Category: Law & Regulations

JULY: Safety Checks On Electrical Appliances Become Mandatory

JULY: Safety Checks On Electrical Appliances Become Mandatory

Landlords are already required to make sure that the wiring and appliances in their properties are safe, but from July it will be a legal requirement for private landlords to have their electrical installations inspected every five years and provide safety certificates to tenants and their local authority.

The regulations will apply to all new tenancies from 1 July 2020 and existing tenancies from 1 April 2021.  If serious problems are identified, these will have to be remedied quickly. Local authorities will have a duty to take action if landlords do not comply with the requirements and will be able to issue fines if necessary.

JUNE: Tenant Fees Acts (EXTENTION)

JUNE: Tenant Fees Acts (EXTENTION)

The Tenant Fees Act 2019 came into force in England last year on 1 June 2019. The Act bans landlords and agents from charging fees to tenants other than those expressly permitted by the Act. It also places a cap on the amount of security deposit a landlord or agent can collect and codifies a procedure for dealing with holding deposits. The ban applies to assured shorthold tenancies granted by private landlords, licence agreements and tenancies of student accommodation (referred to collectively as “tenancies” for the purposes of the Act).

Since 1 June 2019 the Act has applied to all new agreements actively granted on or after this date including renewal agreements. In accordance with the Act’s transitional provisions, the ban has not applied to tenancies entered into before 1 June 2019 or to statutory periodic tenancies that arose at the end of fixed-term ASTs that commenced before 1 June 2019. The transitional period has now come to an end and from 1 June 2020 the Act applies to all relevant tenancies in existence. However, there will still be some differences in how the various rules apply depending on when the tenancy was granted and when the payment was taken.

This is part 1 of a 3-part series exploring how the TFA provisions will apply to tenancies from 1 June 2020. This blogpost will explore how the prohibited payment provisions work and why compliance is important.The second blogpost will look at tenancy deposits and how the cap applies to different tenancies. The final blogpost will examine the holding deposit provisions.

How does the TFA apply from 1 June 2020?

The various scenarios are set out below:

New tenancy granted on or after 1 June 2019 including first tenancies and renewal tenancies

As is the case now, the Act applies so no prohibited payment can be taken. Any term in the agreement that requires a prohibited payment is not binding. This applies equally to the first tenancies and renewal tenancies. This is the most straightforward scenario as no payment taken in connection with that new tenancy will be lawful if it is not a permitted payment under the Act. Requesting a prohibited payment will be a breach of the Act.

Statutory Periodic Tenancy that arose before, on or after 1 June 2019

The Act will now apply to these tenancies as the transitional provisions have come to an end. Any term in the agreement that requires a prohibited payment ceases to be binding on the tenant from 1 June 2020. If a landlord/agent accepts a payment by mistake they have 28 days to return it to the tenant otherwise it is a prohibited payment and they will be in breach of the Act.  However, any payment taken before this date (i.e. up to 31 May 2020) will still be lawful as it will have been taken during the transitional period when the TFA restrictions did not apply.

With these tenancies that span the transitional period some payments may have been taken lawfully while later payments may not be lawful. For example, reference fees and inventory fees may have been taken lawfully at the commencement of a tenancy and default fees collected lawfully throughout the tenancy. However, a check-out fee due to be charged at the end of the tenancy will be unlawful if taken on or after 1 June 2020. Difficulties may arise if payments were taken from tenants ‘on account’ at the start of their tenancies when the fee was still allowed but the charge is only actually incurred at the end of the tenancy, for example, to cover a check-out inspection. That fee is likely to be prohibited even if collected before the ban applied and the money should be returned to the tenant.

Tenancies granted before 1 June 2019 including contractual periodic tenancies and tenancies still within their original fixed term

The Act will also now apply to these tenancies as the transitional provisions have come to an end. There is no exemption for tenancies that have a longer fixed-term period or have been contractual periodic tenancies from the outset. The ban applies retrospectively to these tenancies. Again, from 1 June 2020 any term in the tenancy requiring such a payment will cease to have effect and if a payment is accepted it must be returned within 28 days of receipt otherwise it is a prohibited payment and the landlord or agent will be in breach of the Act.

Why is this important? What are the sanctions for non-compliance?

Compliance with the TFA is important because there are serious consequences for breaching the Act. Local authorities and the lead enforcement authority can issue penalties of up to £5000 for each breach of the Act and repeated non-compliance can result in prosecution or a financial penalty of up to £30,000, banning orders and an entry on the Rogue Landlord Database and/or the Mayor of London’s Rogue Landlord Checker. Tenants can also bring claims against the landlord to recover fees charged unlawfully. You can read more about enforcement of the Act here.

One of the biggest deterrents to non-compliance is the restriction on recovering possession from assured shorthold tenants. A landlord in breach of the Act is not able to serve a valid section 21 notice until any prohibited fee has been returned to the tenant or, with the tenant’s consent, credited to their rent account or deposit (if that does not take the deposit above the cap).

Tenant advisers will have updated their section 21 checklists to check compliance with Act and the Court’s N5B Claim Form for seeking possession using the accelerated procedure has now been amended to include a number of questions relating to the Act. There is no doubt that tenant representatives will be analysing payments carefully to check that any fee taken was permitted. If it was not this could provide the tenant with a complete defence to a section 21 possession claim. However, as illustrated above, this will not always be straightforward and will involve checking when the tenancy was granted, the date when the payment was taken (and potentially when the charge was actually incurred) and, if applicable, the date the payment was repaid to the tenant. Some fees will have been taken lawfully at the time, even if they are now prohibited. Landlords/agents and their advisers will also need to ensure that they have scrutinised any payments so that they can demonstrate compliance and, if necessary any prohibited payments are repaid prior to serving a section 21 notice.

More Links, Content, Supporting Documentation & Solutions To Follow October 2020. TLA.

APRIL: Capital Gains Tax

APRIL: Capital Gains Tax

Selling a property isn’t always as straightforward as hanging a ‘for sale’ sign in the garden and waiting for the money to come in. It often comes with a number of forms, negotiations and is subject to various costs and expenses, one of which is Capital Gains Tax.

You don’t usually pay Capital Gains Tax when you sell your main home. Instead, it’s usually applied to those selling a buy-to-let property or a second home, meaning it’s particularly important for landlords.

To help you work out how it’ll affect you as a landlord, we’ve put together a guide to explain everything you need to know about Capital Gains Tax, including the changes introduced in April 2020.

What is Capital Gains Tax?

Capital Gains Tax is a tax you pay on any profits you make when disposing of an asset, such as a second home or rental property. It also applies to assets you receive as a gift or as inheritance.

The tax only applies to the gains (profit) you make when you sell something you own, and you only pay it on the total gains you make above the tax-free threshold. The ‘gain’ is the difference between the price you paid for something when you bought it and the price you’re selling it for. For example, if a landlord sells a rental property that isn’t their main residence, they’ll pay tax on the difference between the buying and selling price. Or in other words, they’ll pay tax on any profits they make.

What do we mean by ‘disposing of an asset’?

Disposing of an asset usually means selling it, but it could also include:

  • giving it away as a gift or transferring ownership of the asset to someone else.
  • swapping it for another asset.
  • getting compensation for it – like a landlord insurance pay-out for a destroyed item.

How much Capital Gains Tax do I need to pay?

o work out how much Capital Gains Tax you need to pay when you sell your property, follow these three steps:h

  1. Work out the ‘gain’ on your property after you sell or dispose of it. To do this, just subtract the price you bought the property for from the price you sold it for.
  2. Deduct any allowable expenses, losses and your tax-free allowance from your gain. If your gains are lower than the tax-free allowance, you don’t have to pay any Capital Gains Tax.
  3. Report your gain and pay your tax straight away using the ‘real time’ Capital Gains Tax service if you’re a UK resident, and in your Self Assessment tax return if you already submit one.

What are the Capital Gains Tax rates and allowances?

For 2019-20, everyone in the UK has a capital gains annual tax-free allowance of £12,300 a year. This means that when you’re selling a buy-to-let property, the first £12,300 of the profit you make is exempt from tax. If you’re married or in a civil partnership, each person has tax-free allowance, which means your allowance as a couple would be £24,600.

Tax year2018‑192019‑202020‑21
CGT allowance for an individual£11,700£12,000£12,300
Couple’s allowance (married or in a civil partnership only)£23,400£24,000£24,600

The Capital Gains Tax rate on property for a basic-rate taxpayer is 18% for the 2020-21 tax year. For higher and additional-rate tax payers, the Capital Gains Tax rate is 28%.

Tax bracketCapital Gains Tax rate on property
Basic-rate payer18%
Higher or additional-rate payer28%

What can I deduct from my Capital Gains Tax bill?

s well as the Annual Exempt Amount (tax free allowance), there are a few other allowable expenses that can be deducted from your profits to determine the final amount you’ll pay Capital Gains Tax on.

For example, when buying or selling a property you’ll usually need to pay for things like estate agency fees, solicitor fees or Stamp Duty. You can deduct these fees from your overall profits, and only pay Capital Gains Tax on the remainder.

Similarly, if you’ve made any improvements to the property between buying and selling it, like adding an extension, converting a bedroom or installing double glazing, the cost of the improvements can be deducted from the profits you make as well.

You can’t deduct the costs for the upkeep of the property, like a housekeeper’s salary or for general wear and tear. And you can’t deduct the interest you pay on your mortgage from your bill either.

Work out your Capital Gains Tax bill

If, for example, you bought a buy-to-let property for £100,000 and later sold it for £120,000, your profit is £20,000. Your Annual Exempt Amount (tax free allowance) of £12,300 then kicks in, meaning you only pay Capital Gains Tax on the remaining amount, less any other deductions.

ow much tax you’ll pay will then depend on your income and what tax band you’re in. You can use the government’s Capital Gains Tax calculator to work out exactly what you need to pay.

Do I have to pay Capital Gains Tax?

Do I have to pay capital gains tax?

Capital Gains Tax doesn’t apply in every circumstance, and the rules are different for landlords compared to someone who owns one property and lives in it too.

If you’re a homeowner, you won’t pay Capital Gains Tax when you sell the home you live in. But if you’re a landlord and you own a property that you’re letting out, it’s worth knowing what tax exemptions are available so you don’t end up paying over and above what you owe.

You’ll be exempt from paying Capital Gains Tax if:

  • you have one home that you’ve lived in as your main residence for all the time you’ve owned it
  • you’ve not let part of it out (unless you’ve only had a single lodger)
  • you haven’t used part of the property for business purposes
  • the grounds, including all buildings, are less than 5,000 square metres in total
  • you didn’t buy it just to make a gain

Most of the above exemption criteria only applies to homeowners. So, if you’re a landlord, you’ll probably need to pay Capital Gains Tax when you sell your buy-to-let property.

Private residence relief, lettings relief and Capital Gains Tax

Private residence relief is a tax relief you get when disposing of your private residence – for example, selling your home. It means that a homeowner selling their main residence doesn’t have to pay Capital Gains Tax. However, it also has implications for landlords who used to live in the property they’re now selling.

Before April 2020, if a landlord sold a home they used to live in before they rented it out, they would be eligible for lettings relief. The first £40,000 (£80,000 if a couple sells the property) of their gain would be exempt from Capital Gains Tax, even if they hadn’t lived in the property themselves for a long time.

From April 2020, however, this lettings relief and other areas of Capital Gains Tax have changed.

How is Capital Gains Tax changing in 2020?

There are four main changes to Capital Gains Tax which came into force in April 2020. The aim is to raise additional tax from the sale of residential properties and to collect this money more quickly than before.

  1. Lettings relief will now only be available to landlords who are in shared occupancy with a tenant
  2. Landlords who previously lived in a property but then rented it out are exempt from paying tax on gains accrued during the final nine months of ownership (instead of 18 months)
  3. Capital Gains Tax must now be reported and paid within 30 days of a property being sold
  4. The tax-free allowance has increased from £12,000 to £12,300

hat do the Capital Gains Tax changes mean for landlords?

The majority of landlords will be affected by the April 2020 Capital Gains Tax changes. However, ‘accidental landlords*’ are likely to be hit hardest by the changes and could face a larger tax bill. But don’t worry, it’s not all bad news. Landlords will still be able to claim private residence relief for any period the property was their main home, and the tax-free allowance is increasing by £300.

Lettings relief now only applies to shared occupancy landlords

 Before April 2020

If a landlord sold a house they used to live in, the first £40,000 (£80,000 if a couple sells the property) of their gain would be exempt from Capital Gains Tax, even if they hadn’t lived in the property themselves for a while.

 After April 2020

The £40,000 tax relief (£80,000 if it’s jointly owned) now only apply to landlords in shared occupancy with their tenants, for example a landlord who still lives in the property and simply lets out one of the bedrooms.

The tax-free allowance period has been reduced

 Before April 2020

Landlords would get full tax relief for the last 18 months they owned the property, even if they weren’t living there at the time. They wouldn’t pay any tax on gains accrued during that 18-month period.

 After April 2020

The seller of the property will now only get a nine-month tax relief, meaning their tax bill will likely be higher.

You now have 30 days to report Capital Gains Tax and pay what you owe

 Before April 2020

When landlords sold a residential property, they had to report the sale and associated tax charges on a Self Assessment tax return. Any money owed would follow the same Self Assessment payment deadlines.

 After April 2020

Residential property sales must be reported twice, according to Which?. The seller must submit a Capital Gains Tax return to HMRC within 30 days of the sale. If there is any tax due, this must also be paid within the same 30-day window. The sale also needs to be reported on a Self Assessment tax return for the appropriate tax year.

The tax-free allowance has increased to £12,300

 Before April 2020

The tax-free allowance for Capital Gains Tax was £12,000.

 After April 2020

The tax-free allowance for Capital Gains Tax has increased by £300 to £12,300 for individuals and representatives and £24,600 for couples who are married or in a civil partnership. It’s increased from £6,000 to £6,150 for trustees of settlements.

Before April 2020, you had until the next Self Assessment tax deadline to report the sale of a property and pay the Capital Gains Tax you owed. However, as we’ve mentioned, this is one of the areas impacted by the Capital Gains Tax changes in 2020.

After the 6th April 2020, you’ll need to submit a standalone Capital Gains Tax return and pay what you owe within 30 days of the sale completing. It’s important to remember that both the return and payment are due within the same 30-day period. For example, if you submit the Capital Gains return within 28 days, you’ll have two days to pay what you owe.

If you’re a Self Assessment tax payer, you’ll still need to declare this on your annual return (even though you’ve already declared in the Capital Gains return).

APRIL: Domestic private rented property: minimum energy efficiency standard – landlord guidance

APRIL: Domestic private rented property: minimum energy efficiency standard – landlord guidance

Guidance for landlords of domestic private rented property on how to comply with the 2018 ‘Minimum Level of Energy Efficiency’ standard (EPC band E).

This guidance provides information on the main aspects of the regulations. If your particular situation is not covered, we have more detailed guidance including case studies.

Find out if your property is covered by the Regulations

The Domestic Minimum Energy Efficiency Standard (MEES) Regulations set a minimum energy efficiency level for domestic private rented properties.

The Regulations apply to all domestic private rented properties that are:

  • let on specific types of tenancy agreement
  • legally required to have an Energy Performance Certificate (EPC)

Answer these questions to find out whether your property is covered by the Regulations

1. Is your property let on one of the following types of domestic tenancies:

  • an assured tenancy?
  • a regulated tenancy?
  • a domestic agricultural tenancy?

2. Is your property legally required to have an EPC?

If the property you let has been marketed for sale or let, or modified, in the past 10 years then it will probably be legally required to have an EPC.

If you answered Yes to both these questions, and your property has an EPC rating of F or G, you must take appropriate steps to comply with the requirements of the MEES Regulations. We explain how to do this below.

If you answered No to one or both of these questions, your property is not covered by the Regulations, and you don’t need to take action to improve the property rating. You may let it with an EPC rating of F or G.

Find out how to get a rating on your property

Find out more about EPC requirements for homes

When you need to take action to improve your property to EPC E

Since 1 April 2020, landlords can no longer let or continue to let properties covered by the MEES Regulations if they have an EPC rating below E, unless they have a valid exemption in place.

If you are currently planning to let a property with an EPC rating of F or G, you need to improve the property’s rating to E, or register an exemption, before you enter into a new tenancy.

If you are currently letting a property with an EPC rating of F or G, and you haven’t already taken action, you must improve the property’s rating to E immediately, or register an exemption.

If your property is currently empty, and you are not planning to let it, you don’t need to take any action to improve its rating until you decide to let it again.

Funding improvements to your property

The cost cap: you will never be required to spend more than £3,500 (including VAT) on energy efficiency improvements.

If you cannot improve your property to EPC E for £3,500 or less, you should make all the improvements which can be made up to that amount, then register an ‘all improvements made’ exemption.

There are 3 ways to fund the improvements to your property:

Option 1: Third party funding

If you are able to secure third-party funding to cover the full cost of improving your property to EPC E, you can use this and you don’t need to invest your own funding:

  • the cost cap does not apply
  • you should make use of all the funding you secure to get your property to band E, or if possible higher. Funding can include:
  • Energy Company Obligation (ECO)
  • local authority grants
  • Green Deal finance

Find out more about funding opportunities for landlords

Option 2: Combination of third-party funding and self-funding

If you can secure third-party funding but it is:

  • less than £3,500, and
  • not enough to improve your property to EPC E

you may need to top up with your own funds to the value of the cost cap.

Please note

  • you can count any energy efficiency investment made to your property since 1 October 2017 within the cost cap
  • if your property can be improved to E for less than the cost cap, that is all you need to spend

Option 3: Self funding

If you are unable to secure any funding, you need to use your own funds to improve your property. You will never need to spend more than the cost cap.

You do not need to spend up to £3,500 if your property can be improved to EPC E for less. If you can improve your property to E for less than the cap, you will have met your obligation.

If it would cost more than £3,500 to improve your property to E, you should install all recommended measures that can be installed within that amount, then register an exemption.

If you have made any energy efficiency improvements to your property since 1 October 2017, you can include the cost of those improvements within the £3,500 cost cap.

Selecting energy efficiency measures

Your EPC report will include a list of recommendations detailing measures which should improve the energy efficiency of your property. It will include both a short list of top actions you can take, and a more detailed list further down setting out all recommended measures. The recommendations will help you choose which measure or combination of measures to install.

Sample table of recommendations from the EPC report

These measures will improve the energy performance of your dwelling. The performance ratings after improvements listed below are cumulative, that is, they assume the improvements have been installed in the order that they appear in the table.

Recommended measuresIndicative costTypical savings per yearRating after improvement
Room-in-roof insulation£1,500-£2,700£837E39
Internal or external wall insulation£4,000-£14,000£195E45
Solid floor insulation£4,000-£6,000£122E49
Increase hot water cylinder insulation£15-£30£142E54
Draught proofing£80-£120£18D55
Low energy lighting£20£21D56
High heat retention storage heaters / dual immersion cylinder£1,200-£1,800£319D67
Solar water heating£4,000-£6,000£57C69
Replace single glazed windows with low-E double glazed windows£3,300-£6,500£123C73
Solar photovoltaic panels£5,000-£8,000£287B83

The MEES Regulations refer to the concept of ‘relevant energy efficiency improvements’. This is a measure, or package of measures, recommended in your EPC report, which can be purchased and installed for £3,500 or less (including VAT) – the cost cap.

Other types of energy efficiency reports may contain the recommendations list from the EPC report, for example, a Green Deal Advice Report (GDAR), or reports produced by qualified surveyors.

If you have installed all ‘relevant energy efficiency improvements’ for your property, but your property’s EPC rating is still below E, you can register an exemption on the grounds that ‘all relevant improvements have been made and the property remains below an E’.

You are free to install any energy efficiency measure(s), but:

  • if your chosen improvements do not appear in the list of ‘recommended energy efficiency improvements’
  • and they fail to improve your property to EPC E

you will not be able to let the property or register an ‘all relevant improvements made’ exemption. You will then need to make further attempts to improve the rating to a minimum of E, in order to let the property.

Registering an exemption

There are various exemptions that apply to the prohibition on letting a property with an energy efficiency rating below E.

If your property meets the criteria for any of the exemptions, you will be able to let it once you have registered the exemption on the PRS Exemptions Register.

Information required for all exemptions

  • address of the property
  • type of exemption you are registering
  • copy of a valid EPC for the property

‘All relevant improvements made’ exemption

Register this exemption if the property is still below EPC E after improvements have been made up to the cost cap (£3,500 incl VAT), or there are none that can be made.

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • if you didn’t rely on your EPC report to select measures appropriate for your property, and instead opted for a report prepared by a surveyor for example, you must provide a copy of that report
  • details, including date of installation, of all recommended improvements you made at the property (unless none were recommended)

‘High cost’ exemption

Register this exemption if no improvement can be made because the cost of installing even the cheapest recommended measure would exceed £3,500 (including VAT).

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • 3 quotes from qualified installers for purchasing and installing the cheapest recommended measure, demonstrating that the cost would exceed £3,500 (including VAT)
  • written confirmation that you are satisfied that the measure exceeds £3,500 (including VAT)

Wall insulation exemption

Register this exemption if the only relevant improvements for your property are:

  • cavity wall insulation
  • external wall insulation
  • or internal wall insulation (for external walls)

AND

you have obtained written expert advice showing that these measures would negatively impact the fabric or structure of the property (or the building of which it is part).

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • a copy of the written opinion of a relevant expert stating that the property cannot be improved to an EPC E because a recommended wall insulation measure would have a negative impact on the property (or the building of which it is part)

Register this exemption if the relevant improvements for your property need consent from another party, such as a tenant, superior landlord, morgagee, freeholder or planning department, and despite your best efforts that consent cannot be obtained, or is given subject to conditions you could not reasonably comply with.

This exemption lasts:

  • 5 years
  • or, where lack of tenant consent was the issue, until the current tenancy ends or is assigned to a new tenant

In either case, once the exemption comes to an end, you need to try again to improve the EPC rating of the property, or register a further exemption.

To register this exemption, you need to provide this additional information:

  • copies of any correspondence and/or relevant documentation (such as a letter from your tenant, or a planning department decision notification) demonstrating that consent for the recommended measure was required and sought, and that this consent was refused, or was granted subject to a condition that you were not reasonably able to comply with

Property devaluation exemption

Register this exemption if you have evidence showing that making energy efficiency improvements to your property would devalue it by more than 5%. In order to register this exemption you will need a report from an independent surveyor. This surveyor needs:

  • to be on the Royal Institute of Chartered Surveyors (RICS) register of valuers
  • to advise that the installation of the relevant improvement measures would reduce the market value of the property, or the building it forms part of, by more than 5%

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • a copy of the report prepared by an independent RICS surveyor that provides evidence that the installation of the recommended measures would devalue to property by more than 5%

Temporary exemption due to recently becoming a landlord

If you have recently become a landlord under certain circumstances (see section 4.1.6 in Chapter 4 of the full Guidance document for details of those circumstances) you will not be expected to take immediate action to improve your property to EPC E. You may claim a 6 months exemption from the date you became a landlord.

This exemption lasts 6 months from the date you became the landlord. After that it will expire and you must have either:

  • improved the property to EPC E
  • or registered another valid exemption, if one applies

To register this exemption, you need to provide this additional information:

  • the date on which you became the landlord for the property
  • the circumstances under which you became the landlord

How to register an exemption

  • create an account
  • enter the address of your property
  • state the type of exemption you want to register
  • upload all the required evidence, including a copy of a valid EPC for the property (the Register can accept pdf, png, jpg, jpeg, doc or docx files, with a maximum size of 4 MB per file)

Exemption data cannot be amended once the data has been submitted. Make sure you have checked everything carefully before submitting.

All exemptions apply from the point you register them.

If you improve an exempt property to E after having registered an exemption (or stop renting the property out) you can cancel the exemption by going to your account ‘dashboard’ page and selecting ‘View or manage my exemptions’.

Register an exemption

Assisted digital to register an exemption

If Assisted Digital support is required to register an exemption please get in touch by email PRSRegisterSupport@beis.gov.uk or call the digital helpline on 0333 234 3422.

The Assisted Digital service provides digital support in lodging an exemption on the register, but it is the responsibility of the landlord to ensure that their property meets the eligibility criteria for an exemption. The service is not able to provide advice on whether individual properties meet the criteria for an exemption.

Members of the public can:

Enforcement and penalties

The MEES Regulations are enforced by local authorities, who have a range of powers to check and ensure compliance.

The Regulations mean that, since 1 April 2018, private landlords may not let domestic properties on new tenancies to new or existing tenants if the Energy Efficiency Certificate (EPC) rating is F or G (unless an exemption applies).

From 1 April 2020 the prohibition on letting F and G properties will extend to all relevant properties, even where there has been no change in tenancy.

If a local authority believes a landlord has failed to fulfil their obligations under the MEES Regulations, they can serve the landlord with a compliance notice. If a breach is confirmed, the landlord may receive a financial penalty.

Non-compliance with the Regulations

Your local authority may check for different forms of non-compliance, including one or more of the following:

  • from 1 April 2018, you let your property in breach of the Regulations
  • from 1 April 2020, you continue to let your property in breach of the Regulations
  • you have registered any false or misleading information on the PRS Exemptions Register

Compliance notices

If a local authority believes a landlord may be in breach, they may serve a compliance notice requesting information to help them decide whether a breach has occurred. They may serve a compliance notice up to 12 months after a suspected breach occurred.

A compliance notice may request information on:

  • the EPC that was valid for the time when the property was let
  • the tenancy agreement used for letting the property
  • information on energy efficiency improvements made
  • any Energy Advice Report in relation to the property
  • any other relevant document

Penalties

If a local authority confirms that a property is (or has been) let in breach of the Regulations, they may serve a financial penalty up to 18 months after the breach and/or publish details of the breach for at least 12 months. Local authorities can decide on the level of the penalty, up to maximum limits set by the Regulations.

The maximum penalties amounts apply per property and per breach of the Regulations. They are:

  • up to £2,000 and/or publication penalty for renting out a non-compliant property for less than 3 months
  • up to £4,000 and/or publication penalty for renting out a non-compliant property for 3 months or more
  • up to £1,000 and/or publication for providing false or misleading information on the PRS Exemptions Register
  • up to £2,000 and/or publication for failure to comply with a compliance notice

The maximum amount you can be fined per property is £5,000 in total.

Right of review and right of appeal

If you do not agree with a penalty notice, you may ask your local authority to review its decision. They can withdraw the penalty notice if:

  • new evidence shows a breach has not occurred
  • a breach has occurred, but evidence shows the landlord took all reasonable steps to avoid the breach
  • they decide that because of the circumstances of the case, it was not appropriate to issue a penalty

If a local authority decides to uphold a penalty notice, a landlord may appeal to the First-tier Tribunal if they think that:

  • the penalty notice was based on an error of fact or an error of law
  • the penalty notice does not comply with a requirement imposed by the Regulations
  • it was inappropriate to serve a penalty notice on you in the particular circumstances

Full compliance and enforcement process

The Local Authority (LA) checks if a property is in breach of Regulations where:

a. from 1 April 2018 it as been privately let to new or existing tenant; or
b. from 1 April 2020 it is privately let; or
c. the landlord registered an exemption and provided false or misleading information

If the property appears to be in breach of the Regulations, the LA may serve compliance notice on the landlord requesting further information.

If the property is in compliance, no further action will be taken.

If satisfied that the landlord is in breach of the Regulations, the Local Authority may serve a penalty notice on the landlord and publish details of the breach:

a. either the landlord accepts the penalty notice and pays the penalty
b. or if the landlord disagrees with the notice, they can request a review of the penalty notice decision.

The LA reviews the decision:

a. either they find in the landlord’s favour and the penalty is quashed
b. or they uphold the penalty notice

If the penalty notice is upheld, the landlord can appeal the decision to the First-tier Tribunal which will review the decision:

a. either the Tribunal finds in the landlord’s favour and the penalty is quashed
b. or the Tribunal rejects the landlord’s appeal, and the penalty is affirmed

The landlord then:

a. either pays the penalty
b. or does not pay the penalty, in which case the enforcement authority may take debt recovery action

More detail and examples

To find the full detail and case studies, read:

Legal disclaimer

Please note that BEIS cannot provide legal advice or a definitive interpretation of the law, as this is a matter for the courts. If you have questions that aren’t covered here, you will need to seek independent legal advice.

Setting long-term energy performance standards

Government has committed to look at a long term trajectory to improve the energy performance standards of privately rented homes in England and Wales, with the aim for as many of them as possible to be upgraded to EPC Band C by 2030, where practical, cost-effective and affordable.

MARCH: Extension of Homes (Fitness for Human Habitation) Act

MARCH: Extension of Homes (Fitness for Human Habitation) Act

As a landlord, you want to do your best by your tenants, and one fundamental way of doing that is to make sure the houses or flats you rent out are comfortable and safe for your tenants to live in.

It’s not just a mark of a good landlord, it’s a legal requirement too. The Homes (Fitness for Human Habitation) Act gives tenants the power to take legal action against those landlords who don’t take their responsibilities seriously.

So, to find out more about the ins and outs of the Act and what you should be doing to make sure your rental property complies, here’s everything you need to know about the Homes (Fitness for Human Habitation) Act.

What is the Homes (Fitness for Human Habitation) Act?

Introduced on 20 March 2019, the Homes (Fitness for Human Habitation) Act requires all landlords in England (including letting agencies) to maintain their properties so they meet the minimum standard for human habitation at the beginning and for the duration of the tenancy. The Act aims to protect tenants by giving them the power to take legal action against landlords they believe are acting irresponsibly.

The Fitness for Human Habitation Act is an extension of the Landlord and Tenant Act 1985, which sets out guidelines for private and social landlords so their properties are fit for human habitation.

Landlords don’t need to meet new obligations or follow different rules under this Act. The legislation simply makes it easier for tenants to hold landlords accountable and take them to court if they believe their properties aren’t in a habitable condition. 

If you’re a landlord in Scotland or Wales, you can visit the government’s website or Citizens Advice for information about the equivalent legislation in your area.

Does the Fitness for Human Habitation Act apply to all tenancies?

The Act applies to tenancy agreements in England granted after 20 March 2019. This includes:

  • Tenancies shorter than seven years
  • Seven-year tenancies that can be prematurely terminated by the landlord
  • Secure, introductory or assured fixed-term tenancies of more than years
  • Tenancies renewed for a fixed term

The Act will apply to all periodic tenancies (including those that started before 20 March 2019) from 20 March 2020.  

The Act does not apply to:

  • Licence agreements – such as lodgers, people living in temporary accommodation and some property guardians
  • Shared ownership leases
  • Most business, government or local authority tenancies

For more information about the type of tenancies covered by the Fitness for Human Habitation Act, visit the government’s website here.

Does my property meet the Fitness for Human Habitation Act criteria?

A property would be deemed unfit by the courts if one or more of the following issues were so bad that it would be unreasonable to expect a person to live there.

  • Unstable building
  • Serious dampness
  • Unsafe layout
  • Not enough natural light
  • Bad ventilation
  • No hot or cold water
  • Drainage or toilets issues
  • Poor cooking or washing up facilities
  • Or, any of the hazards set out in the Housing Health and Safety (England) Regulations

The courts decide whether a property is fit for human habitation. They might get an expert’s advice, like the Housing Health and Safety Rating System (HHSRS), but they don’t have to. For example, if a property doesn’t have any toilet facilities, an expert opinion isn’t necessary because the property is very obviously unfit.

Are issues with the property always the landlord’s responsibility?

Landlords aren’t always responsible for property defects. There are some occasions where the landlord isn’t required by law to fix a problem with the property. And, tenants have a responsibility to maintain and look after the property.

The landlord won’t be required to fix problems that have been caused by:  

  • The tenant behaving irresponsible or illegally
  • An ‘act of God’ like a fire, storm or flood
  • The tenants’ own possessions that aren’t included in the inventory.

The landlord can’t be held accountable when they can’t fix a problem if:

  • They can’t get planning permission or permission from freeholders. (There must be evidence that they’ve made reasonable efforts to get this.)
  • The tenant isn’t an individual. For example, local authorities, or housing associations.

How long do landlords have to fix a problem?

Landlords are responsible for an issue in their property from the moment the tenant tells them about it. Landlords have a reasonable amount of time to deal with the issue, which varies depending on how serious it is. If there are any hazards in a communal area of a block of flats or in a House in Multiple Occupation (HMO), the landlord could be liable.

If a tenant makes their landlord aware of an issue, and they’re not actively attempting to fix it, the tenant could be able to take the landlord to court. So, landlords should always attempt to fix an issue with the property as soon as possible.

What happens if my property is deemed unfit by the courts?

During the court hearing, the judge will look at the evidence provided by the landlord and the tenant. If a landlord is found to be failing to comply with the Act and the courts decide the property isn’t fit for human habitation because it’s dangerous or unhealthy, they can make the landlord:

  • Pay compensation to the tenant

The amount of compensation is at the judge’s discretion and there aren’t set penalty limits. The judge will consider the harm caused to the tenant and the condition of the property. Landlords may also be ordered to pay tenant’s legal costs.

  • Fix the issues in the property

The courts will consider the work to be compulsory and the type and number of improvements will depend on the property’s condition.  

What happens if I win the court case?

If a landlord wins the case, the tenant might have to pay some costs. The amount they’ll need to pay varies case by case and will be decided by the courts.

You might want to consider taking independent legal advice to discuss the different outcomes of going to court.

Landlord Acts & Regulations Introduction

Landlord Acts & Regulations Introduction

Acts and regulations impose duties and responsibilities on landlords to ensure that the property is completely safe and that all electrical appliances installed are safe throughout the life of the tenancy…

You’ll need to inspect your appliances regularly and ensure that you keep records of all periodic inspections. It is important to be aware of them to ensure that you are compliant and to avoid penalties. Acts and regulations such as the Housing Act 2004 cover a range of issues and introduced regulatory systems such as the Housing Health and Safety Rating System.In additional legislation such as Consumer Protection Acts place liability on landlords to ensure that their property complies with 29 categories of hazard under the Housing Health and Safety Rating System. Therefore to ensure that your property is fit for letting under these acts and regulations, you should follow a series of measures such as providing valid gas safety certificates and taken reasonable precautions to ensure that your premises are free from dangerous defects.

The Housing Act 2004

These explanatory notes has been prepared by the Office of the Deputy Prime Minister to assist the reader in the understanding of the 2004 housing act.

Download PDF

Electrical Equipment Regulations 1994

Provides informations regarding the measures and levels of safety and consumer protection in respect to electrical equipment as laid down in law by the secretary of state.

Download PDF

The Gas Safety (Installations and Use) regulations 1998

This summarises the main changes of the Gas Safety Regulations 1998 and their effects for enforcement.

Download PDF

The Regulatory Reform (Fire Safety) Order 2005.

View Reform

Landlord and Tenants Covenant Act 1995

An act that makes provisions, in some circumstances for those under a tenancy agreement to be released from it and the circumstances surrounding such a proceedure.

Download PDF

The Unfair Terms in Consumer Contracts Regulations 1999

When adding your own terms to a tenancy agreement, we recomend that you familiarise yourself with this regulation.

Download PDF

Liability for land and premises legislation

Covers the:

  • OCCUPIERS’ LIABILITY ACT 1957
  • OCCUPIERS’ LIABILITY ACT 1984
  • DEFECTIVE PREMISES ACT 1972
  • OCCUPIERS’ LIABILITY ACT 1984

Download PDF

More to come July 2020 >