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Coronavirus: Legal and Compliance Update for the Property Sector

Webinar recorded live:
Categories: Guest speakers & industry specialists,Legislation


David Cox, ARLA Propertymark Chief Executive joined us for an extended Q&A webinar on 24th March, the morning immediately after the government’s announcement for people to stay indoors unless immediately necessary. Watch the recording above or jump straight to a specific question in the text summary of David’s responses below.

Please note that at the time of recording, the government had given no advice specific to estate and lettings agents. With the pace of change we are currently seeing, some of the information below may be out of date by the time you read this. Please check the Propertymark website or industry news sources for any subsequent updates to government advice since Tuesday 24th March.

What are the implications of the lockdown measures for agents? Is home moving considered to be “essential” and can we still go ahead with moves?

“Shortly after the Prime Minister’s announcement the government issued about a four-page guidance note on the closure of businesses. Specifically it said the auction houses have to close but didn’t actually mention sales and lettings agencies. However, I think the message that came back to me this morning is to exercise common sense. We’ve already seen this morning from the British Association of removers that they have told their removal agents to not do any more work unless the furniture if physically on your lorry right now and you’re in the middle of a move.

I think that is got to be similar for our industry as well. I cannot tell you what to do. This is your businesses. But there is a very strong message from government coming out that unless it is absolutely essential, there shouldn’t be any house moves, certainly not for the next three weeks until the government makes an announcement.”

What about tenants moving in our out of properties over the coming days?

“If you have got tenants that have given notice or you’ve got new tenants moving in, you might want to suggest that they stay put. That means they continue on with their tenancies for the foreseeable future because the government has been very clear do not go out of your house unless it is absolutely necessary.
The government is never going to be able to issue guidance on every situation, or specific to sales and lettings agents. Instead we need to interpret the broader government guidance for our industry and take a common sense approach.

If somebody’s going to be at risk of homelessness if they don’t move in, or if the house is actually empty… that’s different than if one person one set of tenants is moving out and another set of tenants is moving in. So I think agents need to take a common sense approach and do what is the best in line with government guidance.”

If a tenant stays in the property beyond the end of the tenancy, isn’t that breach of contract?

“No – it depends what’s in your contract as to whether it will move onto a statutory or contractual periodic tenancy. If it just rolls on and the tenant stays in the property, it will drop onto a statutory periodic tenancy under the Housing Act 1988 on exactly the same terms and the same rent levels as the original term and would operate on a rolling month-by-month basis. If you use the Propertymark tenancy agreement or one that clearly states “the tenancy will be from day X to day Y and monthly thereafter”, then it will drop onto a contractual periodic tenancy. That will create a contractual periodic tenancy on all the same clauses as the original tenancy and again continues on a month-by-month basis until terminated by the party.”

Can we move new tenants into vacant properties without an inventory if the inventory companies are not working?

“The answer is yes, technically, you can. There is nothing in law stopping you, however the problem will come at the end of the tenancy.

If there was a dispute and you didn’t have the check-in inventory to be able to document the quality, then what? You and your landlord will be looking for the schedule of condition at the beginning versus the end and therefore it would be very difficult for a them to claim on the deposit.

A way around it could be asking the tenant to do a video of the property when they move, just to give some sort of idea of the quality. That should be enough even if it is not the normal inventory provision. But again, it’s something that we have to factor in when it comes to dealing with these issues later down the line.”

Would you move tenants into an empty property during this time, given that it involves meeting them at the office to sign the tenancy agreement and handing over keys?

“Probably not given that the government guidance is very clear. No more than two people can be in one place. Can you do these things over email? Can you use other systems like DocuSign for example to sign legal documents and post the keys? Or leave the keys somewhere else that they can pick up without coming into direct contact?

Estate agents are not essential businesses under the new definition and therefore they shouldn’t really be open and whilst there is not the specific prohibition like there was for an auction house, I would suggest that’s probably more because it was missed out of the what was clearly a very hastily put together document rather than saying that it’s okay to stay open.”

What do we do if a tenant is due to leave but can’t due to self-isolation? And what if another tenant is lined up, has signed the agreement, and still wants to move?

“Based on the governent’s advice, it’s probably not wise for people to be moving at this point in time. So you might want to contact those tenants that have issued notice to leave and say “Do you really want to be doing this? The government has said that you shouldn’t be leaving your house for the next three weeks.” If they wanted to withdraw their notice then they can and as they are continuing in occupation rent is still payable at the current rates, unless agreed otherwise.

I would suggest dealing with the tenants that are in the property currently first. Then the same question also needs to be asked of the incoming tenant and managing agent, if it’s different. Let them know the tenant wants to stay put and you’d recommend they stay put in their current property too until the crisis is over. This is one of those examples where we are in such unprecedented time that we need to work together as agents to come to a solution that holds the chain of movers together. Moves have basically got to be put on pause for a few months until we go back to normal. But the rent is still payable by the tenant at the rate they have been paying whilst they’ve been living there.”

What is the government’s stance on viewings still taking place providing tenants are not self-isolating?
“If you asked me this question yesterday (23rd March), I think I would have given you a different answer. But today I think we’ve got to say it is not appropriate to be doing face-to-face viewings any longer. It’s not appropriate to be going into people’s houses. The government has been as clear as it possibly can you should stay at home unless it is absolutely essential.

This is where things like video viewings can play a part. Think about how else you can do this. See if the tenants or the property owners would be willing to do the viewings via webcam or their phone even.”

Can we do viewings if the property is empty?
“Again we go back to the fact that you shouldn’t be leaving your houses unless it’s absolutely necessary. I can’t imagine that the government would say it’s necessary to do a property viewing under the circumstances. It’s not essential.

I’m going to assume that the people that you would be doing viewings with are not going to be members of your household. And therefore the government has made it very clear you should not be interacting with people who are not within your own household unless it’s an absolute necessity. So the answer in terms of accompanied viewings, for now, is no.”

Would we now be able to go to the empty property to do a video walkthrough?

“I cannot say for definite on this one, but you’re an individual going alone effectively to an empty property the likelihood of that empty property having the virus is quite low, all thing’s considered – if it’s been empty for at least a few days.

If you are getting going out of your front door, getting into your car, driving to the property, getting out of your car, and walking straight into the property, the likelihood of interacting with people is low.
This scenario is probably the closest you’re going to be able to do to get doing a viewing while still complying with all government guidance.

It is still very subjective though, as you can also rightly argue that we’ve been advised against leaving the house for all but essential reasons – and going to film a video in a property is not an essential task.
But I can’t give advice on this one for definite. My answer is my subjective response to the situation without any advice from government.”

What if we need to visit a property to adhere to our legal requirements? For instance on the renewal of gas safety certificates, electrical tests, updates to EPCs, routine inspections, etc.

Gas safety checks

“Yesterday (23rd March) we got guidance from the Health and Safety Executive published through the Gas Safe Register saying that agents and landlords should still continue doing gas safety checks. We have published that guidance, but I have written very strongly to the HSE saying this is flying in the face of all government advice at this moment in time. Having spoken to them since, they have said it is their view that government does need to issue guidance on this topic. Therefore I am hoping we will get some more specific guidance on that in the days to come.

I cannot see how carrying on with these things is practical in light of the prime minister’s advice last night. Therefore I am hoping that very shortly we will get an update from the HSE issuing new guidance or amending its existing guidance.”

Electrical checks

“On electrical checks, it is simply not practical at this moment in time to introduce the proposed electrical safety regulation because there is no way there’s going to be electricians capable or willing to go out people’s properties and even if they, people probably aren’t going to let them in and quite rightly.”

Routine inspections

“It really isn’t appropriate, I don’t think, at this point in time to be going in doing a routine inspection.
Put yourself in your tenants shoes. Would you want somebody coming into your property right now? The answer is, unless it’s absolutely essential, probably not. Therefore although routine inspections might in your agreement, this is what in law is called a Force Majeure event. It’s outside of the control of anything you would normally consider or plan for and is factored in to most contracts.”

Licensing

“Similarly. I don’t think it is practical to being going into properties to do floor size measurement like Newcastle City Council is requiring for licensing. So at this moment in time, we are currently asking the government MHCLG specifically to stop the requirements for licensing –whether it’s the new scheme, or the existing scheme, for the duration of the crisis.

We’re also asking the government to suspend the need for gas safety checks and be mindful of what happens down the line. We have to factor in what happens later when potentially you have to go through the evictions process and you get a judge say “oh you didn’t have your gas safety certificate on time”. So we’re lobbying for something to say well, yes, but that was because of the coronavirus situation.

With EPC’s it’s generally less of an issue because you don’t actually need them unless the property is being re-let, even if they expire, so you don’t need to worry too much about them at the moment. The same applies to the new electrical regulations, which don’t kick in until 1st July this year.”

David’s answer above was provided before the government issued advice on 25th March about tradespeople visiting properties. Their guidance says:

“Work carried out in people’s homes, for example by tradespeople carrying out repairs and maintenance, can continue, provided that the tradesperson is well and has no symptoms.

“It will be important to ensure that Public Health England guidelines, including maintaining a two metre distance from any household occupants, are followed to ensure everyone’s safety.

“No work should be carried out in any household which is isolating or where an individual is being shielded, unless it is to remedy a direct risk to the safety of the household, such as emergency plumbing or repairs, and where the tradesperson is willing to do so.

“In such cases, Public Health England can provide advice to tradespeople and households.

“No work should be carried out by a tradesperson who has coronavirus symptoms, however mild.”

What obligation do we have if there is an emergency maintenance issue? E.g. no hot water or heating?

David’s answer has been retracted as guidance from the government was subsequently issued on 25th March. Their guidance says:

“Work carried out in people’s homes, for example by tradespeople carrying out repairs and maintenance, can continue, provided that the tradesperson is well and has no symptoms.

“It will be important to ensure that Public Health England guidelines, including maintaining a two metre distance from any household occupants, are followed to ensure everyone’s safety.

“No work should be carried out in any household which is isolating or where an individual is being shielded, unless it is to remedy a direct risk to the safety of the household, such as emergency plumbing or repairs, and where the tradesperson is willing to do so.

“In such cases, Public Health England can provide advice to tradespeople and households.

“No work should be carried out by a tradesperson who has coronavirus symptoms, however mild.”

If there’s an urgent need to send contractors to a property, are we obliged to ensure they wear protective gear?

As an agent you have an obligation to make sure that the contractor is kept informed. Keep a written file to document the conversation you’ve had with them and the tenants, confirming that the tenant said they didn’t have any symptons and that you’ve let the contractor know this.

Whether the contractor wears protective gear is up to them and what they feel is necessary under the circumstances something like this. It depends what they’re doing. Are they going to be working inside? Are they going to be working outside that might have different risk levels and connotations? Is it a flat with communal areas? There are so many different connotations that it is not one-size-fits all. The contractor has to do what he or she thinks is necessary on a case-by-case basis under the individual circumstances.

What if someone has a broken-down boiler or other emergency and they won’t let us in to do the repair, then a tragedy happens? Are we in breach of contract for negligence?
I don’t think you would be liable, but this is one I’m pushing for government guidance on.
If a tenant will not let you in you need to make sure you got a file note of that. You can’t force your way in as the tenant has the right to refuse access; that is a fundamental principle of tenancy law in this country. They have the right of quiet enjoyment. If you go onto those premises when a tenant has said no you are in breach of the law and you are criminally liable on harassment legislation and trespass legislation.

So if they say “no” there is nothing you can do, apart from making sure that you’ve done everything you can to ensure the tenant knows the risk that they’re in. Especially for things like a gas leak, the consequences of them not turning that gas off could be catastrophic. Try and emphasise this to them in the clearest possible way and see if you can find a solution.

Make sure you document everything but at the end of the day, if the tenant won’t let you in, you can’t force entry.

How can we comply with Right to Rent checks in the current circumstances? Do we still need to?
“Again we’re seeking clarity on this. We are lobbying the government to suspend the Right to Rent checks. It’s not just the R2R checks but also the follow-ups, as you’d be in breach of the Immigration Act 2014 for not doing those.

The usual process would go against the government advice around social distancing as it is forcing people who are not of the same household into proximity.

I have heard examples already of having a tenant on one side of the office door posting their documents through the letter box to the agent on the other side. You can do this assuming the door was clear and glass (to check the ID).

For agents in England, I think you’ve got to keep doing them for the time being but try and find a way of not breaching social distancing guidelines. Don’t let them in the door and find a way of exchanging documents. Even if it is literally then putting it there documents against the window and somebody taking a photo on their phone, but you’ve got to try and ensure that you are maintaining the social distancing.

Doing it over Skype or similar isn’t really in accordance with the legislation. But at this point in time is the Home Office really going to be prosecuting an agent for trying to do their level best? We’re in an unprecedented moment in time and I think doing the best you can until we can get a proper suspension of the R2R checks confirmed is the best advice I can give.”

We have an applicant who is an NHS and I any employee who needs to relocate urgently because she currently lives with her elderly parents. Are there special provisions for such applicants?
“That’s a really interesting question. I don’t know the answer, but I would probably say that if they’re maybe that person is moving into an empty property near to a hospital it is less risky.

I think it comes down to a question of suitableness. Is it reasonable? Is it essential for an NHS worker to be socially distancing themselves from elderly parents and or to be closer to work? I think that would fall much more into the essential movement category then somebody that is just moving house.

So again, no, I can’t give you specific guidance, but you’ve got to think what is reasonable on a case-by-case basis taking into account the government guidance that unless it is essential and unavoidable you shouldn’t do it.”

What can we do about sales already exchanged and due to complete shortly? Can we just throw them the keys?!
David’s answer is retracted as the government has since advised that “unavoidable” moves can go ahead.


They government have issued a statement saying:


“Home buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place to fight coronavirus.


“If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on social distancing to minimise the spread of the virus.


“Anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice and not move house for the time being.”

How should we handle the situation where we have tenants who can no longer afford to pay rent?
“Last week we launched the Keep The Rent Flowing campaign to advise the government that whatever happens, everybody in the country needs to be able to afford their rent.

The ban on evictions is closing the door after the horse has bolted. Whilst I entirely understand it and can see exactly why the government has done it. Let’s try and avoid the need for all that and for rent holidays.

The government is issuing unprecedented amounts of money. We are very grateful to the government for that through business loan relief and through the job retention scheme that they announced last week, but that’s not going to impact everybody.

And therefore what we are asking is in exactly the same way as if someone phones up to say they have coronavirus symptoms, they can be signed off sick based on self-assessment, we want the same to be true if they apply online for Universal Credit for the duration of the crisis in order to pay the rent.

The sales side of your business is going to struggle over the coming month and therefore the industry needs to survive the next few months based on rental income. That’s why we’re pushing to Keep The Rent Flowing so businesses can continue to operate and people can continue to have roofs over their head.

Please do support the campaign using the hashtag #keeptherentflowing and let’s make this a mass campaign so the government listens.”

What can we do about tenants (e.g. students) who have left to go back to their home countries with no intention of paying their outstanding rent?
“Their tenancy agreement is a legally binding contract and they are legally bound to pay the rent. Agents can take them to court get money orders against them later down the line if they do don’t pay the rent. It’s why we’re trying to stop that happening by ensuring the government is paying the rent for them.”
What does the 3 month ban on evictions actually mean in practice?
“What the Bill actually says is that the notice period is effectively being extended for three months for Section 8 and Section 21.

On a Section 8, you usually only need to give 14 days notice before bringing proceedings – that will now be 3 months.

For Section 21, you’ll need to give 3 months notice rather than 2, regardless of whether the Section 21 notice is given the day the act is passed or any day subsequently up to the 30th September. There’s also provision for the Secretary of State to extend that 30th September deadline that is currently in the legislation, if thngs changed later in the year.

Some people are saying it’s not a real ban and it’s been watered down. Yes, it is a ban because you’re not going to be able to even start the proceedings now for 3 months, whatever type of tenancy you are using. It also covers all social rented tenancies and all other private rented tenancies as well. Any notices issued from the day the Act is passed will not expire for at least 3 months, and then you have to do the normal eviction process. That is the legislative way in which they’ve effectively banned evictions for the next 3 months. So even if you issue a Section 21 notice on the 29th of September, you’ve still got to wait another at least another three months before you can start the court process.”

What can we do about Section 21s already served before this crisis hit?
“We’re all shutting down, including the courts. We’re having guidance issued from Her Majesty’s Courts and Tribunals sServices. They’re trying to do video links and video conferencing hearings, but they’re still setting up a lot of the equipment.

The courts are going to be under just as much pressure as everybody else is over the coming time. They’re being told to suspend possession claims and not to issue them unless absolutely necessary. We are going to also have to factor in that judges and Court staff are probably going to go off with the virus or go into self-isolation.

We’ve already heard over the last couple of days that once the announcement about the ban on evictions was made, bailiffs were refusing to act.

So, while technically existing Section 21 and Section 8 notices are still valid, I think getting those eviction orders, possession orders and warrants for eviction is going to be very difficult. Even if you do get them, the likelihood of them being enforced is pretty slim at this moment in time.

That’s why even though the ban on evictions has been welcomed by many, in terms of practical application it’s going to be almost impossible to evict tenants even without the ban.

Therefore I think this is a moment to try and hunker down if you are going through possession proceedings with tenants. Try and work with them to get their rent paid by the Local Authority or by Universal Credit to try and keep the rent flowing.”

Tenants are asking landlords for rent reductions and rent holidays. What advice can we give landlords to support them?
“It depends on the individual circumstances. What we are trying to work on at the moment is ensuring that Universal Credit will cover people in those situations. The job retention scheme should help many people but landlords also have to be pragmatic under the circumstances.

I wouldn’t necessarily recommend the rent holiday if at all possible because all that is doing is stalling up problems for later down the line. A mortgage holiday for the landlord and a rent holiday for the tenant doesn’t mean it goes away – it’s still building up the landlord’s interest, for example and tenants might also have a clause in their contract with their agent where the agent can start charging interest when the rent is X days overdue. That’s why it should be the option of Last Resort.

It’s why we are pushing the campaign as heavily as we are to Keep The Rent Flowing so that tenants do not get themselves into that situation and the rent can still be being paid. Even if it is being paid by the government through a mixture of the job retention scheme, Universal Credit and DWP benefit or Local Authority discretionary housing payment. I don’t really care the mechanism that the government use but we’ve got to help tenants at this moment in time. That is what the welfare state is there to do and I’m asking you to help us support the #keeptherentflowing campaign so that we don’t get into that situation.

What should we be doing when it comes to Anti Money Laundering checks?
Please check the NAEA website for the latest advice.

David Cox is Chief Executive of ARLA Propertymark. He joined ARLA, Association of Residential Letting Agents, in January 2014 bringing a sharply focused policy and stakeholder engagement perspective. David has worked alongside a diverse board of experienced practitioners from across the industry to transform ARLA into ARLA Propertymark, an organisation which protects consumers through measures including Client Money Protection, campaigning for mandatory regulation of the lettings industry and raising professional standards. David has held senior policy roles at the National Landlords Association (NLA) and the International Union of Property Owners (UIPI); a trained barrister, David has also acted as Parliamentary Advisor to a well-known backbench MP.