As this exhausting year finally draws to a close, now is the perfect time to review all of the key changes to private rented sector rules and regulations that came into force in 2020. Though many of the landmark reforms mooted to take place this year have been delayed for obvious reasons (we’re sure you know what we're referring to, so we won’t sour your mood by going into detail), there were still some significant developments with implications for how you manage your portfolio.
Below, we take a look at the key updates from 2020 that you need to be aware of and look ahead to 2021 to discuss what’s on the horizon for landlords next year.
Electrical safety standards
What has changed?
As of 1st July 2020, all landlords letting private rented accommodation in England are required to carry out inspections of all electrical installations in their property every 5 years and ensure that tenants are provided with a copy of a valid electrical installation condition report (EICR).
Landlords were already legally required to ensure that their property meets minimum electrical safety standards and face stiff penalties if a renter is injured because of faulty electrical installations. However, there was no legal obligation to complete regular safety assessments and provide an EICR to renters unless required as a condition of an HMO or selective licence.
What do I need to do?
You need to commission an appropriately qualified person to complete an electrical safety inspection and issue a valid EICR prior to any new tenancy. Any incoming renters must be provided with a copy of the EICR certificate before they move into your property. The new rules will apply to existing tenancies from 1st April 2021, so you should provide current renters with a valid EICR prior to this deadline.
Minimum Energy Efficiency Standards (MEES)
What has changed?
Since MEES regulations were first introduced in April 2018, landlords have been unable to let their property to new renters unless it has an EPC rating of E or above. On the 1st April 2020 this requirement was extended to include existing tenancies. This means that if your tenanted property currently has an EPC rating of F or G then you are falling foul of your legal obligations - even if your renters moved in before the rules originally came into force.
What do I need to do?
If your current renters moved in before April 2018 and the property EPC rating is still below the minimum acceptable standard of E or above, you need to arrange for works to improve its energy efficiency as a matter of urgency. The current EPC will include detailed recommendations from the energy assessor explaining what needs to be done to achieve a higher rating. After you have made the necessary improvements, you should arrange for a new EPC assessment to confirm that your property now has an adequate energy efficiency rating and provide a copy of the certificate to your renters.
If you have renovated your property since its previous EPC was issued, then you may not need to undertake any remedial works. If this is the case, you should arrange for a new inspection as soon as possible and provide your renters with a valid certificate as soon as it becomes available.
If you would like help arranging for an accredited assessor to visit your rental property, our operations team is happy to help. Reach out to them here.
Extension of the Tenant Fee Act
Introduced June 2019, the Tenant Fee Act is a comprehensive piece of legislation that, among other things, prohibits landlords and agents from charging tenants fees for all but a few specific purposes. The only payments that can now be charged in connection with a tenancy are as follows:
- The rent.
- A refundable tenancy deposit (capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above)
- A refundable holding deposit capped at one week’s rent.
- Fees for changing the tenancy when requested by the tenant, with a cap of £50 (or reasonable costs incurred if the landlord can demonstrate any greater expense).
- Payments associated with early termination of the tenancy, when requested by the tenant.
- Payment for utility bills and council tax.
- A default fee for late payment of rent and replacement of a lost key/security device (if this is specified in the tenancy agreement).
Many of the expenses that were commonly charged to renters prior to the Tenant Fee Act are now prohibited, as renters cannot be charged for most services directly by the landlord/agent and tenancy agreements cannot include any clauses that can only be satisfied by paying for third-party services. For example, landlords can no longer require renters to pay for either check-out inventories or professional end-of-tenancy cleaning.
Initially, there was a 12-month grace period during which the provisions of the act only applied to new tenancies while landlords could oblige renters to pay prohibited fees if they were stipulated in clauses of any contract signed before 1st June 2019. This grace period expired on 31st May 2020, and any clauses in existing tenancy agreements that contravene the rules established by the Tenant Fee Act are no longer enforceable.
What do I need to do?
If you have a tenancy that commenced prior to 1st June 2019, you need to be aware that you cannot compel your renters to pay any prohibited charges regardless of what was agreed in the contract. You also cannot recover costs from the deposit when your renters leave for expenses such as check-out inventories. If you do charge prohibited fees then your renters will be entitled to claim costs back and you might be penalised by your local authority for breach of regulations.
If you are renewing a tenancy that commenced prior to 1st June 2019, you will need to ensure that the new contract is fully compliant with the Tenant Fee Act and refund any amount of the deposit that exceeds the new cap.
Fifth Anti-Money Laundering Directive
What has changed?
This directive came into law in January 2020 and forms part of a broader international effort aimed at combating money laundering and terrorist financing. Lettings agents must now perform enhanced due diligence on any transactions involved ‘high-risk third countries’ (as delegated by the European Commission) and on the landlords, renters, guarantors, and permitted occupiers of any property they manage with a monthly rental income equivalent to €10,000 or greater. They must demonstrate that they have sought proof of identity and verified the legitimacy of all funds transferred between parties.
What do I need to do?
The new rules will have little to no effect on most landlords and renters. However, you should expect more lettings providers to perform additional due diligence across the board to observe best practice - regardless of whether your rental income exceeds the threshold. Reputable agents will already be performing ‘know your customer’ checks, but you might be asked to provide more information and complete additional ID verification procedures than you have previously been used to. This is particularly the case if you own a high value property.
On the horizon in 2021
The Queen’s Speech on 19th December 2019 signalled the government’s intention to introduce sweeping reforms across the private rented sector, with the aim of delivering ‘a fairer and more effective rental market.’ The centrepiece of this effort will be the Renters’ Reform Bill. Though the legislation was originally due to be progressed in 2020, the bill was subsequently put on hold indefinitely due to the coronavirus pandemic.
However, with the approval of vaccines and other encouraging developments offering hope that a return to something resembling normality is on the horizon, the government is likely to turn its attention to promises made prior to covid. With that in mind, we take a look below at what reforms might be introduced next year.
Abolition of ‘no fault’ evictions
With the government formally committed to scrapping ‘no fault’ evictions and broad cross-party support for the measure, the demise of section 21 of the Housing Act 1998 is inevitable in the near future. This will end landlords’ legal right to regain vacant possession of a property at the end of an assured shorthold tenancy in all circumstances.
To compensate for the removal of ‘no fault’ evictions, the government plans to review and strengthen the grounds for repossession under section 8 while reviewing the court process for landlords. This should make it quicker and easier for landlords to regain possession where there are adequate grounds to do so.
The Renter’s Reform Bill also includes a proposal to introduce a lifetime deposit scheme. This would allow renters to transfer their deposit between tenancies and spare them the difficulty of saving up a substantial sum for a new deposit every time they move. There are few details yet on how this would work in practice, but renters would be required to make up any shortfall arising from deductions. We expect the revival of this initiative if the situation with the pandemic has adequately improved.
Dogs and Domestic Animals Bill
Introduced by Tory MP Andrew Rossindale, the Dogs and Domestic Animals Bill enjoys cross-party support and is scheduled for a second reading on 29th January 2021. Backed by several animal welfare charities, if the bill passed into law it would grant renters an assumed right to keep a pet in their home while prohibiting landlords from introducing blanket bans on pets in rental properties.
Rossindale is keen to stress that the right to keep a pet will not be unconditional and that owners would need to pass a responsible ownership test. This could potentially include demonstrating that an animal is vaccinated, microchipped, and responsive to basic commands. The bill would also include measures to ensure that the animal is appropriate for the property being rented.
With so many reforms deferred due to coronavirus, landlords should expect 2021 to be a year of significant change in the private rented sector. As always, we are here to keep you informed of any forthcoming developments and advise on how to remain compliant with an increasingly complex set of legal requirements. Reach out to us if you would like to discuss your property needs - we would be happy to hear from you.