Landlords: are you up-to-date with legislation?
Residential landlords need to make sure they comply with an increasingly complex web of legislation. Laws are changing all the time, so it can be difficult for landlords to keep up.
We spoke to David Cox, chief executive of ARLA Propertymark, who summed up the legislative landscape for the private-rented sector (PRS) in 2018: “In the grand scheme of recent changes, 2018 has not seen a huge amount of new legislation. Instead, it has been a year of preparation for the tsunami of new laws which are to come.”
So, it’s clear that landlords can’t afford to rest on their laurels. Like most well-laid plans, landlords who stay abreast of any changes in advance will come out on top. “Unquestionably, there are challenging times ahead for the industry, but there is light at the end of the tunnel and those who are planning now will reap the rewards down the line” David Cox continued.
Although 2018 was comparatively light in terms of new legislation, there are still a number of important changes all landlords letting residential property need to know. At Townends, we look after properties as if they were our own, so our lettings team is always monitoring for updates. If you want a team that is constantly looking out for you, get in touch today.
Here, we outline the significant changes that came into force in England during 2018 and look ahead to 2019...
How to Rent Guide
All landlords need to provide their tenants with an up-to-date How to Rent checklist. This applies to all new tenancies, or tenancies that have been renewed from 9 July 2018 and is available from the Ministry of Housing, Communities and Local Government (MHCLG).
Crucially, landlords who haven’t provided their tenants with this information won’t be able to regain possession of their property as it renders a Section 21 notice invalid – so make sure you provide your tenants with a copy of the latest guide at the start of each tenancy. At time of writing* the most recent edition was published in July 2018.
New Minimum Energy Efficiency Standards
From April 2018, all rental properties under new tenancies need to have a minimum energy performance rating of E or above. From April 2020, this will apply to all tenancies. If you find that your property falls below this standard, take a look at funding options such as The Green Deal.
Some exemptions do apply, but your property must be registered on the National PRS Exemptions Register if applicable.
Gas Safety checks
Recent changes mean landlords will have more flexibility when obtaining a gas safety certificate. Put simply, landlords can now complete a gas safety record up to two months before the date it needs to be renewed – much like a car MOT.
Banning Orders and Rogue Landlord/ Agent Database
From April 2018, local authorities can apply to obtain a banning order against any landlord or agent after they have been convicted of an offence, such as illegally evicting a tenant or not obtaining the correct HMO license.
These changes mean they will also be placed on a national database and the control of the property (including all rent) will pass to the local authority for a minimum of 12 months. However, the landlord will still be liable for the property.
Although the national database isn’t yet publicly available, a similar database for London can be viewed online.
Mortgage Interest Relief Reduction
Before April 2017, landlords were able to deduct the interest they paid on mortgages from their taxable income, allowing them to pay tax on profits rather than on turnover. From April 2018, landlords were only able to offset 50% of their mortgage interest. This is set to drop to 0% in 2020. Mortgage Interest Relief has been replaced by landlords being able to offset a basic rate (20%) deduction from their rental income.
General Data Protection Regulations (GDPR)
In May 2018, significant changes were made to Data Protection rules. These now require landlords to audit the information they currently hold about people, how it is treated and how long it is retained.
The changes can be complex, so the Information Commissioner’s Office has produced a 12 step guide alongside more information about complying with the new legislation.
Houses in Multiple Occupation and Residential Property Licensing Reforms
Changes will now require any property with five or more unrelated occupiers to have an HMO licence; irrespective of the number of storeys in the property. Minimum room size regulations have also been published – these prescribe the national minimum sizes for rooms used as sleeping accommodation and require landlords to adhere to council refuse schemes.
Read more about these changes here.
What next for 2019?
The first major change set to land in April 2019 is the long-debated tenant fees ban. The aim of the Tenant Fees Bill is to reduce the costs that tenants face when beginning a tenancy. Further clarification on the new rules have since been published. For example, landlords must make sure that security deposits don’t exceed five weeks’ rent and holding deposits must be capped at one weeks’ rent.
The penalties for non-compliance are severe, with a fine of £5,000 for an initial breach of the ban. ARLA Propertymark has outlined all the need-to-know clarifications on their website.
Another major change for the PRS is the introduction of compulsory Client Money Protection (CMP). From April 2019, all lettings agents must belong to a Government approved CMP scheme, which offers their clients greater protection (Townends already belongs to such a scheme). Crucially, the agent must ensure the level of CMP membership provides sufficient cover to compensate clients for the maximum amount of client money that they hold – so make sure your agent is protecting your interests with the right cover.
The amount of legislation governing the private-rented sector can be overwhelming. If you’d like to reap the rewards of letting property and still have peace of mind that everything is in hand, speak to one of our experts about our Lettings services today.