The Finance Bill 2003 which was enacted on the 10 July 2003 contains three sections which make important concessions to RSL in respect of Stamp Duty on Tenancy Agreements.

These concessions are as follows:-

All tenancies signed on or after the 1 January 2000 for the temporary housing of homeless families, under contract between RSL’s and Local Authorities are exempt from Stamp Duty, and
The increased threshold of £5,000 which has been effective since the 28 March 2000, has been backdated to 1 January 1990. Hence, any duty already paid by RSL’s in respect of such tenancies, can be reclaimed provided the claim is submitted before 1 January 2004.

From 1 January 2004, if any Stamp Duty is payable, it will be the responsibility of the tenants and not the RSL to make the payment.

Furthermore, the tax will be enforceable, which means that the Inland Revenue will be able to chase non-payment and impose penalties, 30 days after Tenancy Agreements are signed. To date, stamp duty has been a voluntary tax and non-payment meant that both the tenant and landlord have had documents which were not protected in law.

The consequences of this is that for agreement signed on or after the 1 December 2003, stamping will no longer be a pre-requisite for Court action.

From 1 December 2003, RSLs with have no financial liability for Stamp Duty on new Tenancy Agreements. However, tenants will be liable to pay Stamp Duty if the annual rent is in excess of £5,000 unless landlords take action to ensure such liability is legitimately avoided.

The legitimate wording put forward by the National Housing Federation is as follows:-

“This tenancy begins on……..for a week/month* and thereafter weekly/monthly* until brought to an end, and it is an Assured Non Shorthold Tenancy, the terms of which are set out in this agreement.” For assured tenancies.

“This tenancy begins on……..for a week/month* and thereafter weekly/monthly* until brought to an end, and it is an Assured Shorthold Tenancy, the terms of which are set out in this agreement.” For assured shorthold tenancies.

On changing the wording, the vast majority of tenants will not be liable for Stamp Duty or the new Stamp Tax.

Of course, failure to make the above amendment will not directly affect RSLs, however, you may find it difficult to explain your action to any tenant subsequently faced with paying unpaid tax, plus any penalties which are applied.

It should be noted that whilst the current threshold exempts the majority of tenancies, the passage of time will gradually erode that value the same way in which the original £500 was eroded over a long period of time.

Unfair Contract Terms

Previously a document was published by the Office of Fair Trading (OFT) dealing with the provisions of the Unfair Terms in Contracts Regulations 1999 and how they apply to tenancy agreements in the private sector.

There are some general provisions concerning the language of tenancy agreements if there is a standard contract not individually negotiated. (In fact most of your agreements will have been negotiated individually). If not individually negotiated then the agreement has to be in clear English and unless it is a core term (e.g. the rent clause, length of tenancy etc) a non-compliant provision may be considered unenforceable.

Examples of unfair clauses are:

An absolute right to rehouse the tenant to other premises as the landlord decides.
Any payment not honoured shall attract an additional charge.

The OFT usually deals with matters informally and suggests changes rather than go to court. For example a letting agency was required to delete a term requiring a tenant to pay a daily £5 penalty when in arrears.

The regulations are not likely to involve you often but when drafting a tenancy agreement it may be sensible to bear these in mind.