Housing Act Rent Increase Order Published

The Government has finally published the necessary statutory instrument to change the maximum rent threshold for tenancies under the Housing Act 1988. The Assured Tenancies (Amendment)(England) Order 2010 has been laid before Parliament as at 25 March 2010 and will come into force on 1 October 2010.
Despite all the suggestions from the Government that they were trying to decide the best way of making the change work they have ultimately gone for the simple approach. On 1 October the threshold will change from £25,000 to £100,000. While this is not, as has mistakenly been stated, a retroactive change it will affect tenancies that are already in place on 1 October. Therefore a tenancy that has started before 1 October which is for a rent in excess of £25,000 per annum but for less than £100,000 per annum will on 1 October automatically convert to an AST.
This will mean that a number of tenancies will, on that date, potentially need to have their tenancy deposits protected and will also fall under the section 8 notice regime for breach of contract and the section 21 notice regime for the termination of the tenancy.
Technically this poses a potential problem in three areas:

1. Tenancy deposits that have been taken for tenancies starting before 1 October which have become ASTs on 1 October will have had the deposit taken more that 14 days before it is registered. This may leave the landlord and agent open to a claim for the usual penalties. There is of course the reasonable argument that the deposit was taken at a time that the tenancy was not an AST and therefore that there is no need to protect in much the same way as there was no need to protect deposits taken prior to 6 April 2007 when the tenancy deposit legislation first came into force.
2. Where Court proceedings have been started for breach prior to 1 October there is a potential argument at the time it reaches trial that the tenancy is now an AST and the appropriate notices have not been served.
3. For tenancies that end shortly after 1 October there will not be time between 1 October and the end date to serve the necessary two months notice under section 21. If the notice is served before 1 October, at the time when a tenancy has not become an AST there may be some doubt as to its validity.

All of these problems will not doubt need to be worked out by the Courts.
It should be noted that the change is being carried out in England only. It is not certain what the Welsh Assembly will choose to do. They have an ongoing consultation on the private rented sector which discusses a similar threshold change but this does not end until 14 May so they will, presumably not act until at least that date. However, the pressure to act in Wales is somewhat lower as rents there do not tend to reach the levels found in some parts of England.

Filed under: England only, Housing Act 1988, rent, rent threshold change

Housing Act Threshold Increase

It is now being widely reported that the maximum Housing Act 1988 rent threshold is to be increased to £100,000 as from 6 April. Some commentators are incorrectly calling this a retroactive change. A retroactive change is one that applies backwards in time. This does not. What is occurring is that the threshold is being changed for all tenancies. Therefore the change will apply to currently existing tenancies. While this is not retroactive it does mean that tenancies which are already in place where the annual rent is in excess of £25,000 but below £100,000 will automatically become ASTs. The date of change for currently existing tenancies is uncertain and has been variously reported as 6 April and 1 October. Tenancies that fall outside the Housing Act 1988 for other reasons, such as lettings to companies, will be totally unaffected.

Tenancies that fall into the Act as from the changeover date will need to have their deposits put into protection with an authorised scheme immediately unless they were already protected (the TDS scheme has been dealing with deposits on non-Housing Act tenancies since inception) and such tenancies will need to follow the usual provisions for termination by service of section 21 notices etc from that date.

There are several interesting problems raised by this change.

For one it could be argued that all tenancies falling into the tenancy deposit regime after 6 April or 1 October (whichever it is) will automatically be in breach of the requirements to protect deposits as they will have had their deposits placed into protection more than 14 days after they were received. This problem was raised in the Draycott v Hannells case (see paras 47-49) but the Court made no ruling on the point.

Secondly, there will be difficulty with tenancies that are due to end less than 2 months after the changeover date. Landlords will not be able to serve valid section 21 notices giving the statutory minimum two months notice to end the tenancy after the date to bring such tenancies to an end at the end of their fixed terms. It is not clear if a notice served before changeover would be valid for the purposes of s21 and it could only be so if the deposit had already been protected prior to service.

Thirdly, forfeiture actions for rent arrears may also be in some difficulty. Actions commenced prior to the changeover date will fall under the provisions of the Act after that date and so tenancies which have technically been ended by the service of a claim form (which is the rule in forfeiture cases) may be held to have been revived by the legislative change. If so the action can only proceed on the service of a valid section 8 notice unless the Court exercises its discretion to dispense with the service of such a notice.

Finally, the various tenancy deposit protection schemes will face a sudden rise in the number of tenancies being registered with them and, presumably, in the number of disputes they have to resolve. Those disputes will, naturally, be for greater sums of money and will inevitably be more complex. This may prove hard for schemes to deal with under their current financial and business constraints.

There is a tendency to blame the Government. However, it is not clear that they had much choice. The Housing Act 1988 simply gives a power to change the threshold figure from one number to another and not to get creative as to the implementation of that process. Admittedly, there were other legislative routes to dealing with the issue but they would all have taken more time. This is a change that needed to be made and it would have been difficult at any time. However, there is still a feeling of an unseemly dash to push through these changes in advance of a presumed election in May.

However, the Government could certainly have done far more to make the position clear by publicizing the changes more aggressively and also by (simply) publishing the legislation in good time so that we can actually take a look at it.

PainSmith Solicitors are running a seminar looking at the changes in London on the evening of 25 March. More information at www.painsmith.co.uk/seminars.

UPDATE: We are now given to understand that the necessary statutory instruments have yet to be finalised to bring the threshold change into force. However, the Government is intending to have these in place in time for 6 April with the intention that the actual changeover date will be 1 October.

Filed under: England & Wales, Housing Act 1988, regulations, rent threshold change

New Planning Categories for HMOs

We have previously reported that the Government was planning to amend the Town and Country Planning (Use Classes) Order 1987 to create a separate planning class for HMOs. The changes will come into force on 6 April 2010. The changes will only apply to England as Wales has its own devolved powers to deal with these matters.

The statutory instrument to carry out this change has just been published on the OPSI website as the The Town and Country Planning (Use Classes) (Amendment) (England) Order 2010.

The new planning classes will be as follows:
Class C3 has been amended to cover single households of up to six occupiers.
A new class C4 has been created which will cover HMOs of up to six people.
Properties with more than six occupiers will continue to be outside any planning category.

These changes will bring the definition of HMO for the purposes of planning in line with those used in the Housing Act 2004. The upshot of this issue is that any property which is an HMO (irrespective of whether it requires a licence) will now need to have a separate planning approval. The government has previously stated that they do not consider that this applies to tenancies which are currently in place as at 6 April but will presumably an application will need to be made on renewal. However, it is not clear how local authorities will view this area.

This will undoubtedly cause a massive increase in the number of planning applications and therefore the number of appeals. This will therefore mean yet another increase in cost to landlords and the amount of paperwork. Inevitably, many landlords will simply decline to let to sharers to avoid the hassle.

Filed under: England & Wales, England only, HMOs, Housing Act 2004, planning

AST Threshold Increase and Seminars

The Statutory Instruments to increase the maximum rent threshold from £25,000 to £100,000 have apparently been laid before Parliament and should be made more generally available shortly.

In order to assist clients with understanding the change PainSmith Solicitors are holding a seminar in London in the evening of 25 March to look at the changes and to revise the key provisions of the Housing Act 1988.

More information is available at www.painsmith.co.uk/seminars.

Filed under: England & Wales, Housing Act 1988, rent threshold change, seminars

Household Energy Management Strategy

The Department of Energy and Climate Change published a new strategy on 2 March regarding energy management and efficiency in homes. A press release on this (with video) is available here while the full document can be found here.

While they are keen that this is led by the social housing sector there is a proposal to regulate the Private Rented Sector as well. The intent seems to be to demand that all rented property after 2015 has loft and cavity wall insulation, where this is practicable. In the meantime more efforts will be made to inform landlords of the grants available to them to assist with energy efficiency upgrades. Some of this may be achieved through the use of the landlord register that the Government has made clear it wishes to introduce in England and Wales.

It is unclear how this strategy will fair after the election. Presumably, if Labour win they will carry it forward. The Conservatives will, no doubt, wish to have their own strategy but it is certainly the case that David Cameron has styled himself in a “green” mould and there will presumably be a similar set of proposals if he is victorious.

This should really be seen as a wakeup call for landlords who are still letting properties with low energy efficiency. Improvements will help to attract tenants and will also ward off the attention of local environmental health officers. The Energy Saving Trust is an excellent source of information and advice including flagging of grants available to make improvements.

Filed under: England & Wales, energy efficiency, strategy

Thermal Efficiency in the PRS

On 23 February Tony Lloyd MP sought to introduce a new bill under the 10 minute rule relating to thermal efficiency in the Private Rented Sector.

This bill seeks to impose a minimum thermal efficiency requirement on properties in the PRS and properties failing to reach this level will be prohibited from being let. Over time the level of thermal efficiency required will progressively increase. There will also be a new offence of marketing a property to let which could have its thermal efficiency improved at reasonable cost.

Given that it was admitted during Mr Lloyd’s speech that properties in the PRS have, on average, higher thermal efficiency ratings than owner-occupied this move seems rather misguided at best. It is also notable that while the social housing sector has very good thermal efficiency ratings this is largely due to the stock held by Housing Associations and properties retained by Local Authorities represent some of the least thermally efficient property.

10 minute rule bills rarely become law and are used by backbenchers to raise issues with Government (and the media!) which they would like consideration to be given to. This bill will inevitably become a casualty of the election but it should be noted as it is part of a wider drive to increase energy efficiency in property and it is likely that the PRS will undoubtedly be at the forefront of any regulation to do this.

Filed under: England & Wales, energy efficiency, legislation