We round-up the latest changes to rules and regulations that impact on landlords and the Private Rented Sector (PRS). In this round-up we look at selective licensing schemes, electrical safety standards, tenant fees and changes to LIBOR.
Recommended pause on additional or selective licensing Schemes
The Government has issued guidance to local authorities to pause all additional and selective licensing schemes not yet in force. Acknowledging that coronavirus may make it harder for local authorities to carry out their usual work, the guidance states that schemes due to be introduced should be paused completely, consultation periods should be extended and that schemes should not be started if they conflict with Government advice related to the Covid-19 outbreak.
More than 60 councils in England operate ‘additional’ or ‘selective’ schemes. The former adds extra stipulations to the mandatory HMO rules, while the latter can apply to every landlord within the area.
Newcastle City Council was one such council that postponed the introduced of additional or selective licensing. This was due to come in on April 6 but has been postponed until July 6. You can view the Government guidelines here.
New Electrical Safety Standards guidance
The Government issued guidance at the start of June on electrical standards in the PRS, including guidance specifically aimed at landlords.
Under the guidance, landlords must ensure:
- Electrical safety standards are met when the property is occupied during a tenancy
- Every fixed electrical installation at the property is inspected and tested at least every five years by a qualified person
- The first inspection and testing are carried out before new tenancies commence on or after 1 July 2020 and by 1 April 2021 for existing tenancies
Landlords have to provide a copy of the electrical safety report to their tenants, and to their local authority if requested. The Regulations apply to all tenancies, apart from those listed as excluded tenancies which are social housing, shared accommodation with a landlord or landlord’s family, long leases, student halls of residence, hostels and refuges, care homes, hospitals, and hospices as well as other accommodation relating to healthcare provision.
Full details can be found via the Government’s website.
Tenancy fees update
The 12-month transition period under the Tenant Fees Act 2019 came to an end at the end of May 2020, meaning any tenancy clauses in existing contracts that charge fees became unenforceable after that date.
Letting agents will not be able to charge check-out fees following this date, as well as transition period fees. In addition, the Act sets out a cap of five or six weeks rent (dependent on the amount of rent paid annually) as a security deposit on a tenancy. An existing tenancy agreement that exceeds that amount does not have to be refunded, although it must if the tenancy is renewed.
Any breach of the fee ban will incur a penalty of up to £5,000. Successive breaches can result in a criminal offence and an unlimited fine.
Full details can be found here.
Article 4 introduced across Birmingham
Birmingham City Council has introduced a city-wide Article 4 Direction, which came into force on 8 June 2020. The introduction of Article 4 will mean that a planning application must be submitted in order to convert family houses (C3 use class) to small HMOs accommodating between 3 and 6 people (C4 use class).
Libor transition
The use of the London Inter-bank Offered Rate (LIBOR) is expected to be discontinued by the end of 2021 and Paragon, along with the wider financial services industry, will be making alternative arrangements for customers with a LIBOR product. The market for alternative reference rates to LIBOR is still developing and we are proactively working with other banks, industry bodies, our regulators and trade associations to define the next steps to support an orderly transition to an alternative rate.
LIBOR is one of a number of Interbank Offered Rates (IBORs). These rates have been widely used in financial markets and referenced in financial agreements since the 1980s. Globally, financial regulatory authorities have expressed concern that the interbank lending market, which IBORs are intended to reflect, is no longer sufficiently active or liquid.
It is likely that LIBOR will be discontinued in all its forms at the end of 2021, and users of LIBOR are preparing for this. We will continue to update you on developments, including how these changes are likely to impact the LIBOR-based products you already have with Paragon, or may be considering taking out and the likely timeframe for the transition.