Why leasehold enfranchisement and Right to Manage recommendations must be enacted

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Why leasehold enfranchisement and Right to Manage recommendations must be enacted

Article by Katherine Simpson, Partner at Edwin Coe LLP

The objectives of the Draft Leasehold and Commonhold Reform Bill involve enacting the remaining Law Commission recommendations on leasehold enfranchisement and Right to Manage.

What issues will this present to professionals and their clients?

In July 2020 the Law Commission published three reports containing over 100 recommendations to enhance leaseholders’ rights to extend their leases, buy their freeholds and take over the management of their buildings.

24 May 2024 in the pre-election wash-up, a somewhat modest number of the Law Commission’s recommendations were enacted by the Leasehold and Freehold Reform Act 2024 (LAFRA).

In July 2024 the Government announced that it would further reform the leasehold system including enacting the remaining recommendations relating to leasehold enfranchisement and Right to Manage, essentially to make enfranchisement easier and cheaper, and is expected to publish a draft Leasehold and Commonhold Reform Bill imminently.

“Cheaper” relates to the valuation methodology and costs, which feature in LAFRA but which are the subject of a landlord driven challenge.

“Easier” relates to the qualifying criteria and the process, which have not been addressed, save for the abolition of the two-year ownership requirement for extended lease and freehold house claims, and the increase to 50% of the 25% limit on commercial parts for Right to Manage claims.

Criteria changes were absent

Changes to the qualifying criteria for collective enfranchisement claims were conspicuous by their absence.

The Law Commission recommended that the qualifying criteria for such claims should be relaxed, enabling more groups of leaseholders to get together to acquire the freehold interest in their building.

The recommendations included increasing the 25% limit on commercial parts to 50%, and so consistent with Right to Manage claims, and that, also in line with Right to Manage claims, there should no longer be a two flat limit to enable a leaseholder to qualify.

The two flat limit was originally enacted to prevent investors from qualifying for a collective claim, the thrust of the initial legislation being to protect homeowners as opposed to investors.

The unintended consequence of that limit meant that homeowners were effectively deprived of their rights.

Furthermore, it was recommended that everyone should have the right to participate and so avoiding disputes between groups of leaseholders who deliberately left fellow leaseholders out of the party, the objective being to make collective enfranchisement a collaborative process and avoid those with deeper pockets taking advantage of others.

Make the procedure easier

The Law Commission also identified the need to make the procedure easier and made a number of recommendations with that in mind.

In particular, claimants are often at the receiving end of “cat and mouse games” driven by landlords seeking to defeat claims on technicalities, increasing costs, and the attendant delays resulting in higher valuations.

It was accordingly recommended that there should be a prescribed form of notice and response, with the Tribunal having greater powers to remedy disputes.

In the same vein, assignments of the benefit of enfranchisement claims were recommended to be automatic, avoiding the potential for disputes as to the validity of an assignment.

This was identified as another area of the process that frequently provoked tactical displays by landlords at the expense of claimants both in terms of costs and valuation outcome.

The effect of the procedural amendments may well be that claimants can avoid having to instruct solicitors with specialist enfranchisement expertise, instead instructing solicitors with general leasehold expertise and at a lower cost.

Only if these recommendations are enacted will the Government have achieved their aim of making enfranchisement cheaper and easier.

Katherine Simpson is a Partner at Edwin Coe LLP and a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).

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The continuing Renters’ Rights Act nightmare – what happens if the first month’s rent isn’t paid?

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Property118

The continuing Renters’ Rights Act nightmare – what happens if the first month’s rent isn’t paid?

In a Property118 comment on 27 December, member “Spock” said:

“I have a student property. Traditionally, I have always asked for the rent payment for the first month a few days before the start of the tenancy start date. I never hand out keys until I know that everyone has paid the first month’s rent. If I can’t receive any rent before day 1, then if even one person hasn’t paid, then I can’t hand out any keys, which obviously creates problems. Have I read this correctly ? Am I unable to accept any rent before day 1?”

I’m guessing there may be other landlords wondering this. Here is my answer.

You don’t have to wait for the rent until Day 1, but you must not refuse to hand over the keys after the agreement has been signed. If you do, there is a real risk that you may have to pay fines (called “penalties”) of up to £40,000.

When both landlord and tenant have signed a tenancy agreement for a new Assured Tenancy, the tenancy is said to have been “entered into”. Usually, the agreement will be dated when the last person who is a party to the agreement has signed. If the commencement date of the tenancy is a later date then the time between the two dates is called the “permitted pre-tenancy period”.

You can accept rent in advance during (not before) the permitted pre-tenancy period, just as you have done in the past. This is limited to one month’s rent or 28 days rent if the rent payment period is less than a month. You can also accept payment of the agreed deposit up to the cap.

So far there is not really much if any, change to what you have been doing. But after the tenancy has been entered into you cannot refuse to hand over the keys even if the tenant never pays the first month’s rent, because that amounts to preventing occupation, which is equivalent to unlawful eviction or unlawful exclusion. That is an offence under the Protection from Eviction Act 1977 and now carries civil penalties of up to £40,000 under section 58 of the Renters’ Rights Act 2025 as an alternative to prosecution.

Make no mistake, refusing to hand over the keys is a serious offence.

If the tenant does not pay the first month’s rent and has moved in, then you can issue a notice under s.8 of the Housing Act 1988 specifying ground 10 and giving 4 weeks’ notice before you start court proceedings. But ground 10 is discretionary. The judge might refuse to grant an order for possession, or give the tenant time to pay, so that you would have to go back to the court again if the tenant never pays any rent.

Alternatively, you can wait until there are three months’ rent arrears and then give a four‑week section 8 notice specifying Ground 8 (serious rent arrears). You could also specify Ground 11 (persistent delay in paying rent). Note that there must be 3 months’ rent outstanding both on the date of the Section 8 notice and on the date of the hearing.

Tenants who understand this and want to game the system can, in practice, go a long time without paying rent.

Suppose the landlord and tenant meet on 1st May 2026 and both sign an agreement for a tenancy to start on 14th May. The landlord cannot ask for any rent until the agreement has been entered into. As soon as it is signed, the landlord asks for the first month’s rent, expecting the tenant to transfer the money there and then because that is what the agreement says they should do. The tenant says they will pay it on the day they move in. On 14th May, they meet at the property, and the landlord asks for the rent. The tenant says it will be paid the next day. The landlord cannot refuse to hand over the keys. They must give the keys to the tenant and let them move in.

The rent never arrives. The landlord gives 4 weeks’ notice specifying ground 10 expiring (say) 12th June and issues proceedings the next day. The court lists a hearing date of 10 August. The tenant has never paid any rent, but the court has discretion, and after hearing the tenant’s sad tale of woe, the judge grants 3 weeks to pay.

The tenant never pays. On 1 September, there are 3 months’ arrears outstanding, so rather than pursue the original claim, the landlord serves a new notice specifying ground 8 and on 30 September issues proceedings for a second time.

The hearing is on 25 November, and this time the court does grant an order for possession. The landlord pays to transfer the claim to the High Court for a writ of possession, and the bailiffs arrive at the property on 27 January 2027. The tenant has gone and has left the property in perhaps not quite as good a state as it was on 1 May 2026. The landlord has had no rent since the last tenant left, many months ago; meanwhile, they have been paying the mortgage, the insurance, and all the costs of the proceedings.

The tenant has lived rent-free for about 8 months.

All this was explained to the government during the committee stage of the Bill, but they ignored it.

Michael

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Government claim LHA rates will remain under review despite freeze

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Government claim LHA rates will remain under review despite freeze

The government claim it will keep Local Housing Allowance (LHA) rates under review.

In answer to a written question, Homelessness Minister Alison McGovern says the government is working to support private renters with their rent.

The news comes after the government froze LHA rates for the second year in a row in the Autumn Budget.

LHA haven’t kept pace with rent prices

LHA determines how much rent support claimants can receive, and since the rates were frozen in April, they haven’t kept pace with rent prices.

Labour MP Jim Machon asked the government in a written question, “What assessment has the government made of levels of homelessness relative to (a) levels of affordability of rented accommodation and (b) rates of local housing allowance.”

According to government data, almost 1.7 million private rented households across the country were receiving housing cost support as of August this year, and 53% of these households faced a gap between their housing benefit payments and their monthly rent.

Keep LHA rates under review

In response, Ms McGovern said: “A lack of affordable housing is a key driver of homelessness. This government plan to deliver a decade of renewal for social and affordable housing, including with £39 billion funding for the Social and Affordable Homes Programme.

“We recognise some private renters need support with their rent. That is why we will work across government to keep Local Housing Allowance rates under review in order to deliver on the government’s priorities, including maintaining the long-term fiscal sustainability of the welfare system.”

The government have also pledged to prevent homelessness by the end of this Parliament through its new homelessness strategy.

This includes halving the number of long-term rough sleepers, ending the unlawful use of B&Bs for families, and preventing more households from becoming homeless in the first place.

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Landlords demand efficiency and cost control for new enforced regulation?

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Property118

Landlords demand efficiency and cost control for new enforced regulation?

The government is imposing new regulations on new landlords’ databases. As responsible landlords, we demand efficiency and proportionality in compliance.

A recent excellent article by the property118 team pointed to the disproportionate nature of regulation. >> https://www.property118.com/deposit-disputes-remain-rare-despite-rising-rents-tds/

The data points to the schemes holding 4.7 million deposits amounting to schemes holding £5.5 billion in cash, around £1,100 per tenancy.

Remarkably, only 1% of deposits are disputed, amounting to £55 million in dispute, but the suppliers can presumably earn interest on the deposits. Assuming this is 5% they earn £275 million a year. Five times the disputed deposits simply for putting the deposit in a bank.

So, if the government are demanding new databases for registration of all and bad landlords, these companies have plenty of money to cover their production and already hold 5 million landlord records.

Landlords demand that the government ensure any regulatory databases are provided free for landlords and tenants at the point of use. The money doesn’t need to be found; it is already presumably being made by the companies supplying the DPS schemes.

Let’s hope the government doesn’t run another cash cow for its preferred computer alliance and instead ensures an existing supplier extends their existing landlord database, paid for by existing DPS schemes providers. Free of Charge to cover any new regulation for landlords’ registration. If charges are made, Landlords would likely pass these onto tenants in any case.

What does the Property118 community think?

Paul

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From Stalled Project to Success – How a Landlord Used Bridging to Complete a Deal

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From Stalled Project to Success – How a Landlord Used Bridging to Complete a Deal

Not every property project goes to plan. Unexpected costs, tight deadlines, and lender withdrawals can stall even the most experienced landlord’s plans. This case study shows how bridging finance, when used strategically, turned a stalled project into a success – and highlights the lessons other landlords can learn.

The Challenge

A landlord had agreed to purchase a semi-commercial property at auction. The property required refurbishment before it would qualify for a term mortgage. Their original lender withdrew just weeks before completion, leaving the landlord at risk of losing the deposit and the property.

The Solution – Bridging Finance

An NACFB broker stepped in to arrange bridging finance. The facility provided:

• Fast access to funds to complete the auction purchase on time.
• Up to 70% loan-to-value, with interest rolled into the loan to protect cash flow.
• Flexibility to cover refurbishment works required to bring the property up to mortgageable standard.

The loan term was set at 12 months, giving the landlord time to complete works and plan a refinance.

The Outcome

Within eight months, the property was fully refurbished and re-let. A commercial lender then refinanced the property onto a long-term facility at a higher valuation, allowing the bridging loan to be repaid in full. The uplift in value and income covered the cost of the bridging finance and improved long-term returns.

Lessons Learned

• Always evidence the exit – the refinance was pre-agreed in principle before the bridging loan completed.
• Factor in contingency – the landlord built a budget buffer for unexpected works, avoiding liquidity pressure.
• Use the right broker – the NACFB broker matched the case with a lender comfortable with both the property type and the refurbishment plan.

Why This Matters for Landlords

Bridging finance is not cheap, but in the right circumstances it can save deals and unlock value. This case demonstrates that when applied with discipline, bridging can be a tool for opportunity rather than risk.

Conclusion and Takeaway

Stalled projects do not have to end in losses. With the right broker and lender, bridging finance can turn setbacks into successes. The key is having a clear plan, realistic numbers, and an exit strategy that is achievable and evidenced.

Next Steps

If you would like to explore bridging finance options for your own projects, please complete the short form below and an NACFB member broker will be in touch.

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Published: 24 December 2025

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Council seeks views on plans to license and inspect all HMOs

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Council seeks views on plans to license and inspect all HMOs

A council has launched a consultation on proposals to introduce additional HMO licensing, which would mean all HMOs in the area would need to be inspected.

Telford and Wrekin Council has launched a 10-week consultation on the proposals and is asking landlords to have their say.

We want to make sure that homes in HMO sector are safe

Currently, in the area, only HMOs accommodating five or more people forming two or more households are subject to mandatory licensing. HMOs housing more than six people also require full planning permission, while those with six or fewer occupants can be established through permitted development rights.

The proposed Article 4 direction would remove the option for landlords of smaller HMOs to use permitted development rights, meaning planning permission would be required for any new HMO regardless of size. The council has said existing HMOs would be unaffected by the planning changes.

The council claim the proposals would allow it to identify the location of all new HMOs, while the additional licensing scheme would focus on improving safety and hazard compliance among landlords.

Councillor Richard Overton, Deputy Leader of Telford and Wrekin Council and Cabinet Member for Highways, Housing and Enforcement, said: “We want to make sure that homes in the HMO sector are safe, well-managed and meet fair standards, and the proposals we’ve put forward are designed to help us achieve that.

“The consultation is now live, and this is the moment when people’s voices are essential. Nothing has been decided yet, and we need residents, landlords and community organisations to tell us what they think so that any future approach is balanced, transparent and genuinely shaped by local people.”

Landlords in the area can view the consultation on Article 4 directions by clicking here and additional licensing by clicking here.

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Renters’ Rights Act breaching Buy to Let mortgage terms and conditions?

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Renters’ Rights Act breaching Buy to Let mortgage terms and conditions?

Hi Everyone, With the Renters’ Rights Act stating that all tenancies are to be periodic from May 2026, how will that affect Buy to Let mortgages that have terms that condition the tenancy must be an AST?

Are we being forced by the Act to breach mortgage Terms and Conditions?

Is there a provision in the act for this anomaly?

Kevin

Editor’s Note:

What the Renters’ Rights Act Does

The RRA abolishes fixed-term ASTs and replaces them with a single assured periodic tenancy (APT) for residential lets from 1 May 2026 (the commencement date). This means:

All current fixed-term ASTs will automatically convert to periodic tenancies on that date.

After commencement, landlords cannot grant new fixed-term ASTs, and every tenancy will be rolling (e.g., monthly).

Tenants can end tenancies by giving statutory notice (e.g., 2 months).

This is a statutory change to housing law, and it replaces the AST regime under the Housing Act 1988 with a different form of assured periodic tenancy.

Mortgage Terms Requiring ASTs

Many buy-to-let mortgage contracts currently include wording like:

“The property must be let on an Assured Shorthold Tenancy (AST) in line with the Housing Act 1988.” Lenders Handbook

This is because lenders traditionally saw fixed-term ASTs as giving a predictable income stream and clear possession rights.

With the AST regime abolished by statute, landlords won’t be able to comply with those specific contractual terms anymore because, quite simply, ASTs will no longer exist.

Does the RRA Force You to Breach Your Mortgage Terms?

No, not technically.

Statutory Override

The RRA changes housing law, and statutory law generally overrides private contracts where there is a conflict (e.g., you can’t give a fixed-term AST if the law forbids it).

A lender’s requirement for an AST becomes impossible to fulfil, not something you are choosing to breach.

Lenders Will Need to Update Mortgage Conditions

Lenders, especially mortgage underwriters and their legal team, will have to revise their acceptable tenancy definitions to reflect the new assured periodic tenancy regime, because the old AST form will no longer be lawful.

Industry guidance (e.g., mortgage handbook acceptability criteria) is already tied to ASTs, but these frameworks will need to be updated as the law changes. Lenders Handbook

Practical Position

Post-Commencement, your tenancy will be what the statute says it is: an assured periodic tenancy. You will not be in breach of housing law by offering this; it’s the only lawful form.

If there is a conflict with a mortgage condition that hasn’t been updated, you would raise it with your lender.

What Lenders Are Likely to Do

While we don’t yet have a unified published set of post-RRA mortgage criteria from lenders, industry commentary suggests:

Lenders will adjust product terms

Mortgage lenders will update wording so that assured periodic tenancies are acceptable instead of ASTs.

Underwriting criteria may emphasise tenancy stability, rental income security, and possession rights under the new Section 8 regime rather than fixed-term ASTs.

Possible shift in risk assessment

Some lenders might adopt stricter serviceability tests, higher rental coverage requirements, and more cautious criteria (e.g., higher deposits or LTV limits) due to perceived volatility with periodic tenancies. Kerr & Watson

No automatic breach

Simply having periodic tenancies because the law changed will not, on its own, put you in breach of your mortgage. If a lender tries to enforce an AST requirement after 1 May 2026, that mortgage condition will likely be unenforceable to the extent it requires something illegal/illegal to grant.

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Illegal Activity by Tenants – Are You Covered?

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Illegal Activity by Tenants – Are You Covered?

One of the worst-case scenarios for landlords is discovering that tenants have used a rental property for illegal activity. Cannabis farms, unlicensed HMOs, or even organised crime can leave behind major damage, loss of income, and potential legal consequences. The immediate question for most landlords is: does my insurance cover this? The answer depends on the wording of your policy, your disclosure at inception, and whether you met inspection requirements.

Common Types of Illegal Activity in Rental Properties

• Cannabis farms – tampered electrics, water damage, mould, and structural weakening from extraction systems.
• Subletting and unlicensed HMOs – breaching licence conditions, fire safety rules, and creating liability exposures.
• Fraudulent use – tenants using the address for identity fraud or illegal businesses.
• Anti-social behaviour – drug dealing, disorder, or activities that create reputational risk for the landlord.

How Insurers Typically Respond

Most landlord insurance policies exclude damage or liability arising from illegal activity. However, some specialist insurers will cover malicious damage caused by tenants engaged in illegal use, provided you can show you took reasonable precautions and complied with inspection conditions. The outcome often hinges on evidence.

Inspection Requirements

To reduce risk, many insurers insist on regular documented inspections. For example:

• Inspections every 3 months (some require every 6–12 weeks).
• Written logs and, ideally, date-stamped photos.
• Prompt reporting of any concerns to insurers or authorities.

Failure to inspect may give insurers grounds to decline a claim, arguing that the landlord did not meet policy conditions.

What About Malicious Damage?

If illegal activity results in deliberate destruction, some policies will pay under malicious damage by tenants – but only if this extension is included. Even then, insurers may refuse claims if they believe the landlord failed to exercise proper tenant checks or inspections.

Loss of Rent – Grey Areas

Loss of rent cover usually applies after an insured peril such as fire or flood. It rarely applies when tenants are evicted due to illegal use. Some specialist policies extend to loss of rent following police closure or malicious damage, but this is not standard. Landlords should not assume rent will continue if a property becomes uninhabitable after illegal activity is discovered.

Practical Steps to Protect Yourself

• Carry out robust referencing and check ID thoroughly.
• Conduct regular inspections and keep records.
• Look out for red flags – covered windows, unusual condensation, tampered electrics, or complaints from neighbours.
• Ensure your policy explicitly includes malicious damage by tenants if you want protection.
• Notify your insurer if the property changes use (for example, becoming an HMO) to avoid non-disclosure issues.

Case Example

A landlord discovered their tenants had converted a three-bedroom semi into a cannabis farm. The electrics had been bypassed, causing fire risk, and the property was saturated with condensation and mould. The insurer initially declined the claim under the “illegal activity” exclusion. However, because the landlord provided quarterly inspection records showing no signs of the operation until the final month, the insurer paid for malicious damage repairs (but not lost rent). This highlights the importance of evidence and compliance.

Final Thoughts

Illegal activity in rental properties is a nightmare scenario, but landlords can protect themselves by choosing the right policy and maintaining strong inspection and referencing records. Do not assume standard landlord insurance will cover malicious damage or loss of rent after illegal activity – check your wording and speak to a broker who understands landlord risks.

Request your quote or call-back

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Publication date: Tuesday 23 December 2025

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Fewer renters moving as section 21 notices decrease – Generation Rent

admin    Uncategorized     agents

Property118

Fewer renters moving as section 21 notices decrease – Generation Rent

A new Generation Rent survey reveals a decline in Section 21 notices and a drop in rent increases.

In a poll of 711 renters about the upcoming Renters’ Rights Act, despite a drop in Section 21 notices, the number of Section 8 notices has risen.

The survey comes ahead of the implementation of the Renters’ Rights Act on 1 May 2026.

Decline in Section 21 notices

According to the survey, the proportion of people having to move has fallen since 2024, which Generation Rent say is a result of a decline in Section 21 notices.

In the survey, the tenant group claim former Chancellor Jeremy Hunt’s decision to cut the higher rate of capital gains tax from 28% to 24% in the Spring Budget 2024 “led to the receding of a spike in evictions following the tax cut for landlords, meaning fewer have been selling up this year. It may also be due to fewer landlords evicting to raise the rent, because rents on new tenancies haven’t been rising as quickly this year.”

In this year’s Autumn Budget, Chancellor Rachel Reeves raised tax rates on dividends, property, and savings income by 2 percentage points.

Elsewhere, the survey reveals that the proportion of renters being served a Section 8 eviction notice has increased.

The tenant group claim this could be due to rising rent arrears caused by the Local Housing Allowance (LHA) being frozen.

Generation Rent predict that, with the upcoming Renters’ Rights Act, eviction trends will change, with the number of eviction notices expected to fall once Section 21 is abolished.

The survey says: “We should see a further fall in these numbers after May 2026, and Section 8 should become the only game in town for landlords who want to evict tenants.

“Along with Section 21 going, there will be no fixed terms, so no moment of anxiety that might prompt renters to move out if they can’t commit for another year, and landlords will not be able to ask a tenant to leave without a formal Section 8 notice, so these reports should decline as well.”

Rising market rent most common reason for rent increases

The survey also reveals the proportion of renters who had not moved in the past year and were asked to pay higher rent has not increased.

Despite nearly two-thirds (63%) of renters reported being asked for a rent increase. The size of rent increases appears to be falling, with 15% of respondents saying they were charged at least £100 more per month in the 12 months up to September 2025, compared to 22% in October 2024.

The most common reason given by landlords for a rent increase was rising market rents a further 4% attributed rent hikes to advice from letting agents. Generation Rent claim mortgage payments “have never been the main reason for rent increases”, despite evidence that more landlords are struggling to pay their mortgages than ever before.

Despite the Generation Rent survey finding that 27% of private renters did not feel confident asking their landlord to fix something that is the landlord’s responsibility, this means that 73% did feel confident.

A government survey also reveals that the majority of private renters have had a positive experience in the private rented sector, with satisfaction higher for landlords (70%) than for property management agencies (62%).

The full Generation Rent can be viewed by clicking here.

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Rent in advance – why you shouldn’t accept it?

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Property118

Rent in advance – why you shouldn’t accept it?

We all know that the prohibition of rent in advance is going to make life really hard for tenants who, for whatever reason, can’t pass normal referencing and until now would have paid rent up front to get the place they want. So it’s natural that people are looking for ways to get around this. I think that’s a really dangerous thing for landlords to get involved in, and in this note, I explain why.

Basically, the Renters’ Rights Act 2025 controls when and how rent can be paid in advance, principally by making amendments to the Tenant Fees Act. (TFA).

For new assured periodic tenancies, the position is broadly as follows.

• Any “pre‑tenancy” rent payment (ie rent paid before the tenancy agreement has been entered into by both parties) is now a prohibited payment under the Tenant Fees Act.
• Landlords and agents must not “invite or encourage” a tenant, guarantor or other “relevant person” to make such a pre‑tenancy rent payment, and must not accept it if it is offered.
• The only lawful pre‑tenancy payments remain the holding deposit and the tenancy deposit, within the existing TFA caps; “initial rent” can only be taken in a short “permitted pre‑tenancy period” once the tenancy has been entered into.
• Any requirement in a new tenancy agreement that the tenant pays rent in advance (for example more than one month at a time, or before the first day of a rental period) is unenforceable.

Existing tenancies in place when the new regime starts can continue to operate on their current advance‑rent arrangements (eg 6‑monthly in advance).

One of the suggested avoidance routes is the payment of a lump sum rent in advance to a third party who will hold it in escrow, which basically means they hold it on trust with an explicit instruction to release it when certain conditions are met.

So the lump sum rent would be paid to an agent or a solicitor, someone like that, with instructions to release it in tranches, usually monthly, as each rent payment date comes up.

But the RRA is drafted with explicit anti‑avoidance language so that a landlord or agent cannot do indirectly, via a third party or escrow arrangement, what they are forbidden to do directly.

The prohibition applies to accepting a prohibited pre‑tenancy rent payment “from a tenant, guarantor or any other relevant person”. I know guidance isn’t supposed to have the force of law but in practice it does and it makes clear that paying rent to a third party (for example, an agent, an associate, or an escrow service) with instructions to release it to the landlord on rent‑due dates will still be treated as a prohibited pre‑tenancy rent payment if the money is rent and is paid before the tenancy is entered into or in excess of the permitted period/amount.

If a lump sum is not clearly rent for identified periods, there is a risk it is characterised as a tenancy deposit; any amount held as security above five weeks’ rent would then breach paragraph 2 of Schedule 1 to the Tenant Fees Act.

In short, routing rent via escrow or a third party before the tenancy is properly in force, or in an amount or timing that is not permitted, is treated as an unlawful attempt to circumvent the statutory restrictions.

As you might expect, given the government’s anti-landlord mindset, there are severe penalties for breach of these rules. Two types of penalty regime interact here: the TFA regime for prohibited payments and the general RRA civil‑penalty framework.

• A prohibited pre‑tenancy rent payment under the TFA can attract a civil penalty from the local authority of up to £5,000 for a first breach, rising to up to £30,000 for a further breach within five years, as an alternative to prosecution. So let’s assume your tenant sets up escrow payments and these start running. At some point you fall out with your tenant and they go to the local authority. If you’ve accepted 6 monthly payments from escrow then that’s you saddled with a £30,000 fine .
• Under the wider RRA enforcement framework, local authorities can impose civil penalties up to £7,000 for first or minor non‑compliance and up to £40,000 for serious or repeat non‑compliance, with the option in serious/repeated cases of criminal prosecution carrying an unlimited fine.
• Tenants and the local authority can also seek a rent repayment order for continuing or repeated breaches where the landlord fails to remedy the breach (for example, by not promptly returning a prohibited rent payment).

Always remember, local authorities now have a statutory duty (not just a power) to enforce “landlord legislation”, and they have a direct financial incentive to find breaches and enforce the payment of penalties because they will keep the cash.

Still fancy trying this way of getting rent in advance payments from tenants?

I don’t.

https://www.gov.uk/government/publications/asking-for-rent-in-advance-guidance-for-local-authorities/asking-for-rent-in-advance-guidance-for-local-authorities

Michael

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