Property Litigation Update - April 2019

Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc) Regulations 2019 came into force on 1 April 2019.

New legislation imposes a requirement on property agents holding money on behalf of a client, that they must be a member of an approved or designated client money protection scheme (“CMP”). 

The aim is that CMP schemes offer protection for the client against loss, theft or misappropriation of their money. Transparency requirements also mean that agents must provide evidence of its membership. 

There are severe financial penalties for any agent failing to comply with the new legislation of up to £30,000 for breach of the requirement to belong to a CMP scheme or £5,000 for a breach of the transparency requirements. 

Agents should bear in mind transparency; whilst agents may well belong to CMP schemes, notifying clients of the same and displaying their membership certificate may not be at the forefront of an agents mind. As such it is crucial to ensure that your membership is clearly displayed and available for clients (in writing, at all premises and on websites).

Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 came into force on 1 April 2019

The Regulations initially came into force in 2015 with the aim to improve energy efficiency of certain private rented properties in England and Wales. 

The Amendments to the Regulations will prescribe a minimum level of energy efficiency for private rented properties of band E and will prohibit landlords letting properties that fall below this standard. 

Transition arrangements provide that a landlord with a sub-standard property is not able to grant a new tenancy after 1 April 2018 or continue to let the property after 1 April 2020 in the case of domestic private rented properties.  

The Amendments also reduce the amount of time a landlord can wait before complying with the Regulations or registering a further exemption (namely that the cost of improvements would exceed £3,500).

This further supports a drive towards greater environmental consciousness on the part of landlords in the private rented sector. Landlords should be proactively considering ways to improve the energy efficiency of their properties and taking steps to make those improvements sooner rather than later; not only will they fall foul of the regulations if they delay but failing to update their properties will be significantly detrimental to their rental business. 

Right to Rent checks 

Pursuant to the Right to Rent scheme (“the Scheme”), landlords or their agents must check the immigration status of all prospective tenants and notify the Home Office of any tenant they believe does not have the right to rent. 

Whilst many commentators considered that imposing such an obligation resulted in landlords being forced to act as border control, they are nonetheless obligations that require compliance given the possible significant penalties (civil fines and criminal sanctions such as custodial sentences).  

It was recently confirmed that the Scheme breached the European Convention on Human Rights and the commentary was that it encouraged landlords to discriminate when considering tenants. 

Most recently, in the case of R (Goloshvili) v Secretary of State, the landlord suspected that the tenant did not have the right to rent and as such, contacted the Home Office. The Home Office issued a Notice of Letting to a Disqualified Person (“Notice”) and the landlord was warned of possible unlimited fines and custodial sentences of up to five years for non-compliance. 

Whilst the court was reluctant to rule on whether the Secretary of State’s decision to issue a Notice was lawful (as the Notice was withdrawn before the hearing), the court offered their views that the Notice breached the Equality Act (“the Act”) on the basis that the tenant was being treated less favourably as a result of their nationality. 

The Secretary of State is exempt from the Act and as a result they cannot be prosecuted for this breach. However, it could mean that landlords and agents who do not benefit from this exemption could be in breach of the Act if they follow Home Office direction when issued with a Notice. 

The Residential Landlord’s Association has written to the Home Office to ask for urgent clarification and legislative changes. 

Clarity is urgently required on this issue but it is clear that landlords and their agents must still carry out right to rent checks until further guidance is provided.  

Boyes Turner lawyers are specialists in these areas and are able to provide advice to both landlords and tenants in respect of these issues.