. As outlined, earlier, it is not uncommon for landlords to be handed schedules for fire safety works, alarm installations and other mandatory improvements costing £10,000 - 20,000.
Management Regulations
Under these regulations, it is the duty of the manager of ANY HMO to display contact details, keep common parts in clean decorative repair, appliances in clean working order (i.e. including any cookers and vacuum cleaners) and keep any parts not in use clean and free from refuse and litter. Perhaps sensible for a large house of bedsits, but it arguably represents over-regulation for a small flat shared by two friends and a small child with threat of heavy criminal penalties!
HHSRS
Following the HHSRS inspection, the LHA have a number of enforcement options. It is too early to tell the normal pattern of such inspections, but it is reasonable to assume that many inspections will result in recommendations for improvement works, or issue of a hazard awareness notice. In these, and other more immediate enforcement methods (e.g. emergency remedial notice, demolition order etc.) there is the suggestion that such notices will be registered (as a Land Charge) against the property. This, in some instances, could cause the property to become blighted as such issues will be revealed during property searches when or before a property is sold. Although this issue receives little publicity at present, it is possible that owners could see significant losses in property values as a result of HHSRS activity, even though, for normal occupation, the house is perfectly and legally safe and acceptable.
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Building Regulations 2000 & Planning Control
Every few years the Building Regulations are updated. At the time of writing, the Building Regulations 2000 apply. Their main aim is to secure the health, safety, welfare and convenience of people in buildings of all types, and they are interpreted and policed by local Building Control officers.
The Regulations apply mostly to new buildings and major alterations, and therefore do not affect most HMOs. However they are also brought into force where there is:
a “material change of use”. For example, a building of three or more stories is to be converted into flats, or
a “material alteration” which includes work which would adversely affect the structure, the means of escape or fire spread within or outside the building. For instance, work on a third floor which interferes with the means of escape, or work to remove a load bearing wall which is next to the main staircase.
The local Building Control Officer can provide more detailed information on specific individual requirements. Where Building Regulations apply, any building work should be carried out ‘with proper materials and in a good workmanlike manner’.
Fire precautions: adequate means of escape
Current Building Regulations require that in any building of three storeys or more, and where any floor is more than 20 feet above ground level or street level, there should be an adequate means of escape in case of fire.
The necessary guidance is given in the Approved Codes in the Building Regulations (Approved Document B - see ‘Further Information’) which requires (amongst other things) the provision of protected escape routes from the building, standards of fire resistance for structural elements of the building, and measures to contain the spread of fire within and between buildings (such as fire resistant walls etc.)
Planning control for properties in England
The Planning Acts (and related legislation) regulate the use of buildings for planning purposes. They apply to: • houses in multiple occupation (HMOs); • buildings used as a hotel, boarding or guest house or for bed and breakfast purposes; • hostels, including accommodation for homeless persons. Where there is a change of use, either from or to an HMO, then permission for ‘change of use’ may be required.
Prior to April 2010, it used to be the case that, under the planning rules, a dwelling was classified as an HMO when it was occupied by a group of seven or more people who constituted more than one household. Where a property came within this definition, then the owner was required to apply to the local authority planning department for planning consent.
New rules took effect on 1st April 2010 under The Town and Country Planning (Use Classes) (Amendment) (England) Order 2010 whereby planning permission is required for any HMO housing in England which becomes newly-occupied by three or more unrelated people where a ‘material change’ of use of the property occurs.
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To establish whether the change is a material change all circumstances will be taken into account to consider whether the change will have a significant impact on residents in the area. Residential properties will fall into the ‘use classes’ below.
Class C3 Use
A house or a self contained flat occupied by a single person or a family will fall within Use Class C3. The C3 Use Class has no maximum number of persons provided they form a single household. Most residential property falls into the C3 Use Class e.g. any property that is not an HMO. Since 1st October 2010, under The Town and Country Planning (General Permitted Development) (Amendment) (No.2) (England) Order 2010 permitted development rights allow a change of use from a Class C3 to a Class C4 property in England without the need to apply for planning permission unless Article 4 Directions apply.
Class C4 Use
A small HMO or Flat in Multiple Occupation (FMO) is a house or flat lived in by between three and six unrelated individuals who share at least one amenity e.g. kitchen or bathroom and comprise of more than one household. A small HMO or FMO falls within Use Class C4 but this class does not include converted blocks of flats to which s257 of the Housing Act 2004 applies. Since 1st April 2010 permitted development rights have been introduced for properties in England allowing a change of use from a Class C4 to Class C3 without the need to apply for planning permission unless Article 4 Directions apply.
Sui Generis Use
A large HMO which comprises of non-self contained units (such as larger houses containing bedsit accommodation), which are occupied by more than six residents, is usually classed as a use on its own and is called a Sui Generis Use in planning terms. Large HMOs may require planning permission where there has been a change of use from a Class C3 or Class C4 to a large Sui Generis Use particularly where there is a material change in use.
Article 4 Directions
Local authorities can make Article 4 Directions in areas in England which take away the rights of permitted developments and in these areas planning permission will need to be obtained even if the property is changing between Use Classes C3 and C4. Enquiries should be made with the local authority as to whether planning permission is required.
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Other Legislation & Powers
Building Act 1984
If local authorities consider they need to act very fast they can also use the Building Act where premises are ‘prejudicial to health or a nuisance’. A Section 76 notice can be served on the landlord stating that the Council intends to put right certain defects and setting out the exact works. Nine days after serving the notice the Council can step in and do the works, unless a counter notice is served by the landlord.
The Fire Precautions Act 1971
With its system of fire certificates awarded by the local fire brigade this Act rarely applies to most HMOs. Unless they are hotels or boarding houses where more than six people receive board and lodging. However, Section 10 can apply to any HMO. This allows a fire officer to place an immediate prohibition or restriction order on a building. They must be “satisfied that the risk to persons in case of fire is so serious that, until steps have been taken to reduce the risk to a reasonable level, the use of the premises ought to be prohibited or restricted”. A fire officer can use this section with almost immediate effect.
Sometimes Environmental Health Departments may contact them to use this power rather than use other laws which might be slower to take effect. This law is infrequently used and its use will vary according to the local attitudes of the fire authority.
Common Law Duty of Care
Anyone injured in a fire or with damaged property can take legal action against the landlord, builders, architects or anyone else that could be directly responsible for negligent work which causes damage to tenants or tenants’ possessions. The common law duty of care requires such people to take sufficient care so that none of their acts, or omissions cause harm or injury.
Other Powers
Landlord and Tenant Act 1985, Defective Premises Act 1972, Occupier’s Liability Act 1957
Tenants may take action against their landlord under some, or all, of these acts. They must show either that there is disrepair, or that they are not reasonably safe from personal injury or damage to their property or that their visitors or partners are not reasonably safe when using the property. For more details see Chapter 11: Disrepair and Fitness.
Environmental Protection Act 1990
Both tenants and Environmental Health Officers could, but rarely do, use this Act if the HMO is considered to be prejudicial to health. Local authorities can use this Act to secure improvements very quickly.
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Fire Safety in HMOs
Introduction
Fire in houses in multiple occupation has been acknowledged to be a major cause of death or injury for many years. Whilst Home Office statistics define Houses in Multiple Occupation (HMOs) in a different way to current housing law, their statistics show over 6,000 casualties each year in HMOs and on average over 80 deaths.
The Housing Act 1996 clearly places a duty of care on landlords to make their property safe in the event of fire. So landlords and tenants now have a clearer common interest than ever before in ensuring that proper precautions are provided and that properties are regularly maintained, repaired and checked. The verdict of unlawful killing at the Scarborough coroner’s inquest following the Richmond HMO fire in 1994 provides a brutal lesson. Even when a fire certificate has been awarded, lapsed maintenance and safety checks can rapidly lead to inoperative alarm and lighting systems contributing to the death of some tenants.
The Regulatory Reform (Fire Safety) Order 2005 applies to the common parts of HMOs and requires a responsible person (property manager, landlord or agent) to carry out an annual check and risk assessment on all HMOs to identify any fire hazards and the measures that have been taken or will be taken to to minimise the risk.
This chapter aims to explain the dangers of fire, and demystify the key aspects of fire safety. It outlines the laws which landlords and tenants should be aware of and provides references for further information. The chapter is restricted to those HMOs that the Department of Environment describes as self contained units, with or without shared facilities i.e. not hostels, hotels or boarding houses. It also restricts itself to HMOs up to 4 storeys high, but the only key difference for 5 or 6 storey HMOs are the regulations regarding escape routes.
Basic Principles
HMOs are a particular high fire risk since: ●● each part of an HMO is subject to the same risks as the whole of a single dwelling. ●● often tenants do not alert each other. In a family home everybody is quickly alerted. ●● HMOs are sometimes in a poorer physical condition including the wiring, heating and cooking facilities. ●● HMOs are often at least 2 storeys high and often much higher. People living on the upper floors floor are particularly vulnerable to what happens on the ground floor or lower floors. ●● many HMOs cater for people who may have special needs, personal problems or behaviour which can lead to additional dangers of fire starting. Or for people who may be unable to escape safely in the event of a fire. The majority of fires start from relatively small sources; from smokers’ materials, portable heaters, accidents on cookers, faulty gas appliances or unsafe electricity supplies.
The start of a fire is called ignition and this followed by the growth phase. Oxygen and ‘fuel’ is needed for this growth phase. The easier a material is to ignite, the faster the fire will grow.
Heat from the fire will cause material in the room to give off gases and vapours. The resulting mixture of vapour and air may then itself ignite. Meanwhile the smoke from the original source will contain considerable heat and rise rapidly to the ceiling and spread out. It will heat up the surface and all the air in the room until a point is reached when anything that is capable of burning can easily be ignited. This is called ‘flashover’. The Building Research Establishment can supply a video called the ‘Front Room Fire’ showing how a home can become an inferno within a few minutes. It is dramatic to watch and a strong incentive to consider fire safety issues very seriously.
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Smoke under pressure
If the walls of the room do not form a tight joint with the ceiling, where the flames and the hot gases are most severe, then the fire will soon penetrate into the space or room on the other side. The general buoyancy and expansion of the fire gases can lead them to other parts of the building. Basically, the hot air is under pressure and will ‘squirt’ through any gap, crevice or crack.
In the early stages of a fire the most dangerous effect will almost always be from smoke and gases. Smoke will usually be the first sign of fire that people notice. The hot smoke laden gases will rise to form a layer which flows under the entire ceiling and then deepens.
Anyone prevented or delayed from escaping by dense smoke can suffer the poisonous effects of carbon monoxide, a lack of oxygen and /or inhale concentrations of other toxic materials such as hydrogen cyanide from plastics. Half a percent of carbon monoxide can lead to rapid collapse, unconsciousness, or death. Hydrogen sulphide can be immediately fatal or cause weakness, headaches and confusion. Some two thirds of deaths in domestic fires are caused by inhaling fire gases.
Key principles in fire safety
The description of the spread of fires and their dangers, leads logically to basic principles of fire safety. These include: • preventing or reducing the risk of the outbreak of fire. For instance by removing potential hazards such as faulty wiring, portable heating appliances, combustible furniture or combustible wall coverings • providing a regularly checked early warning detection and alarm system for smoke and fire • ensuring that any fire which starts is restricted to its original room or compartment for as long as possible • providing a well lit route (or routes where necessary) which is protected from fire and smoke to act as means of escape to a place of safety outside the building • providing fire fighting equipment so that most small fires can be controlled or extinguished at an early stage • ensuring all fire precaution equipment and escape routes are well maintained and in a good state of repair and regularly checked • ensuring all tenants know what to do in case of fire • taking into account the ‘fire dangers’ of a building. For instance, how many people live there, how many kitchens are there, are there any special fire hazards that need special treatment?
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HMO Fire Safety Glossary
The key fire safety components and terms are explained in this section and then exactly what is expected in different types of HMOs is outlined in the following section.
Protected routes
At the heart of HMO fire safety is the protected route. This is a route that is protected from fire. The tenant must be able to use it safely to escape from their flat or bedsit to a final exit. It can involve going downstairs or along corridors or passages. All the floors, walls or partitions on this route must give anybody adequate protection against fire. Moreover any doors leading on to this route should be fire doors.
A protected route must be built entirely from fire resisting materials. The protected route may simply follow the normal landings and staircase used by tenants. Alternatively, it can be a special route designed to be safe in the event of fire. Whatever the case, the route should be effectively separated from the rest of the building by fire resisting materials. The surface finishes (e.g. wallpaper and floor coverings) to the protected route must not allow fire to spread over them easily.
The route must be wide enough to allow everyone to exit safely. Notices and signs must usually be used.
Since the protected route is so important there must be no obstructions, combustible materials or fire hazards of any kind present. The Department of Environment Guide (DOE Circular 12/92) provides a useful list of prohibited items: • portable heaters of any type • heaters which have unprotected naked flames or radiant bars • fixed heaters using a gas supply cylinder • oil fuelled heaters • upholstered furniture • wardrobe or other storage furniture • coat racks • storage of any kind (unless a locked cupboard which is fire resistant) • lighting using naked flames • gas meters and pipes to a standard specified by the Gas Safety Regulations
The list omits other common occurrences such as piles of newspapers, bikes, household belongings ‘temporarily’ stored on the route. Clearly both landlords and tenants have a responsibility to keep the protected route safe and clear 365 days a year. Notices emphasising the need to keep the route free of obstructions and combustible materials should be placed in areas which might prove convenient storage areas (e.g. underneath stairs).
Ladders and external escape routes.
External fire escapes are now frowned upon unless they meet certain conditions. The DOE Guide specifically states that any external escape route i.e. an external fire escape, must be protected from smoke or heat. This may means replacing glass in any windows near the fire escape with fire resisting glass. Protecting the fire escape from the weather and providing lighting will also be necessary.
Other escape aids that are definitely not acceptable are: portable ladders, throw out ladders, fixed vertical ladders, automatic lowering lines, ropes and other devices for self rescue.
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Holes, cavities and service ducts
It is essential to keep smoke from penetrating any protected route or from endangering someone living in nearby accommodation. Therefore any holes resulting from disrepair or other reasons, such as service pipes, ventilation ducts or other defects must not allow smoke to endanger an escape route. The Department of the Environment recommend a detailed examination of the structural separation of each flat or bedsit from each other and the protected route from the rest of the building. This would include checking for cavities or voids which could threaten the escape routes or affect tenants in their rooms.
Fire resistance
Each part (for example a wall, floor, ceiling, door) of a protected route must be resistant to fire for half an hour, or sometimes one hour or even longer. Hence the phrase “half hour fire doors”.
The exact fire resistance of the structure depends entirely on the type of materials, their thickness and the way they are fixed (see example below).
Example Fire Safety Improvement Works
We can consider a typical example to illustrate how improvements can be made to improve the fire resistance of walls and floors. A typical timber floor to a first floor flat might have 15mm tongued and grooved floorboards, joists that are 37mm wide and old ceiling plaster with laths (little strips of softwood). This floor should support normal loads for half an hour, but would only resist fire penetration or fire spread by conduction or radiation for about 15 minutes. However if a layer of plasterboard was added to the ceiling which was 15mm thick and with the boards taped and filled and backed by the timber joists, the fire resistance would be half an hour. This detailed example illustrates how the exact form of construction is important as well as how plaster and plasterboard have excellent fire resisting properties
Most traditional forms of construction will provide half hour fire resistance or can usually easily be upgraded with an additional layer of plasterboard. However, the unacceptable types of construction to look out for include: loose and defective plasterwork to ceilings, partitions made of single sheets of blockboard or plywood, or stud partitions (partitions with vertical pieces of timber) with hardboard or some types of fibreboard, plain edged or badly fitting tongued and grooved floorboards, gaps through walls or floors.
The main rule to work to, is that walls, floors and fire doors need only be 30 minute fire resistant in HMOs. The main exceptions where 60 minute fire resistance is required are where: • walls enclosing a stairway to a basement , • fire doors to a stairway to a basement ( two thirty minute doors should be sufficient) • floors above a basement in a 2 storey HMO where there is no L2 alarm system • walls and doors to a kitchen regarded as a high risk area. Where there is not a great amount of readily combustible material, 30 minutes may be considered acceptable.
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Glass
Glass can be a real danger in fire as standard clear float glass shatters within a few minutes when exposed to fire or excessive heat. Special glass must therefore be used and this is usually wired glass. This will crack in a fire but be held together by the wire mesh. The edges of this glass need a good cover strip, otherwise in fire it may pull out of its frame. A hardwood beading covering 15mm of the edge of the glass secured with 30mm steel pins or screws is a typical specification. Any glass on a protected route must meet the 30 minute standard. The maximum area of 6mm thick wired glazing allowed in one pane for half hour fire resistance is 1.2 square metres, and for one hour fire resistance, is 0.5m2.
Fire doors
Fire doors are one of the most important parts of fire safety, yet on many inspections they are found to be faulty for a wide variety of reasons. There are a number of features to fire doors that can be easily checked and this section should help to develop a critical eye and help the practitioner to understand the jargon.
Fire doors have two main functions: • to protect escape routes from the effects fire and to allow occupants to reach final exits • to protect the contents and/or structure of the building by limiting the fire spread There are two main types of fire door: smoke control fire doors and fire doors.
A fire door and its frame must perform two functions when closed. It must resist the passage of fire and prevent the passage of gases and smoke. It is often imagined that a good fire door will also be a good smoke control door. The relevant British Standard recommends that fire doors should have a heat activated seal and a flexible edge seal. However, this standard has not been widely put into practice and many officers still require just a rebate to the frame or a planted stop i.e. a piece of timber 25mm deep fixed to the frame which overlaps the join of the door and the frame.
Fire doors are usually referred to as ‘half hour’ or ‘one hour’ fire doors. However you may meet other descriptions; 30/20, 30/30 or 60/60 and FD20 FD30 FD60 or FD30S. With the 30/20 description the first figure covers stability (e.g. the ability not to collapse or deform during fire), whilst the second figure covers integrity (the ability not to allow penetration of fire). A 30/20 door is clearly not as good as a 30/30 door and used to be called a firecheck door. This is now an obsolete term which you might still hear. FD20 etc. simply classifies fire doors by integrity only. Adding an ‘S’ at the end indicates it is suitable for smoke control as well.
Where the DOE Guide demands half hour doors, 30/30 or FD30 doors are required. Smoke control doors are often used to prevent smoke building-up, for example, on corridors and stairs. They are usually found in larger more complex buildings and rarely in smaller HMOs.
Identifying a fire door can be difficult. Fire safety professionals use their senses; looking for heavier doors and the type of materials used, and listening for a solid sound when the door is tapped. Modern fire doors have clear identification markings and it is important not to overpaint these. On the edge of the door where the hinges are attached, there should be a small colour- coded ring. The inner core can be red (which means that seals need to be fitted to the door), green (no seals need be fitted) or white. The background colour can range from white to black, indicating different levels of integrity. The colour for a 30 minute door is yellow, and blue for a 60 minute door.
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Door seals & intumescent strips
There is ever increasing awareness that smoke seals fixed to the doors can save lives. All fire doors should be tightly fitting with gaps no more than about 2 to 4mm.
There are two main types of seals/strips that can be fitted to fire doors. Firstly “cold seals” which are normally a brush blade or bubble strip; their job is to keep out smoke. Secondly intumescent seals which, when the temperature in a fire exceeds about 140oC, expand to seal the gap between the door and frame. Half hour fire doors should have intumescent and smoke seals fixed to the sides and top of either the door or the frame. One hour fire doors should have both types of seal fitted to the sides and the top of the door and the frame. However, no door should be tightly sealed where there is a need for ventilation e.g. for a coal or gas appliance. It is important to ensure that any heating appliances have an adequate air supply by other means if fire doors are to be fitted with these types of seals.
Hinges, gaps, seals and closers
The Association of Builders Hardware Manufacturers (ABHM) have produced a code of practice for ironmongery for fire doors. It normally expects 3 hinges to be used (fire jargon describes this as ‘one and a half pairs’!) capable of performing in high temperatures. Some ‘certificated’ lighter fire doors can be hung with two hinges. Rising butt hinges are not acceptable by the ABHM which is endorsed by the DOE Guide and Building Regulations.
Self-closers and locks
A self-closing device is essential for a fire door. Many fire doors suffer from broken or missing self-closers, or faults where the self-closer pulls the door against the frame but does not pull it tightly shut. Fire doors should open in the direction of any person escaping.
Locks on any fire doors must be easy to open by hand. Mortice locks with keys are not acceptable as they would slow down or prevent any escape.
A fire door is ineffective if wedged or held open (yet they often are). A notice saying ‘Fire Door - Keep Shut’ should be displayed at about eye level on both sides of any fire door. However, entrance doors and doors within individual flats or bedsits are exempt from requiring such notices. However, it is recommended that the need to keep fire doors shut at all times is clearly explained in writing to all tenants.
Alarm systems
A good quality alarm system, properly maintained, is at the heart of fire safety. HMOs need more than self-contained battery-powered alarms fitted to ceilings. There are two main types of fire alarm system:
a) an automatic system which gives an alarm automatically without any manual assistance, and
b) a manual system which contains no automatic sensors; the alarm is set off by hand (e.g. by means of little red box where you break the glass - a ‘break-glass’ point).
In small to medium HMOs only the automatic system is usually installed. The basic standard is set out in BS 5839:Part 1:1988 which divides alarm systems into different groups. The DOE Guide recommends an L2 (L indicates that the system is designed for the protection of life) system for all 3-4 storey HMOs. Yet the guide does not require an alarm system for 1-2 storey HMOs. However, the Chartered Institution of Environmental Health Officers recommend a less comprehensive fire alarm system for 1-2 storey buildings.
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The L2 System is described in detail in the British Standard. It consists of four main parts: • detectors (see below for more details) installed on the escape routes and in all adjoining rooms or areas by the entrance door (e.g. hallways/lobbies) • detectors in all areas where occupants are especially vulnerable to fire starting or there is a high risk of ignition and fire spreading e.g. bedrooms, kitchens, large service ducts, store rooms • alarm sounders (see below) capable of waking all residents • a control box.
Correct siting of detectors
The exact siting of detectors is crucial. Smoke detectors should be located at the highest point on any staircase and all landings. A detector should be positioned at the top of any basement staircase. Large cellar areas with several compartments will need detector coverage. Detectors in rooms next to the escape route should be sited near the doorway. They can either be positioned on the ceiling or on the wall but they must be above the level of the top of the door.
Heat detectors and smoke detectors are the main types of detector used in HMOs. They respond differently to different types of fire. For instance, a slowly smouldering fire would probably trigger a smoke detector first. A fire which gave off heat rapidly with little smoke would trigger a heat detector first. In general, smoke detectors give a faster response than heat detectors.
There are two main types of detector. An ionisation detector is often a bit quicker to react to hot blazing fires than an optical smoke detector. An optical detector uses a small photoelectric cell which triggers the alarm when the beam is disturbed by smoke. The optical alarm is better at detecting smoke produced by smouldering fires, the type that may be caused by a cigarette falling down the back of an armchair. The DOE Guide recommends this type where there is no staff supervision. However, the British Standard (BS5446: Part1 covers residential property) says that both types have a wide range of response and are suitable for general use. There are now products which include both devices in a single unit.
Heat detectors are unsuitable for escape routes. Smoke detectors are unsuitable for kitchens, bathrooms or anywhere where steam, condensation or fumes can trigger them.
Alarm sounders
Alarm sounders (e.g. bells or buzzers) must be able to wake sleeping people.
There must be sufficient sounders to make sure they are heard. If sleeping people are to be woken up, the minimum level is 75dB (dB stands for decibels which is a way of measuring noise levels) by a bed, with all the internal doors shut. 75dB is slightly louder than a thunderstorm one or two miles away!
The alarm must be given in time for people to use the escape routes before they are blocked by fire or smoke. The warning signal given by the alarm must be very distinctive. No-one should be able to confuse it with any nearby or familiar sounds.
If the alarm is not linked to the fire brigade, which few are, the British Standard recommends that the responsibility for calling the fire brigade should “be clearly specified and clearly understood”. A pay phone on the premises can be critical here and clear written instructions to all tenants should communicate this message.
Alarm system for 1-2 storey HMOs
The Chartered Institute of Environmental Health Officers recommend a slightly lower version of protection in HMOs of 1 or 2 storeys. They recommend a system of interconnected sensors located as follows, “depending on their location and risk” :
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- bedrooms - circulation areas - heads of stairways/common parts - cellar areas - storage areas on common parts - lounges - dining rooms
The system would consist of detectors installed to minimise the risk of false alarms and provide an interlinked system which is wired to the mains (but with rechargeable batteries or long-life batteries) and include self-contained smoke alarms and heat detectors. If the batteries fail an audible fault warning should be given.
Maintenance and repair
However good the alarm system, it must be guaranteed to work in a fire.
An alarm installer who follows the British Standard should give an HMO landlord a certificate of commissioning and a logbook. The landlord should appoint someone responsible to supervise and maintain the system and keep proper records. There should be clear procedures for dealing with alarms. For example, the alarm system should not simply be switched off until an engineer arrives.
The log book should contain details of all servicing, alarms, practice drills, defects and disconnections. BS 5839 actually requires a daily check of the control panel to make sure this is working. At least one detector should be tested each week. A quarterly inspection should include checking the log book, any back-up batteries, the alarm sounders and the fault indicators.
An annual inspection should include testing every detector, and visually checking the whole system. No law specifically states you must follow this British Standard. However, Environmental Health Officers can use the Housing (Management of Houses in Multiple Occupation) Regulations 1990 to demand that regular servicing takes place. For the safety of tenants and the landlord’s peace of mind, regular checking is essential. A responsible tenant could easily complete a 2 second check on the control panel each day and spend a few minutes checking one detector each week. During the coroner’s inquest following a recent fatal fire at Richmond Hotel, the landlord was cross-examined on every detail of the BS recommended checks.
Emergency lighting
‘Escape lighting’ is the term used to describe what most people call emergency lighting. It is lighting provided for use when the supply to the normal lighting fails. Its purpose is to ensure that the escape route is illuminated at all times when people are in the building.
The normal everyday lighting on escape routes should be in good order and provide safe illumination. If the system is operated by time switches, these should allow plenty of time before the lighting is cut off.
If external lights or street lights do not provide light to the internal escape route(s) in the event of indoor lighting failing, then escape lighting is generally necessary (depending on which guide you read!). The DOE Guide says it is necessary depending on individual circumstances “taking into account factors such as the amount of borrowed light and the complexity of the layout of the HMO in question”. However, the CIEH guide says it is necessary in 3 or 4 storey HMOs, but in 1 or 2 storey HMOs it should be provided “if the route of escape is complex or lengthy” .
Where escape lighting is provided, the relevant standard is BS 5266:Part1:1988. This emphasises that the lighting should come on within 15 seconds; illumination should be provided at all key
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points e.g. changes in direction, near each staircase, near fire fighting equipment. All signs marking escape routes should be illuminated and anyone at any point in the building should be clear as to what route to follow.
Regular tests at monthly, three monthly and three yearly intervals should be carried out. A logbook should be kept on the premises “in the care of a responsible person”.
Notices
If the HMO has a single staircase and the escape route is simple, there may only be a need for a few signs. Signs on fire doors have been discussed above. The DOE Guide says that fire exit signs are only needed on exits which are “not a normal route of travel” from a building. Similarly fire exit signs and directional arrows are only needed when a person escaping might be in doubt as to the location of an exit route. Such signs should be conspicuous, placed between 2 and 2.5 m above floor levels and illuminated as necessary. There is a British Standard for signs. Any door fitted with a panic bolt should be conspicuously signed above the push bar “Push bar to open”.
Fire extinguishers and blankets
In many cases, fire extinguishers can stop a minor fire developing into a major disaster. There should be a sufficient number of extinguishers, well-located and in a good condition. Extinguishers usually contain either water, carbon dioxide or dry powders. Each type has different uses. For instance, a water extinguisher is suitable for everyday fires of paper and wood, yet it could endanger anyone who uses one on an electrical fire.
The DOE Guide recommends one water-type extinguisher of nine litres (or two of 4.5 litres) for every 200 square metres of floor area. At the same time there must be at least two extinguishers on every floor unless the floor area is less than 100 square metres.
Extinguishers should be sited as close as possible to any fire risk and in conspicuous positions. Positions near room exits, corridors, stairways, lobbies and landings are most suitable.
The British Standard recommends at least a quarterly or preferably monthly inspection just to check that the extinguishers are in place, undamaged and have not been discharged. Experienced housing professionals recommend even more frequent checks as these items are prone to abuse. There should be an annual service by a competent person and this should be recorded on a durable, firmly fixed label. The DOE Guide says that fire blankets should be provided for communal kitchens. The CIEH Guide recommends that a fire blanket is provided in any room used for cooking.
Distance of Travel
All fire safety guides and the Building Regulations include limits for ‘distance of travel’. A basic principle of fire safety is to limit the distance anyone has to travel to reach a place of safety. In thick smoke and gases and with little or no light to assist, excessively long escape routes can be fatally dangerous.
The DOE Guide recommends that, for self-contained units (with or without shared facilities), where practicable: • bedrooms are not entered through a living room • bedroom doors should be nearer an exit from the accommodation than the kitchen or living room doors. The DOE Guide recommends that doors which lead to an inner entrance hall (which in turn leads to the main exit door) should be fitted with flexible seals, should be fire resisting and self-closing.
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Three maximum travel distances are set by the DOE Guide within any flat or bedsit area: • from any point in a living room to the room exit - 9 metres • from the exit of any room to the entrance to the accommodation - 9 metres • from flat/bedsit main entrance door to the nearest stairway - 7 metres The DOE Guide accepts these maximum distances are not totally hard and fast but it makes no recommendations if they are exceeded. If they are exceeded, it is argued, additional other fire precautions may be necessary. There is no limit for the travel distance to a final exit door to leave the building. This is because the escape route must be protected and is, therefore, considered to be safe.
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Sources of Further Information and Advice
Letting Factsheets - see Letting Handbook, Section 3.
LFACTS28 - The Housing Health and Safety Rating System (HHSRS) LFACTS40 - Houses in Multiple Occupation and the Housing Act 2004 LFACTS41 - The Housing (Management of HMOs) Regulations 2006
Regulatory Reform (Fire Safety) Order 2005
LACORS Housing Fire Safety Guide - a guide on fire safety provisions for certain existing housing - www.lacors.gov.uk
Fire Precautions for Houses in Multiple Occupation
Part 1: Standard HMO & Fire Guide Part 2: A Practical and Technical Guide - both published by The Chartered Institute of Environmental Health
DOE Circulars:
Circular No. 5/90 - Houses in Multiple Occupation Circular No. 12/92 - Houses in Multiple Occupation - Guidance to Local Authorities on Standards of Fitness under s.352 of the Housing Act 1985. - published by HMSO / The Stationary Office
Building Regulations:
Building Regulations, Approved Document B BS 5588: Part 1: 1990 - Fire Precautions in the Design, Construction and Use of Buildings. Code of Practice for Residential Buildings. - published by HMSO / The Stationary Office
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The Letting Handbook 16-30 © The Letting Centre 10/2019 Back to contents The Law of Agency
17. The Law of Agency
This chapter looks at the legal rules governing the relationship between landlords and agents, and sets out the rights and duties of the respective parties.
The law relating to agency is a mixture of common law rules developed through case law, with statute intervening in particular areas. For example, the Housing Act 1988 (or Housing (Scotland) Act 1988) amended section 1 of the Protection from Eviction Act 19771 so that section 1 of the PEA now applies to agents as well as landlords.
Establishing an Agency Relationship
A genuine relationship of agency requires a principal, which in the context of property management will usually be the landlord or owner of the premises, to authorise an agent to act on the principal’s or landlord’s behalf. Authority to negotiate the terms of the tenancy, prepare the paperwork, sign a contract and agree a lease all fall within the relationship of agency.
The general principle of agency is that, where an agent is authorised by a principal to enter into a contract on the principal’s behalf with a third party, and does so, then a contract is established between the principal and the third party, the agent becoming transparent to the contract. Thus where a letting agent has been authorised to let a property, find tenants and enter into a tenancy on behalf of the principal (i.e. the landlord), the landlord will be contractually bound by the new tenancy that his agent has created between the landlord and his tenants. However, there are many facets to the agency relationship, some of which are explored within this chapter. Agents can act negligently, or act beyond their legitimate authority and leave themselves open to claims for damages.
The agent’s authority should always be set out in a written agreement. This agreement will define the scope of the agent’s duties in accordance with standard terms of management, and provide for the agent to be remunerated according to an agreed scale. Agents should always be clear as to the limits of their authority when acting, and be ready to report back and take new instructions from the principal if a new situation emerges which is outside the normal scope of their everyday duties.
Central to the concept of agency is the notion of ‘authority’. In the normal case, agency arises by agreement; that is the principal actually authorises the agent to act on his behalf and the agent agrees to do so. An agent’s authority may be express or implied. An agent’s authority is express to the extent to which it is conferred in so many words - which could be written or verbal.
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Express Authority
Express authority is normally given in writing and signed by both parties before the agency relationship commences. A well-drafted agency or management agreement is essential, and should specify all the duties or actions that the agent is authorised to carry out - this will be discussed later in this chapter.
As with any general legally binding contract, formality is not always required. Express authority can be given or amended by verbal instructions but such conversations are best evidenced in writing to ensure clarity and avoid dispute. Equally, in some situations, additional formalities are required. Under the Powers of Attorney Act 1971 if the landlord wants the agent to grant a lease for a term of more than three years (which have to be executed by deed), the agent and the landlord must have entered into a deed themselves setting out that the agent has this authority.
Implied Authority
Authority may also be implied - even where there is no express authority - by the conduct of the parties. Equally, authority may also be implied where the express instructions are not clear, and the acts are reasonably incidental to the execution of the express authority.
For example, it would normally be considered that a landlord who hands the keys of his property to a letting agent gives the agent an implied authority to carry out viewings - even if this authority is not stated explicitly in the agency agreement. The letting agent does not automatically have an implied authority to sign a tenancy agreement on behalf of the landlord. Although there is no recent case law, older cases suggest that there is no implied authority for the letting agent to create and sign leases on behalf of the landlord. This important power, if required, should be explicitly stated in the agency agreement.
Best agency practice requires that all actions are expressly authorised either under a comprehensive written agreement, or for extraordinary items, with the written sanction of the principal.
Lack of Authority
If a tenancy is granted without authority the landlord will not be bound by the tenancy agreement. If the agent has only been instructed to identify a suitable prospective tenant the landlord will not be bound by the contract entered into by the agent. The tenant will in fact be a trespasser. If the agent has maintained to the tenant that s/he does have the authority to grant the tenancy where s/he does not, s/he will be deemed to have impliedly warranted that authority exists and so the tenant can hold the agent liable for breach of warranty. The tenant could seek damages for the value of the tenancy lost.
The law recognises that the landlord can decide to ratify the agent’s actions and if s/he does so the agent’s actions are deemed to be authorised. Ratification is not necessarily straightforward, but the law will recognise it where it takes place expressly or impliedly. Express ratification could happen where the landlord has communicated to the agent that the tenancy can go ahead. Implied authority will arise if the landlord knowingly allows the tenancy to continue and accepts rent or takes no steps to evict the tenant.
However, an agent may hold apparent authority in certain situations - that is ‘the authority of the agent as it appears to others’. For example if the tenant contacts the landlord about a burst pipe and is told to contact the agent, the landlord will be bound by the acts of the agent and be liable for any expense incurred if the agent subsequently calls out the plumber. The landlord cannot claim and is estopped from claiming that s/he is not bound by what the agent has done. It does not matter in these circumstances whether the agent had actual authority to hire the plumber. The landlord cannot lawfully refuse to pay the bill.
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Duty of Care
However, if the agent undertakes the work her/himself and acts negligently, making the leak worse so the tenant’s home is flooded, then the agent will be liable for the negligent acts and the loss which results from them. The agent could then be sued for damages by the tenant. The landlord will still be liable for breach of contract under the tenancy agreement, however, if the tenant can show that the landlord was responsible for the repair of the relevant pipe, for example by pointing to a repairing clause in the tenancy agreement.
A considerable number of landlords rely heavily on the skill and expertise of the agents who they appoint to act for them. The agent is under a duty to exercise reasonable care and skill in carrying out their duties and in advising the landlord.
Case Example:
In a recent case, Helling v Parker Breslin Estates 1994, the landlords wished to let a flat. They were concerned to obtain vacant possession when the tenant left. The agents assured them that possession was obtainable using a particular ground - that of saying the letting was one to which Case 11 of schedule 15 of the Rent Act 1977 applied.
Case 11 says that a person who previously lived in a house and then let it can obtain possession only where the court is satisfied that the dwelling is required as a residence for the owner-occupier. Case 11 as a ground for possession was added to the standard tenancy agreement. The owners subsequently decided that they were dissatisfied with the tenant but because they did not wish to resume possession the Case 11 point was not argued when they tried to obtain a possession order. A suspended possession order was given - suspended on the terms that the tenants pay the arrears. When they sued the agents, the landlords argued, and the court was satisfied that the landlords would never have let the flat if they had been informed that possession could not be recovered at the end of the term.
The failure by the agent to explain the circumstances under which possession could have been obtained under Case 11 amounted to a failure of skill in their duty of care to their client landlord. The landlords could not sell the house and sued for diminution of value of the property because it could not be sold with vacant possession.
Duty of Care & Skill
Under the law of agency, the agent is under a duty to his client to exercise reasonable care and skill both in carrying out their duties and in advising the landlord. Although not intended to be a complete list, the examples below demonstrate the type of care and precautions that a competent managing agent should take: - Correctly advising a client on rental value. - Declaring any self-interest (e.g. renting to a friend or relation) - Taking up appropriate references and credit checks on a tenant. - Setting up the correct type of tenancy with the correct forms. - Acting with expedience if serious maintenance issues arise. - Taking appropriate precautions with regard to the security of any keys held. - Informing the landlord of their various legal obligations (e.g. Gas Safety Regulations). - Checking for damage or dilapidations to a property either during or on termination of a tenancy
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Tenancies created by an agent
When a tenancy is agreed directly between the landlord and the tenant, the legal relationship between landlord and tenant will be straightforward. An agent, holding the appropriate authority, may create a tenancy and sign the tenancy agreement on behalf of the landlord. For example, if the landlord resides overseas, it would not be practical for the landlord to sign personally; it would be normal for the landlord in such cases to grant his agent the authority to sign the tenancy agreement on his behalf.
However where the agent has signed and either has not informed the tenant that s/he is the agent or where the tenant believes in good faith that the agent is the landlord and the actual landlord, the principal, is undisclosed, the tenant can sue the agent. This might happen in a situation where the agent has made various promises to the tenant but is unable to fulfil them because the agent does not hold the relevant authority to carry them out. The agent in such cases can be sued as if he was the landlord. The real landlord, the undisclosed principal may identify her/himself at a later stage but this does not absolve the agent who remains personally liable under the tenancy agreement.
There are two commonly used solutions to the above problem:
1. Where the tenancy agreement and related documentation refers to the ‘landlord’, then the actual landlord’s name can be used at this point. It does not matter that the landlord’s address is given as a ‘care of’ address. E.g..
Landlord: Mr & Mrs Brown
Address: c/o ABC Lettings 194 High Street, Anytown, Wessex, WE0 7AA
2. Where the agent signs on the landlord’s behalf, then the agent can make it clear that he is signing ‘as agent’. E.g..
Signature: A N Agent as agent for Mr & Mrs Brown
Disclosure of landlord’s identity
Do not forget that, if the tenant or their advisor requests the identity of the landlord and their address under sections 1 and 2 of the Landlord and Tenant Act 1985 of any person demanding or collecting rent, this request has to be complied with. They can further request the identity of all of the directors and company secretary of a company under section 3 of the same act. Local authorities have the power to prosecute under the Act for failure to supply this information.
Deposit Money
Except for tenancies not covered by the statutory TDP deposit requirements of the Housing Act 2004, agents are bound by law to protect any money accepted as a tenancy deposit from a tenant - these provisions are set out in more detail in Chapter 10. The agency agreement should give the agent actual authority to take a deposit from a tenant at the beginning of the tenancy and hold it under a relevant deposit protection scheme as applicable. Deposits need not be protected where a tenancy is excluded from the TDP provisions - e.g. common law tenancies. If the agent goes bankrupt or into liquidation, the landlord remains liable to return the deposit to the tenant.
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The Agency Agreement
This section looks at the main issues in establishing a formal contract between the agent and his principal (i.e. the landlord of a property) in the management of property. This agreement is known as the agency agreement (although it may also be referred to as ‘terms of business’ or ‘management agreement’)
Where an agent does not undertake management (e.g. let-only situations), the responsibility undertaken by an agent will be significantly lower. Similar principles will apply to the drafting of a ‘let-only’ agreement but the scope will be more limited.
Purpose
The agency agreement is one of the most critical legal documents in any letting business. The agreement should define the duties of the agent very precisely, and the level of fees and charges that the firm may make to its client in return for these services. A well-drafted agreement assists both parties; the scope of the service will be clear from the outset, and disputes relating to charges or respective responsibilities can be resolved in many cases by reference to the original agreement. Furthermore, the value of the firm’s portfolio of properties can be very significant and the agent must take measures not to carry liability for any mishap which is outside his control (e.g. damage to the property by tenants).
The requirement for a formal and carefully written agreement is well understood by authorities in the property management sector. Indeed, most of the professional associations for property management (e.g. NAEA, ARMA, ARLA) now make it compulsory for their members to have signed such an agreement with all clients.
The agency agreement also provides the agent with the formal authority to carry out the various tasks of property management. It also includes various indemnity clauses so that the agent is not held responsible for events outside his/her normal control.
Legal Context
The law of agency has developed over several centuries; with many of the common law rules being derived from the volumes of case law on the subject. Clearly, the reason that many of these cases came to court was that no formal agreement existed between the parties, or any agreement that did exist was not sufficiently watertight to avoid the conflict in the first place. It is therefore very important that the agreement between the agent and the principal has been carefully drafted so that issues can be resolved without recourse to expensive litigation through the courts.
An agent acting without a written agreement or beyond the scope of his authority risks entering the so-called ‘inability minefield’. Where the agent carries no written or express authority, then the doctrine of usual or customary authority will generally apply to agency relationship; i.e. what is usual or customary in the type of business involved. Some essential principles of the law of agency were covered in the earlier section in this chapter and will help us in understanding the operation of agency in relation to the management agreement.
When express instructions or written agreement exist, then the principles of usual authority may, as between principal and agent, be restricted or completely excluded. Where the written agreement or authority conflict with what is usual in the business in question, then under the law of agency, it is the express orders which prevail.
Statute may also determine or even override aspects of the relationship between agent and principal. As we shall see, the new European Directive on Unfair contracts allows, where there is doubt about the fairness or meaning of a written term in a contract, that the interpretation be resolved or even changed in favour of the consumer.
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Drafting the Agreement
Some agents starting in business will procure a similar agreement from another agent and use this as the basis for their own agreement. Whilst this may suffice, such an agreement may easily contain errors or omissions, or simply not suit the method in which the new firm conducts its business. Once entered into, the agreement will create a legally binding contract between both parties and any mistakes could be very expensive. It is therefore recommended that you take professional advice from a legal specialist with experience in this field throughout the drafting process.
The notes within this section will assist agents in the drafting of a typical management agreement and provide advice on some important points of law that should be included as improvements to an existing agreement. The actual process of drafting this type of agreement will greatly assist the firm in clearly understanding its contractual responsibilities and often entails a thorough examination of the way the firm should conduct its business and set its fee structure. The agreement should aim to be fair to both parties yet ensure that the firm is adequately compensated for ALL the activities that are necessary in providing the service. Furthermore, the agreement should act to limit the liabilities carried by the firm (or individuals) in pursuance of its duties to what is reasonable.
It should also be mentioned that the drafting process is ongoing; the firm should be regularly reviewing its systems and looking for improvements. Invariably, a firm will identify refinements in its procedures or review fee levels from time to time.
Offer and acceptance
The law of contract defines a relationship between the agent and principal such that the management agreement and any other information that the agent provides to his client constitutes an offer. Some form of acceptance should also occur for the contract to be binding between the parties; a written acceptance of the agreement by way of the client’s signature is the preferred method. It is quite valid to establish a contract between two parties verbally in the same way but the dangers of doing this have already been highlighted. It is therefore of paramount importance that the management agreement has been signed by both parties at the earliest opportunity before accepting instructions to let or manage a property.
Structure and style
There are several fundamental rules:
1. Be consistent in the use of names; do not refer to the ‘owner’ in one section and ‘Landlord’ in another if it is intended that they are the same person. It is a good idea to use capitals for each reference to the main parties or concepts in the agreement (e.g. Landlord, Property etc.)
2. The agreement should be written in plain and simple English that can be understood by the layperson. Check for ambiguity; you should reread each paragraph carefully to ensure that a different meaning could not be implied by the wording.
Distance Contracts
Where the agent cannot be present in person upon signing, the agreement will need to be drafted well in advance and sent by post. In such cases, the agent should be aware of the effect of the Consumer Contract Regulations (see Letting Factsheet No. 39). From a practical point of view, the Regulations require that, where agreements are concluded ‘at a distance’ or ‘off-premises’, the consumer is provided with specified information set out in Schedule 2 and a cooling-off period of fourteen working days (seven days prior to 13th June 2014) during which s/he can withdraw from the contract. One precaution, therefore, is to ask the ‘distance’ landlord to sign the agency agreement at least fourteen days in advance of the start of the agency. A copy of the required notice is now attached to the end of the example agency agreement. This can be removed where not relevant. The Letting Handbook 17-6 © The Letting Centre 10/2019 Back to contents The Law of Agency
Summary of Service
It is good practice in the agreement to provide a comprehensive summary or list of the duties or services that are to be provided under the standard management service. In this way, should a dispute occur, it will be possible to look to this summary to decide whether a particular action (e.g. checking-out the property at the end of a tenancy ) is included as standard or subject to an extra charge.
Scale of fees
The letting agent’s remuneration is generally based on a percentage of the rents received (or even on rents due), plus various additional costs for setting up a tenancy, drafting inventories etc. In setting out your scale of fees, it is important to try and consider all common costs that may be charged to the landlord. It is good practice to give a client notice of any such costs that can be fixed in advance and if a particular item is not listed and costed, the client may be led into the mistaken assumption that such costs are included within the standard service
There is an important distinction to be made at this point between the ‘rents received’ and ‘rent due’ method of calculating management fees. Many agents charge management fees as a percentage of rent collected or received (e.g. ‘15% of the rent collected’ ). The drawback of this method is that the agent doesn’t get paid if the tenant defaults on the rent payment. Yet it is in just this situation that the landlord relies most on the agent’s expertise to carry out all the extra work involved with chasing up defaulters and issuing warning letters. Unless the agent feels obliged to carry the risk and costs on behalf of the landlord, it seems more sensible to specify that fees should be calculated on rent due.
Many agents also ignore minor costs which can be expensive in the long run. For example, an agent may from time to time be asked to arrange for the duplication of keys and he should include a reasonable allowance when doing so for his administration time. Although the actual duplication cost may be minimal, the agent spends time and travel expense in visiting his nearest locksmith. That locksmith may be unable to copy one of the keys in question thus entailing further lost time in finding an alternative supplier. A visit to the property may also be necessary to check the new keys. On a bad day, an hour or two could easily be expended.
The agent should therefore give thought to a fee structure for many common items:
- Drafting of the inventory
- Providing copies of agreements and other documents
- Tenancy renewals
- Redirection of mail (especially overseas)
- Faxes and overseas telephone calls
- Duplication and testing of keys
- Issuing statutory notices
- Administration of Overseas Tax
- Administration of major works
Minimum charge
Clients are often puzzled by the inclusion of a minimum fee specified within the scale of charges yet this provides an important protection for the firm against premature termination.
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The landlord will have certain rights to termination (see section below) but the agent will wish to protect against any sharp practice; e.g. where a landlord terminates the management
agreement directly the tenant has been found and installed into the property. This minimum fee or penalty fee then acts to re-imburse the agent for the costs of advertising the property and the administration in setting up the tenancy.
If agents wish to guard against the risk of multi-agency (and the subsequent withdrawal of an instruction prior to letting a property) then this type of fee might sensibly be demanded in advance of accepting instructions.
Authority
The level of authority assigned by the principal to the agent should be clear within the agreement. The authority may, for example, include:
- authority to collect rent on behalf of the landlord
- authority to sign the tenancy agreement on the landlord’s behalf (especially if landlord is overseas)
In the same vein, you should also seek confirmation within the agreement that the landlord in turn has authority to rent the property, is the true owner of the property, and has received permission from any mortgagee or head landlord to rent the property.
As a further safeguard for the agent, it is good practice to request within the management agreement that any instructions to the agent be made in writing. In this way, it will be difficult for a dispute to arise as to whether instructions had been received on a specific matter, and the exact nature of these instructions.
Indemnity
As a general rule, an agent is entitled to be indemnified by his principal against any losses and liabilities incurred in carrying out his authority subject to any agreement made between the parties to the contrary. However, this is not an area to be left to chance and it is prudent to re- iterate the message by including an indemnity clause in the agreement.
Furthermore, an agent is not entitled to be indemnified against any losses incurred in carrying out an unlawful act but this rule will not operate against him if his part in the transaction is innocent.
In Adamson v Jarvis for example, an auctioneer sold goods on behalf of a person who in fact had no right to authorise the sale. The auctioneer, who was successfully sued by the owner of the goods, was entitled to recover the damages and his costs from the principal.
Deposits and payments
It is important to state in the agreement that the agent has authority to accept rent and deposit money on behalf of the landlord, and in what capacity any such deposits are to be held. Deposit money accepted by an agent is commonly held in one of two main ways: • as ‘agent for the landlord’ • as ‘stakeholder’ It is important that an agent clearly understands the difference between these two methods (see section on ‘Deposits’ in chapter 10).
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As ‘agent for the landlord’ the agent is obliged to take the landlord’s side in any dispute (even if the landlord is behaving totally unreasonably) whereas as ‘stakeholder’ the agent may act as a neutral intermediary in deciding between any conflicting claims. As an intermediary, the agent may be liable for his decision to either party and may therefore be advised to define an arbitration procedure to be followed if a dispute cannot be resolved (e.g. ‘a dispute may be referred for final arbitration to the RICS’). If no agreement has been made with regard to the acceptance and holding of deposit money, then it will be assumed that any such deposits are held by the agent as ‘agent for the landlord’.
Regarding the agent’s remuneration, an agent may in law deduct whatever is due to him in respect of money by way of a commission and expenses. Many agents add this authority in their terms and conditions but it is strictly unnecessary.
Regarding the payment of rents onto a landlord, the agreement should seek to define the process for this. E.g. ‘we aim to forward any rent payments to our client within 15 working days of receipt’. Still on the subject of rent payments, this may be a good place in the agreement to make reference to the Taxes Management Act 1970 (TMA), Inland Revenue NRL scheme and the agent’s requirement to deduct tax at source for cases where the landlord resides overseas. Again, this precaution serves merely to inform the landlord - TMA already provides the legal basis for agents to do this.
Maintenance
As a general rule, an agent must perform personally what he has undertaken to do, in accordance with the maxim ‘delegatus non potest delegare’ (meaning simply that agent should not delegate those tasks that he has agreed to undertake). If the agent will need to co-ordinate maintenance and other works with third parties, the management agreement should contain the authority for the agent to instruct such contractors on behalf of the landlord, and in accordance with any pre- set limits or other criteria set by the landlord.
It is good practice to agree an authority to spend up to a pre-set figure (e.g. £100) on any single item of repair or maintenance. This is useful if you do not wish to seek authorisation from the landlord on all minor issues (especially if the landlord is overseas and difficult to contact).
There is a debate as to whether an agent should charge a premium on all maintenance invoices. If such work is handled ‘without liability’ and costs passed onto the landlord without profit, then it is arguable that the agent escapes liability if a contractor carries out substandard work. Where the agent profits from the transaction, however, the agent may accept at least a degree of responsibility; a landlord could easily argue that the profit element is accepted in return for the proper supervision of the work. For small repairs, the taking of commissions is often uneconomic; but for larger projects the agent may wish to declare a supervision charge to cover his administration time in overlooking the project, arranging access etc.
Inspections
Should the firm undertake to provide inspections throughout the tenancy, then this may be cited in the agreement. A firm providing such a service might be advised to state in the agreement that such inspections are of a limited nature (if this is the case) in order to verify the general good order of the tenancy and do not constitute a complete check of every item in the property.
Emergency powers
In certain situations, where the property or interests of the principal are threatened by some sort of emergency, or the principal cannot be contacted by the agent on some important issue, the agent may in law act beyond what appears to be the limits of his authority.
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The powers of a shipmaster to act on behalf of the shipowners represents a wide application of this type of authority. Yet it cannot be assumed that every emergency can be used to justify this so-called agency of necessity. In a documented legal case (Hawtayne v Bourne), miners who had not been paid obtained warrants of distress enabling them to seize the mining company’s machinery. The manager of the mine on his own initiative borrowed money from a local bank to pay the arrears of wages and thus avert the distress. The court held that he could not justify this action on the ground of necessity.
From a managing agent’s point of view, this is more likely to happen for overseas landlords, and the standard authority for repairs expenses should be agreed in advance at an appropriate level and agency of necessity is only a rare resort.
Safety Regulations
The letting of property is now closely regulated with respect to consumer safety, and there are important provisions relating to the safety of gas and electrical safety. It is the agent’s duty, as a professional in the business, to make the landlord aware of any such regulations and risks. The various safety regulations should be brought to the landlord’s attention and it is advisable for the agreement to include some sort of warranty by the landlor that he or she is aware of the relevant regulations and that the property complies with them.
Unfair Contract Terms
Care must be taken not to include onerous terms in the agreement which tie the principal beyond what would be reasonable (Consumer Rights Act 2015). A common example of this situation is where a letting agent charges a landlord a ‘Let-Only’ fee for finding a tenant (e.g. 10% of rent due over the term) and demands that the same fee becomes payable on the renewal.
The Consumer Rights Act 2015
The Consumer Rights Act 2015 came into force on 1 October 2015 and applies a test of fairness to notices and terms in consumer contracts. The Act states that any notice or term declared to be unfair will not be binding, with the exception of the ‘core’ terms of the agreement, which set the price or describe the main subject matter of the agreement. A notice or term in a consumer contract will fail the test of fairness ‘if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.’ If a term in an agreement or notice could have different meanings then the meaning that is most favourable to the consumer will prevail. Where a term in a consumer contract is held to be unfair, it will not be binding on the consumer. However, this does not mean that the contract will automatically be terminated because, where the contract is capable of continuing without the unfair term, the contract will still bind the parties. For more information on unfair contract terms see Letting Factsheets 10 and 10a. It should be noted that not all agreements or contracts made between letting agents and their client landlords are consumer agreements and therefore subject to the unfair terms regulations. Under the Consumer Rights Act 2015, a consumer is an individual not acting for the purposes of his or her business or profession. The Competition and Markets Authority acknowledges that, although many small landlords may not be regarded as acting in the course of a business (e.g. the short-term letting of the landlord’s own residence whilst he/ she is working abroad), it is likely that most landlords who have purchased property for investment and letting purposes will be considered to be acting in the course of business.
Variation Make provision in the agreement for terms to be varied by way of written notice to the client. In this way, you can then make any changes in future and be entitled to vary the agreement.
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Termination
The principal is, as a general rule, entitled to revoke the agent’s authority at will in the absence of any specific provisions in the agency agreement. Revocation may take any form; verbally or by letter. Many property agents make it very difficult for a principal to terminate the management agreement prior to the end of the tenancy and it is open for discussion whether such an agreement would be enforceable under the Unfair Contracts Act 1977. If a client can prove that the service provided by the agent is unsatisfactory, then it possible that a court would disregard any obligation to continue. Again, if the agreement is made purely for the period of the tenancy, then thought needs to be given to the issue of renewals and how they will be carried out.
If the management agreement is intended to be ongoing rather than for the defined period of a tenancy, then the agent is advised to specify a (reasonable) notice period for termination within the agency agreement. Similarly, the inclusion of a ‘minimum fee’ or similar charge as noted previously prevents abuse by early termination.
Finally, on the subject of termination, any such agreement is automatically brought to an end by the death, bankruptcy or even insanity of either party. Where the principal is a limited company, its bankruptcy and subsequent winding up acts in the same way as the death of an individual (see below).
Death of Principal
On the death of the principal, the agency agreement will automatically terminate. This in turn terminates the agent’s authority, so that the principal’s estate is not bound by any subsequent acts of the agent, even if the principal’s death is not known. If the agent continues to act, he becomes liable to the estate for any loss which results.
With respect to property, an agent acting for a deceased landlord is advised to contact the executor of the estate for further instructions before taking any further action on behalf of the landlord. Occasionally, the executor of the estate will need to issue (or authorise the agent to issue) notices terminating the tenancy so that vacant possession can be recovered. In time, the executor will normally sell the property or transfer the title to any beneficiary of the estate. At this stage, an agent will need to establish an agency agreement with the new owner if the property is to remain under the agent’s management.
N.B. Where there is a change of landlord either by the landlord selling the property (conveyance) or by the landlord passing on the property through his estate (as above) during the currency of a tenancy, it is important to notify the tenant(s) of the new landlord’s name and address details. This is an important legal requirement under the Landlord and Tenant Act 1985 (see page 7-7).
Summary
In this section, we have tried to stress the importance to the agent of having a good management agreement and the key issues and situations that the agreement should address. So much for the theory. In practice, as we all know, parties are often eager to go ahead and such things get forgotten.
If you haven’t been successful in getting the agreement signed at the initial instruction, then address the issue in a positive way. When you have found a suitable tenant, then confirm the fact in writing to the landlord and ask him to return the signed management agreement to you in order that you may proceed.
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The Legal Rights and Duties of an Agent
Although not a definitive guide, we shall initially consider the most important of the duties imposed upon agents. In the final section of the article, the rights of the agent are examined
Duty of Obedience
Express instructions are paramount and any agent disobeying these will be automatically liable for any loss which is caused to the principal. This duty takes precedence over the duty to exercise all reasonable care and skill.
Two important issues stem from this point of law. Firstly, it is wise to ask for all significant instructions to be given in writing, both at the initial undertaking and throughout the management of a property. Verbal instructions are more prone to ambiguity and can be forgotten. Secondly, the firm’s management agreement should define the professional services provided and what actions will be taken in certain situations. In this way, the definition of ‘reasonable care and skill’ will be less open to interpretation by any aggrieved client.
The only valid excuse for disobeying such express instructions are that they are unlawful, for example where your principal instructed you to deal with a firm in a country the UK was at war with.
This duty assumes that the instructions are capable of only one interpretation. If they are ambiguous and the agent acts upon a reasonable interpretation she is not liable merely if it happens to be the incorrect one.
Agent’s Discretion
The instructions may be actually intended to allow the agent a degree of discretion. If so the agent will not be liable provided the discretion is exercised in a fair and reasonable manner. Clearly as Murdoch points out in his recent book on the subject of agency, “At this point the agent’s duty of obedience effectively merges with the duty to exercise reasonable care and skill” (Law of Estate Agencies 3rd ed. 1994). It is difficult to give an example here because what is fair and reasonable will depend on the facts of the particular case. In such a case where it is adjudged that the discretion was exercised in the wrong way the agent will be liable for the losses to the principal, but it will not necessarily be a breach of contract or a reason for repudiation of the contract.
Duty of Care and Skill
An agent is under a duty to exercise reasonable care and skill which will be examined in the light of all the particular circumstances of the case. From a professional liability point of view, this duty is one of the most important to consider. It holds the highest penalty since professional negligence claims can be costly in time and any awards for damages made if a matter was to go to court.
An agent or any firm involved in the management of property should not lose sight of the extent of the risks and the value of capital at stake.
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Repairs to a property damaged by water escape following frozen or burst pipes can total several tens of thousands of pounds. A faulty gas installation could result in a fatality.
The duty of care and skill applies to a firm’s obligations to both the landlord (when managing the property as agent) and tenants.
The Supply of Goods and Services Act 1982 section 13 implies this duty into all contracts as a term rather than a condition. N.B. This may override exclusion clause in a firm’s standard terms and conditions.
This means it renders the agent liable to pay for loss suffered by the principal - it does not inevitably disentitle the agent to payment. This will depend on the seriousness of the agent’s breach. This duty is subordinate to the duty of obedience so the agent cannot disobey an instruction by claiming to have acted in the principal’s best interests. This of course can work in the agent’s favour. If the agent carries out the principal’s imprudent instructions to the detriment of the principal the agent will not normally be liable in negligence.
It has long been settled that, where an estate agent or letting agent is instructed to find a prospective tenant for property owned by his client, he must use reasonable diligence to ascertain that the person whom he introduces is a ‘proper’ tenant. If the agent fails in this duty, he may well be liable to his client, not only for loss of rent, but also for any damage which the tenant does to the premises.
In Brutton v Alfred Savill, Curtis & Henson,(1971 218 E.G. 1417), for example, an office junior employed by the agents allowed a prospective tenant to take possession of premises without payment of a deposit or any rent in advance because he said that he had forgotten his cheque book. The tenant subsequently defaulted on rent payments and legal proceedings were required to regain possession. The landlady lost some £770 in unpaid rent and the cost of legal proceedings. It was held that, since the normal worldly estate agent would not have been taken in by this simple confidence trick, the young employee’s gullibility amounted to negligence, and the defendants were therefore liable to their client for this loss.
In Hellings v Parker Breslin Estates 1994, the landlords wished to let a flat until such time as it could be resold. They were concerned that possession could be obtained at the end of the granted term. The landlords then proceeded to let the flat through the agents having explained the situation in full. In 1982, the agent granted a tenancy to a Miss B but later became dissatisfied with the tenant who had fallen in arrears with the rent. When possession proceedings were brought, it became clear to the owners that it was not going to be possible to recover the flat with vacant possession; Case 11 of the Rent Act did not apply unless the dwelling-house was originally occupied by the landlord as his residence and “is required as a residence for the owner- occupier ... “. The judge in this case held that failure by the agent to explain the circumstances under which possession could have been obtained under Case 11 amounted to a failure of skill in their duty of care to their clients.
With the majority of landlords and firms now using the assured shorthold tenancy, there are fewer pitfalls. Yet agents should still take care, especially when dealing with non-AST tenancies where the protection afforded to the landlord can be substantially reduced.
Repair and Disrepair
Where an agent is employed to manage the property, the agent will normally be responsible for instructing tradesmen to carry out necessary repairs. Although, in law, the agent is not generally responsible for substandard work of contractors, an agent could be liable if the workmen were employed directly (i.e. as the agent’s employees), or incorrect instructions were given to the subcontractor. Equally, there are potential liabilities to a landlord for disrepair and an absentee landlord relies on his agent to be diligent in performing these duties. If a tenant brought an action against a landlord in this context, the landlord might well sue the agent in turn for negligence.
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Clearly then, the agent also needs to be aware of the duty of care owed by the landlord to the tenant when managing such issues. Failure to take expedient action may cause problems for landlord and agent as a result.
Landlords have a general duty of care when carrying out work to a property so as to avoid defects or damage to the property and danger of injury to the occupier. The landlord should use reasonable materials to ensure that any work done is effective. When a property is built or altered or its use changed there is usually an obligation to comply with building regulations. A person who is harmed by a failure to comply with the regulations may have an action in negligence unless the regulations state otherwise.
It would be impossible to cover all eventualities within a few pages and in many situations, the extent of the agent’s duty of care will be far from clear. According to Murdoch , “Where an agent is engaged in a particular profession, it is by the standards of that profession that he will be judged”. There is more in this generality than meets the eye; it means that a voluntary code of practice (although not legally binding directly) could easily be produced in court to evidence what is to be considered to be the ‘standards of the profession’. The RICS Code of Practice for property management, is an example of this.
One topical example of this nature of this duty of care and skill is where the agent had employed a gas engineer to service and inspect a boiler, the agent should take care that a skilled engineer is appointed. If the repaired or serviced appliance subsequently became unsafe and it transpired that the tradesman was not professionally competent, then the agent could be held liable in part for not taking reasonable care when hiring him. (The fitter would also be criminally liable for working on a gas appliance without appropriate qualifications). In this situation, the measure of competence is fairly straightforward; the gas fitter must by law be Gas-Safe registered. It is a simple and recommended procedure for an agent to verify this.
A landlord (or agent) can be in breach of the duty of care if he fails to act or respond promptly to a reported disrepair as we can see in the following case:
McCauley v Bristol City Council (1991) - The tenants reported a defective garden step. The Council as landlord failed to carry out repairs. The tenant fell and broke her ankle. The council were held to be in breach of duty of care. Tenant was awarded £4,500 damages.
Employed for professional expertise
It should be noted however that where an agent is employed for her or his particular professional expertise there may well be an implied obligation to warn the principal that certain instructions are clearly unwise. For example where a letting agent is instructed to disregard the provisions of the Furniture and Furnishing Regulations 1988 and to buy furniture which does not comply with the regulations. The agent in such a case should refuse to carry out this instruction in any event as it would be unlawful.
Duty of Loyalty
This arises automatically out of the fiduciary nature of the relationship between agent and principal. The underlying principal is that the agent must not allow personal interest or the interest of a third party to come into conflict with the interests of the principal unless the principal has full knowledge of the fact and gives consent.
This might apply, for example, where an agent was letting a property to a friend or relation. The agent has a conflict of interest and it is sensible for the agent to advise his client of the circumstances and obtain permission to proceed.
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Where an agent has failed to disclose his personal interest, the principal may choose to set aside the transaction or to affirm it and claim the profit made by the agent.
Furthermore, the agent should not take secret profits (which are deemed to include bribes and commissions) without the prior knowledge and authorisation of the principal. The implication of this duty is that agents should declare any commissions that may be earned within their agency agreement or terms and conditions.
Duty of Personal Performance
As a general rule an agent may not entrust performance of the agency to any other person. In Allam v Europa Poster Services 1968 the judge said that,
...where the principal does place confidence in the agent... (acts).. must be done by the agent personally unless either expressly or inferentially he is authorised to employ a subagent or to delegate the function to another.
Whether or not an agent is entitled to delegate depends on the scope of the agent’s authority. For example a principal who appoints an agent to carry out certain tasks knowing that the agent does not intend to act personally will be taken to have authorised the appointment of a subagent. Authority may also be implied on the basis of what is usual in a particular trade or profession.
Duty to Account
An agent is obliged to pay over or otherwise account for all money in his possession where such money has been received from the principal; that which he receives from a third party to hand over to the principal, and that which he is deemed to receive on behalf of the principal (e.g. a secret profit). In connection with the agent’s duty to account, it has been held that it is his duty to keep accurate accounts of all his dealings on behalf of the principal. If he does not, everything which is consistent with the proved facts is presumed against him. In accounting for such money received, the agent may deduct whatever is due to him by way of commission and expenses.
Rights of the Agent
Remuneration
Remuneration may include either salary or wages of a person who is employed full time in the principal’s business or the fees or commission charged by an independent professional. The entitlement will depend on the terms of the agency agreement.
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If there is no express term, a right will be implied that a professional will be paid a reasonable sum for services rendered. No-one in business should rely on an implied term as to payment as the proving of what is a ‘reasonable’ sum can be fraught with difficulties.
If however you have been acting for a principal for a considerable number of years and you are asked to take on a transaction which is the same as previous transactions, and those transactions were paid in a way common to all of them, it will not be fatal to such a claim that the present transaction should be paid at the same rate, particularly where there has been no time for the formalities to be observed. This is a good example of the use of the custom and practice argument.
An agent will not be able to claim remuneration in respect of any unauthorised transaction unless the principal ratifies it at a later stage. Neither will remuneration be payable where the agent has been guilty of a breach of duty.
Reimbursement and Indemnity
The general rule is that the agent is entitled to be indemnified by the principal against any losses and liabilities, and to be reimbursed for any expenses which are incurred in acting on the principal’s behalf. An agent who incurs losses or liabilities in performing an unauthorised act cannot claim reimbursement or indemnity in respect of these. Nor is an agent entitled to an indemnity for any losses which result from the agent’s own failure to obey the principal’s instructions, negligence, or other default.
Also, such indemnity does not override statutory obligations. For example an agent would not be indemnified where the agent was prosecuted under the Furniture and Furnishings Regulations.
Lien
The agent may be legally entitled to exercise a lien i.e. retain possession of the principal’s goods until debts to the agent are paid. An agent is not in possession of goods if the goods are furniture in a flat or house. The valid exercise of a lien by an agent is only possible where certain conditions are met and although it is unlikely that a letting agent would have possession of goods they are detailed below for the sake of completeness.
1. The agent must be in actual or constructive possession of the goods in question. Constructive possession can be for example, where the agent has stored the goods elsewhere than on her premises.
2. The agent’s possession of the goods must be both lawful and authorised. Anything obtained by misrepresentation is not lawful and authorised.
3. The agent must have obtained possession of the goods in the same capacity as that in which the lien is claimed. i.e. cannot be used to claim debts incurred before the commencement of the agency.
4. The circumstances in which the agent obtained the goods must not be inconsistent with a lien. This will be the case, for example, where the agent is only given possession of the goods for a specific or limited purpose such as where the agent is arranging carriage of the goods rather than being the carrier.
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Powers of Attorney
A power of attorney is a deed, or legal agreement, by which a person confers power of another to act on behalf of the person granting the power. The person receiving the power is called the donee or agent and the person granting the power is referred to a the donor or principal.
A power of attorney operates under the law of agency, creating an agency relationship between the donor and the donee of the power (but according to more formal rules - largely governed by the Powers of Attorney Act 1971). The power authorises the agent to carry out acts on behalf of the donor and these acts or powers are often (but not always) specified. There is no statutory definition of the term which derives from attorneys at law, who acted for an absent creditor in court, producing a ‘power of attorney’ in order to receive payment from the debtor. Attorneys flourished until 1873 when they became solicitors.
Typical uses
A power of attorney is often granted when a person is abroad or difficult to contact - for example a landlord living overseas for an extended period - but they can also be granted during short absences such as, for example, where a person is away on holiday and it is likely that action will need to be taken in the person’s absence.
Powers of attorney are also commonly used to look after the affairs of elderly people who are, or may become, incapable of handling their own affairs.
Partnership agreements may contain a power of attorney; the partners appoint each other as their attorney to enable them to deal with partnership matters on behalf of each other.
Residential agents
Residential agents must perform their mandate or duties in person. The instructed agent cannot delegate his duties or employ a sub-agent, except with the consent of his principal (McCann & Co. v. Pow, 1974) or where such employment is necessary for the carrying out of the agency (e.g. where an agent is a company which employs staff to handle the various administrative tasks of letting and management), or is customary in the course of business (e.g. instructing tradesmen to attend to the maintenance of the landlord’s property).
While residential agents need authority of the principal to sub-instruct, preferably expressly granted in writing, it is useful for letting agents to obtain a power of attorney if they wish to act for their landlord in court.
Some courts are prepared to allow an agent to represent their client in court (the so-called ‘right of audience’) without a power of attorney, but many are not (although a recent report by the Law Commission recommended that agents be granted the right of audience in possession cases). In Chesters Accommodation Agency v. Abebrese (1997), the agent commenced possession proceedings in his name (rather than in the name of his landlord) and no power of attorney has been granted. In this case, it was held that the court is not obliged to grant a managing agent the right of audience in an action for possession and application was refused. The proper plaintiff is the person in whom the immediate reversion is vested, viz, the landlord.
N.B. Following a recent clarification of the court rules, it is clear that a power of attorney does not guarantee that a representative or agent will have a right to audience in court. However, many judges still seem willing to give an agent rights of audience - especially if a power of attorney can be produced in court. In many cases, however, a landlord may be obliged to employ a solicitor to present a case on his behalf in court.
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Limited Powers
The power can be general or limited. If it is a general power of attorney, the donee will be empowered to do anything which the donor could have lawfully done. A limited power of attorney, on the other hand, might be more common with regard to the letting of a house, where theagent will have authority only to deal with this type of transaction, or for conveyancing transactions where a house may be purchased by a relocation company.
Granting a power of attorney
Anyone who is a solvent adult, of sound mind, can be granted a power of attorney. There is no statutory format for a specific power of attorney, although there is for a general power under Schedule 1 of the Powers of Attorney Act 1971 and for an enduring power under section 2(2) of the 1985 Act.
For letting and managing agents a specific power would be of most value where the client is overseas or for some reason is unable, or does not wish, to attend to his affairs.
All powers of attorney must be executed by deed and witnessed by two persons who are not donees of the power (a deed is simply a formal legal document, clearly identified on the face of it that it is intended to be a deed, signed by the donor and witnessed by two persons).
Stamp duty is also payable on the deed. There is no requirement that the power be lodged with anyone and there is a presumption, provided it appears genuine, that it was rightly granted; the onus of proof being upon the party who alleges that it was not. Section 3 of the 1971 Act provided for copies of the power to be certified by a solicitor or stockbroker.
A specific power should be wide enough to encompass all that may be required to look after the landlord’s interests where he is overseas, or does not wish to attend his affairs. Specifically, authority should be granted to the letting or managing agent for expenditure on out-goings, repairs (perhaps not to exceed a stated sum), advertising and other disbursements in the event of a void, and for any legal or other expenses incurred in maintaining or defending the landlord’s interests in the property, including insurance and other claims, all reasonable expenses being deductible from rent received. In addition, the agent should be specifically authorised to appear and prosecute or defend any matter concerning or touching the property, either in person, or by employing a solicitor.
Execution of Documents
Once granted, the agent may sign and execute documents (such as tenancy agreements) with his own signature, and if desired, in his own name.
Any document executed or thing done in this manner is as effective as if executed or done in the name of the donor of the power. Thus, armed with a power of attorney, an agent may apply to the court for a possession order on behalf of his client landlord. In such proceedings, it would be advisable for the agent to produce a copy of his power of attorney.
Revocation and Expiry
Apart from certain irrevocable powers of attorney (which do not normally affect letting and managing agents), all powers whether special or general, may be revoked by the donor at any time. Revocation may be express, or occur by implication where the donor grants a new power to a different, or even the same person. Obviously, the power of attorney will cease when the occurrence of the event which has been specified has been fulfilled. Death or bankruptcy of the donor, or donee, also revokes the power.
Many powers of attorney are granted without any time limitation. However, the power may be granted for a specified period, either specified as a period of time, or on the happening of a specified event.
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In the case of Danby v. Coutts, 1885, the donor went abroad and granted a power of attorney to take effect whilst he was abroad. Although the duration was not specified, the power was only excercisable whilst the donor was abroad.
Mental incapacity
As mental incapacity revokes the power of attorney at common law, the Enduring Powers of Attorney Act 1985 was enacted to bridge the gap between the donor granting the authority when of sound mind, but subsequently suffering mental illness. There would clearly be a delay between suspicion and finding of mental incapacity and the appointment of a curator, or receiver, by the Court of Protection, to take charge of the donor’s affairs. So, section 1 provides that an enduring power will not be revoked by ‘any subsequent mental capacity of his.’ Although great tact and care must be taken, such a safeguard would be valuable in the case of an elderly client or one of presently sound mind, but victim of a mentally debilitating disease.
Illegality
If the performance of a power of attorney involves the commission of an illegal act, then the power of attorney will terminate.
For example, if the agent is asked to let out a property which is not safe, and the landlord is not agreeable to have the appropriate remedial works done to render the property safe, then the agent may consider that the power is terminated and, with it, the agent’s duty to act.
Is a power of attorney necessary?
In many situations, an agent can do all that is required under the general law of agency, authority being granted either orally, or in preference, using a written management or agency agreement. There are, however, specific situations where a power of attorney is necessary or preferable: • where the agent wishes to grant a lease for more than three years or carry out other property transactions where a deed is required (e.g. conveyance of property) • where an agent is required to represent a landlord in court • where the landlord is intending to go abroad • where there is a possibility of the donor becoming mentally incapable Where there is a possibility of the donor becoming mentally incapable, an enduring power or attorney should be granted - otherwise, under common law, the power would be revoked upon the supervening mental incapacity of the donor. If it is intended that the power should be enduring, the donor needs to grant the power of attorney to the donee using a prescribed form.
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Example power of attorney authorising a letting agent to let and manage property
This limited power of attorney is made this ...... day of ...... 20...
by ......
of ......
I appoint ......
of ......
to do all or any of the following acts:
1. To grant a tenancy or tenancies of [insert address of property] for a term not exceeding ...... years on such terms as my attorney thinks fit.
2. To receive the rent and to apply the rent in discharge of the obligations of the landlord.
3. To take such proceedings as may be necessary to recover any rent or to enforce any of the obligations imposed on the tenant or to recover possession of the property.
4. To arrange for the property to be inspected on a regular basis and to carry out any maintenance as my attorney thinks fit [ up to a limit of £ ...... per item of repair ]
Signed as a deed and delivered: ......
Witness: ......
Witness Address: ......
Witness Occupation: ......
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Third Parties
In contract law the general rule is that where an agent enters into a contract on behalf of a principal and there is a dispute on that contract the agent ‘drops out’ of the contract and the third party can sue the principal directly or vice versa. Problems arise where the contract is not clear as to the status of all the parties and some words have been found to be more effective than others at describing the capacity of the person signing the contract.
Where the agent enters into a contract without revealing the existence of a principal the agent is regarded in law as contracting personally. To avoid any doubt the words “for and on behalf of” should be used where the agent enters into a contract on the principal’s behalf. Other words of explanation such as “on account of” have been held by the courts to be insufficient. However, the courts will take into account the context of the whole of the contract to determine whether the words used are sufficient to show that the person was acting as agent.
Where it is made clear that the agent is acting as agent even where the principal is not named and the agent signed in her own name this is sufficient to show that she intended to act as agent.
Good Practice Guide - The best way to ensure that there is no doubt is to describe the nature of the parties in the contract and to sign as above. “If in both places the agent is referred to as agent it will be almost impossible to regard him/her as the contracting party but if there is no mention in either place it will be almost impossible to deny that he/she is the contracting party”.
Where the tenant has signed a tenancy agreement in good faith believing the agent to be the landlord, the tenant can sue as if the agent were the landlord. The real landlord in such a case is called the undisclosed principal and even if the undisclosed principal appears at a later stage and identifies herself as the landlord the agent is still liable.
Evidence Of Intention
When disputes bring the matter to court the terms and conditions of the agency is determined by the court deciding what the intention of all the parties was at the time the contract was entered into. As always in court the best evidence of this is the written document(s) signed by the parties. Usual custom and practice of the trade or profession, or of the particular parties will also be considered if necessary as already mentioned above.
Misrepresentation
Great care must be taken when making representations to tenants - especially during the pre- contract negotiations in relation to a new tenancy. A significant misrepresentation by the agent will be considered in the same light as if the landlord had made the misrepresentation directly. If the tenant has replied on such representations, and they are material to the tenancy (e.g. the promised availability of a parking space which is subsequently withdrawn) then the tenant may be granted remedies in law. For example, he may be permitted to withdraw from the tenancy or claim damages from the landlord.
In addition, the agent is also bound by additional duties with respect to representations made in his business capacity. Under regulations introduced in 2008 (Consumer Protection from Unfair Trading Regulations) a trader is under a duty to act fairly to consumers. The trader’s behaviour should not cause an average consumer to take a transactional decision he would not have taken otherwise. This duty includes both explicit statements and also material omissions. For example, an agent could be guilty of an offence if he knew that a property had an ongoing history of pest infestation that could materially affect the tenant’s enjoyment of the property, and failed to disclose the fact before the tenant took occupation. Agents and commercial landlords can no longer hide behind the principle of caveat emptor - let the buyer beware - and penalties can now be applied to any business or individual found committing an offence under these regulations.
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Accommodation Agencies Act 1953
The Accommodation Agencies Act 1953 penalises agents if they charge a fee to take details from a prospective tenant and register that person on their books as seeking a tenancy , or take money in return for providing a prospective tenant with addresses of places to let. In 1974 the House of Lords decided that this part of the Act did not create an offence if accommodation is actually taken. However, the Tenant Fees Act 2019 now limits the fees that can be charged to tenants and landlords and letting agents cannot charge prohibited payments from 1st June 2019. See Letting Factsheet 51 for more information.
The Act also creates an offence where ‘an agent issues any advertisement, list or other document describing any house or dwelling as being let without the authority of the owner of the house or his agent’. This puts the obligation on the agent to check the title of any property being offered to let. Thus, if a landlord approaches an agent, asking the agent to let his property, it is prudent for the agent to make sufficient checks to be assured that the landlord is in fact the true owner of the property or if not landlord, a person who has the appropriate authority to let. Such checks might take the form of asking to see the deeds to the property, relevant correspondence with a building society or other lender, or conducting a search at the land registry. An agent was prosecuted in 1996 for offering a house for let where the purported owner was in fact merely a local authority tenant, and the dwelling was a council house.
For more information on the agent’s duties and obligations under this Act, see Chapter 7 (The Accommodation Agencies Act 1953), and Factsheet No. 16 (in Appendix).
Summary
Agents should be unequivocal in their dealings both with the client or principal, and also in dealings with third parties. Many agents have faced problems in the past because of the lack of a written agreement, or as a result of sloppy and ambiguous wording in contracts. If in any doubt, it is better to clear the matter up before the act is done, using plain language and putting everything in writing where at all possible. Without this, the agent runs the risk of a dispute ending up in court with a judge deciding the intention of the agreement and what was signed or not signed, said or not said.
The Housing and Planning Act 2016
Banning Orders
The Housing and Planning Act 2016 (Banning Order Offences) Regulations 2017 introduce banning orders for landlords and letting agents in England who commit a serious offence. Under the regulations landlords and letting agents can be banned from engaging in letting agency or property management work if they are convicted of a banning order offence. The regulations came into force on 6th April 2018. The regulations set out a list of offences which could result in a banning order being issued which include unlawful eviction and harassment of occupiers, violence for securing entry, failing to comply with an improvement notice or prohibition order, offences relating to HMOs and licensing offences, providing false or misleading information, fire safety and gas safety offences and offences under the Immigration Act 2014.
The local authority can apply for a banning order to be imposed for at least 12 months. Breaching a banning order will be an offence and could be subject on summary conviction to imprisonment not exceeding 51 weeks and/or a fine. The local authority can also impose a civil penalty as an
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alternative to prosecution up to an amount of £30,000. The Housing and Planning Act 2016 also introduces a database for criminal landlords and letting agents who will automatically be added to the database if they receive banning orders. The database will be held centrally by the Department of Communities and Local Government.
Client Money Protection Schemes
The Housing and Planning Act 2016 made provision for regulations to be introduced in relation to client money protection schemes. Since 1st April 2019 letting agents in England who hold money on behalf of a client in the course of letting agency work or property management work must belong to an approved or designated client money protection scheme in order to afford protection to that client against loss, theft, misappropriation etc. of their funds (Regulation 3(1) of The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2018). Regulation 3 also requires that the level of membership obtained must provide compensation to an amount not less than the maximum amount of client money that the agent may from time to time hold (Reg 3(2)).
Letting agency work is defined in section 54 of the Housing and Planning Act 2016 and property management work is defined in section 55 of the Housing and Planning Act 2016. A letting agent or property manager does not include a person who engages in letting or property management work in the course of their employment under a contract of employment.
Letting agency work means things done by an agent in the course of a business in response to instructions received from a prospective landlord seeking to find another person to whom to let housing or a prospective tenant seeking to find housing to rent. Letting agency work does not include where the agent only publishes advertisments or information or where they provide a means for the landlord and tenant to communicate directly and no other work is carried out by the letting agent.
Property management work means things done by the agent in the course of business in response to instructions received from another person where that person wishes the agent to arrange services, repairs, maintenance, improvements etc on their behalf.
In accordance with Regulation 4(1) a letting agent must obtain a certificate confirming the membership and display the certificate: • at each of their premises in England at which the agent deals face-to-face with persons using or proposing to use the agent’s services as a property agent; and • at a place in each of those premises where it is likely to be seen by such persons. Letting agents must also publish a copy of the certificate on their website (if any) and produce a copy of the certificate to any person who may reasonably require it, free of charge.
If the agent’s membership is revoked or the agent ceases to be a member of an approved scheme and becomes a member of a different approved scheme each client must be notified, in writing, within 14 days of the event (Reg 4(2)).
A local authority in England may impose a financial penalty where they are satisfied beyond reasonable doubt that the agent has breached the regulations (Reg 9). Before imposing a financial penalty on an agent the local authority must serve a notice on the agent of its intention to do so within six months of the local authority having sufficient evidence of the breach (Reg 10). Where the breach is continuing the notice can be served at any time when the breach is continuing or within six months from the last day on which the breach occurs. The agent may make written representations to the local authority within 28 days from the date the notice was served.
A fine of up to £30,000 can be imposed for a breach where the agent does not belong to a client money protection scheme (Reg 6). The agent will not be in breach of Regulation 4 where they have taken all reasonable steps to obtain a copy of the membership certificate but the scheme administrator has not provided it.
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The Letting Handbook 17-24 © The Letting Centre 10/2019 Back to contents Section 3: Factsheets
Section 3: Factsheets
Available online at: www.letlink.co.uk
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The Letting Handbook © The Letting Centre 10/2019 Back to contents Section 4: Appendices
Section 4: Appendices
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The Letting Handbook © The Letting Centre 10/2019 Back to contents
Appendix A Directory of Addresses
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The Letting Handbook © The Letting Centre 10/2019 Back to contents Directory of Useful Addresses
SUPPLIERS OF LEGAL FORMS, NOTICES AND AGREEMENTS: Letting Centre Oyez Legal Forms Office Team Ltd 13 Fleetsbridge Business Centre Oyez Store Unit 4 Upton Road PO Box 55 500 Purley Way Poole 7 Spa Road Croydon Dorset London Surrey BH17 7AF SE16 3QQ CR0 4NZ Tel: 01258 857375 Tel: 0845 217 7565 Tel: 0844 801 3740
OTHER USEFUL ADDRESSES: Association of Res. Letting Agents: Arbon House, 6 Tournament Court, Warwick, CV34 6LG. Tel: 01926 417 360 Association of Residential Managing Agents: 2-4 St George’s Road, Wimbledon, SW19 4DP. Tel: 020 7978 2607 Association of Relocation Professionals: 9-10 Diss Business Park, Diss, IP21 4HD. Tel: 01379 651671 British Property Federation: 5th Floor, 57-59 Haymarket, London SW1Y 4QX. Tel: 020 7828 0111 Building Research Establishment: Bucknalls Lane, Watford WD25 9XX. Tel: 01923 664000 Child Poverty Action Group: 30 Micawber Street, London, N1 7TB. Tel: 020 7837 7979 Chartered Institute of Environmental Health: Chadwick Ct., Hatfield, LONDON SE1 8DJ. Tel: 020 7928 6006 Chartered Institute of Housing: Octavia House, Westwood Way, Coventry CV4 8JP. Tel: 024 7685 1700 Citizens Advice Bureau: 3rd Floor North, 200 Aldersgate, London, EC1A 4HD. Tel: 03444 111 444 Competition & Markets Authority: Victoria House, 37 Southampton Row, London, WC1B 4AD. Tel: 020 3738 6000 Council for Licensed Conveyancers: CAN Mezzanine, 49-51 East Road, London, N1 6AH. Tel: 0207 250 8465 Deposit Protection Service (DPS): The Pavilions, Bridgewater Road, Bristol, BS99 6AA. Tel: 0330 303 0030 Electrical Contractors Assoc.: Lincoln House, 1370143 Hammersmith Road, London, W14 0QL. Tel: 020 7313 4800 Empty Homes Agency: 70 Cowcross Street, London, EC1M 6EJ. Tel: 020 3135 0674 Gas Safety Action Line: Tel: 0800 300363 Gas Safe Register: PO Box 6804, Basingstoke, RG24 4NB. Tel: 0800 408 5500 H M Land Registry: Croydon Office, Trafalgar House, 1 Bedford Park, Croydon, CR0 2AQ. Tel: 0300 006 0411 Health & Safety Executive: (HSE), Redgrave Court, Merton Road, Bootle, L20 7HS. Tel: 0300 003 1747 Home Builders Federation: HBF House, 27 Broadwall, London, SE1 9PL. Tel: 020 7960 1600 Homes and Communities Agency: Fry Building, 2 Marsham Street, London, SW1 4DF. Tel: 0300 1234 500 Housing for Wales: Welsh Government, Cathays Park, Cardiff, CF10 3NQ. Tel: 0300 0604 400 Housing Justice: 256 Bermondsey Street, London, SE1 3UJ. Tel: 020 3544 8094 Housing Ombudsman: 81 Aldwych, London, WC2B 4HN. Tel: 0300 111 3000 LACORS: Local Government House, Smith Square, London SW1P 3HZ. Tel: 020 7665 3888 Leasehold Advisory Service: Fleetbank House, 2-6 Salisbury Square, London, EC4Y 8JX. Tel: 020 7382 2500 Legal Action Group: 48 Chancery Lane, London, WC2A 1JF. Tel: 020 7833 2931 Local Government Ombudsman: PO Box 4771, Coventry, CV4 0EH. Tel: 0300 061 0614 National Assoc. of Est Agents: Arbon House, 6 Tournament Ct, Edgehill Dr., Warwick, CV34 6LG. Tel: 01926 417 790 My Deposits: 1st Floor, Premiere House, Elstree Way, Borehamwood, WD6 1JH. Tel: 0333 321 9401 National Debtline: Tricorn House, 51-53 Hagley Road, Edgbaston, Birmingham, B16 8TP. Tel: 0808 808 4000 National Housing Federation: Lion Court, 25 Procter Street, London, WC1V 6NY. Tel: 020 7067 1010 National Landlords Association: 2nd Floor, 200 Union Street, London, SE1 0LX. Tel: 020 7840 8900 OFGEM: 9 Millbank, London, SW1P 3GE. Tel: 020 7901 7000 Rent Assessment: First Tier Tribunal (Property Chamber), 10 Alfred Place, London WC1E 7LR. Tel: 020 7446 7700 Rent Smart Wales: PO Box 1106, Cardiff, CF11 1UA. Tel: 0300 0133 344 Royal Institution of Chartered Surveyors (RICS): 12 Great George Street, London, SW1P 3AD. Tel: 02476 868555 Shelter: 88 Old Street, London, EC1V 9HU. Tel: 0808 800 4444 Stationery Office, The: St Crispins, Duke Street, Norwich, NR3 1PD. Tel: 0333 202 5070 The Dispute Service Ltd (TDS): PO Box 1255, Hemel Hempstead, Herts, HP1 9GN. Tel: 0300 037 1000 Tenants Participation Advice Service: Paragon House, 48 Seymour Grove, Old Trafford, M16 0LN. Tel: 0161 868 3500 UK Association of Letting Agents (UKALA): 2nd Floor, 200 Union Street, London, SE1 0LX. Tel: 020 7820 7900
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Appendix B Statutory Extracts See www.legislation.gov.uk for a full copy of the regulations
The Housing Act 1988 (Sections 1-28, as amended by Housing Act 1996)
1988 c.50 and 1996 c.52
- - - - -
The Landlord and Tenant Act 1985 (Section 11)
1985 c.70
- - - - -
The Protection from Eviction Act 1977 (Sections 1 to 5) 1977 c.43
N.B. These statutory extracts are intended to assist landlords and letting agents. These extracts are not a full interpretation of the Acts and are subject to change. A full copy of the Acts are available at: www.legislation.gov.uk.
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Note: Amendments and Changes made to the Housing Act 1988 by the Housing Act 1996 and later legislation are printed in italics
Housing Act 1988 as amended by the Housing Act 1996 Part I Rented Accommodation
Chapter I Assured Tenancies
1. Assured Tenancies (1) A tenancy under which a dwelling-house is let as a separate dwelling is for the purposes of this Act an assured tenancy if and so long as - (a) the tenant or, as the case may be, each of the joint tenants is an individual; and (b) the tenant or, as the case may be, at least one of the joint tenants occupies the dwelling-house as his only or principal home; and (c) the tenancy is not one which, by virtue of subsection (2) or subsection (6) below, cannot be an assured tenancy. (1A) Subsection (1) has effect subject to section 15A (loss of assured tenancy status). (2) Subject to subsection (3) below, if and so long as a tenancy falls within any paragraph in Part I of Schedule 1 to this Act, it cannot be an assured tenancy; and in that Schedule- (a) “tenancy” means a tenancy under which a dwelling-house is let as a separate dwelling; (b) Part II has effect for determining the rateable value of a dwelling-house for the purposes of Part I; and (c) Part III has effect for supplementing paragraph 10 in Part I. (2A) The Secretary of State may by order replace any amount referred to in paragraphs 2 and 3A of Schedule 1 to this Act by such amount as is specified in the order and such an order shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (3) Except as provided in Chapter V below, at the commencement of this Act, a tenancy- (a) under which a dwelling-house was then let as a separate dwelling, and (b) which immediately before that commencement was an assured tenancy for the purposes of sections 56 to 58 of the Housing Act 1980 (tenancies granted by approved bodies), shall become an assured tenancy for the purposes of this Act. (4) In relation to an assured tenancy falling within subsection (3) above- (a) Part I of Schedule 1 to this Act shall have effect, subject to subsection (5) below, as if it consisted only of paragraphs 11 and 12; and (b) sections 56 to 58 of the Housing Act 1980 (and Schedule 5 to that Act) shall not apply after the commencement of this Act. (5) In any case where - (a) immediately before the commencement of this Act the landlord under a tenancy is a fully mutual housing association, and (b) at the commencement of this Act the tenancy becomes an assured tenancy by virtue of subsection (3) above, then, so long as that association remains the landlord under that tenancy (and under any statutory periodic tenancy which arises on the coming to an end of that tenancy), paragraph 12 of Schedule 1 to this Act shall have effect in relation to that tenancy with the omission of subparagraph (1)(h). 2. Letting of a dwelling-house together with other land (1) If, under a tenancy, a dwelling-house is let together with other land, then, for the purposes of this Part of this Act, - (a) if and so long as the main purpose of the letting is the provision of a home for the tenant or, where there are joint tenants, at least one of them, the other land shall be treated as part of the dwelling-house; and (b) if and so long as the main purpose of the letting is not as mentioned in paragraph (a) above, the tenancy shall be treated as not being one under which a dwelling-house is let as a separate dwelling. (2) Nothing in subsection (1) above affects any question whether a tenancy is precluded from being an assured tenancy by virtue of any provision of Schedule I to this Act. 3. Tenant sharing accommodation with persons other than landlord (1) Where a tenant has the exclusive occupation of any accommodation (in this section referred to as “the separate accommodation”) and- (a) the terms as between the tenant and his landlord on which he holds the separate accommodation include the use of other accommodation (in this section referred to as “the shared accommodation”) in common with another person or other persons, not being or including the landlord, and (b) by reason only of the circumstances mentioned in paragraph (a) above, the separate accommodation would not, apart from this section, be a dwelling-house let on an assured tenancy, the separate accommodation shall be deemed to be a dwelling-house let on an assured tenancy and the following provisions of this section shall have effect. (2) For the avoidance of doubt it is hereby declared that where, for the purpose of determining the rateable value of the separate accommodation, it is necessary to make an apportionment under Part II of Schedule 1 to this Act, regard is to be had to the circumstances mentioned in subsection (1)(a) above.
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(3) While the tenant is in possession of the separate accommodation, any term of the tenancy terminating or modifying, or providing for the termination or modification of, his right to the use of any of the shared accommodation which is living accommodation shall be of no effect. (4) Where the terms of the tenancy are such that, at any time during the tenancy, the persons in common with whom the tenant is entitled to the use of the shared accommodation could be varied or their number could be increased, nothing in subsection (3) above shall prevent those terms from having effect so far as they relate to any such variation or increase. (5) In this section “living accommodation” means accommodation of such a nature that the fact that it constitutes or is included in the shared accommodation is sufficient, apart from this section, to prevent the tenancy from constituting an assured tenancy of a dwelling-house. 4. Certain sublettings not to exclude any part of sublessor’s premises from assured tenancy (1) Where the tenant of a dwelling-house has sublet a part but not the whole of the dwelling-house, then, as against his landlord or any superior landlord, no part of the dwelling-house shall be treated as excluded from being a dwelling-house let on an assured tenancy by reason only that the terms on which any person claiming under the tenant holds any part of the dwelling-house include the use of accommodation in common with other persons. (2) Nothing in this section affects the rights against, and liabilities to, each other of the tenant and any person claiming under him, or of any two such persons. 5. Security of tenure (1) An assured tenancy cannot be brought to an end by the landlord except by (a) obtaining- (i) an order of the court for possession of the dwelling-house under section 7 or 21, and (ii) the execution of the order (b) obtaining an order of the court under section 6A (demotion order), or (c) in the case of a fixed term tenancy which contains power for the landlord to determine the tenancy in certain circumstances, by the exercise of that power, and, accordingly, the service by the landlord of a notice to quit is of no effect in relation to a periodic assured tenancy. (1A) Where an order of the court for possession of the dwelling-house is obtained, the tenancy ends when the order is executed. (2) If an assured tenancy which is a fixed term tenancy comes to an end otherwise than by virtue of - (a) an order of the court of the kind mentioned in subsection (1)(a) or (b) or any other order of the court, or (b) a surrender or other action on the part of the tenant, then, subject to section 7 and Chapter II below, the tenant shall be entitled to remain in possession of the dwelling-house let under that tenancy and, subject to subsection (4) below, his right to possession shall depend upon a periodic tenancy arising by virtue of this section. (3) The periodic tenancy referred to in subsection (2) above is one- (a) taking effect in possession immediately on the coming to an end of the fixed term tenancy; (b) deemed to have been granted by the person who was the landlord under the fixed term tenancy immediately before it came to an end to the person who was then the tenant under that tenancy; (c) under which the premises which are let are the same dwelling-house as was let under the fixed term tenancy; (d) under which the periods of the tenancy are the same as those for which rent was last payable under the fixed term tenancy; and (e) under which, subject to the following provisions of this Part of this Act, the other terms are the same as those of the fixed term tenancy immediately before it came to an end, except that any term which makes provision for determination by the landlord or the tenant shall not have effect while the tenancy remains an assured tenancy. (4) The periodic tenancy referred to in subsection (2) above shall not arise if, on the coming to an end of the fixed term tenancy, the tenant is entitled, by virtue of the grant of another tenancy, to possession of the same or substantially the same dwelling-house as was let to him under the fixed term tenancy. (5) If, on or before the date on which a tenancy is entered into or is deemed to have been granted as mentioned in subsection (3)(b) above, the person who is to be the tenant under that tenancy- (a) enters into an obligation to do any act which (apart from this subsection) will cause the tenancy to come to an end at a time when it is an assured tenancy, or (b) executes, signs or gives any surrender, notice to quit or other document which (apart from this subsection) has the effect of bringing the tenancy to an end at a time when it is an assured tenancy, the obligation referred to in paragraph (a) above shall not be enforceable or, as the case may be, the surrender, notice to quit or other document referred to in paragraph (b) above shall be of no effect. (5A) Nothing in subsection (5) affects any right of pre-emption- (a) which is exercisable by the landlord under a tenancy in circumstances where the tenant indicates his intention to dispose of the whole of his interest under the tenancy, and (b) in pursuance of which the landlord would be required to pay, in respect of the acquisition of that interest, an amount representing its market value. “Dispose” means dispose by assignment or surrender, and “acquisition” has a corresponding meaning. (6) If, by virtue of any provision of this Part of this Act, Part I of Schedule 1 to this Act has effect in relation to a fixed term tenancy as if it consisted only of paragraphs 11 and 12, that Part shall have the like effect in relation to any periodic tenancy which arises by virtue of this section on the coming to an end of the fixed term tenancy. (7) Any reference in this Part of this Act to a statutory periodic tenancy is a reference to a periodic tenancy arising by virtue of this section.
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6. Fixing of terms of statutory periodic tenancy (1) In this section, in relation to a statutory periodic tenancy, (a) “the former tenancy” means the fixed term tenancy on the coming to an end of which the statutory periodic tenancy arises; and (b) “the implied terms” means the terms of the tenancy which have effect by virtue of section 5(3)(e) above, other than terms as to the amount of the rent; but nothing in the following provisions of this section applies to a statutory periodic tenancy at a time when, by virtue of paragraph 11 or paragraph 12 in Part 1 of Schedule 1 to this Act, it cannot be an assured tenancy. (2) Not later than the first anniversary of the day on which the former tenancy came to an end, the landlord may serve on the tenant, or the tenant may serve on the landlord a notice in the prescribed form proposing terms of the statutory periodic tenancy different from the implied terms and, if the landlord or the tenant considers it appropriate, proposing an adjustment of the amount of the rent to take account of the proposed terms. (3) Where a notice has been served under subsection (2) above, - (a) within the period of three months beginning on the date on which the notice was served on him, the landlord or the tenant, as the case may be, may, by an application in the prescribed form, refer the notice to the appropriate tribunal under subsection (4) below; and (b) if the notice is not so referred, then, with effect from such date, not falling within the period referred to in paragraph (a) above, as may be specified in the notice, the terms proposed in the notice shall become terms of the tenancy in substitution for any of the implied terms dealing with the same subject matter and the amount of the rent shall be varied in accordance with any adjustment so proposed. (4) Where a notice under subsection (2) above is referred to the appropriate tribunal, the appropriate tribunal shall consider the terms proposed in the notice and shall determine whether those terms, or some other terms (dealing with the same subject matter as the proposed terms), are such as, in the appropriate tribunal’s opinion, might reasonably be expected to be found in an assured periodic tenancy of the dwelling-house concerned, being a tenancy - (a) which begins on the coming to an end of the former tenancy; and (b) which is granted by a willing landlord on terms which, except in so far as they relate to the subject matter of the proposed terms, are those of the statutory periodic tenancy at the time of the appropriate tribunal’s consideration. (5) Whether or not a notice under subsection (2) above proposes an adjustment of the amount of the rent under the statutory periodic tenancy, where the appropriate tribunal determine any terms under subsection (4) above, they shall, if they consider it appropriate, specify such an adjustment to take account of the terms so determined. (6) In making a determination under subsection (4) above, or specifying an adjustment of an amount of rent under subsection (5) above, there shall be disregarded any effect on the terms or the amount of the rent attributable to the granting of a tenancy to a sitting tenant. (7) Where a notice under subsection (2) above is referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, with effect from such date as the appropriate tribunal may direct - (a) the terms determined by the appropriate tribunal shall become terms of the statutory periodic tenancy in substitution for any of the implied terms dealing with the same subject matter; and (b) the amount of the rent under the statutory periodic tenancy shall be altered to accord with any adjustment specified by the appropriate tribunal; but for the purposes of paragraph (b) above the appropriate tribunal shall not direct a date earlier than the date specified, in accordance with subsection (3)(b) above, in the notice referred to them. (8) Nothing in this section requires the appropriate tribunal to continue with a determination under subsection (4) above if the landlord and tenant give notice in writing that they no longer require such a determination or if the tenancy has come to an end. 6A. Demotion because of anti-social behaviour (1) This section applies to an assured tenancy if the landlord is a registered social landlord. (2) The landlord may apply to a county court for a demotion order. (3) A demotion order has the following effect— (a) the assured tenancy is terminated with effect from the date specified in the order; (b) if the tenant remains in occupation of the dwelling-house after that date a demoted tenancy is created with effect from that date; (c) it is a term of the demoted tenancy that any arrears of rent payable at the termination of the assured tenancy become payable under the demoted tenancy; (d) it is also a term of the demoted tenancy that any rent paid in advance or overpaid at the termination of the assured tenancy is credited to the tenant’s liability to pay rent under the demoted tenancy. (4) The court must not make a demotion order unless it is satisfied— (a) that the tenant or a person residing in or visiting the dwelling-house has engaged or has threatened to engage in conduct to which section 153A or 153B of the Housing Act 1996 (anti-social behaviour or use of premises for unlawful purposes) applies, and (b) that it is reasonable to make the order. (5) The court must not entertain proceedings for a demotion order unless— (a) the landlord has served on the tenant a notice under subsection (6), or (b) the court thinks it is just and equitable to dispense with the requirement of the notice. (6) The notice must— (a) give particulars of the conduct in respect of which the order is sought; (b) state that the proceedings will not begin before the date specified in the notice;
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(c) state that the proceedings will not begin after the end of the period of twelve months beginning with the date of service of the notice. (7) The date specified for the purposes of subsection (6)(b) must not be before the end of the period of two weeks beginning with the date of service of the notice. (8) Each of the following has effect in respect of a demoted tenancy at the time it is created by virtue of an order under this section as it has effect in relation to the assured tenancy at the time it is terminated by virtue of the order— (a) the parties to the tenancy; (b) the period of the tenancy; (c) the amount of the rent; (d) the dates on which the rent is payable. (9) Subsection (8)(b) does not apply if the assured tenancy was for a fixed term and in such a case the demoted tenancy is a weekly periodic tenancy. (10) If the landlord of the demoted tenancy serves on the tenant a statement of any other express terms of the assured tenancy which are to apply to the demoted tenancy such terms are also terms of the demoted tenancy. (11) For the purposes of this section a demoted tenancy is a tenancy to which section 20B of the Housing Act 1988 applies 7. Orders for possession (1) The court shall not make an order for possession of a dwelling-house let on an assured tenancy except on one or more of the grounds set out in Schedule 2 to this Act; but nothing in this Part of this Act relates to proceedings for possession of such a dwelling-house which are brought by a mortgagee, within the meaning of the Law of Property Act 1925, who has lent money on the security of the assured tenancy. (2) The following provisions of this section have effect, subject to section 8 below, in relation to proceedings for the recovery of possession of a dwelling-house let on an assured tenancy. (3) If the court is satisfied that any of the grounds in Part I of Schedule 2 to this Act is established then, subject to subsections (5A) and (6) below, the court shall make an order for possession. (4) If the court is satisfied that any of the grounds in Part II of Schedule 2 to this Act is established, then, subject to subsections (5A) and (6) below, the court may make an order for possession if it considers it reasonable to do so. (5) Part III of Schedule 2 to this Act shall have effect for supplementing Ground 9 in that Schedule and Part IV of that Schedule shall have effect in relation to notices given as mentioned in Grounds 1 to 5 of that Schedule. (5A) The court shall not make an order for possession of a dwelling-house let on an assured periodic tenancy arising under Schedule 10 to the Local Government and Housing Act 1989 on any of the following grounds, that is to say,- (a) Grounds 1, 2 and 5 in Part I of Schedule 2 to this Act (b) Ground 16 in Part II of that Schedule; and (c) if the assured periodic tenancy arose on the termination of a former 1954 Act tenancy, within the meaning of the said Schedule 10, Ground 6 in Part I of Schedule 2 to this Act (6) The court shall not make an order for possession of a dwelling-house to take effect at a time when it is let on an assured fixed term tenancy unless- (a) the ground for possession is Ground 2 or Ground 8 in Part I of Schedule 2 to this Act or any of the grounds in Part II of that Schedule, other than Ground 9 or Ground 16; and (b) the terms of the tenancy make provision for it to be brought to an end on the ground in question (whether that provision takes the form of a provision for re-entry, for forfeiture, for determination by notice or otherwise). (7) Subject to the preceding provisions of this section, the court may make an order for possession of a dwelling-house on grounds relating to a fixed term tenancy which has come to an end; and where an order is made in such circumstances, any statutory periodic tenancy which has arisen on the ending of the fixed term tenancy shall end (without any notice and regardless of the period) in accordance with section 5(1A). 8. Notice of proceedings for possession (1) The court shall not entertain proceedings for possession of a dwelling-house let on an assured tenancy unless - (a) the landlord or, in the case of joint landlords, at least one of them has served on the tenant a notice in accordance with this section and the proceedings are begun within the time-limits stated in the notice in accordance with subsections (3) to (4B) below; or (b) the court considers it just and equitable to dispense with the requirement of such a notice. (2) The court shall not make an order for possession on any of the grounds in Schedule 2 to this Act unless that ground and particulars of it are specified in the notice under this section; but the grounds specified in such a notice may be altered or added to with the leave of the court. (3) A notice under this section is one in the prescribed form informing the tenant that- (a) the landlord intends to begin proceedings for possession of the dwelling-house on one or more of the grounds specified in the notice; and (b) those proceedings will not begin earlier than a date specified in the notice in accordance with subsections (3A) to (4B) below; and (c) those proceedings will not begin later than 12 months from the date of service of the notice. (3A) If a notice under this section specifies in accordance with subsection (3)(a) Ground 7A in Schedule 2 to this Act (whether with or without other grounds), the date specified in the notice as mentioned in subsection (3)(b) is not to be earlier than— (a) in the case of a periodic tenancy, the earliest date on which, apart from section 5(1), the tenancy could be brought to an end by a notice to quit given by the landlord on the same date as the date of service of the notice under this section; (b) in the case of a fixed term tenancy, one month after the date on which the notice was served. (4) If a notice under this section specifies in accordance with subsection (3)(a) above, Ground 14 in Schedule 2 to this Act (whether without other grounds or with any ground other than Ground 7A), the date specified in the notice as mentioned in subsection
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(3)(b) above shall not be earlier than the date of the service of the notice. (4A) If a notice under this section specifies in accordance with subsection (3)(a) above, any of Grounds 1, 2, 5 to 7, 9 and 16 in Schedule 2 to this Act (whether without other grounds or with any grounds other than Ground 7A or14), the date specified in the notice as mentioned in subsection (3)(b) above shall not be earlier than - (a) two months from the date of service of the notice; and (b) if the tenancy is a periodic tenancy, the earliest date on which, apart from section 5(1) above, the tenancy could be brought to an end by a notice to quit given by the landlord on the same date as the date of service of the notice under this section. (4B) In any other case, the date specified in the notice as mentioned in subsection (3)(b) above shall not be earlier than the expiry of two weeks from the date of the service of the notice. (4C) A notice under this section that specifies in accordance with subsection (3)(a) Ground 7A in Schedule 2 to this Act (whether with or without other grounds) must be served on the tenant within the time period specified in subsection (4D), (4E) or (4F). (4D) Where the landlord proposes to rely on condition 1, 3 or 5 in Ground 7A, the notice must be served on the tenant within— (a) the period of 12 months beginning with the day of the conviction, or (b) if there is an appeal against the conviction, the period of 12 months beginning with the day on which the appeal is finally determined or abandoned. (4E) Where the landlord proposes to rely on condition 2 in Ground 7A, the notice must be served on the tenant within— (a) the period of 12 months beginning with the day on which the court has made the finding, or (b) if there is an appeal against the finding, the period of 12 months beginning with the day on which the appeal is finally determined, abandoned or withdrawn. (4F) Where the landlord proposes to rely on condition 4 in Ground 7A, the notice must be served on the tenant within— (a) the period of 3 months beginning with the day on which the closure order was made, or (b) if there is an appeal against the making of the order, the period of 3 months beginning with the day on which the appeal is finally determined, abandoned or withdrawn (5) The court may not exercise the power conferred by subsection (1)(b) above if the landlord seeks to recover possession on Ground 7A or 8 in Schedule 2 to this Act. (6) Where a notice under this section - (a) is served at a time when the dwelling-house is let on a fixed term tenancy, or (b) is served after a fixed term tenancy has come to an end but relates (in whole or in part) to events occurring during that tenancy, the notice shall have effect notwithstanding that the tenant becomes or has become tenant under a statutory periodic tenancy arising on the coming to an end of the fixed term tenancy. 8A. Additional notice requirements: ground of domestic violence (1) Where the ground specified in a notice under section 8 (whether with or without other grounds) is Ground 14A in Schedule 2 to this Act and the partner who has left the dwelling-house as mentioned in that ground is not a tenant of the dwelling-house, the court shall not entertain proceedings for possession of the dwelling-house unless - (a) the landlord or, in the case of joint landlords, at least one of them has served on the partner who has left a copy of the notice or has taken all reasonable steps to serve a copy of the notice on that partner, or (b) the court considers it just and equitable to dispense with such requirements as to service. (2) Where Ground 14A in Schedule 2 to this Act is added to a notice under section 8 with the leave of the court after proceedings for possession are begun and the partner who has left the dwelling-house as mentioned in that ground is not a party to the proceedings, the court shall not continue to entertain the proceedings unless - (a) the landlord or, in the case of joint landlords, at least one of them has served a notice under subsection (3) below on the partner who has left or has taken all reasonable steps to serve such a notice on that partner, or (b) the court considers it just and equitable to dispense with the requirements of such a notice. (3) A notice under this subsection shall - (a) state that proceedings for the possession of the dwelling-house have begun, (b) specify the ground or grounds on which possession is being sought, and (c) give particulars of the ground or grounds. 9. Extended discretion of court in possession claims (1) Subject to subsection (6) below, the court may adjourn for such period or periods as it thinks fit proceedings for possession of a dwelling-house let on an assured tenancy. (2) On the making of an order for possession of a dwelling-house let on an assured tenancy or at any time before the execution of such an order, the court, subject to subsection (6) below, may - (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court thinks just. (3) On any such adjournment as is referred to in subsection (1) above or on any such stay, suspension or postponement as is referred to in subsection (2) above, the court, unless it considers that to do so would cause exceptional hardship to the tenant or would otherwise be unreasonable, shall impose conditions with regard to payment by the tenant of arrears of rent (if any) and rent and may impose such other conditions as it thinks fit. (4) If any such conditions as are referred to in subsection (3) above are complied with, the court may, if it thinks fit, discharge or rescind any such order as is referred to in subsection (2) above. (5) Sections 5 and 5A have been omitted by the Housing and Regeneration Act 2008 Sch 11 para. 8(4) (6) This section does not apply if the court is satisfied that the landlord is entitled to possession of the dwelling-house - (a) on any of the grounds in Part I of Schedule 2 to this Act; or (b) by virtue of subsection (1) or subsection (4) of section 21 below.
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9A. Proceedings for possession; anti-social behaviour (1) This section applies if the court is considering under section 7(4) whether it is reasonable to make an order for possession on ground 14 set out in Part 2 of Schedule 2 (conduct of tenant or other person). (2) The court must consider, in particular— (a) the effect that the nuisance or annoyance has had on persons other than the person against whom the order is sought; (b) any continuing effect the nuisance or annoyance is likely to have on such persons; (c) the effect that the nuisance or annoyance would be likely to have on such persons if the conduct is repeated. 10. Special provisions applicable to shared accommodation (1) This section applies in a case falling within subsection (1) of section 3 above and expressions used in this section have the same meaning as in that section. (2) Without prejudice to the enforcement of any order made under subsection (3) below, whilst the tenant is in possession of the separate accommodation, no order shall be made for possession of any of the shared accommodation, whether on the application of the immediate landlord of the tenant or on the application of any person under whom that landlord derives title, unless a like order has been made, or is made at the same time, in respect of the separate accommodation; and the provisions of section 6 above shall have effect accordingly. (3) On the application of the landlord, the court may make such order as it thinks just either - (a) terminating the right of the tenant to use the whole or any part of the shared accommodation other than living accommodation; or (b) modifying his right to use the whole or any part of the shared accommodation, whether by varying the persons or increasing the number of persons entitled to the use of that accommodation or otherwise. (4) No order shall be made under subsection (3) above so as to effect any termination or modification of the rights of the tenant which, apart from section 3(3) above, could not be effected by or under the terms of the tenancy. 11. Payment of removal expenses in certain cases (1) Where a court makes an order for possession of a dwelling-house let on an assured tenancy on Ground 6 or Ground 9 in Schedule 2 to this Act (but not on any other ground), the landlord shall pay to the tenant a sum equal to the reasonable expenses likely to be incurred by the tenant in removing from the dwelling-house. (2) Any question as to the amount of the sum referred in subsection (1) above shall be determined by agreement between the landlord and the tenant or, in default of agreement, by the court (3) Any sum payable to a tenant by virtue of this section shall be recoverable as a civil debt due from the landlord 12. Compensation for misrepresentation or concealment Where a landlord obtains an order for possession of a dwelling-house let on an assured tenancy on one or more of the grounds in Schedule 2 to this Act and it is subsequently made to appear to the court that the order was obtained by misrepresentation or concealment of material facts, the court may order the landlord to pay to the former tenant such sum as appears sufficient as compensation for damage or loss sustained by that tenant as a result of the order 13. Increases of rent under assured periodic tenancies (1) This section applies to - (a) a statutory periodic tenancy other than one which, by virtue of paragraph 11 or paragraph 12 in Part I of Schedule 1 to this Act, cannot for the time being be an assured tenancy; and (b) any other periodic tenancy which is an assured tenancy, other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period. (2) For the purpose of securing an increase in the rent under a tenancy to which this section applies, the landlord may serve on the tenant a notice in the prescribed form proposing a new rent to take effect at the beginning of a new period of the tenancy specified in the notice, being a period beginning not earlier than - (a) the minimum period after the date of the service of the notice; and (b) except in the case of a statutory periodic tenancy- (i) in the case of an assured agricultural occupancy, the first anniversary of the date on which the first period of the tenancy began; (ii) in any other case, on the date that falls 52 weeks after the date on which the first period of the tenancy began; and (c) if the rent under the tenancy has previously been increased by virtue of a notice under this subsection or a determination under section 14 below- (i) in the case of an assured agricultural occupancy, the first anniversary of the date on which the increased rent took effect; (ii) in any other case, the appropriate date (3) The minimum period referred to in subsection (2) above is - (a) in the case of a yearly tenancy, six months; (b) in the case of a tenancy where the period is less than a month, one month; and (c) in any other case, a period equal to the period of the tenancy. (3A)The appropriate date referred to in subsection (2)(c)(ii) above is— (a) in a case to which subsection (3B) below applies, the date that falls 53 weeks after the date on which the increased rent took effect; (b) in any other case, the date that falls 52 weeks after the date on which the increased rent took effect. (3B) This subsection applies where— (a) the rent under the tenancy has been increased by virtue of a notice under this section or a determination under section 14 below The Letting Handbook 6 © The Letting Centre 10/2019 Back to contents Housing Act 1988
on at least one occasion after the coming into force of the Regulatory Reform (Assured Periodic Tenancies)(Rent Increases) Order 2003; and (b) the fifty-third week after the date on which the last such increase took effect begins more than six days before the anniversary of the date on which the first such increase took effect (4) Where a notice is served under subsection (2) above, a new rent specified in the notice shall take effect as mentioned in the notice unless, before the beginning of the new period specified in the notice, - (a) the tenant by an application in the prescribed form refers the notice to the appropriate tribunal; or (b) the landlord and the tenant agree on a variation of the rent which is different from that proposed in the notice or agree that the rent should not be varied. (5) Nothing in this section (or in section 14 below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent).
14. Determination of rent by tribunal (1) Where, under subsection (4)(a) of section 13 above, a tenant refers to the appropriate tribunal a notice under subsection (2) of that section, the appropriate tribunal shall determine the rent at which, subject to subsections (2) and (4) below, the appropriate tribunal consider that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy- (a) which is a periodic tenancy having the same periods as those of the tenancy to which the notice relates; (b) which begins at the beginning of the new period specified in the notice; (c) the terms of which (other than relating to the amount of the rent) are the same as those of the tenancy to which the notice relates; and (d) in respect of which the same notices, if any, have been given under any of Grounds 1 to 5 of Schedule 2 to this Act, as have been given (or have effect as if given) in relation to the tenancy to which the notice relates. (2) In making a determination under this section there shall be disregarded - (a) any effect on the rent attributable to the granting of a tenancy to a sitting tenant; (b) any increase in the value of the dwelling-house attributable to a relevant improvement carried out by a person who at the time it was carried out was the tenant, if the improvement - (i) was carried out otherwise than in pursuance of an obligation to his immediate landlord, or (ii) was carried out pursuant to an obligation to his immediate landlord being an obligation which did not relate to the specific improvement concerned but arose by reference to consent given to the carrying out of that improvement; and (c) any reduction in the value of the dwelling-house attributable to a failure by the tenant to comply with any terms of the tenancy. (3) For the purposes of subsection (2)(b) above, in relation to a notice which is referred by a tenant as mentioned in subsection (1) above, an improvement is a relevant improvement if either it was carried out during the tenancy to which the notice relates or the following conditions are satisfied, namely- (a) that it was carried out not more than 21 years before the date of service of the notice; and (b) that, at all times during the period beginning when the improvement was carried out and ending on the date of service of the notice, the dwelling-house has been let under an assured tenancy; and (c) that, on the coming to an end of an assured tenancy at any time during that period, the tenant (or, in the case of joint tenants, at least one of them) did not quit. (3A) In making a determination under this section in any case where under Part I of the Local Government Finance Act 1992 the landlord or a superior landlord is liable to pay council tax in respect of a hereditament (“the relevant hereditament”) of which the dwelling-house forms part, the appropriate tribunal shall have regard to the amount of council tax which, as at the date on which the notice under section 13(2) above was served, was set by the billing authority - (a) for the financial year in which that notice was served, and (b) for the category of dwellings within which the relevant hereditament fell on that date, but any discount or other reduction affecting the amount of council tax payable shall be disregarded. (3B) In subsection (3A) above - (a) “hereditament” means a dwelling within the meaning of Part I of the Local Government Finance Act 1992, (b) “billing authority” has the same meaning as in that Part of that Act, and (c) “category of dwellings” has the same meaning as in section 30(1) and (2) of that Act. (4) In this section “rent” does not include any service charge, within the meaning of section 18 of the Landlord and Tenant Act 1985, but, subject to that, includes any sums payable by the tenant to the landlord on account of the use of furniture, in respect of council tax, or for any of the matters referred to in subsection (1)(a) of that section, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house concerned or are payable under separate agreements. (5) Where any rates in respect of the dwelling-house concerned are borne by the landlord or a superior landlord, the appropriate tribunal shall make their determination under this section as if the rates were not so borne. (6) In any case where - (a) the appropriate tribunal have before them at the same time the reference of a notice under section 6(2) above relating to a tenancy (in this subsection referred to as “the section 6 reference”) and the reference of a notice under section 13(2) above relating to the same tenancy (in this subsection referred to as “the section 13 reference”), and (b) the date specified in the notice under section 6(2) above is not later than the first day of the new period specified in the notice under section 13(2) above, and (c) the appropriate tribunal propose to hear the two references together, the appropriate tribunal shall make a determination in relation to the section 6 reference before making their determination in relation to the section 13 reference and, accordingly, in such a case the reference in subsection (1)(c) above to the terms of the tenancy to which the notice relates shall be construed as a reference to those terms as varied by virtue of the determination made in relation to the section 6 reference.
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(7) Where a notice under section 13(2) above has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) above applies, to the addition of the appropriate amount in respect of rates) shall be the rent under the tenancy with effect from the beginning of the new period specified in the notice or, if it appears to the appropriate tribunal that would cause undue hardship to the tenant, with effect from such later date (not being later than the date the rent is determined) as the appropriate tribunal may direct. (8) Nothing in this section requires the appropriate tribunal to continue with their determination of a rent for a dwelling-house if the landlord and tenant give notice in writing that they no longer require such a determination or if the tenancy has come to an end. (9) This section shall apply in relation to an assured shorthold tenancy as if in subsection (1) the reference to an assured tenancy were a reference to an assured shorthold tenancy. 14A. Interim increase before 1st April 1994 of rent under assured periodic tenancies in certain cases where landlord liable for council tax (1) In any case where— (a) under Part I of the Local Government Finance Act 1992 the landlord of a dwelling-house let under an assured tenancy to which section 13 above applies or a superior landlord is liable to pay council tax in respect of a dwelling (within the meaning of that Part of that Act) which includes that dwelling-house, (b) under the terms of the tenancy (or an agreement collateral to the tenancy) the tenant is liable to make payments to the landlord in respect of council tax, (c) the case falls within subsection (2) or subsection (3) below, and (d) no previous notice under this subsection has been served in relation to the dwelling-house, the landlord may serve on the tenant a notice in the prescribed form proposing an increased rent to take account of the tenant’s liability to make payments to the landlord in respect of council tax, such increased rent to take effect at the beginning of a new period of the tenancy specified in the notice being a period beginning not earlier than one month after the date on which the notice was served. (2) The case falls within this subsection if— (a) the rent under the tenancy has previously been increased by virtue of a notice under section 13(2) above or a determination under section 14 above, and (b) the first anniversary of the date on which the increased rent took effect has not yet occurred. (3) The case falls within this subsection if a notice has been served under section 13(2) above before 1st April 1993 but no increased rent has taken effect before that date. (4) No notice may be served under subsection (1) above after 31st March 1994. (5) Where a notice is served under subsection (1) above, the new rent specified in the notice shall take effect as mentioned in the notice unless, before the beginning of the new period specified in the notice— (a) the tenant by an application in the prescribed form refers the notice to the appropriate tribunal, or (b) the landlord and the tenant agree on a variation of the rent which is different from that proposed in the notice or agree that the rent should not be varied. (6) Nothing in this section (or in section 14B below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent). 14B. Interim determination of rent by the appropriate tribunal (1) Where, under subsection (5)(a) of section 14A above, a tenant refers to the appropriate tribunal a notice under subsection (1) of that section, the appropriate tribunal shall determine the amount by which, having regard to the provisions of section 14(3A) above, the existing rent might reasonably be increased to take account of the tenant’s liability to make payments to the landlord in respect of council tax. (2) Where a notice under section 14A(1) above has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the existing rent shall be increased by the amount determined by the appropriate tribunal with effect from the beginning of the new period specified in the notice or, if it appears to the appropriate tribunal that would cause undue hardship to the tenant, with effect from such later date (not being later than the date the increase is determined) as the appropriate tribunal may direct. (3) In any case where— (a) the appropriate tribunal have before them at the same time the reference of a notice under section 13(2) above relating to a tenancy (in this subsection referred to as “the section 13 reference”) and the reference of a notice under section 14A(1) above relating to the same tenancy (in this subsection referred to as “the section 14A reference”); and (b) the appropriate tribunal propose to hear the two references together, the appropriate tribunal shall make a determination in relation to the section 13 reference before making their determination in relation to the section 14A reference, and if in such a case the date specified in the notice under section 13(2) above is later than the date specified in the notice under section 14A(1) above, the rent determined under the section 14A reference shall not take effect until the date specified in the notice under section 13(2). (4) In this section “rent” has the same meaning as in section 14 above; and section 14(4) above applies to a determination under this section as it applies to a determination under that section. 15. Limited prohibition on assignment etc. without consent (1) Subject to subsection (3) below, it shall be an implied term of every assured tenancy which is a periodic tenancy that, except with the consent of the landlord, the tenant shall not- (a) assign the tenancy (in whole or in part); or (b) sublet or part with possession of the whole or any part of the dwelling-house let on the tenancy. (2) Section 19 of the Landlord and Tenant Act 1927 (consents to assign not to be unreasonably withheld etc.) shall not apply to a term which is implied into an assured tenancy by subsection (1) above.
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(3) In the case of a periodic tenancy which is not a statutory periodic tenancy or an assured periodic tenancy arising under Schedule 10 to the Local Government and Housing Act 1989 subsection (1) above does not apply if - (a) there is a provision (whether contained in the tenancy or not) under which the tenant is prohibited (whether absolutely or conditionally) from assigning or subletting or parting with possession or is permitted (whether absolutely or conditionally) to assign, sublet or part with possession; or (b) a premium is required to be paid on the grant or renewal of the tenancy. (4) In subsection (3)(b) above “premium” includes - (a) any fine or other like sum; (b) any other pecuniary consideration in addition to rent; and (c) any sum paid by way of deposit, other than one which does not exceed one-sixth of the annual rent payable under the tenancy immediately after the grant or renewal in question.
15A. Loss of assured tenancy status (1) Subsection (2) applies if, in breach of an express or implied term of the tenancy, a tenant of a dwelling-house let under an assured tenancy to which this section applies— (a) parts with possession of the dwelling-house, or (b) sub-lets the whole of the dwelling-house (or sub-lets first part of it and then the emainder).r (2) The tenancy ceases to be an assured tenancy and cannot subsequently become an assured tenancy. (3) This section applies to an assured tenancy— (a) under which the landlord is a private registered provider of social housing or a registered social landlord, and (b) which is not a shared ownership lease. (4) In this section “registered social landlord” has the same meaning as in Part 1 of the Housing Act 1996. (5) In this section “shared ownership lease” means a lease of a dwelling-house— (a) granted on payment of a premium calculated by reference to a percentage of the value of the dwelling-house or of the cost of providing it, or (b) under which the lessee (or the lessee’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house.” 16. Access for repairs It shall be an implied term of every assured tenancy that the tenant shall afford to the landlord access to the dwelling-house let on the tenancy and all reasonable facilities for executing therein any repairs which the landlord is entitled to execute. 17. Succession to assured periodic tenancy by spouse (1) In any case where - (a) the sole tenant under an assured periodic tenancy dies, and (b) immediately before the death, the tenant’s spouse or civil partner was occupying the dwelling-house as his or her only or principal home, and (c) the tenant was not himself a successor, as defined in subsection (2) or subsection (3) below, then, on the death, the tenancy vests by virtue of this section in the spouse or civil partner (and, accordingly, does not devolve under the tenant’s will or intestacy). (2) For the purposes of this section, a tenant is a successor in relation to a tenancy if (a) the tenancy became vested in him either by virtue of this section or under the will or intestacy of a previous tenant; or (b) at some time before the tenant’s death the tenancy was a joint tenancy held by himself and one or more other persons and, prior to his death, he became the sole tenant by survivorship; or (c) he became entitled to the tenancy as mentioned in section 39(5) below. (3) For the purposes of this section, a tenant is also a successor in relation to a tenancy (in this subsection referred to as “the new tenancy”) which was granted to him (alone or jointly with others) if - (a) at some time before the grant of the new tenancy, he was, by virtue of subsection (2) above, a successor in relation to an earlier tenancy of the same or substantially the same dwelling-house as is let under the new tenancy; and (b) at all times since he became such a successor he has been a tenant (alone or jointly with others) of the dwelling-house which is let under the new tenancy or of a dwelling-house which is substantially the same as that dwelling-house. (4) For the purposes of this section- (a) a person who was living with the tenant as his or her wife or husband shall be treated as the tenant’s spouse, and (b) a person who was living with the tenant as if they were civil partners shall be treated as the tenant’s civil partner. (5) If, on the death of the tenant, there is, by virtue of subsection (4) above, more than one person who fulfils the condition in subsection (l)(b) above, such one of them as may be decided by agreement or, in default of agreement, by the county court shall for the purposes of this section be treated (according to whether that one of them is of the opposite sex to, or of the same sex as, the tenant) as the tenant’s spouse or the tenant’s civil partner. 19. Restriction on levy of distress for rent (1) Subject to subsection (2) below, no distress for the rent of any dwelling-house let on an assured tenancy shall be levied except with the leave of the county court; and, with respect to any application for such leave, the court shall have the same powers with respect to adjournment, stay, suspension, postponement and otherwise as are conferred by section 9 above in relation to proceedings for possession of such a dwelling-house. (2) Nothing in subsection (1) above shall applies to distress levied under section 102 of the County Courts Act 1984.
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Chapter II Assured Shorthold Tenancies 19A. Assured shorthold tenancies: post-Housing Act 1996 tenancies An assured tenancy which - (a) is entered into on or after the day on which section 96 of the Housing Act 1996 comes into force (otherwise than pursuant to a contract made before that day), or (b) comes into being by virtue of section 5 above on the coming to an end of an assured tenancy within paragraph (a) above, is an assured shorthold tenancy unless it falls within any paragraph in Schedule 2A to this Act. 20. Assured shorthold tenancies: pre-Housing Act 1996 tenancies (1) Subject to subsection (3) below, an assured tenancy which is not one to which section 19A above applies is an assured shorthold tenancy if - (a) it is a fixed term tenancy granted for a term certain of not less than six months, (b) there is no power for the landlord to determine the tenancy at any time earlier than six months from the beginning of the tenancy, and (c) a notice in respect of it is served as mentioned in subsection (2) below. (2) The notice referred to in subsection (l)(c) above is one which- (a) is in such form as may be prescribed; (b) is served before the assured tenancy is entered into; (c) is served by the person who is to be the landlord under the assured tenancy on the person who is to be the tenant under that tenancy; and (d) states that the assured tenancy to which it relates is to be a shorthold tenancy. (3) Notwithstanding anything in subsection (1) above, where- (a) immediately before a tenancy (in this subsection referred to as “the new tenancy”) is granted, the person to whom it is granted or, as the case may be, at least one of the persons to whom it is granted was a tenant under an assured tenancy which was not a shorthold tenancy, and (b) the new tenancy is granted by the person who, immediately before the beginning of the tenancy, was the landlord under the assured tenancy referred to in paragraph (a) above, the new tenancy cannot be an assured shorthold tenancy. (4) Subject to subsection (5) below, if, on the coming to an end of an assured shorthold tenancy (including a tenancy which was an assured shorthold but ceased to be assured before it came to an end), a new tenancy of the same or substantially the same premises comes into being under which the landlord and the tenant are the same as at the coming to an end of the earlier tenancy, then, if and so long as the new tenancy is an assured tenancy, it shall be an assured shorthold tenancy, whether or not it fulfils the conditions in paragraphs (a) to (c) of subsection (l) above. (5) Subsection (4) above does not apply if, before the new tenancy is entered into (or, in the case of a statutory periodic tenancy, takes effect in possession), the landlord serves notice on the tenant that the new tenancy is not to be a shorthold tenancy. (5A) Subsections (3) and (4) above do not apply where the new tenancy is one to which section 19A above applies. (6) In the case of joint landlords - (a) the reference in subsection (2)(c) above to the person who is to be the landlord is a reference to at least one of the persons who are to be joint landlords; and (b) the reference in subsection (5) above to the landlord is a reference to at least one of the joint landlords.
20A. Post-Housing Act 1996 tenancies: duty of landlord to provide statement as to terms of tenancy (1) Subject to subsection (3) below, a tenant under an assured shorthold tenancy to which section 19A above applies may, by notice in writing, require the landlord under that tenancy to provide him with a written statement of any term of the tenancy which - (a) falls within subsection (2) below, and (b) is not evidenced in writing. (2) The following terms of a tenancy fall within this subsection, namely - (a) the date on which the tenancy began or, if it is a statutory periodic tenancy or a tenancy to which section 39(7) below applies, the date on which the tenancy came into being, (b) the rent payable under the tenancy and the dates on which that rent is payable, (c) any term providing for a review of the rent payable under the tenancy, and (d) in the case of a fixed term tenancy, the length of the fixed term. (3) No notice may be given under subsection (1) above in relation to a term of the tenancy if - (a) the landlord under the tenancy has provided a statement of that term in response to an earlier notice under that subsection given by the tenant under the tenancy, and (b) the term has not been varied since the provision of the statement referred to in paragraph (a) above. (4) A landlord who fails, without reasonable excuse, to comply with a notice under subsection (1) above within the period of 28 days beginning with the date on which he received the notice is liable on summary conviction to a fine not exceeding level 4 on the standard scale. (5) A statement provided for the purposes of subsection (1) above shall not be regarded as conclusive evidence of what was agreed by the parties to the tenancy in question. (6) Where - (a) a term of a statutory periodic tenancy is one which has effect by virtue of section 5(3)(e) above, or (b) a term of a tenancy to which subsection (7) of section 39 below applies is one which has effect by virtue of subsection (6)(e) of that section, (c) subsection (1) above shall have effect in relation to it as if paragraph (b) related to the term of the tenancy from which it derives.
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(7) In subsections (1) and (3) above - (a) references to the tenant under the tenancy shall, in the case of joint tenants, be taken to be references to any of the tenants, and (b) references to the landlord under the tenancy shall, in the case of joint landlords, be taken to be references to any of the landlords. Sections 20B, 20C & 20D relate to demoted social housing tenancies and were inserted by the Anti-Social Behaviour Act 2003 and the Localism Act 2011. 21. Recovery of possession on expiry or termination of assured shorthold tenancy (1) Without prejudice to any right of the landlord under an assured shorthold tenancy to recover possession of the dwelling-house let on the tenancy in accordance with Chapter I above, on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy, a court shall make an order for possession of the dwelling-house if it is satisfied - (a) that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than an assured shorthold periodic tenancy (whether statutory or not), and (b) the landlord or, in the case of joint landlords, at least one of them has given to the tenant not less than two months’ notice in writing stating that he requires possession of the dwelling-house. (2) A notice under paragraph (b) of subsection (1) above may be given before or on the day on which the tenancy comes to an end; and that subsection shall have effect notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises. (3) Where a court makes an order for possession of a dwelling-house by virtue of subsection (1) above, any statutory periodic tenancy which has arisen on the coming to an end of the assured shorthold tenancy shall end (without further notice and regardless of the period) on the day on which the order takes effect. (4) Without prejudice to any such right as is referred to in subsection (1) above, a court shall make an order for possession of a dwelling- house let on an assured shorthold tenancy which is a periodic tenancy if the court is satisfied - (a) that the landlord or, in the case of joint landlords, at least one of them has given to the tenant a notice in writing stating that, after a date specified in the notice, being the last day of a period of the tenancy and not earlier than two months after the date the notice was given, possession of the dwelling-house is required by virtue of this section; and (b) that the date specified in the notice under paragraph (a) above is not earlier than the earliest day on which, apart from section 5(1) above, the tenancy could be brought to an end by a notice to quit given by the landlord on the same date as the notice under paragraph (a) above. (4A) Where a court makes an order for possession of a dwelling-house by virtue of subsection (4) above, the assured shorthold tenancy shall end in accordance with section 5(1A). (4ZA) In the case of a dwelling-house in England, subsection (4)(a) above has effect with the omission of the requirement for the date specified in the notice to be the last day of a period of the tenancy. (4B) A notice under subsection (1) or (4) may not be given in relation to an assured shorthold tenancy of a dwelling-house in England - (a) in the case of a tenancy which is not a replacement tenancy, within the period of four months beginning with the day on which the tenancy began, and (b) in the case of a replacement tenancy, within the period of four months beginning with the day on which the original tenancy began. (4C) Subsection (4B) does not apply where the tenancy has arisen due to section 5(2). (4D) Subject to subsection (4E), proceedings for an order for possession under this section in relation to a dwelling-house in England may not be begun after the end of the period of six months beginning with the date on which the notice was given under subsection (1) or (4). (4E) Where - (a) a notice under subsection (4) has been given in relation to a dwelling-house in England, and (b) paragraph (b) of that subsection requires the date specified in the notice to be more than two months after the date the notice was given, proceedings for an order for possession under this section may not be begun after the end of the period of four months beginning with the date specified in the notice. (5) Where an order for possession under subsection (1) or (4) above is made in relation to a dwelling-house let on a tenancy to which section 19A above applies, the order may not be made so as to take effect earlier than - (a) in the case of a tenancy which is not a replacement tenancy, six months after the beginning of the tenancy, and (b) in the case of a replacement tenancy, six months after the beginning of the original tenancy. (5A) Subsection (5) above does not apply to an assured shorthold tenancy to which section 20B (demoted assured shorthold tenancies) applies. (6) In subsections (4B)(b) and (5)(b) above, the reference to the original tenancy is - (a) where the replacement tenancy came into being on the coming to an end of a tenancy which was not a replacement tenancy, to the immediately preceding tenancy, and (b) where there have been successive replacement tenancies, to the tenancy immediately preceding the first in the succession of replacement tenancies (7) For the purposes of this section, a replacement tenancy is a tenancy - (a) which comes into being on the coming to an end of an assured shorthold tenancy, and (b) under which, on its coming to being - (i) the landlord and tenant are the same as under the earlier tenancy as at its coming to an end, and (ii) the premises let are the same or substantially the same as those let under the earlier tenancy as at that time. (8) The Secretary of State may by regulations made by statutory instrument prescribe the form of a notice under subsection (1) or (4)
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given in relation to an assured shorthold tenancy of a dwelling-house in England. (9) A statutory instrument containing regulations made under subsection (8) is subject to annulment in pursuance of a resolution of either House of Parliament.
21A. Compliance with prescribed legal requirements (1) A notice under subsection (1) or (4) of section 21 may not be given in relation to an assured shorthold tenancy of a dwelling-house in England at a time when the landlord is in breach of a prescribed requirement. (2) (2)The requirements that may be prescribed are requirements imposed on landlords by any enactment and which relate to— (a) the condition of dwelling-houses or their common parts, (b) the health and safety of occupiers of dwelling-houses, or (c) the energy performance of dwelling-houses. (3) In subsection (2) “enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978. (4) For the purposes of subsection (2)(a) “common parts” has the same meaning as in Ground 13 in Part 2 of Schedule 2. (5) A statutory instrument containing regulations made under this section is subject to annulment in pursuance of a resolution of either House of Parliament.
21B. Requirement for landlord to provide prescribed information (1) The Secretary of State may by regulations require information about the rights and responsibilities of a landlord and a tenant under an assured shorthold tenancy of a dwelling-house in England (or any related matters) to be given by a landlord under such a tenancy, or a person acting on behalf of such a landlord, to the tenant under such a tenancy. (2) (2)Regulations under subsection (1) may— (a) require the information to be given in the form of a document produced by the Secretary of State or another person, (b) provide that the document to be given is the version that has effect at the time the requirement applies, and (c) specify cases where the requirement does not apply. (3) A notice under subsection (1) or (4) of section 21 may not be given in relation to an assured shorthold tenancy of a dwelling-house in England at a time when the landlord is in breach of a requirement imposed by regulations under subsection (1). (4) A statutory instrument containing regulations made under subsection (1) is subject to annulment in pursuance of a resolution of either House of Parliament.
21C. Repayment of rent where tenancy ends before end of a period (1) A tenant under an assured shorthold tenancy of a dwelling-house in England is entitled to a repayment of rent from the landlord where - (a) as a result of the service of a notice under section 21 the tenancy is brought to an end before the end of a period of the tenancy, (b) the tenant has paid rent in advance for that period, and (c) the tenant was not in occupation of the dwelling-house for one or more whole days of that period. (2) The amount of repayment to which a tenant is entitled under subsection (1) is to be calculated in accordance with the following formula - R x D P where - R is the rent paid for the final period; D is the number of whole days of the final period for which the tenant was not in occupation of the dwelling-house; and P is the number of whole days in that period. (3) If the repayment of rent described in subsections (1) and (2) has not been made when the court makes an order for possession under section 21, the court must order the landlord to repay the amount of rent to which the tenant is entitled. (4) Nothing in this section affects any other right of the tenant to a repayment of rent from the landlord.
22. Reference of excessive rents to appropriate tribunal Subject to section 23 and subsection (2) below, the tenant under an assured shorthold tenancy may make an application in the prescribed form to the appropriate tribunal for a determination of the rent which, in the appropriate tribunal’s opinion, the landlord might reasonably be expected to obtain under the assured shorthold tenancy. (1) No application may be made under this section if - (a) the rent payable under the tenancy is a rent previously determined under this section; (aa) the tenancy is one to which section 19A above applies and more than six months have elapsed since the beginning of the tenancy or, in the case of a replacement tenancy, since the beginning of the original tenancy; or (b) the tenancy is an assured shorthold tenancy falling within subsection (4) of section 20 above (and, accordingly, is one in respect of which notice need not have been served as mentioned in subsection (2) of that section). (2) Where an application is made to the appropriate tribunal under subsection (1) above with respect to the rent under an assured shorthold tenancy, the appropriate tribunal shall not make such a determination as is referred to in that subsection unless they consider - (a) that there is a sufficient number of similar dwelling-houses in the locality let on assured tenancies (whether shorthold or not); and (b) that the rent payable under the assured shorthold tenancy in question is significantly higher than the rent which the landlord might reasonably be expected to be able to obtain under the tenancy, having regard to the level of rents payable under the tenancies referred to in paragraph (a) above.
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(3) Where, on an application under this section, the appropriate tribunal make a determination of a rent for an assured shorthold tenancy- (a) the determination shall have effect from such date as the appropriate tribunal may direct, not being earlier than the date of the application; (b) if, at any time on or after the determination takes effect, the rent which, apart from this paragraph, would be payable under the tenancy exceeds the rent so determined, the excess shall be irrecoverable from the tenant; and (c) no notice may be served under section 13(2) above with respect to a tenancy of the dwelling-house in question until after the first anniversary of the date on which the determination takes effect. (4) Subsections (4), (5) and (8) of section 14 above apply in relation to a determination of rent under this section as they apply in relation to a determination under that section and, accordingly, where subsection (5) of that section applies, any reference in subsection (4)(b) above to rent is a reference to rent exclusive of the amount attributable to rates. (5A) Where - (a) an assured tenancy ceases to be an assured shorthold tenancy by virtue of falling within paragraph 2 of Schedule 2A to this Act, and (b) at the time when it so ceases to be an assured shorthold tenancy there is pending before the appropriate tribunal an application in relation to it under this section, (c) the fact that it so ceases to be an assured shorthold tenancy shall, in relation to that application, be disregarded for the purposes of this section. (5) In subsection (2)(aa) above, the references to the original tenancy and to a replacement tenancy shall be construed in accordance with subsections (6) and (7) respectively of section 21 above.
23 Termination of tribunal’s functions (1) If the Secretary of State by order made by statutory instrument so provides, section 22 above shall not apply in such cases or to tenancies of dwelling-houses in such areas or in such other circumstances as may be specified in the order. (2) An order under this section may contain such transitional, incidental and supplementary provisions as appear to the Secretary of State to be desirable. (3) No order shall be made under this section unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament
Sections 24- 26 apply to agricultural occupancies.
Chapter IV Protection from Eviction
27. Damages for unlawful eviction. (1) This section applies if, at any time after 9th June 1988, a landlord (in this section referred to as “the landlord in default”) or any person acting on behalf of the landlord in default unlawfully deprives the residential occupier of any premises of his occupation of the whole or part of the premises. (2) This section also applies if, at any time after 9th June 1988, a landlord (in this section referred to as “the landlord in default”) or any person acting on behalf of the landlord in default - (a) attempts unlawfully to deprive the residential occupier of any premises of his occupation of the whole of part of the premises, or (b) knowing or having reasonable cause to believe that the conduct is likely to cause the residential occupier of any premises - (i) to give up his occupation of the premises or any part thereof, or (ii) to refrain from exercising any right or pursuing any remedy in respect of the premises or any part thereof, does acts likely to interfere with the peace or comfort of the residential occupier or members of his household, or persistently withdraws or withholds services reasonably required for the occupation of the premises as a residence, and as a result, the residential occupier gives up his occupation of the premises as a residence. (3) Subject to the following provisions of this section, where this section applies, the landlord in default shall, by virtue of this section, be liable to pay to the former residential occupier, in respect of his loss of the right to occupy the premises in question at his residence, damages assessed on the basis set out in section 28 below. (4) Any liability arising by virtue of subsection (3) above - (a) shall be in the nature of a liability in tort; and (b) subject to subsection (5) below, shall be in addition to any liability arising apart from this section (whether in tort, contract or otherwise). (5) Nothing in this section affects the right of a residential occupier to enforce any liability which arises apart from this section in respect of his loss of the right to occupy premises as his residence; but damages shall not be awarded both in respect of such a liability and in respect of a liability arising by virtue of this section on account of the same loss. (6) No liability shall arise by virtue of subsection (3) above if - (a) before the date on which proceedings to enforce the liability are finally disposed of, the former residential occupier is reinstated in the premises in question in such circumstances that he becomes again the residential occupier of them; or (b) at the request of the former residential occupier, a court makes an order (whether in the nature of an injunction or otherwise) as a result of which he is reinstated as mentioned in paragraph (a) above; and, for the purposes of paragraph (a) above, proceedings to enforce a liability are finally disposed of on the earliest date by which the proceedings (including any proceedings on or in consequence of an appeal) have been determined and any time for appealing or further appealing has expired, except that if any appeal is abandoned, the proceedings shall be taken to be disposed of on the date of the abandonment.
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(7) If in proceedings to enforce a liability arising by virtue of subsection (3) above, it appears to the court - (a) that, prior to the event which gave rise to the liability, the conduct of the former residential occupier or any person living with him in the premises concerned was such that it is reasonable to mitigate the damages for which the landlord in default would otherwise be liable, or (b) that, before the proceedings were begun, the landlord in default offered to reinstate the former residential occupier in the premises in question and either it was unreasonable of the former residential occupier to refuse that offer or, if he had obtained alternative accommodation before the offer was made, it would have been unreasonable of him to refuse that offer if he had not obtained that accommodation, the court may reduce the amount of damages which would otherwise be payable to such amount as it thinks appropriate. (8) In proceedings to enforce a liability arising by virtue of subsection (3) above, it shall be a defence for the defendant to prove that he believed, and had reasonable cause to believe - (a) that the residential occupier had ceased to reside in the premises in question at the time when he was deprived of occupation as mentioned in subsection (1) above or, as the case may be, when the attempt was made or the acts were done as a result of which he gave up his occupation of those premises; or (b) that, where the liability would otherwise arise by virtue only of the doing of acts or the withdrawal or withholding of services, he had reasonable grounds for doing the acts or withdrawing or withholding the services in question. (9) In this section - (a) “residential occupier”, in relation to any premises, has the same meaning as in section 1 of the 1977 Act; (b) “the right to occupy”, in relation to a residential occupier, includes any restriction on the right of another person to recover possession of the premises in question; (c) “landlord”, in relation to a residential occupier, means the person who, but for the occupier’s right to occupy, would be entitled to occupation of the premises and any superior landlord under whom that person derives title; (d) “former residential occupier”, in relation to any premises, means the person who was the residential occupier until he was deprived of or gave up his occupation as mentioned in subsection (1) or subsection (2) above (and, in relation to a former residential occupier, “the right to occupy” and “landlord” shall be construed accordingly). 28. The measure of damages. (1) The basis for the assessment of damages referred to in section 27(3) above is the difference in value, determined as at the time immediately before the residential occupier ceased to occupy the premises in question as his residence, between - (a) the value of the interest of the landlord in default determined on the assumption that the residential occupier continues to have the same right to occupy the premises as before that time; and (b) the value of that interest determined on the assumption that the residential occupier has ceased to have that right. (2) In relation to any premises, any reference in this section to the interest of the landlord in default is a reference to his interest in the building in which the premises in question are comprised (whether or not that building contains any other premises) together with its curtilage. (3) For the purposes of the valuations referred to in subsection (1) above, it shall be assumed - (a) that the landlord in default is selling his interest on the open market to a willing buyer; (b) that neither the residential occupier nor any member of his family wishes to buy; and (c) that it is unlawful to carry out any substantial development of any of the land in which the landlord’s interest subsists or to demolish the whole or part of any building on that land. (4) In this section “the landlord in default” has the same meaning as in section 27 above and subsection (9) of that section applies in relation to this section as it applies in relation to that. (5) Section 113 of the Housing Act 1985 (meaning of “members of a person’s family”) applies for the purposes of subsection (3)(b) above. (6) The reference in subsection (3)(c) above to substantial development of any of the land in which the landlord’s interest subsists is a reference to any development other than - (a) development for which planning permission is granted by a general development order for the time being in force and which is carried out so as to comply with any condition or limitation subject to which planning permission is so granted; or (b) a change of use resulting in the building referred to in subsection (2) above or any part of it being used as, or as part of, one or more dwelling-houses; and in this subsection “general development order” has the meaning given in section 56(6) of the Town and Country Planning Act 1990 and other expressions have the same meaning as in that Act.
Sections 28-33 make amendments to the Protection from Eviction Act 1977 Section 34 - 39 Agricultural and Rent Act 1977
Chapter VI General Provisions 40. Jurisdiction of county courts (1) A county court shall have jurisdiction to hear and determine any question arising under any provision of - (a) Chapters I to III and V above, or (b) Sections 27 and 28 above, other than a question falling within the jurisdiction of the appropriate tribunal by virtue of any such provision. (2) This section has been removed by S.I. 199 (3) Where any proceedings under any provision mentioned in subsection (1) above are being taken in a county court, the court shall have jurisdiction to hear and determine any other proceedings joined with those proceedings, notwithstanding that, apart from this subsection, those other proceedings would be outside the court’s jurisdiction.
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41. Rent assessment committees: procedure and information powers (1) Removed by Leasehold Reform, Housing and Urban Redevelopment Act 1993 (2) The rent assessment committee to whom a matter is referred under Chapter I or Chapter II above may by notice in the prescribed form served on the landlord or the tenant require him to give to the committee, within such period of not less than fourteen days from the service of the notice as may be specified in the notice, such information as they may reasonably require for the purposes of their functions. (3) If any person fails without reasonable excuse to comply with a notice served on him under subsection (2) above, he shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (4) Where an offence under subsection (3) above committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager or secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 41A. Amounts attributable to services (1) In order to assist authorities to give effect to the housing benefit scheme under Part VII of the Social Security Contributions and Benefits Act 1992, or to assist the Secretary of State in the administration of universal credit, where a rent is determined under section 14 or 22 above, the appropriate tribunal shall note in their determination the amount (if any) of the rent which, in the opinion of the tribunal, is fairly attributable to the provision of services, except where that amount is in their opinion negligible; and the amount so noted may be included in the information specified in an order under section 42 or 42A below. 41B. Provision of information as to exemption from council tax (1) A billing authority within the meaning of Part I of the Local Government Finance Act 1992 shall, if so requested in writing by a rent officer or the appropriate tribunal in connection with his or their functions under any enactment, inform the rent officer or the appropriate tribunal in writing whether or not a particular dwelling (within the meaning of Part I of the Local Government Finance Act 1992) is, or was at any time specified in the request, an exempt dwelling for the purposes of that Part of that Act. 42. Information as to determinations of rents in Wales (1) The President of the rent assessment panel shall keep and make publicly available, in such manner as is specified in an order made by the Welsh Ministers, such information as may be so specified with respect to rents under assured tenancies and assured agricultural occupancies which have been the subject of references or applications to, or determinations by, rent assessment committees in areas in Wales. (2) A copy of any information certified under the hand of an officer duly authorised by the President of the rent assessment panel shall be receivable in evidence in any court and in any proceedings. (3) An order under subsection (1) above— (a) may prescribe the fees to be charged for the supply of a copy, including a certified copy, of any of the information kept by virtue of that subsection; and (b) may make different provision with respect to different cases or descriptions of case, including different provision for different areas. (4) The power to make an order under subsection (1) above shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of the National Assembly for Wales.
42A. Information as to determinations of rents in England (1) The Chamber President of the Property Chamber of the First-tier Tribunal shall keep and make publicly available, in such manner as may be specified in an order made by the Lord Chancellor, such information as may be specified in an order made by the Secretary of State with respect to rents under assured tenancies and assured agricultural occupancies which have been the subject of references or applications to, or determinations by— (a) rent assessment committees in England, (b) the First-tier Tribunal, or (a) the Upper Tribunal. (2) A copy of any information certified by a member of staff appointed by the Lord Chancellor and duly authorised by the Chamber President shall be receivable in evidence in any court and in any proceedings. (3) An order made by the Lord Chancellor under subsection (1) may prescribe the fees to be charged for the supply of a copy, including a certified copy, of any of the information kept by virtue that subsection. (4) The power to make an order under subsection (1) shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
Section 43 & 44 relate to powers of local authority and application to crown property 45. Interpretation of Part I (1) In this Part of this Act, except where the context otherwise requires, - “appropriate tribunal” means- (a) in relation to a dwelling-house in England, the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal; (b) in relation to a dwelling-house in Wales, a rent assessment committee; “dwelling-house” may be a house or part of a house; “fixed term tenancy” means any tenancy other than a periodic tenancy;
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“fully mutual housing association” has the same meaning as in Part I of the Housing Associations Act 1985; “landlord” includes any person from time to time deriving title under the original landlord and also includes, in relation to a dwelling-house, any person other than a tenant who is, or but for the existence of an assured tenancy would be, entitled to possession of the dwelling-house; “let” includes “sub-let”; “prescribed” means prescribed by regulations made by the Secretary of State by statutory instrument; “rates” includes water rates and charges but does not include an owner’s drainage rate, as defined in section 63(2)(a) of the Land Drainage Act 1976; “secure tenancy” has the meaning assigned by section 79 of the Housing Act 1985; “statutory periodic tenancy” has the meaning assigned by section 5(7) above; “tenancy” includes a sub-tenancy and an agreement for a tenancy or sub-tenancy; and “tenant” includes a sub-tenant and any person deriving title under the original tenant or sub-tenant. (2) Subject to paragraph 11 of Schedule 2 to this Act, any reference in this Part of this Act to the beginning of a tenancy is a reference to the day on which the tenancy is entered into or, if it is later, the day on which, under the terms of any lease, agreement or other document, the tenant is entitled to possession under the tenancy. (3) Where two or more persons jointly constitute either the landlord or the tenant in relation to a tenancy, then, except where this Part of this Act otherwise provides, any reference to the landlord or to the tenant is a reference to all the persons who jointly constitute the landlord or the tenant, as the case may require. (4) For the avoidance of doubt, it is hereby declared that any reference in this Part of this Act (however expressed) to a power for a landlord to determine a tenancy does not include a reference to a power of re-entry or forfeiture for breach of any term or condition of the tenancy. (5) Regulations under subsection (1) above may make different provision with respect to different cases or descriptions of case, including different provisions for different areas.
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SCHEDULE 1 TENANCIES WHICH CANNOT BE ASSURED TENANCIES Schedule 1 Tenancies which cannot be assured tenancies Part I The Tenancies Tenancies entered into before commencement 1. A tenancy which is entered into before, or pursuant to a contract made before, the commencement of this Act Tenancies of dwelling-houses with high rateable values 2. (1) A tenancy- (a) which is entered into on or after April 1, 1990 (otherwise than, where the dwelling-house had a rateable value on March 31, 1990, in pursuance of a contract made before April 1, 1990), and (b) under which the rent payable for the time being is payable at a rate exceeding £100,000 a year. (2) In sub-paragraph (1) “rent” does not include any sum payable by the tenant as is expressed (in whatever terms) to be payable in respect of rates, council tax, services, management, repairs, maintenance or insurance, unless it could not have been regarded by the parties to the tenancy as a sum so payable. 2A. A tenancy- (a) which is entered into before April 1, 1990, or on or after that date in pursuance of a contract made before that date, and (b) under which the dwelling-house had a rateable value on March 31, 1990 which, if it is in Greater London, exceeded £1,500 and, if it is elsewhere, exceeded £750. Tenancies at a low rent 3. A tenancy under which or the time being no rent is payable 3A. A tenancy- (a) which is entered into on or after April 1, 1990, (otherwise than, where the dwelling-house had a rateable value on March 31, 1990, in pursuance of a contract made before April 1, 1990), and (b) under which the rent payable for the time being is payable at a rate of, if the dwelling-house in Greater London, £1,000 or less a year and, if it is elsewhere, £250 or less a year. 3B. A tenancy- (a) which was entered into before April 1, 1990 or, where the dwelling-house had a rateable value on March 31, 1990, on or after April 1, 1990 in pursuance of a contract made before that date, and (b) under which the rent for the time being payable is less than two-thirds of the rateable value of the dwelling-house on March 31, 1990. 3C. Paragraph 2(2) above applies for the purposes of paragraphs 3, 3A and 3B as it applies for the purposes of paragraph 2(1). Business tenancies 4. A tenancy to which Part II of the Landlord and Tenant Act 1954 applies (business tenancies). Licensed premises 5. A tenancy under which the dwelling-house consists of or comprises premises which, by virtue of a premises licence under the Licensing Act 2003, may be used for the supply of alcohol (within the meaning of section 14 of that Act) for consumption on the premises. Tenancies of agricultural land 6. (1) A tenancy under which agricultural land, exceeding two acres, is let together with the dwelling-house. (2) In this paragraph “agricultural land” has the meaning set out in section 26(3)(a) of the General Rate Act 1967 (exclusion of agricultural land and premises from liability for rating). Tenancies of agricultural holdings etc 7. (1) A tenancy under which the dwelling-house- (a) is comprised in an agricultural holding, and (b) is occupied by the person responsible for the control (whether as tenant or as servant or agent of the tenant) of the farming of the holding (2) A tenancy under which the dwelling-house- (a) is comprised in the holding held under a farm business tenancy, and (b) is occupied by the person responsible for the control (whether as tenant or as servant or agent of the tenant) of the management of the holding. (3) In this paragraph- (a) “agricultural holding” means any agricultural holding within the meaning of the Agricultural Holdings Act 1986 held under a tenancy in relation to which that Act applies, and (b) “farm business tenancy” and “holding”, in relation to such a tenancy, have the same meaning as in the Agricultural Tenancies Act 1995 Lettings to students 8. (1) A tenancy which is granted to a person who is pursuing, or intends to pursue, a course of study provided by a specified educational institution and is so granted either by that institution or by another specified institution or body of persons.
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(2) In sub-paragraph (1) above “specified” means specified, or of a class specified, for the purposes of this paragraph by regulations made by the Secretary of State by statutory instrument. (3) A statutory instrument made in the exercise of the power conferred by sub-paragraph (2) above shall be subject to annulment in pursuance of a resolution of either House of Parliament. Holiday Lettings 9. A tenancy the purpose of which is to confer on the tenant the right to occupy the dwelling-house for a holiday Resident landlords 10. (1) A tenancy in respect of which the following conditions are fulfilled - (a) that the dwelling-house forms part only of a building and, except in a case where the dwelling-house also forms part of a flat, the building is not a purpose-built block of flats; and (b) that, subject to Part III of this Schedule, the tenancy was granted by an individual who, at the time when the tenancy was granted, occupied as his only or principal home another dwelling-house which, - (i) in the case mentioned in paragraph (a) above, also forms part of the flat; or (ii) in any other case, also forms part of the building; and (c) that, subject to Part III of this Schedule, at all times since the tenancy was granted the interest of the landlord under the tenancy has belonged to an individual who, at the time he owned that interest, occupied as his only or principal home another dwelling- house which,- (i) in the case mentioned in paragraph (a) above, also formed part of the flat; or (ii) in any other case, also formed part of the building; and (d) that the tenancy is not one which is excluded from this sub-paragraph by sub-paragraph (3) below.
(2) If a tenancy was granted by two or more persons jointly, the reference in sub-paragraph (1)(b) above to an individual is a reference to any one of those persons and if the interest of the landlord is for the time being held by two or more persons jointly, the reference in subparagraph (1)(c) above to an individual is a reference to any one of those persons.
(3) A tenancy (in this sub-paragraph referred to as “the new tenancy”) is excluded from sub-paragraph (1) above if - (a) it is granted to a person (alone, or jointly with others) who, immediately before it was granted, was a tenant under an assured tenancy (in this sub-paragraph referred to as “the former tenancy”) of the same dwelling-house or of another dwelling-house which forms part of the building in question; and (b) the landlord under the new tenancy and under the former tenancy is the same person or, if either of those tenancies is or was granted by two or more persons jointly, the same person is the landlord or one of the landlords under each tenancy. Crown tenancies 11. (1) A tenancy under which the interest of the landlord belongs to Her Majesty in right of the Crown or to a government department or is held in trust for Her Majesty for the purpose of a government department. (2) The reference in subparagraph (1) above to the case where the interest of the landlord belongs to Her Majesty in right of the Crown does not include the case where that interest is under the management of the Crown Estate Commissioners or it is held by the Secretary of State as the result of the exercise by him of functions under Part III of the Housing Associations Act 1985. Local authority tenancies etc. 12. (1) A tenancy under which the interest of the landlord belongs to- (a) a local authority, as defined in sub-paragraph (2) below; (b) the Homes and Communities Agency but only if the tenancy falls within subsections (2A) to (2E) of section 80 of the Housing Act 1985; (c) the Welsh Ministers but only if the tenancy falls within subsections (2A) or (2E) of section 80 of the Housing Act 1985; (d) an urban development corporation established by an order under section 135 of the Local Government, Planning and Land Act 1980; (d) (a) a Mayor development authority; (e) a development corporation, within the meaning of the New Towns Act 1981; (f) an authority established under section 10 of the Local Government Act 1985 (waste disposal authorities); (f) (a) an authority established for an area in England by an order under section 207 of the Local Government and Public Involvement in Health Act 2007 (joint waste authorities); (g) a residuary body, within the meaning of the Local Government Act 1985; (g) (g) The Residuary Body for Wales (Corff Gweddilliol Cymru) (h) a fully mutual housing association; or (i) a housing action trust established under Part III of this Act. (2) The following are local authorities for the purposes of sub-paragraph (1)(a) above- (a) the council of a county, county borough, district or London borough; (b) the common Council of the City of London; (c) the Council of the Isles of Scilly; (d) the Broads Authority; (e) the Inner London Education Authority; (e) (e) The London Fire and Emergency Planning Authority; (f) a joint authority, within the meaning of the Local Government Act 1985; (f) (a) an economic prosperity board established under section 88 of the Local Democracy, Economic Development and
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Construction Act 2009; (f) (b) a combined authority established under section 103 of that Act; and (g) a police and crime commissioner.
Family Intervention Tenancies 12ZA. This section relates to a tenancy granted by a private registered provider of social housing or a registered social landlord
Accommodation for asylum seekers 12A. (1) A tenancy granted by a private landlord under arrangements for the provision of support of asylum-seekers or dependents of asylum-seekers made under section 4 or Part VI of the Immigration and Asylum Act 1999. (2) “Private landlord” means a landlord who is not within section 80(1) of the Housing Act 1985
Accommodation for persons in Temporary Protection 12B. (1) A tenancy granted by a private landlord under arrangements for the provision of accommodation for persons with temporary protection made under the Displaced Persons (Temporary Protection) Regulations 2005. (2) “Private landlord” means a landlord who is not within section 80(1) of the Housing Act 1985
Transitional cases 13. (1) A protected tenancy, within the meaning of the Rent Act 1977. (2) A housing association tenancy, within the meaning of Part VI of that Act. (3) A secure tenancy. (4) Where a person is a protected occupier of a dwelling-house, within the meaning of the Rent (Agriculture) Act 1976, the relevant tenancy, within the meaning of that Act, by virtue of which he occupies the dwelling-house.
Part II Rateable values
14. (1) The rateable value of a dwelling-house at any time shall be ascertained for the purposes of Part I of this Schedule as follows- (a) if the dwelling-house is a hereditament for which a rateable value is then shown in the valuation list, it shall be that rateable value; (b) if the dwelling-house forms part only of such a hereditament or consists of or forms part of more than one such hereditament, its rateable value shall be taken to be such value as is found by a proper apportionment or aggregation of the rateable value or values so shown. (2) Any question arising under this Part of this Schedule as to the proper apportionment or aggregation of any value or values shall be determined by the county court and the decision of that court shall be final.
15. Where, after the time at which the rateable value of a dwelling-house is material for the purposes of any provision of Part I of this Schedule, the valuation list is altered so as to vary the rateable value of the hereditament of which the dwelling-house consists (in whole or in part) or forms part and the alteration has effect from that time or from an earlier time, the rateable value of the dwelling-house at the material time shall be ascertained as if the value shown in the valuation list at the material time had been the value shown in the list as altered. 16. Paragraphs 14 and 15 above apply in relation to any other land which, under section 2 of this Act, is treated as part of a dwelling- house as they apply in relation to the dwelling-house itself.
Part III Provisions for determining application of paragraph 10 (resident landlords)
17. (1) In determining whether the condition in paragraph 10(1)(c) above is at any time fulfilled with respect to a tenancy, there shall be disregarded- (a) any period of not more than twenty-eight days, beginning with the date on which the interest of the landlord under the tenancy becomes vested at law and in equity in an individual who, during that period, does not occupy as his only or principal home another dwelling-house which forms part of the building or, as the case may be, flat concerned; (b) if, within a period falling within paragraph (a) above, the individual concerned notifies the tenant in writing of his intention to occupy as his only or principal home another dwelling-house in the building or, as the case may be, flat concerned, the period beginning with the date on which the interest of the landlord under the tenancy becomes vested in that individual as mentioned in that paragraph and ending- (i) at the expiry of the period of six months beginning on that date, or (ii) on the date on which that interest ceases to be so vested, or (iii) on the date on which that interest becomes again vested in such an individual as is mentioned in paragraph 10(1) (c) or the condition in that paragraph becomes deemed to be fulfilled by virtue of paragraph 18(1) or paragraph 20 below, whichever is the earlier; and (c) any period of not more than two years beginning with the date on which the interest of the landlord under the tenancy becomes, and during which it remains, vested- (i) in trustees as such; or (ii) by virtue of section 9 of the Administration of Estates Act 1925, in the Probate Judge or the Public trustee.
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(2) Where the interest of the landlord under a tenancy becomes vested at law and in equity in two or more persons jointly, of whom at least one was an individual, sub-paragraph (1) above shall have effect subject to the following modifications- (a) in paragraph (a) for the words from “an individual” to “occupy” there shall be substituted “the joint landlords if, during that period none of them occupies”; and (b) in paragraph (b) for the words “the individual concerned” there shall be substituted “any of the joint landlords who is an individual” and for the words “that individual” there shall be substituted “the joint landlords”. 18. (1) During any period when- (a) the interest of the landlord under the tenancy referred to in paragraph 10 above is vested in trustees as such, and (b) that interest is held on trust for any person who or for two or more persons of whom at least one occupies as his only or principal home a dwelling-house which forms part of the building or, as the case may be, flat referred to in paragraph 10(1)(a), the condition in paragraph 10(1)(c) shall be deemed to be fulfilled and accordingly, no part of that period shall be disregarded by virtue of paragraph 17 above. (2) If a period during which the condition in paragraph 10(1)(c) is deemed to be fulfilled by virtue of sub-paragraph (1) above comes to an end on the death of a person who was in occupation of a dwelling-house as mentioned in paragraph (b) of that sub-paragraph, then, in determining whether that condition is at any time thereafter fulfilled, there shall be disregarded any period - (a) which begins on the date of the death; (b) during which the interest of the landlord remains vested as mentioned in sub-paragraph (1)(a) above; and (c) which ends at the expiry of the period of two years beginning on the date of the death or on any earlier date on which the condition in paragraph 10(1)(c) becomes again deemed to be fulfilled by virtue of subparagraph (1) above. 19. In any case where- (a) immediately before a tenancy comes to an end the condition in paragraph 10(1)(c) is deemed to be fulfilled by virtue of paragraph 18(1) above, and (b) on the coming to an end of that tenancy the trustees in whom the interest of the landlord is vested grant a new tenancy of the same or substantially the same dwelling-house to a person (alone or jointly with others) who was the tenant or one of the tenants under the previous tenancy, the condition in paragraph 10(1)(b) above shall be deemed to be fulfilled with respect to the new tenancy.
20. (1) The tenancy referred to in paragraph 10 above falls within this paragraph if the interest of the landlord under the tenancy becomes vested in the personal representatives of a deceased person acting in that capacity. (2) If the tenancy falls within this paragraph, the condition in paragraph 10(1)(c) shall be deemed to be fulfilled for any period, beginning with the date on which the interest becomes vested in the personal representatives and not exceeding two years, during which the interest of the landlord remains so vested. 21. Throughout any period which, by virtue of paragraph 17 or paragraph 18(2) above, falls to be disregarded for the purpose of determining whether the condition in paragraph 10(1)(c) is fulfilled with respect to a tenancy, no order shall be made for possession of the dwelling-house subject to that tenancy, other than an order which might be made if that tenancy were or, as the case may be, had been an assured tenancy 22. For the purposes of paragraph 10 above, a building is a purpose-built block of flats if as constructed it contained, and it contains, two or more flats; and for this purpose ‘flat’ means a dwelling-house which- (a) forms part only of a building; and (b) is separated horizontally from another dwelling-house which forms part of the same building.
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SCHEDULE 2 GROUNDS FOR POSSESSION OF DWELLING-HOUSES LET ON ASSURED TENANCIES
Part I Grounds On Which Court Must Order Possession Ground 1 Not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on this ground or the court is of the opinion that it is just and equitable to dispense with the requirement of notice and (in either case) - (a) at some time before the beginning of the tenancy, the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them occupied the dwelling-house as his only or principal home; or (b) the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them requires the dwelling-house as his, his spouse’s or his civil partner’s only or principal home and neither the landlord (or, in the case of joint landlords, any one of them) nor any other person who, as landlord, derived title under the landlord who gave the notice mentioned above acquired the reversion on the tenancy for money or money’s worth.
Ground 2 The dwelling-house is subject to a mortgage granted before the beginning of the tenancy and - (a) the mortgagee is entitled to exercise a power of sale conferred on him by the mortgage or by section 101 of the Law of Property Act 1925; and (b) the mortgagee requires possession of the dwelling-house for the purpose of disposing of it with vacant possession in exercise of that power; and (c) either notice was given as mentioned in Ground 1 above or the court is satisfied that it is just and equitable to dispense with the requirement of notice; (d) and for the purposes of this ground “mortgage” includes a charge and “mortgagee” shall be construed accordingly.
Ground 3 The tenancy is a fixed term tenancy for a term not exceeding eight months and - (a) not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on this ground; and (b) at some time within the period of twelve months ending with the beginning of the tenancy, the dwelling-house was occupied under a right to occupy it for a holiday. Ground 4 The tenancy is a fixed term tenancy for a term not exceeding twelve months and - (a) not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on this ground; and (b) at some time within the period of twelve months ending with the beginning of the tenancy, the dwelling-house was let on a tenancy falling within paragraph 8 of Schedule 1 to this Act. Ground 5 The dwelling-house is held for the purpose of being available for occupation by a minister of religion as a residence from which to perform the duties of his office and - (a) not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on this ground; and (b) the court is satisfied that the dwelling-house is required for occupation by a minister of religion as such a residence. Ground 6 The landlord who is seeking possession or, if that landlord is a non-profit registered provider of social housing, a registered social landlord or charitable housing trust, or (where the dwelling-house is social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008) a profit-making registered provider of social housing, or a superior landlord intends to demolish or reconstruct the whole or a substantial part of the dwelling-house or to carry out substantial works on the dwelling-house or any part thereof or any building of which it forms part and the following conditions are fulfilled - (a) the intended work cannot reasonably be carried out without the tenant giving up possession of the dwelling-house because - (i) the tenant is not willing to agree to such a variation of the terms of the tenancy as would give such access and other facilities as would permit the intended work to be carried out, or (ii) the nature of the intended work is such that no such variation is practicable, or (iii) the tenant is not willing to accept an assured tenancy of such part only of the dwelling-house (in this sub- paragraph referred to as “the reduced part”) as would leave in the possession of his landlord so much of the dwelling-house as would be reasonable to enable the intended work to be carried out and, where appropriate, as would give such access and other facilities over the reduced part as would permit the intended work to be carried out, or (iv) the nature of the intended work is such that such a tenancy is not practicable; and (b) either the landlord seeking possession acquired his interest in the dwelling-house before the grant of the tenancy or that interest was in existence at the time of that grant and neither that landlord (or, in the case of joint landlords, any of them) nor any other person who, alone or jointly with others, has acquired that interest since that time acquired it for money or money’s worth; and (c) the assured tenancy on which the dwelling-house is let did not come into being by virtue of any provision of Schedule I to the Rent Act 1977, as amended by Part I of Schedule 4 to this Act or, as the case may be, section 4 of the Rent (Agriculture) Act 1976, as amended by Part II of that Schedule.
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For the purposes of this ground, if, immediately before the grant of the tenancy the tenant to whom it was granted or, if it was granted to joint tenants, any of them was the tenant or one of the joint tenants of the dwelling-house concerned under an earlier assured tenancy or, as the case may be, under a tenancy to which Schedule 10 to the Local Government and Housing Act 1989 applied, any reference in paragraph (b) above to the grant of the tenancy is a reference to the grant of that earlier assured tenancy or, as the case may be, to the grant of the tenancy to which the said Schedule 10 applied. For the purposes of this ground “registered social landlord” has the same meaning as in the Housing Act 1985 (see section 5(4) and (5) of that Act) and “charitable housing trust” means a housing trust, within the meaning of the Housing Associations Act 1985, which is a charity. For the purposes of this ground, every acquisition under Part IV of this Act shall be taken to be an acquisition for money or money’s worth; and in any case where - (i) the tenancy (in this paragraph referred to as “the current tenancy”) was granted to a person (alone or jointly with others) who, immediately before it was granted, was a tenant under a tenancy of a different dwelling-house (in this paragraph referred to as “the earlier tenancy”), and (ii) the landlord under the current tenancy is the person who, immediately before that tenancy was granted, was the landlord under the earlier tenancy, and (iii) the condition in paragraph (b) above could not have been fulfilled with respect to the earlier tenancy by virtue of an acquisition under Part IV of this Act (including one taken to be such an acquisition by virtue of the previous operation of this paragraph), (iv) the acquisition of the landlord’s interest under the current tenancy shall be taken to have been under that Part and the landlord shall be taken to have acquired that interest after the grant of the current tenancy.
Ground 7 The tenancy is a periodic tenancy (including a statutory periodic tenancy) or a fixed term tenancy of a dwelling-house in England which has devolved under the will or intestacy of the former tenant and the proceedings for the recovery of possession are begun not later than twelve months after the death of the former tenant or, if the court so directs, after the date on which, in the opinion of the court, the landlord or, in the case of joint landlords, any one of them became aware of the former tenant’s death. For the purposes of this ground, the acceptance by the landlord of rent from a new tenant after the death of the former tenant shall not be regarded as creating a new tenancy, unless the landlord agrees in writing to a change (as compared with the tenancy before the death) in the amount of the rent, the period or length of term of the tenancy, the premises which are let or any other term of the tenancy. This ground does not apply to a fixed term tenancy that is a lease of a dwelling-house— (a) granted on payment of a premium calculated by reference to a percentage of the value of the dwelling-house or of the cost of providing it, or (b) under which the lessee (or the lessee’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house Ground 7A Any of the following conditions is met. Condition 1 is that— (a) the tenant, or a person residing in or visiting the dwelling-house, has been convicted of a serious offence, and (b) the serious offence— (i) was committed (wholly or partly) in, or in the locality of, the dwelling-house, (ii) was committed elsewhere against a person with a right (of whatever description) to reside in, or occupy housing accommodation in the locality of, the dwelling-house, or (iii) was committed elsewhere against the landlord of the dwelling-house, or a person employed (whether or not by the landlord) in connection with the exercise of the landlord’s housing management functions, and directly or indirectly related to or affected those functions.
Condition 2 is that a court has found in relevant proceedings that the tenant, or a person residing in or visiting the dwelling- house, has breached a provision of an injunction under section 1 of the Anti-social Behaviour, Crime and Policing Act 2014, other than a provision requiring a person to participate in a particular activity, and— (a) the breach occurred in, or in the locality of, the dwelling-house, or (b) the breach occurred elsewhere and the provision breached was a provision intended to prevent— (i) conduct that is capable of causing nuisance or annoyance to a person with a right (of whatever description) to reside in, or occupy housing accommodation in the locality of, the dwelling-house, or (ii) conduct that is capable of causing nuisance or annoyance to the landlord of the dwelling-house, or a person employed (whether or not by the landlord) in connection with the exercise of the landlord’s housing management functions, and that is directly or indirectly related to or affects those functions.
Condition 3 is that the tenant, or a person residing in or visiting the dwelling-house, has been convicted of an offence under section 30 of the Anti-social Behaviour, Crime and Policing Act 2014 consisting of a breach of a provision of a criminal behaviour order prohibiting a person from doing anything described in the order, and the offence involved— (a) a breach that occurred in, or in the locality of, the dwelling-house, or (b) a breach that occurred elsewhere of a provision intended to prevent— (i) behaviour that causes or is likely to cause harassment, alarm or distress to a person with a right (of whatever description) to reside in, or occupy housing accommodation in the locality of, the dwelling-house, or (ii) behaviour that causes or is likely to cause harassment, alarm or distress to the landlord of the dwelling-house, or a person employed (whether or not by the landlord) in connection with the exercise of the landlord’s housing
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management functions, and that is directly or indirectly related to or affects those functions.
Condition 4 is that— (a) the dwelling-house is or has been subject to a closure order under section 80 of the Anti-social Behaviour, Crime and Policing Act 2014, and (b) access to the dwelling-house has been prohibited (under the closure order or under a closure notice issued under section 76 of that Act) for a continuous period of more than 48 hours.
Condition 5 is that— (a) the tenant, or a person residing in or visiting the dwelling-house, has been convicted of an offence under— (i) section 80(4) of the Environmental Protection Act 1990 (breach of abatement notice in relation to statutory nuisance), or (ii) section 82(8) of that Act (breach of court order to abate statutory nuisance etc.), and (b) the nuisance concerned was noise emitted from the dwelling-house which was a statutory nuisance for the purposes of Part 3 of that Act by virtue of section 79(1)(g) of that Act (noise emitted from premises so as to be prejudicial to health or a nuisance).
Condition 1, 2, 3, 4 or 5 is not met if— (a) there is an appeal against the conviction, finding or order concerned which has not been finally determined, abandoned or withdrawn, or (b) the final determination of the appeal results in the conviction, finding or order being overturned.
In this ground— “relevant proceedings” means proceedings for contempt of court or proceedings under Schedule 2 to the Anti-social Behaviour, Crime and Policing Act 2014; “serious offence” means an offence which— (a) was committed on or after the day on which this ground comes into force, (b) is specified, or falls within a description specified, in Schedule 2A to the Housing Act 1985 at the time the offence was committed and at the time the court is considering the matter, and (c) is not an offence that is triable only summarily by virtue of section 22 of the Magistrates’ Courts Act 1980 (either-way offences where value involved is small).
Ground 7B: Both of the following conditions are met in relation to a dwelling-house in England.
Condition 1 is that the Secretary of State has given a notice in writing to the landlord or, in the case of joint landlords, one or more of them which identifies- (a) the tenant or, in the case of joint tenants, one or more of them, or (b) one or more other persons aged 18 or over who are occupying the dwelling-house, as a person or persons disqualified as a result of their immigration status from occupying the dwelling-house underthe tenancy.
Condition 2 is that the person or persons named in the notice- (a) fall within paragraph (a) or (b) of condition 1, and (b) are disqualified as a result of their immigration status from occupying the dwelling-house under the tenancy.
For the purposes of this ground a person (“P”) is disqualified as a result of their immigration status from occupying the dwelling-house under the tenancy if- (a) P is not a relevant national, and (b) P does not have a right to rent in relation to the dwelling house.
P does not have a right to rent in relation to the dwelling-house if- (a) P requires leave to enter or remain in the United Kingdom but does not have it, or (b) P’s leave to enter or remain in the United Kingdom is subject to a condition preventing P from occupying the dwelling- house.
But P is to be treated as having a right to rent in relation to a dwelling-house if the Secretary of State has granted P permission for the purposes of this ground to occupy a dwelling-house under an assured tenancy.
In this ground “relevant national” means- (a) a British citizen (b) a national of an EEA State other than the United Kingdom, or (c) a national of Switzerland.
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Ground 8 Both at the date of the service of the notice under section 8 of this Act relating to the proceedings for possession and at the date of the hearing - (a) if rent is payable weekly or fortnightly, at least eight weeks’ rent is unpaid; (b) if rent is payable monthly, at least two months’ rent is unpaid; (c) if rent is payable quarterly, at least one quarter’s rent is more than three months in arrears; and (d) if rent is payable yearly, at least three months’ rent is more than three months in arrears; and for the purpose of this ground “rent” means rent lawfully due from the tenant.
Part II Grounds On Which Court May Order Possession Ground 9 Suitable alternative accommodation is available for the tenant or will be available for him when the order for possession takes effect Ground 10 Some rent lawfully due from the tenant - (a) is unpaid on the date on which the proceedings for possession are begun; and (b) except where subsection (l)(b) of section 8 of this Act applies, was in arrears at the date of the service of the notice under that section relating to those proceedings. Ground 11 Whether or not any rent is in arrears on the date on which proceedings for possession are begun, the tenant has persistently delayed paying rent which has become lawfully due Ground 12 Any obligation of the tenancy (other than one related to the payment of rent) has been broken or not performed. Ground 13 The condition of the dwelling-house or any of the common parts has deteriorated owing to acts of waste by, or the neglect or default of, the tenant or any other person residing in the dwelling-house and, in the case of an act of waste by, or the neglect or default of, a person lodging with the tenant or a sub-tenant of his, the tenant has not taken such steps as he ought reasonably to have taken for the removal of the lodger or sub-tenant. For the purposes of this ground, “common parts” means any part of a building comprising the dwelling-house and any other premises which the tenant is entitled under the terms of the tenancy to use in common with the occupiers of other dwelling- houses in which the landlord has an estate or interest.
Ground 14 The tenant or a person residing in or visiting the dwelling-house - (a) has been guilty of conduct causing or likely to cause a nuisance or annoyance to a person residing, visiting or otherwise engaging in a lawful activity in the locality, (aa) has been guilty of conduct causing or likely to cause a nuisance or annoyance to the landlord of the dwelling-house, or a person employed (whether or not by the landlord) in connection with the exercise of the landlord’s housing management functions, and that is directly or indirectly related to or affects those functions, (b) has been convicted of - (i) using the dwelling-house or allowing it to be used for immoral or illegal purposes, or (ii) an arrestable offence committed in, or in the locality of, the dwelling-house.
Ground 14ZA The tenant or an adult residing in the dwelling-house has been convicted of an indictable offence which took place during, and at the scene of, a riot in the United Kingdom. In this Ground- “adult” means a person aged 18 or over; “indictable offence” does not include an offence that is triable only summarily by virtue of section 22 of the Magistrates’ Courts Act 1980 (either way offences where value involved in small); “riot” is to be construed in accordance with section 1 of the Public Order Act 1986. This Ground applies only in relation to dwelling-houses in England.
Ground 14A The dwelling-house was occupied (whether alone or with others) by a married couple, a couple who are civil partners of each other, a couple living together as husband and wife or a couple living together as if they were civil partners; and (a) one or both of the partners is a tenant of the dwelling-house, (b) the landlord who is seeking possession is a non-profit registered provider of social housing, a registered social landlord or a charitable housing trust, or, where the dwelling-house is social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, a profit-making registered provider of social housing, (c) one partner has left the dwelling-house because of violence or threats of violence by the other towards - (i) that partner, or
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(ii) a member of the family of that partner who was residing with that partner immediately before the partner left, and (d) the court is satisfied that the partner who has left is unlikely to eturn.r For the purposes of this ground “registered social landlord” and “member of the family” have the same meaning as in Part I of the Housing Act 1996 and “charitable housing trust” means a housing trust, within the meaning of the Housing Associations Act 1985, which is a charity.
Ground 15 The condition of any furniture provided for use under the tenancy has, in the opinion of the court, deteriorated owing to ill- treatment by the tenant or any other person residing in the dwelling-house and, in the case of ill-treatment by a person lodging with the tenant or by a sub-tenant of his, the tenant has not taken such steps as he ought reasonably to have taken for the removal of the lodger or sub-tenant. Ground 16 The dwelling-house was let to the tenant in consequence of his employment by the landlord seeking possession or a previous landlord under the tenancy and the tenant has ceased to be in that employment. [For the purposes of this ground, at a time when the landlord is or was the Secretary of State, employment by a health services body, as defined in section 60(7) of the National Health Service and Community Care Act 1990, or by a Local Health Board, shall be regarded as employment by the Secretary of State.] Ground 17 The tenant is the person, or one of the persons, to whom the tenancy was granted and the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by - (a) the tenant, or (b) a person acting at the tenant’s instigation.
Part III Suitable Alternative Accommodation 1. For the purposes of Ground 9 above, a certificate of the local housing authority for the district in which the dwelling-house in question is situated, certifying that the authority will provide suitable alternative accommodation for the tenant by a date specified in the certificate, shall be conclusive evidence that suitable alternative accommodation will be available for him by that date. 2. Where no such certificate as is mentioned in paragraph 1 above is produced to the court, accommodation shall be deemed to be suitable for the purposes of Ground 9 above if it consists of either - (a) premises which are to be let as a separate dwelling such that they will then be let on an assured tenancy, other than - (i) a tenancy in respect of which notice is given not later than the beginning of the tenancy that possession might be recovered on any of Grounds 1 to 5 above, or (ii) an assured shorthold tenancy, within the meaning of Chapter II of Part I of this Act, or (b) premises to be let as a separate dwelling on terms which will, in the opinion of the court, afford to the tenant security of tenure reasonably equivalent to the security afforded by Chapter I of Part I of this Act in the case of an assured tenancy of a kind mentioned in sub-paragraph (a) above, and, in the opinion of the court, the accommodation fulfils the relevant conditions as defined in paragraph 3 below.
3. (1) For the purposes of paragraph 2 above, the relevant conditions are that the accommodation is reasonably suitable to the needs of the tenant and his family as regards proximity to place of work, and either - (a) similar as regards rental and extent to the accommodation afforded by dwelling-houses provided in the neighbourhood by any local housing authority for persons whose needs as regards extent are, in the opinion of the court, similar to those of the tenant and of his family; or (b) reasonably suitable to the means of the tenant and to the needs of the tenant and his family as regards extent and character; and that if any furniture was provided for use under the assured tenancy in question, furniture is provided for use in the accommodation which is either similar to that so provided or is reasonably suitable to the needs of the tenant and his family.
3. (2) For the purposes of sub-paragraph (1) (a) above, a certificate of a local housing authority stating - (a) the extent of the accommodation afforded by dwelling-houses provided by the authority to meet the needs of tenants with families of such number as may be specified in the certificate, and (b) the amount of the rent charged by the authority for dwelling-houses affording accommodation of that extent, shall be conclusive evidence of the facts so stated. 4. Accommodation shall not be deemed to be suitable to the needs of the tenant and his family if the result of their occupation of the accommodation would be that it would be an overcrowded dwelling-house for the purposes of Part X of the Housing Act 1985. 5. Any document purporting to be a certificate of a local housing authority named therein issued for the purposes of this Part of this Schedule and to be signed by the proper officer of that authority shall be received in evidence and, unless the contrary is shown shall be deemed to be such a certificate without further proof. 6. In this Part of this Schedule “local housing authority” and “district”, in relation to such an authority, have the same meaning as in the Housing Act 1985.
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SCHEDULE 2A ASSURED TENANCIES: NON-SHORTHOLDS
Tenancies excluded by notice 1. (1) An assured tenancy in respect of which a notice is served as mentioned in sub-paragraph (2) below. (2) The notice referred to in sub-paragraph (1) above is one which - (a) is served before the assured tenancy is entered into; (b) is served by the person who is to be the landlord under the assured tenancy on the person who is to be the tenant under that tenancy, and (c) states that the assured tenancy to which it relates is not to be an assured shorthold tenancy. 2. (1) An assured tenancy in respect of which a notice is served as mentioned in sub-paragraph (2) below. 2. (2) The notice referred to in sub-paragraph (1) above is one which - (a) is served after the assured tenancy is entered into; (b) is served by the landlord under the assured tenancy on the tenant under that tenancy, and (c) states that the assured tenancy to which it relates is no longer an assured shorthold tenancy. Tenancies containing exclusionary provision 3. An assured tenancy which contains a provision to the effect that the tenancy is not an assured shorthold tenancy. Tenancies under section 39 4. An assured tenancy arising by virtue of section 39 above, other than one to which subsection (7) of that section applies. Former secure tenancies 5. An assured tenancy which became an assured tenancy on ceasing to be a secure tenancy. Former demoted tenancies 5A. An assured tenancy which ceases to be an assured shorthold tenancy by virtue of section 20B(2) or (4) Tenancies under Schedule 10 to the Local Government and Housing Act 1989 6. An assured tenancy arising by virtue of Schedule 10 to the Local Government and Housing Act 1989 (security of tenure on ending of long residential tenancies). Tenancies replacing non-shortholds 7. (1) An assured tenancy which - (a) is granted to a person (alone or jointly with others) who, immediately before the tenancy was granted, was the tenant (or, in the case of joint tenants, one of the tenants) under an assured tenancy other than a shorthold tenancy (“the old tenancy”), (b) is granted (alone or jointly with others) by a person who was at that time the landlord (or one of the joint landlords) under the old tenancy, and (c) is not one in respect of which a notice is served as mentioned in sub-paragraph (2) below. (2) The notice referred to in sub-paragraph (1)(c) above is one which - (a) is in such form as may be prescribed, (b) is served before the assured tenancy is entered into, (c) is served by the person who is to be the tenant under the assured tenancy on the person who is to be the landlord under that tenancy (or, in the case of joint landlords, on at least one of the persons who are to be joint landlords), and (d) states that the assured tenancy to which it relates is to be a shorthold tenancy. 8. An assured tenancy which comes into being by virtue of section 5 above on the coming to an end of an assured tenancy which is not a shorthold tenancy. 9. This section refers to assured agricultural occupancies.
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Landlord and Tenant Act 1985 (section 11) Repairing Obligations
SECTION 11. REPAIRING OBLIGATIONS IN SHORT LEASES (1) (1) In a lease to which this section applies (as to which, see sections 13 and 14) there is implied a covenant by the lessor - (a) to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes), (b) to keep in repair and proper working order the installations in the dwellinghouse for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and (c) to keep in repair and proper working order the installations in the dwellinghouse for space heating and heating water.
Sub/s. (1A) and (IB) Added by S. 116 Housing Act 1988. (1A) If a lease to which this section applies is a lease of a dwelling-house which forms part only of a building, then, subject to subsection (1B), the covenant implied by subsection (1) shall have effect as if- (a) the reference in paragraph (a) of that subsection to the dwelling-house included a reference to any part of the building in which the lessor has an estate or interest; and (b) any reference in paragraphs (b) and (c) of that subsection to an installation in the dwelling-house included a reference to an installation which, directly or indirectly, serves the dwelling-house and which either- (i) forms part of any part of a building in which the lessor has an estate or interest; or (ii) is owned by the lessor or under his control. (1B) Nothing in subsection (1A) shall be construed as requiring the lessor to carry out any works or repairs unless the disrepair (or failure to maintain in working order) is such as to affect the lessee’s enjoyment of the dwelling-house or of any common parts, as defined in section 60(1) of the Landlord and Tenant Act 1987, which the lessee, as such, is entitled to use. (2) The covenant implied by subsection (1) (“the lessor’s repairing covenant”) shall not be construed as requiring the lessor- (a) to carry out works or repairs for which the lessee is liable by virtue of his duty to use the premises in a tenant-like manner, or would be so liable but for an express covenant on his part, (b) to rebuild or reinstate the premises in the case of destruction or damage by fire, or by tempest, flood or other inevitable accident, or (c) to keep in repair or maintain anything which the lessee is entitled to remove from the dwelling-house.
Sub/s. (3A) Added by S.116 Housing Act 1988. (3) In determining the standard of repair required by the lessor’s repairing covenant, regard shall be had to the age, character and prospective life of the dwelling-house and the locality in which it is situated. (3A) In any case where- (a) the lessor’s repairing covenant has effect as mentioned in subsection (1A), and (b) in order to comply with the covenant the lessor needs to carry out works or repairs otherwise than in, or to an installation in, the dwelling-house, and (c) the lessor does not have a sufficient right in the part of the building or the installation concerned to enable him to carry out the required works or repairs, then, in any proceedings relating to a failure to comply with the lessor’s repairing covenant, so far as it requires the lessor to carry out the works or repairs in question, it shall be a defence for the lessor to prove that he used all reasonable endeavours to obtain, but was unable to obtain, such rights as would be adequate to enable him to carry out the works or repairs. (4) A covenant by the lessee for the repair of the premises is of no effect so far as it relates to the matters mentioned in subsection (1)(a) to (c), except so far as it imposes on the lessee any of the requirements mentioned in subsection (2)(a) or (c). (5) The reference in subsection (4) to a covenant by the lessee for the repair of the premises includes a covenant - (a) to put in repair or deliver up in repair, (b) to paint, point or render, (c) to pay money in lieu of repairs by the lessee, or (d) to pay money on account of repairs by the lessor. (6) In a lease in which the lessor’s repairing covenant is implied there is also implied a covenant by the lessee that the lessor, or any person authorised by him in writing, may at reasonable times of the day and on giving 24 hours’ notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair.
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The Letting Handbook 28 © The Letting Centre 10/2019 Back to contents Protection From Eviction Act 1977 Part I Unlawful Eviction and Harassment
1. Unlawful eviction and harassment of occupier (1) In this section “residential occupier” in relation to any premises, means a person occupying the premises as a residence, whether under a contract or by virtue of any enactment or rule of law giving him the right to remain in occupation or restricting the right of any other person to recover possession of the premises. (2) If any person unlawfully deprives the residential occupier of any premises of his occupation of the premises or any part thereof, or attempts to do so, he shall be guilty of an offence unless he proves that he believed, and had reasonable cause to believe, that the residential occupier had ceased to reside in the premises. (3) If any person with intent to cause the residential occupier of any premises - (a) to give up the occupation of the premises or any part thereof; or (b) to refrain from exercising any right or pursuing any remedy in respect of the premises or part thereof; does acts likely to interfere with the peace or comfort of the residential occupier or members of his household, or persistently withdraws or withholds services reasonably required for the occupation of the premises as a residence he shall be guilty of an offence. (3A) Subject to subsection (3B) below, the landlord of a residential occupier or an agent of the landlord shall be guilty of an offence if - (a) he does acts likely to interfere with the peace or comfort of the residential occupier or members of his household, or (b) he persistently withdraws or withholds services reasonably required for the occupation of the premises in question as a residence, and (in either case) he knows, or has reasonable cause to believe, that the conduct is likely to cause the residential occupier to give up the occupation of the whole or part of the premises or to refrain from exercising any right or pursuing any remedy in respect of the whole or part of the premises. (3B) A person shall not be guilty of an offence under subsection (3A) above if he proves that he had reasonable grounds for doing the acts or withdrawing or withholding the services in question. (3C) In subsection (3A) above “landlord”, in relation to a residential occupier of any premises, means the person who, but for - (a) the residential occupier’s rights to remain in occupation of the premises, or (b) a restriction on the person’s right to recover possession of the premises, would be entitled to occupation of the premises and any superior landlord under whom that person derives title. (4) A person guilty of an offence under this section shall be liable - (a) on summary conviction, to a fine not exceeding the prescribed sum or to imprisonment for a term not exceeding six months or to both; (b) on conviction on indictment, to a fine or to imprisonment for a term not exceeding two years or to both. (5) Nothing in this section shall be taken to prejudice any liability or remedy to which a person guilty of an offence thereunder may be subject in civil proceedings. (6) Where an offence under this section committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager or secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 2. Restriction on re-entry without due process of law Where any premises are let as a dwelling on a lease which is subject to a right of re-entry or forfeiture it shall not be lawful to enforce that right otherwise than by proceedings in the court while any person is lawfully residing in the premises or part of them. 3. Prohibition of eviction without due process of law (1) Where any premises have been let as a dwelling under a tenancy which is neither a statutorily protected tenancy nor an excluded tenancy and (a) the tenancy (in this section referred to as the former tenancy) has come to an end, but (b) the occupier continues to reside in the premises or part of them, it shall not be lawful for the owner to enforce against the occupier, otherwise than by proceedings in the court, his right to recover possession of the premises. (2) In this section “the occupier”, in relation to any premises, means any person lawfully residing in the premises or part of them at the termination of the former tenancy. (2A) Subsections (1) and (2) above apply in relation to any restricted contract (within the meaning of the Rent Act 1977) which - (a) creates a licence; and (b) is entered into after the commencement of section 69 of the Housing Act 1980 as they apply in relation to a restricted contract which creates a tenancy. (2B) Subsections (1) and (2) above apply in relation to any premises occupied as a dwelling under a licence, other than an excluded licence, as they apply in relation to premises let as a dwelling under a tenancy, and in those subsections the expressions “let” and “tenancy” shall be construed accordingly. (2C) References in the preceding provision of this section and section 4(2A) below to an excluded tenancy do not apply to - (a) a tenancy entered into before the date on which the Housing Act 1988 came into force, or (b) a tenancy entered into on or after that date but pursuant to a contract made before that date, but, subject to that, “excluded tenancy” and “excluded licence” shall be construed in accordance with section 3A below. (3) This section shall, with the necessary modifications, apply where the owner’s right to recover possession arises on the death of the tenant under a statutory tenancy within the meaning of the Rent Act 1977 or the Rent (Agriculture) Act 1976.
3A. Excluded tenancies and licences (1) Any reference in this Act to an excluded tenancy or an excluded licence is a reference to a tenancy or licence which is excluded by virtue of any of the following provisions of this section. (2) A tenancy or licence is excluded if - (a) under its terms the occupier shares any accommodation with the landlord or licensor; and
The Letting Handbook 29 © The Letting Centre 05/2019 Back to contents Protection From Eviction Act 1977 (b) immediately before the tenancy or licence was granted and also at the time it comes to an end, the landlord or licensor occupied as his only or principal home premises of which the whole or part of the shared accommodation formed part. (3) A tenancy or licence is also excluded if - (a) under its terms the occupier shares any accommodation with a member of the family of the landlord or licensor; (b) immediately before the tenancy or licence was granted and also at the time it comes to an end, the landlord or licensor occupied as his only or principal home premises in the same building as the shared accommodation and that building is not a purpose-built block of flats. (4) For the purpose of subsections (2) and (3) above, an occupier shares accommodation with another person if he has the use of it in common with that person (whether or not also in common with others) and any reference in those subsections to shared accommodation shall be construed accordingly, and if, in relation to any tenancy or licence, there is at any time more than one person who is the landlord or licensor, any reference in those subsections to the landlord or licensor shall be construed as a reference to any one of those persons. (5) In subsections (2) and (4) above - (a) “accommodation” includes neither an area used for storage nor a staircase, passage, corridor or other means of access; (b) “occupier” means, in relation to a tenancy, the tenant and, in relation to a licence, the licensee; and (c) “purpose-built block of flats” has the same meaning as in Part III of Schedule 1 of the HousingAct 1988; and section 113 of the Housing Act 1985 shall apply to determine whether a person is for the purposes of subsection (3) above a member of another’s family as it applies for the purposes of Part IV of that Act. (6) A tenancy or licence is excluded if it was granted as a temporary expedient to a person who entered the premises in question or any other premises as a trespasser (whether or not, before the beginning of that tenancy or licence, another tenancy or licence to occupy the premises or any other premises had been granted to him). (7) A tenancy or licence is excluded if - (a) it confers on the tenant or licensee the right to occupy the premises for a holiday only; or (b) it is granted otherwise than for money or money’s worth. (7A) A tenancy or licence is excluded if it is granted in order to provide accommodation under Part VI of the Immigration and Asylum Act 1999. (7C) A tenancy or licence is excluded if it is granted in order to provide accommodation under the Displaced Persons (Temporary Protection) Regulations 2005. (7D) A tenancy or licence is excluded if - (a) it is a residential tenancy agreement within the meaning of Chapter 1 of Part 3 of the Immigration Act 2014, and (b) the condition in section 33D(2) of that Act is met in relation to that agreement. (8) A licence is excluded if it confers rights of occupation in a hostel, within the meaning of the Housing Act 1985, which is provided by - (a) the council of a county, county borough, district or London Borough, the Common Council of the City of London, the Council of the Isles of Scilly, the Inner London Education Authority, the London Fire and Emergency Planning Authority, a joint authority within the meaning of the Local Government Act 1985 or a residuary body within the meaning of that Act; (a) (b) a combined authority established under section 103 of that Act; (b) a development corporation within the meaning of the New Towns Act 1981; (c) the Commission for the New Towns; (d) an urban development corporation established by an order under section 135 of the Local Government, Planning and Land Act 1980; (d) (a) a Mayoral development corporation; (e) a housing action trust established under Part III of the Housing Act 1988; (f) the Development Board for Rural Wales has been removed. (g) the Regulator of Social Housing; (g) (a) the Secretary of State under section 89 of the Housing Associations Act 1985; (h) a housing trust (within the meaning of the Housing Associations Act 1985) which is a charity, a private registered provider of social housing or a registered social landlord (within the meaning of the Housing Act 1985); or (i) any other person who is, or who belongs to a class of person which is, specified in an order made by the Secretary of State. (9) The power to make an order under subsection (8)(i) above shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. 4. Special Provisions for Agricultural Workers (this section is rarely encountered for Private Sector lettings and is not included here)
Part II Notice To Quit
5. Validity of notices to quit (1) Subject to subsection (1B) below no notice by a landlord or a tenant to quit any premises let (whether before or after the commencement of this Act) as a dwelling shall be valid unless - (a) it is in writing and contains such information as may be prescribed, and (b) it is given not less than four weeks before the date on which it is to take effect. (1A) Subject to subsection (1B) below, no notice by a licensor or a licensee to determine a periodic licence to occupy premises as a dwelling (whether the licence was granted before or after the passing of this Act) shall be valid unless - (a) it is in writing and contains such information as may be prescribed, and (b) it is given not less than four weeks before the date on which it is to take effect. (1B) Nothing in subsection (1) or subsection (1A) above applies to - (a) premises let on an excluded tenancy which is entered into on or after the date on which the Housing Act 1988 came into force unless it is entered into pursuant to a contract made before that date; or (b) premises occupied under an excluded licence. (2) In this section “prescribed” means prescribed by regulations made by the Secretary of State by statutory instrument, and a statutory instrument containing any such regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament. (3) Regulations under this section may make different provision in relation to different descriptions of lettings and different circumstances.
The Letting Handbook 30 © The Letting Centre 10/2019 Back to contents
The Letting Centre
Letting Handbook and Factsheets
Editors: Paul Ives Bsc (Hons), MBA and Tracey Cheyne ACILEx
Consultant Lawyers: Anthony Clark BLaw (Hons), FNAEA and Phillip Hopkins LLB (Hons)
The Letting Handbook © The Letting Centre 05/2019