Breaking news this morning following the leak last week – the government has published their Levelling Up White Paper – and the impact of matters contained within could shake up the private rented sector and have far reaching implications on landlords and tenants alike.

What is a White Paper?

A “White Paper” is a policy document published by the government which sets our their intentions for future legislation. White papers form the basis of discussion and consultation before the final bill(s) are put forward before government to be voted into law.

What is the purpose of the Levelling Up White Paper?

The purpose of this document is to bring about system change across both the Government and the country. The White Paper sets out the changes required, and how these will be implemented to “level up” the UK. The paper contains 12 national missions that are to be completed by 2030, and are quantifiable allowing them to be tested and measured.

How does this apply to landlords?

There are three main elements within the White Paper that will affect landlords: The introduction of a “Decent Homes Standard”, the introduction of a National Landlord Register and the abolition of the Section 21 Eviction Notice.

The Decent Homes Standard

Homes in the private rented sector will need a meet a mimumum standard known as the “Decent Homes Standard”. There is nothing new about this standard, and you can find information about it by clicking here. We are in support of this government move, as decent landlords will not be affected, only those who do not maintain their properties and protect their tenants.

The National Landlord Register

There is minimal information provided within the White Paper on this proposal so we will be tentatively waiting for further details to be released. There is likely to be a minimum standard or accreditation to join the register, or it may be that landlords can avoid registration by using a registered letting agent such as ourselves. If you would like more information about our services, please do get in touch.

The Abolition of the Section 21 Notice

The abolition of the Section 21 notice has been under discussion for a number of years, but its inclusion in the White Paper shows that the implementation is moving closer. The idea behind the abolition is to prevent landlords from evicting tenants with no formal reason – hence the Section 21 procedure is known as the “no fault eviction”.

Giving tenants more security should not be seen as a bad thing given the number of “rogue” landlords operating in the UK, however in our opinion, a sharp reform of the remaining eviction process “known as the “Section 8″ procedure” needs to be completed before the loss of the Section 21. At the very least, the process needs to be shortened and simplified, with additional grounds added and all grounds to be made mandatory. We simply cannot be placed in a position where landlords cannot regain possession of their property when there is a genuine requirement to do so.

What Happens Next?

According to Government officials, £4.8 billion has be commiteed to this project and its implementation although there are some doubts over the contents of the paper and the ambitiousness of the 12 national missions with regards to funding. The next step will be for the contents of the paper to be discussed and debated, until a draft bill is produced ready to be put forward before Government and eventually enacted into law.

What is a Residents’ Management Company?

A Residents’ Management Company (RMC) is a limited company set up to manage a building containing flats, or an estate containing freehold houses. In most cases the property owners or leaseholders are members or shareholders of the company.

The RMC is normally set up by the original developer to enable to ongoing management of the building and/or communal areas, and it some instances the freehold of the development will transfer to the RMC when the last unit is sold.

An RMC can also be written into a lease where the freehold is retained by the developer. The RMC would have management obligations such as insurance, maintenance, compliance and collection and accounting for service charges. In most instances, an RMC will employ a professional managing agent (like us) to run and manage the development.

What are RMC Directors?

RMC directors are members of the company who are appointed by the leaseholders/owners to make decisions on behalf of the company. It is normally an unpaid position.

To be eligible to be a director, you must:

  1. Be an owner/leaseholder within the development (this is often a requirement, but check your Mem & Arts to confirm)
  2. Over the age of 16
  3. Not be an undischarged bankrupt
  4. Not be a disqualified director whose term of disqualification has not yet been spent
  5. Not be the auditor of the company

What are the obligations of an RMC Director?

As a limited company registered in the UK, the Company and its Directors must abide by company law. The general principles that must be abided by are:

  • Follow the rules of the company (known as the “Memorandum and Articles”)
  • Decisions must always be made for the benefit of the company rather that the individual
  • Promote the success of the company at all times
  • Complete statutory filings and returns
  • Maintain the statutory books
  • Ensure the statutory accounts are an accurate representation of fact
  • Disclose any conflicts of interest to other directors immediately

In addition, as an RMC director, there are a few other responsibilities:

  • Be available to liaise with your managing agent and other directors on management matters
  • Discussing and approving the annual service charge budget
  • Ensuring the service charge accounts are an accurate representation of fact
  • Ensuring that all decisions or actions taken are within the bounds of the lease
  • Ensuring that all Health, Safety and Fire obligations are met
  • Ensuring the insurance cover is valid and adequate
  • Attendance at 1to 2 board meetings per year, or as required
  • Attendance at AGM
  • Willingness to be involved with on-site issues

Do I need any experience?

In short, no. You need a willingness to be involved in the proactive management of your building or estate; the rest you can leave in our hands. As professional managing agents with a proven track record, we can make your life as an RMC director easy and stress free.

What are the benefits?

As an RMC director, you will gain an insight into how your block or development runs. You will be involved in decisions relating to the service charge budget and mangement of the site. You will have more input over the service charge budget and the selection of the managing agent who is ultimately responsible for the day to day running of the development.

How do I become a director?

Each company will specify how directors are appointed with its Memorandum and Articles. Often, directors can be appointed by being proposed and seconded by existing directors. At other times, you will need to wait for the next AGM to be appointed. You can view the Memorandum and Articles of your RMC by clicking this link and searching for your company.

For more information on becoming an RMC director, use the contact form below to contact us today.

Unless you have been living without a TV, phone or radio, I expect you have now heard about the Tenant Fees Act 2019, aka the “Tenant Fee Ban” (TFB).

So, what is it?

In short terms, the TFB is a piece of legislation introduced by the government which came into force on 1st June 2019. It specifically prohibits landlords and agents taking any form of payment (or forcing tenants to contract with a third party) in order to obtain or continue an Assured Shorthold Tenancy Agreement, unless that payment is specifically permitted by the ban (a “permitted payment“). All other payments are known as “prohibited payments” and carry heavy penalties, as I will discuss later in this article.

The TFB applies to all AST’s and licences (not common law, company or high rent tenancies) granted on or after 1st June 2019 and all AST’s and licences from 1st June 2020.

What payments are permitted?

There are several, including:

Rent (but this must be kept at the same level, or higher, throughout the duration of the fixed term. If it is decreased, the additional amount during the months prior to the increase will be seen as a prohibited payment.

Security Deposit (This is now capped at 5 weeks rent, and not a penny over, regardless of circumstances i.e. pets. Deposit calculators are widely available online, and the the following calculation must be used: (Monthly rent x 12/52 x 5). This cap is increased to six weeks rent for properties with an annual rent of over £50,000.

Holding Deposit (there are many regulations around the acceptance of a holding deposit, which I may need to go into further detail on a separate post. However the main points are that it is capped at 1 weeks rent, and it must be returned to the tenant save for four explicitly stated sets of circumstances .)

Change of tenancy Charge (a charge can be made when the tenant requests a change to the tenancy, such as the addition of a permitted occupier, or the change of a rent date. This charge is capped at £50 including VAT).

Late Rent Charge (this is one is pretty laughable and likely not worth even thinking about. You cannot charge for late rents, chasing letters, visits. The only charge you can make is an interest charge of 3% over the BOE base rate, after the rent is more than 14 days late).

Replacement keys/security device (Self explanatory, but you can only charge the cost of the replacement key or device, not for your time.)

Early Termination (If the tenant would like to leave a contract early, you can charge to cover your costs. However, if you are not using an agent, you are not permitted to charge them for re-referencing the new replacement tenants. They are also expected to pay rent and utilities up until the day before a replacement tenant moves in).

Breach of tenancy (If the tenant breaches any part of the agreement, you can seek to recover your costs from them, either directly or through the security deposit).

What payments are prohibited?

Anything not listed above is prohibited.

What are the penalties for breaching the ban?

Luckily for us Bristol folk, the government helpfully decided to place the central UK enforcement authority for the Tenant Fees Act within Bristol city council. They are a team who will be able to enforce the ban through penalties, and make no mistake, after reading the government guidance written for enforcement authorities it is very clear that they are being pushed to enforce this legislation to the letter. The reasons for this may become clearer to you if you allow me explain a little further about the penalties for breaching the ban.

If you purposefully or accidentally take a prohibited payment and do not return it to the tenant within 28 days, if reported it is likely you will be given a penalty charge. Ignorance is sadly no excuse so it is important you are aware of your obligations.

Any breach would render a Section 21 eviction notice invalid, so you would not be able to regain possession of your property until the prohibited payment was returned.

First breach: Up to £5000 penalty charge per breach (note: if you charge one fee that includes several items i.e. referencing, check in, tenancy fee: this could easily be seen as multiple breaches which would each attract a penalty charge in its own right).

Second or subsequent breach within 5 years: Criminal offence, or a penalty charge of up to £30,000 as an alternative to prosecution, per breach.

Common Errors

There are many people that believe the TFB only applies to letting agents, however this could not be further from the truth. As a self-managing landlord, here are a couple of scenarios which could easily catch you out if you are not making sure you are fully up to date with your obligations.

  • Your tenant is on a six month AST which renews on the 1st August 2019. You currently hold six weeks deposit. At their request, you supply another six month agreement as you normally do, and as the deposit is held in a custodial scheme, no action is needed.

WRONG. Prior to signing the new fixed term agreement (and effectively creating a new tenancy, you MUST return the portion of the deposit that is over the five week deposit cap. If you do not do this, that money will become a prohibited payment and you will be in breach.

  • You are advertising your property to rent as no pets, but someone phones and offers to pay a separate payment as protection against pet damage. This is fine, because it technically isn’t part of the security deposit.

WRONG. You must not take any money over the five weeks rent as a security deposit. In this scenario, not only would you be in breach of the TFB, but you would also be in breach of the Tenancy Deposit Protection Legislation.

  • You are advertising your property to rent as no pets, but someone phones and offers to sign a contract that states they will have the property and carpets professionally cleaned and flea treated at the end of the tenancy. You agree to the tenancy on those terms.

WRONG. You must not make or allow the tenant to contract with a third party (that costs them money) as a condition of granting a tenancy. In this instance, the fact that they must pay for cleaning and flea treatment in order to have the tenancy would be a breach.

  • Your tenant calls you at 10pm to say they have locked themselves out as they have lost their keys. You visit the property to let them in and provide them with a spare, and they give you £20 for your trouble.

WRONG. You are not able to charge for your time when resolving issues like this. You are only able to charge them the cost of the key. Our advice in this situation would be to either ask them to come to you to collect the key, or for them to call a locksmith who they would need to pay directly.

As you can see, the TFB was created as a piece of legislation to protect tenants from unscrupulous landlords and letting agents. I am the first to acknowledge that historically there has been a huge amount of unfair treatment of tenants, particularly from city centre Letting Agents across the country. However, the way this legislation has been written goes above and beyond the job it was meant to do.

It is so convoluted and technical that it makes it difficult for the non-professional landlord to stay compliant without expert support. It is full of opportunities for mistakes, and this coupled with widespread ignorance around the true implications and requirements of the Act means I am expecting to see a large amount of prosecutions over the next few years.

That said, any piece of legislation is subject to interpretation and until we have case law coming through giving us better more conclusive guidance on how to interpret the Act, we all just need to keep our fingers crossed that doing our due diligence is enough to comply and ensure that we aren’t one of the unfortunate few who are involved in creating that case law that everyone else is awaiting to enable them to learn from.

As always, I hope this information was useful, and if you have any questions feel free to post them below. Please make a point of reading our disclaimer located on the privacy page of this website.

On the 13th January 2020 “The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020” were laid in parliament. There are still a few steps to go through, but the important dates you need to know are:

  1. All NEW and RENEWING tenancies (AST’s) must have a satisfactory fixed wire test (Domestic Electrical Installation Condition Report) in place before 1st July 2020.
  2. All current tenancies, regardless of start date or length, must have a satisfactory fixed wire test (Domestic Electrical Installation Condition Report) in place before 1st April 2021.

As much as I feel sorry that landlords have literally been peppered with incoming legislation over the past few years (meaning lots of added expenses) I think that we can agree that this particular legislation is not only necessary, but has been a long time coming.

Electrical safety is one of the most important things to consider when renting your property, and one of the biggest and most important steps you can take is a fixed wire test.

Ever since the initial announcement of The Housing and Planning Act in 2016, we always knew these mandatory tests would be coming, so have been working on a very slow roll-out across our properties over the past three years.

Now we have a formal date to work to, we will be increasing the speed of this roll-out and contacting all our landlords to ask them for their permission to proceed with the test. Due to the amount of properties involved, we have secured competitive rates with our contractors.

Should you wish to have your property tested, please do not hesitate to get in touch. We can arrange the test for the price of:

1-4 bedrooms £175 + VAT (£210)
4+ Bedrooms £195 + VAT (£234)

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