The unlocking of the letting landscape

The easing of lockdown has had a positive effect on residential lettings.

New measures announced by the Ministry of Housing Communities and Local Government on 21st May re-opened the sales and lettings markets. Since then the letting market has boomed – partly due to pent-up demand but also due to tenants wanting to move to larger properties and / or those with more outside space.

Guidance for estate agents and letting agents in relation to conducting viewings was issued at that time. Whilst the guidance appeared restrictive, agents have been able to follow that without compromising marketing properties for sale or rent unduly.

On 1st June MHCLG published new guidance for landlords and tenants including updated on health and safety obligations as well as new measures relating to possession proceedings.

Given the number of new tenancies being entered into, landlords should be mindful of some new obligations as well as those in place for new tenants which are to be extended to existing tenancies, as well as extensions of measures brought in by the Coronavirus Act 2020.

Electrical Safety

Electrical Safety Standards in the Private Rented Section Regulations 2020 come into force for new tenancies on 1st July 2020. These stipulate that an Electrical Installation Condition Report (EICR) must be undertaken before a tenancy commences and a copy of the inspection report must be given to the tenant within 28 days of inspection. All recommended works must undertaken within 28 days of the report and the landlord then has a further 28 day period to provide a copy of a remedial report to the tenant. Landlords experiencing difficulties in obtaining access to meet this statutory obligation should follow the advice mentioned above.

A local authority can request a copy of the report which then must be produced within 7 days of request. Penalties of up to £30,000 can be imposed for non-compliance.

The Regulations require an electrical installation to be inspected every five years and landlords must keep up with this continuing obligation.

These come into force for all tenancies – including existing tenancies – from 1st April 2021.

Repair and maintenance

A landlord’s responsibility for safety compliance has never altered despite the Covid crisis. It is now easier for landlords to access properties despite the continuation of social distancing. Landlords, or an agent on its behalf, must make every attempt to ensure compliance with both gas and electrical safety regulations. Likewise any repairs that were postponed during lockdown should now be attended to in order to comply with their repairing obligations under the tenancy agreement. Landlords and agents should document their efforts to obtain entry to a property where tenants continue to resist access. Recent guidance on working safely should provide tenants with some comfort that workmen following those guidelines will pose little risk as possible of spreading the virus.

The Fitness for Human Habitation Act – which obliges landlords to carry out essential improvement works on a property – was extended on 20th March 2020 to include existing statutory periodic tenancies.

Tenant Fees Act

From 1st June 2020 the Tenant Fees Act now applies to all qualifying tenancies irrespective of when the tenancy commenced. It has applied to new tenancies since 1st June 2019.

Only rent and security deposits may now be demanded from tenants. All other payments – such as check out and renewal fees – are no longer permitted even if the tenancy agreement provides for these. There are financial penalties for non-compliance. Moreover a landlord will not be able to serve a notice requiring possession unless the tenant has been reimbursed for any non-permitted payment.

Right to Rent

The Right to Rent scheme has been in place since February 2016. It requires landlords of residential properties to check the immigration status of all tenants and adult occupiers to verify that they have the right to remain in the UK.

Government guidance on undertaking right to rent checks during the Covid crisis was adjusted on a temporary basis from 30 March 2020 to make it easier for landlords to carry out checks. For instance the obligation on a landlord to check original documents was relaxed with verification permitted by electronic means such as Facetime. There has been no announcement from the Government as to when the relaxed measures would be terminated and the original process reinstated. When that does happen Landlords will have 8 weeks within which to carry out retrospective checks on tenants whose tenancies commenced after 30th March.

Landlords should acquaint themselves with new rules on who has a right to remain in the UK following Brexit. Our Immigration team is able to provide more detailed advice on that.

Ending tenancies

On 5th June Housing Minister Robert Jenrick announced that the Government’s ban on evictions is extended for a further two months to 23rd August. This means that the moratorium on evictions is now a total of five months thereby providing continuing protection for tenants facing financial hardship.

The two month extension comes into force on 25th June and therefore there is no gap between the existing ban and the extension. It also applies to commercial tenants.

Ministers are working on new rules to ensure that vulnerable tenants are protected when the moratorium ends.

Members of our Property Litigation team are able to provide detailed advice on this.

Financial relief for landlords

This continues and was referred to in the statement made by MHCLG on 5th June. In that statement, the Lord Chancellor, Robert Buckland, reiterated the Government’s policy to protect vulnerable people throughout the pandemic – which includes landlords suffering financial pain due to reduced or no income from rent.

On 22nd May HM Treasury announced that mortgage holidays for home owners would be extended to October 2020 to allow for six month mortgage holidays – an extension of the previous 3 month holiday.

This is not automatically applied to Buy to Let mortgagees and landlords need to discuss this with directly with their lenders.

Capital Gains Tax changes

A reminder that for disposals from 6th April 2020 onwards, sellers now have only 30 days from the date of completion within which to notify HMRC of the gain and pay the tax due. Now that the sales market has been unlocked the number of sales agreed has increased hugely largely due to pent up demand but also due to some landlords needing to cash in for income following losses on the financial markets. Private landlords who are selling up need to be aware of this change. Tax partner Hetal Sangvhi is able to advise further.

If you have any queries about these topics, please contact Rosie McCormick Paice, the experts named above or any member of the Residential Property team.

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