The new RICS Code of Practice and what it means
The rental housing market plays an important role in both the UK's economy and the day to day life of a high proportion of the population; whether that be as landlords or tenants.
There is a national housing shortage, and with lending confidence levels continuing to be low the Government have regularly been called upon to introduce measures which encourage and increase investment in the sector.
It is estimated that 220,000 new homes must be built per year to meet population projections. The shortage also often leaves tenants with few options of where to live, and the government has also been pressured to increase both protection and guidance for them.
To answer such calls the Government commissioned the Royal Institute of Chartered Surveyors (RICS) to produce a new Code of Practice for landlords. This was published last month and has been endorsed by the Government.
The aim of the Code is to promote more flexibility in granting long term leases, as well as improving levels of service given for tenants. By following the new Code landlords will empower their tenants to negotiate and challenge, and also give them greater protection in disputes.
It has been introduced in conjunction with a model 3 year tenancy agreement, released on 11 September 2014, to give landlords better guidance and assistance when opting to rent out their properties. Brendan Lewis, Minister for Housing, has issued a statement urging landlords to take account of the Code and adopt the model tenancy agreement. He highlights the importance of the residential rental sector to the nations' economy.
From a purely practical point of view, landlords would be well advised to adhere to the Code. A happy tenant is more likely to remain long term, care for the property that they are living in and recommend their landlord to their friends and associates looking for rented accommodation. Disgruntled or unhappy tenants demand a lot of landlord's time and are more likely to vacate at the end of their contractual term leaving unlet voids.
Recent research found that over 20% of tenants had concerns about their landlord or agent even before the tenancy agreement is signed. More worryingly, 55% reported having problems with their landlord once the tenancy was in place.
A large part of the new Code discusses the use of agents by landlords, and how decisions around this should be made. Landlords are recommended to ensure that their agents are accredited by an independent body with a redress scheme, hold valid professional indemnity insurance and protect their client money in a separate account which will enable them to account interest generated to the appropriate party.
In order to promote price clarity the Code recommends that all prices are quoted as VAT inclusive, a measure likely to assist tenants. Looking to property quality, the code recommends PAT testing, carbon monoxide sensors and obtaining regular electrical certificates. Finally, the code recommends that all tenants are provided with a copy of 'How to Rent', a Government published guidance document that is likely to assist all parties.
Most of the Code is voluntary. Some does stem from mandatory legislation but tenants will only be able to fully benefit from the code where they have a compliant landlord or they are aware of its existence.
By promoting best practice with the Code, model tenancy agreement and 'How to Rent' guidance the government are giving landlords clear instructions on how to provide their services, without increasing red tape which would discourage much needed investment in the sector.
Restricting investment would only drive up prices and facilitate landlord practices by landlords. Landlords would be advised to comply with the guidance wherever possible. Any judge is likely to consider these best practices when ruling on a housing dispute. They will view them as something to abide by, even if exact implementation methods are left up to the individual situation.
*Nigel Emmerson is a Partner in Real Estate at Bond Dickinson LLP
Comments