Landlords – Deposit laws will bite you if you don’t do it right

Monopoly HouseLandlords Need to be Aware of Deposit Legislation

In Property Eye today Rosalind Renshaw reported an industry scandal about deposits. In fact four in every ten landlords who called Landlords Action’s legal helpline have broken the law by failing to protect tenants’ deposits.

Since 2007 Landlords and Letting Agents have been required by law to protect tenant’s deposits using a government-recognised scheme within 30 days of the tenancy start date. In addition there is a requirement to issue the tenant with Proscribed Information so that they know where their deposit is, and how to retrieve it at the end of the tenancy.

The Penalties for Not Protecting Tenants’ Deposits

Where the deposit is not protected Landlords can face penalties of up to three times the value of the deposit, which is then awarded to the tenant. Less well known is that landlords may still face penalties even if they used an agent, if their agent failed to comply with the legislation.

In addition to the possible fines, where a landlord wishes to gain possession of a property through Section 21 they will be unable to do so unless and until the deposit is legally protected. A court order for possession cannot be granted without proof that the deposit is protected in a recognised scheme, and may be refused if the deposit was not protected when it should have been.

The founder of Landlord Action, Paul Shamplina commented: “There are too many landlords that still do not know enough about being a landlord and their responsibilities.

Many are failing to comply with deposit protection rules and this is having a knock-on effect when landlords wish to evict through Section 21. The simple fact is, ignorance will not solve the problem.”

Landlord Action are seeing more landlords contacting them because of legal action being taken against them by tenants for not protecting the deposit. Tenants appear to be becoming increasingly aware of the legal situation where many landlords are still in the dark.

The problem is that many landlords will struggle to find a solicitor to act for them because the legislation is so straightforward, and there is no defence for not protecting the deposit. There is a really clear guideline for landlords about tenants’ deposits on the Government website.

The Property Eye article goes on to quote Eddie Hooker of MyDeposits who raises the point that not only should the deposit be protected but the tenant should be served with the Prescribed Information. He says “The majority of legal cases we see surround the incorrect issuing of the Prescribed Information, or failing to issue it at all.”

Is My Deposit Protected?

Riley Marshall ensures their clients stay within the law to protect their interests. However we are aware that some landlords do not know their obligations in regard to deposits. In fact we highlighted this issue in 2012 in our blog post – How Secure is Your Deposit? You can read that article here.

Don’t risk falling foul of the legislation on deposits. If you are unsure of the status of your deposit you can use this handy tool on the Shelter Website which will check whether your deposit is protected. You just need your postcode, tenancy start date and the amount of the deposit.

New licencing requirements for landlords in Newham

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Licencing of rental properties Newham could start a trend in the rental sector

Newham Landlords who rent out properties privately are the first in the country to face mandatory licensing which came into effect on the 1 January 2013.

Following a 10-week consultation on proposals to introduce a licensing scheme for all private landlords in the East London Borough, the scheme was approved by Councillors  making it a requirement for private landlords in Newham to show that they are “fit and proper persons”.

Landlords are now required to fill in an application form which allows the council to check the credit background of landlords as well as requiring them to provide proof of safety checks. Follow this link for more information from Newham Council, including a link to the form for licencing.

Newham Council ran a pilot scheme for 18 months prior to the Olympics charging £500 for a licence, or £300 for early applications.
The aim of the council is to improve the quality of private rented housing in the borough and eradicate so called ‘rogue landlords’ who do not take their obligations seriously. The discounted fee has been extended from the 1st January to the 31st January 2013 but it is unlikely to be further extended.

Newham mayor, Sir Robin Wales (above), said: “We want to ensure that private sector rented properties are well managed and meet a good standard.” He added “We also want to deal with the crime and anti-social behaviour that is sometimes associated with bad private sector rented housing,”

A national regulatory scheme to protect tenants was proposed by the previous Labour government after the Rugg Review, a reported on the private rented sector. The then government proposed plans to establish a national register of landlords, make written tenancy agreements compulsory and regulate letting and managing agents.

However, Coalition government housing minister Grant Shapps rejected the regulations as he believes the majority of England’s three million private tenants are happy with the conditions of their housing.

In 2010 he announced to landlord: “I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords.” Going on to promise “the government has no plans to create any burdensome red tape and bureaucracy.”

We would advise landlords who run their rental property as a business with the rights and responsibilities that incurs are unlikely to have any problems getting licenced by Newham or any other borough. Riley Marshall have noticed a marked increase in demand for new property in the rental sector over the last twelve months which is obviously good news for property developers, and investors. New properties are not likely to have any problems with licencing if it does come into effect more widely, but as long as your property is well maintained there is no reason you should have a problem even if it is an older building.

The Riley Marshall Blog intends to keep you up to date with property matters – why not check out our series on what you agent does for you click here to go to part 1 – Marketing.

House Prices are subject to the North – South divide

block-managementProperty prices rose and fell around Britain last year but the trend overall was downward. With already low interest rates and lenders being cautious many people will have to continue to rent as mortgages are out of their reach

According to the figures released by Nationwide this week house prices fell last year however this is not the story over the Great Britain as a whole.

While average house prices fell in the North of England, Wales and Scotland by around 3%, worse in Northern Ireland which suffered an Northern Ireland 8.2% fall, while property prices rose in London by 0.7%.

Commuter zones also benefited from a slight rise, and by 0.2% the in the South West. This is probably due to the higher employment rates in these areas.

Many tenants would like to buy but deposit requirements are making it impossible for them to do so. Taking an average first-time buyer property price of £140,000 requiring a 20% deposit which amounts to £28,000, this would require buyers to save £450 a month for five years, assuming an interest rate of 2.5%. Out of most people’s pockets we believe.

So it appears that renting is going to be the future for many young people in the UK, if they want to set up their own home.

For information on the properties we have available please visit our home page and fill in the search options.

New Council Tax Ruling is a ‘tax on Landlords’

Council tax relief may end on rental property depending on the local council

How will the new Council Tax regulations affect the Rental Market?

Rented property as Second Home 
If you own property that is rented you officially have a second home. If this property is furnished and empty for a period between tenancies, Local Councils have been obliged to offer discounts of between 10-50% on Council Tax, although in practice most councils only allowed a 10% reduction in fees.

This situation was already biased against the rental sector when you consider that a single occupier of a property can apply for a 25% reduction, but a Landlord could only get 10% relief.

Previous Legislation on Rented property and Council Tax
Previously if a rental property was empty and unfurnished there was no Council Tax due for six months, and after that period it could also qualify for up to 50% discount, as per the furnished property detailed above.

Second homes have long been controversial because owner non-occupiers have been accused of tying-up available living space while effectively draining the economy, by not being fully involved in the local community. However we argue that Landlords do not fall into this category. In fact they may be the only ones providing affordable housing in some areas of the country.

New Council Tax rates
New Government regulations announced last week, give responsibility to Local Councils for setting Council Tax discounts on second homes. As each Council comes under growing financial pressure it becomes increasingly likely that Councils will scrap any relief on Council Tax on second homes, and rental property.

While property undergoing major repair work or structural changes remains exempt from Council Tax bills for up to 12 months, each Local Council will chose what constitutes ‘major work’. It is unlikely to include upgrading heating systems, replacing windows, or redecorating – all of which responsible landlords will do periodically to protect their investment and to keep up the standard of housing.

No incentive for landlords to refurbish property
In a week where a landlord in Plymouth is in danger of getting an ASBO because of the condition of his properties, does this send out the right message to responsible landlords?

This new legislation does not take into consideration the financial pressures on private landlords who are often working on tight margins or indeed could be subsidising their investment now to gain long term benefits as ‘pension plans’ for the future. In effect they are being penalised for being fiscally responsible.

The Council housing sector is not able to place all the people who need to rent property, so if Councils put more pressure on private landlords they may decide to sell up and put their money elsewhere. After all being a landlord is not ‘easy money’.

Riley Marshall are Sales and Rental sector agents. Our blogs are intended to inform, and we welcome debate, please feel free to comment on this page or visit our Facebook page.

Gas Safety in rental property – What your agent does for you Part 6

Landlords: If you have gas appliances in your rental property they must be checked every year, and an annual Gas Safety Certificate issued by a Gas Safe engineer. We explore why you should use a letting/management agent?

Gas appliances must be checked by a Gas Safe Engineer

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How does your letting agent help?
Any gas installation and appliances in rented property should be safe. In the UK it is a legal requirement for landlords to have gas appliances checked by a Gas Safe engineer annually. Your Letting or Estate agent can arrange these inspections on your behalf. This can benefit you by finding the most competitive rates. They will liaise with tenants to get access to the property for workmen. Once the work is done the bills can typically be paid from the rent collected. Perhaps the most important role your managing agent plays is the keeping records of due dates and certification.

Letting and managing agents build up good relations with reputable local tradesmen and this often leads to these engineers giving priority to their agents when there is an emergency or urgent job to deal with. It is in their interests to make sure a bigger client like a letting/estate agent is happy in circumstances where they might keep an individual waiting.

Tenants are often not as patient as homeowners when it comes to repairs so this can be beneficial to landlords who value hanging onto their good tenants.

CORGI replaced by Gas Safe
The old approved registration for Gas installers was called CORGI, and many people still refer to it even though it been replaced by the Gas Safe Register. Any gas fitter in the UK, Guernsey, and Isle of Man must be on the register to work legally on gas installations and gas appliances. Any reputable agent will only allow any gas related work at your rental property to be carried out by a Gas Safe engineer. If your agent does not comply with this basic standard then they put you and themelves at risk of prosecution, in which case you should get yourself a new managing agent.

The engineer will test that the appliance is working safely and write a report on their findings. This will include any mandatory work, any recommended work, and an any notes for the future. If you are arranging an engineer yourself it is worth checking that they are Gas Safe registered (and not just claiming to be) you can check their credentials on the Gas Safe Register site here.

When to get your Gas Safety Certificate
Your letting agent should arrange your Gas Safety Certificate to be issued before you let your property. Do not leave it until the tenants move in. We understand this means you incur costs before the property is let but moving tenants into a potentially unsafe environment has legal implications for you as landlord and for your letting/management agent. You may have a valid Landlords Gas Safety Certificate already in place from a previous tenancy and this is perfectly acceptable. Your letting agent should have a copy for their own records. You do not need to have a gas safety inspection carried out at the beginning or end of each tenancy – just on an annual basis.

Renewing your Gas Safety Certificate when appliances are serviced saves you money
If you are not sure when to have appliances serviced and maintained, it is worth noting that although anniversaries of renewal are likely to be dictated by the first tenancy, it is actually a good idea to have gas appliances tested, serviced, and maintained in the spring and summer. That way if there are problems to be addressed the tenant will be less inconvenienced. Finding a reliable GasSafe engineer, with time to make repairs, will be much easier in the summer too. There is no problem with having two Landlords Gas Safety Certificates issued within a year if you decide to make your dates coincide, just don’t wait for longer than 12 months t have your safety certificate issued.

Remedial works – your agents role
If the engineer finds a gas appliance or installation is not safe he is obliged to disconnect it and place a warning sticker on it (like the one below), so the tenant cannot use it, until it is repaired. This can upset tenants and so it may be helpful for you to have a letting agent as a middleman to deal with their concerns.

One of the best ways to prevent this inconvenience to your tenant is to have the appliance serviced when you have it tested. This is most appropriate for gas boilers and fires. Many landlords assume that their appliance will be serviced as part of the fee, but actually it is more like a car MOT – the engineer is simply testing performance and not carrying out any maintenance work. Your managing agent can arrange to have the appliance serviced at the same time as the annual gas safety check, and it is often cheaper to have this done together, rather than on two separate visits.

Remedial works are tax deductible and any good managing agent will receive the bill on your behalf, deduct the amount from rent paid by the tenant and pay the contractor for you. Your letting agent will keep records and issue statements which you can use to fill in tax returns.

About Riley Marshall Limited
Riley Marshall are Estate agents who specialist in letting and management of properties in South East London. If you would like us to come out to discuss managing your property around Greenwich, Shad Thames, Bermondsey, Rotherhithe, Deptford, Lewisham or New Cross areas then please do contact us for a free valuation. For other blogs on matters relating to property please visit our main blog page.

What your agent does for you – Part 5 Feedback

The benefit of the feedback you get from your agent cannot be overestimated. Agents spend their days talking with tenants so they know exactly what tenants want and can quickly react to trends in the market. Fluctuations in the market occur for a number of reasons throughout the year, (which could be the subject of another blog) and a good agent is an excellent tool for measuring demand. This blog explores how best to utilise this valuable resource.

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Your agent should give you regular feedback on viewings at your property. Make time for them to do this for you, tell them what methods of contact you prefer and when you like to be contacted. Some landlords like to be called each time we visit and others prefer a quick email, some want a weekly roundup.

You can do your part by remaining receptive to what your agent is telling you. It is much easier for an agent to advise you if you are clear about what you are, and are not, prepared to consider in respect of tenants’ requests. These may include: removing or providing furnishings; negotiating on rent; agreeing move-in dates; and improving décor and maintaining the property.

It might help for you to have a best scenario in mind, and an idea of your lowest limits. For instance the table below shows what you would really want, but gives the agent an idea of what you might be able to accommodate if a tenant requests it. You don’t have to prepare it in such a formal way but it might help you to list them in a way that you find appropriate, and then discuss the points with your agent. Don’t forget to keep re-evaluating this throughout the process if things change.

Best Will accept Will not accept
Rent £1000 per month £900 per month Less than £880 per month
Professional tenant students with guarantor students without guarantor DSS tenants
Furnished as it is removing any furniture apart from the beds adding furniture or removing the beds
Décor as is Painting the living room and kitchen and external paintwork Painting any other areas or replacing windows/doors
Move in 1st December 2 week lead time More than a month lead time without increasing the rent

If you have laid out your wishes to your agent in this way they will still bring offers to you – indeed they are obliged to put offers forward, however they will have been able to negotiate ‘best terms’ offers with the prospective tenants based on your wishes, before approaching you. This should save a lot of time for you and the tenant, and allows us to act more efficiently as your agent.

See more in our series of Blogs on What your agent does for you

What your agent does for you – Part 1 Marketing

We like to blog in series – giving our clients information in bite sized pieces that they can easily digest. In our latest planned group of blogs we are going to look at the role that the agent plays in … Continue reading →

 

What your agent does for you – Part 3 Getting References

In our previous posts we looked at marketing and finding a suitable tenant

We are now going to look into the next step, which is to obtain the references. At this stage we will have already met the tenant and discussed their requirements and their background to ensure it meets your requirements as a landlord. Now we need to formally confirm this and to ensure that the tenant is likely to be able to afford the rent.

Obtaining references

While it could be argued that finding a tenant is relatively easy in London where population levels are high and decent property can soon be let if the landlord will accept the first offer. The agent’s job is to find the right tenant for the property. This is built up from a number of indicators including the impressions the tenant gives when dealing with the agent; their demeanor and attitude; their credit rating; previous landlords’ references and employer’s reference.

We use specialist referencing companies who are able to concentrate on getting financial and employment information quickly. This is an efficient way of building up a tenants profile, plus they can also offer a range of rent guarantee products to our clients. This is an improvement on trying to contact each of the references yourself, chasing people up and trying to speak to the right person all of which can take up valuable time at times that you are trying to work yourself.

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Occasionally tenants do not fit into the boxes that mark out the perfect tenant but with some background digging and gathering other financial information about the tenants it may be possible to satisfy the landlord that the tenant is a genuine case. It is in these cases that a good agent can really earn their keep by using all their experience to rule out poor tenants and include good ones.

Obviously if it turns out that the tenant is not going to be a good risk then we advise the landlord who is likely to then make the decision not to proceed with at tenant. Again this avoids a confrontation for you as landlord as we are used to handling this process in a professional manner – to avoid personal conflict.

Negotiating

We are addressing this out of order as the negotiating is done prior to the reference procedure, but it ties in to the last point about personal confrontation. Many landlords struggle to negotiate a good deal find because they find it stressful as tenants haggle for the best terms they can get. Using an agent imparts an emotional distance to these negotiations and often results in a better deal for the landlord.

In our next post we will look at the legal paperwork surrounding tenancies and how your agent can help you with these.

Part 4 will come out next week.