Devil in the detail for residential landlords
Residential landlords are under pressure to keep on top of a raft of new legislation and guidelines this year, including many protections for tenants extended by the government during the pandemic.
They include a continuing hold on evictions, the new debt moratorium scheme, and changes to validating the right to rent, through to permission for pets, new rules on electrical testing and the anticipated extension for carbon monoxide monitoring later in the year. Landlords must also comply with the shift to online reporting to HMRC, under the Making Tax Digital initiative.
All evictions remain on hold until after 31 May 2021, except in limited circumstances – domestic abuse, anti-social behaviour, or rent arrears of more than six months – following a temporary change to the law introduced during 2020 to protect tenants during the pandemic. It is not known if the government will extend this date, and landlords need to look out for further updates.
“The government is keen to see landlords and tenants resolving disputes without going to court while the pandemic continues,” explained Alice Trainor, Solicitor in our Dispute Resolution team. “This could involve agreeing on a repayment plan if there are arrears, or a lower rent if tenants are struggling because of job loss.
“Where action is taken, landlords must follow procedures carefully. They must be sure they serve the right notice and give the required notice period, whether taking action under section 8 where the terms of the tenancy have been broken or under section 21 for no-fault situations, where they need to take back possession of a property.”
For section 21 notices – which allow landlords to regain possession of the property at the end of a fixed-term assured shorthold tenancy or one with no fixed end date – a longer notice period is required currently because of coronavirus. Since 29 August 2020 in England, and since 24 July in Wales, the notice period must be at least six months. The time in which the landlord can start possession proceedings after the service of the notice is also extended, from six to ten months. Landlords must use new paperwork which reflects these changes in time limits, with an updated form 6A for a no-fault possession notice under section 21.
“That’s how it stands at present, but it’s likely that the government will abolish section 21 evictions altogether later this year,” added Alice. “This month’s Queen’s Speech confirmed they would publish the consultation response on reforming tenancy law, to improve security for tenants in the private rented sector, while strengthening repossession grounds for landlords where there is a valid reason.”
Another major legislative change is the debt respite scheme which came into force on 4 May 2021 in England and Wales. Now, a debt advisor authorised by the Financial Conduct Authority (FCA) or a local authority can start what is known as a ‘breathing space moratorium’. This will provide someone in financial difficulties with legal protections from creditors, and in this context, the landlord will usually be the creditor and tenant the debtor.
“The government has published some useful guidance for creditors, although it’s likely specialist advice will be needed as creditors feel their way on this. What is important to understand is that if you are told that a debt owed to you is in a breathing space, you must stop all action and put protections in place until the breathing space ends,” explained Alice.
There are two types of breathing space: a standard breathing space and a mental health crisis breathing space. The standard breathing space is available to anyone with problem debt, giving legal protection from creditor action for up to 60 days. Those given breathing space while receiving mental health crisis treatment will have additional protection, with the breathing space lasting as long as the treatment, plus 30 days.
The legislation is known formally as The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.
Every property should have an electrical safety compliance certificate since 1 April 2021, to prove that fixed electrical installations have been safety tested by a qualified electrician.
The Electrical Safety Standards in the Private Rented Sector (England) Regulations applied to all new tenancies from June 2020, and all existing tenancies were required to comply by April this year. There are few exceptions on residential tenancies, and landlords must ensure that electrical installations are checked by a qualified person to ensure they meet the standards set out in the BS 7671: 2018 Wiring Regulations and an Electrical Safety Condition Report – or EICR – must be provided to existing tenants within 28 days and before a tenancy starts for new tenants. The electrical installation must be visually checked on a regular basis, and a full check undertaken by a qualified person at least every five years.
The outcome of a review of carbon monoxide alarm requirements is expected later this year. Currently limited to solid fuel appliances in the private rented sector, the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 may be extended to the installation of oil and gas boilers and to social housing.
Following the huge spike in pet ownership during the pandemic, being a pet-friendly landlord came another step closer, with the government amending its Model Tenancy Agreement (MTA) to make allowing pets the default position.
The MTA is the recommended contract for landlords and under the new guidelines, landlords will no longer be able to impose a blanket ban on pets. Instead, they will have to object in writing within 28 days of a written pet request from a tenant and provide a good reason for their objection. Tenants could still face restrictions, such as in smaller properties or flats where it may be impractical and would still be legally required to repair or cover the cost of any damage to the property caused by the pet.
Checks and balances
There are further changes in validating prospective tenants under the Right to Rent rules. Firstly, because of Brexit, since 1 January the EU-Exit grace period has allowed EEA citizens to continue to use their passport or national identity card to demonstrate their right to rent in the UK, but this comes to an end on 30 June 2021. Also in June, there will be an end to the temporary relaxation on seeing original documents which were allowed during the pandemic, meaning landlords could check tenant documents over video call or by receiving a scanned version. From 21 June 2021 landlords must revert to face-to-face and physical document checks.
All landlords with a turnover of more than £85,000 should already be reporting their VAT digitally, under HMRC’s MTD (making tax digital). From April 2022, MTD will apply to all UK VAT registered businesses, regardless of their turnover, and to certain business income tax records from April 2023. It means even micro-businesses who may have registered voluntarily to obtain VAT refunds, will need to use compatible software to submit their VAT return.
Alice adds: “This year there are more tripwires than usual for landlords who don’t keep an eye on the calendar and up to date with all these changes.”
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