New Gas Safety Requirement for Landlords

It's well known that landlords of residential property are required to have a gas safety test carried out each year. The requirement is contained in the Gas Safety (Installation and Use) Regulations 1998. A feature of regulations such as this is that they tend to tighten over time so that a gas appliance which passes one year can fail the next without any deterioration in its condition, simply because the goalposts have narrowed.

A number of landlords may get caught out by just such a new development: A new requirement due to kick in on 1 January 2013 is that, where gas boilers are vented via a flue which is concealed within a void, the GasSafe Engineer must be able to visually inspect the flue. This is most likley to be the case where boilers are located on an internal wall of the property because the flue will then have to run within the property to an outside wall. For aesthetic reasons such flues are usually neatly concealed within a hidden void.

If you are a landlord of such a property then you will need to create a means of enabling the inspecting engineer to see that hidden flue. This will probably mean cutting out access hatches through which he can shine a torch and take a look along the hidden flue. As I have said above the new requirement takes effect next month, but you will remain legal until such time as your current Gas Safety Record expires.

You must take action before that expiry date to ensure that the engineer can see what he needs to. If not he will turn the boiler off and advise you and your tenant not to use it. For properties under Simply Let management we will also advise the tenant in writing that he or she must not use the boiler until a valid Safety Record is in place.

The courts take a dim view of breaches by landlords of the Gas Safety Regulations and some impressively large fines have been awarded. The standard penalty is a fine of £6000 per appliance and/or a 6-month prison sentence. That's perhaps less relevant to your tenant than the fact that he or she will be without heating and possibly hot water until you become compliant again.

So you would be wise to take action now:

• Ascertain whether any part of the the flue runs in a void (most unlikley if the boiler is fitted on an external wall)
• If it does, seek advice from a GasSafe Engineer
• Instruct the work required to make the flue arrangement compliant.

Easy as 1,2,3 !

What happens about the deposit at end of tenancy now that TDS is here?

As a landlord, what should you do at the end of the tenancy as far as the deposit is concerned?

If all's well with the property and you're happy to see the cash handed back to your tenant, then it couldn't be simpler.  Just tell that to the deposit scheme administrator.  But what if you'd like to see £100 come your way to deal with any issues?  Here's a simple summary (as simple as the Regulations allow, that is)

The first thing to do is to have a converstation with your tenant.  You'll have had such conversations when you've visited periodically during the tenancy, and this is just another.  You can probably do it as you check him out (we'll use the masculine but as lawyers say "referencees to the masculine are deemed to include the feminine")   Indeed you really must do it then if there are any issues, although perhaps you'll need to finish the conversation later if you need to look into costs to make good.  The important thing is to raise the issues face to face in a non-confrontational way and seek to get his agreement, even if only in principle until costs are known.

Tell him you're not happy with the state of the whatever it is - let's say it's a professional carpet clean that's needed.  (Incidentally, English experience has been that by far the biggest number of disputes relate to cleaning, followed by unpaid rent and then damage or breakages.)  Perhaps you've raised concerns about this at the periodic visits, in which case he'll probably be anticipating what you're about to tell him.  That makes it easier.  Folks don't take well to a bolt out of the blue, and cleaning's particularly difficult as it's subjective.  Show him the ingoing inventory and ask him to compare the state of cleanliness recorded there with how it is now.  If he's a reasonable sort he'll agree and you should be home and dry.  (Well, just about)

You then need to write to the scheme administrator and propose that £100 be passed to you with the balance going to your tenant.  The administrator then writes to the tenant to seek either his agreement or a counter-proposal.  If your tenant's as good as his word, then he'll confirm his agreement to your proposal in which case the administrator actions it within 5 days.  (Days in the context of TDS are always working days, excluding week-ends.)  You can see why you need to have had that conversation.

The tenant must respond to the administrator within 30 working days.  If he doesn't then you'll get your £100 and the tenant's share will remain with the scheme in case he claims it later. (Any deposits left unclaimed after 6 years may be treated as ownerless and fall to be consigned to the Queen’s and Lord Treasurer’s Remembrancer)  It's worth adding that in the case of SafeDeposits Scotland, which Simply Let uses, any operational surpluses are passed to a charitable trust whose objective is to raise renting standards

But, what if you can't agree?  Some folks are just stubborn, particularly where cleaning is concerned and they believe everything is fine and that you're being pernickety.  Well, it then gets a wee bit more complex.

If you can't reach agreement then either party can ask the scheme administrator to refer the case to adjudication.  It's important to understand that this is adjudication, not a mutually negotiated settlement through mediation.  Adjudication is entirely evidence based and the adjudicator won't visit the property to see for himself or seek input from you or your tenant.  He'll simply decide in the privacy of his office on the basis of the evidence you each give him.  That's why you need a fully detailed ingoing inventory report, setting out the condition and state of cleanliness of the property at commencement, and signed by your tenant.  It helps too, to pass the adjudicator copies of any letters or e-mails you've sent to your tenant after your periodic visits setting out your concerns over cleanliness.  If there are issues at check-out you should produce a check-out report based on the ingoing report and highlighting the items at issue. (That's good practice even if all's well)  All of that should make it patently clear to the adjudicator that he needs to uphold your claim.  Oh.. the last bit you'll need to give him is the estimate or invoice (as the case may be) from your cleaning company.  If there's a particular problem such as a pink stain on a bedroom carpet what really helps is if the estimate or invoice relates directly to that in terms of the check out report.  (Instead of just "cleaning at such and such and address" ask them to quote the actual problem "removal of pink stain from bedroom carpet ....")

The scheme administrator will refer the case to adjudication only once he's satisfied that the two of you have made a real attempt to reach agreement and have failed.  Adjudication's not there to replace honest discussion and engagement.  Adjudication, I should have said, is also completely free to use.

The adjudicator needs to bring his deliberations to a close within 20 days of the referral (that's working days again of course) and then he has a further 5 days to tell you both his decision.  There is the possibilty for either party of an appeal against the adjudicator's decision, but only on the grounds of fact or law (or both).  You can't appeal just because you don't like the result!

So, there's potentially a fair bit of time drag in all of that.  However the fact that most tenants will need what's left of their deposit to put down as a deposit on their next place should focus their minds.  A difficult tenant though could slow down your access to any justified cash just when you need it quickly in order to restore the property to a markatable condition.

I should add that it's open to the tenant to instead use court process instead of adjudication, but I can't see why anyone would prefer to do that. 

There are some useful case studies here illustrating how adjudicators arrive at their decisions.  They are very informative and well worth a look.  Key to much of it is the concept of wear and tear, but that's for another blog.  Suffice it to say that you must take wear and tear into account when arriving at a proposed deposit retention.  If you aren't realistic about that you will be disppointed at any adjudication outcome.

If all's not clear, or if you have any questions, please get in touch.

TDS - (More of a Moan than a Blog Post)

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In the eight years we've been running Simply Let, we've hardly ever had any difficulties over deposits.  Our tenants are usually responsible folks.  We visit them from time to time mid-tenancy and raise any deposit-threatening concerns we might have as a result, so that there's ample time for tenants to address them before end of tenancy, and generally it has all worked pretty well.  In most cases we've been able to return deposits in full and, where retentions have been considered necessary, tenants have been happy to agree.

One tenant took us to the small claims court alleging wrongful retention of deposit (we had instructed cleaners to remove crumbs and some food residues and mould from the fridge interior)   Summoned before the Sheriff to explain ourselves, production of before and after digital images soon saw her sent packing.  On another occasion a young couple sought to recover from us a deposit retention to cover advertisng costs.  Having specifically sought a 12-month term they then sought landlord's agreement to relinquish their tenancy mid-term, and that consent was granted conditional on their covering re-letting costs.  They referred Simply Let to Landlord Accreditation Scotland alleging we weren't acting in the manner required of an accreditted agent, but declined to engage in dialogue with us as required by LAS.  They declined also to pursue our Complaints Management Procedure (reference to Ombudsman) and the matter just fizzled out.

In eight years that's about it - about 1% of deposit retentions causing grief.

Why then do we now find ourselves spending many valuable hours in the completely unproductive process of transferring tenants' deposits from our client bank account (where the cash is protected by RICS Client Money Protection Scheme ) to SafeDeposits Scotland ?  I accept that not all agents are as rigorous with third-party cash as Simply Let is and there is without doubt a small minority of landlords who will set out to deliberately avoid handing back tenants' deposits.  But apart from those instances most difficulties will have arisen through misunderstanding and poor communication.  Misunderstanding by tenants of how they should leave the property or of what their landlord may use the deposit for, and misunderstanding by landlords of what they may use the deposit for and how clear they need to make that to their tenants.

I don't grudge SafeDeposits Scotland the money.  It may as well be in their bank account as ours and they're a decent cross-sector not-for-profit body who'll apply any surplus funds to the benefit of the rented sector.  We wish them well.

What does grieve me is the approach taken by government, which fails to acknowledge best-practice where it exists and which seems to regard all landlords as potential criminals.  Neither does government attach any relevence to the fact that Simply Let, as a firm Regulated by RICS, operates to a strict code of professional ethics and holds all third-party money in a discrete protected bank account quite separate from our own business funds. Why can't we have some government resources put into awareness-raising and capability building?  A few carrots and less stick might just work wonders.

Moan over!

Electrical Checks in Let Property

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It’s pretty widely know that landlords must have a gas safety check carried out on their let properties each year, and the penalties for failing to do so can be severe, but what about electrical checks?

The Repairing Standard set out in the Housing (Scotland) Act 2006 places a statutory duty on landlords to, amongst other things, to ensure that the electrical installation in the house is in “reasonable repair and proper working order” and that any appliances provided under the tenancy are similarly in “reasonable repair and proper working order”.  How are you going to ensure that they are?

In my view it would be much better to set out a clear certification requirement, as with gas. “Reasonable” is far too wooly a measure for electricity - a silent, odourless and potentially lethal force, and we have had clients who have used that wooliness to try to dissuade us from doing what we consider necessary to ensure electrical safety.  Unbelievably, there’s no reference at all in the Repairing Standard to the clear need to ensure that the electrical installation and appliances are safe.  That is a straightforward duty of care irrespective of statute.

A worst case scenario, hopefully unlikely but nevertheless perfectly possible, is a dead tenant and a landlord in the dock trying to convince the sheriff that he has fulfilled his statutory obligation.  In the absence of reasonably recent expert certification, he is likely to have difficulty doing so.  A more probable case is that your tenant is subjected to an electric shock, which would show you to be at least pretty inept and which might lead to a compensation claim and all the hassle entailed in that.

We once had a client who replaced an inoperative washing machine with a washer/dryer he had himself been using for a few years.  The dryer function didn’t work but then, said our client, "the tenants didn’t have a dryer before anyway”  We had sympathy with that observation but had to point out that, under the Repairing Standard, any appliance provided by a landlord has to be in reasonable repair and proper working order.  He was happy to run the risk on that one, but we insisted that the replacement machine underwent a portable appliance test.  “Why?” said our client.  “I’ve been using it for years and I know it’s safe”  “How can you be certain?” we responded.  “Because I’ve never had a shock from it”.

The machine failed a Portable Appliance Test on the earth leakage measure, and by quite a long way.  Just to complete the tale, we were instructed by our client to remove the “Do not Use” label forthwith.  Needless to say, we declined, and he’s no longer a client.

It’s simple really:  You should have the electrical installation checked every 5 years by a Select electrician.  Ask for a Periodic Inspection Report.  You should also implement any recommendations in the report.  Similarly, have anything with a plug on it put through an annual Portable Appliance Test (PAT).  This will show up any propensity to give users a shock well before they actually get one.  That’s infinitely better than our former client’s method of presumably waiting until he received a shock!   Keep the reports and receipts for any expenditure on remedial works in your file so that you can lay your hands on them easily if requirerd.

That testing regime should ensure that your tenants always have safe use of electrical appliances and fittings.  If something goes wrong however and there’s a mishap (or even a fraudulent claim) and your tenant sues for compensation, you can wave your electrical reports aloft in court and demonstrate that you have indeed taken measures to ensure that the installation and appliances were safe.

I’d like to see our legislators introduce that certification requirement and remove the scope for confusion.


You can download a copy of the "Landlord's Guide to Electrical Safety in Scotland" here.

Tenancy Deposit Scheme - An Update

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Tenancy Deposit Scheme– An Update

Now that the operational date for the Tenancy Deposit Scheme in Scotlandis known to be 2 July 2012, we can look at actual dates when landlords will need to hand deposits over to one or other of the schemes. These are:-

A) Deposit received prior to 7^th March 2011:

· Where tenancy renewed (either by a new agreement, or by tacit relocation) on or after 2^nd October 2012 and before 2^ndApril 2013

Within 30 days of renewal

· In any other case

By 15th May 2013

B) Deposit received on or after 7^thMarch 2011 and before 2^nd October 2012:

By 13^thNovember 2012

C) Deposit received on or after 2^ndOctober 2012

Within 30 working days of the beginning of the tenancy

Duty to inform the tenant

Landlords must remember that as well as handing over the deposit, they are required to provide certain information to their tenant.

1. Confirmation of the amount of the deposit paid by the tenant and the date on which it was received by the landlord;

2. The address of the property to which the deposit relates;

3. The date on which the deposit was paid to the scheme administrator;

4. A statement that the landlord is registered with the local authority;

5. The name and contact details of the administrator of the tenancy deposit scheme to which the deposit was paid; and

6. The circumstances in which all or part of the tenancy deposit may be retained at the end of the tenancy, with reference to the terms of the tenancy agreement

Although there is currently only one approved scheme – Letting Protection Service Scotland, a further two, SafeDeposits Scotland and http://www.mydepositsscotland.co.ukare under consideration. I understand that the government hopes that either or both of these will also be approved by 2 July.

SafeDepoits Scotlandis a not-for-profit organisation and any surpluses it makes will be gift aided to a related charity, the SafeDeposits Scotland Trust, which will provide grants to promote education, training and best practice in the private rented sector in Scotland.

The members of SafeDeposits are-

• Scottish Association of Landlords (SAL)
• National Federation of Property Professionals (NFOPP)
• Royal Institution of Chartered Surveyors (RICS)
• The Scottish Council for Voluntary Organisations (SCVO)
• National Union of Students Scotland (NUS Scotland)
• The Dispute Service (TDS)

At the end of the tenancy

Either the landlord or the tenant can apply to the deposit holder for the return of the deposit, either in full or in part. If the landlord wishes to claim part of the deposit he should state in his application why he feels that to be justified. The scheme administrator will then write to the other party asking whether or not they agree. If they do, all is straightforward and the deposit will be returned to the party claiming it within 5 working days of that agreement. So it would be sensible for landlords to discuss any proposed claim from deposit with their tenants, and try to reach agreement with them before application is made so that the formal process runs smoothly and quickly.

If a landlord has applied for the deposit (for example, to fund the cost of damage caused by the tenant) and the tenant fails to respond, the scheme operator will pay the amount claimedto the landlord after 30 working days, retaining the balance in the scheme in case the tenant follows up at a later date.

Where the tenant has applied for the deposit and the landlord doesn’t agree but doesn’t make an alternative proposal within 30 working days, the fulldeposit is repaid to the tenant within 5 working days of the end of the 30 day period. So if you don’t agree that your tenant is entitled to have the whole deposit back, you must submit your reasoned case to the scheme administrator within 30 days of the date of his notification letter.

If you’re a landlord you need to make sure that anything you might want to claim for, such as the last month’s rent not being paid, or your costs in cleaning carpets, or your time in purchasing replacement contents which have been damaged by the tenant, is set out in your tenancy agreement, otherwise the decision will be at the discretion of the scheme administrator. In the same vein you must have a thorough and detailed inventory and record of condition agreed with your tenant (and signed by both parties) at the start of the tenancy.

Disputes

If the parties can’t agree on the amount to be returned to the landlord, then the legislation provides for reference to a dispute resolution service at no cost. The scheme administrator must be satisfied that the parties have attempted to resolve the dispute and have been unsuccessful in doing so, before referring a case to dispute resolution. The adjudicator will make a decision about how the deposit should be repaid, based on evidence provided by you and the tenant, including what is provided for in the tenancy agreement. So landlords and tenants need to have evidence which is reliable, or they will fail to convince the adjudicator of their case. The adjudicator must decide any dispute within 20 working days of receiving the referral.

After a decision is notified, both parties will have 10 working days to request a review. For a review to take place, the parties (or one of them) would need to be able to establish that the adjudicator had made a factual error, for example by overlooking relevant evidence, or had failed to follow the statutory procedure correctly.

Sanctions for failure to comply

If a deposit is not paid to an approved scheme within the required timescale, or if the landlord doesn’t provide the tenant, again within the statutory timescale, with the required details about where his deposit is being held, the tenant may apply to the court for sanctions against the landlord.

If the sheriff is satisfied that you the landlord has failed as above, then he must require the landlord to make a payment to the tenant and this payment can be up to three times the amount of the deposit. In addition he may order the landlord to submit the deposit to an approved scheme. These sanctions could therefore cost a negligent landlord dear. It seems to me that there’s an incentive there for tenants to take a keen interest in how their deposit has been handled (and we should find many more landlords applying for local authority registration)

It’s worth stating again that these obligations fall on landlords and not agents, so if you’re a landlord using an agent to manage your properties you will need to ensure that the agent is doing all of this correctly on your behalf, ideally by having the point covered in your service agreement so that you have redress if there’s a problem.

I hope that wasn’t too dry a read, and I’ll be happy to answer any questions. Just get in touch!

 

Consultation Open on Strategy for Scottish Private Renting

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With the precentage of privately rented homes in Scotland having risen from 5% in 1999 to 11% today, the government has declared its committment to raising standards. If private renting is to be a reliable and trouble-free experience for tenants and become mainstream as it is in Europe, we do need to ensure that underperforming landlords raise their game. Here at Simply Let we believe that "rogue" landlords are few and far between and that most underperforming landlords are well intentioned but underinformed. We believe that legislation and coercion has its place in dealing with deliberately devious or malicious landlords but that for the majority of landlords improvement is best attained by ready access to information, guidance and support to help them do better. This larger, latter group needs recognition and encouragement rather than apparently being perceived as being on the verge of criminality, and their is a real risk that increasing statutory regulation will be counterproductive in driving them out of the sector while the rouges remain. What then for increased standards?  We are encouraged therefore by the recognition of the Chairman of the Scottish Private Rented Sector Strategy Group, Professor Douglas Robertson, that "the vast majority of landlords would welcome some support".

Housing minister Keith Brown says ""The Scottish Government is committed to enabling effective action to help remove the small minority of rogue landlords from the private rented sector and to ensure that local authorities have the powers that they need to tackle this problem." 

In Simply Let's view there is precious little evidence so far of that committment leading to any such landlords being identified or effectively dealt with, while those landlords who want to play fair and who have their tenants' interests at heart are made to jump through ever more hoops and to pay for the privilege of doing so. Simply Let supports legislation designed to raise PRS standards but only if it is effectively policed and seen by the "satisfactory" landlords to be effectively dealing with the rouges and delivering on its stated intentions.

So what is this latest consultation about?

It opens with the Group's vision of a "thriving and professional private rented sector that offers good quality homes and high management standards; inspires consumer confidence; and encourages growth and investment to further develop and improve the sector".  However, if the Govermnment is to achieve that result ministers will need to listen to and be guided by objective views of people with experience in the sector, rather then seeking to score political points.

The consultation looks at three broad aims:

1. Growth and Investment: to increase overall housing supply and for more investment to develop and improve the existing sector;

2. Better quality: of property management, condition and energy efficiency,

to be enabled by smarter, more targeted regulation; and

 3. More informed choices to support and encourage consumer driven improvement of the sector.

So, why not take this opportunity to have your own say and try to influence the legislation by participating in this consulation via the link below, which also contains some interesting backgound reading putting Scottish renting in context. The consultation runs until 10 July.

Consultation Paper

RICS Lettings Market Survey

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UK Rental increases slowed at the end of last year as some tenants began to resist the sharp rises in rent levels seen in recent quarters, according to the latest RICS Residential Lettings Survey.

The latest RICS Residential Lettings Survey shows rents continuing to pick up, but the pace of rental growth moderated further in the three months to January.

Continued strong demand from tenants is putting upward pressure on rents, although surveyors say that the supply of properties for letting also continues to rise.

Rental prices continued to increase across the UK, albeit at the slowest pace in two years, in the three months to January with a net balance of +13% of surveyors reporting increases in past rental values (from +21% in the previous quarter) and expectations are for rents in the next three months to rise at a slower pace also.

Looking to the future, 14 % more surveyors across the UK expect rents to rise rather than fall.  Respondents suggested that after strong gains over the past 12 months, rents are reaching a plateau, and the market may become a little more stable. The proportion of UK landlords choosing to sell their property at the end of a tenancy increased from 2.6% in the previous period to 4%, which may reflect the rush of first-time buyers seeking to purchase before the beneficial stamp-duty rate ends this month.

These UK-wide figures are however the average of regional variations: The rental picture was most positive in the South East of England, followed by Scotland, the Midlands and Wales. The outlook for rents on balance is positive, but it is a little more cautious in London and the East, where the net balance has turned negative for the first time.

From our perspective here in Inverness, the usual January rush of tenant enquiries didn't materialise this year but tenant demand did pick up in February.  Similarly new instructions have until recently been slack. There are indications now however of some new buy-to-let activity and I believe that 2012 will see some resurgence of this as mortgage finance is more readily available. Tenants are also tending to stay on longer. Inverness hasn't seen the volatility of southern markets and, on balance, I anticipate a continuation of the steady and gradual increase in rents that we have seen over the last few years.

J R Gell MRICS

Director, Simply Let

Download the RICS Lettings Market Survey

Tenancy Deposit Scheme

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Tenancy Deposit Scheme

In a previous blog here I outlined the two contenders to run the scheme in Scotland, The Letting Protection Service Scotland and SafeDeposits Scotland.  In today’s blog I’ll run through the procedures landlords will need to use when lodging deposits and seeking return of the money, and also look at what provisions there are if landlord and tenant disagree on the amount of deposit to be retained, but first I need to provide an update to that first blog.

My Deposits Scotland has also now applied to run the scheme and is under consideration by the Scottish Governement.  My Deposits Scotland is a partnership between the National Landlords Association (NLA) and Hamilton Fraser Insurance, and is an offshoot of My Deposits, a Tenancy Deposit Protection Scheme authorized by the UK Government to operate a scheme in England and Wales.

So there are now three contenders for the scheme in Scotland.  A decision on which of these three will be appointed is expected by the end of March, and the scheme should become operational about a couple of months after that.

Moving on to the subject of today’s blog, how the schemes will operate and what are the penalties for non-compliance.

When do landlords need to hand the deposit over?

This will depend on whether the tenancy commencement date (in terms of the Regulations the date the landlord received the deposit) before or after the scheme commences

All deposits received after a scheme first becomes operational must be submitted to an approved scheme, and information provided to tenants within 30 working days of the start of the tenancy.

Where the deposit was received before a scheme first becomes operational, things are a wee bit more complicated and one of two timescales will apply:

1. Where the deposit was received before 7 March 2011 then:

a) if that tenancy is renewed at a date between 3 and 9 months after the operational date of the scheme, then you must submit the deposit within 30 working days of that renewal date

b) in any other case, you must submit the deposit within 30 working days of whatever date falls 9 months after the operational date.

2. Where the deposit is received between 7 March 2011 and the date the first scheme becomes operational - you must comply within 30 working days of the date that falls 3 months after the date the first scheme becomes operational.  (It’s actually simpler than it sounds to work that out!  Legislators seem to like complexity!)

It should be noted that the definition of 'working days' does not include Saturdays, Sundays or  bank holidays.


Duty to inform the tenant

Landlords are responsible for ensuring that the following information is provided to the tenant:
 

1.       Confirmation of the amount of the deposit paid by the tenant and the date on which it was received by the landlord;

2.       The address of the property to which the deposit relates;

3.       The date on which the deposit was paid to the scheme administrator;

4.       A statement that the landlord is registered with the local authority;

5.       The name and contact details of the administrator of the tenancy deposit scheme to which the deposit was paid; and

6.       The circumstances in which all or part of the tenancy deposit may be retained at the end of the tenancy, with reference to the terms of the tenancy agreement.

 

At the end of the tenancy

Either the landlord or the tenant can apply to the deposit holder for the return of the deposit, either in full or in part. If the landlord wishes to claim part of the deposit he should state in his application why he feels that to be justified. The scheme administrator will then write to the other party asking whether or not they agree. If they do, all is straightforward and the deposit will be returned to the party claiming it within 5 working days of that agreement.  So it would be sensible for landlords to discuss any proposed claim from deposit with their tenants, and try to reach agreement with them before application is made so that the formal process runs smoothly and quickly.

If a landlord has applied for the deposit (for example, to fund the cost of damage caused by the tenant) and the tenant fails to respond, the scheme operator will pay the amount claimed to the landlord after 30 working days, retaining the balance in the scheme in case the tenant follows up at a later date.

Where the tenant has applied for the deposit and the landlord doesn’t agree but doesn’t make an alternative proposal within 30 working days, the full deposit is repaid to the tenant within 5 working days of the end of the 30 day period.  So if you don’t agree that your tenant is entitled to have the whole deposit back, you must submit your reasoned case to the scheme administrator within 30 days of the date of his notification letter.

If you’re a landlord you need to make sure that anything you might want to claim for, such as the last month’s rent not being paid, or your costs in cleaning carpets, or your time in purchasing replacement contents which have been damaged by the tenant, is set out in your tenancy agreement, otherwise the decision will be at the discretion of the scheme administrator.  In the same vein you must have a thorough and detailed inventory and record of condition agreed with your tenant (and signed by both parties) at the start of the tenancy.

Disputes

If the parties can’t agree on the amount to be returned to the landlord, then the legislation provides for reference to a dispute resolution service at no cost.  The scheme administrator must be satisfied that the parties have attempted to resolve the dispute and have been unsuccessful in doing so, before referring a case to dispute resolution.  The adjudicator will make a decision about how the deposit should be repaid, based on evidence provided by you and the tenant, including what is provided for in the tenancy agreement.  So landlords and tenants need to have evidence which is reliable, or they will fail to convince the adjudicator of their case.  The adjudicator must decide any dispute within 20 working days of receiving the referral.

After a decision is notified, both parties will have 10 working days to request a review.  For a review to take place, the parties (or one of them) would need to be able to establish that the adjudicator had made a factual error, for example by overlooking relevant evidence, or had failed to follow the statutory procedure correctly.

Sanctions for failure to comply

If a deposit is not paid to an approved scheme within the required timescale, or if the landlord doesn’t provide the tenant, again within the statutory timescale, with the required details about where his deposit is being held, the tenant may apply to the court for sanctions against the landlord.

If the sheriff is satisfied that you the landlord has failed as above, then he must require the landlord to make a payment to the tenant and this payment can be up to three times the amount of the deposit.  In addition he may order the landlord to submit the deposit to an approved scheme.  These sanctions could therefore cost a negligent landlord dear.  It seems to me that there’s an incentive there for tenants to take a keen interest in how their deposit has been handled (and we should find many more landlords applying for local authority registration)

It’s worth stating again that these obligations fall on landlords and not agents, so if you’re a landlord using an agent to manage your properties you will need to ensure that the agent is doing all of this correctly on your behalf, ideally by having the point covered in your service agreement so that you have redress if there’s a problem.

I hope that wasn’t too dry a read, and I’ll be happy to answer any questions.  Just get in touch!

John Gell

Director, Simply Let

9 March 2011

Renting and Insurance

Renting and Insurance

While insurance of a let property itself is fairly straightforward (the landlord has a responsibility to insure the building to the full replacement value, and would be pretty short-sighted not to want to do so in any case) insurance of the contents often causes some confusion. 

The landlord’s buildings insurance will cover damage to the building structure.  A good landlord-specific insurance will extend to cover the costs of temporarily re-housing the tenant in the event of the property becoming uninhabitable as a result of fire, flood or similar, although insurers are increasingly becoming reluctant to provide such cover in the case of flooding.  Tenancy Agreements should have a clause enabling the tenancy to be terminated early in the absence of such cover if the property becomes uninhabitable as a result of and Act of God (Force Majeure).  This will enable the parties to abandon the tenancy if circumstances make that the only realistic option.

The landlord’s insurance should also cover damage to his own contents within the property – carpets, white goods, etc., and it would be appropriate to claim against that cover in the event of, for instance, damage caused by a plumbing leak.   But what about damage caused by the tenant?  Most tenant damage is the result of an accident – the inevitable spilled wine, for example, rather than deliberate, but whether deliberate or accidental it is not appropriate that the landlord makes a claim and perhaps prejudices future premium rates, when he is not himself at fault.  For that reason Simply Let’s standard tenancy agreement requires tenants to maintain contents insurance cover against damage they might cause to the landlord’s property. 

What then about tenants’ own property?   While it’s clearly sensible for tenants to have insurance in place against damage caused them to their own belongings, and while Simply Let recommends tenants to do so, landlords and agents can’t insist on that.  Indeed there has recently been a case where a well known tenant referencing company and insurance provider has been taken to task by the Office of Fair Trading for encouraging letting agents to make such cover mandatory on tenants.  Most contents insurance will also cover loss of items outside the property – i-pod, phone or even bicycle, so it’s well worth considering. 

Whatever cover you are looking for, you do need to check the small print carefully to ensure it's what you really need or, if in doubt, arrange cover through a BIBA approved broker.  Although not financial advisers, Simply Let are authorised introducers for Homelet insurance for both landlords and tenants, and we will be pleased to assist you with any enquiries regarding that.

Letting Agency Fees

Remember that tempting £10.99 flight to Paris which actually cost you £109?  Are you sure your letting agent isn’t operating a similar pricing strategy?

Most landlords searching for a letting agent focus on the agent’s commission rate. At Simply Let we charge 12.5%. Some are more expensive and some will charge less, but we believe that 12.5% is about right for what we do and the expertise and professionalism we bring to the task.

However you need to look behind that headline rate to discover what other charges you might be faced with.  We’ve heard of agents making exorbitant charges to their clients each time a new tenant moves in and even of agents charging their client each time the contractual tenancy period ends even although the same tenant is staying put (Foxtons-Case).  We hear of letting agents charging prospective tenants dear for referencing and even for checking them in to their new home.  Such charges could well act as a disincentive to tenants and so prolong the time taken to secure a new tenancy.  Simply Let is transparent about the fees and costs it charges to both landlords and tenants, and that information is available on request.

Pre-tenancy charges to tenants are illegal in terms of the Housing Acts although many agents (Simply Let included) take the view that a charge for referencing applicants is not unreasonable.  However, we believe that such a charge must relate to the actual costs involved instead of being as high as prospective tenants will bear.

At Simply Let we take the view that we owe a duty of care to the landlord (who is or client) and we treat our client’s property just as if it were our own, seeking responsible tenants who are likely to stay, and so minimising void periods which are the most expensive times for our client.  That is our duty as professionals.  Some agents must surely relish changes of tenancy, seeing them as an opportunity to impose charges both on their landlord client and on applicant tenants. 

So landlords, where does your agent’s loyalty really lie and how much are those attractive commission rates really costing you?  Are those charges to tenants perhaps acting against your own interests?  Tenants, why not challenge that expensive referencing or “administration” fee or even ask the agent how it squares with the statutory prohibition of pre-tenancy charges?

J R Gell MRICS

Director

Simply Let Ltd.

Tenancy Deposit Scheme

Tenancy Deposits – The New Arrangements in Scotland

Tenancy Deposit protection has been in force in England and Wales for several years and now Scotland is to follow suit with its own scheme.  Whether you welcome this or shudder at even more government involvement probably depends on your perspective and experience.  All we can say is that at Simply Let we have hardly ever had a deposit retention disputed.  It seems to us that, with a detailed inventory agreed by both parties at the commencement of a tenancy, then through common sense and honest discussion over any issues arising at the end disputes can be avoided, and it makes me a little sad to see honest human interaction being replaced by bureaucratic process.  Be that as it may, we are to have a scheme in Scotland.

Although the enabling Regulations were enacted some time ago, the Tenancy Deposit Scheme will come into effect only when one or more providers are approved by the Government. This is widely expected to happen early this summer.

Currently there are two contenders being considered to run the scheme; SafeDeposits Scotland and the Letting Protection Service Scotland, and it is widely anticipated that both will receive Government approval.

 SafeDeposits Scotland describes itself as an innovative partnership between landlords, agents and tenants and comprises the following bodies.

• Scottish Association of Landlords (SAL)
• National Federation of Property Professionals (NFOPP)
• Royal Institution of Chartered Surveyors (RICS)
• The Scottish Council for Voluntary Organisations (SCVO)
• Shelter Scotland
• National Union of Students Scotland (NUS Scotland)
• The Dispute Service (TDS)

It is -

• a not-for-profit limited company registered in Scotland.
• supported by the Dispute Service which is already operating in England.
• based in Scotland with an office in Glasgow and Edinburgh (We believe that they are looking to have a presence in Inverness also).

Full details are on the SafeDeposits Scotland website at http://www.safedepositsscotland.com

Letting Protection Service Scotland (LPS)

• a subsidiary of Computershare Investor Services plc, a company registered in England and Wales.
• based in Bristol.
• already operating one of the deposit schemes in England and Wales.

Full details are on the Letting Protection Scotland website at http://www.lettingprotectionscotland.com/

So how will the schemes work?

• Both will be completely free to use
• Both will offer online payment of deposits as well as by cheque.
• Both will offer a dispute resolution service with independent adjudicators.

When must deposits be protected?

The scheme will come into effect when the first provider is approved.  This is expected to be about May this year, but some time slippage is quite possible.  When deposits must be lodged will depend on whether the tenancy is in existence when the first scheme becomes operational or whether it commences after that date.

All deposits received after a scheme first becomes operational must be submitted to an approved scheme, and information provided to tenants within 30 working days of the start of the tenancy.

Landlords already holding deposits before a scheme becomes operational must also lodge those deposits but will be allowed up to nine months to submit them to an approved scheme, according to the status of the tenancy.

What happens if a landlord uses a letting agent?

The duties in relation to tenancy deposits apply to landlords, irrespective of whether an agent might be taking and currently holding the deposit.  However, although the obligation falls on the landlord, the agent can lodge the deposit on the landlord’s behalf.

It is important to realise that any sanctions imposed as a result of non-compliance with the regulations would apply to the landlord and not to the agent and, since the penalty for non-compliance can be up to three times the amount of the deposit, landlords using an agent should satisfy themselves that the agent is acting in accordance with the Regulations.

In future blogs, I'll summarise how the lodgement and reclaim processes are to work and run through what happens if there is disagreement between landlord and tenant.    

J R Gell

Director, Simply Let.