Regulations & Landlords:
Earlier this month the Tenant Fee Ban was introduced, after much fanfare from the Government. However, it is not the only piece of regulation and policy change set to affect the landlord market this year.
It joins what can only be described as a slew of restrictive Government policies – including tax changes, tougher HMO requirements and the recent announcement / threat to ban ‘no fault’ evictions – which many would agree amount to an unfair and sustained attack on the landlord market.
It is clear the Government seems to have forgotten landlords are often just ordinary, hardworking people and savvy investors, who have saved to buy an additional property as a nest egg or source of income. A report from the Institute of Economic Affairs (IEA) recently criticised the Government’s approach, concluding landlords are unfairly being discriminated against and scapegoated for the rental housing crisis.
By squeezing profit margins and pushing landlords to exit the market, there is a very real danger that the recent Government policies will start to undermine the UK rental sector altogether.
The fact of the matter is, the rental market is growing, and landlords fulfil an incredibly important role in providing essential property stock. Instead of increasing red tape and making it harder for landlords to turn a profit, the Government should be supporting and encouraging the sector.
Appropriate planning is now incredibly important to ensure you avoid any financial, practical or legal ramifications of new and upcoming legislation. So, as a landlord, what should you be doing to navigate this new regulatory landscape and make sure your assets are protected?
As most will know, the Tenant Fee Ban means the only payments that can now be levied at tenants by landlords or agents are rent, dilapidation deposits and default fees, with the deposit limit reduced from 6 weeks to 5. However, the biggest danger for landlords is the removal of an agent’s ability to charge for tasks like reference checks.
Nightmare tenants can wipe out profit through property damage or failure to pay rent. It is therefore vital to commit to paying for reference checks and a rent guarantee to ensure all parties are fully protected. Alternatively, make sure you are using a reputable agent who will continue to carry out these tasks properly, potentially by using deposit replacement schemes that include these as standard.
Another significant change has been to HMO licenses, traditionally required in any property where five or more people live over three floors but are not part of the same family. Non-compliance can result in unlimited fines, a criminal record and a ban from acting as a landlord in the future.
What many don’t realise is that HMO rules can be different for each borough, and numerous councils are getting much stricter about enforcement (encouraged by the fact they now profit from any fines!). For example, in Camden, London, HMOs are now required for any property with three unrelated persons, and also within properties on a single floor.
Tenants are also being invited to report non-compliance, encouraged by the fact that landlords can be forced to repay all rent to tenants for the length of their contract. In just one of the London boroughs, there have been 1,200 prosecutions of landlords and agents for HMO breaches in the last 5 years, so ensuring you are HMO compliant by checking your borough’s specific rules is an absolute must.
On 20th March this year the Homes Act 2018, or ‘Fitness for Human Habitation Act’ also came into effect. While not entirely new, rather a clarification and bringing into line of previous legislations, it is harsher in a number of ways. There are now 29 hazards that landlords are responsible for monitoring – including damp, mould, cold, asbestos, heat, and radiation to name a few.
Tenants can take landlords to court and sue if it is found they have failed to maintain standards in one of these areas. The problem here is that it can be incredibly difficult, as an independent landlord, to both have the necessary knowledge on these matters and make sure you are compliant. This is where a knowledgeable and reliable agent or advisor is key.
Finally, the Government have also announced that they intend to end ‘no fault evictions’, by removing the Section 21 notice. Although their proposals presently lack any real detail, this will make it even harder for landlords to get rid of disruptive tenants.
Their current suggestion that Section 8 notices should be used instead, by which grounds such as failure to pay rent must be provided for eviction, are little comfort thanks to a backlogged court system that with three-to four-month delay in hearings can make this an incredibly lengthy and costly option. Given the lack of detail, there might still be opportunity to adjust this law, and so lobbying MP’s and Parliament members on this could provide some relief.
Rental yields are improving and buy-to-let can still prove to be a good investment for many, so you should not necessarily be put off. However, it is vital to remember the onus is now on you to put the necessary precautions in place to protect both your property and rental income.
Information and education are key – to this end, I will be hosting a number of round table events in the coming months, aimed at helping local landlords understand and navigate recent policy changes. Attendees will be able to ask questions, gain insight and discuss their experiences with experts from Martyn Gerrard, ARLA and local councils.
By Simon Gerrard, MD, Martyn Gerrard
For more information and to register your interest email HO@martyngerrard.co.uk