Deposit Breaches and RRB

People should be familiar with the deposit rules by now, but here’s a quick crash course:

Landlords must register the deposit and serve prescribed information within 30 days of the deposit being received;

If a landlord breaches those rules then the tenant can claim up to 3x the value of the deposit per breach;

There is a new breach for each new tenancy, subject to a six year limitation period, if the deposit rules have still not been complied with;

A tenancy becoming a statutory periodic tenancy following a fixed term counts as a new tenancy and therefore is a new breach. This is based on a case called Superstrike Ltd v Rodrigues, so when I refer to Superstrike this is what I mean.

None of that should be new to anyone, hopefully, but these rules have been in force for nearly 20 years and landlords are still getting caught out, so it is clearly not universal knowledge.

I had a question from Julie Ford about how the RRB transition might affect deposit breaches, particularly whether, if a landlord has failed to comply with the deposit rules, does the introduction of RRB create a new tenancy and therefore a new breach to be claimed for?

When RRB comes into force it will end all fixed terms and create something called ‘Section 4A Assured Tenancies’ (named after the amendment to the Housing Act 1988 created by S1 of RRB). S4A Tenancies are not the same as Statutory Periodic Tenancies that were dealt with in Superstrike; those are created by S5 of the Housing Act 1988. At para 26 of the Superstrike judgment LJ Lloyd comments that when a fixed term ends it creates a ‘new and distinct’ tenancy, but that was specifically in reference to S5. S5 uses the language of surrender and regrant; the fixed term ends and a new and distinct periodic tenancy arises. Accordingly, it is not a given that Superstrike would apply to S4A tenancies.

S146 RRB adds some clarity in that it specifically states that the S4A tenancy that arises on commencement date is a ‘continuation’ of the previous tenancy; compare this to the language of S5 which creates something ‘new and distinct’. Echoing what I wrote earlier, ‘continuation’ is not the language of surrender and regrant.

On this basis, I do not think that the transition from fixed term to S4A tenancies will be considered a new tenancy for the purpose of the deposit rules and so does not cause a new breach.

PBSA exemption follow-up questions

I have had two big questions following my post yesterday about the PBSA exemption to RRB. Suzanne Smith wanted to know about the possibility of it applying to private student landlords (non-PBSA) and Sophie Lang wanted to know about whether a compliant agent could count for the purposes of this.

Usual caveats; this isn’t yet part of the RRB so subject to change.

Lets first drill down into Clause 34 which introduces the PBSA exemption. Clause 34 identifies three things to be approved by future regulations:

Members of a Housing Management Code of Practice (these are the ‘codes’ that you will read about)

Types of Landlords

Types of Building

The future regulations will then say, for example:

Housing stock owned by PBSA Provider A in the City of Bath are exempt the Renters’ Rights Act

Members of XYZ Code are exempt from the Renters’ Rights Act.

Development ABC in the City of Durham is exempt from the Renters’ Rights Act

And so on. I would expect, in order to be truly exempt, a landlord must themselves be in an exempt class, own a building in an exempt class, and subscribe to a code that is also exempt. You need all three basically.

This allows me to answer Suzanne’s question: it is certainly possible for a private student landlord to meet those three criteria in principle. The real answer is that currently none of these rules exist so we do not know what landlords and buildings will be caught by this (though I suspect we can make an educated guess). We can, however, look at the current approved codes and see who might currently fit within that.

There are two codes as far as I can see: The Unipol/ANUK code that I linked yesterday, and the Universities UK/Guild HE Code. These seem to be the only active codes because they are the only ones mentioned in the Regulations that authorise a ‘Housing Management Code of Practice’ mentioned in Clause 34 and empowered by S233 of the Housing Act 2004. A link to those regulations is here:

The Student Accommodation (Codes of Management Practice and Specified Educational Establishments) (England) Regulations 2024

The regulations revoke earlier versions of the Regulations so I believe the intention is that there is only ever one ‘live’ set of regulations which will list all of the approved codes.

The Unipol/ANUK code is named the ‘Code of Standards for Larger Residential Developments’ for both those managed and not managed by universities, which indicates it is not appropriate for small landlords.

The Universities UK code is for the Universities themselves, so also not appropriate.

Unless and until a code is created and approved by the government there is no code that a private landlord can subscribe to and so they will be excluded from the PBSA exemption.

It is also worth my mentioning that there is an amendment to the RRB directly below Clause 34 which requests permission for a private landlord who has signed up to a code of conduct to also be exempt. This amendment is unlikely to make the final version, but it seems to me to be a tacit acknowledgment that private landlords are excluded from this exemption by design.

As for Sophie’s question, if we say that a landlord and a building must themselves be made exempt then we need to see whether an agent can comply with a code on a landlord’s behalf. I am looking at the Unipol/ANUK code here.

On page 21 of the code it says:

Member (with a capitalised initial) is used throughout this document to mean a member of the National Code of Standards for Larger Developments for student accommodation NOT managed and controlled by educational establishments. In practice, much of the work entailed in complying with Code standards and requirements will fall to agents or contractors. Nonetheless, Member is consistently used because it is Members who are responsible for compliance and who will be held accountable for failure to meet Code standards or other breaches.

This acknowledges that most PBSA landlords outsource their management to agents who do the leg work for them but that the landlords remain responsible. On this basis, if the agent fully manages the building and that management is compliant with the code then the landlord is also compliant with the code. I think this is fine.

PBSA RRB exemption wording announced

This has been coming for some time, but the exact wording of how the Purpose-Built Student Accommodation sector (“PBSA”) will be made exempt from the Renters’ Rights Bill (“RRB”) has not been clarified until now.

Clause 34 in the RRB list of amendments contains this much awaited exemption (link: HL Bill 60—Running List 1 April ). More importantly, it has been put forward by Baroness Taylor of Stevenage who is the Labour minister for Housing in the House of Lords. This means it is very likely to garner government support and so make it into the final version of the RRB. That said, the usual caveats apply; these are proposed amendments so not necessarily going to make it and even if they do make it the amendment may not be in the form it is now. 

The gist of Clause 34 is that if a PBSA provider signs up to an approved code of conduct then the tenancies that it creates cannot be Assured Tenancies and so will fall outside of the RRB. Currently the approved code is produced by ANUK and Unipol and details on that code can be found here:  https://www.nationalcode.org/download-codes

The code itself is quite benign and you would expect most reputable PBSA providers to already be compliant with it.

The clause operates (as expected) by amending Paragraph 8 of Schedule 1 to the Housing Act 1988 which is currently reserved for higher education establishments. This means that PBSA would still be subject to the Tenant Fees Act (“TFA”) (see S28 of the TFA and the definition of “tenancy”) but not the new part of the TFA that introduces a ban on advanced rent as this section only applies to Assured Tenancies. This alone is a good reason for a PBSA who is not currently a member of the code to sign up as it allows them to take on ‘risky’ foreign students who may not be able to provide a UK guarantor.

Sanctions Checks for Letting Agents - a deep dive.

OFSI Letting Agent Guidance Advice

Executive Summary

I have reviewed the OFSI guidance published on March 2025 (“the guidance”) as well as the Sanctions and Anti-Money Laundering Act 2018 (“the act”) which gives the government powers to enact sanctions and dictate their enforcement. I have been asked to advise on the extent of these checks, particularly whether all tenants need to be checked.

I find the guidance to be unhelpfully ambiguous over the scope of what a ‘prospective tenant’ is, so I turned to the act to see if I can infer what the broader intention is behind these rules and work from there. I have also emailed the OFSI to get their opinion on my conclusions.

Taking the act into account, it makes no sense for the scope of ‘prospective tenant’ to be limited, and the ambiguous language used by the OFSI may be just to cover all eventualities rather than trying to omit certain types of tenants. With this in mind I think it would be sensible, pending further guidance from the OFSI, to treat the requirement as applying to all tenants. This can be outsourced to a referencing agency.

Checks on tenants only need to be done at the point a tenancy agreement is being discussed (i.e. referencing) rather than at the point of initial enquiry.

Methodology

This issue has reached the industry’s attention through the publication of the guidance on the rules for letting agents, but the legislative framework for these rules is set out in the act. The main issue for letting agents is do I need to check all tenants at the point of agreeing a contract? I take issue with the guidance because it appears, to me, that the definition of ‘prospective tenant’ is blurry. On this basis I must refer to the act to get a broader picture of these rules and why they are being implemented.

The act makes broad provisions about sanctions relating to ‘land’ – including ‘making available’, ‘acquisition of’ and ‘for the benefit of’ sanctioned individuals. Land includes ‘leases’ of land i.e. tenancies.

It is clear to me that the intention of the act is to prohibit sanctioned landlords from making money from their UK assets and to prohibit sanctioned tenants from leasing properties. With that in mind, I turn to the guidance.

In my opinion the guidance is poor because of the vague definition of ‘prospective tenant’. For clarity, there is no vagueness on ‘prospective landlord’ – the only issue is with the tenant definition. It is possible to come to an initial conclusion from reviewing the tenant definition that it only applies to tenants who instruct agents to find a property that is not currently listed with that agent i.e. a ‘moving agent’. I have set out some sections of the guidance below which support that position:

‘a person (a “prospective tenant”) seeking to find land to rent…’

‘“Instructions” here are considered the result of a prospective tenant formally instructing, engaging or authorising a letting agent to act on their behalf to find land to rent’

These two sentences run contrary to the way in which most letting agents would understand their roles to be.

A prospective tenant does not ‘instruct’ a letting agent to ‘find land to rent’. A prospective tenant would usually contact a letting agent in response to a specific property listed with that agent. A prospective tenant does not ‘instruct’ a letting agent insofar as they do not sign formal terms of business – but there may be a less formal instruction such as a broad outline of the type of property a prospective tenant is looking for.

The words ‘seeking to find’ also suggest that a property has not yet been ‘found’ i.e. it is not already listed with that agent’.

There is one paragraph which suggests that these rules apply to all tenants:

‘you are not obliged to report if you have knowledge or reasonable cause to suspect that a prospective tenant is a designated person or has breached financial sanctions – until the point that a prospective tenant’s offer is accepted by the landlord. This is because of the large number of prospective tenants a letting agent could encounter during the course of their work for the prospective landlord.’

This suggests that the OFSI expect a ‘large number’ of tenants to be affected by this. This is not in-keeping with a ‘moving agent’ model, but it also does not fully support the idea that all tenants are captured by these rules because an agent could still face a number of enquiries that do not lead anywhere.

I suspect that the issue with the ‘prospective tenant’ definition is that it could have been clearer, particularly because the requirement to check only starts at the point where an agreement is being entered into and so other referencing checks will likely be happening as well. That said, I think the language is purposefully broad and vague to capture all tenants rather than omit certain classes of tenants.

I have contacted the OFSI who have suggested a two week turn-around time on a response. Hopefully their guidance can be definitive, but I think it makes sense to err on the side of caution – particularly because it could be incorporated as part of a referencing check – until we have confirmation either way.

Guarantor Alternative Products - are they Tenant Fees Act compliant?

Are Guarantor Alternative Products (“GAPs”) permitted by the Tenant Fees Act (“TFA”), and does the Renters’ Rights Bill (“RRB”) change anything in this regard?

This question is prompted by a post by David Smith (link: The Challenge of Rent in Advance ) in which he suggests that GAPs may come under scrutiny when RRB bans rent in advance. David is the gospel on lettings law and so this caused quite a stir in the industry.

That said, I disagree with what he has written and I will set out to explain why I believe GAPs are TFA compliant. The main reason for this view is that GAPs are an alternative to guarantor agreements which are not themselves prohibited by the TFA. The change to rent in advance is irrelevant because it was not rent in advance that permitted GAPs in the first place.

Terminology

The TFA works by banning any ‘prohibited’ ‘requirement’. A ‘prohibited’ requirement is one that is not ‘permitted’.

Usually in the context of the TFA we are talking about a prohibited payment, but here the issue is around a prohibited requirement (that the tenant must enter into a contract with a third party). To be clear, GAPs are both a prohibited payment and a prohibited requirement under the TFA, but for the purposes of this I do not believe that it also being prohibited payment matters, so I will use prohibited/permitted requirement going forwards.

The TFA talks about a ‘relevant person’, but for simplicity I will just use the word tenant since the alternative does not meaningfully apply here.

The TFA does not meaningfully talk about guarantor agreements, but when I say it I am talking about an agreement with a person/organisation based in the UK that the landlord will look to enforce against in the event of default by the tenant. This is distinct from an overseas guarantor where the mechanisms of enforcement are far harder which makes them inherently less desirable to a landlord.

The Law

I have copied the key parts below, and I will focus on Section 1 of the TFA because Section 2 (which affects agents) is essentially the same as Section 1 so there is no need to split hairs. A link to Section 1 is here: Tenant Fees Act 2019

Section 1(3) reads:

A landlord must not require a relevant person to enter into a contract with a third party in connection with a tenancy of housing in England if that contract is—

(a)a contract for the provision of a service, or

(b)a contract of insurance.

This is the section that makes GAPs into a prohibited requirement because it is a contract with a third party and it is a contract of insurance.

I think it is also worth stating at this point that traditional guarantor agreements are not prohibited or expressly permitted under the TFA.

They are not prohibited because S1(3) does not apply to a guarantor agreement because, whilst it is a contract with a third party, the contract is not ‘for the provision of a service’, nor is it ‘a contract of insurance’.

They are not permitted because there is no ‘permitted requirement’ schedule in the same way that Schedule 1 of the TFA sets out ‘permitted payments’. I make this point to distinguish between ‘permitted’ in the sense of the TFA, and permitted in the usual English use of the word. Guarantor agreements are not prohibited and that means they are permitted, even if there is no express section to confirm that in the TFA.

Section 1(7) reads:

For the purposes of this section, a landlord does not require a relevant person to make a payment, enter into a contract or make a loan if the landlord gives the person the option of doing any of those things as an alternative to complying with another requirement imposed by the landlord or a letting agent.

Which leads into Section 1(8) which reads:

Subsection (7) does not apply if—

(a)the other requirement is prohibited by this section or section 2

The combination of Section 1(7) and 1(8) explore what ‘requirement’ means. 1(7) states that there is no requirement if the prohibited requirement is an alternative to ‘something else’, and 1(8) states that the ‘something else’ must itself not be prohibited.

It is also this section that means a GAP being both a prohibited payment and prohibited requirement does not matter because they are both resolved by being an alternative to something else.

The Guidance

I have included a link to the guidance at the end of this post, but we are concerned with Page 32 which discusses Deposit alternatives, which reads:

[a tenant may agree to a deposit alternative if] the tenant has been given [an] alternative option which is explicitly permitted under the ban

I believe this guidance is semantically different from what the law says. The guidance suggests that a prohibited requirement can only be an alternative to an explicitly permitted requirement, but S1 of the TFA says that the prohibited requirement cannot be an alternative to another prohibited requirement. I have highlighted the word ‘explicitly’ because, as mentioned above, guarantor agreements do not feature in TFA at all. Therefore unlike, say, cash deposits, guarantor agreements are not explicitly permitted.

Whilst this is guidance is given the context of Deposit alternatives and so may not directly translate to GAPs, it is still guidance on interpretation of what might need to be offered be so that the landlord can avoid making a prohibited requirement.

Interpretation

There is clearly then a clash between the law and the guidance; GAPs can only be offered as an alternative to ‘something else’ otherwise it is a ‘requirement’ and a breach of the TFA. The status of that ‘something else’ is what decides whether the alternative is a ‘requirement’. Let us play out the two scenarios:

1)      The law would suggest that the ‘something else’ must not be prohibited. Since guarantor agreements are not prohibited, GAPs are an acceptable alternative and so permitted.

2)      The guidance would suggest that the ‘something else’ must be explicitly permitted. Since guarantor agreements are not permitted, GAPs are not an acceptable alternative and so banned unless they are also an alternative to a permitted payment.

This is where rent in advance comes in. Presently, rent in advance is a permitted payment and so it also permits GAPs in scenario 2, but when rent in advance ceases to be permitted under RRB it means the scenario 2 goes back to banning GAPs.

This sounds bad, but I think it is a false dichotomy; the law and the guidance are not equal. The law trumps the guidance and so it is irrelevant what the status of scenario 2 is when it is never the permitted payment (rent in advance) that allowed GAPs, it was the offer of a guarantor agreement. So long as the tenant is given the option of providing a UK guarantor then a GAP can be offered as an alternative, and rent in advance is irrelevant.

I believe that GAPs can continue to be offered for the foreseeable future.

Tenant_Fees_Act_2019_-_Guidance_for_landlords_and_agents.pdf

Rent Adjustment Periods and RRB.

Today I have been looking at how the ban on rent in advance works with taking an 'adjustment' payment so that subsequent rental payments fall on a day that is more convenient for the landlord and/or tenant.

For consistency I will work with one scenario: a tenancy that starts on the 15th of September but the rent needs to be adjusted to be paid on the 1st of the month and then monthly thereafter. How much can a landlord take up front?

S1 of RRB (which introduces a new S4A into HA'88) states that rental periods must be 'a period of 28 days or shorter' or 'monthly' (S4A(3) HA'88).

S1(8) of RRB states that the rental is deemed 'monthly' even if the first rental period is different to the rest, as long as that first period does not exceed 30 days and the remaining rental periods are monthly. For our scenario we cannot therefore take 46 days rent up front to take us to 1st November as we are capped at the first period being 30 days or less. Our first rental period must be the 16 days to 1st October.

S9 of RRB (which introduces a new S4B into HA'88) states that rent cannot be taken in advance, except for the 'initial rent' (S4B(2)(b) HA'88).

Initial rent is defined at S9(12) RRB as 'the first rent period' (note: there is a second definition for initial rent, but I believe it relates to being able to take multiple weeks' rent up front if the rent is payable weekly).

Therefore in our scenario, if the landlord wants to take the adjustment period up front, the 'initial rent' is the adjustable period of 16 days. We can take that payment in advance (note: after the agreement has been signed) but no more.

On this basis there is a real trade-off to adjusting the rent at the start of the tenancy that does not currently exist. You can do it, but you are taking a lower amount at the outset. So what can be done instead?

Turning back to S4A HA'88. S4A(4) allows for 'different rent periods at different times' as long as those periods are permitted by S4A(3). That means we can introduce a rental period between the first month and the second month of less than 28 days to adjust the rent. This allows a landlord to take the full month's rent up front, adjust the rent thereafter, and then run from the new rent date for the rest of the tenancy. The restrictions on initial rent do not apply because the adjustment period is not the initial rent. We ignore S1(8) of RRB because whilst we can do the adjustment period up front, we do not want to.

To apply it to the scenario:
Initial rent payment: 15th September to 14th October (permitted, once the agreement is signed)
Adjustment rent: 15th October to 31st October
Second rent: 1st November.