Landlord Legal Issues

Q: I am evicting my tenant under section 21 and have just issued proceedings for possession at the county court. My tenant has sent me a cheque for this month’s rent – should I accept it or will this prejudice my possession claim?

A: You should accept it. The idea that accepting rent will de-rail a claim for possession goes back to the old system of forfeiture. In the old days, if you wanted to forfeit a tenancy for breach of the tenancy agreement, you could lose your case if you accepted rent as this would show ‘waiver of forfeiture’. However forfeiture cannot be used as a ground for possession for assured and assured shorthold tenancies, and its rules no longer apply to possession claims for these types of tenancy. The section 21 process in particular is wholly unconnected to rent, as you are just claiming possession because you the tenancy has ended and you have complied with the notice requirements. You should therefore accept the rent and be grateful for it!

Q: What is the correct procedure when getting tenancy agreements signed? Should the landlord and tenant sign both documents and does their signature need to be witnessed?

A: When tenancy agreement is signed, the landlord needs to end up with a copy signed by the tenant, and the tenant needs to end up with a copy signed by the landlord. But there is no harm in them both signing both and this is often done.

So far as witnessing signatures is concerned, this is necessary if the tenancy agreement is to be signed ‘as a deed’. A tenancy agreement is a document of title, as it is transferring ownership of property (albeit just for a period of time such as six months or a year, rather than permanently, as in a conveyance). Generally documents transferring title to land need to be signed as a deed. However the Law of Property Act 1925 (s54) makes an exception for leases which are (i) for a term of less than 3 years, (ii) which take effect immediately, and (iii) which are for a market rent. So in most cases you do not need to get the signatures witnessed. However if the exceptions do not apply, for example if the tenants are signing the tenancy agreement in advance of the day when they actually move in (as is often the case with student lets for example), then the tenancy should be signed as a deed, which means witnessing.

Q: I have been renting my house for several years to the same tenants. The female tenant has asked my permission if she can set up a small business from the house. They are very good tenants and I would like to say yes, but what would the implications be for me?

A: You should not agree to this. Your property is currently let as residential tenancy and on the basis of the Housing Act 1988, the legislation which covers residential tenancies. If you agree to let your tenant use the property for business purposes, then if that business use develops and becomes the main use of the property, the legislation relating to business tenancies would apply, rather than the Housing Act 1988 as now. You don’t want this. For example it could prevent you recovering possession. Once you have agreed to a business use, there is always a possibility that the business use in the property will escalate if the business is successful. Whether or not it happens is out of your control. If a property is to be let as a business tenancy, this should be its purpose at the outset, so the legal documentation can be drafted on that basis.

My view is that if the ‘business’ is really just a hobby, such as selling a few home made handbags on E-bay, then it is not really any of your concern, and the tenant does not need your permission. However if selling the handbags becomes the tenant’s main or a major source of income, then you should ask her to rent separate business premises (and threaten to end the tenancy if she does not).

Q: My tenant has changed the locks to her flat without gaining my consent. Although it states this isn’t allowed in her tenancy agreement, I have been told she is within her rights and that she doesn’t have to give me a key. Is this correct?

A: Strictly speaking she is in breach of contract, but practically there is little you can do about it. Theoretically you could go to court for an injunction ordering her to give you a key, but this would be very expensive, and the Judge would probably refuse to make the order unless you had a compelling reason for wanting a key. If you just change the locks yourself then this will almost certainly be considered harassment, which is a criminal offence. However you can charge for getting locks changed at the end of the tenancy if she fails to return all the keys to you.

Q: My former agent charged me commission every time the tenancy was renewed even thought they are not managing the property. I see that the Office of Fair Trading won a recent case where the Judge found that this sort of clause was illegal. Can I sue the agents to reclaim the commission paid?

A: We have now heard that Foxtons are due to appeal the decision at the Court of Appeal, so if you issue a clam now, it is likely that it will be ‘stayed’ by the court pending the Court of Appeal decision. In these circumstances, unless your claim for commission is over five years old (and is at risk of being ‘statue barred’), it is probably best to see what decision the Court of Appeal comes to before taking any action.

Q: I served a section 21 notice on my tenant two months ago. My tenant says he will not be leaving so we will need to evict him through the courts. I am about to go abroad, but my agent says he will handle it for me. Is that a good idea?

A: It depends what your agents mean by this. If they intend to instruct a solicitor on your behalf, this is fine, except that the solicitor will probably want confirmation that you agree to this, and a letter of authority allowing them to take instructions from your agents. They may also need to verify your ID. Once this is done, the solicitors can then draft and sign the paperwork and issue it on your behalf. However if your agents mean that they will do all the work and in effect act as your solicitor, you should not agree to this. Strictly speaking only solicitors are allowed to represent someone in court proceedings, and if someone tells you that they can do it for you it may be a criminal offence! Also the only people who can sign a court claim form are the claimant himself (or an officer of the claimant company) or the claimant’s solicitors. One of the most common reasons for the courts rejecting possession claim forms is that they have been signed by the letting agent, rather than the landlord.
Even if you avoid this problem by signing forms which have been drafted up for you by your letting agent, you need to think about whether this is a good idea. For example if anything goes wrong (which could prove expensive for you, particularly if you are ordered to pay your tenants legal costs), I would be surprised if this would be covered under your agents insurance, as it is not work that they are supposed to do.
The safest course of action is to instruct a reputable firm of solicitors that specialize in this type of work, or get your agents to liaise with such a firm on your behalf. Make sure you find out in advance what the costs are going to be. For a straightforward claim for possession under section 21 using the accelerated procedure you are probably looking at a total bill in the region of £350-500. Avoid firms which want to charge on a time costing basis, all the specialist firms in this area of work will offer a fixed fee.

Q: Our property is managed for us by local letting agents. We have just found out that they gave the wrong tenancy agreement to the tenants to sign. The tenancy agreement they have signed is a 12 month agreement without a break clause, whereas we wanted a break clause. We are not entirely happy about the tenants, and want to be able to end the tenancy early if there were problems. Apparently the tenants (who have moved in at the moment) are refusing to sign a replacement agreement – is there anything we can do about this?

A: I am afraid not. It is up to your agents to make sure that the tenancy agreement used is the correct one. As your tenants are now living in the property they are quite within their rights to insist on keeping with the tenancy agreement they have signed. You cannot force them to change.
If you suffer any financial losses as a result of this however, you may be able to bring a claim against your agents, as it is their fault that you are not now unable to end the tenancy after six months, as was anticipated.

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Inventories are not an optional extra

After having to pay unneccessary money out myself, I believe that “inventories are not an optional extra” and those landlords that do not take a property inventory at the start of a tenancy are taking risks with their money.

When a tenancy ends, some landlords i know can find themselves left with damage, cleaning or the cost of replacing furniture and fittings. And if they can’t provide evidence of the state of their property at the start of the tenancy the landlord could well end up footing the bill.

Since their introduction back in April 2007, tenancy deposit schemes require landlords to provide evidence to justify withholding any of their tenant’s deposit for damage or cleaning costs. Inventories are a good way to record the condition of a property, and show exactly how a property looks when a tenant moves in, plus any changes that have occurred during the tenancy. A detailed inventory can help deposit negotiations be dealt with quickly and easily at the end of a tenancy. If there is a dispute it can also be used as evidence in a tenancy deposit adjudication process.

Dont forget to complete for every new tenant.


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The UK's leading website with FREE resources to empower property investors

Hampered by a lack of finance

According to Paragon Mortgage’s latest research, 10% of residential landlords plan to purchase property for investment purposes in the first quarter of 2010, but they continue to be hampered by a lack of suitable mortgage finance.

Of those looking, 65% said that they want to purchase a terraced property, followed by semi-detached houses (25%), flats (20%) and detached property (10%). Terraced housing has traditionally been a popular choice with professional property investors because it is well-constructed, liked by a wide range of tenant types and can generate strong rental yields. (Hint! We have plenty of terraces in nottingham to invest in, make sure you speak to me about this.)

However, mortgage finance looks set to remain a serious issue for residential property investors in 2010, with mortgage conditions worsening in the final quarter of 2009. Of those that applied for a mortgage for portfolio expansion or remortgaging purposes, an overwhelming 67% said that it was more difficult to secure a mortgage in Q4 2009 than Q3. A quarter (26%) said that they found it easier to secure mortgage finance between the two quarters.

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Pet insurance scheme solves thorny issue for tenants

A pet insurance specialist, has recently launched a new pet insurance policy that could make life easier for us landlords.

Petpals Direct claims their scheme is ideal for smoothing deal-breaking situations where a landlord is not as keen on pets as the potential tenant, TenantCare Cat and TenantCare Dog insurance from Petpals Direct can be taken out by the pet-owner to insure against property damage the pet may cause to rented accommodation.

This insurance is designed specifically for tenants living with cats or dogs, the company claim it is the only product of its kind on the market. Not only does it insure against property damage caused by the pet, it also includes cover for common types of accident and illness.

With prices starting from just £5.17 per month for cat insurance, based on a six month old moggy living in Nottingham, or from £8.42 per month for dogs, based on a six month old Jack Russell living in Lincoln, the insurance offers a cost-effective way for tenants to secure the house of their dreams and cover expensive vet bills.
The policy allows tenants to claim £700 if there is damage caused by the pet during the first 26 months of occupancy, and £600 thereafter. Might be worth checking it out.

www.rhettlewis.com

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FSA ‘playing to gallery’ over regulation

The Financial Services Authority (FSA) has announced plans last month to regulate buy to let mortgages, in a move that is likely to see lenders tightening, already restricted, lending criteria. The NLA responded by welcoming increased protection for smaller, less experienced landlords, but adding, professional landlords like me who operate as a business do not require the same protection. The association is concerned that the costs of regulation will pass on to the industry.

As with all proposals, the devil will be in the detail but the FSA may come across problems of definition. When does a so-called ‘amateur landlord’ become a professional landlord? How large does a property portfolio need to become? The answers to these questions may well indicate exactly which investors are in need of further protection and which are capable of protecting their own interests quite adequately.

I believe the report presents a logical approach to the regulation of buy-to-let, some of the rhetoric about reckless lending is playing to the gallery. The focus should be about getting lenders lending once more and allowing us landlords to get on with our businesses.

The majority of landlords are financially sound and approach their lettings business in a professional and business-like way. We as landlords, we must ensure this fact is at the heart of all discussions relating to regulation.


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The UK's leading website with FREE resources for property investors

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Firstly, please confirm with us that you would like to proceed with the purchase of the property, you can do this by either emailing us at rhett@rhettlewis.com or by calling the office on 0115 981 6846. We will confirm the availability of the investment property in question, and make sure you have seen all relevant information for the property including all photos and particulars. We will provide you with the following steps as soon as you are confirmed as the buyer.

www.rhettlewis.com

The UK's leading website with FREE resources for property investors

Valuation activity significantly rises

Valuation activity on residential properties in the second half of 2009 rose significantly on levels seen in 2008.

For five consecutive months from August to December, the number of valuations conducted significantly exceeded the number for the same month of 2008. December was the stand-out performer, with 52% more valuations than the same month of 2008, reflecting a growth in confidence in the housing market – a stark contrast compared to the end of 2008. This trend follows a trough in valuation activity in the first half of the year, compared to 2008.

In January alone, valuation numbers were down nearly -60% on January 2008. The country has ended 2009 on a much firmer footing than 2008. But while the news is more encouraging, 2010 will undoubtedly present many challenges. Doubts still persist over issues such as the timing and impact of the general election, the effect of removing the £175,000 stamp duty exemption, and trends in the wider economy. I clearly do see a more positive trend in the second half of last year as house prices started to rise and confidence strengthened in the market. I would also expect to see the market continue to improve in 2010, with further modest growth in the number of housing transactions and surveys conducted.


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Cash buyers make 34% of all sales

The proportion of cash buyers is rising, as mortgage lending continues to be problematic. In a new and unpublished update seen by myself today, the Council of Mortgage Lenders says that in December, cash sales rose to 34% of all transactions – twice the historic norm.

In the report, the CML said that house sales last year almost certainly hit a postwar low. It said that 2008 sales were definitely the lowest since the war, and 2009’s final figures may turn out to be even worse.

The CML report – by Bob Pannell, the CML’s head of research – said then that it expects sales activity to improve only very slightly this year. It warns that house prices are volatile and not necessarily a good barometer of the underlying health of the housing market.

According to its very latest figures, for January, mortgage lending slumped 32% from December and 21% from January last year. The monthly total for last month was £9.1bn, the lowest monthly total since February 2000. This is great for property investors for the next 12 months!!

HOUSE PURCHASES DOWN

The number of home purchase loans approved by banks in January was up nearly 40 percent from a year ago, but fell on the month after a tax exemption on properties worth up to 175,000 pounds expired on Dec 31.

The British Bankers' Association said 35,083 mortgage applications were approved last month. That was down from the 45,650 loans approved in December but up 37.8 percent from a year ago. Still, it was the lowest since May 2009.

Net mortgage lending rose by 2.7 billion pounds in January, compared with 3.5 billion pounds in December, which was the slowest pace of growth since last July.

The figures come after a Bank of England survey last week showed mortgage approvals by Britain's biggest lenders had fallen last month.

I feel that the monthly decline was partly due to a reversal of a rush of activity at the end of last year as homebuyers sought to benefit from an exemption from tax on properties worth up to 175,000 pounds, which expired on December 31. It is no surprise to see the January mortgage figures falling back from December, when transactions were being pushed through to beat the end of stamp duty relief. The bad weather would have further suppressed market activity."

Guidance for Students and Landlords on Staying Safe wih Gas

The HSE (Health and Safety Executive) have recently launched a new campaign offering practical guidance for students using gas appliances in rented accommodation. The link below offers advice reagarding 'What are a Landlords responsibilities' and 'How can I Stay Safe' etc.

http://www.hse.gov.uk/gas/domestic/student.htm

If landlords want to know what their responsibilities are too, they can follow the following link below ,which gives clear guidance to Landlord Duties under Gas Safe (installation and Use) Regulations 1998.

http://www.hse.gov.uk/pubns/indg285.pdf

Guidance for Students and Landlords on Staying Safe wih Gas
The HSE (Health and Safety Executive) have recently launched a new campaign offering practical guidance for students using gas appliances in rented accommodation. The link below offers advice reagarding 'What are a Landlords responsibilities' and 'How can I Stay Safe' etc.

http://www.hse.gov.uk/gas/domestic/student.htm

If landlords want to know what their responsibilities are too, they can follow the following link below ,which gives clear guidance to Landlord Duties under Gas Safe (installation and Use) Regulations 1998.

http://www.hse.gov.uk/pubns/indg285.pdf

Local Housing Allowance

It is the norm for a tenant to be paid their LHA (Local Housing Allowance) direct, and then for the tenant to pay the rent to their landlord. However, if a tenant is eight weeks or more in arrears, councils are obliged to pay the LHA directly to the landlord unless it is in the overriding interests of the claimant or his family not to do so.

The Benefits Service assumes that all tenants receiving LHA pay their rent to their landlord unless evidence is received to suggest otherwise. Any evidence received to the contrary will then be investigated by the benefit team within the local authority.

To ensure the process of evaluating whether or not LHA payment to the landlord is adopted, it is vital that the landlord has all the relevant information and presents it to the local authority as quickly as possible. This will speed up the process and avoid the tenant falling into further arrears.

As a landlord you will need to provide evidence of the tenant's rent arrears, showing what rent is due & what payments have already been received.

The proof you provide must cover the total amount of rent arrears outstanding.

Examples of evidence that can be considered are:

•Rent account statement
•Rent Book
•Rent Receipts or payments sheets duly dated and signed.
•Bank statement confirming transactions for rent payments
•Evictions notice - because of rent arrears
•Court documents - confirming rent arrears details of amounts and dates paid
All evidence you send to the council must be the original documents as photocopies will not be acceptable.

If no evidence is provided, or if the evidence does not provide adequate proof of the arrears, it is unlikely that direct payment will be made.

In order to further assist the local authority in making the decision to pay you direct as a landlord you must also provide the council with:

•A copy of the tenancy agreement signed by both parties.
•A copy of the receipt from your tenancy deposit scheme operator (if a deposit has been taken)
•A diary of events showing when you visited the property to collect the rent, who you spoke to & what was said.

Back to Basics Guide for Buy to Let Investors

1. Buy into the right location. Look at areas that are getting or have just got faster transport links. Use the Internet and publications like Estates Gazzette, available in most libraries, for news on planned regeneration. Do your own research.

2. Use today’s weak market to make “hard ball” offers at below the asking price. If the vendor won’t play ball simply walk away and make a cheeky offer somewhere else.

3. Buy the type of property that is in demand from tenants and for which there will be a strong resale market when you eventually come to sell. Ask letting agents for their view of what type of house is in demand locally.

4. Read up and understand your legal responsibilities as a landlord.

5. Try to build up a deposit of at least 25 per cent to allow you access to the best mortgage rates.

6. Carefully check all prospective tenants’ references to avoid the “tenant from hell”. If your agent does this for you ask to see the references they obtained. Don’t fully trust to an agent until you have worked with them for a while and they have earned that trust.

7. Treat tenants as you would like to be treated.

8. Keep all receipts and invoices and have a good administration system.

9. Have a sense of humour. You’ll need it from time to time.

10. If you need advice, make sure it is independent advice and not provided by someone also looking to sell a property or finance package to you.

This is another crazy idea I heard last night that landlords must deal with. The Government’s plans to force property owners to apply for planning permission if they want to turn homes into shared housing, have come under fire. The Government also wants local authorities to have greater powers over the licensing of shared houses. Planning permission will be required where three or more unrelated people live together – the definition of a House in Multiple Occupation (HMO). The Government has bowed to a small minority who have shouted the loudest. These plans will do nothing to improve housing or increase choice for tenants but are more about placating local protest groups in certain parts of the country.