letsfocus - February 2009
Susan Fitz-Gibbon looks at the ins and outs of current legislation and tenancy agreements, and asks how it is affecting the market
Ignorance is no excuse
Anyone who states that lettings is an 'easy option' over sales does not fully understand how the lettings industry works. Now more than ever it is vital agents are up to speed on all the new and existing legislation affecting the industry and agents must recognise the true impact of legislation on day-to-day activities as well as on tenancy agreements. Whereas some Acts have been positive it's questionable whether others are quite so constructive.
The most recent change in the industry has been the introduction of the Energy Performance Certificate (EPC) and whilst this doesn't have an impact on the tenancy itself, it most certainly imposes restrictions on the letting of a property. Gone are the days when a valuation could take place to result in confirmation of an instruction then a property being marketed and viewed immediately.
Since 1 October 2008 landlords and lettings agents have been required by law to make an EPC available to every prospective tenant viewing a property and to tenants as they enter into their tenancy. It's debatable how useful this legislation is because although some landlords and tenants are curious to see the current and potential energy efficiency rating of a property and its environmental impact, we have yet to find a tenant who chooses a property based on the contents noted on the certificate. However EPC's for lettings properties are still in their infancy and maybe things will change.
Prior to EPC's we saw the introduction of the Tenancy Deposit Scheme (TDS) whereby different schemes, such as insured and custodial schemes, were put in place to safeguard deposits. This legislation does affect the tenancy agreements and it is imperative that agents have their agreements drawn up correctly to reflect the scheme and workings of it.
Tenancies affected by the TDS include all Assured Shorthold Tenancies (AST's) commencing on or after 6 April 2007 and AST's commencing before 6 April 2007 which are extended in writing on or after that date for a further fixed term. Company Tenancies, Premium Leases and tenancies where the rent exceeds £25,000 per annum are just a few types of tenancies that are exempt and this must be reflected on the correct agreement prepared in line with the parameters of the offer accepted. For example a tenancy for a corporate body would fall under Common Law (tenancies that are excluded from cover under the Housing Act) and so the style of tenancy might be called a 'Non Housing Act Agreement' or 'Law of Contract Tenancy' and so forth.
In the early days, time and energy was expanded in ensuring documentation was correct for all agents and the Government's delay in introducing the scheme only caused confusion and exasperation as agents required clear direction. However, now the scheme is in place it's proving to be extremely positive for both landlord and the tenant ensuring disputes are dealt with swiftly and agents can crack on with letting their clients' properties, rather than spending time negotiating unnecessary demands about deposits. Clearly this requirement still exists but if the landlord or tenant is unrealistic in their claim there is now a clear recourse for both parties.
Of course, non-compliance with the TDS in the first place would be a costly matter. Firstly the private landlord who takes a deposit will be unable to fain possession of the property under the usual 'Section 21' route and furthermore his tenant can apply to Court for an order requiring the deposit to be safeguarded. If ordered, the Court will additionally order the landlord to pay to the tenant a fine of three times the deposit within fourteen days, although this has recently been challenged in court - this should represent sufficient encouragement for all parties to comply.
There are few who are now not aware of the importance of the Gas Safety Certification which came into force on April 1 1006 and the second amendment that became statute on October 31 1996. Without any doubt this safety legislation together with the Fire and Furnishing (Fire) (Safety) Regulation 1988 (amended 1989 and 1993) and the Electrical Equipment (Safety) Regulations 1994, forms the most important set of regulations agents must adhere to.
For many years properties were offered to the market unfurnished to alleviate the necessity for replacing non-compliant furniture but this has changed over the last few years with more and more properties furnished to meet the demands of tenants. And savvy landlords understand that furnished properties are so much more attractive! The Fire and Furnishing requirements must be adhered to prior to letting a property and indeed it is in the interest of letting agents to confirm with landlords that all furniture complies with the regulations before the property is marketed.
There is a wealth of further regulations in relation to mortgages which unscrupulous lettings agents can easily overlook or fail to understand in this economic climate it is imperative that if the Landlord has a mortgage on a property the mortgage company is aware the property is to be let and has provided consent in writing for the Landlord to do so. If the landlord holds a buy-to-let mortgage then there may still be stipulations in the terms as to the type of tenancy that can be used and the term of any agreement entered into.
It should be noted that in the event there is a mortgage on a property, the necessary clause confirming this must be inserted in to the tenancy agreement and reference to consent being granted for the letting of the property will be shown in this clause. Further recovery under Ground 2 in Part 1 of Schedule 2 of the Housing Act 1988 would also need to be inserted into a tenancy agreement that allows for repossession with a mortgage. If letting agents are in any doubt about a tenancy agreement being acceptable to a mortgage company, they must request that their client/landlord agrees the wording with the mortgage company.
As we come into 2009 lettings agents need to embrace the entire spectrum of legislation more than ever and it's prudent to set procedures in place ensuring everyone is aware of the statutory requirements. Tenancy agreements, in particular, should be reviewed to ensure they are in 'plain English' and all negotiators or administrators must fully understand the requirements of each.
The market is going to be interesting in 2009 with many clients experiencing difficult times, tenants moving as their circumstances change and mortgage companies becoming ever more diligent in their terms relating to mortgage consent. Whilst we have all experienced a slow down of applicants it is evident those applicants who are looking are serious home-searchers and if procedures are in place then a slick, quick service can be offered which will prevent any dilatoriness when it comes to securing tenants. We're looking forward to a solid first quarter and successful year ahead.
Fitz-Gibbon, 127 St Margarets Road, St Margarets, Twickenham, Middx TW1 1RG. Call: (020) 8892 8921.