ATTENTION LANDLORDS!!!WHAT’S NEW FOR LANDLORDS?
CHANGES IN REGAINING POSSESSION RULES
If the government’s latest ‘How to Rent Guide’ – issued on 1st June 2019 - is not given to private sector tenants when moving in or renewing, landlords will be unable to serve a section 21 ‘no fault’ possession notice. A new Form 6a specifies a Section 21 notice cannot be used either if a ‘prohibited payment’, as defined in the new Tenant Fees Act, has been taken from a tenant and not repaid within 28 days.
And there’s more bad news for landlords. Last April, the government announced its intention to scrap section 21 notices in England to encourage longer tenancies and improved security of tenure. We find rent arrears is the main reason landlords use Section 21 to evict tenants so, if that option is removed, they are likely to become even more selective.
The alternative ‘section 8’ procedure will probably be speeded up. Hopefully, landlords will still be able to reclaim their properties relatively quickly if they have to move back in, evict tenants who have not paid rent, and/or are causing a nuisance. But the Courts will have to be satisfied sufficient evidence has been obtained.
This may be easier said than done especially if criminal landlords or difficult tenants try to exploit the new arrangements!
At present, landlords can in theory remove tenants within 8 weeks of giving notice without giving a reason although in practice it takes on average over 5 months, according to latest government figures.
A consultation will be carried out to assess the impact of the withdrawal of section 21, as well as clarifying the circumstances in which landlords can regain possession.
Landlords, who have been letting out properties on favourable terms to retain better tenants, may be more inclined to increase the rent soon, at least gradually, as it will almost certainly be more difficult to do so in future.
A balance needs to be found between the need to improve security of tenure for tenants without compromising investment by landlords which will only increase upward pressure on rents.
WHAT DOES THE NEW TENANT FEES ACT MEAN FOR LANDLORDS?
Since 1st June 2019, landlords and agents have been unable to charge tenants other than for rent, utilities, council tax, security deposits to a maximum of five week’s rent and holding deposits up to one week’s rent. A ‘reasonable’ amount can be requested for losing keys, changing sharers etc. but only if provision has been made in the tenancy agreement. We understand tenants can still be charged for optional services i.e. those not conditional on the granting, renewing or continuation of their tenancy.
The law becomes retrospective on 1st June 2020 when it will cover all tenancies regardless of when they started. This means landlords may be unable to charge for say, end of tenancy cleaning if a tenant moves out or renews after May 31st 2020, even if included in agreements drawn up before 1st June 2019.
HOW ARE ‘RIGHT TO RENT’ RULES CHANGING FOR LANDLORDS AND TENANTS?
Under Right to Rent, landlords and their agents must establish which adults will live in a property and whether they are entitled to do so by checking original documents – and in their presence - or otherwise face heavy fines and up to five years in prison!
However, the Immigration Advice Service has found some landlords are not renting to migrants or descendants of migrants to avoid the extra workload and potential penalties so the legislation is resulting in discrimination!
The High Court ruled at the end of February 2019 that Right to Rent breached tenants’ human rights, increased homelessness, was disproportionately discriminatory and had little or no effect on immigration.
As a result, the government are reviewing the scheme pending a possible legal challenge - as the Courts cannot repeal primary legislation.
The Residential Landlords Association (RLA) wants the legislation repealed as they say it has not resulted in a single prosecution and is only causing anxiety for landlords and covering for failings in UK Border Agencies. At the very least, the RLA believe urgent clarification is required, bearing in mind two thirds of all EU citizens are said to be renting property in the private sector!
CLIENT MONEY PROTECTION (CMP)
All letting agents and property managers have been obliged to belong to an approved client money protection (CMP) scheme since April 2019. CMP is an insurance policy that covers rent and deposit held by agents while giving landlords and tenants the opportunity for recovery if an agent misappropriates funds.
The government confirmed CMP providers will not need to cover money already protected in an approved deposit protection scheme.
WHAT ABOUT LANDLORDS’ HEALTH, SAFETY AND ENERGY RESPONSIBILITIES?
Landlords failing to comply with Minimum Energy Efficiency Standards (MEES), which could involve replacement of an inefficient boiler, new radiator valves, loft or wall insulation, double glazing etc face fines of up to £5,000 and won’t be able to let their properties to new tenants.
Landlords in England and Wales have been legally required since 1st April 2018 to provide an energy performance certificate (EPC), which is valid for 10 years, with a rating of ‘E’ or above for all new privately rented tenancies as well as renewals and extensions. The EPC assesses how much a building costs to heat and light as well as its carbon dioxide emissions. A is the most efficient and G the least.
From April 1st 2020, the minimum E rating will become a legal requirement for all properties let before April 2018. Landlords wishing to rent out the 15% of private residential properties in England and Wales with a current EPC rating of F or G must prove the cost of bringing them up to an E rating exceeds £3,500 including VAT. The requirement applies to all landlords unable to access third party funding such as via Green Deal Finance or local authorities.
IS YOUR RENTED HOME FIT FOR HUMAN HABITATION?
Since March 2019, the Homes (Fitness for Human Habitation) Act 2018 meant all social and private sector landlords in England - or agents acting on their behalf - must ensure properties and common areas are in an appropriate condition at the beginning and throughout the tenancy.
If a home is found to be hazardous and the issue not resolved, tenants have the right to take direct legal action in the Courts for breach of contract.
All new or renewed domestic tenancies from 20 March 2019 fall under the new rules and include tenancies significantly altered, such as when there is a change of sharer.
Existing fixed term tenancies will be included when renewed or become periodic whereas existing periodic tenancies have 12 months grace but need to comply by 20 March 2020.
WHAT ELSE IS ON THE HORIZON FOR LANDLORDS AND TENANTS?
The government launched a consultation in June 2019 into whether tenants will be able to transfer deposits between rented properties without waiting for a refund from previous landlords. Some of our landlords fear transfer before any dispute arising from a previous occupation has been resolved could compromise outstanding claims.
The government have also indicated it broadly supports selective licensing and a national register of private sector landlords. The Residential Landlords Association believe licensing won’t necessarily promote better quality accommodation or root out bad landlords unless additional resources are allocated to local authorities to enforce existing rules. They believe an annual property ‘MOT’ to ensure rented homes are fit for purpose would be a better idea.
New rules mean anyone selling an investment property after 6th April 2020, where capital gains tax is due, will have to pay within 30 days of completion rather than the 31st January following the end of the year in which the sale is made i.e. up to 22 months later!
In January 2019, the government announced that all landlords will be required to join a redress scheme to settle disputes.
IS BUY TO LET STILL WORTHWHILE FOR LANDLORDS?
Despite an increasing number of rules and regulations, most of our landlords are retaining their properties as they tell us returns still outweigh those available from other opportunities.
However, our most successful landlords regard buy-to-let as a longer-term investment and tenants as valued customers.
Landlords can still offset mortgage interest and other financial costs, repairs, maintenance, renewals, management and professional fees against profits as well as council tax, insurance and ground rent. Buy to let mortgage rates are near record lows and loan products at an all-time high.
Many potential first time buyers are finding it impossible to raise sufficient deposits or meet challenging lending criteria so renting is their only option.
Household formations still far exceed the number of homes built so upward pressure on rents remain. It’s no surprise tenant numbers are said to have more than doubled over the past ten years to 4.7 million - equivalent to 20% of all households and over 25% in major cities – and the Barnet area is certainly no exception!
Asking Jeremy Leaf & Co to let and/or manage your property means one less thing to worry about!