Residential tenancies: AST rules round-up

Vast change to residential tenancies looks imminent, irrespective of which party wins the forthcoming General Election. As we await the likely abolition of Assured Shorthold Tenancies (ASTs), it is easy to forget the numerous rules of the AST regime, the breach of which often disqualifies the landlord from serving a no fault section 21 notice to quit. As an aide memoire, we have prepared a summary of the current rules in England and highlight the key practice points for landlords and agents to note.

  1. Using no fault section 21 notices to terminate ASTs:

Since 1 October 2018, landlords of all ASTs (new and existing) must comply with the following requirements in order to serve a valid section 21 notice to quit:

Prescribed Form 6A

Prescribed Form 6A must be used

Time Limits

Landlords have 6 months from the date on which the Section 21 notice was given to act on it

Prescribed Information given at start of tenancy

At the start of the tenancy tenants must have been given the latest copy of the Government's How to Rent Booklet, the property's Energy Performance Certificate (EPC) and the Gas Safety Certificate (where appropriate), free of charge.

Deposit protection

The deposit must have been protected in an authorised scheme within 30 days of receipt (or returned to the tenant before the S21 notice is served)

Retaliatory eviction

Landlords cannot serve a s21 notice within 6 months' of receipt of an improvement notice or emergency works notice under the HHSRS or following a complaint from the tenant about the condition of the property, which then leads to such a HHSRS notice;

Tenant Fees Act 2019

If the tenancy started after 1 June 2019, any banned fees or excess deposit must be returned to the tenant before a valid s21 notice can be served.

 

  1. Gas Safety Certificates:

  • Landlords must ensure that gas safety checks are conducted every 12 months on all gas appliances and flues by a registered Gas Safety Engineer.
  • A copy of the resulting certificate must be given to all tenants before they occupy the premises, or for existing tenants, within 28 days of the date of the gas safety check.
  • The cost of the checks must be borne by the landlord.

Two cases

Following the widely publicised (but unreported) County Court cases of Caridon Property Ltd v Monty Shooltz (Feb 2018) and Trecarrel House Ltd v Rouncefield (Feb 2019) landlords should ensure that tenants are provided with a copy of the Gas Safety Certificate before the start of their tenancy, in order to avoid the risk that a later section 21 notice is invalidated. Applying Caridon and Trecarrel, it is not possible to remedy a breach of this requirement by providing a copy of the certificate at a later date. Although neither case is binding, they will be persuasive to other judges and the Government has confirmed that it does not intend to legislate to reverse the effect of the decisions.

The landlord in Trecarrel has been granted permission to appeal to the Court of Appeal. The appeal has not yet been heard, but a Court of Appeal judgement will be binding and will provide definitive guidance for landlords and tenants alike. In the meantime, prudent landlords should serve a copy of the certificate before the start of all ASTs.

Finally, as explained in Hannah Drew's recent article posted in Agricultural Lore December 2019 edition, unless the tenancy agreement specifically states that documents may be served on the tenant via email, then for certainty, the gas safety certificate should always be provided to the tenants in hard copy, and an acknowledgement of receipt should be obtained.

  1. Tenant Fees Act 2019:

The Tenant Fees Act 2019 ("TFA") has been applicable to all new AST's since 1 June 2019 and will apply to existing AST's from 1 June 2020.

It has banned most letting fees, caps tenancy deposits and restricts the ability of landlords or agents to require any payments from tenants apart from certain "permitted payments", set out in schedule 1 to the TFA.

Restrictions include a deposit cap (5 weeks rent); a ban on renewal fees and administration fees (e.g. referencing, property viewing, inventory checks, pet fees, right to rent checks) and a requirement to return any excess deposit held in breach of the TFA if the AST is renewed.

Financial and criminal sanctions are imposed for non-compliance, and landlords are restricted from using the s21 eviction procedure if prohibited payments were taken and have not been returned.  For further details see the Government website.

  1. Homes (Fitness for Human Habitation) Act 2018

The Homes (Fitness for Human Habitation) Act 2018 introduced a new implied covenant that the let residential dwelling is fit for human habitation throughout the tenancy.

Currently, it automatically applies to all new residential tenancies (of less than 7 years) granted after 20 March 2019 and will apply to existing tenancies after 20 March 2020.

If a dwelling is not up to the appropriate standard a tenant will be able to take court action for breach of covenant. Further details are available on the Government website.

  1. MEES (Minimum Energy Efficiency Standards):

In 2015, the government passed the Energy Efficiency (Private Rented Sector) (England and Wales) Regulations which have been implemented in stages:

  • Since 1 April 2018, it has been unlawful to let a residential property with an EPC rating of less than E. This stage only affected grants of new tenancies or any renewals.
  • From 1 April 2020 the MEES will apply retrospectively, across the board, to all new and existing residential tenancies. Landlords will not be able to continue to let a residential property after 1 April 2020 unless the property has an EPC with a minimum energy efficiency rating of E or above (or specific exemptions apply).
  • The MEES Regulations apply to all residential tenancies. They are therefore relevant to AST's, assured tenancies and assured agricultural occupancies under the Housing Act 1988 and Rent (Agriculture) Act 1976 occupancies as well.
  • There are financial penalties for non-compliance and landlords are restricted from using the s21 eviction procedure if the tenant has not been provided with a copy of the EPC.

 

Action for Landlords

 EPC's

Landlords with existing tenancies granted prior to 1 April 2018 should use the next 4 months to commission energy performance surveys, and where necessary (and no exemption applies), carry out works to improve the rating.

Cost Cap

Landlords are required to make all improvements possible up to a cost cap of £3,500 (inclusive of VAT). Any investment made since October 2017, including work carried out with third-party or grant funding, will be counted within the cap. Note that the £3,500 must be spent even if the property can't be improved to an E standard within that cost cap.Landlords are expected to carry out all the improvements they can up to that level, and then apply for an "all improvements made" exemption which will last for 5 years.

Exemptions

There are other exemptions, including where the local authority refuses permission for energy efficiency improvements to a listed building or where an independent surveyor determines the works would reduce the property's value by 5% or more, or would damage the property.

Service

EPC certificates last for 10 years, and so if your property has a valid EPC certificate with a rating of E or above, the only action required is to serve a copy of the EPC on the tenant before the start of the tenancy.

 

It is worth noting the next deadline on the horizon, which will require all non-domestic private rented properties to have an EPC rating of E or above from 1 April 2023.

  1. Consultation on Deposit Reform

On 5 September 2019, a Government Consultation closed regarding potential reforms to the deposit system applicable in the private rented sector.

There is concern that when tenants move between private rental properties, the overlap between the return of the previous deposit and the deadline for paying a deposit on their new tenancy is adversely affecting tenant mobility, and has serious impacts on the most vulnerable tenants. The Consultation aimed to determine the extent of the problem and obtain views on possible solutions (e.g. imposing a deadline on landlord's for returning deposits or a system of "passporting" deposits directly between tenancies). Although in its early stages, this Consultation is very much in line with current Government policy in the sector.