When I started out in my legal career, the Oxford English Dictionary defined the exploitation and intimidation of tenants by unscrupulous landlords as “Rachmanism”. All sorts of dirty tricks were employed to control what were called “unprofitable tenants” and get rid them so that otherwise unwanted tenants who would pay extortionate rents for tiny squalid rooms could be provided for.
Peter Rachman was a notorious landlord operating in London in the 1950s who owned over a hundred mansion blocks in London. His penchant was to move protected tenants into a smaller group of properties. Alternatively he bought them out so he could reduce the number of tenancies which were subject to statutory rent controls. He then filled the properties with West Indians who had recently come into the UK. He had no compunction in overcharging them since they had no statutory protection.
He had properties in Paddington and North Kensington and notably Notting Hill, which has now of course become extremely fashionable. I have a client who is buying a two-bedroom flat to let which needs extensive upgrading in that area which is going to cost in the region of £750,000 before any cost of purchase repairs – a figure unheard of in his day.
LIKE A DEGREE COURSE
The reference and the heading of this article to university is by way of an acknowledgement to all the rules and regulations that landlords now have to know and that have come into being for the protection of tenants’ welfare and quality of living. They are of such magnitude that they seem to be the equivalent to a university degree course.
REDUCED TAX RELIEF
6 April 2017 is a significant date as the amount of tax relief that buy-to-let landlords can claim on their finance costs (such as mortgage interest) is to be gradually restricted from that date to the basic rate of income tax – 20%. This means that some landlords may even make losses on their lettings business. A landlord currently on the higher rate of income tax who has a mortgage at over 50% loan-to-value of the property may want to think about measures to reduce the effect of the changes. Some landlords are setting up managing companies which are exempt from the changes – then they should take advice from their accountants.
On 6 April 2017 we also saw the introduction of new penalties for landlords. It has therefore become ever more important for landlords and their agents to ensure they are in compliance with the Housing Act, and for tenants to know their rights. This compliance check-list will be of some help to home owners who rent out their property and for tenants living in rented accommodation.
BEFORE IT STARTS
Before a tenancy begins it is essential for landlords to:-
- Obtain tenant and guarantor details
- Agree heads of terms
- Obtain references
- Apply for the mortgage company’s consent to the grant of the tenancy if that is required under the terms of the mortgage
- Have an inventory prepared
FORM OF AGREEMENT
On granting the tenancy it will be necessary to use an appropriate form of agreement such as an Assured Shorthold Tenancy Agreement, a Home Business Tenancy Agreement, a Contractual Tenancy Agreement, a Company Let Tenancy Agreement, Room Licences, or Student Letting Agreements.
It will then be necessary to ensure that any tenancy deposit is protected in an approved Tenancy Deposit Scheme within 30 days. It will also be essential to give a receipt for the tenancy deposit, and prescribed information about deposit protection. Non-compliance means risk of penalty and delay in any proceedings.
The landlord needs to ensure the tenant has been provided with the following documents and send a letter confirming the same:-
- Energy performance certificate
- Gas safety record which is current
- “Prescribed information” regarding protection of any tenancy deposit
- A copy of either the Department for Communities & Local Government’s “How to Rent: The Check-List for Renting in England” or the Welsh Government’s equivalent
- Ensure compliance with Smoke and Carbon Monoxide Alarm (England) Regulations 2015 and send a letter to the tenant confirming the same
- Advise the council tax department of the name of the new occupier
- Ensure compliance with housing health and safety rating system
- (If the property is a house in multiple occupation) ensure compliance with the 2006 Regulations
A prudent landlord will make sure that the tenant is provided with a written receipt or acknowledgement that they have all been complied with in addition to the signed copy of the tenancy agreement and inventory. Rather than provide a bundle of loose leaf documents I would wholeheartedly recommend the use of a ring binder containing an identical set of paperwork for the landlord and for the tenant. This can prove to be a very useful piece of evidence if there should be a suggestion of non-compliance with all the red tape I have referred to. Better still for each party to sign every page so there can be no suggestion that the bundle was added to later or any paper substituted. Yes, all these requirements have come an awful long way since the abuses of Mr Rachman in his time.
During the tenancy the landlord needs to ensure that the tenant is given up-to-date information about the landlord’s address for service and gas safety checks. The landlord should carry out a mid-term inspection of the property.
TERMINATING THE TENANCY
On termination of the tenancy, the landlord should ensure that the Section 21 notice, Section 8 notice or other termination notice is prepared and served correctly.
Hopefully by compliance with this check-list both landlord and tenant will have a good relationship, and one which passes the necessary statutory requirements.
ROGUE LANDLORDS TO BE EXPOSED
Later this year, in October, the Government is going to produce a black list of rogue landlords and letting agents. The database is to be made available to Government agencies who can ensure that such landlords and agents have been served with banning orders. Placement on the black list will ban a landlord from letting property for at least 12 months.
In addition the Housing and Planning Act 2016 effective from 6 April allows local authorities to fine landlords for multiple occupation offences and for the use of unlawful force. Where necessary they can obtain an injunction. Theoretically this could lead to fines of up to £30,000 in the case of multiple offences. And no doubt there will be a long list of rules and red tape to let the powers that be know how to enforce these new penalties.
In the end Peter Rachman left quite an unexpected legacy for tenants to benefit by! Sometimes significant good can come from significant wrongdoing. Rachman’s exploitation of the poor and the desperate caused successive Governments to overhaul a wretched system of inadequate protection for tenants paying extortionate rents on squalid lettings. The conundrum now is to ensure that there is a fair balance between the rights of both landlord and tenant.
If you need advice on legal matters concerning property, then do get in touch with us here at Busbys. We have the coveted Lexcel accreditation from the Law Society. Lexcel stands for “legal excellence” – a testimony to the care we show to our clients. Contact us on 0128