New UK rental laws may catch out landlords

Hong Kong landlords of British properties are in danger of being caught out by new rental laws that may see some being fined thousands of pounds, lettings agents warn.

From October 1, landlords of British properties generating more than GBP25,000 (HK$300,000) a year in rent lose their right not only to negotiate individual contracts - known as non-Housing Act tenancies - with tenants, but also to hold tenants' deposits during the tenancy.

Instead, they must sign assured-shorthold-tenancy agreements with tenants, the standard contracts for properties let out for up to GBP25,000 per year. Properties let out for more than GBP100,000 per year remain exempt from the legislation.

Under the new agreement, a landlord must place a tenant's deposit in a tenancy-deposit scheme. This ensures quick return of a deposit to a tenant at the end of a tenancy and provides independent adjudication on how much deposit should be returned should landlord and tenant dispute how dilapidated the property may have become during a tenancy. The lettings agent looks after the deposit in many tenancy-deposit schemes.

Introduced by the previous, Labour government in March and accepted by the current coalition government, the legislation is retrospective, so the assured-shorthold-tenancy agreements replace other contracts for existing lettings.

Landlords must place tenants' deposits in a tenancy-deposit scheme within 14 days of the changes becoming law on October 1, and provide tenants with proof that this has been done, lettings agents warn.

If landlords fail to comply, they risk legal action from the tenant that could see the landlord paying the tenant a sum of up to three times the original deposit. Landlords will lose their right to serve notice on a tenant to leave the property.