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Category: Legals, Finances & Staying Efficient

Mental Health Breathing Space Explained | The Debt Respite Scheme

by Aaron CostelloPosted on

In Part 1 of the Debt Respite Scheme, Debt Breathing Space legislation article, we discussed the implications for landlords and in Part 2 we delve into the mental health crisis breathing space. Do note however that;

‘this is only available to someone who is receiving mental health crisis treatment and it has some stronger protections. It lasts as long as the person’s mental health crisis treatment, plus 30 days (no matter how long the crisis treatment lasts). 

Excerpt from UK government publications

This aspect of the legislation is probably the one that has caused much confusion and we felt it was worth quoting the government website again as a starting point.

‘The government committed to develop an alternative route to access the protections for people receiving mental health crisis treatment, so that they do not have to access debt advice first. If an Approved Mental Health Professional (AMHP) certifies that a person is receiving mental health crisis treatment, the AMHP’s evidence can be used by a debt adviser to start a mental health crisis breathing space.

In addition to the debtor, the following people can apply to a debt adviser on behalf of a debtor for a mental health crisis breathing space:

  • any debtor receiving mental health crisis treatment
  • the debtor’s carer
  • Approved Mental Health Professionals
  • care co-ordinators appointed for the debtor
  • mental health nurses
  • social workers
  • independent mental health advocates or mental capacity advocates appointed for the debtor
  • a debtor’s representative’

It is important to understand this aspect of the legislation carefully

Many people have missed its point. The Mental Health Breathing Space can only be issued by a registered mental health professional. No one can go to their GP and ask for one, for example.

The Mental Health Breathing Space is only available to someone who is receiving mental health crisis treatment

That is, being locked up against their will because their mental health is a danger to themselves or their community. This also applies to someone who has voluntarily gone into hospital before the section was implemented. The third group of people will be those dealt with by an emergency mental health team. This means they were thinking about sectioning but decided not to as they thought the person could be cared for at home. This pertains to very serious mental health conditions. 

We are not talking about someone who is depressed or sad and lonely. These are people who regularly and routinely are at very high risk. They are experiencing a crisis and need very specific help. 

Basically, this solution can be applied to a very limited group of situations and people with very serious conditions. It is not a ‘get out of jail free’ card on any level.

The Mental Health Breathing Space legislation differs from a standard breathing space 

This is available to anyone experiencing problem debt. It gives people legal protections from creditor action for up to 60 days. The protections include pausing most enforcement action and contact from creditors. It also freezes most interest and charges on their debts. The time for this is limited to 60 days. Under the Mental Health Breathing Space, the freeze lasts for the length of the mental intervention, however long that might be, plus 30 days. It is not time limited

It may sound like a long period but do bear in mind that most people committed to hospital in this way for more than 60 days will probably want to give up their property anyway. We suggest this number is probably 99.9%. They will not be residing in the property so there are other grounds to terminate the tenancy potentially.

However, we want to emphasise that this is a limited category of people we are talking about that need to be cared for, not evicted.

What about Property guarantors? Are they liable?

As a landlord thinking about property guarantors or joint liable tenancies where one person might be granted breathing space but there is another tenant that owes an equal amount but doesn’t have that. What happens?

A Breathing Space applies to all joint tenants that are part of the same tenancy. But they wouldn’t apply to people on single room lets, these are unconnected. If they are on a joint tenancy it applies but doesn’t apply to guarantors. They are not jointly liable, and their liability is separate and is for different reasons anyway. However, in a joint tenancy you could potentially chase the guarantor.

All of this discussion underlines the importance of the landlord regarding undertaking thorough affordability checks and references. There is a responsibility to ensure that tenants can afford the rent responsibility to pay the rent and also to compare income and expenses etc. during the onboarding stage.

Planning for wastage and possible loss is part of good business planning

There is a wider point that if you are running a sensible business then there should be plans in place to meet objectives and even if your tenants can’t pay for a period of time you should be able to manage this having factored in such a scenario. Basically, a business owner is not running a good business if they can’t weather such a storm. Any decent business has to plan for some possibility of wastage and loss.

Of course, single asset business’ are tougher to factor in non-payment especially through Covid and will possibly change the landlord landscape going forward. Some landlords are walking away while others are increasing their portfolios. In these situations portfolio landlords can typically ride the wave more effectively.

However walking away is not the only solution. Landlord protection is available and is something Howsy offers as part of our Protect plan, which includes rent guarantee to protect your income when your renters can’t pay on time. Find out more.

Can you refuse to rent to someone with known mental health issues?

This is unlawful discrimination and actually asking the mental health question contravenes data protection issues. In fact, asking that question will put you in trouble with the Information Commissioner plus the Equality and human Rights Commissioner. This is definitely not a strategy to pursue. In fact, asking the question won’t give you enough value after all there is not an obvious bright line between past and future health conditions. 70-80 % of the general population have low level health issues. As a percentage these numbers are very high, especially at the moment. Therefore, it cannot be considered as a useful decision point.

If you have questions of your own, get in touch via hello@howsy.com and we will do our utmost to help.

Summary from David Smith

We will have to see how this pans out. However, I do not think this will affect too many people. As we slowly unlock courts and potentially a significant number of tenants saying that they have a Breathing Space move into employment with luck they will enter into a debt solution. In theory everyone gets upset at new legislation but ultimately nothing really changes very much.

Growing rent debt and long notice periods and moratoria will stay in property because of debt solutions. If it doesn’t work out not much will change. After all, landlords need to experience 6 months of rent arrears to start proceedings now.

If you are looking for help in managing your properties, to stay on top of growing legislation, and have access to a legal property expert on speed dial, Howsy can help. Find out more about our property management plans here or book a call with one of our team to find out more.  

Letting agent refusing to disclose tenant references?

by Asif AliPosted on

When taking over the management of properties from other agents we often encounter one particular issue. Whether or not we are entitled to the tenant’s references and whether or not the previous agent is entitled to rely on the UK General Data Protection Regulations when refusing to release it. 

Is a landlord entitled to a tenant’s reference?

Put simply, yes, a landlord is legally entitled to their tenant’s reference. It is in fact a common misunderstanding in the lettings industry that a landlord is not entitled to a tenant’s reference for GDPR reasons. 

When agents act on behalf of landlords they do so under the law of agency. This means that when a landlord instructs an agent they are instructed entirely on the landlord’s behalf. By the very nature of the agent and landlord relationship, an agent is an extension of a landlord and acts on their behalf. Therefore when an agent secures a tenant they do so on behalf of the landlord and arrange for a tenancy agreement to be signed between the landlord and tenant. This of course means that there is in fact no contractual relationship between the agent and tenant. 

Any agent acting on behalf of their client the landlord is required to do so in their best interest. Landlords are ordinarily not a party or aware of the exchange between agents and tenants however, they are entitled to their tenancy documents, including references on demand due the agents responsibility and duty to account. 

Tenant references and data protection

Further with regards to the specific statement that references cannot be provided for GDPR reasons, this is wholly misconceived. Agents obtain references on behalf of their clients and they belong to those landlords. In fact when agents obtain these references they do so as data processors and it is the landlord that is the data controller for GDPR purposes. This means that agents are freed from many of the ordinary responsibilities for data protection that apply in this scenario. 

Read more about data processors and controllers and their respective roles in data protection.

Furthermore, having paid for the references a landlord is entitled to them not only to be confident about the person renting their property but also to ensure that the references have been obtained in the first instance. 

Finally, an agent can pass over data for processing by the landlord if it falls within the legitimate interests processing basis under the GDPR. Clearly, it is a legitimate interest of the landlord to have a copy of the references belonging to the tenant because they will have an interest in the identity of the person occupying their property as well as their ability to meet the tenancy obligations.

Gurdeep Clair
In-house Legal Counsel

The Tenant Eviction Ban: What you need to know (Update 11th March)

by Aaron CostelloPosted on

11th March 2021 – Update

Yesterday the government announced further support for tenants by extending the bailiff enforced eviction ban and Six-month notice periods until atleast the 31st May. Exceptions to the ban continue, with regards to anti-social behaviour and fraud.

Read the latest government press release here.

How Howsy can help protect landlords during this period

Howsy Protect is one of our comprehensive property management plans. It includes guaranteed rent protection, so your rental income is secure during the most challenging of times.

As an example, some of our landlords who are subscribed to our protect plan, have been able to support renters facing difficult situations over the past 12 months, without impacting their own financial wellbeing.

Howsy Protect also includes appliance and home emergency cover. Check out more here.

Speak to one of the Howsy team, give us a call on 0330 999 1234 or email us and we can begin the process of getting your rent protected.

14th February 2021 – Update

Over the weekend the Ministry of Housing, Communities and Local Government has announced an extension to the ban of bailiff evictions. 

The ban was introduced as a result of the pandemic and was originally due to end in January this year however, it was extended to February and now it has been extended for a third time to 31st March. The announcement can be read here. https://www.gov.uk/government/news/housing-secretary-extends-support-for-renters-during-pandemic

At present all we know is that which is included in the press release. However, regulations are expected in the early part of this week. We will update this post as soon as more information is available. 

In the meantime for those that are concerned about this extension, it is important to note that there are exemptions to the ban and they are expected to continue. Unless there is a change the current exemptions include illegal occupation, anti-social behaviour and arrears of 6 months’ rent or more.

The courts are likely to continue prioritising possession claims where there is anti social behaviour, illegal occupation or domestic abuse. Landlords will also continue to be offered the government free mediation pilot to support them and their tenants to resolve disputes before a formal court hearing takes place. 

16th October 2020 – Update

The tenant eviction ban has been in force over the past five months to protect tenants from being evicted by their landlords throughout the coronavirus pandemic. Many individuals are facing financial hardship and struggling to keep up with rental payments due to job losses and a reduction in salary due to being furloughed. Before the ban, many tenants were at risk of eviction from their homes and the government has sought to protect tenants with this initiative.  The English government has also announced that landlords will need to give tenants six months notice of eviction until the end of March 2021. Housing Secretary Robert Jenrick said this is to help protect tenants through the winter months but will keep these measures under review. 

Yet, where there are cases of anti-social behaviour or domestic abuse, this will not apply. Once courts open, they will then priortise those cases and where landlords have not received rent for over a year. 

Our advice to tenants

  • If you are having difficulty paying your rent, speak to your landlord asap and try to come to some arrangement. At least let them know the situation so they can be clear and understand what you’re going through. 
  • If you’re receiving housing benefit or Universal credit currently and unable to be furloughed, you may be able to get a discretionary housing payment from the council. 

What this means for landlords

Although the eviction ban supports tenants, it has left numerous landlords without rental income. Some landlords have said this “blanket approach” is unacceptable. Each landlord is different and in different circumstances. Some landlords may be renters themselves and rely on renting their property out to cover the mortgage for the property they currently live in. Some landlords rely on this income for their pension and financial stability. Ben Beadle, Chief Executive of the National Residential Landlords Association said, “Private landlords cannot be expected to foot the bill for government failure.”

Landlords also need to be given some way to have their income protected if tenants can’t pay their rent. Yet currently, there is no government support available. In some cases, landlords are able to have buy to let mortgage payment breaks but this can impact on landlords looking to get buy to let mortgages further down the line.

Although the current situation we’re facing is no fault of the nation’s tenants, it is simply unfair to expect landlords as the backbone of the rental market to foot the bill for unpaid rent. Not only has the ban been extended but landlords must now face an increased eviction notice period before they can even commence court proceedings. 

With such an unprecedented backlog, there will no doubt be sizable delays that could see landlords face an even longer wait before they can reclaim their bricks and mortar investment. As a result, some could be facing in excess of a year without any rental income.

The Government is yet to provide any form of help other than the rather pitiful buy-to-let mortgage holiday which, in some cases, can impact a landlord’s financial credentials further down the line.

EICR | Electrical Installation Condition Report | What You Need To Know

by Asif AliPosted on

One of the main causes of electrical fires in the home is faulty and/or old wiring. Landlords can directly reduce the risk of a fire damaging or even destroying their property by regularly checking the condition of the wiring, fuse board, etc. This is where an electrical condition report (EICR) comes in.

Part of HMO and Scottish landlord’s safety checklist for years, EICRs are nothing new, however a recent change in legislation has now switched on the legal requirement for all landlords in England too, no matter the size of your property.

What is an EICR?

An EICR is the document issued, following an in-depth inspection and test to check the condition of the electrical installations (electrical outlets, wiring and consumer units) in a property against the national safety standard for electrical installations. It also picks up any potential safety issues. Think of it as a MOT for the electrics, if you will.

The checks must be carried out by a professional electrician, and the EICR issued by them. If passed, an EICR gives the green light to keep using the electrics in the property as they are. Which explains why they’re often asked for at the start of a new rental tenancy.

Any faults will be listed on the report, along with an explanation of why that electrical system failed the EICR. The faults will also be graded:

  • Code 1 or C1 means ‘Danger is present’, risk of injury is likely and IMMEDIATE action is required. The electrician will fix these there and then or at least make them safe before arranging to return to correct them.
  • C2 means ‘potentially dangerous’ and remedial action is needed urgently, which the electrician can quote for.
  • C3 means improvement to your electrical system is recommended, but not required because they see it’s safe. It’s the only code that can appear on a report that’s passed the EICR test.

Make sure your electrician is correctly qualified. They should be NIC EIC-accredited at approved contractor level. Or approved by another electrical regulatory body at a similar or higher level, which you can easily check on the Electrical Safety Register.

How much do they cost?

The cost of an electrical safety check depends very much on the size of your property – there is no simple one-price-fits-all answer. You can expect to pay anywhere from £160 for a one bedroom flat, rising to around £250 for a five-bedroom property. Of course, the larger the property, the higher the price tag. Your engineer will have to closely examine the safety of cover all electrical outlets, wiring and consumer units, so the price reflects the hard work that goes in to producing this important safety document.

What is tested?

In general, your electrician will check that:

  • your fuse board is safe and compliant with the current regulations.
  • Everything is correctly earthed – to prevent potentially fatal electric shock.
  • The wiring in your sockets, lights, switches and accessories is installed correctly.

What if there’s an issue?

If your engineer’s report flags up any issues with the electrical condition of your property, you are duty bound to act immediately, to guarantee the safety of your tenants, and other residents in the property’s surrounding yours.

Work should be carried out quickly, by a qualified electrician to bring the property up to standard. The engineer should provide written evidence on completion, detailing the work that has been carried out, and that the required standards have now been met. Once you have this evidence in writing, you should provide it to your tenants as proof that the property is now safe, and meeting all of the appropriate requirements.

Local authorities have the power to arrange remedial action is repairs and improvements are not acted on swiftly, you have up to 28 days to get work underway. Failure to do this can lead to the council carrying out emergency remedial work on the property on the landlord’s behalf, and presenting the landlord with the bill!

Is an EICR a legal requirement?

Landlords in Scotland, and HMO landlords across the UK will already be familiar with the requirements to carry out EICR checks. However. Following a change to the law this month, the new Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 states that it is now a legal requirement for all rented properties in England to have a valid Electrical Condition report in place from July 1st 2020 at the start of a new tenancy.

Just as you would a gas safety check, you must ensure that your property has undergone a complete inspection, by a compliant engineer, and the relevant paperwork is supplied to all of your new tenants before they occupy the property. Subsequent checks must be supplied to all tenants within 28 days of completion. Once complete, the check is valid for five years, and can be supplied to subsequent tenants. There is no need to have a new check at the start of each new tenancy (within the five years validity window).

By April 1st 2021, the rules will apply to all tenancies, new or existing. If you have tenants in situ, you must still ensure that you carry our an EICR check, and supply the documentation to them within 28 days of the check being completed.

It is worth noting that if a prospective tenant requests a copy of the EICR, you must also provide this within 28 days. Additionally, if your local authority requests a copy, you only have a seven day window in which to provide them with the relevant documentation.

What are the penalties for failing to comply?

Failing to comply with the new regulations could hit landlords hard.

After 1st July, if you do not carry out an EICR before a tenancy commences, you could find yourself facing a hefty fine of up to £30,000, issued by your local Housing Authority.

How often does it need to be done?

There are no strict guidelines. Both campaigning charity Electrical Safety First and the Institution of Electrical Engineers recommend that private landlords get a new EICR done with every change of occupancy, or every five years, whichever is soonest.

Tenant Referencing – why it’s important

by Asif AliPosted on

Tenant referencing is very important, even if you’re renting to people you know. It protects both parties and helps you be sure you’re making a wise decision. Why? Because it flags potential problems, such as historic missed rental payments or poor credit, before you’ve signed a tenancy agreement.

Until recently, the cost of referencing potential tenants was passed to the tenants themselves. Not any more.

Since the tenancy fee ban came into force 1 June 2019, landlords and estate agents now need to cover the cost of doing background checks on prospective tenants.

Because the ban is new, some landlords may inadvertently – or deliberately – skip this step. But frankly, this is asking for trouble!

‘Nightmare’ tenant stories

The internet offers up plenty of landlord horror stories, such as the landlady in Hull who was forced to pay £300 for her tenant to leave, despite them leaving the property in an awful state, with holes in the walls and floors and rotting food strewn all over.

The tenant said she had housing benefit that would pay the landlady, but it turns out she wasn’t entitled to it and the landlady wasn’t paid a penny throughout the entire tenancy.

Then there’s the chap who caused £12,000 worth of damage to the property after a dispute about an electric meter.

Not even celebrity landlords are exempt from terrible tenants. Two years ago, English footballer Frank Lampard rented his £2 million London property to a woman who openly began using his basement for unlawful activities.

What should you be checking?

Financial Reliability

This will check whether your property falls into the affordability bracket for the prospective tenant, and whether their outgoings each month are consistently more than their income.

Scanning credit reports and credit history for CCJs or payment defaults

If a prospective tenant hasn’t been able to keep up with credit, loan or bill repayments this would raise a red flag.

Employment status

Confirmation of your new tenant’s employment status with confirmation of their contract type and/or length.

Tenancy track record

If your tenant is moving from another rented property it is important to ask for landlord references. Landlords tend to look out for each other, so if a tenant is to be avoided, a previous landlord is likely to let you know!

All these checks and reports will help you make an informed decision about the suitability of your new tenant.

If your prospective tenant raises a red flag in any of these checks it may be an immediate ‘no thanks’. You could also consider a guarantor if your worries are on a strictly financial basis.

It’s also important to remember that if you are taking out Rent Guarantee Insurance the policy will include that a tenant has passed affordability, proof of earnings, credit score and CCJ checks.

Regular property inspections

As well as all the credit and referencing checks that you should do at the start of the tenancy you should make sure you do regular property inspections.

This will make sure everything is being kept clean and in good working order, and that the property is not being used for something outside the terms of the tenancy agreement such as running a business.

The Howsy tenant referencing service

The good news is, such stress (and money drains) can easily be avoided. Unlike some traditional letting agents that charge an additional fee to vet prospective tenants, it’s included in both Howsy’s Standard, and Protect Plans.

From just £35 a month (or £65 in London) we do industry-standard credit checks and references on your tenants.

Usually all of this is done fast  – in under 72 hours. And our smart technology and experienced reference team will flag up fraudulent tenancy applications and misleading information within that time, too.

Always check the facts – or at least let us help you check them – and enjoy the benefits of having good tenants.

Smoke Alarms and Carbon Monoxide Detectors in Rental Properties

by Asif AliPosted on

Putting solid safety measures in place is good for everyone. Both landlords and tenants can sleep well at night knowing there are working safety alarms in their property that will warn of any danger.

There’s no doubt about it; working alarms save lives. If there was a fire in your home, it’s said you’re at least four times more likely to die if there’s no working smoke alarm.

Since the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 came into force on 1 October 2015, it’s a legal requirement for private landlords in England to fit smoke and carbon monoxide alarms. This means privately rented properties are now in line with building regulations that require newly-built homes to have hard-wired smoke alarms fitted.

Are smoke and carbon monoxide alarms the landlord’s responsibility?

Yes, and no. Yes, the landlord has to make sure the alarms are working on the first day of the tenancy (even if the tenant decides to move in after that date). After that, it’s the responsibility of the tenants to check – ideally every month – they’re working properly.

Is it illegal not to have a smoke and carbon monoxide alarms?

Yes, it is.

Are there penalties?

Fail to install smoke alarms and carbon monoxide detectors and landlords in England could face up to a £5,000 civil penalty, imposed by the local housing authority. If they disagree with the penalty charge notice, they can ask the relevant local authority to review it.

At worst, landlords may go to prison for breaking the law. A landmark British case in 2018 saw a landlord jailed for a year following the death of two young brothers from a fire in a Huddersfield home that his property company managed.

The West Yorkshire Police Detective Superintendent dealing with the tragedy said: “We hope that this case is a stark reminder to landlords and letting agents to treat their responsibilities seriously and they have an obligation to ensure that all properties are fully equipped with all adequate safety measures to ensure the safety of their tenants.”

Where should the alarms be placed?

The regulations don’t state where the alarms should be go, just that at least one smoke alarm should be on every storey, and a carbon monoxide alarm in every room with a solid fuel-burning appliance in it, such as an open fire. A purely decorative fireplace doesn’t count.

However, as gas appliances can emit carbon monoxide, we encourage landlords to ensure that working carbon monoxide alarms are installed in any room with a gas appliance in it.

In general, smoke alarms are best fixed to the ceiling in a hallway or a landing, and carbon monoxide alarms at head height, either on a wall or shelf, about one to three metres from a potential source of carbon monoxide.

London Fire Brigade strongly recommend an additional heat detector in the kitchen.Your local fire and rescue authority may be able to offer extra advice, or you can download fire safety information from www.gov.uk/firekills.

Do rental properties need hard-wired smoke alarms?

The regulations don’t specify what type of alarm should be fitted. That said, Howsy believes the best option would be a hard-wired type. If opting for stand-alone ones, we recommended getting the models with a 10-year battery life.

If the occupier shares the accommodation with the landlord or landlord’s family, the 2015 regulations don’t apply.

Tenancy Deposit Schemes – What Landlords need to know

by Asif AliPosted on

Landlords and letting agents that rent a private property on an assured shorthold tenancy have to protect their tenants’ deposits in a government-backed tenancy deposit scheme. It’s the law, and it protects you too.

What is a tenancy deposit protection scheme (TDP)?

A tenancy deposit protection scheme has two main roles: to protect deposits in an authorised scheme, and to help resolve disputes about deposits.

What are the schemes I can use?

In England and Wales a deposit can be registered with one of these schemes:

They’re quick to join if you opt for what’s called custodial protection, where the deposit is held by the scheme provider for the duration of the tenancy. The other option is insured protection, where the landlord and the agent holds the deposit and the TDP scheme to protect it.

And while there are other schemes you could use, only the three above are protected in law. Other schemes won’t give the same level of protection for either landlords or tenants.

Does a landlord have to put deposit in a scheme?

Yes; as of 1 June 2019 it’s a legal requirement. You have to use a TDP even if a deposit is paid by someone other than the tenant, such as their parents. And you have to pay it in within 30 days of receiving it. Within that time, you must also tell your tenant:

  • the address of the rental property
  • how much deposit they’ve paid
  • how their deposit is protected
  • the name and contact details of the TDP scheme and its dispute resolution service
  • your (or the letting agency’s) name and contact details
  • the name and contact details of any third party that’s paid the deposit
  • why you would keep some or all of the deposit
  • how to apply to get the deposit back
  • what to do if they can’t get hold of you at the end of the tenancy
  • what to do if there’s a dispute over the deposit.

You don’t need an inventory to join a TDP but it can be helpful to have one anyway. It could help resolve any dispute that may arise at the end of a tenancy.

How can a tenant check if their deposit has been secured?

By visiting the website of the scheme their deposit is protected with and entering a few details, such as a code (provided by the landlord or letting agent), postcode, surname and/or the date the tenancy started. The details asked for differ from scheme to scheme but are all straightforward.

What are the benefits for landlords?

It allows them to have money as security should a tenant break the terms of the tenancy agreement.

What are the benefits for tenants?

They’ll get their deposit money back if, at the end of the tenancy, they:

  • meet the terms of their tenancy agreement
  • haven’t damaged the property
  • paid the rent and all bills in full.

Landlords must return a deposit within 10 days of agreeing with the tenant(s) how much they’ll get back.

How much deposit can a landlord ask for?

Landlords in England cannot legally ask for more than the equivalent of five weeks’ rent for new and renewed tenancies — or six weeks if the annual rent is at least £50,000.

What happens if you don’t protect a deposit?

A tenant can apply to the local county court if a landlord hasn’t used a TDP scheme when they should have.

Penalties include:

  • repaying the deposit in full to the tenant
  • paying it into a TDP scheme’s bank account within 14 days
  • a fine between one and three times the deposit amount, payable to the tenant
  • you may also lose the ability to get a court order to regain possession of the property (under a Section 21 notice of the Housing Act 1988). The landlord can only serve a Section 21 eviction notice after the deposit has been repaid, or after any court case about the deposit is over.

The court can decide that the tenant won’t have to leave the property when the tenancy ends.

What can a landlord deduct from a deposit?

The landlord or agent can take a payment from the deposit if:

  • both landlord and tenant have agreed
  • the court has ordered the deposit to be paid.

How are deposit disputes handled?

If there’s a disagreement about how much money should be given back, your tenancy deposit protection scheme offers a free dispute resolution service.

Your not obliged to use the service, but if you do, both tenant and landlord have to agree to it. You’ll both be asked to provide evidence, and the decision made about a deposit will be final. There’ll be no right to appeal. The entire process can be handled completely online. The alternative? Go through the courts.On a final note, the law requires your TDP scheme to guarantee only that the tenant receives the amount they’re entitled to. No more, no less.

Howsy uses MyDeposits.co.uk, a scheme authorised by the British Government that protects tenants’ money across England and Wales.

Tenant Fee Ban – What Does it Mean for Landlords?

by Asif AliPosted on

The new Tenant Fee Ban now effects all residential landlords in England. Whether you know much about it or not, landlords can’t afford to ignore the new legislation. Those who do risk facing a big fine. Here’s what you need to know…

What is the Tenant Fee Ban?

The Tenants Fee Act 2019 came into effect 1 June, making it now illegal to charge unfair additional fees — such as an admin fee — to tenants when they take on a new property, or renew a contract.

The ban automatically applies to all new contracts signed after 1 June 2019. From 1 June 2020 it will apply to all other applicable tenancy contracts too.

Why has the Tenant Fee Ban been introduced?

To make renting fairer for private tenants who for too long were being charged unfair fees each time they went to rent a new property.

Private renters in England — including families with dependent children — have been paying £13 million a month in letting fees, says Citizens Advice. One in seven tenants paid over £700, while one shelled out over £2000 for the privilege of moving into one property! 

The old ‘system’ was especially harsh on those forced to look for a new place because their landlord was selling up. In other words, it wasn’t their choice to move.

When landlords use a traditional letting agent to let out their property, the agent would charge to cover the purported costs of credit checks, referencing and drawing up the tenancy agreement, for example. Charges could also include a mandatory inventory fee, contract renewal fee, and an ‘admin fee’.

With so many people moving home every year, such fees could put a huge strain of families and individuals. Research by the Citizens’ Advice Bureau reveals that 42% of renters had to borrow money just to pay their tenant fees.

What does the tenant fee ban mean for landlords?

The government estimates that in its first year it could cost landlords up to £83m, and letting agents £157m.

What’s certain is that landlords cannot now lawfully charge:

  • Viewing fees 
  • All fees associated with setting up a tenancy, including referencing, inventory and credit checks
  • Check-out fees 
  • Third party fees 
  • Gardening services.

You can, however, charge for:

  • Rent
  • A refundable tenancy deposit (maximum five weeks’ rent, or six if the annual is £50,000 or more)
  • A holding deposit (capped at one week’s rent)
  • Replacing lost keys
  • Any changes the tenant asks to be made to the contract (capped at £50)
  • Bills, such as council tax, water, broadband, TV licence
  • Ending the contract early
  • Late rent payments (after 14 days, and only if written in the contract)
  • Cleaning fees in extreme circumstances.

Tenant fees account for about 19% of a letting agent’s income, with some agencies reporting as much as 30% of their annual income from tenant fees alone. Agents will look to recover this by increasing the fees they charge the landlords.

While many have argued that the landlord will in turn increase the rent they charge, there’s evidence this may not happen. The ban was introduced in Scotland in 2012,  yet only 2% of Scottish landlords were able to put up their rents because of the fee ban. Which means the hit is to be absorbed between landlords and letting agents. 

Experts agree that the most likely outcomes for landlords now are:

  • Face longer void periods because they increased rents to cover costs
  • Cut back on making improvements, which will see them unable to raise the rent or attract better-quality tenants
  • Decide to ‘self-manage’ their properties rather than use an agent, which will see many landlords struggling to stay abreast of property rules.

In Wales, agents and landlords will be banned from charging for viewings, signing a contract or renewing a tenancy from September. Northern Ireland have yet to announce a ban on tenant fees.

What is the risk of non-compliance?

Landlords and lettings agents who ignore the ban face an initial fine of up to £5,000. Those committing another breach within five years may be fined a maximum of an extra £30,000, and may possibly be taken to court.

The changes aren’t retrospective, so landlords and agents will not be penalised for fees already paid. They do, however, apply to all landlords, even those who only own one property.

Howsy — the smarter solution

We started Howsy to provide a fairer, kinder lettings service for both landlords and tenants. This is why we don’t charge our landlords or our tenants for:

  • advertising the property on big property search websites
  • referencing and credit checks
  • arranging viewings, or
  • drafting and renewing contracts. 

And we don’t take any ‘admin fees’ either. This was true before the new ban.

In fact, Howsy landlords don’t pay a thing until AFTER the tenants have moved in. And our tenants don’t pay anything besides their rent and deposit.

We offer a complete property management service for just £35 a month anywhere in England, and £55pm inside the M25. As a landlord, you’ll be completely covered for repairs, inspections and rent collections. And even for the eventuality that you’ll need new tenants.

For savvy landlords, this is the time to start looking around for better alternatives to your letting agent. Unlike Howsy’s model, getting out of a contract with a traditional letting agent can take up to six months. 

So, waiting until the last moment to start shopping around could mean facing the double impact of increased letting agent fees and the next Section 24 increase. Act now and protect your profits.

To find out more about what we can do for landlords, email us or call us on 0330 999 1234 today.

8 Questions Every First-Time Buy-to-Let Buyer Needs to Ask

by Asif AliPosted on

Like the idea of being a landlord? Owning a buy-to-let property can still be a great investment – if do your research. With new landlords facing more risks than ever, it’s vital to get clear on what’s going to work best for you.

Buy-to-let means buying a property for tenants, not you, to live in. As the landlord, you make money from the rent – as long as it’s higher than the monthly buy-to-let mortgage repayments, of course – and/or when you come to sell the place.

Here are the key questions we recommend you ask yourself when planning a successful rental property investment.

1, Where do I buy?

Location is every bit as important in a buy-to-let property search as it is when buying your own home. “Invest locally” is our advice to first-time buy-to-letters. You know the market well, and it will be easy to meet prospective tenants and keep an eye on your investment. All of which means more peace of mind.

Location is every bit as important in a buy-to-let property search as it is when buying your own home. “Invest locally” is our advice to first-time buy-to-letters. You know the market well, and it will be easy to meet prospective tenants and keep an eye on your investment. All of which means more peace of mind.

That said, certain areas, especially in England, are dependably strong renters markets. University cities, for example, with thousands of students, like Edinburgh, Liverpool, Leeds, Swansea, and Manchester, promise some of the UK’s highest rental yields (see question no.7). The consistent influx of new students every year are a big draw for landlords.

When you’ve chosen an area to focus on, get on the phone to local letting agents. They’ll know what kind of properties are most in demand, the average house prices, and what they rent for.

2, New build or an older property?

Modernised homes typically rent out quicker than older ones. All new builds in the UK are covered by a 10-year home warranty and insurance guarantee that protects the owner against all sorts of issues, including construction problems.

In the first two years, any faults that don’t meet the warranty provider’s technical requirements have to be corrected by the builder. You won’t pay a penny. After that, the warranty covers you against certain structural defects and smaller issues, such as the double-glazing, internal plastering, and the staircase.

While older properties are likely to be cheaper, they may need money spent on them to get them into a rentable state. On the plus side, places that need improvement present you with an opportunity to renovate them cheaply and quickly boost the value of your investment.

3, Flat or house?

It depends on the level of stress you can handle. A house will probably have more potential maintenance and repair demands because it has external walls and a roof. But a flat will have ongoing service charges. Make sure you know what they are, and whether they’re likely to go up, and when. The most popular type of property in rental areas is a two-bed flat.

4, Who do I want as tenants?

Who you have in your property not only directly impacts how easy – or not – being a landlord is, but all of your plans. Many lenders, for example, put restrictions on mortgages for student properties.

Who do you see as your ideal tenants? What are their needs? If it’s students, they’ll want a good value, non-plush place close to their university, while young professionals tend to prefer somewhere modern, airy and stylish.

A family will typically need to be near a good school and have space and plenty of storage for their belongings, as well as the freedom to put their mark on the property and make it their home. The more at home they feel, the longer they’re likely to stay, which is good news for you.

It’s very important to do reference checks on all prospective tenants to avoid trouble down the line. Skip this step at your peril.

5, What are the transport links like?

If you’re planning to buy in or around London, or any city for that matter, research the local transport links. Easy access to public transport, especially the Tube in London, will be a big selling point. Like buyers, renters are willing to pay more to live near a public transport station.

Are there new transport infrastructure projects being discussed? They’re likely to spark a sharp upward trend in (sales and) rental prices for you. Get in as early as you can.

6, How low can I go?

As a buy-to-let investor know that you’re in a strong position to negotiate a discount on the property price. Just like a first-time buyer, you’re not in a chain, and that’s very attractive to a seller. So haggle hard on sale prices and don’t feel you need to love a property. You aren’t going to live there – it’s an investment.

7, What’s the rental yield and affordability?

Do the maths thoroughly before you start your search in earnest. Figure out what your monthly rental yield will be – that’s the income you’d make on a property expressed as a percentage on the building’s value. As a benchmark, 5% a year is considered a good rental yield.

Your mortgage application will also consider affordability. In other words, whether you can keep up with mortgage payments while the property is empty. As a rule of thumb, it’s smart to budget for a place being empty for at least two months in any 12. Consider all costs, such as agent fees, stamp duty, repairs, etc., when working out the affordability.

8, What capital gains might I get?

Although you’re initially looking at rental income as your key return on investment, long term capital gains and property price increases can be very nice too. So invest in up and coming areas.

Word of warning: buy-to-let properties are not exempt from capital gains tax (CGT), due on any increase in value when you come to sell. CGT is paid at 18% or 28%, depending on your tax bracket. Other profit-eating costs you’ll face include insurance premium tax, and an extra 3% on stamp duty.

Property investing still makes people money. Sometimes a lot.Talk to those who’ve done well and ask them for tips, and which pitfalls to avoid.

Going in with your eyes wide open like this will boost your chances of securing a successful buy-to-let investment. Good luck!