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Landlord & Tenant
Tenancy Deposit Schemes HMO Licensing Business Tenancy Reforms Quarter Days
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Home Information Packs Stamp Duty Land Tax
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Time limits for bringing legal actions Costs in Small Claims Cases
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Tenancy Deposit Schemes
The Housing Act 2004 (sections 212-215) introduced provisions for Tenancy Deposit Schemes to be operated in England and Wales. These schemes are intended to protect security deposits taken from tenants and provide a fairer system for settling disputes about the return of a deposit at the end of a tenancy.
Since 6th April 2007, it has been compulsory for any private landlord of an assured shorthold tenancy, created on or after this date, that receives a security deposit, to protect that deposit via an authorised Tenancy Deposit Scheme operated by one of the scheme administrators authorised by the Government. The Tenancy Deposit Scheme applies only to security deposits and not to any payments of rent which are made in advance. TDS will apply to any new tenancy in England and Wales created after 6th April 2007 or to any previous tenancy renewed by the entering into of a new written agreement after 6th April. There are three schemes available to both private landlords and letting agents and I set out below brief details of each scheme.
The Deposit Protection Scheme
The Deposit Protection Scheme is a ‘custodial’ type scheme managed by Computershare Investor Services plc. Under this scheme, the tenant pays the deposit to the landlord or agent, who then pays it into the scheme. At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties. If there is a dispute, the scheme will hold the amount until the dispute is resolved with through a resolution service or by a county court. This scheme is free to use and open to all landlords and letting agents. The service is funded entirely from the interest accrued on the deposits held by the company. Any surplus interest held in the scheme will be offered to the party entitled to it. For more information, visit www.depositprotection.co.ukor call 0870 707 1707.
Tenancy Deposit Solutions Limited This is an insurance-based tenancy deposit protection scheme which enables landlords, either directly or through agents, to hold deposits. Under this type of scheme the landlord retains the deposit received from the tenant. There is an annual fee payable by the landlord to become a member of this scheme and the landlord must pay an insurance premium for each deposit taken from a tenant. At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit. If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved. If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it. For more information, visit www.mydeposits.co.uk
The Tenancy Deposit Scheme
The scheme which is run by the Dispute Service is also an insurance-based deposit protection and dispute resolution scheme run to provide dispute resolution and complaints handling for the lettings market. The scheme enables landlords and letting agents to keep hold of the deposits. There is an annual fee payable per property for landlords and a one off annual fee for letting agents. For more information, visit www.thedisputeservice.co.uk or call 0845 226 7837.
The landlord or letting agent can decide which scheme to use without consulting the tenant. However, within 14 days of receipt of the deposit, the landlord or letting agent must provide the tenant with certain information, which includes:
- the landlord or agent's contact details;
- which scheme they are using and the contact details for the scheme;
- information about the purpose of a tenancy deposit;
- how the tenant can apply to get the deposit back at the end of the tenancy;
- what the tenant can do if there is a dispute about the deposit.
Failure to operate a Tenancy Deposit Scheme could have serious consequences for the landlord. If the landlord or agent has not protected the deposit, the tenant can apply to the county court for an order that the landlord or agent should pay the deposit back to him/her, or to protect it in one of the Tenancy Deposit Schemes. The court can also order the landlord or agent to pay the tenant compensation equivalent to three times the value of the deposit paid. The landlord or agent must do all of these things within 14 days of the court order. In addition to the above, until the landlord or agent has protected the deposit, they will be prevented from using the section 21 notice procedure to recover possession of the property.
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Landlords of HMOs which require to be licensed must apply for registration with the local authority. There will be a license fee payable and the amount of this differs with each council. A HMO license lasts for five years.
- the property is (or can be made) reasonably suitable for the maximum number of households or people;
- the property contains the required number of bathrooms, toilets, washbasins, cooking and laundry facilities; and
- the property is managed by someone who is competent and fit to manage it.
The council will carry out checks to make sure that the person applying for the HMO licence is a 'fit and proper' person. In deciding whether someone is fit and proper the council will take into account:
- any previous convictions relating to violence, sexual offences, drugs and fraud
- whether the proposed licence holder has broken any laws relating to housing or landlord and tenant issues
- whether the person has been found guilty of unlawful discrimination
- whether the person has previously managed HMOs that have broken any approved code of practice.
Landlords who operate an HMO without a licence will be committing an offence and can be fined up to £5,000. If a landlord is successfully prosecuted, the tenants of the unlicensed HMO will be entitled to have up to 12 months of their rent repaid by the landlord. As a further deterant any notice to quit served on a tenant by a landlord of an unlicensed HMO will not be recognised.
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Business Tenancy Reforms
Key provisions and procedures under the Landlord and Tenant Act 1954 (‘the Act’) which regulates the security and renewal of business tenancies, have been amended by the introduction of the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (‘the Order’). These changes came into effect on 1st June 2004 and the main points are set out below.
Contracting Out It is no longer necessary to apply to a court for authorisation to exclude the security of tenure provisions of the Act. The new procedure requires the landlord to serve a ‘warning’ notice on the prospective tenant at least 14 days before the lease is executed, warning that there will be no security of tenure. The notice directs the tenant to seek independent legal advice before accepting the tenancy. In response to the notice and before the new tenancy is entered into the tenant must make a simple declaration that the landlord’s warning notice has been received and is accepted. If the warning notice is not given by the landlord at least 14 clear days before the tenancy commences, the tenant will need to make a statutory declaration (as opposed to a simple declaration). This will involve the tenant attending before a Solicitor/Commissioner for Oaths to have the declaration made before him/her.
Counter-Notice Tenants are no longer required to serve a counter-notice within a prescribed time in response to a Section 25 Notice served by their landlord. This was often a trap for tenants in that they sometimes missed the deadline and thereby lost the right to claim a new tenancy.
Applications to the Court for a New Tenancy Under the new scheme either the landlord or the tenant can now apply to the Court for lease renewal proceedings to begin. Landlords can also apply for an order that there should be no new tenancy granted to the tenancy. A landlord can make an application to the court as soon as he/she has served his section 25 notice of termination, or as soon as the tenant has served his section 26 request for a new tenancy. The Order has abolished the time limits in the Act for making the application to the Court. Instead the Order provides that the date specified in the landlord’s section 25 notice or in the tenant’s section 26 request is to be the deadline for the application to the Court. The Order allows for this deadline to be extended by agreement between the parties provided that agreement is made before the expiry of the original time limit.
Interim Rent The reforms allow tenants as well as landlords to apply to the court for an interim rent whilst the terms of a new tenancy are settled. Tenants may wish to do this where their rent is higher than the current market rent as the Court has power to order an interim rent that is lower than the existing rent. An interim rent is now payable from the earliest date that could have been inserted in the landlord’s section 25 notice or the tenant’s section 26 request. This applies regardless of the actual date inserted in the notice which means the Court can back-date interim rents.
Lease Term The maximum term a tenant may secure for a new lease has been increased from 14 years to 15 years.
Compensation Following the reforms a tenant may now claim compensation from his landlord where the landlord has obtained an order refusing the grant of a new tenancy but then does not (or cannot) proceed with the plans he relied on as his grounds to oppose a new tenancy. For this reason tenants may well be advised to keep an eye on their former business premises to see whether the landlord has carried out the plans relied on to resist the lease renewal. If the landlord has not then a claim for compensation may be in order.
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Quarter Days
Most commercial lease (and some residential ones) are drafted so that the yearly rent is payable in four equal instalments on four specified dates in the year. Collectively these dates are known as 'Quarter Days' and there are two distinctive sets of Quarter Days
- Usual Quarter Days
- Modern Quarter Days
The 'usual quarter days' are most commonly used, having been around the longest of the two. The usual quarter days are derive from the Christian calendar and are as follows:
25 March 25th March to 23rd June 91 days
(Lady Day)
24 June 24th June to 28th September 97 days
(Midsummer Day)
29 September 29th September to 24th December 87 days (Michaelmas)
25 December 25th December to 24th March 90 days
(Christmas) (leap year - 91)
More recently a new set of quarter days has emerged which divides the year into four periods of similar lengths. These are generally known as the 'modern quarter days’ and are becoming increasingly popular with the draftsman of today. The modern quarter days are:
1 January 1st January to 31st March 90 days (leap year - 91)
1 April 1st April to 30th June 91 days
1 July 1st July to 30th September 92 days
1 October 1st October to 31st December 92 days
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Home Information Packs
The Housing Act 2004 (sections 148-178) introduced a legal obligation on home-owners or their selling agents to have a Home Information Pack (HIP) available when marketing homes for sale.
Since 10th September 2007, any owner wishing to sell their home in England and Wales, which has three or more bedrooms (and which does not fall within one of the exceptions) must provide a HIP with their property. Eventually HIPs will be required for all smaller properties as well.
The Pack is intended to make home buying and selling faster and easier to understand.
The HIP includes an Energy Performance Certificate (EPC) which is commissioned from an accredited Energy Assessor. The Assessor will visit the property by appointment to collect the information needed to prepare the EPC. The Certificate contains information on the date and type of construction of the property, its location and relevant installations such as its heating system and insulation. It provides a rating for the property from A to G - where A is very efficient and G is very inefficient. The EPC also contains expert advice to homeowners on how to cut carbon emissions and fuel bills to improve the energy efficiency of the property.
Also included in the Pack are documents such as evidence of the seller’s title, a sale statement, searches and where appropriate leasehold or commonhold documents.
Not all sales require a Home Information Pack to be provided. There are some exceptions:
- Non-residential properties
- Mixed use properties (eg. shop with flat above)
- Properties where there is no marketing (eg. sale to a member of the family)
- Properties which are not being sold with complete vacant possession
- Properties which are to be demolished
- Holiday accommodation
- Right to Buy properties
- A portfolio of properties New homes (built under Part L of the Building Regulations 2006)
For further information visit www.homeinformationpacks.gov.uk
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Stamp Duty Land Tax
Stamp Duty Land Tax a tax payable on the purchase or lease of property or land within the UK. The tax is payable by the buyer/tenant to Her Majesty’s Revenue and Customs (HMRC).
When you buy or lease property or land, you are required to fill in a form called Land Transaction Return (SDLT1) and send it to HMRC within 30 days of the effective date of the transaction. This is usually the completion date. If this Return and/or payment isn’t sent to HMRC within the 30-day period certain penalties and interest will be charged.
Usually the conveyancer/solicitor handling the transaction will complete the Return for you as part of the service, requiring you only to check the details and sign the form. As the buyer or tenant you are responsible for the information submitted on the form and for any penalty for late delivery.
Once the return has been processed and the tax has been paid HMRC will issue you with a 'Land Transaction Return Certificate' (SDLT5). Without this certificate you will not be able to register the purchase or lease at the Land Registry.
SDLT is calculated and charged as a percentage of the amount paid by the buyer/tenant (or the cash value of the transfer if payment is not in the form of cash). The rates are as follows:
Residential property £0 - £175,000 nil £175,001 - £250,000 1% £250,001 - £500,000 3% £500,001 + 4%
Non-residential property £0 - £150,000 nil £150,001 - £250,000 1% £250,001 - £500,000 3% £500,001 + 4%
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Time limits for bringing legal actions
Time limits (known as limitation periods) exist in respect of each type of cause of action. A party must commence legal proceedings within the appropriate limitation period or face losing the right to sue.
There are different limitation periods for different types of cause of action imposed primarily by the Limitation Act 1980. The key limitation periods are as follows:
Actions for Breach of Contract Within 6 years of the date of the breach in respect of an ordinary contract Within 12 years of the date of the breach in respect of a contract executed as a deed
Actions to recover a debt Within 6 years of the date that the debt was incurred or from the date of any subsequent part payment made by the debtor or from the date of his/her acknowledgement of the debt. An acknowledgment by the debtor must be in writing and signed either by the debtor or his/her agent.
Actions in Tort (negligence, nuisance, breach of duty) Within 6 years of the date that the loss was first sustained or, where facts are not known at that date, 3 years from the date the claimant becomes aware (or ought to have become aware) that he/she has suffered loss, whichever is later. This is subject to a ‘long-stop’ date of 15 years from when damage was sustained.
Actions for Personal Injuries arising from a Tort (negligence, nuisance etc) Within 3 years of the cause of action, or from the date the injured person became aware that the injury was significant. If the claimant dies, a further 3 years from the date of his/her death or from the date his/her personal representatives become aware of the injury.
Product Liability Actions Within 10 years of the date of the supply of the product to the consumer.
Actions for Breach of Trust (property held on trust by a trustee) Within 6 years. However, there is no limit if there has been a fraud by the trustee, or if the action is for recovery of trust property or to recover the proceeds of sale in respect of trust property.
Actions for the recovery of land Within 10 years of the date of the cause of action in respect of registered land and within 12 years in respect of unregistered land.
Action to enforce a Judgment &