On 12 May 2016 the Housing and Planning Act 2016 received royal assent, this act brings in a number of changes to the private residential letting sector, aimed at tackling rouge agents and adding yet more regulation and protection for tenants.
A lot of the changes brought in by the Act require further regulations to be made by the Secretary of State, so will not come inforce until a later date. This note highlights the areas of particular interest for letting and managing agents.
Rogue letting agents and property managers (commencement date yet to be appointed)
Part 2 of the act gives local housing authorities (“LHA”) a number of tools to deal with rogue Landlords and agents. When the regulations come into force LHA’s will be able to apply the First-tier Tribunal for a banning order against residential landlords and property agents who have been convicted of a “banning offence”.
At present the meaning of a banning offence is unknown, as this has been left for the SOS to define in separate regulations.
If convicted of a banning offence, a LHA can apply to the First-tier tribunal for a banning order. The act provides that a banning must be for a period of at least 12 months and during the period of the banning order the landlord or property agent will be prevented from:
1. Letting a house in England
2. Engaging in English letting agency work
3. Engaging in English property management work
4. Holding a licence for a house in multiple occupation
5. Transferring property to a person/body corporate associated with the Landlord
Breach of a banning order will be punishable by imprisonment and or a fine not exceeding 30,000.
The act provides for a database of rogue landlords and property agents to be maintained. Additionally the act allows for LHA to have access to the database for purposes connected with their functions under the Housing Act 2004, for example breaches relating to licensing of HMO’s. LHA’s are not the only organisations that will have access to the database, the act provides for HM Revenue and Customs to have access to monitor and ensure Landlords comply with their tax obligation on their investment properties.
Electrical safety standards (commencement date yet to be appointed)
The act gives the SOS the power to make regulations imposing duties on private landlords of residential premises in England only, for the purpose of ensuring that electrical safety standards are met during any period when the premises are occupied under a tenancy.
Electrical safety standards is defined as “standards specified in or determined in accordance with the regulations in relation to a) the installations in the premises for the supply of electricity, or b) electrical fixtures, fittings or appliances provided by the landlord”.
At the time of writing no regulations have been drafted to cover this, but Landlords should watch this space as it appears that it is only a matter of time before this additional requirement will come into force.
HMO’s – Additional tests (commencement date yet to be appointed)
The act adds further requirements to the existing fitness test applied to persons who wish to obtain a HMO licences. The following criteria will need to be met in addition to the existing fitness test:
1. The applicants should be entitled to remain in the UK
2. The applicant should not be insolvent or bankrupt
Additionally past breaches of duties under the Immigration Act 2014 (e.g. right to rent) will be taken in consideration when granting HMO licenses.
Access to Tenancy Deposit Information (commencement date yet to be appointed)
To assist LHA in the statutory obligation to review housing conditions, the act enables LHA to access data relating to tenancy deposits. This will give LHA greater information as to the size and extent of the private rent sector in their area.
By enabling access to deposit it will help highlight houses acting as HMO’s without licenses and will provide for better regulation of these. LHA may only access this information for purposes in connection with its obligations under the Housing Act 2004.
Limiting ability to recover legal costs as an Administration charge(commencement date yet to be appointed)
Section 131 inserts the following new paragraph into schedule 11 of the Commonhold and Leasehold Reform Act 2002:
1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant’s liability to pay a particular administration charge in respect of litigation costs.
2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.
This new section has been introduced to correct an irregularity regarding the inability of courts to restrict recovery of landlord’s legal costs by way of an Administrative charge. Currently where the lease allows recovery of legal costs through service charge the court is can limit the amount of costs to be recovered through the service charge, to an amount that is just and equitable, such a right, until now, did not exist where the lease allowed for legal costs to be recovered by way of an Administrative charge.
Regulation of Estate Agents
The SOS is appointed as lead enforcement authority for the purposes of the Estate Agents Act 1979. The act provides that the SOS may engage the services of a trading standards authority to carry outs its functions.
Client money protection scheme
There is the ability within the act for the SOS to consider making regulations requiring property agents to enrol as members of a client protection scheme. The policy idea behind this is to protect Landlord and Tenant monies held by agents, in the event the letting agent company enters Administration. Additionally, if enacted, it will give Landlords and Tenants comfort that there are safeguards in place against theft and misappropriation of client money.
All of the above changes at present do not yet have dates for commencement, these changes are coming, however we have no indication as to exactly when, one would expect implementation to be slowed given the recent governmental changes. For further details on any of the above or for any other Landlord and Tenant advice contact one of our team.
Head of Department & Partner
DDI: 01206 719669
DDI: 01206 719609