As we begin a new year we are reflecting on a busy 2019 – we have seen the most changes to the industry and lettings processes since we opened in 1998.
In March this year the Homes Fit For Human Habitation Act came into force. The bill means tenants can take legal action against their landlord should they fail to maintain their property to a good condition, without having to rely on the local authority being involved. From March 2020 this will apply to all tenancies rather than just those created since March 2019.
The tenant fee ban came into effect in June 2019. It impacts much more than tenant application fees. It prohibits charging tenants before, during and after a tenancy but also caps the deposits that can be taken to secure a property and held against a tenant’s performance. Importantly the maximum deposit that can be taken is 5 weeks of rent. We believe that this will be backdated to include all tenancies at some point in 2020. Once we receive clarification of this we will let all our landlords know how we plan to implement it as the majority of tenancies pre June 2019 have a deposit higher than 5 weeks rent.
In 2019 the Government announced plans to end ‘no fault’ evictions by abolishing the ability for landlords to serve a section 21 notice. In our experience it is very uncommon for a landlord to serve a tenant notice without good reason. I cannot imagine there not being an effective process where by a landlord can regain possession of a property as long as procedures are followed correctly and landlord’s responsibilities have been met. The housing court system would require investment and an overhaul to handle the additional possession claims. Interestingly the Residential landlords Association have recently surveyed their members and 96% of landlords consider the ability to regain possession of their property in the future as vital to their letting.
In April 2020 Minimum Energy Efficiency Standards (MEES) regulations will be extended to include existing tenancies. Currently new tenancies must meet an energy efficiency rating of E or above but there is no requirement to have an EPC for a property let prior to this becoming a requirement. From April 2020 ALL tenancies must meet the minimum standard of an E. We are currently checking our database of managed and let only properties to be able to advise those landlords this will affect.
Finally the staggered reduction of Mortgage Interest Tax Relief will reach the point some landlords being able to claim only 25% of their mortgage tax relief. This impacts the 2019-2020 tax year. This has lead to many landlords looking at their current portfolio structure as they find themselves with higher tax bills and rising costs. Many are reviewing their mortgages and business entities to make it worthwhile to continue investing in property. As more landlords exit the private rented sector and demand from tenants continues to increase we will surely see rents continue to rise.
Listening to the Queens speech it highlighted the government’s plans to protect tenants and improve home safety as well as encourage local first time buyers to own their own home. Reading the document produced by the government they have stated the plan that they will create a Renters Reform Bill to deliver a fairer and more effective rental market. The benefit of the bill will include improving security for tenants but also strengthening the rights of landlords who need to gain possession of their property when they have a valid reason to do so. They intend to improve standards in rental accommodation and professionalise letting agents.
The main elements of the bill include abolishing ‘no fault’ evictions by removing section 21 of the Housing Act 1998 and reforming the grounds for possession. It states they intend to give landlords more rights to gain possession through the courts where there is a legitimate need for them to do so. They plan to improve the court process to make it quicker and easier to get their property back sooner.
If nothing else all these changes are making many landlords consider carefully what they are doing. During 2020 we will be holding more landlord events to update anyone with an investment property or considering investing in property. To register your interest please email katie.archer@belvoir.co.uk
We are also able to offer advice on tax planning with our associates at Franklyn Financial Management – let me know if you would like an informal discussion with them to establish whether your investment portfolio performance could be improved with a review –
https://www.belvoir.co.uk/bingham-estate-agents/franklyn-financial-management/
