Do you know what the current hot topics on property management in the UK are?
Here is a list bothering most residential property landlords and managing agents.
• Future of Section 21 & amendments to Section 8
• Fitness for human habitation (Fitness for Human Habitation) Act 2018
• 3 year tenancies
• Tenants Fee ban & Tenancy Deposit Cap
• Licensing issues
• Tax, Section 24 etc.
Some of these have been discussed in our recent posts, but for sake of completeness we have tried to consolidate them all in this one post.
Section 21 notice issue
The UK Government has announced plans to consult on new legislation to abolish Section 21 evictions – so called ‘no-fault’ evictions in England. This will effectively create open-ended tenancies, and lead to what the Government believe will be more effective means of getting their property back when they genuinely need to do so.
Under the UK Government’s proposals, landlords will have to provide a concrete, evidenced reason already specified in law for bringing tenancies to an end.
To ensure landlords have confidence the Government will allow them to be able to end tenancies where they have legitimate reason to do so. To this end, Ministers at Westminster will amend the Section 8 eviction process, so property owners are able to regain their home should they wish to sell it or move into it.
The Government will also expedite Court processes, so landlords are able to swiftly and smoothly regain their property.
Want to know more?
Fitness for human habitation
The Homes (Fitness for Human Habitation) Act 2018 travelled through Parliament on the general acceptance, post-Grenfell, of the need to update legislation which was enacted to ensure that those in low-rent housing were not living in the kind of conditions that shame a civilised society.
The Act is deceptively simple on its face, consisting of two sections, one of which deals with commencement and extent. It will come into force on 20 March 2019.
Section 1 is the meat of the Act and amends the Landlord and Tenant Act 1985 to insert a new section 9A, 9B and 9C. The effect of section 9A is to imply a new term into any lease for less than seven years that is granted after 20 March 2019 and into any existing short lease from a 20 March 2010.
Section 10 is amended by the Homes (Fitness for Human Habitation) Act 2018 to add a provision that a property will not be fit for habitation if it has a prescribed hazard which makes it “not reasonably suitable for occupation”.
It is therefore incumbent on landlords to ensure that there is a proper system in place for responding to letters before action and recording the action taken.
3 year tenancies?
On 2 July 2018, the Government launched an eight-week consultation seeking views on longer tenancies, which proposed a new, three-year tenancy model. Below are some extracts from this consultation paper…
In light of this, the government aims to introduce a generational change to the law that governs private renting. This Government will put an end to ‘no-fault’ evictions by repealing Section 21 of the Housing Act 1988. Our announcement is the start of a longer process to introduce these reforms.
It will be important to find a balance between giving tenants greater security whilst ensuring landlords are able to recover their property if needed. We do not want to discourage investment in the sector or affect the supply of good quality rental accommodation.
Therefore, to ensure landlords have confidence they will be able to end tenancies where they have legitimate reason to do so, we will also strengthen the Section 8 possession process, so property owners are able to regain their home should they wish to sell it or move into it. These will be in addition to the existing grounds which allow landlords to evict tenants who don’t pay the rent or commit anti-social behaviour.
Tenant Fee Act
Holding deposits, rents, deposits and charges for defaulting on the contract, are all exempt from the tenant fee ban. But do also note, that all these 4 exemptions are still subject to additional restrictions as part of the legislation.
• Holding deposits – limited to a maximum of 1 weeks rent, plus additional legislation on the repayment of this should the tenancy not go ahead
• Rent – ban on setting rent at a higher level for the first portion of the tenancy then dropping it down afterwards
• Deposits – limited to 5 weeks rent as a maximum amount for tenancies where the annual rent is below £50,000. Above £50,000, limited to equivalent of 6 weeks rent
• Tenancy breaches – deposit deductions for damages, reasonable charges for loss of keys, 3% above BOE for late rent payments and no charge for sending reminder letters (current legislation draft)
We have touched upon many of these recently on our other blog articles, but 1st June is a big date for all Letting Agents and some landlords who manage their own properties. If you have not yet heard or are still unsure about it’s impact, then you do need to speak with a professional urgently and get some systems in place so that you do not fall foul of any requirements by the law. Unfortunately, the penalties are far too high to ignore any of these requirements.
The Tenant Fee Act, which comes into effect on the 1st June 2019 and includes a cap on the amount of deposit that you can take from a tenant. The deposit amount will differ depending on the annual rent amount, and will be capped at 5 or 6 weeks rent;
• Where the annual rent is up to £50,000, a maximum of 5 weeks rent can be taken as a deposit
• Where the annual rent is £50,000 or over, a maximum of 6 weeks rent can be taken as a deposit
Licensing has become the new ‘money making machine’ machine for most councils, as is described by most landlords. So landlords need to be aware of all different types of licensing that may be applicable to a rented out property, not just HMOs. Licences applies to any rented property in some councils across the country, so beware. There are Selective and Additional Licensing schemes operated by councils all over the country and hence it is of utmost importance to keep up-to-date with any local government changes and the laws associated with properties rented out under PRS arrangements (Private Landlords).
Clause 24 of Finance Act 2016
The final effect of the Section 24 changes for Property Income will be felt from April 2021 when there will be no Mortgage Interest allowed to be deducted from rental income. Some landlords who have just become aware of these changes and have not been keeping an eye on their accounts will soon start feeling the pinch and if you are the owner of a very small portfolio which is highly geared, this will become particularly painful. So, please seek guidance as soon as possible, if you fall into this category.
Feel free to contact us if you wish discuss any of the above and discuss any mitigation strategies, if possible.