According to Knight Frank’s UK Tenant Survey 2017, the ’proportion of households living in the private rented sector (PRS) has doubled in the past 10 years or so, and it is expected to continue to grow – by the end of 2021, nearly one in four households will be living in the PRS’.
The same report identifies that only 12% of PRS accommodation is run by large-scale corporate landlords, with the majority of accommodation being managed by private landlords. It is not surprising then that there are large numbers of landlords/managing agents in the PRS who do not fully understand the regulatory landscape governing it.
The law in this area has changed dramatically within a relatively short space of time. There is now a much heavier regulatory burden on landlords who let properties on an assured shorthold tenancy (AST) and non-compliance with the rules can have far reaching consequences.
We will not delve into how we arrived at this point as that would be an entire article on its own, but instead we will focus on:
There are several legal requirements imposed on landlords who want to grant an AST, all of which must be complied with to avoid issues further down the line.
In our experience, both landlords and managing agents often fail to fully understand that these obligations must be complied with at the outset.
Non-compliance with the tenancy deposit rules is still the biggest mistake landlords and managing agents make. This can leave landlords thousands of pounds out of pocket, even where the errors appear to result from a simple lack of knowledge. Unfortunately, the courts have no sympathy with such an excuse.
Perhaps more excusable is a lack of understanding around premises let to more than one tenant and the consequences of an additional or replacement tenant moving in after the expiry of the initial fixed term (where either the tenancy continues as a periodic tenancy or a replacement tenancy is entered into).
It is not uncommon for tenants to find strangers to live with them when friends move out. However, in our experience, this can cause problems. Managing agents and landlords often neglect to revisit the legal requirements highlighted above and simply allow tenant changes so long as the new tenant passes the required financial checks (and the income from the premises remains constant).
This is a costly error. Failure to reprotect the deposit and to provide the prescribed information along with the How to rent… booklet to all of the tenants (existing and new) within 30 days, will put the landlord in breach of the tenancy deposit rules. As we know, the consequences are serious:
Landlords looking to purchase a portfolio of ASTs should be particularly alert to this issue. They should pay special attention to premises with two or more tenants as these are often the ones where mistakes occur.
This is an area which need not cause landlords and managing agents difficulties. The key is to be organised. Put processes in place to ensure all obligations are complied with both:
Existing landlords should carry out periodic reviews of their portfolios to ensure they are compliant and seek legal advice if they are unsure about how best to deal with any non-compliance.
Purchasers considering buying property subject to existing ASTs should request all relevant documentation and check it carefully to minimise any unwelcome surprises.
This article was published in Estates Gazette in November 2017.