News & Insights

The private rented sector – new rights for tenants

Mark Banham considers a raft of recent legislation designed to enhance the rights of tenants in the private rented sector.  This has been backed up by new guidance published by the Government. 

Landlords and letting agents need to be on their toes at the moment.  In the last couple of months there has been a flurry of new legislation and new guidance to tenants and local authorities on the subject of tenants’ rights.  The private rented sector has grown rapidly in recent years and there are now 4.4 million households living in properties owned by private landlords.  Concerns have been raised by campaigners about the lack of security of tenure for tenants and the condition of private rented properties, as well as uncontrolled private rents.  The coalition government has addressed a number of these concerns and after the election it seems possible that further measures may be introduced.  This article summarises recent developments.

Membership of redress schemes

From 1st October 2014, all letting agents are required to be a member of one of three government-approved letting agency redress schemes.  It is a criminal offence for a letting agency not to be a member of a redress scheme and a local authority can issue a fixed penalty fine of up to £5,000 to a letting agency branch that is not a member of a scheme.  Letting agents with multiple branches could face multiple fines.

Redress schemes provide a free, independent service for resolving disputes between letting agents and their customers – both landlords and tenants can use the scheme.  If a letting agent doesn’t resolve a complaint within 8 weeks the aggrieved party will be able to complain to the redress scheme.

The current government-approved redress schemes are:

  • The Property Ombudsman
  • Ombudsman Services Property
  • The Property Redress Scheme

Requirement to publish fees

From 27th May 2015, letting agents in England and Wales will be under a legal obligation to publicise details of all fees, charges or penalties which are payable to the agent by a landlord or tenant in connection with an assured shorthold tenancy.  The requirement is for a comprehensive list of everything that a landlord or tenant might have to pay to a letting agent at any time before, during or after a tenancy.  The list must be clearly defined and there is no scope for surcharges or hidden fees.  Ill-defined terms such as “administration fee” must not be used and all costs must include tax.

There are certain exceptions to the requirement to publicise.  The agent does not need to publicise the following:

  • Rent payable to a landlord
  • The amount of a tenancy deposit taken as security against damage or a breach of the tenancy agreement
  • Any fees, charges or penalties which the letting agent receives from the landlord on behalf of a third party

The last exception relates to the situation where, for example, a letting agent recommends an electrician to carry out work at a property and arranges to pass payment from the landlord to the electrician without taking a cut or adding a fee for this service.  In that example, there would be no requirement to publicise the fee charged by the electrician – the agent is simply providing a more convenient way for the landlord to pay the electrician.

The agent must display a list of the fees at each of their premises at which the agent deals face-to-face with persons using or proposing to use services to which the fees relate.  The list must be displayed such that it is likely to be seen by customers.  Guidance from the Department of Communities and Local Government states that “ideally someone walking into an agent’s office should be able to see the list without having to ask for it and if someone does ask it should be clearly on view an not hidden for example in a drawer”.

Where a fee cannot reasonably be determined in advance, the list should describe how a cost will be calculated.  This will apply in the common situation where a letting agent charges for certain services based on a percentage of the rent payable under the tenancy agreement.

In addition to the fees, letting agents must publicise whether or not they are members of a client money protection scheme and which redress scheme they have joined.  Letting agents who are not members of a client money protection scheme must make this clear – silence on this matter is a breach of the legislation.

Smoke and CO alarms

New regulations are expected to come into force in October 2015 requiring landlords to instal smoke alarms on every floor of a property occupied under a tenancy – and in this case a tenancy includes a licence.  Landlords will also need to instal carbon monoxide alarms in high risk rooms such as those where a solid fuel heating system is installed.  The alarms would need to be tested at the start of a tenancy.  Those who fail to comply with the new regulations could face up to a £5,000 civil penalty.

The new regulations are expected to be laid before Parliament after the election and are expected to come into force, subject to Parliamentary approval, on 10th October 2015.

Another announcement expected shortly is the allocation of funding to fire and rescue authorities to enable them to offer free smoke and carbon monoxide alarms to local landlords.

New rules on section 21 agreements and retaliatory eviction

Substantial changes to the giving of section 21 notices will come into effect for new tenancies commencing on or after 1st October 2015.  The aim is to tighten up the use of section 21 notices by landlords and in particular to address the issue of a landlord serving a section 21 notice and proceeding to evict a tenant after the tenant has complained about the condition of the property.  The new section 21 regime is described in detail in another FSP article Section 21 notices and retaliatory eviction.

Changes in the law relating to tenancy deposits

The Deregulation Act 2015 contains a number of provisions amending the existing legal requirements relating to tenancy deposits.  The new provisions are described in detail in another FSP article Tenancy deposits – some important changes.

Government guidance

Part of the Government’s strategy in addressing the concerns of groups campaigning on behalf of tenants has been to offer guidance rather than further regulation.  The guide, “Renting a safe home:  a guide for tenants” makes clear the standards tenants should expect, what to look out for when renting a home and how to spot the signs of a poorly-managed property.  Another guide, “Improving the Private Rented Sector” provides advice to local authorities on building up an effective case in court against rogue landlords.