New Welsh rules on holding deposits went live today

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Landlords now face having to draw up a lengthy list of ‘specified information’ for prospective tenants before they can legitimately ask them for a holding deposit.

New more draconian rules on Holding Deposits went live today in Wales requiring landlords and letting agents to give tenants far more information about a property and person managing it.

The lengthy list of ‘specified
information’ must be supplied to a tenant before a holding deposit can be requested
under the Renting Homes (Fees etc.) (Wales) Act 2019.

This is designed to help
tenants ‘make an informed choice’ before putting down their money to secure a
property.

Landlords frustrated by the
new rules have told LandlordZONE that they consider the information to also be
a deterrent, designed to put off landlords charging holding deposits in the first
place.

Nevertheless, if the
information is not supplied correctly then a landlord will not be able to with keep
hold of a holding deposit if the tenant decides to pull out from the deal prior
before the ‘deadline for agreement’ date.

The long list includes 12 pieces
of information that must be included. These are:

• Amount of Holding Deposit.
• The dwelling in respect of which the deposit is paid.
• Name, address, telephone number and any email address of the landlord.
• Nature and duration of the contract.
• Proposed occupation date.
• Amount of rent or other consideration.
• The rental period.
• Any proposed additional contract terms or proposed modifications or exclusions to fundamental or supplementary terms.
• Amount of any Security Deposit.
• Details of whether a guarantor is required and if so, any relevant conditions.
• Reference checks the landlord or letting agent will undertake.
• What the landlord requires from the prospective tenant.

This legislation had originally been expected to go live in December but landlords and letting agents argued successfully to give more time to get ready.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – New Welsh rules on holding deposits went live today | LandlordZONE.

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Adverts that stipulate ‘NO DSS’ could cost landlords up to £5,000 in damages and costs

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Housing charity Shelter has helped two tenants on benefits win out-of-court settlements after they were denied accommodation by a letting agent.

Shelter is warning landlords who insist on ‘No DSS’ conditions
within property adverts that they face heavy fines after the charity helped two
tenants win legal victories over letting agents who wouldn’t rent to benefit
claimants.

Amanda
Staples and Emma Loffler both won out-of-court settlements against ‘No DSS’
letting agents, on the grounds of indirect discrimination.

Shelter
used a previously successful case of another single mother, Rosie Keogh, to
successfully argue that blanket bans on claimants indirectly discriminated
against women and disabled people who are more likely to be on benefits.

Ms
Staples, 36, who has three primary-aged children, needed accommodation after
her marriage broke down. Despite offering to pay six months’ rent up-front on a
house, and with an offer of a loan from her father, the letting agent kept
saying the landlord’s insurance did not cover tenants on benefits.

With Shelter backing her legal action, the letting agent
ultimately agreed to write a public letter of apology and to pay £3,000
compensation and the £10,000 legal costs.

The agent in Ms Loffler’s case also issued a public
letter of apology and paid £3,500 compensation and £2,500 towards legal costs.

Shelter chief executive Polly Neate says letting agents
and landlords must not treat potential tenants as second-class citizens simply
because they rely on benefits.

“If they continue to blindly discriminate against those
receiving housing benefit, they risk legal action and a hefty fine,” she says.

“Not only is ‘No DSS’ discrimination outdated and grossly
unfair, it is unlawful under the Equality Act.”

The
housing charity analysed 7,100 adverts on the biggest letting agent websites,
and found more than one in 10 contained phrases such as ‘No DSS’ or similar.

Agents
and landlords could face fines of about £5,000 per advert based on the three
pay-outs made in cases so far, it says.

However, a poll of
1,009 private landlords for the charity by YouGov in December 2019 and January
2020 revealed 86% thought ‘No DSS’ was lawful or were not sure.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Adverts that stipulate ‘NO DSS’ could cost landlords up to £5,000 in damages and costs | LandlordZONE.

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Industry INSIDER shows LandlordZONE report on how agent referral fees can inflate prices

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Anonymous whistle blower says agents should be more honest about how they earn fees from landlords but that an outright ban would be unworkable.

LandlordZONE has been sent an internal industry
briefing document by an anonymous insider that reveals how much referral fees
paid to letting agents are sometimes inflating what landlords are charged for
services.

The government is in the process of considering
whether to bring in a partial or total ban on these fees, which are the hidden
kick-backs paid to letting agents when they recommend services or product.

They can be a significant part of an agent’s
income, but landlords are unaware that the price they pay for some services
include these referral fees.

Ministers want to either ban these fees
outright or require letting agents to tell landlords when they earn a commission
from a referral.

Our industry whistle blower claims that in some
cases 10% of the cost of maintaining a property charged to a landlord is the
agent ‘adding on’ a commission for managing the project, even though they are
already charging the landlord a monthly management fee for the property.

“A £1,000
bill for, say, gas works will become £1,100 once the agent’s commission is
factored in,” the source says.

“The agent applies the supervision fees often
detailed in their terms of business of another 10% plus VAT. The total bill to
the customer is £1,232 and the agent will retain £210.”

But although this is shocking, it is argued
that the recently-introduced tenant fees ban is forcing many letting agents to
find alternative sources of income, and that banning them outright and making
it a criminal offence might sound just but would be unworkable.

“It would be the responsibility of local
Trading Standards organisations to police a referral fees ban and launch
criminal cases but most of them are severely stretched fulfilling their current
responsibilities never mind referral fees,” our source says.

“It would be better to make it a civil matter
and deal with it via fines, which would be much easier to administer.

“Also, circumvention of any ban is also quite simple. Instead of receiving a referral fee for each customer, an agent can agree a ‘sponsorship’ deal with a supplier to cover costs such as advertising, conference and even a Christmas party!” “Whilst the momentum appears to be gathering to impose an outright ban of referral fees, the reality is that it is almost unworkable and self-defeating.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Industry INSIDER shows LandlordZONE report on how agent referral fees can inflate prices | LandlordZONE.

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Break Clauses in Residential & Commercial Leases

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Tenant & Landlord Breaks:

A break clause is common in both private residential tenancy agreements and commercial leases, therefore it is highly advisable that both landlords and tenants are familiar with the nature of break clauses in their lease and understand their rights.

It is important to note that not all leases will include a break clause, and in certain circumstances break clauses are drafted to be highly favourable to one party, though consumer laws are against this and judges may frown on this practice.

A break clause is ultimately the right to ‘break’ the lease and terminate the agreement. The break may arise on a specified date, or if the lease is a rolling contract then it is often permitted on a given period of time.

Break clauses often come with conditions attached which should be strictly adhered to: for example, a specific length of notice must be given before the break date, no rent arrears or outstanding charges at the time of the notice or the break etc.

Commercial Tenancy Breaks

For commercial leases, the Code for Leasing Business Premises in England and Wales 2007 is a useful document for anyone involved with commercial property. The Code recommends that the only precondition for a tenant wishing to exercise a break clause should be that they are up-to-date with rent, to give up occupation and leave behind no continuing sub-leases.

The Code further states that disputes regarding the state of the premises should be settled once the tenant has vacated the property. This is to try and prevent landlords from using a pretext as to the state of the premises to disallow the tenant from breaking the lease.

However, in a commercial (contractual) agreement the break clause can be drafted to implement its own conditions and providing the parties agree and sign the lease, then they are bound by it.

It is important for landlords who are tempted to take on the task of drafting a lease themselves to seek legal advice regarding the incorporation of a break clause. Break clauses require careful drafting and can be detrimental to either the landlord or tenants’ rights depending on the nature of the lease.

The landlord to tenant relationship can often be strained which paves the way for grounds for disputes to easily arise. A common cause for a dispute is in the event that the tenant wishes to vacate the premises at an earlier date than was perhaps first intended. This often arises with commercial leases; a location for a business can be of paramount importance to its success.

Circumstances can arise which mean that the location of the premises, or the size of the premises, the subject of the lease, are no longer suitable, and a business may wish to acquire new premises. If the lease does not provide a break clause, then it is advisable for the business owner to contact an experienced property solicitor and seek advice. If, however the lease does provide a break clause then the lessee may be able to exercise it effectively.

The alternative to the above is in the circumstance where the break clause permits the landlord to break. These are often highly beneficial to the landlord, especially if they are experiencing ongoing difficulties with a tenant. A landlord wishing to exercise its right to break should seek the legal advice of an experience property solicitor.

The break clause will incorporate a break date which could be in terms of the following;

1)      A rolling break meaning that the lease can be terminated at any time.

2)      That the lease can be terminated at any time after a specified date. The tenant will usually be afforded with a minimum period of occupation before they can exercise the break.

3)      The lease can be terminated on an agreed fixed date. The fixed date will usually coincide with the rent review date. This can be of benefit to the tenant if the landlord imposes an increase to the rent, as it allows them to break the lease with no penalties incurred.

4)      Certain preconditions are met.

Residential Tenancy Breaks

If the landlord foresees the likelihood of his needing to terminate the tenancy, then by far the simplest strategy is to set up the tenancy for six months. The tenancy will continue after the expiry of that fixed-term as a periodic tenancy. Currently, the landlord can terminate it with absolute certainty, subject to giving notice as the law requires under section 21, but this may change if the government is serious about removing this right. The tenant has a similar right by giving a minimum of one month’s notice ending on the last day of a tenancy period.

It follows that if the landlord grants a residential tenancy for a longer term, he will want to exercise a break provision only in the event of something unexpected. It follows too that a tenant will insist on a longer term only if he or she has a good reason, before the agreement is signed, to require the continuity of a longer term. For example, the bread winner will be working abroad and wants his family to be secure while he is away and the children may be at local schools.

All this means that in a residential tenancy, if a break provision is exercised, it is very likely that the other party will be inconvenienced, perhaps severely.

However, a break clause in a residential tenancy is a common law right. There is no statutory support for a person exercising it. So, if the other party wishes to oppose it, he can go to the County Court and provide whatever defence his solicitor can dream up. What is more, judges tend to lean towards tenants in a residential tenancy as they are deemed to be consumers entitled to some protection, as opposed to a business person who should know better. Children will not be thrown out. For that reason, a break provision is not a safe route to rely on for landlords.

In any case, break clauses need to be seen to be fair in a residential agreement, whereby both parties, not just one, have the right to break.

It follows that if the tenant needs a long-term agreement, he or she should never agree to a landlord’s break provision, and a landlord should always insist on a six month deal initially because it simply gives him or her the option apply for a possession order to remove the tenant, should the relationship go awry. In any case this process will give the tenant anywhere between 6 weeks and 9 months to find alternative accommodation.

If one side needs continuity but the other will not give it, a compromise may be to line up a new AST starting, for example, one month before the expiry of the first one. Then the original can be terminated by exchange of letters on the day that the new one takes effect.

Subject to that, there is no problem with a break clause after six months. If so, it should be included as a two-way option. One-way break clauses favouring either party are deemed “unfair” and are likely to be unenforceable.

See the guidance originally published by the Office of Fair Trading (OFT) and now adopted by the Competition and Markets Authority (CMA) updated and re-published as Unfair contract terms: CMA37

A break provision by a residential landlord before the expiry of the first six months would certainly be “unfair” to the tenant and would not be exercisable in law – assured shorthold tenancies are for a minimum of 6 months.

Most residential landlords want a simple deal with a reliable tenant, giving them maximum power and total certainty. That is why it is always best to stick to a basic six-month term initially with no break provision. This simplifies everything and may then be renewed for a longer term once the parties are comfortable with each other.

From a landlord’s viewpoint, and despite the government’s insistence that it supports longer term tenancies – see model agreement for a shorthold assured tenancy – there are many pitfalls, and open ended tenancies as the government is now suggesting, could be fraught with difficulties.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Break Clauses in Residential & Commercial Leases | LandlordZONE.

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Today in politics: Eco funding and homelessness

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We look at the latest housing energy efficiency statistics and calls for an exemption from the shared accommodation rate for people aged under 25 who have been homeless. ECO funding data The Department for Business, Energy and Industrial Strategy has published the latest Housing Energy Efficiency statistics.  They show that of 37,022 households in receipt of […]

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Freeholder refusing responsibility for roof repairs?

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I have a problem with my freeholder, a large national company. I live in Cyprus so am not on the spot so to speak. The leaseholder in the flat below mine in the UK which I rent out, contacted my agent to say the roof had been damaged in the recent storms and the agent passed the message on

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