Government action to end letting agent fees

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Breaking News – Letting Agents’ Fees:

A draft Tenant Fees Bill is to be introduced to Parliament today (1 November 2017) to ban letting fees.

The Bill will set out the government’s approach to banning letting fees for tenants, which the government claims will help millions of tenants by bringing an end to upfront payments.

According to a recent government press release, evidence shows the level of fees charged are often not clearly or consistently explained, leaving many tenants unaware of the true costs of renting a property.

The aim of the proposed legislation is to “improve transparency, affordability and competition in the private rental market. It will also prevent agents from double charging both tenants and landlords for the same services.”

Today the government has also launched a consultation on making membership of client money protection schemes mandatory for letting and managing agents that handle client money.

These schemes ensure greater financial protection for landlords and tenants, says the communication, giving them complete confidence that their money is safe when it is with their agent and they can be compensated if all or part of their money is not repaid.

Communities Secretary Sajid Javid says:

“This government is determined to make sure the housing market works for everyone. Tenants should no longer be hit by surprise fees they may struggle to afford and should only be required to pay their rent alongside a refundable deposit.

“We’re delivering on our promise to ban letting agent fees, alongside other measures to make renting fairer and increase protection for renters.

“As part of wider plans to improve the rental market, government has already introduced measures that crack down on the small minority of rogue landlords that shirk their responsibilities. Earlier this year, the law was changed to allow councils to impose new fines of up to £30,000 as an alternative to prosecution for a range of housing offences.”

The draft Tenant Fees Bill, which reflects responses from a public consultation also published today, will:

“Cap holding deposits at no more than one week’s rent and security deposits at no more than 6 weeks’ rent. The draft bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.

“Create a civil offence with a fine of £5,000 for an initial breach of the ban on letting agent fees and creating a criminal offence where a person has been fined or convicted of the same offence within the last 5 years. Civil penalties of up to £30,000 can be issued as an alternative to prosecution.

“Require Trading Standards to enforce the ban and to make provision for tenants to be able to recover unlawfully charged fees.

“Appoint a lead enforcement authority in the lettings sector.

“Amend the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla.”

It is claimed that More than 9 out of 10 tenants who responded to the government consultation backed the action to ban letting agent fees, with 7 out of 10 of them saying these fees affected their ability to move into a new rented property.

Overall more than 4,700 responses to the consultation were received from a range of individuals and representative bodies from across the sector.

A government housing white paper sets out measures to build more homes “to give those that rent a fairer deal. It puts tackling the high cost of renting at the heart of its plan to fix the broken housing market.”

The new measures set out in the draft bill are now subject to Parliamentary scrutiny before they can be introduced into law.

Further information

All these proposals relate to England only. The ban on letting fees will apply to assured shorthold tenancies and licences to occupy in the private rented sector.

The consultation on making membership of a Client Money Protection Scheme mandatory for letting and managing agent will help to ensure that all tenants and landlords have they financial protections they deserve.

Client money protection schemes give landlords and tenants’ confidence that their money is safe when it is with their agent, it also means that when things do go wrong – both tenants and landlords will be compensated if all or part of their money is not repaid.

The consultation will run for 6 weeks from 1 November 2017.

Read the government response to the consultation on banning letting agent fees.

Tenants’ Fees Bill

Consultation Document

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Government action to end letting agent fees | LandlordZONE.

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New Mortgage Sourcing Tool

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Live system, constantly updating …. please allow up to 30 seconds loading time

The Property118.com mortgage sourcing tool is available for you to use with our compliments (no charge). Once you have found a product you like simply click the “ENQUIRE”

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Security Deposits cap increased to six weeks rent

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The Government will extend a proposed cap on security deposits to six weeks’ rent instead of four, it has been announced today 1/11/2017.

The details were included in the publication of the draft Tenant’s Fees Bill. The Government first announced that they would introduce a cap on security deposits along with a ban on charging tenants fees almost 12 months ago

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Make Inventories Mandatory!

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Mandatory Inventories:

Agents and landlords are being urged to sign a petition to bring in mandatory inventories.

The Association of Independent Inventory Clerks (AIIC) has launched a petition which asks the government to make independent inventory reporting a compulsory requirement.

The organisation, which has almost 1,000 members nationwide, believes that independent inventory reporting of private rental properties on an Assured Shorthold Tenancy should be an industry standard.

Coming at a time when the government is consulting on the future of the leasehold and property management sector, the petition’s aim is to encourage MPs to consider the benefits of mandatory inventory reporting as part of its plans to increase regulation of the Private Rented Sector (PRS).

Alongside the ongoing high-profile consultation on the leasehold and management sector, there is currently a review into improving the quality of the PRS being carried out by an all-party Communities & Local Government Select Committee of MPs.

On top of this, at the recent Conservative party conference, Communities Secretary Sajid Javid announced plans for a number of new PRS initiatives, including industry-wide regulation of letting agents and mandatory membership of a redress scheme for all private landlords. The details of these proposals are expected to be unveiled as part of the Budget taking place on November 22.

“It’s clear the government is keen to increase regulation and professionalism in the letting sector and we see no reason why mandatory inventory reporting should not be a part of this movement,” says Danny Zane, Joint Chair of the AIIC.

“Compulsory tenancy deposit protection was introduced in 2007. However, there has never been any additional legislation concerning the documentary evidence required to enable adjudicators to adequately arbitrate on disputes.”

“With this in mind, regulating independent inventories really is a no-brainer for the government. An independent and professionally compiled inventory offers protection to both tenants and landlords and can prove invaluable in the event of a tenancy deposit dispute,” he says.

The AIIC argues that with landlords and letting agents currently free to produce their own inventories, there is increased opportunity for impartiality and this could lead to tenants or landlords being left unfairly out of pocket at the end of a tenancy.

Danny Zane, who is also Managing Director of My Property Inventories, adds: “We are urging all property professionals, landlords and tenants to sign this petition in order to bring this issue to the government’s attention, which is long overdue.”

“We honestly believe that the regulation of impartial, independent inventories as an industry standard would reduce the number of deposit disputes between landlords, tenants and letting agents.”

“Adding this measure as a compulsory part of the rental process is only a small step for the government to take and could make a huge difference for renters and private landlords all over the country,” he says.

“That’s why we’re calling on all affected parties to sign and share this petition and help us make the letting process more transparent and fair to all.”

You can view and sign the AIIC’s petition on the government’s official website.

The AIIC is the UK’s largest membership organisation for independent inventory clerks. The organisation runs numerous online and two-day training courses which you can find out more about here.

The Association of Independent Inventory Clerks (AIIC) was established in 1996 to ensure that every landlord, tenant and letting agent in the UK is aware of the importance of the inventory process and the benefits of employing an independent, professional independent inventory clerk. All AIIC member independent inventory clerks are professionally insured, are experts in their field and abide by the AIIC’s Code of Practice.

https://theaiic.co.uk

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Make Inventories Mandatory! | LandlordZONE.

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Five Year Deals at Record High

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Buy-to-Let Remortgaging:

The demand for five-year fixed deals is at a record high amongst remortgagors, that’s according to the latest (September) LMS Remortgage Report.

This is the seventh month in a row that the percentage of remortgagors fixing for five-years has grown – a dramatic change from the 9% of remortgagors who had previously opted for this type of mortgage.

• 42% of remortgagors opted for a fixed five-year deal in September
• Rush to five-year fixed deals driven by fears of rate rises: 56% of remortgagors now anticipate an impending rate rise – up from 45% in August
• Current low-rates have made remortgaging more affordable than ever with annual repayments falling to 16.4% of total income – an all-time low
• Two-fifths (42%) of remortgagors opted for a five-year fixed deal in September – a new record according to conveyancing service provider, LMS.

Interest rate fears are causing the surge in demand, with 56% of September’s remortgagors anticipating a rate rise. This is a considerable increase from last month when just 45% of borrowers said they were expecting an imminent rate rise, and is in stark contrast to September 2016, when this number was only 14%.

With GDP beating forecasts by 0.4% (1) in October, inflation reaching the 3% mark (2), and Mark Carney hinting that rate rises will occur in the “relatively near term” (3), it looks like these fears are set to materialise sooner rather than later. With average mortgage rates at 2.0%, borrowers are capitalising on this benign lending environment by locking-in to fixed five-year deals and securing rates for the medium-term.

This surge in demand has been facilitated by the attractive affordability of remortgaging, with annual repayments falling to 16.4% of total income – an all-time low. In September alone, the number of remortgagors increased by 13% to 41,573 from August’s 36,700, while the value of remortgaging increased by 2% to £6.6bn over the same timeframe.

(1) The Guardian – 25 October 2017

(2) Consumer Price Index – 17 October 2017

(3) BBC News – 29 September 2017

Nick Chadbourne, chief executive of LMS, commented: “Over the last month, remortgaging activity has skyrocketed. This activity has been dominated by the five-year fixed deal with 42% of September’s remortgagors opting for this type of mortgage.

With 56% of September’s borrowers fearing an impeding rate rise – a significant increase from the 45% seen in August – anticipation of rate increases is driving this surge. With mortgage rates the second-lowest on record, and remortgaging more affordable than ever, borrowers are taking the initiative to lock into these low rates.”

LMS’ full Remortgage Report

The methodology for calculating average LTV and loan amounts in regional areas changed in May 2016 and now uses the LSL House Price Index. Previously the ONS House Price Index was used which has since been combined with the Land Registry House Price Index.

LMS’s UK remortgage lending estimates are based on LMS’s up to date internal conveyancing data, which, every month, covers many thousands of remortgage completion transactions.

http://www.lms.com

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Five Year Deals at Record High | LandlordZONE.

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Fire Safety in Rented Premises

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Fire Regulations in Rentals:

There are several regulations relating to fire safety within rental dwellings; some affect all dwellings whereas others apply mainly to Houses in Multiple Occupation (HMO).

This looks complicated, but fire safety management in reality boils down to common sense, making sure you meet certain requirements, and for all your rental premises, doing regular checks for hazards, with ideally a written risk assessment.

This article applies primarily to English law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.

A house in multiple occupation (HMO) is a property rented to at least 3 people who are not from 1 “household” (e.g. a family) but sharing facilities like the bathroom and kitchen, sometimes called a “house share”, which may or may not need a local authority license. Large HMOs of 3 stories or more and housing 5 or more unrelated people need an HMO Licence from the local authority.

Regulations which apply to rented premises:

1. Building Regulations 2010 Part B. These apply only with new buildings, extensions and alterations, but also to services e.g. electricity, sanitation and water. These out the requirements for fire warning, means of escape, preventing fire spread, fire separation between different parts and access facilities to assist fire fighters.
2. Housing Health & Safety Rating System (“HHSRS”) – Fire is included in the 29 hazards covered by the system introduced by Housing Act 2004.
3. The Smoke and Carbon Monoxide Alarm (England) Regulations 2015 – apply to all rented dwellings
4. Fire Safety Order – the full title is The Regulatory Reform (Fire Safety) Order 2005
5. The Management of Houses in Multiple Occupation (England) Regulations 2006 – applies to all HMOs – Bedsits and shared houses.
6. The Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007 apply to buildings converted into self-contained flats not complying with Building Regulations 1991 or later.

The Regulatory Reform (Fire Safety) Order, June 2005, effective from 1 October 2006 affects all non-domestic (commercial) premises in England and Wales including HMOs and came into force on 1 October 2006. This legislation replaced the need for the now obsolete Fire Certificates, and is a form of self-assessment for fire safety.

Who is Responsible for compliance?

Ultimately the landlord is the “responsible person” who must make sure the legislation is complied with. However, a managing agent who collects rent can be held responsible for ensuring that the legislation is observed.

The legislation uses two technical terms: the “person having control” and the “person managing” but confusingly, the latter is not the same as the manager of the property. Where a property is not licensed when it should be, or if, in the case of an HMO license, the maximum permitted number is exceeded, the person having control and the person managing can both be prosecuted for the property.

The person managing is responsible for ensuring that the management regulations are observed. The license holder (usually the landlord) also has various responsibilities under the legislation, including seeing that the license conditions are observed.

HMO Landlords (or their managing agents) must carry out a Fire Risk Assessment for each property but no particular system or method of fire risk assessment is mandatory; instead the Fire Safety Order concentrates on achieving satisfactory outcomes.

The objective is to identify and evaluate all fire risks to which tenants and visitors are exposed and create a “suitable and sufficient” – ideally a written – fire risk assessment. Whilst the legislation does not define suitable and sufficient it is generally considered that a risk assessment should follow this five step approach:

1. Identify fire hazards
2. Identify people at risk
3. Evaluate, remove or reduce, and protect from risk
4. Record, plan, inform, instruct and train
5. Review your fire risk assessment regularly and make changes where necessary

The main fire provisions in single occupation domestic rented premises:

• Smoke alarms on every floor level as a minimum, ideally hard wired or 10 year lithium battery ones – a legal requirement.
• A fire escape plan especially on 1^st or 2^nd floors should be a consideration combined with smoke alarms and emergency access to door/window locks and keys.
• Any furniture should be fire retardant and meet the furniture regulations.
• Any highly flammable surfaces and substances should be removed, polystyrene tiles being one example.
• The electric wiring system and appliances should be checked at regular intervals and all sockets and leads given a visual inspection for signs of burning or misuse.
• Any open fires should be protected with fire guards and of course CO detectors supplied.
• Fire safety in the kitchen, such as fire blankets and fire extinguishers can be supplied, though not a legal requirement in single lets.
• Gas appliances must be checked annually and a Gas Safety Certificate issued.
• Although not a legal requirement, it’s a good idea to produce a written risk assessment following the checklist between every tenancy.

The main provisions in HMOs

With HMOs and non-domestic premises a higher degree of fire safety management is called for in the regulations, including:

• A hard wired fire alarm system and safety lighting with weekly testing drills, 6-monthly servicing intervals and regular fire emergency drills.
• Half hour protection fire doors with closers and intumescent strip seals.
• Clear exit signposting and unobstructed emergency lighted fire escape routes which may require the provision of a fire barriers between the common areas and the living accommodation, especially cooking areas, to create a protected route to a place of ultimate safety.
• Eliminate all obstructions in common areas and escape routes, for example, packages, bicycles, rubbish etc.
• Consider the need for fire detectors and warning systems to be extended into the living and sleeping areas.
• Complete an annual fire risk assessment for the shared or common areas including shared stairways, landings, kitchens, bathrooms etc., and eliminate or reduce risk to the lowest possible level.
• Consider recording, planning, informing, instruction training which will require producing a fire action plan.

Given the complexity and local variations in these fire safety requirements it is recommended that landlords always consult their local authority housing or fire safety officer for an on-site inspection and specific advice.

Specific Licensing Conditions.

Basic fire safety conditions as above are required if the premises require a local authority licence under Housing Act 2004, and Councils have discretion subject to appeal to impose their own additional fire requirements.

There are 3 types of licence.

Mandatory Licence – applies to HMOs of 3 or more storeys and occupied by 5 or more persons who occupy as 2 or more households. Applies to all areas of England and Wales.

Additional Licensing (HMO) – discretionary scheme which a Council may apply by Declaration which can apply to any HMO, other than those requiring Mandatory Licensing. Council has discretion on the extent of the area affected and the type of HMO e.g. could limit to HMOs with only 4 persons, or could apply to all others.

Selective Licensing – a discretionary scheme may be applied by the local Council’s Declaration to any rented dwellings which are not a HMO – family/single households – and may cover all or part of the Council’s district.

Useful Guides:

Housing Health and Safety Rating System – Operating Guidance – https://goo.gl/uknbo4

Local Authorities Coordinators of Regulatory Services (LACORS) – Housing Fire Safety Guide – https://goo.gl/YJkhQa

Example risk assessment for maintenance of flats – www.hse.gov.uk/risk/casestudies/pdf/flats.pdf

Landlords’ responsibility for gas safety – www.hse.gov.uk/gas/landlords

You will find example Fire Risk Assessment templates in the LandlordZONE® Documents here: https://www.landlordzone.co.uk/documents

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Fire Safety in Rented Premises | LandlordZONE.

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