House Rentals: Legalities To Know In Private Rental Sector

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    house rentals

    The private house rentals sector in the UK has increased from 2.8 million in 2007 to 4.5 million in 2017.

    An increase of 1.7million (63%) households.

    While private rentals sector is increasing, it is important for both landlords and tenants to become aware of the legalities.

    Property investment has been one of the growing investment methods to earn passive income.

    There has been an increase in accidental landlords, amateur landlords, professional landlords and others trying to do their best investing in property.

    Now:

    There are several factors of being a successful landlord and property investor in private house rentals.

    Following on few of top must-dos of property investment:

    1. Operating property portfolio legally.
    2. Ensuring that property is safe and secure for tenants at all times.
    3. There is positive cash flow from the property

    In this blog, I will try to cover the part of legally operating the portfolio. Yes, it can be a bit boring part, but if not done or understood correctly, it can be expensive for the business.

    There are so many different sections that landlords/letting agents need to be aware of while operating property portfolio.

    Following are few of those sections related to house rentals.

    Section 21

    Recovery of possession on expiry or termination of assured shorthold tenancy.

    Section 21 was introduced as part of the Housing Act 1988. Section 21 is ‘no-fault possession’ of the property.

    What can be done under Section 21?

    • Private landlords can regain possession of the property, except during the fixed term of a tenancy.
    • The tenant can also be evicted if there is no fixed end date – known as ‘periodic’ tenancy.

    Section 21 can’t be served if

    • the tenancy is less than 6 months since started.
    • The property is HMO and does not have HMO licence from the council
    • the tenancy started after April 2007, and you have not put the tenants’ deposit in a deposit protection scheme.
    • You live in Wales, and you do not have a landlord licence.

    You cannot also use section 21 if you have not given the tenants copies of:

    • The property’s EPC
    • Current gas certificate for the property
    • The governments “how to rent” guide.

    New changes that were announced on 15th April 2019 mean that:

    Private landlords will not be able to serve section 21 to evict tenants, which will create open-ended tenancies.

    This is to stop “no-fault” eviction.

    We will know the effects when it comes into practice if it does.

    Let’s move on to other sections.

    Must Read: Top 6 Tenant Issues in Rental Properties And Your Response As A Landlord

    Section 8

    Section 8 came into force along with section 21 as part of the Housing Act 1988

    While section 21 is ‘no fault’ notice served to take possession of the property, section 8 is served when to take possession of the property when there is a fault.

    A ‘Section 8 notice’ is also known as a ‘section 8 possession notice’.

    There are several grounds under while section 8 can be served. Landlords can include several grounds mandatory as well as discretionary, as long as they can provide evidence for each ground mentioned. A Judge will have to go through the discretionary grounds and make sure they are valid for the landlord to get the property possession.

    The landlord will have to fill in Form 3 to give section 8 notice. If the tenant refuses to leave on the date specified in the notice, then you will need to apply to courts for a ‘possession order.’

    Landlords can give you a section 8 notice if:

    • There are rent arrears.
    • Tenants are involved in criminal or antisocial behaviour
    • Tenants break other terms of your tenancy agreement like damaging the property

    Tips for serving a Section 8 notice

    • Do not send by Recorded Delivery/email.
    • Take an independent witness and deliver by hand in an envelope to the tenant.
    • Show witness what is in the envelope, i.e. Section 8
    • If handed to the tenant, if possible, get the tenant to sign for receipt on their copy and yours. When handed to the tenant personally, it is considered to have been served on that day
    • If posted through the letterbox, get a witness to photograph this with a digital camera, displaying the date on the photograph. Also, if possible, get the flat / house number in the photograph. The notice is considered to have been served the next working day when posted through the letterbox. If you are using a smartphone, consider an app like Solocator which puts the date, time and location on your photographs.

    Section 8 notice won’t be valid if it doesn’t include:

    • the tenant’s name
    • the address of the property
    • the ‘grounds for possession’ – these are the reasons why your landlord wants you to leave your home
    • the date your notice ends – the landlord will need to get a possession order from the court if you don’t leave by that date

    If the landlord hasn’t given you the notice correctly, they could still ask the court to order you to leave your home. You’ll have a chance to put your case forward, and the court will make a decision.

    Must Read: 5 Property Investment Risks And How To Mitigate Them Building Your Portfolio

    Section 13a

    In house rentals especially when the tenant has been for a while in the property, rents may have to be increased due to various reasons including letting agent fees, additional costs due to inflation etc.

    The landlord can use a section 13 notice to increase rent if the tenancy agreement doesn’t contain a rent review clause (or if the rent review clause no longer applies).

    The landlord must use Form 4 to give you valid notice.

    Section 13 procedure can only be used once a year to increase your rent.

    The tenant must get at least one month’s notice of the increase if you have a weekly or monthly tenancy. The tenant is entitled to more notice if your tenancy period is longer than a month.

    The landlord can serve the notice during the fixed term of your tenancy, but the rent increase can’t take effect until after the fixed term has ended. If your tenancy didn’t start with a fixed term, a section 13 notice can’t be used during the first year.

    If the tenant does not challenge the increase, the new rent applies after the notice expires.

    Thought:

    Think about the cost of re-letting and void period if the property is not let straight away. Process of finding new tenant may be more costly than missing out on a few pounds.

    But:

    Put the numbers as well as any other factors behind the decision of rental increase and then take an appropriate call.

    Must Read: Buy To Let: 8 Questions You Should Ask Before You Buy A Property

    Section 24

    With the surge of private house rentals, quite a few landlords have chosen setting up limited company and operating it as a business and there are few others who chose to buy properties on personal name.

    Now:

    With introduction of Section 24 there can be massive tax implications based on your personal situation. It required a whole different article to discuss. We have published article about Section 24 previously and can be found at Section 24 Guide And How This Impacts Buy To Let Landlords.

    Conclusion:

    These are few sections that landlord and tenant should be aware of in private house rentals sector. The legislation is much bigger and covers more aspects but this is an attempt to get people aware of few of them and point towards the detailed legislation.

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