I reckon we all deserve a break from the daily Covid-19 press briefings, so here’s some light relief – a legal briefing for landlords! Who needs a streaming service when you can familarise yourself with what’s imminent or in the pipeline and what action you could / should be taking as a landlord?!
Contrary to the general view, being a landlord is far more challenging than it looks from the outside. Maintaining your property, finding and keeping tenants are (relatively) easy tasks. It’s the legislation that really takes all your energy and focus. Hence this, our legal briefing for landlords.
Of course, everything has to be viewed through the lens of Covid-19 so, in many cases, the exact timings are not clear. Some will happen, some will be delayed – whatever, we think you should be aware of what’s coming down the line.
Mortgage interest tax relief
Detail: no legal briefing for landlords would be complete without an input from HMRC! In 2017/18 buy-to-let mortgage tax relief began its phased disappearance. Since April 2017, landlords’ finance costs have been slowly disallowed; instead we only receive a 20% tax credit on our allowable interest payments. From April 2020 landlords won’t be able to claim any tax relief on mortgage interest payments at all, meaning our ‘taxable income’ will be significantly higher than before and many of us will jump into a whole new tax bracket.
Schedule: fully implemented from 06 April 2020
Action: this only impacts those being taxed at the higher rate, but many landlords with mortgages will be pushed into this tax bracket as a result of the changes. Check to see if you have been affected already, because this problem could get much, much worse for you from April 2020. Tax efficiencies, are always possible though.
Coronavirus Act 2020 and suspension of evictions
Detail: emergency legislation, preventing landlords from being able to start court proceedings to evict tenants for at least 3 months, has been passed. Luckily, property owners who are suffering financially could qualify for a 3 month mortgage holiday. This means landlords whose tenants aren’t paying all their rent could get some respite until the middle of June. After that point “landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances” (Robert Jenrick, Housing Secretary).
Schedule: as of 26 March 2020
Action: show compassion, but don’t cause a major debt problem for yourself. Carry on being ethical and law-abiding and take no notice of Shelter’s relentless trolling of landlords. If you chose to take our Rental Guarantee then you will be covered, but remember there’s a process to follow, otherwise no one benefits, so contact me if you’re unsure where you stand. See comprehensive guidance here.
Homes (Fitness for Human Habitation) Act 2018
Detail: protects tenants and ensures their property is fit for purpose. Affects all periodic tenancies in England, including those that existed before 20 March 2019. The only exceptions are tenancies on a fixed term that begun before 20 March 2019, to which the act won’t apply until the end of the fixed term. Replaces existing fitness for human habitation clauses in the Landlord and Tenant Act 1985, and applies to all human habitation tenancies with a term of up to seven years.
Schedule: 20 March 2020
Action: make sure your property is compliant.
Minimum energy efficiency standards
Detail: an energy performance certificate (EPC) rating of E or above is required for new tenancy agreements and renewals, other than some HMOs, e.g. bedsits, listed buildings, etc. See also Minimum Energy Efficiency Standards – MEES – which came into effect in April 2018.
Schedule: 1 April 2020
Action: make sure your property has an EPC rating of E or above. If not, then implement measures to raise it above an E rating, or, if appropriate, apply for an exemption.
Principal Private Residence relief
Detail: changes to Principal Private Residence (PPR) relief mean that landlords will lose 9 months’ worth of Capital Gains Tax (CGT) relief when they come to sell. Currently, landlords can claim PPR relief for the whole time they lived in a property before they let it out, in addition to an extra 18 months after moving out. This final exemption period will be reduced to the time they lived in the property plus just 9 months.
Schedule: 6 April 2020
Action: seek other opportunities to remain tax efficient!
Detail: lettings relief applies to shelter part of the capital gain arising on the sale of let property that at some time was also the owner’s PPR. The amount of letting relief is currently the lowest of (a) the amount of PPR relief available on the disposal; (b) £40,000; or (c) the gain attributable to the letting. However, from 6 April 2020 lettings relief will only be available where at some point the landlord actually shared occupation with their tenant(s).
Schedule: 6 April 2020
Action: remember, there are other opportunities to remain tax efficient…
Capital gains tax payment deadline
Detail: the deadline for payment of CGT will no longer be from 31 January in the year after the tax year the landlord made the sale. From April 2020, it will be within 30 days of the completion of the sale.
Schedule: 6 April 2020
Action: within 30 days of completion of sale submit a provisional calculation of the gain to HMRC and pay the tax that is due. Any gain will still be recorded on your tax return and any over or under payment of tax dealt with at that point.
Detail: as energies and attention are quite rightly being focused on the Coronavirus pandemic, both Britain and the EU are facing calls to back away from a “game of chicken” and extend the Brexit transition period immediately.
Schedule: June 2020 (planned)
Action: monitor the situation and follow existing rules (e.g. Right to Rent checks) until told otherwise.
Tenant Fees Act 2019
Detail: the Tenant Fees Act, which came into force in England in June 2019, will be extended to cover all existing tenancies. This Act really will tie you up in knots if you aren’t vigilant and organised.
Schedule: 1 June 2020
Action: the Tenant Fees Act really tests the mettle of landlords, especially those who are self-managing. A dedicated legal briefing for landlords awaits!
Mandatory electrical safety checks
Detail: landlords already have to make sure that the wiring and appliances in their properties are safe. However, from July 2020 it will be a legal requirement for private landlords to have their electrical installations inspected every five years and provide a safety certificate to tenants and their local authority upon request. The regulations will apply to all new tenancies from 1 July 2020 and existing tenancies from 1 April 2021.
Schedule: 1 July 2020
Action: don’t delay, July is not far away and electricians are already in short supply. Local authorities will take action if landlords do not comply with the requirements and fines will be issued. Talk to us, we’ll help you schedule the work and avoid the pain.
Client money protection
Detail: since April 2019 all agents who manage property lettings in England have been required to belong to an approved Client Money Protection scheme.
Schedule: 1 April 2021 (hard deadline, previously delayed)
Action: check that your agent is a member of a Client Money Protection scheme (we joined a scheme several years ago). Remember, if anything happens like going out of business, misappropriation of client funds, etc, it’s the landlord who feels the greater impact.
Renters’ Reform bill
Detail: abolishes the use of Section 21 ‘no fault’ evictions and introduces a lifetime deposit, along with measures to expand the database of rogue landlords and letting agents. Apparently it “improves the possession process for landlords”, so we look forward to an improvement on the usual 16 weeks’ wait to get a hearing.
Schedule: subject to parliamentary time
Action: protect yourself with super-efficient management of your tenancy, such as great record-keeping, efficient processes in place (e.g. for non-payment of rent) and clear communication. If you have to serve a Section 8 (and have no desire to sell or move into the property itself), you’ll need a 100% watertight case so the judge has no reason not to grant your possession. Such evidence-gathering does not come naturally to many self-managing landlords!
Pet friendly tenancies
Detail: this revision of the Model Tenancy Agreement for Assured Shorthold Tenancies in the private rented sector is intended to make it easier for tenants with pets to find landlords who will accept them. It removes restrictions on responsible tenants with pets and encourages landlords who use the Model Tenancy Agreement to offer greater flexibility in their approach to pet ownership.
Schedule: no idea!
Action: notwithstanding any planned legislation or ‘movements’ in the pipeline, welcoming pet-owners makes good, commercial sense. It opens up a wider base of potential tenants who, in contrast, currently have a limited choice of properties from which to choose. Time to make your property pet-friendly!
Legislation never stops for landlords!
The private rented sector is a very busy section of the law. New legislation, amendments to existing and bolt-ons are appearing all the time. Stick with us – we’re always monitoring and scrutinising the legal landscape for private landlords. No doubt, we’ll be posting another legal briefing for landlords again very soon…