More and more people are looking to purchase buy-to-let properties as an investment so we have put together a brief guide to a landlord’s obligations and the consequences for failing to comply.
Introduction to the Law
Tenancy Deposit Schemes (TDSs) are a legal requirement for all residential assured shorthold tenancies (ASTs) created on or after 6 April 2007. Additional requirements for deposits held in TDSs have since been introduced as well as other obligations, some of which are listed below.
There are different types of Deposit Schemes which give rise to various responsibilities to be followed by the Landlord along with consequences for falling to comply.
Types of Tenancy Deposit Schemes (TDSs)
There are two types of TDS’s that the Landlord can choose from:
- Custodial TDS – Where the deposit will be held by the TDS provider until the end of the tenancy and, assuming no dispute has arisen, the deposit is returned the tenant.
- Insurance TDS – The deposit is retained by the Landlord, however, the Landlord must secure it by paying a fee and an insurance premium to protect the funds. If the Landlord fails to return the deposit at the end of the tenancy, the TDS provider will use the insurance premiums to pay the tenant.
Landlords Obligations
- Provide TDS information within 30 days – It is required that the Landlord provide the Tenant with the prescribed information regarding the chosen TDS within 30 days from the date the deposit has been paid. This information must also be provided to ‘any relevant person’ within the same time frame. This can be a parent or other person who provided the Tenant with the deposit funds.
- Provide ‘How to Rent’ Guide – The Landlord must provide the Tenant with the government guide on how to rent. This sets out the obligations required by both parties (please see below a link to this guide).
- Provide Gas Safety Certificate – If there is gas installation, the Landlord should provide the tenant with the Gas Safety Certificate for the property at the beginning of the tenancy and with 28 days of each annual check.
- Provide Energy Performance Certificate (EPC) – The landlord must provide a copy of the property EPC. Tenancies entered into after 1st April 2018 must have an EPR rating of at least an ‘E’.
- No more than 5 weeks rent – The introduction of the Tenant Fees Act 2019 put a cap on the value of a tenancy deposit. A landlord must not request more than 5 weeks rent as a tenancy deposit when the annual rent is less than £50,000.
- Check immigration status of Tenant(s) – A Landlord is prohibited from granting an AST to a person who is not legally allowed to remain in the UK. The Landlord must make reasonable enquiries to be satisfied that their prospective tenants have the right to remain in the UK i.e. ‘the right to rent’.
Government ‘How to Rent’ Guide – https://www.gov.uk/government/publications/how-to-rent/how-to-rent-the-checklist-for-renting-in-england#assured-shorthold-tenancies
Consequences
Failure to comply with the above mentioned obligation can lead to a number of consequences as listed below:
- If a landlord fails to comply with the TDS requirements, the tenant can apply to the Courts to order their landlord to repay them a sum no less than the value of the deposit but no more than three times the value of the deposit. This sum must be paid within 14 days of the Court order being made.
The tenant may also apply the Courts to order their Landlord to pay the deposit into the designated TDS also within 14 days of the Court order being made.
The penalties for non-compliance apply if the landlord protects the deposit or provides the prescribed information late (after the 30 day deadline).
- If the deposit is not protected in an authorised TDS within 30 days, the landlord can only serve a section 21 notice once action has been taken to rectify the situation by agreed repayment of the deposit (whether in full or with agreed deductions) or following determination, settlement or withdrawal of any claim. This can result in the Landlord finding themselves with no deposit protection for damage or non-payment of rent.
- If a Landlord grants an AST to any persons who are not legally allowed to remain in the UK (as outlined above), they can be liable for a penalty fine up to the value of £3,000.
If you are purchasing a buy-to-let property, we can assist with checking the above has been complied with and provide further information on the consequences if they have not. Contact a member of our Commercial Property team on:
Exeter 01392 285000 Cullompton 01884 33818 Newton Abbot 01626 330127