Letting agent fees ban – Thank you for sharing your views

Last year, Chancellor Philip Hammond announced his intention to ban letting agents’ fees in England. With the ban expected to have a big impact on the industry, the Department for Communities and Local Government (DCLG) launched a consultation to gauge the views of the market. And unsurprisingly, it generated a huge response.  

To make sure letting agents, landlords and tenants voices were heard and to help the DCLG gain a broader picture of the market, we ran our own survey to collate the views of our customers.


Any ban should also include landlords

We received 3,286 responses, and although there were expected divisions between agents, landlords and tenants, it was encouraging to see suggestions that people on all sides of the market could agree on. 

Most of the people who took our survey agreed that any ban should apply to all agents and landlords equally, with data held on rogue landlords and agents shared across the industry to help improve standards. 

It’s expected that rents will increase because of the ban, and tenants are willing to accept the rise, if fair. But according to the responses, 86% of tenants were strongly in favour of capping holding deposits. 

Interestingly agents were fairly evenly split between yes (54%) and no (46%) when it came to charging for a premium service in certain sectors, such as relocations. Tenants on the other hand were comfortable with the charges, as long as they’re known up front and representative of the service given.

Also, most people felt that any measures that remove costs, or spread them over a longer a period of time, will help with the affordability of housing and increase mobility in the housing market. 


Lifting the negative perception of letting agents

One point that came through clearly was that many tenants have a negative view of letting agents. Most tenants (86%) felt that a ban, with strong, effective enforcement will help remove some of their concerns and make them more likely to use a professional agent, a point echoed by 70% of agents and landlords who support the introduction of stronger enforcement measures. 

Such a move would not only increase competition in the market, but also force those letting agents with lower standards out of the market – increasing the overall quality of industry service.


What’s next for the private rented sector? 

Implementing the ban is still on the government’s to-do list, but the information published earlier this year shows their commitment to delivering a total ban on fees that will include landlords and tenants. There was also a proposed cap on holding deposits at one week’s rent, and tenancy deposits at four weeks rent. 

Thank you for taking to the time to complete our survey. Your responses allowed us to present a detailed view of the market to the DCLG. We’ll make sure you to keep you updated as the story develops.

Average tenancy deposits in the UK hover just below £1000

Our latest tenancy deposit ratings are out now. Every three months we crunch the numbers and calculate the average tenancy deposit for 100 cities across England and Wales.

Our sums have revealed that the average tenancy deposit for England and Wales is £970.18 – continuing to hover just below the £1,000 mark.

While the rest of the country maintains a certain level of consistency, London postcodes set a new all-time peak, averaging £1,831.14, which is more than double the figure for the rest of England and Wales (£883.21 without London).
 
To give you a clearer picture of what’s going on in your region, we’ve compared the 100 cities to the national average. How does your city stack up? Click here to find out.

Our Managing Director, Julian Foster said: “…tenancy deposits can be demanding sums for tenants to raise when they move.

“However, both parties can have peace of mind over the money when it is protected with The DPS…” 

It’s clear that these are challenging times for the Private Rented Sector and whether you’re a landlord, tenant or letting agent we’ve got some helpful tips and advice to help you get the most from your tenancy.

How can landlords end an assured shorthold tenancy

Recently, there’s been some discussion in the lettings community about serving notice to end a tenancy, resulting in a range of responses with no clear view. To help landlords understand this complex issue, we’ve invited Tessa Shepperson from Landlord Law to explain how landlords can end tenancies. 

Please note: Comments regarding amendments arising from the Deregulation Act 2015 apply to tenancies in England only, not Wales.

How can landlords end an assured shorthold tenancy?

There’s generally a lot of confusion about the service of notices and whether they actually end a tenancy in the eyes of the law.

Before we explore this further, let’s take a look at the original form of notice that we used to use – a Notice to Quit.

Notices to Quit (NTQ)

An ‘NTQ’ is a special type of common law notice that will completely end a tenancy after the notice period. It’s not the same as, say, a section 21 (s21) notice, even though an s21 is a notice asking your tenant to leave!

People sometimes make the mistake of using the term NTQ to end their tenancies. Although NTQs are still used for common law and unregulated tenancies (such as company or resident-landlord lets), they’re invalid for the majority of residential tenancies.

Section 5 (s5) of the Housing Act 1988, which regulates assured tenancies (ATs) and assured shorthold tenancies (ASTs), states that landlords’ NTQs are of no effect, as:

> They can’t be used to end a fixed term early; and
> They can’t be used for ATs or ASTs!

If a landlord is able to use a NTQ (for example if they don’t have an assured or an assured shorthold tenancy), they’ll need to act quickly to issue proceedings to evict their tenant, as accepting another month’s rent from the tenant can resurrect the tenancy - meaning that they’ll have to serve another NTQ to end it again!

However, it’s worth bearing in mind that AT and AST tenants can still serve an NTQ - for example to end a periodic tenancy.

So, if an NTQ is useless for ending the vast majority of tenancies, what should landlords use instead?

Ending a tenancy under the Housing Act 1988 

The Housing Act 1988 governs most tenancies created since 15 January 1989. It put into place new rules about ending tenancies, set out in s5 of the act, and says that tenancies can only be ended in the following ways:

1. By a landlord getting a possession order from the Court AND the order being ‘executed’ – e.g. by a County Court bailiff physically removing the tenants - s5(1)(a); or

2. Where the tenancy agreement allows the landlord to end the tenancy - normally by exercising a ‘break clause’ - s5(1)(c)  (although it should be noted that if the tenant stays in occupation, a ‘periodic’ tenancy will then come into being, under section 5(2), meaning that the tenant will still have a tenancy.); or

3. By ‘a surrender or other action on the part of the tenant’ - s5(2)(b). This will normally be:

> Exercising a break clause;
> Moving out at the end of the fixed term;
> Serving a tenant’s NTQ during a periodic tenancy; or
> Surrender (which normally needs to be agreed with the landlord).

The Housing Act 1988 notices

There are two notices to be aware of here:

> Section 8 (s8) - landlords can use this when they want to base their claim on one of the grounds for possession set out in Schedule 2 of the Act.  The most common ground is ground 8, the mandatory rent arrears ground; and
> Section 21 – this is for when landlords want to use the ‘no fault’ ground for possession.

It’s clear from the legislation that serving these notices doesn’t actually end the tenancy in the same way as an NTQ.  They do, however, entitle the landlord to obtain an order for possession if they go to court.

The tenant can continue to live in the property and will be liable for the rent.  If the landlord doesn’t issue proceedings, the tenancy will continue indefinitely - unless the tenant leaves of their own free will.


What happens if the tenant leaves early?  

Does this ‘end’ the tenancy? This is an important point as the tenant is only liable for the rent while the tenancy exists.  

The legislation does not actually say anything on this point, and currently there is no guidance available from the courts.  Therefore, the requirement for the tenant to serve notice if they wish to end the tenancy remains. Whilst section 40 of the Deregulation Act 2015 adds a new section 21C to the 1988 act providing for landlords to refund any rent paid in advance where:

“as a result of the service of a notice under section 21, the tenancy is brought to an end before the end of a period of the tenancy”

This would appear to be limited to any overpayment received as a result of the landlord no longer being required to serve their notice to coincide with the rental due date, which may result in an overpayment of rent.

So far as s8 notices are concerned, information is limited to a point at the end of the prescribed form, which says:

“Your landlord cannot make you leave your home without an order for possession issued by a court. By issuing this notice, your landlord is informing you that he intends to seek such an order. If you are willing to give up possession without a court order, you should tell the person who signed this notice as soon as possible and say when you are prepared to leave.”

The important point to understand here, is that the tenant needs to inform the landlord if they wish to end the tenancy after the service of a notice. I do not think that the tenant can unilaterally end the tenancy by moving out after the service of a notice without doing this first.

To help illustrate the point, here are a couple of scenarios. Imagine a landlord has served an s8 notice on 23 May:

Scenario 1
The tenant just ups and leaves on 4 June, taking all his possessions and putting the keys through the letterbox. The landlord doesn’t find out until he visits the property on 23 June.

Scenario 2
The tenant tells the landlord that he will be moving out on 4 June. He moves all his property out on that day and gives the keys back to the landlord.

> In the first scenario, the tenant is liable for the rent up until the 23 June because they didn’t inform the landlord they’d be moving out on 4 June.
> In the second scenario, the tenancy ends on 4 June because the tenant let the landlord know. Therefore the tenant will not be liable for any further rent after that date.

In many cases where tenants leave in this way, the tenants liability for rent is academic as there won’t be any money available, other than by claiming against the deposit. However, it is always a good idea for tenants to minimise their liability to their landlords. 

To put it simply, tenants need to keep their landlords informed if they’re moving out and landlords need to keep a close eye on their properties.

Tessa Shepperson is a specialist landlord & tenant lawyer.  Find more of her writing on the Landlord Law Blog.

 

The ‘new’ model tenancy agreement

In February the Department for Communities and Local Government updated their ‘Model agreement for a shorthold tenancy’. The agreement is designed to strike a fair balance between the needs of the tenant and the landlord when entering a new tenancy. 

With property prices rising ever higher, getting on the housing ladder is becoming more difficult all the time. As a result, demand for rental properties with longer tenancies is expected to be higher than ever. 

A longer tenancy does have its advantages. A tenant can plan for the future, safe in the knowledge that they won’t be looking for a new place to live in three months. And landlords will have a steady rental income without the hassle of always looking for new tenants (and the hefty fees that often go with it). 

The agreement has a really useful step-by-step process that a landlord and tenant can go through before entering a new tenancy. If you’d like to know more, download the document here

SAFEagent Awareness Week – we’re fully behind it

From the 6-10 June, letting agents and organisations from across the UK will come together in support of SAFEagent Awareness Week. SAFEagent was set up “by the industry, for the industry” to protect landlords’ and tenants’ money. As a company that is committed to protecting tenants’ deposits, we’re fully behind it.

Throughout the week, SAFEagent will highlight the importance of choosing a letting agent that is part of a Client Money Protection (CMP) Scheme. In an industry that’s estimated to be worth £2.7 billion, it’s vital that our customers’ deposits are safe. There are still too many cases where tenants are losing money to rogue agents. 

John Midgley, Chair of the SAFEagent Steering Group, says: 

“Choosing a letting agent without CMP in place is a massive risk for both landlords and tenants. Who can afford to lose thousands of pounds? We might finally be getting closer to mandatory CMP but we aren’t there yet. It is so important that consumers understand that they need to choose their agent wisely by asking if they are part of a CMP scheme before entering into a contract with them.”

While it’s not mandatory to protect client money in a CMP, it is now firmly on the Government’s agenda. It’s definitely a step in the right direction and one that is supported by many organisations in the housing industry, including us. 

We’d like to encourage all letting agents to become members of SAFEagent. The blue and black SAFEagent ‘mark’ gives tenants and landlords the peace of mind that their money is protected.

Updates in the Private Rented Sector

The Private Rented Sector has generated many talking points in 2015 and this will continue throughout 2016 and beyond.  New laws and proposals implemented by the Government look set to alter the way letting agents and landlords in the housing sector operate.

Right to rent checks roll out nationally

In 2015, the Government trialled a new immigration law that forces landlords to take responsibility for checking whether their prospective tenants are eligible to live in the UK.  The pilot was held in the West Midlands and though the results were inconclusive, the Government has decided to roll it out nationally.  

From the 1 February 2016, landlords across the country are required to have performed right to rent checks for any new tenancies starting after this date.  

The Home Office has provided guidance for landlords on how to administer right to rent checks, and the documents that prospective tenants must provide. These can be found on www.gov.uk.

Taxation changes

Along with changes to tax relief on wear and tear and on buy-to-let mortgages, the government is also looking to increase tax revenues by introducing a three percent Stamp Duty Land Tax surcharge on purchases of second homes. This includes buy-to-let residences, with exceptions proposed for investors buying multiple properties. 

The tax will be applied to all eligible second home purchases from 1 April 2016 and many commentators have said this could affect the PRS and home-buyers’ market, with some suggesting there will be a rush to buy property before the April deadline. Others expect the buy-to-let market to remain buoyant despite increased purchase costs. 

It’s not just about what’s being introduced by the Government, but what’s not  

Many people were shocked by the Government’s withdrawal of an amendment to the Housing Bill currently going through Parliament, which would’ve enforced mandatory Client Money Protection for letting agents.  

With many senior industry voices and letting agents calling for the change, it was disappointing that the amendment was removed. We believe along with others that this would have improved standards in the PRS.  

We were also disappointed to see the Government reject a proposal for rented properties to be fit for human habitation. Rogue landlords who disregard tenant safety have a negative impact on the reputation of the industry and most landlords and agents believe that more can be done to weed them out.  

Many of you responded to our survey about rogue landlords, allowing us to present a collective industry view to the Government consultation on the subject in late 2015. The Department of Communities and Local Government (DCLG) has now issued their response to the consultation, displaying strong support for the following measures:

> A blacklist of persistent rogue landlords and letting agents
> The introduction of Rent Repayment Orders
> Additional criteria in the fit and proper person test for licences
> The introduction of civil penalties
> New procedures for tackling abandonment
> An agreement for data held by deposit protection schemes to be made available to local authorities.

The government's response to the consultation discusses each of these proposals and the next steps they plan to take.  You can view the full response on the Government website, www.gov.uk.

Autumn Statement 2015 – What it means for landlords

Yesterday’s Autumn Statement from the Chancellor of the Exchequer contained some unexpected tax changes that stand to make it harder for small investors to enter the Private Rented Sector as landlords. From April next year, the Government is to introduce new rates of stamp duty for buy-to-let properties and second home purchases, set 3% above the rate for first home purchases.

On a buy-to-let property costing £180,000, stamp duty will be £6,500, whereas under current rules it would add a mere £1,100 to the purchase costs. The new rate applies to all second home purchases, not just buy-to-lets, so investors can’t just purchase a house for personal use and convert it to a rental property at a later date.

The new stamp duty rules, combined with recent increased regulation and tax relief changes for wear and tear replacement and buy-to-let mortgages, suggest that the Government intends to restrict the role of private investors in the PRS, and there is a real risk that landlords feeling the squeeze may exit the market. It’s interesting to note that the higher stamp duty rates will not apply to corporate entities or funds making significant investments in residential property, which indicates the Government is seeking to shift towards a more institutionally managed Private Rented Sector. The Government plans to consult on the policy detail, including on whether an exemption for corporate entities and funds owning more than 15 residential properties is appropriate.

The Government intends to use some of income generated by the increased duty to inject £60 million into the affordable housing budget for communities in England where the impact of second homes has had a particular impact, to help first time buyers get on the housing ladder. It’s not clear how an area will qualify as impacted by second home ownership, nor if new affordable housing can be created in these locations.  

There’s also little indication that the funds generated by the changes will be used to increase the provision of affordable renting. In fact, the statement announces that a pilot to extend right-to-buy to Housing Association tenants will commence shortly with five associations, further reducing the availability of social housing, with the expectation that the Private Rented Sector will absorb the strain.

Many commentators are already decrying the Chancellor’s changes, suggesting that they will in effect choke off investment in the PRS, but it remains to be seen how they will alter the make-up of the market and the type of investors operating in this sector.

A new contract, the same high standards

We’re delighted to announce that we’ve retained the government contract to continue operating our Custodial tenancy deposit protection scheme following a competitive tender.

Our Managing Director, Julian Foster, said: “I’m delighted that the government has again chosen to entrust us with this substantial responsibility.

“This contract reflects the smoothness, transparency, fairness and security with which we have run the scheme over the last eight years – as well as its huge popularity among landlords and letting agents.”

We’re the largest provider of tenancy deposit protection in the UK to date and have been the only operator of a Custodial scheme since our launch in April 2007. We’re thrilled that we have the opportunity to continue providing high quality services to the almost half a million landlords and letting agents we have registered with us, as well as over 2 million tenants who depend on us to keep their deposits safe.

The government invited prospective partners to submit tenders for the scheme in March this year, and as well as awarding us a licence to continue operating our existing Custodial scheme, have given licences to two other businesses to set up new Custodial schemes to run alongside our existing scheme and the three Insured deposit protection schemes.

With the rental sector expanding and evolving, we’ll continue to play a leading role within the industry, focusing on rapid deposit repayment; clear, regular communication with landlords and tenants; and the provision of the best support, whether online, over the phone or in person at events, exhibitions and workshops.

We look forward to building on our relationship with you in the future, and continuing to provide you with the same high standards of service you expect!

The DPS Team

New smoke and carbon monoxide alarm regulations for landlords

On 1 October 2015, a number of new regulations for landlords were introduced, as a result of the Deregulation Act 2015. This included a requirement for landlords to have smoke alarms installed in their properties. Landlords are also legally obliged to provide carbon monoxide alarms in any premises which contain a solid fuel burning appliance – this applies to any kind of wood burning stove or an open coal fire. It will also extend to equipment such as a solid fuel Aga in the kitchen.

We think tenant safety should be the top priority for landlords, so we asked the London Fire Brigade if they would share their advice following the introduction of the new regulations. Mark Hazelton, Group Manager for Community Safety Development at London Fire Brigade, discusses the recent changes in the law and what this now means for landlords.

Did you know that…

  • 40 people per year are killed by carbon monoxide
  • You are four times more likely to die in a fire at home without a smoke alarm
  • You are seven times more likely to have a fire if you’re living in rented or shared accommodation

Due to a recent change in the law, it is now the landlord’s responsibility to fit smoke alarms at the beginning of each tenancy. It is also their responsibility to test them regularly to make sure they’re working. If these measures aren’t put in place, not only could you be risking the lives of your tenants, you could also face a possible £5,000 fine.

It is vitally important to fit at least one working smoke alarm on each level of a house or home. As the Government statistic above shows, those in rented accommodation are much more likely to have a fire. Many fires happen at night when people are sleeping and smoke alarms are the best early warning, buying precious seconds for people to escape. Only recently, a smoke alarm saved four people from a house fire in Lewisham.

Following the change in the law on October 1st 2015, the Government is giving away free smoke alarms via Fire and Rescue services across the country.
 
In London, fire chiefs are offering free alarms to landlords in areas that have been identified as being more at risk of having fires. You can fill out the following application form to see whether you are eligible for one: http://www.london-fire.gov.uk/freesmokealarms.asp

If you’re a landlord in another part of the UK, please contact your local fire and rescue service to ask about whether you are able to get a free alarm. The scheme also provides carbon monoxide alarms to landlords of properties that contain a solid fuel burner, like a wood stove. Smoke and carbon monoxide alarms can also be bought relatively cheaply at most hardware shops.
 
It really is easy to fit them in your properties and necessary if you want to stay on the right side of the law.

New Deregulation Act rules come into force

Earlier this year, the Deregulation Act 2015 introduced changes to tenancy deposit protection law to resolve issues raised by the Superstrike Ltd vs Rodriguez case in 2013. The Deregulation Act also contained a number of new requirements for landlords which come into force today (1 October 2015). As part of our commitment to helping you keep abreast of changes to the Private Rented Sector, we’ve summarised the changes for you here.

Changes to eviction procedure

Where a landlord has failed to address a tenant’s complaint about the condition of the property they’re renting, and the local authority has both verified the complaint and served either an improvement notice or a notice of emergency remedial action, the landlord can’t evict the tenant for 6 months, and must also complete the repairs demanded by the local authority notice. By introducing this law, the Government hopes to protect tenants against retaliatory evictions.

The Act also introduces changes to simplify the process of eviction for landlords in cases where it’s justified. A new form has been introduced for use when applying to court for a ‘no-fault’ (section 21) eviction, and is designed to reduce the likelihood of cases being thrown out on technical errors which lead to increased costs, lost time and inconvenience for landlords. The form must be used for all tenancies starting on or after 1 October 2015. Use for tenancies starting before this date is optional but encouraged. You can find the form in the snappily titled document The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) (Amendment) Regulations 2015 No. 1725, which can be accessed here.

There are also some additional new rules on evictions and the information which must be provided to tenants before landlords can start the eviction process. More detail on these will be available in guidance available on the Government website from today (1 October 2015). 

Smoke and Carbon Monoxide Alarm Regulations

To reduce the risk of fire or carbon monoxide poisoning to tenants, Parliament has approved new regulations, meaning from today, 1 October 2015, private sector landlords will need to have installed at least one smoke alarm on every storey of their properties, and a carbon monoxide alarm in any room containing a solid fuel burning appliance such as a coal fire or wood burning stove. This applies to all tenancies, not just those starting on or after 1 October. Landlords must ensure the alarms are in working order at the start of each new tenancy. It has been suggested that they’ll even need to have them tested on the  day tenancy begins, to properly ensure they are in working order, rather than a few days before. An alarm failure in the intervening days between the test and the tenancy commencing could result in a breach and the potential for a large fine to be imposed. To find out more, download the Government’s explanatory booklet for landlords.

The Government will be updating their ‘How to rent’ guide to reflect the changes that have now come into force, helping to  ensure both landlords and tenants are clear on their key rights and responsibilities and improve standards in the private rented sector.

Government Proposals Could Mean Big Changes for Private Rented Sector Landlords

During recent weeks, the Government has proposed a number of changes to legislation, each of which is expected to have a significant impact on landlords in the Private Rented Sector .

The lettings industry is coming under ever greater scrutiny. This added attention is generating a wide range of viewpoints from many commentators, and in many cases, dividing opinion. In this post, we explain each proposal in turn, and discuss the implications each would have.

Tougher Punishments for Rogue Landlords

The Department for Communities and Local Government (DCLG), recently invited input from the PRS on new proposals that will make it harder for rogue landlords to operate.

It must be stressed that, whilst rogue landlords make up a very small percentage, they have a large effect on public opinion, and damage the reputation of good landlords everywhere.

The DCLG ’s recent discussion paper was clear -  they want to do more to drive rogue landlords out of the industry - and it included a variety of ways that may help achieve this, such as fines for offenders and the possible introduction of a blacklist and bans for repeat offenders. 

It also explored the use of rent repayment orders, civil penalties and other ways to weed out the rogues, including fit and proper person tests. While these tests already exist, the document proposes making them stricter and less open to interpretation.

We’re really pleased to see the DCLG reaching out to gain the views, insight and experiences of landlords and agents. It’s clear from the discussions and feedback we’ve had, that many of you welcome these steps, providing they don’t result in more red tape. We look forward to seeing the outcome of the consultation later this year.

We also recently surveyed landlords registered with us asking for their opinions on the government consultation, and we’re currently analysing the results. We’ll share our findings with you soon.

Big Changes to Tax Relief

In his recent budget, the Chancellor announced a shake-up of the tax relief rules landlords can currently take advantage of. The capping of buy-to-let mortgage tax relief to the basic 20% tax rate has divided opinion, with many people suggesting it will price landlords out of the market and ultimately drive rents up.

Others, however, have suggested that it levels the field of landlord taxation with homeowners who can’t claim tax relief on their mortgage repayments, making it fairer for everybody.

Then there are some who claim that landlords should treat the renting of their property as a business rather than simply as an investment, and should, therefore, be taxed accordingly. 

Much of the discussion rests on whether landlords view buying a property to let as a way to get more money coming in every month, or whether they see it as a long-term investment, relying on the house to increase in value over time.

Wear and Tear - Consultation

Another area where tax relief changes have been proposed is for wear and tear of furniture and fittings.

Currently, landlords can claim a wear and tear allowance of 10% of rent received, regardless of the level of costs incurred. This means some landlords gain relief where no expenditure has been made, whilst others spending above the 10% level are limited on the relief they can claim. It’s also restricted to fully furnished properties only.

The new proposals will allow all residential landlords (with the exception of those providing furnished holiday lets) to claim a deduction for the cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use. 

It is important to note that this tax relief is strictly for the replacement of existing furniture and fittings and not for furnishing a property in the first place.

If you’d like to make sure your voice is heard, HMRC are currently running a consultation on the proposals until 9th October 2015. You can view the consultation here.

Right to Rent to go Nationwide

Another recent announcement is the plan to roll out nationally the responsibility for landlords and letting agents to perform ‘right-to-rent’ checks, to ensure the tenant has a right to be in the country. The idea has been trialled in the West Midlands, and whilst the full results have yet to be released, the Government have decided that they will press ahead with expanding the scheme to the rest of the UK.

It’s certainly an intriguing time for the Private Rented Sector and we expect more changes to be proposed. There’s still much discussion and debate to be had about all of these topics, and we expect there to be further changes to the proposals. We’ll be following them closely to see how they develop.

Big changes for landlords and letting agents in Wales

As you may have read, The Housing (Wales) Act 2014 has been enacted by the Welsh Assembly to allow a greater level of control over the housing market. 

Some of the new legislation is due to launch in autumn this year, and from even the quickest of scan-reads, it’s clear to see that it will have a huge impact on landlords and agents.

The proposed changes include the creation of standardised ‘model’ tenancy contracts, but the biggest change will be the introduction of compulsory licensing for landlords and letting agents for both the letting and management of tenanted properties. 

The new licensing scheme will operate as ‘Rent Smart Wales’, with Cardiff County Council appointed to act as the primary registration authority.

What does this mean for agents?

Under the current proposal, to obtain a licence agents will be required to pass a ‘Fit and Proper Person’ (FPP) test, the details of which are still being agreed. Without a licence, agents will not be able to undertake any letting activity including collection of rent, viewings or management. The licence requirement will extend to ‘tenant find only’ agents, though online agents may be exempt from the legislation.

It’s unclear at this point as to which agency representatives will be required to pass the FPP. However, initial indications are that anyone owning 25% or more of the lettings company will have to pass it. This will become clear when the scheme rules are released.

What does this mean for landlords?

The proposed changes for landlord registration will require landlords to register and pay fees to gain a licence for every property they let. Licences are expected to last for five years, at which point they can be renewed upon payment of another fee. Charges have yet to be decided, though to keep fees down, it’s expected that registration will be a short online process, capturing information about both the landlord and the property.  

If a landlord does not obtain a licence to manage a property, they will be committing an offence - unless they appoint a licensed letting agent to manage it on their behalf. It will be an offence to appoint an unlicensed agent.

Developing a Code of Practice

Some additional conditions are being introduced for agents and landlords applying for a licence. Recently the Welsh Government consulted with Welsh industry about the development of a ‘Code of Practice’ which would need to be adopted and adhered to as a condition of having a licence. Failure to meet the conditions of the code could result in both the licence being revoked and a potentially unlimited fine.

If introduced, the code may also state that landlords and agents will have to undertake mandatory training, though it’s not yet clear what the training would cover.

Licensing is expected to commence in autumn this year. Enforcement is likely to start in late 2016 or early 2017, in order to allow agents and landlords time to comply with the law. The Welsh Government has now launched the Rent Smart Wales website, where agents and landlords will soon be able to find out more and apply for a letting and management licence.

Have you thought about what would happen if your letting agent went bankrupt?

As a landlord, renting out a property can sometimes be stressful, especially if things outside of your control go wrong.

A new appliance breaking down outside of warranty, rent arriving consistently late or weather damage to your property’s roof… these are scenarios familiar to many landlords and ones you can usually deal with.

But what happens if your letting agent goes bankrupt? Unfortunately, this occurrence is not as rare as it once was, and we’ve seen a small but steady increase in cases over recent years. There’s no doubt this situation has the potential to be incredibly stressful and will have many repercussions, but if it’s protected with us then one thing you don’t have to worry about is your tenant’s deposit. Both our Custodial and Insured deposit protection schemes protect against this scenario, and we work with landlords to allow them to take over the management of the deposit from a bankrupt agent, maintaining protection throughout the process.

We were recently contacted by one of our customers after this scenario happened to them:

When my letting agent was declared bankrupt, I was worried that my tenants’ deposits would no longer be protected.

However, The DPS reassured me and guided me through the process of regaining the deposits. I was really impressed that the excellent systems in place at The DPS are equally secure for both landlords and tenants.
— Landlord

As this Landlord found out, we provide simple, secure deposit protection and you can trust us to keep your tenant’s deposit safe.

If you have questions or concerns about any aspect of deposit protection, you can find a host of information on our web pages, or you can always contact us on 0330 303 0030.


Did you know...

Agents can only use our insured scheme if they're regulated?

This means that all of our agents have client money protection insurance giving you a guarantee that your money is safe in the event of theft or misappropriation. Alongside our deposit protection, it’s the perfect combination.


Beware of fraudsters targeting tenants

Con artists and fraudsters are constantly changing their tactics. This is why we continually monitor the use of our service, as from time to time tenants can sadly find themselves a target.

We’ve identified a new scam which is targeting tenants using websites such as spareroom.com.

Here’s how it works:

  • The fraudster advertises a fake property or room – often at quite a cheap rental rate to attract interest
  • To secure the rental, prospective tenants are told to make a deposit payment to The DPS using a set of bank account details that actually belong to the fraudster

How to spot the scam

First and foremost, we will never ask you to make a payment directly to us.

You should only ever make a deposit payment to the letting agency or landlord, and we advise that wherever possible you inspect the property/room in person before doing so. Always obtain a receipt.

In many scams, communication is conducted via email. Tell-tale signs will be bad spelling or grammar and overly informal language (e.g. “finish the deal”). They may also try to make you feel under pressure to do what they want, and will sometimes ask you to confirm information that they should already have.

Protecting your money

Fortunately fraudulent landlords and letting agents are a minority in our industry. The majority are genuine and treat their tenants fairly. For further peace of mind, it’s also worth checking if your landlord or agent is a member of an industry body such as the Residential Landlords Association (RLA), the National Landlords Scheme (NLA). the Association of Residential Letting Agents (ARLA), or the National Approved Letting Scheme (NALS). Membership of these schemes indicates that a letting agent/landlord is genuine and committed to improving standards in the private rented sector. If you’re dealing with a letting agent, you can also check if they operate a client money protection scheme. The Safe Agent mark is an industry accreditation that shows an agent uses client money protection, which can also give you additional reassurance about the organization or person you’re dealing with.

Staying safe online

Here’s a few other tips:

  • Keep your passwords secret
  • Where possible, use passwords that include numbers, capital letters, lower case letters and symbols to make them more secure
  • Don’t write passwords down or save them in your phone
  • Take a good look at emails before clicking on any link – if it looks fake, or the offer sounds too good to be true, then think twice

You can also watch our video on ‘phishing’ to help you learn more about staying safe from fraudsters using email as a way to gain your personal information.

If you’re still not sure if an email has come from us, please forward it to us here and we’ll let you know if it’s genuine.

The DPS rules out membership and annual renewal fees for new Insured Scheme

We are pleased to announce the pricing structure for our new insurance based deposit protection scheme. Offering customers the easiest and cheapest option

  • Value for money - We will offer the industry’s cheapest published option for landlords and letting agents to protect their deposits.
  • Easy - The DPS insured scheme will not be charging membership or annual renewal fees to its customers, so no membership paperwork to contend with either!
  • Convenient - Letting Agents will be charged per deposit monthly by direct debit; the (ex vat) fee to protect each deposit will be just £9.50 (further discounts will be available for volume).
  • Landlords will be charged just £15.00 per deposit for deposits under £500 (inc vat), and only £22.20 per deposit for deposits over £500 (inc vat) on a pay-as-you-go basis.

We’re delighted to be able to provide our customers with the best value for money deposit protection options. Our goal is to deliver excellent service to the industry and offering the most cost effective insured scheme alongside our custodial option will ensure landlords and letting agents have the best choice of protection.

 

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A ‘one stop shop’ for deposit protection

We currently run the only custodial based deposit protection scheme in England and Wales and we are the first scheme to offer landlords and letting agents both protection options.

Following in the footsteps of The DPS custodial scheme, landlords and letting agents will be able to register with this service online as well as by phone; and manage both custodial and insured deposits via one easy, integrated online account. Our new insured scheme is due to launch on the 2nd April 2013 and we’re pleased to see landlords and letting agents are already registering in advance.

To find out more about The DPS (Insured and Custodial), please visit www.depositprotection.com or contact us direct at media@depositprotection.com

 

Keep safe, stay safe, #fraudprevention

We are aware of emails using our name asking customers to transfer money via wire transfer – these emails are fake and they are not from The DPS. If you receive one of these emails please ignore and delete it. We will be working with the relevant authorities to investigate who is sending these emails.

 

We are also aware of emails using our name which asks recipients to click on a link in the email which takes them to a fake log in screen. To try and fool the user, this fake log in screen may also contain links to our real website. These emails are fake and should be ignored and deleted. If you are ever unsure of the authenticity of an email, please do not click on any links within the email, but instead open a new web browser and go directly to www.depositprotection.com.

We will never email you to ask you to transfer money, or to ask for confidential information such as your username, password or answers to security questions. If you receive an email asking for this information, do not click on any links in the email or agree to any of the email requests.

All legitimate transactions with The DPS are completed via our secure website www.depositprotection.com only. If you are unsure, please go direct to our website or call us on 0844 4727 000.

When completing a transaction at www.depositprotection.com you will see our secure website starting with https:// so you can rest assured our site is safe and protected.

We will be tweeting online safety hints and tips with the hashtag #fraudprevention – spread the word and pass this information on to your tenants to protect our industry from fraud.

 

Changes to tenancy deposit protection from 6th April 2012

The Localism Act achieved Royal Assent in December and the DCLG has now confirmed that changes to tenancy deposit protection, introduced by the Bill, will come into force on 6th April. Tenancies already in place on this date will have 30 days in which to comply with the new rules. Here’s a recap of the changes due to take effect as a result of The Localism Act:

30 days – not 14 – to protect deposits

From 6th April, landlords and letting agents have 30 days from receipt of deposit in which to protect it.

The re-wording and extension of this timeline also closes the loophole with regards to deposit protection deadlines that was highlighted by cases such as Universal Estates v Tiensia in 2010.

Now, if a deposit is not protected within 30 days, the tenant can take their landlord or letting agent to court – there is no other way to interpret this legislation.

Prescribed Information

The requirement for providing the Prescribed Information to the tenant will also be changed to within 30 days of receipt of the deposit.

Whilst we provide a template for Prescribed Information on our website, it is the landlord or letting agent’s responsibility to ensure it is issued at the correct times so it’s vital they review the Localism Act and understand when Prescribed Information should be issued.

No retrospective protection after the tenancy ends

If a tenant makes an application to the county court once the tenancy has ended, the landlord will no longer be able to retrospectively protect the deposit in order to comply with the Act. If the tenancy has ended, the only option is for the landlord to repay the deposit, or part thereof, to the tenant.

Revised sanctions for non protection

The changes give the courts discretion to award not less than the amount of the deposit and not more than three times that amount depending on the individual case. For example, a repeat offender may find themselves with a larger fine compared to a landlord who has simply forgotten to protect as  an administrative oversight.

Section 21 notices

Further clarity to Section 215 of the Housing Act highlights that a section 21 notice may not be given where a deposit has not been protected within the 30 day period. However, there are exceptions to this which you can view in The Localism Act.

For a comprehensive explanation of each change, read our blog from September 2011 – ‘Tenancy deposit protection amendments proposed by the Localism Bill’. You can also read the The Localism Act (section 184) and view the amendments against the Housing Act 2004 (sections 213 – 215 are relevant).

ADR Insight: DIY SOS - tenants painted my living room bright pink!

As a general rule, responsibility for decorating a property lies with the landlord. However, we see a number of disputes each year where the parties agreed to the tenant redecorating but the precise details were not clearly defined. Landlords who find that their calm and tranquil magnolia property has been returned in fuchsia pink, turquoise blue or pillar box red can be understandably shocked at the changes to the property. Here are a few of the statements we often see in evidence and the potential flaws with each of them:

1    Landlord says: ‘I told them it was ok if they used a neutral colour’

[caption id="attachment_964" align="alignright" width="300" caption="'You said yes, as long as it's neutral...yellow is neutral isn't it?'"][/caption]

What is a neutral colour? Most would assume magnolia, cream or beige but the landlord’s definition may be very different to the tenant’s, so it is helpful to be clear about what constitutes a ‘neutral’ colour.

2    Landlord says: ‘I told them they could use whatever colours they liked as long as they repainted it all back to original colours at the end of the tenancy’

If the details of the decorating agreement are not clearly set out in writing, it is difficult for the landlord to prove that such a discussion took place. Therefore it is unlikely to result in the claim being awarded in the landlord’s favour.

3    Landlord says: ‘I didn’t give permission’ but tenant says: ‘I told them I was going to redecorate and they didn’t object’ or alternatively ‘the landlord has been round many times since I redecorated and said how lovely it looked’.

Again, the precise details of any permitted decoration needs to be clearly defined.  Depending on what is said in the Tenancy Agreement, the tenant’s argument is unlikely to be persuasive in this instance, particularly if the agreement requires written permission from the landlord.

4    Landlord says: ‘I gave tenant permission to redecorate but they botched it and it looks awful’.

You may wish to include a requirement in the Tenancy Agreement that if the tenant is going to redecorate, the landlord is entitled to inspect the results. If they’re not satisfied the tenant can be asked to do it again, or the landlord can complete the works at the tenant’s cost. Alternatively, the landlord could insist that the tenant uses a professional to decorate the property.

Often Tenancy Agreements will state that the tenant can redecorate if the landlord’s written permission is given. Our adjudicators often see letters from landlords which simply allow the tenant to redecorate without stating the specific parameters. It is helpful to fully define them, so for instance an agreement may be drafted to confirm:

›       What rooms are being decorated

›       What colours are being used – this could include reference to colour charts or even sample wallpaper

›       Who is doing the redecoration – the tenant, or a professional decorator

Either way you should have something in writing, which is dated and signed by both the tenant and the landlord, that sets out the rules for redecoration so that the details agreed at the time can be absolutely proven.

Whilst disputes over redecorating are most common, if there is any agreement for other works to be carried out to the property by the tenant, such as alterations to the garden or carpets, or if for example appliances are being replaced, it is always prudent to document these and ensure that the terms are agreed by both parties at the time.

Our ‘Guide to tenancy deposits, disputes and damages’ provides comprehensive information and advice about deposit disputes – you can download the guide from our website.

The DPS – a year in review

Undoubtedly the hottest topic on the property pages has been the rapid rise of the private rented sector. Monthly rental values soared and tenant population increased as the housing market struggled. Letting agent Haart released figures in December 2011 that showed a 10% increase in the number of people registering with them over the last 3 months – a trend they expect to continue this year.

Activity at The DPS over the last year has also increased in line with this report. Since April 2011, monthly registrations and deposit submissions have been higher than last year. Here are some of the highlights:

›  Nearly 1 million deposits repaid since scheme launch in 2007

›  825,000 deposits worth £644 million currently protected on behalf of 166 organisations, 280,000 landlords and letting agents.

›  191,000 enquiries through Emma, our online virtual agent

›  69,000 text message reminders sent

›  50,000 deposit submissions in September – always a peak month but this was 4,000 more than 2010.

›  6,000 new landlords in August - 500 more than in 2010

›  600 adjudications completed in November – twice as many as last year but you’d expect this rise as the scheme matures

›  450 new letting agents in October

The DPS has the infrastructure and capability to easily deal with any rise in registrations, submissions, repayments and adjudications. With a new look website launched late last year and several new features that make deposit protection even easier for those landlords and tenants who are new to deposit protection, we’re more than ready to cope with further increases expected in 2012.

A landlord’s work is never done…

Landlords and letting agents never rest, particularly when there is so much demand on rental property and it seems several didn’t even take a break over Christmas and New Year.

›  We registered 5 new landlords on Christmas Day and a further 59 on New Year’s Eve.

›  15 deposits were submitted on Christmas Day and another 187 on New Year’s Eve

›  The latest deposit submitted on Christmas Day was at 23:09. On New Year’s eve, the last deposit was registered just in   time for fireworks and champagne at 23:41!

The year ahead…

We’re all very excited about taking deposit protection to Scotland this year and are currently awaiting approval from the Scottish Government to launch The LPS Scotland. We’re expecting this to be in April this year, so if you have rental properties in Scotland, get familiar with the requirements on the website and blog.

On behalf of everyone at The DPS, I wish you all the best for 2012.

ADR Insight – don’t neglect your rental property over the Christmas period

As you know, you can never fully switch off from your responsibilities as a landlord, whether that be taking on new tenants, completing deposit disputes or making sure your property is kept in good condition over the festive period. There are a couple of things you can do to make sure your properties are in order, ensuring the safety of your tenants and hopefully a stress-free Christmas for you.

Are your tenants leaving the property over Christmas?

Our adjudication team received a lot of claims earlier this year following the severe winter weather in 2010. The majority were the result of burst or frozen pipes at student houses where tenants had left the property to spend Christmas with their families.

In the worst cases seen by our adjudicators over the years burst pipes have resulted in damage to carpets and flooring, kitchen appliances needing replacing and claims for lost rent whilst damage is repaired. Some landlords have faced repair bills of several thousand pounds.

To avoid this stress and expense, you should contact your tenants if they’re going away to ensure that the proper measures are taken to avoid this kind of damage.

The AIIC has issued some guidance on keeping your properties safe during cold spells:

›   Insulation – Ensure water pipes and tanks are lagged and insulated.

›   Heating – Advise tenants to keep the heating on, at a min. of 15 degrees, if they’re going away. It’s also sensible to open the loft hatch allowing air to circulate and prevent pipes freezing and bursting in the loft.

›   Boiler servicing – Ensure that gas and oil boilers are serviced every 12 months.

›   If the property is going to be empty for an extended period it’s sensible to have the heating/water system drained by a qualified contractor.

›   Chimneys – Ensure they are swept once a year by a professional chimney sweep, ideally before the tenant starts using the fire.

›   Smoke Alarms – Check that smoke alarms are fitted in all properties and that they are all working properly. Replace batteries as necessary.

Be aware of evidence submission deadlines

If you’ve currently got a deposit in dispute then don’t forget to stick to your evidence submission deadlines. The DPS is not extending any deadlines but is making allowances for bank holidays so if you’re concerned about a deadline then get in touch so we can see what we can do for you.

Our Christmas opening hours

If you’re taking on new tenants over Christmas or the New Year you can submit deposits at any time online. If you need assistance our contact centre opening hours are:

Friday 23rd - 8:30am – 4:00pm

Monday 26th - CLOSED 

Tuesday 27th - CLOSED 

Wednesday 28th – 8:30am – 5:30pm

Thursday 29th – 8:30am – 5:30pm

Friday 30th - 8:30am – 5:00pm

Monday 2nd - CLOSED

You can also get in touch via online form or why not ask Emma, our online customer service agent.

Finally, a very merry Christmas to you from everyone at The DPS!