We have previously provided updates on the big headlines under the proposed Renters Rights Bill (“the Bill”), and the proposed amendments to Section 8 grounds. However, this article intends to give an overview of the additional duties and clauses that the Bill contains that, if implemented, will govern landlords and letting agents, and the consequences of being non-compliant with such duties.
Unlawful eviction
Currently, under the Protection from Eviction Act 1977, landlords can be criminally convicted for unlawful eviction. This will remain, however the Bill proposes to make it possible for local authorities to impose a civil financial penalty where the Protection from Eviction Act 1977 is breached, in the alternative to a criminal conviction. The maximum financial penalty proposed for unlawful eviction is £40,000.
Deposit protection
It is mandatory that a deposit taken in connection with an assured shorthold tenancy must be protected in accordance with the Housing Act 2004. However, currently if a deposit is not correctly protected, a Section 8 notice can still be served and relied upon. The Bill proposed that if a deposit is not correctly protected, a Section 8 notice will not be able to be validly served until the deposit is either protected correctly or returned.
Prohibited actions when letting a property and serving Section 8 notices
The Bill introduces actions that a landlord or letting agent cannot do, for example:
- Purporting to let a property on a fixed term (as fixed terms will be abolished under the Bill)
- Ending the tenancy by giving a notice to quit as opposed to a Section 8 notice
- Giving notice to end a tenancy orally as opposed to in writing
- Serving any notice for possession that does not comply with Section 8 (i.e. not using the correct form, not specifying the ground, incorrectly completing the correct form)
- Specifying a ground that you do not have an objective belief that you can successfully obtain possession under that ground
Where a former or current landlord has failed to comply with any of the above, a local housing authority can impose a fine of up to £7,000 if they are satisfied beyond reasonable doubt that the landlord committed a breach.
Where a landlord or agent relies on a ground for possession, knowing that the landlord would not be able to obtain an order for possession on that ground, and the tenant surrenders the tenancy within the period of four months without an order for possession, this will be a criminal offence, or alternatively, a fine of up to £40,000 may be imposed.
Where a landlord or their agent is a corporate entity, and a member of the corporate entity consents or colludes in the commission of the above offence by the corporate entity, both the member of the corporate entity and the corporate entity can be liable for the above penalties or prosecution.
Restricted period after possession is recovered due to the landlord selling the property, or a landlord or their family member moving in
When using Section 8 grounds 1 or 1A to obtain possession (selling the property or a landlord or their family member moving into the property), landlords and agents must conduct themselves carefully for 12 months after possession is obtained, which will be known as the restricted period.
In the restricted period, landlords cannot:
- Let or market the property for a term of 21 years or less; or
- Give or market the property for a licence to occupy; or
- Authorise anyone else to market the property for let or licence.
The exceptions to this in respect of Ground 1, are where the tenant or licensee is a person mentioned in Ground 1, or that person also occupies the property as their only or principle home. The exceptions to this in respect of Ground 1A, are where the licensee has agreed to purchase the landlord’s interest in anticipation of purchase, or the licensee has agreed to the landlord granting them a lease and the licence is granted in anticipation.
Where a landlord or agent breaches these marketing restrictions, this will be a criminal offence, or alternatively, a fine of up to £40,000 may be imposed.
Where a landlord or their agent is a corporate entity, and a member of the corporate entity consents or colludes in the commission of the above offence by the corporate entity, both the member of the corporate entity and the corporate entity can be liable for the above penalty or prosecution.
Rent
Landlords and letting agents will be prohibited from advertising a property to rent without specifying the proposed rent payment. They will also be prohibited from inviting or encouraging anyone to pay rent above the proposed rent and from accepting payment of rent above the proposed rent.
If a breach is discovered, a financial penalty of up to £7,000 can be imposed.
Rent increases
The Bill proposes that rent will only be permitted to be reviewed annually, and it can only be reviewed in accordance with the Section 13 procedure, regardless of what parties have contractually agreed. Rent review clauses will therefore not be of any affect.
If within the first six months of a tenancy the tenant believes the initial rent is excessive, they can seek determination from the First Tier Tribunal (“FTT”), along with any proposed increases during the tenancy. The FTT will also be able to determine the validity of Section 13 notices.
Discrimination
The Bill prohibits a prospective landlord or their agent from turning down prospective tenants or discriminating against them because they claim benefits or have children.
If a breach is discovered, a financial penalty of up to £7,000 can be imposed.
Landlord database
The Bill will introduce a private rented sector database which will be compulsory for landlords or their agents to register with every time a property is marketed, advertised or let.
Landlords will be prohibited from obtaining possession under Section 8 where they have not complied with this. The database will require an EPC and a gas safety certificate to be uploaded, so therefore provision of these documents will be an inadvertent requirement to gain possession under a Section 8 notice.
The Court will also be prevented from granting a possession order if the landlord has failed to ensure there is both an active landlord entry and an active property entry on the database.
If a landlord or agent fails to register or to comply with the requirements to register, a financial penalty of £7,000 per breach can be imposed. It will also be an offence to give false or misleading information to the database and this will carry a fine of a maximum of £40,000 per offence or criminal prosecution.
Where a landlord or their agent is a corporate entity, and a member of the corporate entity consents or colludes in the commission of the above offence by the corporate entity, both the member of the corporate entity and the corporate entity can be liable to the above penalties or prosecution.
There is no indication as of yet of how much it will cost to join the database, but landlords will be required to pay to register.
Landlord ombudsman/redress scheme
It will be compulsory for landlords or their agents to register with an ombudsman/redress scheme prior to marketing a property for let. To aim of the ombudsman is to provide a quick and cheap resolution to dispute for prospective, current and former tenants only, the service will not assist landlords.
A maximum financial penalty of £7,000 can be imposed by the local housing authority if a landlord fails to register with the ombudsman service or failure to comply with the ombudsman service. It will also be a criminal offence to give false or misleading information to the ombudsman and this will carry a maximum fine of £40,000 per offence or criminal prosecution.
Where a landlord or their agent is a corporate entity, and a member of the corporate entity consents or colludes in the commission of the above offence by the corporate entity, both the member of the corporate entity and the corporate entity can be liable to the above penalties or prosecution.
Comments
Landlords and agents should be proactive and assure they are ready to comply with the requirements of the Bill.
It is likely that the sooner landlords and agents register for the database and the ombudsman, the more they will be protected.
Landlords and agents would do well to take stock of their properties and portfolios now, so that any Section 21 notices that need to be served or rent increases that need to be completed are actioned in good time.
It is worth noting that whilst the Bill may not become law in the exact format as detailed above, the Bill is currently on its way through the House of Commons, so will be enacted in some variation in the near future.
This article does not provide an exhaustive list of additional duties and clauses and should not substitute landlords and agents own reading of the Bill.
Should you require assistance with your obligations as a residential landlord, please contact our Residential Possession Team.
Please note that the above does not constitute legal advice.
