UK Property Investors Review Spring 2010
NEW LANDLORD RED TAPE SHOWS NEED FOR EXPERIENCED AGENCY HELP
Marc von Grundherr, Director of Benham and Reeves Residential Lettings comments on the London rentals market.
New rental laws mean many London tenants will from October 1st will automatically have formal Assured Shorthold Tenancies - this is a move that will push extra responsibilities on to landlords and agents with hefty fines if they do not comply.
Until now many tenants paying more than £25,000 a year (that is the equivalent of about £2,085 a month) fell outside the AST classification, but from October 1 the threshold increases to £100,000.
From that date onwards any individual tenant paying up to £100,000 for an apartment or house that is their main residency automatically gets AST status and at this point the landlord must:
- Hold the deposit in either the Deposit Protection Service or register it with Tenancy Deposit Solutions;
- Inform the tenant which scheme it is protected under, and provide proof that it has been registered;
- Do this within a 14-day timescale or risk legal action by the tenant which could, in some circumstances, involve the landlord having to pay the tenant a sum of up to three times the original deposit.
The new law will apply across the UK but will hit hard in London in particular, because so many tenants pay above £25,000 per year and under £100,000. Many homes in multiple occupation - with, say, several students - will also be affected.
Any landlord with tenants already in situ, and without a lettings agency, will face a particular struggle in coming to terms with the legislation.
The measure has been vigorously opposed by the lettings industry but the new UK government is going ahead and it will apply retrospectively; therefore existing tenancy deals have to abide by this, as well as new deals struck after October 1. The government insists that this mandatory deposit system offers additional protection to the tenant but lettings experts say experience with the old system for renters who pay up to £25,000 suggests it may lead to an increased numbers of disputes.
Whatever its disadvantages, the new measure comes into effect imminently. anyone flouting it, even if they plead ignorance of the law, faces drastic consequences.
"Until a landlord complies, he or she faces a huge fine and will be unable to serve a section 21 notice - that's the legal notice obliging the tenant to leave the property. The landlord cannot get a possession order until the deposit is lodged. Imagine all the complications, expense and loss of rental income that this can bring" explains Marc von Grundherr, director of Benham and Reeves Residential Lettings.
He says: "For any landlord, especially those living some distance away from their investments including those who live overseas, there is only one sensible solution. Use an experienced lettings agent who has experience of the system under the current rules and can handle the tenancies up to £100,000 quickly, reliable and efficiently".
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