Property Focus | Housing for all

The last decade or so has seen an unprecedented growth in the private rented sector (PRS). There are a variety of reasons for the shift in the balance from a predominantly home owning population to one that may chiefly rent their accommodation in future.

The PRS has seen a 47.9 per cent increase over the last five years according to Jones Lang Lasalle's (JLL) latest research on home ownership. Since 2006 it has increased to 8.2 per cent per annum. If this trend continues (and there is no plausible reason to believe it will not) 1.7m more private rented homes will be required by 2016.

It would not surprise anyone to say that this is a reversal of the situation that existed in the beginning of the twentieth century when most homes were rented immediately following the First World War. This trend declined over a major part of the twentieth century when more people were able to purchase their own houses either outright or with the aid of a mortgage or loan. The rather bureaucratic nature of private renting also contributed to its rapid decline. Rent controls and alternative investment opportunities for landlords painted a rather negative image of PRS. Political priorities also favoured their decrease.

However, a range of measures introduced by the government in the 1980s, particularly the Housing Act 1988 helped revive the sector with the deregulation of rents for new lettings. An exponential increase in the immigrant moving population into the UK has also greatly aided the growth of this aspect of the housing market.

The economic downturn of 2007/2008 has contributed to the sharp rise in the number of people renting privately. As opposed to the downturn of the 1990s the present stagnation appears to have made a near permanent change to the UK housing landscape

PRS is a highly responsive tenure and does not restrict access to any particular group, providing homes for a wide range of households from different social and economic backgrounds, catering to the needs of the wealthiest as well as the most vulnerable. In the light of the current credit constraints, unstable market conditions, and government cutbacks on social housing, PRS provides an ideal bridge between owner-occupation and affordable housing provision.

If the UK is presenting a different picture in the housing scenario, then the time is ripe for property professionals to change their focus of service towards this sector.

PRS is guided by relevant laws and regulations which while exhibiting similarities with the landlord- tenant law also has its own peculiarities.

There are three types of tenancies in the PRS.

These are the assured shorthold tenancy (AST), assured tenancy (AT) and regulated tenancy (RT). RT provides the most protection against eviction by the landlord and AST is the least secure of the three. However, all three have certain basic legal entitlements: a) the tenant is free to live in the property without interference from entry by others including the landlord unless through prior appointment for a legitimate reason such as for repairs. b) a right to live in the property unless the landlord obtains a court order for eviction based on valid grounds and c) a right to have the landlord's name and address.

Tenancy agreements:

All tenancies are legal agreements between the landlord and tenant and the final decision on setting up the tenancy rests between the parties. While it is not a legal requirement to have it in writing, it is worth stressing the value of a written agreement with the landlords. The rights and responsibilities of the parties are embodied in the agreement. Where landlords use their own agreement, onus is on the tenant to ensure that there are unusual hostile clauses. As with all tenancy agreements the agreement should be signed and any amendments initialled by the parties concerned before the tenancy begins. As with all legal documents each party retains a copy of the agreement. The PRS access scheme provides monetary assistance to people in financial difficulties and helps the process of creating an agreement. It is advisable that the scheme also retains a copy of the agreement. If tenants receive council tax benefit they will be responsible for paying the council tax.

It is recommended that break clauses be included in the agreement enabling tenants to end the tenancy before the end of a fixed term tenancy by giving a month's notice. It is common to have a break clause at six months in a one year tenancy agreement. This ensures that a) the landlord does not try to claim rent for the whole term if the tenant leaves early and b) tenant can move if circumstances change. In longer tenancies the annual break clause should coincide with the end of term of rent payments.

Joint tenancies are jointly and severally binding on each tenant so that if one tenant defaults in payment other tenants are responsible for making the payment. Therefore unless the tenants are part of the same family unit it is advisable to have separate tenancies. Where joint tenants are sharing facilities drawing up a sharer's charter will lessen the chances of conflicts and disagreements.

Landlords and tenants have rights and responsibilities which are automatically implied in the tenancy even if it is not explicitly mentioned in the tenancy agreement. Landlords who do not abide by the tenants' legal rights may be guilty of harassment or illegal eviction.

Rights and responsibilities

As mentioned earlier, rights of the tenants are dependent on the type of tenancy they hold. All three have some rights in common: a legal right to live in the accommodation for a period of time under either a fixed tenancy which can run for six to 12 months or on a periodic tenancy on a rolling weekly or monthly basis; obtain some basic information about the tenancy such as the start date, amount of rent and the interval between payments, how and when the rent may be changed and determining the length of a fixed term tenancy. The landlord is under a legal obligation to provide rent books where rent is payable on a weekly basis; landlord must provide repairs when required to the roof, guttering, walls and windows and doors. It is important to remember that landlords are only responsible for the exterior and common parts of the premises. Tenants are responsible for maintaining the property to the required level and paying the rent on a regular basis and performing all other covenants agreed in the tenancy agreement.

Landlords must ensure good sanitation facilities and must also provide for the following important safety measures:

Safety of the gas equipment by making sure it is properly installed and maintained by a gas safe registered engineer and checked at regular intervals. The tenant must be given a copy of the safety record either before moving into the premises or within 28 days of the check.

The landlord must also secure safety of all electrical appliances and follow fire safety regulations by providing fire escape routes. All furniture and furnishings must be fire resistant. A good water supply is vital for cold as well as hot water.

The tenants are well within their rights to take appropriate legal action if landlords fail to provide these basic amenities.

All tenancies can be ended by mutual agreement between the parties by surrender or by service of a month's notice by the tenant in writing or longer if rent is paid less frequently. The notice must end on the first or last day of the period of a tenancy. The tenancy ends with the end of the notice period. The landlord has a right of eviction for which he must serve a notice in writing to the tenant and if he has a valid reason the tenant can be evicted in two weeks. In the absence of valid reasons the time is two calendar months. Evictions are usually made through a possession order by the court and the court is responsible for ensuring that the grounds are reasonable before making the order. Illegal evictions are a criminal offence and the tenants are within their rights to apply to the court to regain entry into the property.

With the higher level of protection afforded by the AT and RT, existing tenants can pass on their tenancy to their spouses, partners or civil partners on the death of the tenant, or if the rights are included in the tenancy agreement or yet if the landlord agrees to it. This is subject to the proviso that the partner or spouse is living in the property at the time of the death or at the time of passing if through the other two reasons. ATs and RTs can also argue any increase in rents and this will not be the subject of eviction as with ASTs.

Going green

The Energy Act 2011 enables the government to regulate energy consumption and helps to ensure the take up of cost effective energy efficiency improvements in the PRS. This is known as The Green Deal. This is mutually beneficial to the landlord and tenant as landlords will not be required to pay for them upfront as in the previous regime as tenants will repay the cost of the measures through their energy bill savings while enjoying a more energy efficient home. From April 2016 domestic landlords cannot unreasonably refuse requests from their tenants for the consent to energy efficiency improvements where financial support is available through The Green Deal. With a high prevalence of poorly insulated energy inefficient houses under the PRS this step will be great benefit to the sector. There will be a civil penalty of £5,000 for non-compliance with meeting the minimum standards for domestic properties levelled against the landlords.

Property professionals are under a legal obligation to let prospective buyers know about The Green Deal. This is done by disclosing the deal to the buyers and obtaining an acknowledgement from them to confirm their liability to The Green Deal. Green deals are disclosed through the energy performance certificates.

With PRS increasingly becoming a hub of the UK housing market property professionals are under increasing pressure to familiarise themselves with all the nuances of the PRS and the earlier they adapt to the changing backdrop the easier it will be for them to survive the turmoil of the rapidly declining home ownership market.