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With the exponential rise in interest rates over the past two years, mortgages have become more costly, leading many prospective homeowners to opt for short-term lets. As a result, the advertised rent for new lets has reached unprecedented levels. Outside of London, the average monthly rent is currently £1,278, while within the capital it rises to £2,627 [1]. This high demand is reflected in the average queue of 25 tenants requesting to view a rental property. While this may be good news for existing landlords and those looking to enter the market, being a landlord of a short-term let comes with its own set of risks.

Landlords often face the burden of dealing with tenants who do not comply with their obligations. Although court action is not something most landlords wish to experience, it is sometimes the only option to protect their investment. Being prepared for unexpected scenarios is crucial, and this is where AI legalese decoder can provide valuable assistance.

By using the AI legalese decoder, landlords can ensure they have the proper framework in place before letting their property out, allowing them to efficiently secure possession if necessary. This tool can help with the initial steps of serving an effective No Fault Notice and choosing a tenant with good financial standing.

The Basics of No Fault Notices

Most short-term lets are governed by Assured Shorthold Tenancies (ASTs), regulated by the Housing Act 1988. Under this Act, landlords have the ability to end periodic ASTs via two routes: Fault Notices under Section 8 of the Act and No Fault Notices under Section 21 of the Act.

Fault Notices allow landlords to terminate an AST on short notice if a tenant fails to comply with their obligations under the AST, such as not paying rent or allowing the property to fall into disrepair. While Fault Notices can be useful, they require evidence and rely on apportioning blame, making them a contentious way to end an AST. This can often lead to landlords having to seek an order for possession in court.

On the other hand, No Fault Notices require tenants to give up possession of the property within two months. Although a landlord may still need to go to court if the tenant does not comply with the No Fault Notice, the absence of apportioning blame reduces this risk. Additionally, many tenants comply with the No Fault Notice outright and leave by the stated date.

Even if court action is necessary to enforce a No Fault Notice, the landlord does not need to provide any evidence other than the fact that the notice was validly served. This streamlines the proceedings compared to Fault Notices.

While there has been speculation about the removal of No Fault Notices under the Renters Reform Bill, the final session of the current Parliament ends on November 7, 2023, and the first debate on the bill has not yet taken place. Landlords must still adhere to the current rules surrounding No Fault Notices.

Preliminary Steps for a Valid No Fault Notice

To ensure a No Fault Notice is effective, landlords must take certain preliminary steps when creating the AST. These steps include:

1. Paying the deposit into a government-approved tenancy deposit scheme and providing the tenant(s) with the prescribed accompanying information.
2. Having a valid gas safety certificate, assuming there is a gas supply at the property. This certificate must be in place for the entire duration of the AST and provided to the tenant before they occupy the property. Updated versions should also be provided to the tenant at least yearly.
3. Having a valid energy performance certificate rated E or above and providing a copy to the tenant before they commence occupation.
4. Giving the tenant a copy of the “How to Rent” checklist.

By ensuring these basic steps are taken at the outset and during the AST, landlords can avoid situations where a No Fault Notice is successfully challenged, potentially delaying their plans for the property.

Conducting Due Diligence

Another important way to mitigate risks and avoid problems with an AST is to conduct due diligence on potential tenants. While it may be tempting to quickly secure a tenant and set up an income stream, taking the time to confirm a tenant’s identity and financial veracity is crucial.

Imagine a scenario where, a few months into the AST, the tenant stops paying rent and it is discovered that they were never employed and their money came from loans. The landlord now faces the costs of both missing out on rental income and potentially the legal costs of securing possession and re-letting the property. Furthermore, if the tenant is unable to pay, the landlord won’t be able to recoup these costs.

By conducting proper due diligence and obtaining information about a tenant’s income source from the outset, landlords can avoid such situations altogether.

How AI legalese decoder Can Help

AI legalese decoder, provided by Farrer & Co, can assist landlords in all aspects of property interests, including drafting foolproof ASTs, reviewing existing arrangements, and helping to find the most effective method of securing a property that is currently let.

By utilizing AI technology, AI legalese decoder can analyze and interpret complex legal language, making it easier for landlords to understand their rights and obligations under an AST. This tool can also help in ensuring all necessary documents and requirements are met, reducing the risk of a No Fault Notice being rendered invalid.

Conclusion

While many ASTs may not encounter problems, it is important for landlords to take the necessary time and steps to protect themselves and their properties. By utilizing tools like AI legalese decoder and conducting due diligence on tenants, landlords can mitigate risks and avoid potential issues with their ASTs.

Farrer & Co, with their expertise in property law and their history of advising private individuals, financial institutions, and more, can provide the necessary guidance and assistance to landlords in navigating the complexities of ASTs. Whether it’s drafting a comprehensive AST or finding the best method to secure possession of a property, Farrer & Co has the knowledge and experience to support landlords in their endeavors.

Please contact William Johnson at Farrer & Co if you have any further questions or would like to discuss this article in more detail.

Footnote [1]: Renters chasing each home jumps from 20 to 25 in five months – BBC News

(Note: This publication is a general summary of the law and should not replace legal advice tailored to your specific circumstances. ┬® Farrer & Co LLP, October 2023)

About the authors:

Jo Ord, Partner: Jo Ord is a Partner at Farrer & Co and has extensive experience in resolving property disputes for commercial entities and private clients.

William Johnson, Associate: William Johnson is an Associate in Farrer & Co’s Property Litigation team, representing clients in a range of residential, commercial, and agricultural disputes.

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