Rental Property:

Housing was a major election issue this time, given the general acceptance that housing is facing something of a crisis in the UK. Both of the main parties had proposals for the private rented sector (PRS) in their election manifestos, particularly Labour with its proposals to radically shake up the sector; rent controls, forced sales, capital gains hikes and ending the shorthold tenancy being the main fears…

Labour had planned new policies which would have seen a huge expansion of tenants’ rights, including government funded renters’ unions, open-ended tenancies, removing immigration status checks, and removal of a landlord’s rights to exclude tenants on housing benefits.

Rent rises would have been capped in line with inflation, while some cities would have been given the right to impose further restrictions, as well as introducing an annual MOT check on all rental properties, coupled with a national landlord licensing scheme.

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Capital Gains Tax was to be brought in-line with income tax, in most cases from ten per cent up to 20, 40, 45 and 50%, depending on individual circumstances, while removing the current £12,000 tax-free allowance. However, a concession was to be applied for those with long-term lettings.

Landlords therefore will have breathed a collective sigh of relief last Friday morning when it became clear that a huge threat had been lifted, though the Tories still intend to carry out their plans already in train to make renting more tenant friendly. Indeed, the plan to remove Section 21 is slated to be in the Queens speech this Thursday.

That the Conservatives plan to scrap no fault evictions is no longer news, but perhaps less welcome than the suggestion that lifetime deposits become mandatory.

The Conservative manifesto confirmed that existing plans to abolish ‘no fault’ Section 21 evictions would be scrapped in England and Wales, bringing the system in this respect in-line with Scotland, though the introduction of a Housing Court or Tribunal in operation in Scotland is still in question, and probably unlikely.

It is more likely that a beefed-up Section 8 procedure will be introduced with extended grounds for possession and a “stream-lined” court process, the details of which are yet to be revealed. Unlike a no fault notice, Section 8 notices will only operate in circumstances where a breach of the tenancy rules has occurred, thereby giving landlords the opportunity to take a tenant to court and argue their case.

The lifetime deposit system would replace the current system in which tenants are having to raise a deposit twice when moving: leaving their old deposit under the landlord’s/agent’s control, while raising another one for the new tenancy. The whole process involves a substantial amount of money, especially where rents are high in the capital for example.

The lifetime deposit suggestion would mean that deposits can be transferred from tenancy to tenancy, a seemingly ideal solution, but the devil will be in the detail here; what happens if there’s a deposit dispute – all yet to be revealed.

In addition to these two key changes, there was a whole raft of other reforms in train and due to be implemented next year, most of which it can safely be assumed, will now go ahead.

  • Next April sees the final phase of George Osborne’s 2015 tax changes. Landlords will no longer be able to claim any tax relief on mortgage interest payments, apart from a Tax Credit of 20%.
  • Energy efficiency rules that came in last year will be extended to all existing tenancies from April next year. Properties with an EPC rating of F or G will not be able to be rented out from that date onwards.
  • Currently homeowners who have previously lived in a property but have since rented it out can claim capital gains tax relief on the sale of the property for up to 18 months after they moved out. From next April this period will be reduced to nine months under changes to the Private Residence Relief. This could have significant implications for many ‘casual’ or ‘accidental’ landlords and is expected to raise an additional £470million for the Treasury over five years. Anyone in this position and wanting to sell must do so before April 2020 to avoid any additional Capital Gains Tax.

David Smith from the Residential Landlords Association said:

“On the pledge by the Conservatives to end so called ‘no fault’ repossessions, we agree that the system needs to be reformed, but this needs to be done properly.

“Whilst any new system should protect tenants from the minority of landlords who abuse the current rights, it is important that good landlords can be confident that in circumstances such as tenant rent arrears or anti-social behaviour they can swiftly and easily regain possession of their property.

“We want to see comprehensive reform that works for both landlords and tenants.

“This should include setting up a dedicated housing court offering easy and inexpensive access to justice for both tenants and landlords.”

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