9 June 2020
Residential property - June 2020 – 4 of 5 Insights
From 1 June 2020, the Tenant Fees Act will apply to all qualifying tenancies irrespective of when the tenancy commenced. The Act has been in force for a year now, but until 1 June it only applied to new tenancies. This is particularly relevant during the current lockdown restrictions.
The Act prohibits all payments from a tenant unless that payment is categorised as a "permitted payment" under the Act, such as rent and a security deposit. Prohibited payments include right to rent check fees, renewal and exit fees and "administrative charges". Landlords should therefore check their existing tenancy agreements and ensure that their letting agents do not collect fees that are in breach. If a fee is charged that is not permitted, a landlord will not be able to serve a valid s21 notice to recover possession until the unlawful payment has been repaid. There are also financial penalties for non-compliance.
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 came into force on 1 June 2020. The regulations require inspections of electrical installations every 5 years, and for inspection reports to be supplied to tenants. Breaches of the regulations can result in financial penalties of up to £30,000.
The regulations will apply to all new tenancies from 1 July 2020 and to existing tenancies from 1 April 2021.
Under these regulations, all landlords must:
In practice, this means that landlords will need to ensure that they are compliant when granting any new tenancy from 1 June 2020 onwards.
The UK government has recently issued guidance on the regulations which confirms that a landlord will not be in breach of duty if it can show that it has taken all reasonable steps to comply with a remedial notice. This is particularly relevant during the current restrictions during lockdown.
Local authorities will be responsible for enforcement. These duties and powers will include sending remedial notices, carrying out remedial action for tenants, and issuing financial penalties for landlords who fail to comply with the regulations.
In this year's budget, it was announced that the government would be creating a new £1bn remediation fund for all private and social sector buildings taller than 18 metres that are fitted with unsafe cladding. The official launch of the fund was in May 2020 and potential applicants have been asked to register their interest. Once the registration process has been completed, the intention is for a detailed application process to begin in July 2020, with several months' worth of detailed scrutiny of the applications to follow.
This is not the first fund provided by the government to address the issue of unsafe cladding post-Grenfell. A £400M fund was provided for the social housing sector in 2018 and a further £200M for the private sector in 2019. However, these schemes were limited to buildings with Aluminium Composite Material cladding and did not extend to those incorporating timber or high pressure laminate, despite concerns over the fire risk of these materials. This new fund has been welcomed for including other materials as being below a specified fire safety standard.
The fund is intended to meet the costs of removing and replacing unsafe cladding systems on high rise residential buildings where the cost would otherwise be passed onto leaseholders through the service charge. Many tenants in these buildings have found themselves unable to sell or mortgage their properties. This is in addition to being aware that their buildings are unsafe, with little prospect of remedial works being undertaken in the near future.
It should be noted that the fund will not cover any other required fire safety works that are unrelated to the cladding system, nor does it cover the cost of any interim safety measures put in place regarding the building which could in the interim be passed on to leaseholders through the service charge. Most significantly, the fund is not available for works which have either been committed to or where work started prior to 11 March 2020.
It remains to be seen how the funds will be allocated and on what basis, what conditions will be attached to accessing the funds, and how quickly funds will be made available. It is likely that the full application process will be lengthy, and given the number of affected buildings, even a £1bn fund is unlikely to cover the remedial costs of all buildings. While this is a welcome and positive move, it still leaves freeholders (and therefore tenants) in an uncertain situation for the time being.
by Lisa Bevan
by Lisa Bevan