Good news for Landlords

by Mary Groves

large quotation mark Royal Institute of Chartered Surveyors (RICS) report on the steady rise of rents, but beware of the pitfalls - keep up to date with changing laws.

A recent survey, published on 7 September 2009, by the Royal Institute of Chartered Surveyors (RICS) showed that there had been a significant change to the residential rental market during the period May to July 2009. The oversupply of property in the rental market had been keeping rents low since 2008 when the number of  what are known as “accidental” landlords increased. The “accidental” Landlords are homeowners who had been unable to sell their properties at the asking price and decided to let the property rather then sell at a lower price.

Now, it appears that there is a slight movement in the sales market and as a result there is still a growth in the demand for rental properties but less “accidental” landlords are putting their properties in the rental market. The RICS conclude:

"The outlook for rents is steadily improving offering some encouragement for landlords, with the rental expectations net balance reaching -6 percent, up from the previous reading of -25 percent and offering the best reading since the spring of 2008.” (RICS)  

More good news for Landlords

During the past 12 months there has been nothing but bad news in the property markets but another welcome piece of news for Landlords has been the recent case of Office of Fair Trading v Foxtons Ltd (2009) where the Courts decided that it was unfair to hide a “renewal commission clause” in the small print of an Agency Agreement. Under the Agreement with Foxtons the Landlord was liable to pay them Commission at a rate of 11% every time a tenant renewed their tenancy.

The Judge commented that: -

"The consumer would not expect important obligations, of this nature with likely and significant impact to be tucked away in the 'small print' only with no prior flagging, notice or discussion. I think that that is what has happened here."

This just goes to show that if you are considering letting your property through a Lettings Agent, you should approach a reputable Agent and make sure that you are fully aware of the fees that you will be liable to pay them before sign their Agency Agreement. If you are unsure about any of the terms or the wording is difficult to understand then make sure that they explain the terms to you in full.

Beware of the pitfalls

If you are new to the Lettings market there are pitfalls which can catch out the unprepared Landlord. Even if you have been letting property for a while it is important that you keep up to date with changes to the Law which affect Residential Tenancies.

You may already be aware that since 6 April 2007 if a deposit is collected the Landlord or Agent must protect the deposit under one of the approved Tenancy Deposit Schemes.

The approved schemes are as follows:-

  1. The Deposit Protection Service (a free service) www.depositprotection.com
  2. Tenancy Deposit Solutions Ltd www.mydeposits.co.uk
  3. Tenancy Deposit Scheme 

Full details can be obtained from their websites or from the Direct Gov website where you can also obtain details of the information that you are required to supply to the Tenant within 14 days of the deposit having been lodged in an appropriate scheme.

Even if you are aware of the Tenant Deposit Scheme you may not be fully aware of the consequences of not complying with the legislation. If you have not secured the deposit in an approved scheme and given the tenant the information within 14 days then the Tenant can make a Claim in the County Court for the deposit to be returned.

If the Tenant succeeds the Court also have the power to order the Landlord to pay the Tenant compensation equivalent to 3 times the amount of deposit paid. This can be a costly mistake for a new Landlord who is not fully aware of this piece of legislation.

Another consequence of not complying with the Tenancy Deposit Schemes legislation is that the Landlord is prohibited from obtaining possession of the property using what is known as the S21 grounds of the Housing Act 1988. Under S21 the Landlord can apply for a possession Order after serving a 2 month notice and making the appropriate application to the Court. However, if the Landlord cannot provide the documents to show that the deposit is in one of the approved schemes then the Court will dismiss the Claim and the Landlord will be unable to gain possession of the property until he/she has complied with the legislation.

So, you found a Tenant either through advertising your property or through a Lettings Agent; you have secured the deposit in a Tenancy Deposit Scheme and given the Tenant a Tenancy Agreement. Now 12 months later the Tenancy expires and you want your property back.

Well, the Landlord can simply ask the Tenant to leave – after all they no longer have a valid Tenancy Agreement.

Sounds simple? Next month’s article will cover obtaining possession of your property.

At Ascot Lawyers we can deal with Residential Tenancies or any other landlord and tenant disputes. Mary Groves has specialist experience in relation to disputes involving property including ownership, commercial and residential tenancies and boundary disputes. You can contact Mary on 01344 383 233 or email her on maryg@ascotlawyers.co.uk

You can also contact us via our online contact form and we will respond quickly.

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