Upad attended this year’s Legislation Live 2017 at the Barbican Centre, hosted by Rightmove, to help agents stay on top of legal compliance with a series of talks from industry experts. Here’s what happened:
Setting the scene for tomorrow’s market
Sam Mitchell, Head of Lettings at Rightmove, discussed his market analysis for this year. He started by highlighting that the volume of legislation in recent years has caused a lot of uncertainty in the property market: with the 3% stamp duty, Section 24, EPC minimum standards, scrapping of wear and tear allowance, tighter lending criteria, Right to Rent and the tenant fees ban.
In a nutshell, the market is not looking as grim as we would be led to believe. New listings are at the highest level since 2015/2016, largely pushed by the 3% stamp duty deadline last year. Available property levels are showing that properties are taking a little longer to let but tenant demand is still strong- he advises landlords to be aware of their competition and set their rent right to minimise let times.
During question time, members of the audience asked Sam why he thought the government were attacking landlords. His opinion was that when it comes to rogue landlords or those that don’t abide by the law, it’s very hard for the government to tax those people- perhaps explaining why a tax change for all landlords has been brought in. He discussed that there has been a lot of talk in recent years about how to keep first time buyers, and those looking to get onto the housing ladder, happy and the government’s response has been to pull landlords out of the market to free up supply for FTB’s.
Is compliance the new black?
Mark Hayward, Chief Executive of NAEA Propertymark, discussed the property market for sales. He wondered if the industry was forgetting about Consumer Protection Regulations, particularly related to estate agents disclosing material defects to potential buyers. He had some humorous recollections of agencies dealing with sellers who did not want to disclose certain issues that buyers should know about- such as a property situated next to a traveller’s site. He said it was essential that estate agents disclose material defects and need-to-know information that may affect a sale to buyers as soon as possible to remain compliant.
Mark also discussed the Green Deal, a government initiative which allows tenants to request reasonable adjustments to a property to improve the energy efficiency. Whilst this is a good incentive to improve properties, he advised that payments are attached to the property, not the person, and as such future tenants and buyers must be made aware that they will be paying for this.
Mark also discussed that the agency industry needs to do more to identify money laundering, with new legislation being brought in to ensure agencies are doing as much as they can to identify and report concerns.
Draft Tenant Fees Bill
David Cox, Chief Executive of ARLA Propertymark, discussed the hot topic of the tenant fees ban- ARLA have been working tirelessly since the announcement to try and ensure fairness for both tenants and the lettings industry.
The draft tenant fees bill, which we covered here, has shed light on the implementation and proposes the following:
Total ban: Agents and landlords cannot charge what is deemed a ‘prohibited payment’, which means no fees can be charged for arranging the grant of a tenancy, the renewal or the continuance of a tenancy. It was also mean a total ban on charging any fees for contract arrangement, referencing or inventories. The government have also clarified that a higher rent cannot be charged in month 1 of a tenancy, to cover any costs. The ban includes not just letting agents and landlords but also third parties, such a referencing company directly charging a tenant.
Permitted payments: the only payments that can be legally charged will be the rent (!), tenancy deposit (capped at 6 weeks rent, even if a pet is accepted), holding deposit (capped at 1 week’s rent) and tenant default fees. The holding deposit can only be held for a maximum of 15 days and at the end of that period the contract must be signed or the deposit returned. If the landlord or agent pulls out the holding deposit must be returned. Once a tenant has been successful and signed a contract, the holding deposit must be returned to them or deducted from the first month’s rent or deposit. Circumstances when the holding deposit can be retained when a tenancy has not been agreed include a tenant pulling out, failing referencing for giving false or misleading information, failing a Right to Rent check or ‘dragging their feet’. The latter is also applied to agents and landlords, which is why the 15 day rule for holding deposits has been applied. The 15 day period can be extended by agreement of both parties (i.e. the tenant isn’t moving in for a few months).
David discussed how it’s important to look at what happened in Scotland as a result of the fees ban. He said that after implementation, it effectively became a free-for-all with tenants applying for multiple properties and deciding which to move to later, and the same with agents accepting multiple tenants and seeing who passed referencing and signed contracts the quickest.
Trading Standards will enforce the fees ban and penalties will be to return the prohibited payments plus up to a £5,000 fine for a first offence and £30,000 for further offences within 5 years. It’s yet to be announced who will be the lead enforcement authority but it will enable enforcement fees to be covered, offer redress, issue guidance and force others to prosecute.
David advised letting agents and landlords to prepare for the fees ban to be implemented in October 2018, but that it may be introduced in April 2019. He advised preparing much earlier, particularly for letting agents, as this revenue stream will be wiped out.
During question time, David highlighted that 12 months after the ban in Scotland, rents increased by 4.2% whilst rents in England reduced by 0.7%. It’s not clear whether this can be directly attributed to the fee ban, as it may be due to changes in the market. He also discussed how the impact was felt less in Scotland for letting agents and landlords as average fees were around £50-60, much less than the average of £202 for England.
Get ready for GDPR (General Data Protection Regulation)
Matthew Holman, EMW of LLP Law, discussed the biggest change to data protection law in 20 years, which is in force from the 25th of May 2018. This change will mainly effect companies but individual landlords should be aware in order to be compliant.
Potential fines for breaches have significantly increased, with serious breaches capped at 20 million euros or 4% worldwide turnover. He also discussed the very important issue of consent in data protection. Consent must be freely given by a consumer and they should know what information they’re being asked for. Companies will also now have the burden of proof when it comes to proving that a customer has given consent and may also be required to name all third parties that they would share information with.
Consumers will now, under Article 17, be able to ask for their personal data to be deleted by companies under the Right to be Forgotten. Any unnecessary data must be deleted if requested, this would not apply to data required to be kept such as Right to Rent ID checks.
In question time, Matthew explained that tenant applicant data can be kept but you must have consent and will need this before the 25th of May 2018. Consent given before this date would not be compliant with GDPR. He also warned that agencies need to be careful about contacting landlords for marketing purposes as consent must be given to do so.
Thanks to Rightmove and all the speakers- a very informative and enjoyable day of talks!