Selective licensing in the private rented sector

Selective Licenses

What is Selective Licensing?

Selective Licensing allows a local authority to respond to local concerns such as poverty or immigration, by requiring different licences from landlords. The requirement for a license can also be isolated to small areas within an authorities’ jurisdiction and not act as a blanket rule.

When an authority designates an area for licensing, it applies to all privately rented homes in that area, unless a property falls under certain exceptions listed in the Selective Licensing of Houses (Specified Exemptions).

However, if a property is a House in Multiple Occupation and already requires a license under Part 2 of the Act, it doesn’t need another selective license.

As of April 1, 2015, if this scheme affects more than 20% of privately rented homes in the area under the jurisdiction of the local authority, the local authority must get approval from the Secretary of State for Levelling Up, Housing, and Communities. If the designation covers 20% or less of the area, it doesn’t need this extra approval. The authority must also follow certain legal requirements and consult with the public for at least 10 weeks before making these decisions.

If the local authority has multiple designations at the same time and each covers less than 20% of the area, then they are still required to submit all of the schemes to the Secretary of State for confirmation, if cumulatively they account for more than 20%.

Selective Licenses

Why might a local housing authority introduce a license?

There are a few reasons a local authority might introduce a license, but the designation has to satisfy one or more of the following conditions:

  • Low housing demand or that it’s likely to become low
  • High level of deprivation
  • Poor housing conditions
  • Significant and persistent anti-social behaviour problems
  • High levels of crime
  • High levels of migration

There are then further restrictions to designating a Selective License. For the following conditions, a designation may only be made where there is a high proportion of homes in the private rented sector:

  • Poor housing conditions and/or
  • Migration
  • Deprivation
  • Crime

What's the penalty for not not having a selective license?

Shelter has provided an outline of potential penalties for not having a Selective License where required.

“Where a property should be but has not been licensed, or a license has been obtained but its conditions are breached, a range of sanctions may be available.

These are:

  • Offences can be punished on conviction by a fine

  • A local authority can impose a civil penalty of up to £30,000 as an alternative to prosecution

  • A rent repayment order (RRO) can be obtained but only in respect of a period where a property has been let unlicensed when it should have been licensed

  • The landlord could be subject to a banning order

  • The landlord cannot serve a section 21 notice requiring possession of an assured shorthold tenancy during the unlicensed period”

London Property Licensing reports of one landlord in Brent being ordered to pay a £90,000 penalty.

“Applying to license the three private rented properties would have cost the landlord £1,620, as Brent Council charge a fixed application fee of £540 per property for up to five years.

However, on 28 January 2020, they were ordered by the court to pay a £25,000 fine for each of the unlicensed properties, £5,000 for failing to supply documents to the council when required to do so, and £10,763 in court costs to the council, totalling £90,863 including a victim surcharge.”

How can a landlord find out if they need a Selective License?

As the need for a Selective License, and the specific requirements for that license changes between local authorities and postcodes, the local authority for the property being rented should be consulted. Here are 4 steps to check and verify any Selective License requirements for a property:

  1. Identify Your Location: Determine which local authority governs your property. You can find this information by searching online or contacting your local council.

  2. Check the Local Rules: Visit the website of your local authority or contact them directly to find information about Selective Licensing schemes in your area. They will provide details about whether Selective Licensing is required, which types of properties it applies to, and any exemptions.

  3. Review the Criteria: Typically, Selective Licensing is applied to certain geographical areas or specific types of properties where there are issues with housing conditions, anti-social behaviour, or other concerns. Your local authority will outline the criteria that trigger the need for a Selective License.

  4. Check for Exemptions: Some properties may be exempt from Selective Licensing requirements. Common exemptions include properties already licensed as Houses in Multiple Occupation (HMOs) or those covered by other licensing schemes. Verify if your property falls under any exemptions outlined by your local authority.

Applying for a License:

If your property falls within the area covered by a Selective Licensing scheme, and it’s not exempt, you will need to apply for a license from your local authority. They will provide you with application forms and instructions on how to proceed.

Remember that failure to obtain the required Selective License when necessary can result in penalties and legal consequences, so it’s important to follow the regulations set by your local authority. If a landlord has multiple properties in their portfolio, it is very likely that each property will require different licenses. Therefore, a landlord should ensure each property is checked even if two properties are close to one another. 

If this all seems like a bit of a mine-field with multiple properties requiring different licenses, we’ve seen that Yuno could be a particularly helpful tool. They provide a user with “alerts when your property(s) is affected by changes to local and national legislation, including Licensing and Article 4 Planning permission. Yuno will provide a clear process and solution to ensure you are compliant.”

Selective Licensing

In conclusion

Selective Licensing is a regulatory tool used by local authorities to address specific local concerns related to housing conditions and community well-being. These licensing requirements can be tailored to apply to particular areas within an authority’s jurisdiction, rather than being a one-size-fits-all rule.

Property owners should consult their local authority to determine whether they need a Selective License, as the criteria and exemptions can vary by location. Failing to obtain the necessary license can result in penalties, including fines and other legal consequences.

It’s essential for landlords and property owners to stay informed about the regulations in their area, follow the appropriate application process if required, and ensure compliance with the law to avoid potential financial and legal repercussions.

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Government changes to EPC’s and gas boiler legislation

What's the UK's latest position on Net Zero?

In previous articles we discussed the latest legislative developments with both Energy Performance Certificates for landlords, and the end of gas boiler installation by new home developers. In September 2023 the Prime Minister re-mapped a “fairer” path to achieve the target to ease the financial burden. Gov.uk states that:

“UK’s over-delivery on reducing emissions provides space to take a more pragmatic, proportionate, and realistic approach to reaching net zero.” 

  • Revised plans will ease the burden on working people, as the Prime Minister forges a credible, transparent path to net zero that maintains public consent.

  • The ban on new fossil fuel boilers for certain households will be delayed while cash grants for boiler upgrade schemes will increase by 50% to £7,500 for those who want to transition now.

  • Scrap policies to force landlords to upgrade the energy efficiency of their properties, but instead continue to encourage households to do so where they can.

What are the changes to EPC's and the MEES?

LandlordZONE quote Ben Beadle, chief executive of the National Residential Landlords Association, responding to the PM’s speech scrapping the proposed energy efficiency targets as saying: 

“We want to see all properties as energy efficient as possible.”

“But the uncertainty surrounding energy efficiency policy has been hugely damaging to the supply of rented properties.”

“Landlords are struggling to make investment decisions without a clear idea of the Government’s direction of travel.”

Ben Beadle

“It is welcome that landlords will not be required to invest substantial sums of money during a cost-of-living crisis when many are themselves struggling financially.”

“However, ministers need to use the space they are creating to develop a full plan that supports the rental market to make the energy efficiency improvements we all want to see.”

“This must include appropriate financial support and reform of the tax system which currently fails to support investment in energy efficiency measures.”

Does that mean there are no MEES?

The Government has announced that the latest EPC proposals have been abandoned, but the existing Minimum Energy Efficiency Standards (MEES) are still in place and fully enforceable. It is important therefore, that landlords maintain the energy efficiency of rented properties in line with the MEES of “E” or above. 

Lettingaproperty.com reports that “The Government also proposed raising the penalty for not having a valid EPC from £5,000 to £30,000 from 2028.” As these are part of the proposal for 2028, these too will be scrapped. 

How will the gas boiler ban be affected?

We provided commentary in August 2023 on gas boilers no longer being installed in new build homes from 2025. There are two parts to the Government’s gas boiler proposal, and we focussed on the second:

  1. Private residential homes upgrading personal boilers
  2. Heating systems being installed in new build homes. 
Under revised plans, the Government will:
 
  • Delay the ban on installing oil and LPG boilers, and new coal heating, for off-gas-grid homes to 2035, instead of phasing them out from 2026. Many of these homes are not suitable for heat pumps, so this ensures homeowners are not having to spend around £10-15,000 on upgrading their homes in just three years’ time.

  • Set an exemption to the phase out of fossil fuel boilers, including gas, in 2035, so that households who will most struggle to make the switch to heat pumps or other low-carbon alternatives won’t have to do so. This is expected to cover about a fifth of homes, including off-gas-grid homes – those that will need expensive retrofitting or a very large electricity connection. – Gov.uk

Whilst the EPC changes have been scrapped, the “boiler ban” relating to property developers installing heating systems into their new homes, has only been delayed. The ban date previously set for 2025, has been extended to 2035. A 10-year delay

In conclusion

The Government suggests a need for balance. Landlords, homeowners, and property developers alike have expressed concerns about the uncertainty surrounding energy efficiency policies and the financial burden they may impose. However, Institutions like the Royal Institute of Chartered Surveyors (RICS) says that the “ongoing indecision about this and related matters does not fill the built environment sector with confidence.”

The Negotiator quotes RICS as saying the following on both topics:

“RICS looks forward to the government providing an alternative solution to improve energy efficiency given its importance in not just tackling climate change, but economic and social well-being. “The government should also use this time to undertake a much-needed reform of the EPC methodology to ensure we accurately assess and incentivise energy performance improvements.”

“RICS welcomes the announcement of additional support for the boiler upgrade scheme; however, we reiterate the importance of a holistic strategy that promotes energy efficiency and decarbonisation that is not limited to energy products.”

The path to a sustainable and energy-efficient future must consider the practical challenges and financial implications for all stakeholders. It is suggested that the revised plans aim to strike this balance while maintaining the goal of reaching net zero emissions, ensuring that the transition is credible, transparent, and supported by public consent. It’s essential for policymakers to continue working closely with industry stakeholders to develop comprehensive plans that promote energy efficiency and sustainability while addressing the concerns of those affected by these changes.

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HMO legislation: National or local Government

HMO image

What is an HMO?

According to GOV.UK, “A house in multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.”

If your landlord is renting out a large HMO in England or Wales, then they must have a licence if all of the following are true:

  • It is rented to 5 or more people who form more than 1 household
  • Some or all tenants share toilet, bathroom or kitchen facilities
  • At least 1 tenant pays rent (or their employer pays it for them)

Each HMO a landlord runs will require a separate licence and each is valid for a maximum of 5 years.

GOV.UK goes on to clarify that; “Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council.”

HMOs were defined by The Housing Acts 1985 and 1989. They provided the first guidelines for safety requirements and licensing. The Housing Act 2004 was introduced and two years later, licensing for large HMOs became mandatory. These were defined as having five or more tenants from more than one household.

In October 2018, this was further developed to where the ‘3 storey’ requirement for HMOs was scrapped.

What’s the benefit of HMO licences managed by local councils?

HMO (House in Multiple Occupation) licensing laws are typically managed at the local council level for several reasons:

  • Local Knowledge and Control: Local councils have a deep understanding of their specific housing markets and the unique needs and challenges of their communities. Managing HMO licensing at the local level allows councils to tailor regulations to address the specific housing issues and demand for HMOs in their areas.
  • Local Accountability: Being accountable to their residents, local councils are better positioned to respond to local concerns and ensure that HMO properties are managed in a way that is consistent with the needs and preferences of the local population. This local accountability fosters greater transparency and responsiveness in managing HMO licenses.
  • Enforcement: HMO licensing often involves regular inspections and enforcement of safety and quality standards. Local councils are more readily able to monitor and inspect properties within their jurisdiction, ensuring that landlords comply with regulations and that tenants are safe and well-cared-for.
  • Varied Local Conditions: Housing markets and conditions can vary significantly from one locality to another. What works well in one area may not be suitable for another. Local councils can adjust HMO licensing requirements to account for these variations, ensuring that regulations are appropriate for the specific circumstances of each area.
  • Community Engagement: Local councils can engage with local residents, landlords, and other stakeholders to gather input on HMO regulations. This engagement helps in the development of balanced and effective licensing policies that take into account the needs and concerns of the local community.
  • Rapid Response to Local Issues: Housing conditions and demand can change over time. Local councils have the flexibility to adapt HMO licensing regulations quickly in response to changing local conditions or emerging issues.

Decentralised Decision-Making: By managing HMO licensing at the local level, authorities can avoid one-size-fits-all approaches that may not be appropriate for all areas. It allows for decentralised decision-making that considers the specific circumstances of each council’s jurisdiction.

HMO - Town Hall

How to get an HMO Licence

According to Kamma, a PropTech platform which helps landlords and letting agents navigate the complexity of property licencing:

“Applying for a licence is a complex, multi-step process and can be daunting for inexperienced as well as seasoned landlords. The first step is to verify if the property needs to be licensed and to find out if you need to apply for a mandatory, additional or selective licence. Second, speak to the council to double-check licensing requirements.” They emphasise the importance for the landlord or agent to “carefully check each time as ignorance is no defence against being fined. A property inspection then usually needs to be set up and the licence applicant needs to meet and liaise with the council and manage the application through to a decision.”

The penalties for non-compliance?

The National HMO network provides a helpful summary of the penalties under the Housing Act 2004 which was modified by the housing and planning act 2016. They state that:

“Letting a licensable HMO without a licence is an offence and can result in unlimited fines (often in the range of £10,000-£40000) or the civil penalty as an alternative to prosecution.  The penalties apply to any person(s)/company(s) having control and/or managing the property.

Landlords who operate a licensable HMO without a licence may also, in certain cases, have to repay rent – known as a Rent Repayment Order (RRO). This applies to rent paid by tenants or by local authorities in housing benefit during a maximum 12 month period.  An RRO is awarded by the FTT on application.

Anyone failing to comply with licence conditions placed on them or breaches any of the HMO Management Regulations commits an offence which could result in a fine of up to £5,000 per offence or an alternative civil penalty.”

The largest recent HMO fines:

One of the clearest, most obvious deterrents for landlords and agents from incorrect licencing is the enforcement of large fines. However an additional pressure to comply to the licencing comes from industry news reports. Every reader gets drawn in by big headings quoting huge fines and misdemeanours. But for the company in the firing-line, especially those who made a mistake with the licencing rather than acting criminally, the consequence to industry reputation can be devastating.

“A buy to let investor has been found guilty of 35 HMO-related offences – and has to pay a total fine of £182,314.90, thought to be one of the largest penalties ever for an individual landlord.”

“But Babar unwisely ignored the requests and the property inspected under warrant in June 2019 where multiple breaches of regulations were uncovered.”

“Such obvious offences breached the HMO licence and a prosecution began.

The licence was revoked immediately and a prohibition order prevents anyone staying at the house until it was made safe and the family relocated.”

“In 2021 when the licences expired, despite repeated contact by the council, no application was received to renew either licence. Inspections in October 2022 confirmed that both properties needed a new HMO licence and that the works had not been done.”

HMO - Houses of Parliament

In conclusion

The regulations surrounding HMOs vary by location, but in England and Wales, large HMOs (housing five or more people from different households) require licensing. These licenses are typically managed by local councils, offering benefits such as tailored regulations, local accountability, enforcement, and community engagement.

Obtaining an HMO license can be a complex process involving verification, council communication, property inspections, and application management. Non-compliance with HMO licensing regulations can result in substantial fines, potentially damaging a landlord’s reputation.

The examples of large fines serve as a deterrent to landlords and agents, reflecting the importance of adhering to HMO licensing requirements. The consequences of non-compliance extend beyond financial penalties, impacting property safety and the reputation of those involved. It is crucial for landlords and agents to stay informed about and adhere to HMO licensing regulations to ensure the well-being of tenants and avoid legal consequences.

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The 2025 Gas Boiler Ban

solar alternative to gas boiler

IMPORTANT UPDATE:

In September 2023, the UK Government made significant updates to their over-all targets for Net Zero. Some of our articles relating to energy legislation provide timelines which are now inaccurate. We therefore have an updated summary for proposals and dates mentioned post 2023. For the latest updates, please see:

Government changes to EPC’s and gas boiler legislation – Finch (finch-app.com)

What's driving the 2025 Gas Boiler Ban?

“In 2025, compliance with the Future Homes Standard (FHS) will become mandatory. Its aim is to ensure that new homes built from 2025 will produce 75-80% less carbon emissions than homes built under the current Building Regulations.” – CBRE

The first thing to note with the new legislation is that gas boilers are not being banned in all properties from 2025 but instead, part of these new regulations are likely to be the substitution of gas boilers with energy efficient alternatives within new build homes. This means that current homes with gas boilers will continue on as they are, but developers and builders of new homes will need to make a decision on which alternatives will be installed into properties. 

Although this new legislation largely affects developers, landlords planning to extend their portfolio should still be aware of the new regulations. If for example, a landlord is considering a new build as their next investment, they should be mindful that although gas may not be running into the property for the boiler, a gas safety certificate may still be required if the property includes other gas appliances such as a gas cooker. 

For landlords with existing portfolios, British Gas have stated that: “There is no legislation on gas boilers that means you must scrap or replace your existing boiler, either before or after 2025. If yours is relatively new and still doing a good job, then there’s no reason to get rid of it

Is this a staged roll-out?

As this is still under technical consultation, the dates given are the past and current considerations to offer a good understanding of where the the Future Homes Standard stands. The initial consultation has been completed to determine the overall plan and so we are now at the technical consultation stage to map out how the FHS will be implemented. The key dates are:

  • 2019 (Spring) – Government announces a Future Homes Standard by 2025 “so that new homes are future-proofed with low carbon heating and world leading levels of energy efficiency.”
  • October 2019 – The consultation on both the conservation of fuel and power, and ventilation to make changes to The Building Regulations for new homes to improve the energy efficiency of England’s buildings.   
  • 2021 – The Government responded to the consultation and The Future Buildings Standard. 
  • 2022 – Overheating Regulations came into effect, meaning that developers must submit building notice, initial notice or deposit plans by June of 2022 for transitional arrangements to apply.
  • 2023 – Full technical consultation on the Future Homes Standard with consideration of required/ appropriate transitional arrangements.
  • 2024 – legislation to be put in place for Future Homes Standards.
  • 2025 – The Future Homes Standard will be implemented

What’s the reason for the removal of gas boilers?

The UK government has made a firm pledge to achieve carbon neutrality by 2050. Discovering an alternative to fossil fuels is crucial for attaining this ambitious goal. As a continuation of the Heat and Buildings Strategy, the upcoming focus is on addressing emissions from residences and enterprises. A significant component of this effort involves the gradual elimination of natural gas-powered boilers. The primary aim is to successfully realise the objective of reaching net zero emissions.

boiler ban

What are the alternatives to gas boilers?

As the ban affects new builds only, it means that the whole heating system will be designed and installed differently from the off-set. The advantage of phasing this in through new houses being built is that alternative systems don’t need to replace in a way that’s compatible with old designs.

Here are some options for alternative heating but not all of these will be used by home builders:

Air source heat pumps (ASHPs) are a type of renewable energy technology that can significantly help in reducing carbon footprints. They operate by extracting heat from the outdoor air and transferring it indoors to provide heating or hot water for buildings. This process is achieved through a cycle of compression and expansion of a refrigerant gas, similar to how a refrigerator works in reverse.

Ground source heat pumps (GSHPs), also known as geothermal heat pumps, are another renewable energy technology. These systems harness the relatively stable heat stored in the ground to provide heating, cooling, and hot water for buildings.

Infrared heating panels are a type of heating technology that operates by emitting infrared radiation, which heats objects and surfaces directly without significantly heating the air in a room. It’s important to note that the carbon footprint reduction achieved by infrared heating panels depends on various factors, including the energy source used to generate electricity, the efficiency of the panels themselves, and how they are used in a specific setting. However, their ability to provide efficient, targeted heating and minimize energy waste makes them a potential tool for reducing energy consumption and, consequently, carbon emissions associated with building heating.

Solar thermal panels, also known as solar water heating systems, are designed to capture sunlight and convert it into usable heat for various applications, such as heating water for domestic use, space heating, and even industrial processes. Their ability to directly convert sunlight into usable heat energy without emissions makes them a valuable tool in the transition to a more sustainable and low-carbon energy future.

Biomass boilers are heating systems that use organic materials, often derived from plant or animal waste, as fuel to produce heat for various applications, such as space heating, water heating, and industrial processes. the overall environmental impact depends on various factors, such as the type of biomass used, the efficiency of the boiler, the sourcing practices, and the management of the fuel supply chain.

Ground source heat pump gas boiler alternative

How a ground source heat pump works:

How close is the industry from meeting the targets?

Estate Agency Today has reported that “In November, research conducted by The Housing Forum’s Futures Network unearthed concern with the potential to meet the requirements set out in the Government’s 2025 Future Homes and Buildings Standards. One in five members surveyed said that their organisation does not have a plan in place that will allow them to deliver homes in line with the 2025 emissions targets, while three in four believed that the industry does not have the necessary skills and knowledge to meet the target within the next 10 years.”

In July of this year, Michael Gove The Housing Secretary, whilst talking about the ban of gas boilers in all new build properties from 2025, said this was ‘one area that I do think that we need to review’.

Mail Online reported Matthew Pratt, Redrow chief executive, as saying that the move would ‘future-proof’ homes, adding: ‘This will provide the opportunity for our customers to reduce their costs and carbon footprint.’

Moving away from the Future Homes Standard and looking to the broader topic of the Governments goal to improve energy performance within UK homes, The Negotiator reported the Chair of the National Infrastructure Commission, Sir John Armitt as saying; “There have been negligible advances in improving the energy efficiency of UK homes, the installation of low carbon heating solutions.”

In the same article referencing the Governments net zero targets, a survey by the British Property Federation and JLL, said that 90% of property sector leaders “do not believe current government policy will deliver a carbon-free property sector in less than 30 years.”

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What are the largest fines in residential property?

Agencies and landlords being fined

We’ve all either heard the stories of or even have experience with troublesome tenants, lousy landlords and non-compliant agents, but are the tens-of-millions of pounds in fines handed out last year really down to an increase in these badly behaved few? Or is the increase in fines down to the newly tightened rules around compliance with the effect of well-meaning landlords and agents unknowingly falling short of compliance requirements?

Here we take a look at some of the biggest fines landlords, lettings agents and sales agents could face in 2023. We also hear from some of the industries’ leading voices to see what they have to say, and look at how you as an agent, can avoid inadvertently landing one of these big fines.

High profile, big ticket fines include:

The industry as a whole seems aligned to the spirit of the rules, regulations and requirements, However, there is no doubt that differing opinions exist regarding the specifics and their application.

Non-compliance issue
Possible fine value
AML compliance
£500,000+
Right to Rent compliance
£1,000 – unlimited + up to 5 years in prison
EPC
£5,000
Incorrect or no licensing
£20,000 – unlimited
Safety certification breaches
£30,000

Are the fines proportionate?

Nigel Lewis at Landlord Zone, reported that Ben Beadle, chief executive officer of the NRLA, when speaking about Right to Rent fines where “Repeat breaches will be fined up to £10,000 per lodger and £20,000 per occupier” he said that; “The announcement is little more than a gimmick.” Ben told The Telegraph “that piling pressure on landlords would merely fail to deal with the root cause of immigration and “make it more difficult for poorer British nationals to find housing because they are more likely not to have passports or driving licences they can use to prove their citizenship status”.

Ben Beadle

In July of this year, Graham Norwood at Landlord Today reported on Ben Beadle’s response to the £10,000 cap on improvement works for MEES to be raised for an EPC.

In 2018 a Minimum Energy Efficiency Standard was introduced, requiring all properties to be let to meet an energy efficiency band of E. Any properties within the bands of F or G can not be let and need the landlord to take appropriate action to comply. The cost relating to the landlord’s appropriate action has a financial cap of £3,500 and includes actions such as loft and wall insulation, upgraded boiler, double or triple glazing, etc. Beyond this maximum cost, a landlord can apply for an ‘All improvements made’ exemption and will be awarded the EPC to let the property. The minimum spend cap is being increase from £3,500 to £10,000 before exemptions can be requested.

Ben Beadle advised Lord Callanan, the Energy Efficiency Minister on the “uncertainty and nervousness over the timescales, and their fear that a cap on improvement works at £10,000 per property might create huge bills for those landlords with the most problematic properties.” Adding that “Landlords are not the ‘fat cats’ the media would make us out to be, with almost 70 per cent basic rate taxpayers. However £10,000 also has a different value depending where in the country you and your portfolio are based”

What must be done to avoid fines?

This isn’t an exhaustive list of all potential residential property fines, but we’ve sourced advice from industry voices to look at avoiding some of the larger fines and navigate recent legislation changes to highlight how to stay clear of any unexpected penalties.

 AML – Anti Money Laundering: Advice from the Fintech Times

To mitigate the risk of incurring AML fines in 2023, agents and landlords should:

  • Enhance customer screening measures to streamline onboarding processes through automation and exceed regulatory requirements
  • Implement a transaction monitoring solution that screens in real-time and can be configured according to different risk appetites for various business flows
  • Access real-time global coverage with robust watchlists and sanctions-screening software
  • Provide thorough training to compliance staff on AML requirements, including reporting obligations, sanctions/asset-freezing measures, and conducting adequate SOF and source of wealth (SOW) checks

Right To Rent: Advice from Finch’s Right to Rent article

Landlords and agents are required to check the following during the Right to Rent Check, as per UK law:

  • They must check that all the documents provided are genuine, original, unchanged, and belong to the tenant in a face-to-face meeting or digitally through a digital trust framework.
  • They need to check that the dates on the tenant’s Right to Rent in the UK have not expired.
  • Landlords and agents must ensure photographs are the same across all documents.
  • If the documents presented have different names on them, the landlord or agent must receive supporting documents showing why they’re different.

Non-compliance with Licensing Schemes: Advice from Housing Anywhere

“Failing to obtain the correct licence is one of the common reasons for costly landlord fines. To avoid this fine, visit your local council’s website and research the required licences and permits in your area. Make sure you obtain them before you start renting out your property.”

Licensing has recently become more complex due to different licenses now in some cases, being required for different sides of the same street. It is crucial now, more than ever that the landlords and agents are up-to-date on license requirements in their areas. Two helpful tools we’ve managed to source to help with this are:

Safety Certificate breaches: Advice from Choices.co.uk

Faulty gas appliances can kill. So, naturally, failing to comply with the Gas Safety Regulations is a serious offence. You are breaking the law if you can’t provide an up-to-date gas safety record. The fines for this are unlimited and can also result in a prison sentence.

If you are a landlord without a valid EICR in place, then you are committing an offence. Breaching Electrical Safety regulations can result in fines of up to £30,000.

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New Homes Quality Code – have you updated your reservation forms?

New Homes Quality Code title image

Is the New Homes Quality Board a new concept?

The New Homes Quality Board (NHQB) was constituted as a legal entity in January 2021. But it was 2022 that saw the NHQB tasked to “put in place a New Homes Ombudsman Service and develop a new industry code of practice – the New Homes Quality Code“. 

Some readers will be aware that this type of body isn’t unique to our industry and be familiar with previous codes created to ensure building quality and growth in industry standards. To name just two; there’s the Consumer Code for Home Builders, established in April 2010 and the Consumer Code for New Homes.

I mention these to provide a distinction to the NHQB. It’s a new government backed framework to oversee reforms in two areas: The build quality of new homes, and the customer service provided by developers.

Created under the direction of The Building Safety Act 2022 (BSA 2022) the NHQB also established a New Homes Ombudsman Service and a new industry code of practice called the New Homes Quality Code (NHQC). Each one fulfilling a demand of the Building Safety Act 2022.

Finch's reservation form is NHQC compliant:
  • Give buyers a link so they can reserve anytime, anywhere
  • Deliver the required documentation to the buyer
  • Collect a reservation fee cleared into your bank account using faster payments, no charge backs
  • Record all of your reservations in a secure database
Try the reservation form now and see the difference for yourself:
Digital forms trusted by:

Is the NHQB compulsory?

The Building Safety Act requires that developers join an approved scheme. The New Homes Quality Board is currently the only approved scheme. Membership to the board demonstrates alignment to the Act’s values, standards of build quality as provided by the Act, as well as upholding the required customer service standards.

Finally, they are demonstrating to their customers that they are accountable to an industry body for their standards, values and build quality. This secures trust with the buyer and shows the integrity of the developer. Most importantly, it ensures high safety and operational standards for developments across the UK.

Obtaining membership to the NHQB requires an initial application followed by an additional nine steps which are listed below: 

New Homes Quality Code - application steps
https://developers.nhqb.org.uk/developers.html

Although the NHQB only launched in 2022, there are currently 94 active developers listed on the register and 316 additional developers with pending applications at this time (Jan 23). Being registered as a member of the NHQB communicates to new home buyers that the UK government’s standards have been met without the need for thorough personal investigation when a buyer may not have the knowledge or expertise to investigate.

Is the NHQB a membership or a governing body?

The NHQB is a membership based organisation with memberships divided into 15 levels of fee. These tiers range from £500 for a dormant company to £220,000 for a Tier 1 developer. Step two of the onboarding process shown in the image above, is invoicing / payment. Once a developer is a member, the board will hold the members to the NHQB terms of membership in accordance with the BSA 2022.

The NHQB has established the New Homes Ombudsman Service (fulfilling the demand of the Building Safety Act 2022). This ombudsman service ‘exists to help customers resolve issues with their new homes, which the registered developer has been unable or unwilling to fix.’ – nhos.org.uk

The NHOS will ensure adherence to The Building Safety Act, making membership to the NHQB less of a badge of quality assurance but rather, alignment to compulsory industry standards. This agreement upholds a national, governmental standard, managed by an independent board.

As a member, developers can face corrective or disciplinary action and even fines for breaching the New Homes Quality Code.

What are the 10 Guiding Principles?

The code has been created by the NHQB in two parts. This first part establishes the ten core principles which developers agree to apply to their business and their dealings with customers.
 
  • Fairness
  • Safety
  • Quality
  • Service
  • Responsiveness
  • Transparency
  • Independence
  • Inclusivity
  • Security
  • Compliance
New Homes Quality Code Guiding Principles
https://developers.nhqb.org.uk/downloads.html

What are the 4 practical steps laid out in the code?

  • Step 1: Selling a new home
  • Step 2: Legal documents, information, inspection and completion
  • Step 3: After-sales service, complaints and the New Homes Ombudsman
  • Step 4: Solvency, legal rights and jurisdiction
New Homes Quality Code: The four steps to adhere to

What happens if a New Home Reservation form doesn't comply with NHQB?

In addition to buying a new home where the build is complete, a customer may want to reserve a plot. Plots can be reserved prior to construction and are referred to as an early bird or plot-option arrangement. Either way, if a buyer wants to reserve a new home, both parties must enter into a formal reservation agreement. There are 4 key dictates given by the NHQB about the reservation agreements:

  1.  Neither party should enter into a reservation agreement until they have the relevant facts
  2. The developer is responsible for ensuring that the terms are clear, fair and written in plain language. The developer is accountable here for keeping to all relevant legislation.
  3.  An agreement must be signed by both parties, either electronically or in person and the customer must be given a copy. 
  4.  The developer must include all 16 details in their reservation agreement terms provided in section 2.2 of the Consumer Code. These details reflect what the NHQB considers to be clear, fair and in plain language.

The NHQB Discipline & Sanctions Committee investigates any reported breaches of the Code or other disciplinary offences.

If the required standards are not met by the registered developer, or if they do not act in line with the New Homes Ombudsman’s decisions, they may be referred to the NHQB Discipline & Sanctions committee to determine if any corrective action, disciplinary measures are to be applied. These range from retraining, fines being levied, and in severe cases, removal from the Register of Developers.

What is the best way to ensure your forms are compliant?

Developers need to make sure they use forms which are compliant with the NHQB terms. New Homes Reservation forms must utilise all of the specific language, correct details and terminology.

Finch provide an NHQB compliant New Homes Reservation Form. Finch’s smart forms provide the relevant information required by the NHQB to the relevant parties, at the correct time. The Finch New Homes Reservation forms can be quickly adapted to each developer, ensuring that the core elements for compliance remain at the heart of the form, whilst including any additional information required by the developer.

Finch's digital reservation form helps you secure the sale:
  • Give buyers a link so they can reserve anytime, anywhere
  • Delivers the required documentation to the buyer
  • Collect a reservation fee cleared into your bank account using faster payments, no charge backs
  • All your reservations recorded in a secure database
Try the reservation form now and see the difference for yourself:
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Property Particulars – Property Marketing Compliance

Property Particulars

Marketing materials regulation & approval

Our previous article (Property Information Forms) provided an overview of the content of the TA6 form, and discussed how it could be divided into two distinct sections completed at different times. The first section focused on the information needed to market a property, and the second the additional information required to complete a sale.

This article is a continuation, exploring Property Particulars and the importance of ensuring property owners approve their content before they are published. 

Property Particulars refer to the materials agents produce to advertise a property for sale or rent.

They identify the specific key characteristics about a property which are most likely to affect the interest of a purchaser. They will range from (among other attributes) the number of bathrooms, garden dimensions, Energy Performance Certificates, council tax bands and tenure.   
 

Prior to 1st October 2013, Property Particulars were regulated by the Property Misdescriptions act 1991. Following it’s repeal, consumers are now protected by the Consumers Protection from Unfair Trading Regulations – May 2008 and businesses are protected by The Business Protection from Misleading Marketing Regulations – May 2008.

What’s the difference between Property Particulars and the TA6?

Property particulars normally consist of a written brochure, text and photography for use on websites and property portals and where appropriate video tours and drone footage. Their layout and content will vary from agent to agent.

The property information from or TA6 is a much more in-depth document historically requested once a sale has been agreed. It provides the buyer with additional information to help them to decide if they wish to continue with the purchase.  The content will be consistent and is administered by the Law Society.

Are property particulars regulated?

In terms of overall content and layout no its very much down to the individual agent and their customer how they want to present a property. However, estate agents have to adhere to consumer protection regulations meaning trading standards can hold them accountable if they produce property particulars that are judged to be misleading. In addition, agents must belong to an approved redress scheme such as the The Property Ombudsman who have specific standards that members must comply with.   

What are the potential consequences of inaccurate property particulars?

Inappropriate viewings and the fall through of a sale in the first instance. In severe cases potential charges for misrepresentation under the consumer protection regulations.

Should property particulars be approved by the owner?

Yes it’s best practice and also a requirement for those agents registered with the Property Ombudsman  

When are property particulars produced and can they be circulated to prospective buyers/tenants before they are approved by the owner?

It’s normally one of the first tasks an agent will complete once they have been formally instructed, however some agents may produce a draft as part of their post market appraisal sales proposal.

If they are to be circulated prior to approval, they should clearly state that is the case using a statement such as “draft” or “Subject to approval”.  

Can other agreements be made alongside signing off particulars?

Yes, there is no reason why an approval request could not include terms and conditions not related to the property particulars.

Can Finch help agents with the property particulars approval process?

Yes, Finch provides a flexible digital process that allows agents to securely present a consolidated marketing pack to their customers for comment and approval.

Property Information Form: How upfront information can avoid fall throughs  

Particulars

Is a Property Information Form a resurrected Home Information Pack?

For those who have been selling and letting residential properties over the past couple of decades, they will remember the Home Information Packs (HIPs), sometimes called a sellers pack. These were created during the coalition government and were formally repealed by the Localism Act 2011 on the 15th January 2012. One element of the HIP has continued on to current day though, as the Minimum Energy Efficiency Standards which continue to be developed within the now required Energy Performance Certificates (EPC’s).

HIPs were a legal requirement regulated by a governing body and were to be completed prior to a property being marketed. Property Information Forms are a set of informative data points which will likely be requested by a solicitor for a buyer to complete a sale. These data points include information on boundaries, commodities and neighbourly situations. And whilst the information is no longer a legal requirement and is therefore distinct from HIPs, it is information which will likely derail a sale should it remain absent.

Property Information Form timeline

What is a Property Information Form?

A Property Information Form (PIF) is one of eight transaction forms known as TA Forms. The form relevant to freehold property sales is the TA6 (or transaction Form 6). These forms have been created by The Law Society and cover multiple purchase options. TA6 is designed for the vendor to provide detailed information about the property to the buyer

TA6 (PIF as we will continue to call them) includes the following information:

  1. Property boundaries
  2. Disputes and complaints
  3. Notices and proposals
  4. Alterations, planning and building control
  5. Guarantees and warranties
  6. Insurance
  7. Environmental matters
  8. Rights and informal arrangements
  9. Parking
  10. Additional charges
  11. Occupiers
  12. Services
  13. Connections to utilities and services
  14. Transaction Information

This is a large body of work for a vendor. A PIF is a significant challenge for any agent encouraging their vendor to complete the form prior to marketing the property. A typical road-block here will be the vendors desire to have a deal secured prior to addressing a full PIF. There are however some must haves for the marketing materials.

The good news for agents is that this form in contrast to the HIP, is divisible. If the information gathered by a PIF isn’t provided at the point of marketing the property, it will simply be requested by the buyers solicitor later. There is information which should be used to hook the interest of a potential buyer and information which only becomes relevant to the buyer at offer and sale progression. For example, at the initial point of interest a buyer is likely to want to know whether or not the property is a listed building, they may also be interested in its energy efficiency rating or in its boundaries, but less concerned with information such as the absence of historical fishing rights on the land (of their 1980’s urban mid-terrace)… section 8.5. The specific peculiarities of a property can come later! 

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Is there a Property Information Form for both Sales and Lettings?

There are a number of different transaction forms provided by The Law Society in addition to a PIF:

  • TA4 – Required commonhold information
  • TA6 – Property information form (likely to be needed for every purchase)
  • TA7 – Leasehold information form
  • TA8 – New home information form
  • TA9 – Commonhold information form
  • TA10 – Fittings and content form
  • TA13 – Completion information and requisitions on title
  • TA15 – Commonhold information request

All of these forms apply to the sales conveyance process.

In lettings a Property Information Questionnaire (PIQ) serves a similar purpose to a PIF. However, whilst the absence of a PIF during the sale process will likely halt the sale completely, a missing PIQ would likely have no effect on the tenancy proceeding. It is possible, that a tenant facing adverse or mis-sold conditions, might suggest a breach of section 10.8 of the Unfair Commercial Practices Directive. Below are two helpful excerpts from SHELTER and GOV.UK showing that a high degree of clarity about a property (sold or let) is essential.

Property Information Form legislation

Who's responsible/ accountable for the details provided in a Property Information Form?

The vendor is responsible for recording the information correctly but assistance is offered through many avenues, not least of all by The Law Society. The vendor is the one who sign the contracts and is responsible for ensuring that the buyer has accurate information to make a purchasing decision. If an agent or third party was to provide information on behalf of the vendor, it would still be the vendor signing the information off.

One example of a third party’s actions resulting in a successful claim against a vendor is in Strover v Harrington [1988]. A farmhouse property was described as having mains drainage when the property did not have mains drainage. The vendor did in fact give the right information to the buyers solicitor, who failed to pass this information on to the buyer. It was held that the loss to the buyer was not as a result of misrepresentation but the solicitor was likely liable for professional negligence.

Should an agency encourage a seller to complete a Property Information Form prior to an offer?

The major benefits of Property Information Forms is that they offer transparency for the property being sold. There is a difference however, between what is helpful in marketing the property, and what is a need-to-know for the buyer to complete the sale. Best practice might be to divide the form into two sections, for the vendor to complete each one at distinct stages of the sales process. The first of these two sections being the questions aimed towards marketing the property. And the second being the finer details a buyer is going to need to make an informed purchasing decision.

Even with the form divided in two, it’s advantageous for a seller to provide the information early because not providing the information, could be a reason for a sale either not being perused or worse, for a sale falling through. Some suggested sections to include in a marketing focused part 1 might be:

  • The situation with ownership details and any associated charges
  • If there are any new building, conversions or alterations to the property
  • The timings of the sale
  • If there are any potential liabilities with the property
  • If the property has solar panels
  • Whether there are any protected buildings or trees
  • What are the rights for access, services and are there any shared facilities
  • Reporting the situation with parking, flooding and any current and historical disputes

In a market where supply is out-stripping demand, the availability of more information demonstrates that the seller is really serious. According to a report by Quick Move Now, 31% of property sales fell through during the middle part of 2022. This looks to be up from a 2018 report by HOA’s YouGov study where the number was significantly lower at 20%. 

As an agent, it is worth addressing the barriers your vendors may present as to why they don’t want to complete a PIF, or parts of a PIF sooner. Largely, this is going to be down to the time investment to complete the form, the time restraints in preparing to move, or their perception of the forms importance. Dividing the form up and educating the vendor that an informed buyer is more likely to complete, will help everyone secure a sale sooner. 

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End of the Help-to-Buy Scheme: Know how to prepare

Do buyers understand the impact of a staged ending to the Help to Buy scheme?

 

The full economic consequence of ending the Help to Buy scheme isn’t yet known. But whilst much speculation exists within the industry around the pros & cons, there is clarity for the final stages. The way the scheme will be brought to a close has been clearly defined, including definitions for the eligibility to submit applications, the specific geographical financial value bands for borrowing, and ultimately, the explicit steps which will be taken to close the scheme.

Help to Buy is a government scheme for first time buyers. It is a loan that a buyer puts towards the cost of a new build. For those who are eligible, they can borrow 20% of the property’s value, or up to 40% for those in London. Throughout the term of the loan, the buyer isn’t required to pay off the loan, but the interest on the amount borrowed. When the property is sold, all the equity loan must be repaid.

 

Why was the Help to Buy equity loan scheme created?

The loan was launched in April 2013 to help bolster the housing market during a challenging climate. Its purpose was to assist those struggling to purchase their first property. It offered a way for first time buyers to get onto the property ladder sooner. The scheme stipulates specific eligibility criteria where those using it must:
 
  • Be 18 or over
  • Be a first time buyer
  • Be able to afford the fees and interest payments

The property being purchased must:

  • Be a new build
  • Be sold by a Help to Buy registered home builder
  • Be the only home the buyer owns and lives in

If a person has owned a home or residential land in the UK or abroad, they are ineligible. They’re also ineligible if they’ve had sharia mortgage finance.

Help to Buy scheme




How will the scheme closure deadlines impact imminent and accepted applications?

Help to Buy Scheme timeline

A buyer must submit their application for an equity loan by 31st October. Homebuilders must have registered the property onto the scheme for this to be possible. The buyer must also have a PIF (Property Information Form) submitted to a Help to Buy agent, prior to the deadline. Anyone purchasing at this late stage must check (for their own peace of mind) with their homebuilder to ensure a qualifying property completion deadline will be met and that the home will be built before the new year. A new home warranty is also required by the final day of 2022.

What if a property isn’t ready in time?

There’s a foreseeable risk of some housing projects over-running. This means some new homes not meeting the cut-off date for the closing of the Help to Buy loan. Regarding reservation fees and deposits there is security in the event of missing the deadline. But unfortunately, this may not be a full consolation to buyer’s with their eyes on a dream home.
 
  • If a homebuilder is unable to complete by the deadline, the homebuilder must return the full reservation fee.
  •  If a buyer has exchanged, the homebuilder must release them from the contract unconditionally and return the deposit.
  • Legal fees and financial advice costs, may still need to be paid.
Homebuilders are working to two Longstop Dates. These dates are the 31st December 2022, and the 31st March 2023.

“The First Longstop Date is 31 December 2022, and this is the practical completion deadline. Your homebuilder must have finished building your home so it’s ready to live in, and your home must have received a new-home warranty to be eligible for Help to Buy.”

“The Second Longstop Date is 31 March 2023, and this is the legal completion deadline. This is the last date you and your homebuilder can legally complete the purchase of your home“

*Source: Help to Buy: Equity Loan (2021-2023) applications closure – frequently asked questions, accessible version – GOV.UK (www.gov.uk) 

Is there a replacement for the Help to Buy equity loan scheme? 

 

Are Lifetime ISA’s an alternative to Help to Buy ISA’s?

 Lifetime Individual Savings Account’s aren’t a new scheme. The Lifetime ISA’s have been around from 2017 and were not created as a replacement for Help to Buy, but have been used in conjunction. A person can only use the government bonus from one of them for a property (even though they both offer 25%). Lifetime ISA’s also come with eligibility requirements. These include a person being 18 or over but under 40. There is a maximum value to save each year which is £4,000, until that person reaches the age of 50. The government pays out a bonus of 25% up to a maximum of £1000 per year (annual ISA limits also apply here). 

“If you have a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of them to buy your first home.

You can transfer money from a Help to Buy ISA to a Lifetime ISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA you’ll have to pay the 25% withdrawal charge.” – GOV.UK

Help to Buy vs L-ISA

 

 

Email threats facing estate agency in 2022

Email is one of the biggest cyber security challenges facing not just estate agents but all businesses today. Research conducted by Microsoft indicates that over 90% of cybercrime begins with email, so it’s important that every organisation has a plan to prevent these threats reaching staff.

The reason email is the prefered choice of cyber criminals is simple – it bypasses the technical measures and protections your IT administrators have put in place and preys on the social fallibility of people working within the organisation to unknowingly breach your cyber security.

A sophisticated or targeted breach can be devastating, with criminals then able to embed themselves within your IT estate, sometimes installing backdoors making themselves perrenial, which can then require a complete rebuild of networks, devices, and infrastructure to ensure bad actors don’t still have access to your data. Late last year, the conveyancing firm Simplify was victim to a cyber security incident which directly obstructed business for weeks and ultimately took months to fully remedy. I observe now that solicitors have created landing pages allowing canned legal claims against Simplify for the disruption caused to property transactions, which I’m sure is one of many knock on effects from this incident which has distracted Simplify from its core business for much of this year.

This is why paying attention to your cyber security practices proactively is so important: because if you are unfortunate enough to suffer a breach, despite you being a victim of crime, the attention of your customers and the media will not be of pity, but rather of skeptism regarding your processes put in place to prevent the breach (e.g. security), and measures applied to minimize the damage should there be one (e.g. encryption). Don’t be one of the businesses closing the stable door after the horse has bolted, much like Uber, seen hiring for an increased number of cyber security professionals following their breach this month.

So how are the criminals breaking in?

1) Spear phishing

“Hi it’s Alex here, landlord at 13 Kingston Road. You and I spoke last Thursday about my rent payments. I need you to change my bank details…”

Spear phishing is a targeted, often researched cyber attack. The research allows the criminal to appear legitimate to your member of staff. This is a particular threat to agencies who tend to communicate personally identifiable information about their customers, or the nature of their business via email. Bear in mind, if a hacker has gained access your clients email, they may know a huge amount of information about names, places, dates and amounts that would lead you to believe the communication is genuine.

2) Business Email Compromise

“Hi John it’s Mary here at accounts. The supplier at Queen Street have issued this invoice and it’s urgent we pay this today…”

Business email compromise is an advanced form of spear phishing where the criminals will impersonate key members of your staff, either to other staff in your organisation or to your clients. This attack is most commonly seen in the property industry as fraudsters sending false bank details during the conveyancing process to persons about to commit to a transaction, such as a deposit.

3) Ransomware, trojans, malware

“There is a tax issue on your account. Click this link or face legal consequences”

Usually the first phase in an attack, the criminal will attempt to trick a member of your staff into opening an attachment or link which causes their computer to run a malicious program of software (malware). Because the program is running within your IT estate, it is often the case that such programs can run rampant stealing, damaging or holding to ransom your business data across all departments. Many businesses are surprised that their backup and disaster recovery plans fail entirely when faced with ransomware – which can end up unfortunately ransoming the backups and cloud-stored data as well if they are not properly protected. Fortunately, your IT administrator can help protect against this by running and maintaining anti-virus software, but do make sure this is running on all devices (difficult when staff are using their own phones!).

How can we improve?

Don’t rely on email for communicating sensitive business transactions. Use it to arrange people into safe spaces to conduct business, such as face to face meetings or secure property technology platforms where the identity of your customer is verifiable.

Most agents I have worked with have been using Microsoft Outlook as their app for working with email. By integrating property technology into Outlook directly, we can help make email more secure.

  • Clients will always end up using email to communicate with your business, even when other solutions exist, such as a portal app. They will take the path of least resistance to them and follow the process they are the most familiar with. Access to email is ubiqitious, access to your app might not be.
  • Thus, your staff will receive requests for account changes or personally identifiable information via email. It’s easiest if your staff can respond intuitively from within Outlook to close the opportunity for a potential threat to be realised.
  • For instance, when receiving a request to change bank details, your staff can now be prompted with your (customizable) notices to them helping them further secure that request, like so:

If you’d like to learn more about how Finch can protect your organisation from email threats, please get in touch, or join our newsletter for more tips.