Summary:Tenant Fees Act 2019; Homes (Fitness for Human Habitation) Act 2018; R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2019] EWHC 452

This article summarises three important updates to the law that will affect residential landlords and tenants:

• The Tenant Fees Act 2019 comes into force on 1 June 2019. This legislation will limit the fees residential landlords and their agents can charge a tenant, with tough penalties for non-compliance.
• The Homes (Fitness for Human Habitation) Act 2018 came into force on 20 March 2019. This is intended to "hold residential landlords to account" by ensuring acceptable living standards in rental properties.
• The decision in the High Court case of R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2019] EWHC 452 provides a thought provoking judgment, labelling the 'right to rent' policy as discriminatory. Whilst the policy is still applicable to every residential landlord in England, there could be some interesting developments in the coming months which could see the policy altered or even repealed.

The Tenant Fees Act 2019 (the "TFA")

Who does it apply to?

The TFA comes into force on 1 June 2019 and will apply to all new assured shorthold tenancies, student lettings and licences in England. It will not apply to social housing, statutory periodic tenancies (which became periodic before 1 June 2019) or other long leases.

If a tenancy commenced before 1 June 2019, landlords and letting agents will still be able to claim any prohibited payments up to 1 June 2020 as a transitional period.

Impact on landlords/tenants

From 1 June 2019 any payment from a residential tenant to a landlord or its letting agent will be prohibited, unless it is specified as a 'permitted payment' in the TFA. If a landlord or letting agent accepts a prohibited payment after 1 June 2019, it must return the funds within 28 days from the day it is accepted.

The key provisions are outlined below:

• Rent – whilst landlords can blow a sigh of relief that rent, of all things, is a permitted payment, an increased rent for individual months is not permitted under the TFA. For example, increasing the rent for the first month (perhaps in order to cover some of the, now prohibited, initial payments) is not permitted. Rent must be consistent throughout the tenancy but this does not prevent rent increases in accordance with the terms of a tenancy.
• Deposits – A tenancy deposit, being funds used to protect the landlord against a tenant's breach of the tenancy, is a permitted payment under the TFA. However, the amount that can be requested has new constraints. Where the annual rent is £50,000 or less, a landlord can request up to five weeks of rent as a deposit. If the annual rent is over £50,000 the landlord can request up to six weeks.If a landlord or its agent is in breach of the TFA in relation to a tenancy deposit, it may invalidate a section 21 notice to recover possession. A holding deposit, being money held in order to reserve a tenancy for a tenant, is permitted but a landlord can only accept a maximum of one week's rent.The restriction only applies to holding deposits paid after 1 June 2019, after which landlords can only hold the deposit for a maximum of 15 days, unless the tenant agrees to extend the deadline in writing. Once the tenancy is agreed, the tenant must provide consent for the landlord to use the funds as payment towards rent, or the funds must be returned to the tenant.
• Default payments – Landlords or their agents can ask for default payments in relation to the loss of a key/security device, provided these are reasonably incurred costs and supported by evidence in writing to the tenant. Landlords can also ask for payment following a tenant's failure to pay the rent in full, damages for breach of the agreement, as well as charges for assignment or early termination, council tax and utility bills. All requests for payment must be reasonably incurred.
• Penalties for non-compliance – The local authority's trading standards team will regulate enforcement of the TFA. A penalty for a first offence will be a fine up to £5,000. A penalty for a second offence (committed within five years of the first offence) will be a fine up to £30,000 and it will also be a criminal offence. In addition, a landlord is unable to terminate a tenancy until it has returned any prohibited payments wrongly received to the tenant. Ultimately, this will prevent a landlord from obtaining possession of the property, which acts as a penalty in itself.

The Homes (Fitness for Human Habitation) Act 2018 (the "HFHHA")

Who does it apply to?

The HFHHA came into force on 20 March 2019 and applies to all new tenancies (with a term of less than 7 years) and any tenancy which became periodic on or after 20 March 2019. If a current tenancy is already periodic, it will apply from 20 March 2020. It also applies to common parts of a dwelling let to a tenant.

Impact on landlords/tenants

The HFHHA imposes an implied term into a tenancy that the property must be fit for human habitation, and that it will remain fit for human habitation throughout the term of the tenancy.

Essentially, a property will be unfit for human habitation if there is a serious defect in either repair, stability, damp, lighting, ventilation, water supply, drainage/sewage, cooking facilities, internal arrangement or if there is a 'prescribed hazard'. It is not possible to contract out of these obligations.

However, landlords will not be responsible for damage caused by the tenants, by fire, by storm or by flood, nor will the HFHHA apply to anything that the tenant can remove from the property. The HFHHA also implies a covenant into the lease to the effect that the landlord is able to inspect the property to view its condition by giving reasonable notice.

Whilst the HFHHA does not specify the point in which a landlord is in breach of the HFHHA, commentators generally agree that the current common law position will still apply.

Under common law, tenants have a duty to put the landlord on notice of a defect in the property and the landlord can then act accordingly. A court is unlikely to find that a landlord is in breach of its statutory obligations if it is unaware of an issue or if it has been unable to attempt to remedy a defect in the property.

R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2019] EWHC 452

The High Court has ruled that the government's Right to Rent Scheme (the "Scheme") causes racial discrimination in breach of Articles 8 (right to respect for private and family life) and 14 (non-discrimination) of the European Convention on Human Rights.

The Immigration Act 2014 requires landlords in England to comply with the Scheme, by checking a prospective tenant's documents to show that they have a right to be in the UK. For UK/EU nationals, the test is satisfied by showing a UK/EU passport. However, for anyone from outside of the UK and Europe, it is necessary to also show visa documentation.

In this case, the Claimant provided substantial evidence in the form of surveys and 'mystery shopper' emails, showing that the scheme was discriminatory towards foreign nationals. The Defendant argued that even if the scheme was discriminatory, the issue derived from the landlords' conduct, not the policy itself.

The judge found that it was the Scheme itself that made landlords discriminate, as evidence showed that, in the absence of the Scheme, landlords would not discriminate against foreign nationals to the same extent. The judge also stated that the Defendant fell short of even justifying the scheme and that parliament's decision to approve the legislation was without "reasonable foundation".

Currently, the Scheme is only in practice in England, so the ruling stifle the Scheme from being transferred to other parts of the UK. Despite the decision, landlords in England will still need to comply with the Scheme, until amendments are made to the Immigration Act 2014.