The passing of the Deregulation Bill 2015 last week brings with it a swath of new measures affecting landlords and agents and the so call “revenge” eviction section represents perhaps the biggest fundamental change in English residential tenancy law since the introduction of the assured shorthold tenancy (AST) in 1988.
The Bill, which is likely to become effective from October, effectively takes the decision as to when a tenant can be evicted out of the landlord’s hands, if the tenant reports a repair issue. In most cases the landlord should not be affected unless the repair issue is of a serious (category 1 or 2) nature, but it means that the landlord is at the mercy of local authority officers, with the potential for long delays and miss-interpretation of defects.
If the tenant is not paying rent and bringing claims of disrepair – these issues are never black and white – the potential losses for landlords are considerable.
Add to this the pre-eviction new requirements to provide a current Energy Performance Certificate (EPC), a Gas Certificate (CP12), and as previously, licensing details (where applicable), tenancy deposit details and proof of service of the prescribed notice (Section 213 notice) and you have a build-up of bureaucracy and administration that the average landlord has not been faced with before.
Also, we now have the requirement to install smoke alarms, a mandatory requirement to inform utility companies (water) as has been introduced in Wales, and it probably won’t be long before electrical checks become mandatory, as in Scotland.
Admittedly, most of these changes are perfectly reasonable and many would argue, necessary, but the administrative burden they place, and the attention to detail that will be needed to manage a tenancy effectively, and avoid being stuck with a nightmare tenant, will be considerable in the future.
A total surprise and a worrying development is the proposal that preventing sub-letting in tenancy agreements might be barred. Hidden in the Budget 2015 documentation, this measure, which the Government argues will increase flexibility in the rental market, is likely to open up a whole can of worms for landlords if enacted.
So, not only are landlords potentially to be prevented from evicting when they decide, for very good reasons, when they can no longer tolerate (or afford) a rent dodging or delinquent tenant, they could be saddled with occupiers they have not screened and approved.
We don’t have the full details of the sub-letting issue, so we should not expect the worst, but it is a potential nightmare and, along with the eviction issue, has implications for landlords, agents and insurance companies, particularly rent guarantee policies.
Nevertheless, despite these developments, buy-to-let investment will likely continue apace and with “pension freedom day” approaching in April, we could see an influx of new and inexperienced “silver grey” investors.
There is a widespread belief that bricks and mortar is a safe haven for everyone’s money and, if these seniors are looking for a regular income for retirement and long-term capital growth they will not take too much persuasion to see a buy-to-let property or two as an ideal solution.
And plenty of persuasion there will be. The property boom saw a slew of property investment “experts”, seminar “gurus” and snake oil sales operators, many of whom have since gone bankrupt themselves, advising novices to put their life savings into dodgy property investments. It was the blind leading the blind.
Fast forward to 2015 and we are seeing again the conditions that lead to this sort of thing. There are many reputable financial and property investment advisors out there, but for the novice, it’s really hard to tell the difference. Faced with a slick, sharp suited young executive, who tells you what you want to hear, and has the glossiest smart website you ever saw, it’s so easy to get drawn in to some highly dubious investment schemes.
So, for anyone contemplating buy-to-let as a safe haven for their pension pot I would say approach with caution. Seek out reputable and qualified advisers yourself and accept that buy-to-let is not a passive investment – it will take a fair amount of work and expertise to manage it effectively, whether you mange yourself, or you use a reputable agent.
Tom Entwistle, Editor