Lettings legislation update – February 2022

The Government has outlined its intention that by 2030, renters will have a secure path to ownership with the number of first-time buyers increasing in all areas. The Government’s ambition is for the number of non-decent rented homes to have fallen by 50%, with the biggest improvements in the lowest performing areas.

The key parts affecting the property industry are on pages 221-228 of the White Paper. Here’s a link to the full document.

The policy programme is focused on 3 areas.

1.Making home ownership a reality

• Ambition of delivering 300,000 new homes per year in England by the mid-2020s to “create a more sustainable and affordable housing market”.
• £1.8bn investment in brownfield and infrastructure projects to deliver 160,000 homes across England.
• £11.5bn Affordable Homes Programme will deliver up to 180,000 affordable homes with 75% of these delivered outside London, and lever in an additional £38bn in public and private investment in affordable housing.
• First-time buyers (turning Generation Rent into Generation Buy):
  • The new Help to Buy scheme, launched last year, focuses entirely on first-time buyers.
  • First-time buyers will be given the first opportunity to buy homes as they hit the market through a ramping up of the First Homes scheme which will provide a 30% discount.
  • The Government will also explore further options to limit the competition first-time buyers face.
• The Government and the industry will work together to make sure the critical material information buyers need to know – like tenure type, lease length and any service charges – is available digitally wherever possible from trusted and authenticated sources, and provided only once. If necessary, the UK Government will legislate.
• Introduce new powers for councils to apply a premium of up to 100% on Council Tax to homes left empty for a year.
• On leasehold:
  • The Government will ban new leasehold houses and new financial ground rents, placing power back in the hands of homeowners.
  • They will consult on measures that will empower leaseholders to take control of their property management and make it cheaper and easier for them to buy the freehold of their property.
  • They want to see wider take up of commonhold flats, bringing forward further leasehold and commonhold legislation this parliament.

2.Improving housing quality

• More details of this section will be provided in a separate, focused, White Paper in Spring. It will include:
  • Ending Section 21 .
  • Giving all tenants a strong right to redress.
  • Introducing a National Landlord Register.
  • Taking tough action against rogue landlords.
• The Government will review the Decent Homes Standard to make sure it is fit for the present day and applies across all rented tenures.
  • It will consult on the impact on the private rental sector and particularly those on the lowest incomes.
• £2bn of investment to tackle homelessness and rough sleeping was announced over the next three years.

3.Reforming the planning system

• Little new information was given. The paper mentions the desire to speed up, make use of PropTech and for Local Authorities to have local plans.

This landmark case finally came to an end this month. David described the ruling, in the agent’s favour, as a “near miss” that could have had significant ramifications for the industry. Here’s a summary of the background, the court process and the decision taken.

The facts

• AST signed 25 July 2014 and started on 6 August 2014.
• Rent of £695pcm and deposit of £1,025.
• Section 8 served 27 March 2017. Tenants in arrears of £3,533.46.

The issue

• Were the TDP Prescribed Information and Section 8 Notice validly served under the Companies Act 2006?
• Section 44 requires documents to either be signed by:
  • Two authorised signatories (Directors or Company Secretaries, if in a limited company), or
  • A director of the company in the presence of a witness who attests the signature.
• The Prescribed Information was only signed by a single director.
• The Section 8 notice was signed by the corporate landlord’s property manager, who was not a director.
• The Case and first appeal found the Section 8 valid but the Prescribed Information invalid.

Court of Appeal verdict

• A second appeal was made to the Court of Appeal who handed down judgment on 26 January 2022.
• Judges started with the PI and held that it didn’t comply with the Companies Act, but that it didn’t need to, for 2 reasons:
  • The law (Section 213(9)) only requires that it be signed by someone acting on behalf of the landlord.
  • The law (Section 213(6)) permits the giving of the information in a form substantially to the same effect as the prescribed form.
• The Section 8 hinged on an error on the form. The Property Manager signed as landlord or agent.
• The judges held that in law this did not amount to the Section 8 not being validly served and that it even if it did, “the effect of the notice was substantially the same as it would have been if Ms Miles had not crossed out the wrong part”.

The impact

• This was a near miss for the industry but a victory for common sense.
• It would’ve had a massive impact on agents if legal directors would have to sign every Prescribed Information.
• It could have made millions of PI certificates invalid with consequential TDP claims.
• This case shows that minor errors (technical defences) to section 8 and 21 notices are not likely to work in court.

Read the judgment in full via this link.

Why is Legionella being discussed at the moment?

Some consultants and letting agents are using the revised guidance to suggest that new legislation has been imposed on landlords of domestic rented properties for managing and controlling the risks of exposure to Legionella bacteria of their tenants. This is wrong. The legislation has not changed and misinformation can impose unnecessary financial burdens on landlords where they are being charged for Legionella testing and certificates they don’t actually need.

What is Legionella?

Legionnaires’ disease is a pneumonia-like illness commonly caused by the inhalation of small droplets of contaminated water.

What does the law say?

• The Health and Safety Executive states: “There is a legal duty for landlords to assess and control the risk of exposure to legionella bacteria”.
• Section 3(2) of the Health and Safety at Work Act 1974 means that any relevant health and safety legislation places a duty of care on landlord for the health and safety of their tenants.
• Landlords must assess and control the risk of tenants being exposed to Legionella.
• This does not require an in-depth detailed assessment.
• The HSE does not recognise a ‘Legionella test certificate’ and health and safety law does not require landlords to obtain or produce one.

Testing requirements

• Most landlords can assess the risk themselves and do not need to be professionally trained.
• However, landlords can arrange for a competent person to carry out the assessment if they wish.

Control measures

To protect against Legionella, you can advise your landlords to:

• Flush out the water system before letting the property.
• Make sure cold water tanks have a tight lid to stop debris getting into the system.
• Set control parameters to make sure water is stored at the correct temperature.
  • The hot water should be set so that the water is heated up to 60°C.
  • Tenants should be advised to not interfere with the settings.
• Remove any unused pipework.

Tenants should be informed of all control measures

What can tenants do?

• Tell the landlord if problems occur with the water system or if the water is not heating properly.
• After a period of absence (such as a holiday or student accommodation left empty) tenants should run all taps for at least two minutes.
• Where showers are installed at the property and used regularly, the risks are reduced. However, tenants should be advised to regularly clean showerheads.

Record keeping

• Records of any assessments should be kept.
• Follow up checks need to be carried out periodically, such as when undertaking the annual gas safety check or routine maintenance visits.

The HSE guidance is available here.

What’s the penalty for non-compliance?

Although incredibly rare, breaches of Section 3 of the Health and Safety at Work Act 1974 could result in up to 2 years imprisonment, a fine of up to £20,000 or both. Here’s a link to the full legislation.