Lettings legislation governs nearly every task that a letting agency undertakes on behalf of its landlords, to ensure it stays compliant, meets its obligations, and understands the rights and responsibilities of everyone involved.
Some welcome the increased accountability of this legislation on the private rented sector, making letting a property a fair experience for all.
Others highlight the growing pressures that may discourage more landlords joining and push more landlords out of the market, at a time when stock levels struggle to meet tenant demand.
What's the role of letting agents when it comes to compliance?
Agents need to be vigilant to ensure they're keeping themselves and their landlords acquainted with the latest legislative updates in the UK to stay compliant.
This can be anything from serving prescribed information at the right time to tenants to featuring up-to-date EPC certificates when marketing a property.
Why may it be beneficial for landlords to work with an agent?
Lettings compliance requirements are renowned for being increasingly stringent.
In fact, here are four agencies that have shared how it helps them do just that.
What's covered in this guide?
This guide outlines the key pieces of legislation from across the UK that your agency needs to familiarise itself with help it stay compliant, avoid hefty fines, and make sure your tenants and landlords receive the best possible service.
Plus it outlines the legislation on the horizon in the UK that may agents and landlords will need to start to consider and prepare for - such as changing EPC ratings and the Renters (Reform) Bill.
The information found in this page is intended as a guide only and does not constitute legal advice. For more details about your legal obligations as a letting agent or landlord operating in the private rented sector, visit gov.uk.
1. Preparing your landlord's property
Keeping your tenants safe is a primary responsibility of all landlords and agents.
There are various checks, inspections, and tests to undergo to ensure everything in the property is in full working order, it doesn't pose a hazard to your tenants, and your landlords legal obligations are met.
You can use the government's Housing Health and Safety Rating System to assess the safety of your property in more detail.
Fitness for Human Habitation
When you welcome tenants into your landlords' properties in England, you need to make sure that the properties are fit for purpose.
In other words, you need to make sure they're suitable for someone to live in - at the beginning and through to the end of the tenancy.
Multiple layers of legislation covering repairs and the safety of tenants while in a property help to direct your agency in what you'll need to do to stay compliant.
In Wales, landlords can even apply for a loan from the government to help get a property fit to let.
What is the Fitness for Human Habitation Act?
The Homes (Fitness for Human Habitation) Act 2018 in England outlines a landlord's obligations to make their property fit for human habitation from the start to the end of a tenancy, including shared spaces.
To be compliant, properties must be "free of serious hazards". Since 20 March 2020, the act has applied to all periodic tenancies in England.
It has applied since 2019 for all renewing fixed-term tenancies; new secure, assured, and introductory tenancies; and tenancies under seven years granted on or after 20 March 2019.
How can landlords and agents meet their legal obligations under the act?
Under the act, landlords and their agents need to ensure that their property is free from hazards at the start of the tenancy.
If the tenant makes them aware of a hazard, they'll normally need to give 24 hours’ written notice to their tenants to fix the hazard.
There are certain circumstances where the landlord won't be responsible for rectifying the issue.
For example, if the tenant causes the issue or if the landlord can't get consent to enter the property.
You can share this checklist with your landlords to understand what they may need to consider under the act.
How to meet your repair and maintenance compliance obligations
To help keep your landlords' property fit for habitation in England, you and your landlords have certain repair and maintenance responsibilities to your tenants.
If your tenant contacts you about an issue, you'll need to be ready to take action.
You can specify certain minor repairs that your tenants can carry out in the tenancy agreement.
If the tenant causes damage to the property, they will generally be required to fix it or pay for it to be repaired - or, if they don't, that's where their security deposit comes in.
The Gas Safety (Installation and Use) Regulations 1998 in England, Scotland, and Wales outline that landlords and agents need to carry out safety checks of gas appliances on a yearly basis to stay compliant and ensure they're keeping their tenants safe.
How to stay gas safety compliant
You and your landlords aren't responsible for the safety of your tenants' gas appliances.
However, for any appliances you provide, you'll need to make sure you use an engineer registered with Gas Safe to:
- Safely install and maintain all gas equipment in their properties
- Do an annual gas safety check on all permanent and portable gas appliances and flues
- Obtain and share a Gas Safety Certificate with new tenants or within 28 days, mid tenancy
- Rectify the problem quickly
Agents and their landlords have certain fire safety obligations to their tenants, and should be aware of the risks posed by different elements in a property.
How to keep your tenants safe from risk of fire
First, the basics: agents and landlords need to ensure they have a minimum of one smoke alarm on each floor of the property and a carbon monoxide detector in rooms with a solid fuel burning appliance (i.e. a fireplace) - all checked at the start of the tenancy.
The government has also confirmed its plans to extend the current regulations on domestic smoke and carbon monoxide alarms, to provide more comprehensive protection from fixed combustion appliances.
Draft legislation has been released, and the new rules are expected to come into effect from 1 October 2022.
Robert Bolwell, Senior Partner at Dutton Gregory, has also shared some top tips for how you can help your landlords prepare for the changes.
Next, fire doors. These aim to stop smoke and high temperatures from preventing tenants escaping if there were a fire.
You should make sure that all front doors and doors leading onto corridors and staircases are "self-closing" - and that they don't bang shut, encouraging your tenants to wedge them open.
You'll have to check that the tenants' potential escape routes are clear and that your tenants don't store anything in the electrical and gas riser cupboards.
You'll need to undertake a fire risk assessment of the property if you plan to upgrade your home with any building work or refurbishments too.
What are the steps to assessing a property's fire risk?
- Identify any fire hazards in your property
- Identify who will be at risk i.e. your tenants
- Evaluate those hazards to find ways to remove or reduce them
- Keep a record of your findings
- Prepare an emergency plan for your tenants
You'll need to redo your risk assessment on a regular basis, to make sure that nothing's changed and that the landlords' properties are still compliant.
Fire safety regulations are evolving as part of the Housing Safety Bill.
You can read more about the Fire Safety Act 2021, which specified more on the topic of multi-occupied residential buildings, in our guide.
Energy efficiency is a hot topic, especially with the energy crisis ongoing.
The UK government has set itself the target of reaching net zero by 2050 - and that means a lot of extra regulation for a lot of industries.
What are the Domestic Minimum Energy Efficiency Standard (MEES) Regulations?
The Domestic Minimum Energy Efficiency Standard (MEES) Regulations have applied to most domestic private rented properties since 1 April 2020 in England and Wales.
Under these regulations, your landlords' properties are required to have a minimum Energy Performance Certificate rating of E.
To stay compliant, you'll also need to make sure you're advertising the EPC rating when marketing the property.
What do landlords need to invest to upgrade their property's energy efficiency?
If a property doesn't meet this standard, your landlords are required to invest in upgrades to improve its energy efficiency.
However, there are limits to what a landlord is required to do.
For example, they only need to spend a maximum of £3,500 of their own funds to make these improvements.
If they can't raise the rating to the required level, they can apply for an "all improvements made" exemption.
Some local councils have been granted extra funding to crack down on any properties that don't meet the required standards.
Your agency should be on hand to help advise your landlords, not only of their legal obligations but also on the opportunities in making a property more energy efficient.
What are the plans to increase energy efficiency standards?
The government plans to raise the EPC rating required even further, with proposals made to require an EPC band C by 2028 for all private rented properties.
Landlords will need to invest more to reach this rating, and so the government is proposing to increase the maximum investment required to £10,000.
Electrical safety obligations are becoming more stringent, with the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 coming into force in June 2020 and applying to all tenancies since April 2021.
How you can meet the Electrical Safety Standards
The regulations outline that agents or their landlords must:
- Have the electrical installations in their properties inspected and tested at least every five years
- Use “qualified and competent” engineer to do so
- Provide a copy of the Electrical Installation Condition Report (EICR) to their tenants and to their local authority if requested
- Complete any remedial work within a maximum of 28 days - and provide tenants and local authorities with proof of this having been completed within 28 days too.
There are fewer regulations and inspections to undertake in England and Wales for water than for other safety aspects of renting out a property.
There's no requirement to keep a record of inspections, for example, and it's simple to assess the risk yourself, so it does not need to be costly.
How to keep water safe in your landlord's property
There are still things that your agency and its landlords should be doing to ensure that the properties' water supplies are risk free, including:
- Flushing out the system before you let the property
- Making sure no debris gets into the water system
- Ensuring that water temperatures remain consistently at the correct level i.e. keep hot water hot and cold water cold
- Checking the pipework for any issues
If a property is empty, that's when there's most risk as the water won't be flowing through the system as regularly.
Hot and cold taps should be used at least once a week to make sure water doesn't stagnate.
If the house is vacant for an extended period, point one of the above risk assessment list becomes even more important.
2. Letting a property
Once your landlord's property has undergone all the necessary checks to make sure it's safe for your tenants, the next step is to get a tenant into that property.
From creating a tenancy agreement to making sure that your tenants' deposits are registered with an appropriate scheme, there are steps that need to be completed at the right time in the rental process to keep you compliant and make sure that the rights of all parties are protected.
Tenancy agreements are a written or verbal agreement between a landlord and a tenant, outlining the rights and responsibilities of each party, including the agent.
Although a written agreement is not a legal requirement, it's best practice, to avoid confusion during the tenancy and to make sure it's fair for everyone.
Types of agreement
In England, Assured Shorthold Tenancies (AST) are the most common type of agreement (although this may change under the Renters (Reform) Bill.
In Wales, new Occupation Contracts came into play in December 2022 under the Renting Homes (Wales )Act 2016.
In Scotland, Private Residential Tenancies (PRT) are the norm.
All your written contracts should ensure that they include certain details, such as:
- the names of everyone involved
- how much rent you're charging
- the tenancy start and end date
- rights and responsibilities
...and so on.
Rights and responsibilities
Your tenants should also read through the contracts carefully to understand their responsibilities - such as allowing access to a property for repairs - and their rights - such as end-of-tenancy requirements.
To help your landlords and tenants understand what may be required of them, you can share these guides:
- A guide to your landlords' rights and responsibilities for repairs
- A guide to your tenants' rights and responsibilities
You can head back to section one, "Preparing your landlord's property", to read more about your landlords' responsibilities when it comes to repairs and fitness for human habitation in more detail.
Renting with pets is becoming ever more popular, and choosing to allow pets can make your landlords' properties more attractive.
The latest AST templates in England now include a clause for allowing pets in private rented properties.
However, this clause is a suggestion only - landlords are not legally required to include it in their written contracts.
There are different ways to better protect your landlords' investment if they choose to welcome pets, from including clauses on the veterinary records required to suggesting that both the landlords and tenants take out extra insurance.
For each new tenancy, it's common practice to take a security deposit from your tenants to help protect your landlords' investment in case the tenant damages the property during their stay. That deposit must be protected in a registered scheme.
Holding deposits in England and Wales don't need to be in a scheme but, if that payment then goes towards the security deposit, you'll then have to protect it.
A recent court case raised the question of who can sign the tenancy deposit certificate in England, concluding that anyone with express or implied authority can sign, including agents on behalf of their landlords.
How to stay deposit protection compliant in England and Wales
In England and Wales, security deposits must be:
- Capped at five weeks’ rent when the property's annual rent is less than £50,000, and six weeks’ where the annual rent is more than £50,000
- Registered in one of three tenant deposit protection (TDP) schemes within 30 days of receiving the payment:
- Returned to the tenant within 10 days of them moving out
You'll then need to share extra information about the property with your tenants too, including the address of the property and why you may retain some of their deposit at the end of the tenancy.
If you don't supply these details to tenants within the required timeframe, you may not be able to serve a Section 8 eviction notice to regain possession of your landlord's property at a later date.
How to stay deposit protection compliant in Scotland
In Scotland, security deposits must be:
- Capped at two months' rent
- Registered in one of three tenancy deposit protection schemes within 30 days of receiving the payment:
- Returned to the tenant, once they've confirmed within 30 days if they agree or disagree on the amount they'll receive based on the landlords judgement
Similar to England and Wales, you'll need to share details about the property address, the provider you're using, and why part or all of the tenant's deposit may be kept, among other information.
At the end of the tenancy, if an agreement can't be reached on the deposit amount to return to the tenant, the schemes across England and Wales and Scotland offer free dispute resolution services, to help determine how much of the deposit should be returned.
Deposit Replacement Schemes
You can choose to offer your tenants an alternative to a deposit - a non-refundable fee - alongside a traditional deposit of five to six weeks' rent.
Your tenants won't have to wait for their security deposit to be returned before paying for the deposit on their next home, reducing void periods for your landlords.
The tenants would still be liable for any costs at the end of the tenancy, as with a traditional deposit.
Right to rent
In England, renters need to prove their right to rent.
While this has traditionally involved checking original documents - you can find a full list of eligible documents on the government's site - the checks are slowly becoming more and more digitised.
Brexit sped up the process, with new online checks required for EU, EEA, and Swiss nationals.
You can get up to speed on the different ways to conduct the right to rent check in our blog.
You can also read more about a recent evaluation of the right to rent scheme and how landlords currently engage with it on our site.
What's the right to rent process for EU, EEA, and Swiss nationals?
EU, EEA, and Swiss nationals in the EU Settlement Scheme or with a UK visa should now use the government's "view and prove" scheme to prove their right to rent.
Tenants will need to go through the simple online process to get a "share code", which you or your landlords will then use to check their right to rent.
What are the right to rent guidelines for B5JSSK nationals?
Visitors from Australia, Canada, Japan, New Zealand, Singapore, South Korea and the United States - B5JSSK nationals - can prove their right to rent with their passports alongside proof of when they entered the UK, as they will have leave to stay for six months.
How will the new digital right to rent process for British and Irish citizens work?
Digital right to rent checks for British and Irish citizens are now a reality through the use of Identification Document Validation Technology (IDVT).
Identity Service Providers (IDSPs), once certified, can undertake the ID and eligibility checks on behalf of the agent or landlord using IDVT.
Tenants eligible to use this new process must still be given the option of a manual check if they wish.
Tenant Fees Act 2019 (England)
The Tenant Fees Act 2019 banned all fees letting agents could charge tenants and guarantors, aside from a small number permitted by the act.
In the two years since it became law, letting agencies have become more agile and efficient in response, so that they could pivot and find new revenue streams, while cutting down on costs and working smarter.
Agents letting on Assured Shorthold Tenancies, or renting out student lets or HMOs, need to consider not only the upfront requirements of the Act but the potential consequences of non-compliance.
For example, did you know that you may find it harder to evict a tenant that's in arrears or that you may not be able to return a holding deposit?
What you can charge tenants and guarantors
There are limits to what you can choose to charge your tenants and guarantors. You can still charge for:
- holding deposits (maximum of one week's rent)
- security deposits (maximum of six weeks', in certain circumstances)
- late rent payments (3% above Bank of England base rate)
- changes to a tenancy if a tenant asks for it
- ending a tenancy early on the tenants' request
- payments for extra bills
How holding deposits are affected by the Act
As well as the cap on the amount you're allowed to charge on deposits, there are strict new rules around returning or retaining holding deposits.
You'll only be able to retain a holding deposit in four situations:
- If your tenant doesn't pass the right to rent checks
- If they share false or misleading information with you
- If the tenant decides to back out of the rental process
- If the tenant doesn't take reasonable steps to enter into the tenancy agreement.
3. Keeping your agency compliant
As an estate and letting agency, you have certain legal obligations for how you assess your customers and how you protect their interests. Although these may evolve in the future, as Great Britain becomes less aligned with EU legislation post-Brexit, here's the situation as it stands for just some of those laws that you'll need to follow.
Client Money Protection Schemes
Letting agents in England that hold their landlords' money - e.g. rent, deposits, etc. - in an FCA authorised bank account are required to be part of a Client Money Protection scheme to protect their landlords' money in case they're unable able to pay them back. The two-year grace period to get these systems in place came to an end in April 2021.
That means that you'll need to register and display a certificate as proof - plus, put in place procedures to show that you're handling that money in a responsible way.
Money Laundering and Terrorist Financing (Amendment) Regulations 2019
Under anti-money laundering legislation, since June 2021, if your agency processes monthly rents of €10,000 or more for a property, you'll need to be registered with HMRC and assess your business for money laundering risk.
You should consider the types of customer you have, where they're based, where their funds come from, whether you meet them face to face, and so on. This will also require more in depth "Know Your Customer" checks as part of your customer due diligence.
Based on your assessment, you'll be responsible for setting up policies and procedures to address any risks that your assessment may have highlighted.
General Data Protection Regulation (GDPR)
Although Great Britain is no longer part of the European Union, GDPR is still part of your day-to-day responsibilities.
In the UK, its regulations are implemented through the Data Protection Act 2018. The Act means that, as a business that handles personal data, you will need to make sure that information is:
- Used for very clear and specific purposes
- Accurate and up to date
You also need to make sure that you don't keep any of your customers' information for longer than needed.
You can read more about your GDPR responsibilities on the government's site.
Referral fees and commissions
As well as being limited in what you can charge your tenants in England, under the Tenant Fees Act 2019, you must comply with consumer protection law too, which means being transparent in the fees that you're charging your landlords and all the costs associated with letting a property to a tenant.
You need to make sure your landlords know all of the non-optional fees that you're charging, so they can make a decision based on accurate and not misleading information.
Any fees that are optional, or variable, should be clearly set out too - basically making it easy for your landlords and tenants to see exactly what they'd be charged in different eventualities, with no confusion on their part.
Registering for a redress scheme
Your agency needs to be registered with a redress scheme, to make sure that, if one of your customers had a complaint against your business, there are procedures in place that they can follow, particularly if you can't reach an agreement on how to resolve their case.
There are two redress schemes that you could join:
These schemes offer a resolution service. Once your agency has joined one of these schemes, you'll have to agree to use that resolution process to resolve any complaints - and to accept the outcome, once a decision has been made on how to handle the complaint.
Making Tax Digital (MTD)
For Making Tax Digital (MTD), your agency will need to comply with the shift to digital, and you can also remind your landlords of the need to start moving their tax returns online too.
This will involve ensuring digital records are kept and setting up relevant software to submit returns and tax information to HMRC.
MTD will move VAT returns, income tax, and corporation tax online. So far, since April 2019, businesses registered for VAT with a turnover above £85,000 have needed to keep digital records and submit returns digitally. The next steps are:
- April 2022 - all VAT-registered landlords and self-employed sales agents will need to meet the above conditions too
- 6 April 2026 - businesses registered for Income Tax Self Assessments, including landlords, with an income over £10,000 will need to follow MTD rules
- Date TBD - MTD on corporation tax. Changes are expected to be mandated by 2026
4. Preparing for the future
Although there are many legislative dates on the horizon that agents need to be aware of to keep their landlords up to date, some new lettings legislation in 2022 will have a bigger impact than others.
Renters (Reform) Bill
The Renters (Reform) Bill has been on the cards since 2019, announced as a "sweeping raft of reforms" aiming to enhance the rights of renters.
The bill is now awaiting its second reading as it passes through Parliament.
For an overview of how the Renters' Reform Bill proposals have evolved over time, dip into our timeline of the bill.
Proposals on the table include:
- Abolishing section 21
- Strengthening section 8
- Creating Lifetime Deposits
- Introducing a property portal
- Expanding the remit of the Decent Homes Standard to include private rented properties
- Strengthening redress for tenants through a new Ombudsman for private landlords
Abolishing section 21
Letting agents and landlords can currently use a section 21 notice in England to evict tenants after the end of a fixed-term tenancy, or during a periodic tenancy.
It is also known as a "no-fault eviction" - the landlord or agent doesn't need to establish that a tenant is at fault to ask them to leave - and you'll generally need to give your tenants two months' notice.
What will change for section 21 under the bill?
The promise to abolish section 21 in the Renters (Reform ) Bill aims to stop landlords and agents from being able to "evict tenants from their homes at short notice and without good reason".
Concerns around how easy it will be to regain possession of a landlord's property are a top critique of the proposals - which is why the government is also proposing to strengthen section 8 at the same time.
Strengthening section 8
Landlords and agents can use a section 8 notice to evict a tenant before a tenancy comes to an end, but only if the tenant has broken the terms of the agreement in some way.
For example, if they're behind on their rent, they've damaged the property, or they originally gave false information when applying for the tenancy. In total, there are 17 grounds for eviction under a section 8 notice.
Crucially, for a section 8 notice to be valid, there are a number of steps to follow - and many are linked to the documents shared with tenants at the start of the tenancy, such as the EPC, or the prescribed information.
If these are shared at the wrong time in the tenants' lettings journey, you may not be able to serve the notice to regain possession of your landlord's property.
How will section 8 be strengthened in the bill?
Currently, landlords can issue a section 8 notice if they want to live in the property as their home - while the new proposals suggest allowing the landlord to repossess a property for family members to move in.
Similarly, a new ground allowing a landlord to sell the property will come into play, as well as one for repeat serious arrears.
The government will also work with the Ministry of Justice (MOJ) and HM Courts and Tribunals Service (HMCTS) to streamline the court process.
Introducing a property portal for landlords
A landlord register is already in place for Scotland and Wales, but this is not the case in England, although landlords can choose to register with their local council if they wish.
What could the property portal in England look like?
In February 2022, the government announced in its Levelling Up White Paper that it will consult to introduce a property portal, which landlords will be legally required to register for.
This will help landlords understand their obligations and give tenants performance information about the property to hold their landlord to account.
The costs associated with enforcement and the current scattered "selective licensing" have been labelled as concerns around implementing a national system.
Shelter has previously argued that the Renters' Reform Bill should be used to ensure that a full support system is in place to help ensure the success of a nationwide register.
Implementing the Decent Homes Standard
The Fairer Private Rented Sector White Paper confirmed that it will legislate to apply the existing Decent Homes Standard to the private rented sector.
Currently, the standard is only for the social housing sector, so it will be reviewed to see how it could directly be applied to the private rented sector too.
Regulation of Property Agents (RoPA) (England)
The Regulation of Property Agents (RoPA) Report was published back in 2019. Since then, little legislative progress has been made.
However, property agents are starting to take it upon themselves to prepare, to ensure that they're not caught out when it is ratified.
The report includes three main recommendations:
- Introducing a new, independent property-agent regulator
- Creating a legally-enforceable Code of Practice for property agents
- Ensuring minimum entry requirements and mandatory professional development for property agents.
How to prepare your agency for the Regulation of Property Agents
To get a jump start on what is likely to become law, your agency can already start to prepare. The first suggestion, from ex-ARLA Propertymark CEO, David Cox: look into getting your OFQUAL-regulated level three qualification, as this will be a requirement for most agents - and directors will even need the next level up.
He also has further recommendations for the future, once more information has been released about what the report defines as "reserved activities."
This will of course involve some investment on your agency's side. The fees for this type of required training has yet to be defined.
Sean Hooker, Head of Redress at the Property Redress Scheme, has predicted that this will be "affordable", and in line with ARLA Propertymark's current costs.
Your agency should plan ahead to ensure you can pivot and include this in your budget for relevant staff members.
The information found in this page is intended as a guide only and does not constitute legal advice. For more details about your legal obligations as a letting agent or landlord operating in the private rented sector, visit gov.uk.
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