Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Deposit Variation Deeds for 1 October

The PainSmith webshop now has deeds of variation available for all three tenancy deposit schemes.

These deeds are designed to vary the terms of existing common law tenancies which will become ASTs on 1 October to incorporate mention of the relevant deposit protection scheme and any clauses required by that scheme.

Deeds for the three schemes can be found here.

Filed under: England only, ,

Rent Arrears on Common Law Tenancies- Last Chances to Act

Landlords who have common law tenancies which will become ASTs on 1 October and whose tenants are in arrears of rent should act now.

Once those tenancies become ASTs the tenant will need to be in 2 months of arrears before the landlord stands a good chance of securing possession in Court. If proceedings are issued before the tenancy converts then it will not become an AST, even if the Court hearing is after 1 October, and the landlord will be able to seek possession under the common law rules of forfeiture. These require the Court to award possession however small the level of rent arrears. While the tenant has the option of paying the outstanding rent and staying in the property he will also be obliged to pay the landlord full interest and their legal costs so the tenant has an incentive to pay up and the landlord does not lose out.

By contrast if the landlord waits until after 1 October he will need to wait for a full two months worth of rent arrears to accrue, give 14 days notice under section 8 of the Housing Act 1988 and then start proceedings. In Court he will get an order for the arrears, interest, but probably less than his total legal costs but the tenant has no right to stay if they pay the landlord. Therefore the incentive on the part of the tenant to pay the debt is much reduced.

However, proceedings must be issued by the Court before 1 October. In practice this means they will need to have been sent to the Court by 27 September at the very latest.

Filed under: England only, , ,

New TDS Required Clauses

The Dispute Service, operators of one of the two insurance backed tenancy deposit protection schemes will shortly be providing guidance as to their position on the changes to the maximum rent threshold under the Housing Act 1988.

More importantly we understand that TDS will be updating document TDS G which contains the prescribed clauses that TDS require to be placed in any tenancy agreement that is to be dealt with under the scheme. There are to be two different sets of clauses. One set will be for Assured Shorthold Tenancies that are being formally registered with TDS to comply with the requirements of the Housing Act 2004 (although these are unchanged from previous versions) while the other are for Non-Housing Act tenancies which are not being registered but wish to make use of TDS to resolve any disputes over the tenancy deposit at the end of the tenancy.

It should be noted that TDS will now be charging for their adjudication services in relation to disputes over Non-Housing Act tenancies.

We understand that the new version of TDS G will be available from Monday 13 September. On that date it will also be possible to purchase ASTs and Non-Housing Act tenancies incorporating the new clauses from the PainSmith webshop. It will also be possible to purchase deeds of variation which will insert the relevant information for any of the three protection schemes into a tenancy agreement which is converting to an AST on 1 October.

You can view all our posts on the AST threshold change by following this link.

Filed under: England & Wales, ,

DCLG FAQs Regarding ASTs after 1 October

The DCLG have decided the final version of their FAQs regarding the Housing Act 1988 rent increase threshold to be placed on their website. We have seen an advance copy and are pleased to note that some changes have been made as a result of representations made to the DCLG by this firm, among others.

Most notably the DCLG has now resiled from their earlier position that all tenancy deposits for tenancies that have converted to ASTs must immediately be protected on 1 October. This is a view that we have previously criticised. The DCLG have listened on this point and the FAQ now states:

We do not consider that deposits taken before 1 October will need to be protected as these were not taken in connection with a shorthold tenancy and therefore do not meet the criteria for protection specified in the Housing Act 2004.

However, agents and landlords should be aware that this is a matter for the Courts to decide and it would be wise to protect deposits on 1 October and certainly on any renewal of the tenancy.

DCLG has, however, maintained their position that a section 21 notice issued in respect of a tenancy which becomes an AST on 1 October cannot expire until 6 months after that date, ie. not before 1 April 2011. This is a view that we do not agree with and have previously criticised. We are pleased to note that the DCLG has watered this position down in the light of our representations and now says that it will be for the Courts to make a final decision on this issue. Doubtless such a case will appear in the Courts in short order.

You can view all of our blog posts on the Housing Act 1988 rent threshold increase by following this link.

Filed under: England only, ,

Housing Act Threshold Changes Coming Soon

It is now less than a month to the change in the maximum rent threshold of £25,000 found in the Housing Act 1988 in England.

We have written a large number of posts on this topic which can be found by following this link.

Filed under: England only, ,

Short Lets After 1 October

We have recently come across another unanticipated issue which may become a problem after 1 October. A number of properties in London are let on ‘short lets’ to individuals working or holidaying in London. In the past the high rents charged on these properties meant that they were excluded from the Housing Act 1988. However, with the increased rent threshold this exception will apply to far fewer of these properties.

Premises being let for the purposes of a holiday in London will still fall outside the Housing Act 1988 and these will not present a problem. However, properties being let to individuals who are working in the UK for a short period and where the rent is below £100,000 per annum (pro rata) will now fall under the Housing Act 1988. This of course means that the tenant is entitled to 6 months security of tenure in the property.

To clarify, there is no requirement that a property which falls under the Housing Act 1988 is let for 6 months as is sometimes believed. It is perfectly possible to let such a property for a shorter term. However, a Court is simply not empowered to give possession on a section 21 notice any sooner than 6 months from the start of the initial tenancy. Therefore letting a property for a shorter period is a calculated risk on the part of the landlord as he is at risk of the tenant continuing to pay the rent and simply staying for 6 months with little or no recourse.

What options does the landlord have? If the landlord has resided in the property before as his main residence then he can give a notice before the tenancy begins under ground 1 of Schedule 2 to the Housing Act 1988. This would allow a section 8 notice to be given at any stage giving the tenant 2 months notice to vacate provided that the landlord wishes to reside in the property again as their main home. Otherwise the only option will be to avoid creating a tenancy at all. If a landlord wishes to do this then they will need to provide some services as a part of the agreement which will require access to the property. A landlord who was providing regular cleaning and fresh towels and linen as a part of the agreement should be able to argue that he has not created a tenancy at all but has only created a licence and so the provisions of the Housing Act 1988 will not apply at all. Of course, this will involve a lot more organisation on the part of the landlord but it may be worth it if it is necessary to be sure that vacant possession of the property can be obtained.

Filed under: England only, FLW Article, , ,

Uncertainty About Tenancy Agreements Approaching 1 October

We have been asked a lot of questions recently about how to draw up a tenancy agreement in the run up to 1 October.

The short answer is that it does not really matter. Tenancies that will become ASTs on 1 October will become ASTs on that date irrespective of what the actual agreement says. Equally, they will not be ASTs before that date irrespective of the wording on the agreement.

Therefore agents can draw up these tenancies on Common Law Agreements now and accept that the agreement will misdescribe itself from 1 October or they can draw them up as ASTs now and accept that the agreement will misdescribe itself until 1 October. Alternatively, the agreement can state that it will change to an AST on 1 October or a new agreement can be issued on that date. All of these are reasonable approaches and each agent and landlord should decide what works best for them. Anyone purporting to sell some form of agreement that will deal with the situation is really just taking money for old rope and this is the reason that this firm has chosen not to produce a special tenancy agreement to cover the transitional period.

What will be necessary for members of The Dispute Service will be to make sure that the prescribed clauses required by the scheme are incorporated into the Agreement after 1 October. This can easily be done by sending the tenant a letter setting out the clauses and stating that they will be incorporated into the agreement. It would be wise to ask the tenant to sign and return a copy for recording purposes.

Don’t forget that when the deposit is registered a copy of the registration certificate, the information required by the Housing (Tenancy Deposit) (Prescribed Information) Order and the appropriate scheme leaflet must also be sent as well.

Filed under: England only, ,

Assured Tenancies After 1 October 2010

We have posted already (several times) on the issue of the increase in maximum rent threshold under the Housing Act 1988 which will occur on 1 October 2010.

While it is well understood that this will increase the number of assured shorthold tenancies it has been forgotten that the Act also includes assured tenancies, that is market rent tenancies with a security of tenure for life. These will also be affected by the change.

Therefore non-Housing Act tenancies which began after 15 January 1989 but before the 28 February 1997 will not convert to ASTs on 1 October but will convert to Assured tenancies. Equally, formerly Assured tenants who have lost their protection due to their rent being raised above the £25,000 threshold will regain their assured status.

Presumably this will affect relatively few tenancies but the effect will, of course, be profound. Landlords in this position would be well advised to make sure that they have clearly and unequivocally terminated these tenancies prior to 1 October by either evicting the tenants or, at the very least, signing deeds of surrender and granting new ASTs.

Filed under: England & Wales, England only, ,

ASTs and Security of Tenure after 1 October

It has come to our attention that some landlord and tenant advisors are suggesting to agents and landlords that tenancies which convert to ASTs on 1 October 2010 will not be able to be terminated under s21 of the Housing Act 1988 until 6 months after that date, ie not before 1 April 2011.

This is simply not correct and is based on a misunderstanding of the wording of section 21.

S21(5) states that a possession order cannot be made until “six months after the beginning of the tenancy”. The error is assuming that tenancies which convert to ASTs on 1 October start from that date. Tenancies which have converted on 1 October are not new tenancies starting from that date. They are new tenancies from their original date of inception which have simply fallen under the statutory control of the Housing Act 1988 from 1 October. Therefore the 6 months for the purpose of s21(5) starts from the original start date of the tenancy and not from 1 October.

Filed under: England & Wales,

CLG View on Tenancy Deposits After 1 October

As we have previously reported the maximum rent threshold for Housing Act 1988 tenancies is to be altered on 1 October from £25,000 to £100,000.

One of the key questions has been what the position will be for tenancy deposits taken in respect of tenancies which start prior to 1 October and are not ASTs but which will become ASTs on 1 October. There has been some uncertainty as to whether these tenancy deposits will need registration with an authorised scheme or not. If they do need registration then there is some doubt as to when that will need to occur.

It seems that DCLG thinks they will need registration. They have been advising stakeholders that:

Our intention is that these new assured shorthold tenants should have the same protection as existing tenants, so if the tenancy started after 6 April 2007, the landlord will have to protect the deposit.

It is debatable whether they can, in fact, achieve this as the trigger for the protection of a deposit is receipt in connection with an AST. These deposits were received prior to the change and were not received in accordance with an AST and so did not require protection as at the time they were received. Clearly, however, the DCLG thinks different and will seek to encourage the Courts to rule on this basis.
The DCLG recognises that landlords will not have been able to register deposits within 14 days of receipt but states that

we would expect them to protect the deposit as soon as possible.

Apparently they will ask the Courts to give landlords leeway on this issue although after the ruling in Draycott v Hannells the Courts should not be acting on late registration anyway so it is hard to see what useful guidance can be provided.

While we have some doubts about the validity of the DCLG position the message is clear. Protect all tenancy deposits as soon as possible and definitely promptly after 1 October. We hope the deposit protection schemes are prepared for the rush.

Filed under: England & Wales, , , ,

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 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, , ,

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, , ,

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