Landlord Updates: Energy Cap, Right to Rent, RRO, Japanese Knotweed and More

The government has revealed major plans to “level up” England dealing with issues like unemployment and local economies with the aim to close the North-South divide. In a White Paper, published in February, they laid out their plans to achieve this.  There is mention of a Landlords Register and the loss of Section 21 but there are no details yet and it’s unhelpful to speculate. I will cover the proposals when more is known hopefully in the next month or two. 

Will Rising Energy Bills and Interest Rates Cause More Rent Arrears? 

It’s important for all landlords to be sensitive to the fact that rises in the cost of living for our tenants may well have a negative impact on us. Wages are not rising at anything like the cost of living; UK wages have increased by 4.3% in the last quarter of 2021 (Office of National Statistics) and the same source says that inflation rose over that period by a massive 5.4% a 30 year high. 

• Average UK petrol prices surpassed 148p a litre for the first time in February this year – It doesn’t seem so long since we were shocked by the £1 a gallon land mark! 
• The energy price cap will increase from 1 April 2022 Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year. Prepayment customers will see an increase of £708 from £1,309 to £2,017. Fortunately the weather should improve and the cost will not really hit home until next autumn unless those paying monthly are asked to increase their payments immediately to avoid a bigger increase in the autumn/winter. 

There is an added danger to the increase in fuel prices and that is where tenants are trying to manage their expenditure and reduce the heat in their homes, this makes it less likely that many tenants will open windows and the likelihood of condensation and black mould will increase significantly.  We cannot interfere with our tenant’s household budgets, but we can increase the thermal efficiency of our properties to reduce the impact of the energy price increases and keep our tenants warm while at the same time protecting our properties. 

I am seeing discussions across the Facebook property groups among landlords who let HMO on an “all inclusive” basis.  I have written about this in the past, but I am going to repeat myself because this is going to be a big issue next winter. 

Tenants must have control of the heating by law, and the best way to reduce misuse is by having a Fair Usage Clause in the Contract and taking a monthly reading so that if tenants increase the temperature too much, a small amount can be charged to cover the excess rather than racking up a quarterly bill. We can only charge tenants the same amount that we are being charged it is unlawful to make a profit this way. Tenants who don’t want to pay the extra usage will help to curtail anyone misusing the utilities. I know one HMO where the mother of a tenant came daily with her washing and ironing, watched the TV and made tea but because “no one minded” it went on for months until the cleaner told the landlord that the washing machine was always hot when she visited! The other tenants would have minded, and I expect reported it, if they had been charged for using more than the Fair Usage Clause allowed. Make sure to include the fact that you will share any underspend among the tenants to ensure that this is seen as a fair and balanced clause, therefore enforceable.  

If you do reduce the temperature, take away control from tenants, reduce the times when heating is on …. Expect two things 1. Black mould in kitchens and bathrooms  2. An increase in your electricity bills when your tenants bring in electric heaters to keep their rooms warm. You might also find yourself answering to the local authority for taking control of the heating away from your tenants 

Right to Rent Update 

Right to Rent was introduced in the Immigration Act 2016 when, for the first time, landlords needed to check the immigration status of tenants before we offered to rent properties to them. Even live-in landlords cannot take a lodger who cannot prove they are permitted to live in the UK. There have been several changes since 2016, especially following Brexit and the latest of these will begin on 6^th April 2022, this time it’s good news for landlords. 

This is the introduction of Certified Identity Service Providers which will enable us to carry out digital eligibility checks on tenants who hold a British or Irish passport to ensure that they have the Right to Rent. This will be quicker and less expensive than the current system. We won’t have to ask prospective tenants to show us their passports or other documents which means less responsibility for data protection. We remain responsible to make the checks and to ensure that we do not let to a person who is not in the country legally.  

Update on the use of BRP/Cs to prove right to rent in England. Guidance for landlords and Identity Service Providers regarding the use of digital identity verification is in the new guidance here:  

 Landlord’s guide to right to rent checks (publishing.service.gov.uk) 

Until the 6^th of April 2022 we should continue to carry out Right to Rent checks as we do now. 

A second Code of Practice was issued in February. This time focusing on discrimination: 

“Code of practice for landlords: avoiding unlawful discrimination when conducting ‘right to rent’ checks in the private rented residential sector” 

Code of practice for landlords: avoiding unlawful discrimination when conducting ‘right to rent’ checks in the private rented residential sector – GOV.UK (www.gov.uk) 

“The purpose of this code of practice is to ensure that landlords do not unlawfully discriminate contrary to the Equality Act 2010 when carrying out right to rent checks. It provides practical guidance for landlords on what they should or should not do to avoid unlawful discrimination when complying with their obligations under the Immigration Act 2014. The code applies both to landlords and to agents who carry out letting services on behalf of landlords.” 

The code references the Equality Act 2010 which you can find here: 

Equality Act 2010 (legislation.gov.uk) 

This Act lists what are called ‘protected characteristics’ and we need to take care not to discriminate against: 

• age 
• disability 
• gender reassignment 
• marriage or civil partnership 
• pregnancy and maternity 
• race 
• religion or belief 
• sex 
• sexual orientation 

“In relation to right to rent checks, direct discrimination would include: 

rejecting prospective tenants because they do not have British citizenship or another specified citizenship 

refusing to consider any international tenants, or only carry out checks on person believed to not be British citizens on the basis of the individual’s colour, ethnic or national origins” 

Rent Repayment Orders Update 

Rent Repayment Orders (RROs) were introduced in the Housing Act 2004 as a penalty for landlords who failed to licence a property which should be licenced. In the Housing and Planning Act 2016 they were extended to cover illegal eviction and breach of a banning order. A tenant can apply for a RRO where the landlord has been successfully prosecuted for any of these issues, if the rent has been paid from Housing Benefits a local authority can also claim via an RRO. The claim can be for up to 12 months’ rent and should be a significant deterrent.  

Problems have occurred where it was not the landlord who committed the offense, but the landlord was still held to be legally responsible. In a recent case the Judgement was very helpful to landlords who have entered into a rent-to-rent contract where the person responsible to pay the rent to the landlord will not live in the property but will sub-let it at a profit and this is agreed in the contract. 

 Robin Stewart, Solicitor, Anthony Gold reported on this case here: 

https://www.londonpropertylicensing.co.uk/no-more-rros-against-superior-landlords-what-next-after-court-of-appeals-decision-rakusen-v-jepson/

The case is Rakusen v Jepson 2021 In this case the tenants applied for an RRO against the property owner who was in fact the landlord of their landlord. The law allows this, and because the property owner has assets, tenants prefer to take action against that person rather than their direct landlord who probably has no assets and therefore is not worth suing.  The tenant won the case and the landlord had appealed via First Tier Tribunal and Upper Tribunal and on both occasions, it was judged that the tenant could, under the legislation, sue their landlord’s landlord, known as the Superior Landlord. In the Court of Appeal, the judgment was overturned, and it was found that only the landlord who had actually collected the tenants rent was liable to repay it. REALLY good news, but it should not be ignored that the owner landlord can still be held responsible for some of the actions of a rent-to-rent landlord and it is therefore vital to do a complete check on anyone with whom you are considering a rent-to-rent contract, if they have no assets who will be dealing with the fall out if they break the law in your property? 

The tenants are probably going to take this case to Supreme Court because it is not good news for tenants who are left with a landlord who has no assets and doesn’t pay a Rent Repayment Order. 

Robin Stewart said in his case report: 

“The Renters Reform Bill (primarily the vehicle for the now long-awaited abolition of section 21 notices) does potentially provide a way to introduce changes. No doubt some MPs will be persuaded that rent repayment orders are the best solution to encourage enforcement of housing standards legislation, since they empower tenants to impose a form of ‘fine’ on bad landlords without relying on resources or willingness from local authorities. However, other MPs may feel that extending powers for tenants to effectively carry out law enforcement duties is unwise, and that pursuing punishment against criminal offenders should remain primarily a matter for the state.” 

We will see when the Renter Reform Bill is finally published, and I will report back. 

Japanese Knott Weed Update 

Japanese Knott Weed is just another invasive garden plant until you get it in your garden and suddenly your house has lost value if you can sell it at all. For years, banks have refused to lend on homes where it is found within seven metres of the building. Its presence can wipe up to 15% off a property’s price.  Now there is new advice to property surveyors which comes into force this month (March 2022) and means surveyors assessing property on behalf of mortgage lenders do not need to flag Japanese knotweed as a risk, unless it is causing visible damage to a property. This is very good news for the thousands of people who have this pernicious weed.  

The full guide can be downloaded here: 

Technical Documents: Japanese knotweed Guidance for Professional Valuers & Surveyors – Property Care (property-care.org)   

• Supports the RICS Guidance Note “Japanese knotweed and Residential Property 2022” 
• Covers all aspects of knotweed surveys and examples of the RICS Management Categories 
• Provides advice on Japanese Knotweed Management plans/options – the pros and cons 
• Ensures that Valuation surveyors can assess documentation provided by vendors 
• Signposts to other supporting documents in the PCA’s Invasive Weed Document library 

Dealing With Rent Increases 

There are an increasing number of discussions going on in property Facebook groups where either the landlord or tenant are raising the issue. 

Let’s look at the ones which tenants raise first: 

A constant thread is a list of items of “disrepair” posted by tenants who have been told that the rent is increasing. These tenants are constantly reminded that disrepair is nothing to do with a rent increase. Often tenants have failed to report repair issues hoping that the landlord will not increase the rent and when the rent is increased, they are angry. 

And Landlords: 

Landlords post that they told the tenant that the rent would be increasing, often by up to £100 a month, and the tenant is upset. The landlord goes on to say that the rent hasn’t been increased for several years or that they have spent money upgrading the property …. 

No one likes a price increase but there is a best practice way to deal with these issues: 

• Have a clear term in your contract which states that the rent will be REVIEWED on the anniversary of the contract EVERY YEAR.  This is a review not necessarily a rent increase, but it makes it clear that there is going to be a formal process which will not be affected by reports of disrepair. 
• Encourage your tenants to let you know when there is a repair issue. 
• Deal with disrepair when it is reported first time and avoid it becoming a bigger problem and a more expensive repair or replacement. 
• At the annual anniversary of the contract (even if this has been split over two contracts) review the rent and decide whether it is in line with similar properties in the area, our good friends Zoopla and Rightmove will help with this. 
• If you are not going to increase the rent – write to the tenant and tell them that you have reviewed the rent as per the contract but will not be increasing it this year. This tells the tenants that they have a year before they might get an increase and they don’t need to worry in the meantime. 
• If you are going to increase the rent – Issue an appropriate Notice (see links below) to Increase Rent which gives the tenant all the information they need to know how to challenge the rent increase if they believe that it is above the local rents for similar properties. They can take it to a Rent Tribunal at no cost, but disrepair will not have an influence on the decision if the rent is not going outside of the local rents unless the disrepair is really very serious. 

Rent Increase notices can be found: 

• ENGLAND Form_4_-_Eng.docx (live.com) 
• WALES Section 13 Notice.pdf (gov.wales) 
• SCOTLAND Create a Rent Increase Notice for your tenant – mygov.scot 

Believe me when I tell you that a small rent increase every year is better for your relationship with your tenants than “being nice” and not increasing the rent for years than hitting them with a big increase, even where the annual increase may have cost them more overall. £25 a month each year will cause tenants a lot less stress than £100 a month after 4 years. This will usually mean that they do not take it to tribunal nor do they come back with a list of repairs. 

Now that storm Eunice has done her worst let’s hope that we can look forward to less unplanned repairs.