THE landscape is changing for land- lords with the introduction this week of two new laws giving greater protection for residential and commercial tenants.
From April 6, residential landlords accepting deposits under an assured shorthold tenancy must join a govern- ment-approved tenancy deposit scheme.
The legislation, which replaces a vol- untary pilot scheme abandoned last summer, is designed to avoid the diffic- ulties experienced by tenants in recov- ering their deposit at the end of a tenancy.
There are two forms of tenancy deposit scheme.
The first is a custodial scheme where deposits are placed in a designated account controlled by a government-appointed administrator.
The second is an insurance-based scheme which insures the deposit in case of any dispute at the end of the tenancy. Landlords must choose one scheme or the other – there is no opt out.
The insurance-based scheme allows landlords to hold on to the deposit themselves, only paying it over to the insurer if there is a dispute with the tenant at the end of the tenancy. As a result, this scheme may become the preference for landlords and more widely used in practice.
However, both schemes require landlords to give details of the arrangement to their tenants and explain how the deposit will be held.
Failure to comply could leave landlords liable to a fine of up to three times the deposit and preclude them from recovering possession.
The second change, effective from April 1, is the new Service Charge Code published by the Royal Institution of Chartered Surveyors.
The new code sets out best practice and clear guidance as to how service charges should be administered by landlords of commercial buildings.
It aims to ensure service charges are “not for profit, not for loss” and to encourage transparency and communication in the relationship between landlord and tenant over service charges.
Unfortunately, the code is only volun- tary and has no legally binding status. As a result, it may not receive accept- ance from all landlords across the UK.
It is hoped, however, that the code will be embraced by the majority of landlords in an effort to drive standards upward and remove some of the mystery surrounding the calculation of service charges on multi-let buildings.
