Whether you’re just starting out in the rental game, or a long-standing professional, it can be a confusing business. Not only is there an ever-changing whole new set of rules to understand, you’ve also got a whole new language to learn as well.
But speaking the language of lettings needn’t be hard, as long as you understand the basics. We’ve covered some of the more basic here, but let's explore some of the trickier terminology that you may not come across quite so often…
Article 4 Direction: A planning limitation put in place by the local planning authority and designed to restrict the scope of permitted developments, an article 4 directive can have a real impact on landlords. One restriction includes the prevention of family homes being changed into an HMOs – not ideal if your business model requires the income of an HMO!
Abandonment: Not a scenario any landlord hopes to find themselves in, abandonment occurs when a tenant moves out of a property before the tenancy has ended, without informing their landlord. The tenant still has a legal right to return and take up residence at any time and it is a criminal offence for landlords to do anything to prevent the continuation of the tenancy.
Bailiffs (enforcement agents): If you are recovering arrears or costs from your tenant, and have been through the official court process, you may find that you are able to instruct bailiffs to enforce the debt. Bailiffs are officers of the court (although many are third party contractors) and will attempt to reclaim your funds through collecting debts or repossessing goods.
Client Money protection: The Client Money Protection (CMP) Scheme is a compensation scheme which provides assurance to landlords and tenants that should their letting agent mishandle their rent, deposit or other client funds, the money is protected in a securely insured scheme. It will be mandatory for all agents to have Client Money Protection from April 2019.
County Court Judgement (CCJ): A CCJ is a type of court order that can be issued in England, Wales and Northern Ireland against an individual if they fail to pay money that they owe. In Scotland, the process is called enforcing a debt by diligence. A CCJ will stay on a credit rating for six years.
Deeds:Many documents relating to letting a property can now be entirely managed digitally, with digital signatures and online approvals being absolutely watertight. However, deeds – the most common being Deed of Surrender and Deed of Guarantee – should still be witnessed and signed in person. That said, change is afoot, with the Law Commission ruling that electronic signatures will soon be recognised on all legal documents. Until then though, deeds must still be signed in person!
Electrical installation condition report (EICR): A report, carried out by a certified professional, confirming that all electrical installations within the property are safe to use. These five-yearly checks are already mandatory for landlords in Scotland and those with HMOs, and are soon to be introduced to England and Wales.
Guarantor: The lender may sometimes require a borrower to appoint a guarantor. This is someone who agrees to pay the borrower's liability if the borrower cannot pay. A guarantor is someone who agrees to pay the rent on behalf of the tenant if they are unable to meet payments, this is usually agreed in writing when the tenancy agreement is signed.
Health and Safety Executive (HSE): The HSE is a government organisation working to ensure that people are protected against risks created by the poor management of health and safety, primarily in the workplace, however some regulations also apply to residential properties.
Housing Health and Safety Rating System (HHSRS): The HHSRS lays out a series of 29 health and safety risks in residential properties, and the procedures used to asses them. Covering England and Wales, HHSRS is designed to make properties healthier and safer to live in, and in instances where risks are identified, the system requires councils to take enforcement action against the landlords. Action can range from fines, to demolition of the property!
Inventory: An inventory is a detailed list of everything that is provided with the property, and the condition that the property and its contents were in when the tenant took over the tenancy. It should include everything, from flooring, to white goods. The inventory is the key tool you as a landlord have to refer back to should there be any disputes over the deposit at the end of the tenancy.
Joint and several liability:When more than one adult tenant lives at the property, most tenancy agreements state them to be jointly and severally liable for the payment of all rent, bills and liabilities during the tenancy. This means that they are individually responsible for their own percentage of the rent, and the payment of the rent as a whole – if their co-tenant doesn’t pay their percentage, each person can be held fully financially responsible until the payment is made. This is also true of guarantors – tenant A may have paid full rent, but tenant A’s guarantor could still be held responsible for tenant B’s missed payments.
Land Registry: The Land Registry is a government department tasked with maintaining the Land Registers of England and Wales and recording any changes to property ownership, mortgages or other transactions. As well as being a key cog in the property investment cycle, the Land Registry can also be utilised by property fraudsters looking to take advantage of landlord portfolios, so it is vital to utilise the free tools provided by the Land Registry to safeguard your investments.
Minimum energy efficiency standards (MEES): MEES, introduced on April 1st 2018, stating that your property must have an EPC rating of at least E if you are planning to let it. Buildings with an EPC rating of less than E cannot legally grant a new tenancy or renew an existing tenancy unless they have registered an exemption. The rules will apply to all tenancies, new and existing, by April 2020.
Mediation:If you end up in a situation where you are facing court to resolve a tenant issue, such as rent arrears, you may be offered mediation as an informal method of resolving disputes. Aimed at minimised court time, this method involved an independent mediator working with both parties to resolve the dispute, and coming to an agreeable conclusion. Mediation can be turned down by either party, however it is highly encouraged by the courts and is usually very successful.
Minimal room sizes: For HMO landlords, one of the biggest concerns under the new licensing requirements is the new minimal room sizes. As of October 1st 2018, new guidelines dictate that rooms slept in by one person over the age of 10 years can be no smaller than 6.41 square meters, those slept in by two people over ten years can be no smaller than 10.22 square meters and those slept in by children of ten years of younger can be no smaller than 4.64 square meters. Rooms must have a minimum ceiling height of 2.14 meters over 75% of the floor area, and if the ceiling height if the room at any stage is less than 1.52 meters, the floor space below that ceiling will be disregarded.
Prescribed Information: This refers to information which you must provide to anyone who has contributed to the deposit within 30 days of the deposit having been received. This includes; information about the scheme in which you have protected the deposit (most have a form you can download online), information about the tenancy and how it allows you to utilise the deposit (what you can deduct, how a deposit could be used etc) and a copy of the deposit protection certificate/receipt.
PAT Testing: A PAT test, which must be carried out by a qualified professional, involves a visual inspection of freestanding electrical appliances, as well as any cables and plugs, supplied by the landlord. The test usually takes place with the appliance remaining in the original location in the property. If the appliance passes the test, a sticker will be put on the plug with a date of the test. For HMOs, annual PAT testing is already a legal requirement, and it is likely that this will become a requirement for all residential rented properties.
Quiet Enjoyment:Although you own the property that your tenant lives in, it is their home, and they have the legal right to ‘quiet enjoyment’ of the property without unnecessary intrusion from you, or any other individual (tradesperson, neighbour etc). It is important to remember that you no longer have the right to access the property at will, and must give your tenant 24 hours’ notice if you wish to do so – and they can still refuse you access.
Right to Buy scheme: A new scheme is being trialled in the Midlands, offering housing association tenants the opportunity to purchase their property with discounts of up 50% on market value. The tenants, individuals or families, must have been living in the property for over three years, and it is hoped that if the pilot is successful, that eventually 1.3million tenants nationwide will benefit from the potential to purchase their home.
Subletting: Subletting is becoming more and more coming, especially in large towns and cities. It is the process of your tenant turning into a landlord themselves, and bringing in ‘sub-tenants’ to live in the property, sometimes without your knowledge. This can be dangerous as you Many tenancy agreements will include a clause preventing the tenant from subletting.
Solid fuel: It’s common knowledge that gas safety in rental properties is no joke, however, one of the most common confusions is over when a CO alarm is required. Legislation requires an alarm to be fitted in any room that contains an appliance that burns (or is capable of burning) solid fuel. This includes wood, coal and pellets, but does not include gas or oil. There is no legal requirement to fit a CO alarm near a gas boiler – but it is a good idea to do so.
Tenant fee ban: the tenant fee ban is a new planed legislation designed to prevent the charging of extortionate fees to tenants. The proposed ban, which is likely to be introduced in 2019, will see a both landlords and agents unable to charge tenants for anything other than holding/security deposits, or costs incurred following breaches of the tenancy agreement. Deposits are also capped at six weeks’ rent, with holding deposits capped at one week.
Universal Credit: An update to the traditional benefit system. Universal Credit sees recipients receiving all their benefit payments paid into their own bank account in one lump sum, once a month. They are then responsible for paying their own bills, and rent.
Verbal tenancy agreement: A legal agreement between landlord and tenant, where no written tenancy agreement is issued, but the terms of the tenancy are discussed and agreed verbally. This format can be very difficult to enforce because there is often no proof of what has been agreed, and is not advised.
Wear and tear: Wear and tear is the amount of damage you would expect to see in a property upon the end of a lease. This would vary depending on the length of the lease and the amount of people living in the property.
ZZZ:It might be exhausting, but keeping barest of up-to-date terms can really help you wrap your head around some of the trickier situation you may find yourself in as a landlord.
If you can think of any terms that you think should be added, let us know in the comments, and we’ll make sure they’re added in!