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The Housing Act 2004

The Housing Act 2004 is now law and its parts are gradually being implemented.

Without doubt, it’s the biggest change for landlords since assured shorthold tenancies started in 1989.

There are different “provisions” so, over the course of the next few newsletters we look at each part in more detail to see what the changes mean for you. For now, we’ll give you a brief overview of the parts that most affect landlords.

The key points are:

A change to the house in multiple occupation (HMO) definition so that where more than two unrelated tenants are sharing a property it will now be classed as an HMO.

A mandatory licensing system for all HMOs with three or more storeys AND five or more occupants.

Local authorities can also extend licensing to include other HMOs.

In some areas, local authorities will be able to license all private landlords to ensure basic standards of management are being met.

The old “fitness standard” will be replaced by a new Housing Health and Safety Rating System (HHSRS) to help councils identify houses in an unacceptable condition.

All landlords will have to join government approved Tenancy Deposit Schemes (TDS)

In addition to the Housing Act changes, we’ll look at the implications if, as now seems likely, the government decides to extend the Local Housing Allowance pilot nationwide.            

Welcome

Welcome to this first edition of the LandlordZONE e-mail newsletter, to be known as “LandlordLOG”

The newsletter itself will be available as a web page on LandlordZONE and will also be archived in Adobe pdf format on the LandlordZONE site. It can be down-loaded at any time and it will also always be accessible through our “Weblog” site: “LandlordLOG.com”

The intention is to produce a journal or “LOG” which will provide a useful up-date and reference for landlords and letting agents.

It will also provide information which will be of use to property professionals, property investors and of course tenants in the residential and commercial property fields.

The email itself will be brief, outlining the main newsletter content, with a link to the actual newsletter on the site. 

The newsletter will be sent out to around 7,000 subscribers and those who have dealt with LandlordZONE over the last 5 years. 

HMOs and Licensing

Where more than two people occupy a property but don’t form a single household, usually because they are not related, the property will now be classified by the government as an HMO.

In England and Wales with effect from “late autumn” (the exact date is still to be decided), private landlords with HMOs of three or more stories AND with five or more tenants will have to get a license. These impose tough standards on fire and electrical safety, the number of people in occupation and even the kind of person who can be a landlord. 

Local authorities can also “selectively extend” licensing in part of their area to ALL properties (not just HMOs) if they think there is a need, say, if a local problem with antisocial behaviour exists or they think the standard of housing justifies it.

Each local authority will set its own license fee. Landlords who don’t register can be fined up to £20,000 plus having to repay rent received whilst not registered.

However, there is likely to be a 3 month grace period when the scheme starts.

Housing Health & Safety Rating System (HHSRS)

Under the new Housing Health and Safety Rating System (HHSRS) the focus will shift to whether a house in poor condition is likely to damage the occupants’ health. This is slightly different to the old “fitness standard” which looked more at issues to do with the building.

Under the new HHSRS, inspectors will now view health and safety hazards according to (1) how likely a risk (e.g. fire) it is to occur and (2) the impact it will have, should it occur.

For shared houses inspectors will have to consider if there is an increased risk because it’s shared, but behaviour of occupants won’t be taken into consideration.

The potential hazards include fire, damp, overcrowding, poor lighting, pests etc.

Inspectors will examine if the property is fit for the widest range of occupants, so even if you let to students, they’ll have to consider risks if the occupiers were elderly people or children instead.

Inspectors will have a range of powers. For serious problems, they can issue Emergency Remedial Action and Emergency Prohibition Orders requiring immediate action.

The HHSRS applies to all buildings not just HMOs. However, all HMOs which need a license will also have to be inspected for hazards within 5 years of an HMO license being granted.

Local authorities can’t use license conditions, to deal with health and safety hazards.

So, whilst it’s possible a local authority may assess an HMO license application at the same time as doing an HHSRS inspection, the HMO application would only depend upon the person applying being a fit and proper person, the management of the building being OK and the property being suitable for the number of occupants.

The Property Investor Show
Providing the ultimate industry forum for all property and investment issues, The Property Investor Show will have over 100 of the most informative, cutting-edge and significant seminars.

LandlordZONE™ editor Tom Entwistle will be hosting a seminar on Saturday 24th at 3.45pm - "Investing in Commercial Property - Successful Strategies for the Private Investor

Tenancy Deposit Scheme

From October next year, tenancy deposits will have to be placed in an authorised Tenancy Deposit Scheme (TDS) of which there will be two types - a single custodial scheme and an insurance scheme.

In the custodial scheme landlords will pay deposits into a special account where it stays until the tenancy ends, when either the landlord or tenant can apply to have it returned. If both agree on how it should be split, the scheme administrator pays within 10 days of receiving a request.

In the insurance scheme deposits are kept by landlords on the basis that when the tenancy ends, the amount agreed between landlord and tenant will be paid out to the tenant. The insurance only comes into effect if, at the end of a tenancy, the landlord doesn’t pay back part or all of the deposit within 10 days of the tenant asking for it.

Should this happen, the tenant approaches the scheme administrator. The landlord will then have to pay the amount into a special authorised account within a further 10 days. Once a dispute is settled the administrator has to pay the tenant within 10 days. The insurance comes into effect if the landlord fails to pay the deposit into the account as requested.

Landlords will have to pay to join a scheme and there will be penalties for landlords who don’t join a scheme. It will also be impossible to get possession if you aren’t in one.

Local Housing Allowance

The government has said that it intends that Local Housing Allowance (LHA) will replace the current Housing Benefit arrangements, possibly nationally from 2008.

LHA is currently being piloted in various parts of the UK. 

The big difference is that with LHA, money is paid to the tenant rather than to the landlord.

The aim is to engender tenants’ financial responsibility by paying an allowance that can be spent on housing of their choice. The obvious risk is that the tenants spend the money on something other than rent!

Also, since many tenants don’t have bank accounts, landlords may have to collect rents in person, which is a real hassle, especially where the property is not nearby.

Tenants will be encouraged to open bank accounts, but many don’t understand how to and banks often don’t want them as customers.

Many landlords say their tenants would prefer their money went straight to the landlord as they don’t trust themselves not to waste it on other things!

When dealing with DSS tenants, especially those on LHA, always insist on having an employed person as guarantor and if rent arrears accumulate to more than 8 weeks, serve a section 8 notice, and then try to get the DSS to pay direct to you.

Book Review:  Successful Property Letting

Buy-to-Let has perhaps been the equivalent of the “dot com” boom in this first decade of the 21st century and in doing so has spawned a plethora of TV programmes and books on every aspect of property investment and letting — some good, some bad and some rather indifferent.

David Lawrenson, who has contributed to the content of this newsletter, has made a valuable contribution to the savvy landlord’s bookshelf by producing a book based on a lot of practical experience—something money just cannot buy.

David’s succinct and straightforward writing styles takes the reader though a well structured practical approach to letting and managing property.

The book’s up-to-date content and sound advice provide excellent guidance to those who want to make a success of buying and letting property for the long-term.

Click4Quote.com - Landlords need to Protect their Investment

Many private landlords are investing in property for the long term according to a survey by the Council of Mortgage Lenders.  Over 60% of landlords in the survey said they expected to stay in the residential rental market for more than 10 years.  Property is now seen by many as a safer option for their old age than some of the more traditional options available.

Although there is no law to state that landlords must have insurance, it is wise for a landlord to protect their investment.  To do this adequately, established, reputable policies are a sensible choice.

The standard perils usually provided in most popular building risk policies include: Burglary and Theft, Burst pipes and Water leaks, Fire, Smoke, Storm and Flood, Subsidence, Vehicle Impact, Aircraft Damage, Lightning, Explosion and Malicious Damage.

However landlords should also make sure cover for loss of rent and cost of alternative accommodation following an insured peril is included along with property owners liability.

It is important that landlords inform their mortgage company that they are letting their property out, as they will usually insist on a specialist insurance policy.  Some landlords do not disclose that the property is rented, which usually makes a normal household policy void.

A good insurance policy will allow the landlord to move with market conditions and be able to offer cover for a FULL range of tenants from professionals to DSS & Asylum Seekers.  Landlords sometimes face the task of finding a new policy just because the tenant type has changed.

Landlords also need to remember to insure the buildings for the full replacement cost, including the cost of clearing the site after complete destruction and all professional's fees. It is important to remember that the replacement cost is not

necessarily the same as the market value of the property or your purchase cost. It is possible to get an insurance valuation using a building cost calculator provided by the Association of British Insurers (ABI) on their website. For an accurate cost it is recommended to get a professional insurance valuation done by a chartered building surveyor.

For peace of mind many landlords choose established, reputable policies as they have evolved with the changes and growth in the let property market.  Click4Quote.com can offer the new or experienced landlord a competitive let property policy that has been in existence for 12 years and has over 10,000 landlords using this policy.  For more information go to www.click4quote.com or phone 08450 89 90 91.

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Articles in all our publications are for general information only. We try to keep information accurate and up-to-date but cannot guarantee this is always the case. Laws change regularly and investment prices can fall as well as rise.. You are advised to always seek expert professional advice in your specific case before making or refraining from making decisions about investments and property management. We do not accept responsibility for any loss suffered.