When does a tenancy start?

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A tenancy agreement between the landlord and the tenant is just like any other contract, it is legally binding on both parties.

And like all contracts under Eglish law, an assured shorthold tenancy (AST) agreement, for example, becomes legally binding when the parties – the landlord, tenant and guarantor (if there is one) sign the contract document. If either party fails to perform their obligations: supplying the accommodation as agreed, paying the rent and sticking to the terms of the agreement, then it is enforceable at law – through the court system.

Generally, and advisably, the parties sign an agreement – though it is possible to have a binding tenancy agreement when there is no written document, then determined by the action of the parties, i.e., landlord offers the property up and hands over the keys, the tenant takes up residence and pays the rent – bingo, all the elements now exists for a legally binding contract.

It’s important that both parties understand their obligations under the agreement and therefore landlords / agents should always allow tenants and guarantors time to read and query any items in the contract before signing it. There is usually a clause in the contract to the effect that “I have read and understood this agreement before signing”.

The simplest arrangement is for the parties to sign the agreement as the tenancy commences, at the property and while the inventory is checked off and agreed. In the case of a AST there are now several other important documents which should accompany the agreement and these should be signed and attached to the agreement document itself: gas and electric certificates, deposit protection details, the EPC, the How-to-Rent guide etc.

However, sometimes it’s not possible to meet together at the property, or the tenancy is to commence at a later date. Signing the contract in advance provides surety for both landlord and tenant in this situation, but having signed it will be very difficult for either party to withdraw.

It’s important that the agreement states clearly the date the tenancy will commence, which is the date the keys will be handed over so that occupation can begin. Usually, the landlord will collect the deposit (which must be protected in a government approved scheme within 28 days) and one month’s rent in advance.

One example of where the date of commencement of a tenancy was very important was in the case of Lynch v Kirby. An appeal court ruling against a judgement made September 2009 regarding an order for possession reversed the original judge’s decision.

The landlord had agreed to let a room in his premises to the tenant if he could obtain housing benefit. The tenant had entered into occupation on the 20^th February 1997, but did not obtained housing benefit until six weeks later, backdated to the start of the tenancy.

The landlord had contended that the tenancy did not actually start until housing benefit was obtained and paid. The tenant argued that the tenancy had commenced upon occupation.

This was important at the time due to the fact that prior to the 28 of February 1997, granting a AST depended on the landlord serving on the tenant a notice under section 20(2) of the Housing Act 1988 – the Section 20 notice as it was then known. This had to be done before the tenancy was entered into, otherwise the tenancy became a fully Assured Tenancy with security of tenure.

For all AST’s entered into after the 28 February 1997 the section 20 notice was no longer required, hence the importance to both parties of establishing the date when the tenancy legally commenced.

The first judge had awarded a possession order to the landlord.

The appeal court judge found for the tenant, agreeing that the tenancy had commenced on the day occupation commences, the 20^th February 1997, giving him a fully assured tenancy. Under this tenancy the landlord would only be able to gain possession if the tenant was in breach of his contract of on some other limited grounds, pretty much the situation that will pertain when Section 21 is abolished, as promised.

Can important documents like tenancy contracts be signed electronically?

Legal Issues – signing an agreement as a deed

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Tenant referencing revolution is now ‘very close’, says leading tech CEO

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Tenant referencing is on the brink of a major breakthrough that will significantly alter the way landlords and letting agents vet tenants, it has been claimed.

It’s been brewing for over two years since the EU’s Open Banking regulations went live, but 2021 is likely to be the year when the tech, and tenants’ acceptance of its principles, breaks through, says Freddy Kelly (pictured, above), founder of Credit Kudos.

“More and more data is becoming available about people that enables platforms like ours to understand people’s debt, rent, pensions and other payment commitments,” he says.

Also, lockdown, and people’s greater use of online banking as traditional banking and referencing have become more difficult, means millions of tenants are now getting to grips with the concept of Open Banking.

Rental payments

This is tech that enables tenants to let platforms like Credit Kudos to anonymously read their bank accounts and record their rental payments, among other things.

Live since January 2018, anyone who has an account with the leading high street banks can choose to share their personal finance track record with a tech provider.

Landlords, who in the past have had to rely on references from credit ratings agencies, banks, employers and previous landlords, can now see if a prospective tenant has paid their rent on time and in full in the past.

Kelly, whose firm recently signed a major deal with lettings platform Goodlord, says his tech means Credit Kudos can gauge both a tenant’s ability to pay the rent for a property, but also their likelihood of paying it in the future.

Visit Credit Kudos.
Advice: What are the ten key referencing checks?

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Would you? How deposits can help homeless into privately rented homes

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Last week Crisis wrote exclusively for LandlordZONE about its pioneering scheme to help private landlords rent their properties to vulnerable tenants.

Called the Edinburgh Skylight scheme, it is being watched by councils, landlords and homelessness charities around the UK as a new housing model.

The trickiest aspect of it is that few – if any – of the homeless people involved have the ability to afford a deposit.

But one of the city’s deposit protection schemes has been involved in Skylight since early this year and now offers those seeking accommodation through the scheme a ‘leg up’.

David Gibb, of MyDeposits Scotland, says he came across Skylight programme while working as a letting agent in Edinburgh (pictured).

When he joined MyDeposits, Crisis then approached him because, although the charity was providing deposit bonds for homeless people, they had significant issues helping them repay their deposits or understanding how much they had paid off.

“I discovered that we already ran a deposits scheme for a council in Cheshire and that we could use it in Edinburgh, enabling tenants to pay us the money until they have built up a deposit to replace the Crisis bond,” says Gibb. “We can then track their payments.”

“I feel it’s a fair solution, and it has helped widen the range of landlords who feel reassured enough to get involved, including corporate landlords.”

The sorts of people the deposits scheme helps includes victims of domestic violence who, after fleeing their homes, have no way to rent within the private sector because they have no access to money or even a bank account.

“In these circumstances paying a deposit and the first month’s rent is completely out of their reach,” he says. “I thought if we can do something to help here, then ‘let’s do it’.”

Find out more about Crisis’ Skylights programme in Edinburgh.

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Commercial property – EPC clarity required?

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I have commercial premises currently let to a tenant, and they use it as a dance school. Current lease comes to an end in December (we purchased the property with her as a sitting tenant and this original lease has an end date of Dec 2020)

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ARLA wants requirement for repeat Right to Rent checks to be abandoned

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ARLA Propertymark have written an open letter to Kevin Foster, Minister for Future Borders and Immigration, warning him that their agents will struggle when restrictions are lifted to repeat Right to Rent checks in person that were carried out remotely during the lockdown period.

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Experts fear office values could follow retail into decline

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Experts think that history may repeat itself, just as when valuers were caught out in recent years for valuing retail stores and shopping centres too optimistically.

The warning signs were there early on, but these were often ignored by valuers until an increasing number of empty shops resulted in dramatic reductions in property values. Covid merely accelerated that, with shop closures in lockdown and a rapid shift to online orders.

The same fate could befall offices especially as when large scale occupiers such as HSBC, Barclays, Deloitte, JP Morgan, Stan­dard Life Aberdeen and Fidelity have have all indicated there could be a major shift in their modus operandi, a move to much more home-working.

As vacancies start to rise, when leases run their terms, rents will fall dramatically, as will property values. According to The Times newspaper, available London office space has recently increased to almost 20 million sq ft, from the 10-year aver­age of 14 million sq ft, as many businesses are now seeking to sublet space they no longer require.

Investors in large office blocks, insurance companies and property funds in the main, rely on annual valuations given by the main property agents and consultants including: Colliers International, CBRE, Knight Frank and Cushman & Wakefield. Can investors in these funds still rely on valuations when these professional valuers have marked underlying property assets down a mere 0.2% to 0.3% per month?

The profes­sional accounting body, The Institute of Chartered Account­ants in England and Wales, has expressed concern about a lack of objective evidence for property valuations in investment company accounts.

The Institute has said:

“We sometimes find there is very little evidence to support valuations, and where there is a formal valua­tion by a specialist valuer, little or no evidence of evaluating their compe­tence and objectivity, the relevance and reasonableness of assumptions, or completeness and accuracy of source data.”

According to its website CBRE values around two-thirds of Britain’s top UK real estate investment trusts and is a valuer to three major office landlords reporting results last week. Great Portland Estates, Land Securities and the Workspace Group showed only modest changes in their portfolio valuations with falls of 2.4%, 1.9% and 4.9% respectively.

Nick Knight, head of UK valuation at CBRE, has said:

“Has the effect of Covid brought an internet moment to the office sector that is comparable to retail? I think it’s quite early to make that call. We know that companies are moving to hot-desking, a lot of organi­sations are looking to reduce their foot­print, availability has risen and that’s impacting on forecasts and rental values in the valuation world.”

“There is a view emerg­ing that the longer people have been in lockdown, the more they’ve realised what the office gives that they are not having at home.” Mr Knight says that CBRE be­lieves there will continue to be strong demand for offices with good amenities and “wellbeing characteristics that help companies to attract talent.”

­

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Build-to-rent VS buy-to-let battle of the suburbs begins

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Landlords are getting some competition in the suburbs where developers have started to build rafts of new family rental homes.

Legal & General is the latest house-builder to set its sights on the growing ‘suburban build to rent’ sector, with an ambitious plan to create 1,000 family homes each year from 2024.

Savills reports that of the 66 completed suburban build to rent schemes in the UK, all are located on the edge of major employment hubs, while most have schools, shops, medical centres, access to major roads and bus stops within a 1km radius.

Amenities in the schemes are more geared to families, with common features including playgrounds, electric car clubs, a community centre and exercise facilities.

Entirely urban

It adds that while there are 2.3 million households in the private rented sector, until recently new developments had been skewed almost entirely to urban, high-density markets.

Legal & General has recognised the untapped potential in a market forecast to grow in excess of £200 billion, and aims to meet increasing demand for single family homes with its schemes.

It promises they’ll be: “community-focused and service-led, offering residents choice, security of tenure and flexibility”. Developments will consist of a mixture of houses and low-density apartments, while ticking all the boxes for post-COVID requirements, with home offices and more extensive outdoor space.

David Reid, MD of Legal & General suburban build to rent, says it will provide high quality rental housing options for the growing number of families across the UK.

Our size and commitment to the housing market across tenures, means we’re in a strong position to lead the way in this nascent sector, delivering well-managed, service-led communities which provide a reliable and positive alternative to home ownership,” he says.

Read more about build to rent.
What does build to rent mean for private landlords?

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LATEST: CGT can be reformed to help BOTH landlords and HMRC, say accountants

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Permanently reducing the Capital Gains Tax (CGT) rate for investment property and raising the general rate would keep both landlords and the taxman happy, according to a leading accountancy body.

The Association of Accounting Technicians (AAT) suggests effectively splitting the difference by only having two rates instead of the current four, so charging 14% for the basic rate and 24% for the higher rate, irrespective of what the asset is.

There are currently four different rates: 10% for basic rate taxpayers and 20% for higher rate taxpayers and two separate rates for residential property with 18% for basic rate taxpayers and 28% for higher rate taxpayers.

It follows warnings from property experts that the Government tax advisor’s idea to raise CGT rates up to the levels of income tax – currently 28% on residential property and 20% on other assets – so that higher rate taxpayers face a flat rate of 40 or 45%, could cause a mass exodus of landlords.

Phil Hall (pictured), head of public affairs & public policy, tells LandlordZONE: “This would be a simplification (two rates instead of four) and being lower for residential property investors than it is at present would also help to encourage more house sales.

The 4% increase for other assets would generate additional income for the revenue but would still be much lower than the big increases, to bring into line with income tax rates, that others have suggested.”

Landlord Pete Coleman who’s based in Scarborough, reckons it could be a good workable solution.

He tells LandlordZONE: “I’m a retired accountant and wish to be a retired landlord but still have two properties, both in Whitby, that I’ve had since the 1970s and won’t be selling while CGT is so high – and I’m worried it could go even higher.” 

Read more about the CGT proposals.

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COVID stories: My £35k battle to evict rent arrears tenant from apartment

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A desperate landlord stuck in an Airbnb for months while her tenant refuses to pay rent or move out has featured in a BBC investigation into the current and and harsh evictions regulations and their effect on landlords.

Lilyana Markova, who works in a cosmetic clinic and bought her property as a buy-to-let investment, tells LandlordZONE she now has losses totalling £35,000 in back rent, court fees and legal costs, and despairs of ever getting the flat back.

Despite finally securing a Section 21 order against her tenant, with help from Landlord Action – after years of part or non-payment – the court hearing was suspended on 5^th April and she’s now waiting for another date.

Lilyana’s problems were made worse when she was evicted from her central London rented flat in September as the landlord needed it back for a family member.

Tough times

She’s now struggling to pay her own bills, and while friends have been helping out, she isn’t sure how much longer it can go on.

“It’s been so tough for me,” Lilyana tells LandlordZONE. “This woman doesn’t respect me and owes me so much money yet I can’t do anything. It’s really frustrating.”

Lilyana rented out her two-bedroom flat to the woman and her three children near London city airport, using letting agent Re/Max in September 2017.

Rent payments were erratic or non-existent from the start but when she tried unsuccessfully to serve a Section 21 notice in 2018, the tenant countered with a compensation demand for problems caused by damp.

Lilyana paid up in the hope that she would leave the property but when she didn’t, Landlord Action stepped in late last year and kicked off the eviction process.

Her story was featured on BBC London News last night as part of an investigation into rent arrears and evictions broadcast just hours after the government revealed it latest evictions regulations.

She and Landlord Action founder Paul Shamplina (pictured) are both featured in the film. “Despite all this, Newham Council have just asked me why I don’t want her as a tenant anymore. It’s so unfair – I don’t understand how this can happen.”

Watch the BBC London news episode.

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Excellent tenant wants a 20% rent reduction?

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I have an excellent tenant who pays £1500 every month. With 2 months left on the contract, I asked for his intention on renewal. He said he would renew, but only at £1200 per month.

I said I would do some research and let him know.

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