A ‘Look Back’ and ‘Look On’ at Landlord Liabilities

Every December I write a roundup which summarises the year gone by; what changes have impacted landlords and what changes we can expect from the year ahead. Perhaps I should just say “Brexit” as a summary and leave it there.

There is no doubt that most industries across the country have felt the impact of the crushing political stalemate. However, one thing we do know is that once we finally get through the election and have some idea of the direction of our country, there will almost certainly be some further big changes to the private rented sector.

So, first of all, let’s look at some of the changes which had previously been announced and came into force in 2019:

Homes (Fitness for Human Habitation) Act

The Homes Act 2018 came into force on 20 March.  The purpose of this is to ensure that all rented accommodation is fit for human habitation. Although this will only have affected a small number of landlords, it is an important point to note as the Bill means tenants can now take legal action against their landlord should they fail to maintain their property to a good condition, without having to rely on their local authority to get involved.

Tenant Fee Ban

After gaining royal assent, the ban on tenant fee charges came into force on 1 June. This means that landlords and letting agents can no longer charge for anything other than:

• Rent
• Deposits (including holding deposits)
• A change or early termination of a tenancy when requested by the tenant
• Utilities, communication services and council tax
• Key replacement costs (charge for new keys and petrol, but not time lost)
• Arrears
• Damages

A breach of the fee ban is a civil offence with a financial penalty of up to £5,000. I said at the time, and still believe, that rents will rise to tenants as agents are forced to put up their fees to landlords.

Compulsory CMP (client money protection)

From April this year, it became a legal requirement for all letting agents to hold client money protection insurance. This is good news for landlords as it means their rental income is protected.   I am delighted that this is now a legal requirement as I have been calling for this change for years, especially as I have dealt with my fair share of rogue agents over the years who have stolen landlords’ rent. 

Section 21

Earlier this year, the Government announced a proposal to end “no fault evictions” by abolishing the right for landlords to serve notice under section 21 of the Housing Act 1988.  It launched a consultation “A New Deal for Renting: Resetting the balance of rights and responsibilities between landlords and tenants” to obtain the views of landlords on its proposals. Despite strong opposition from landlords and the industry, including myself, it would seem that whichever political party wins the election, Section 21 will be scrapped.  For me, this could have the greatest impact on the PRS we have ever seen, especially without substantial funding for our court system.

What can we expect from 2020?

Landlord’s Minimum Energy Efficiency Standards broaden

Although this has already been well-documented, the staggered approach means more landlords will be affected by the tightening of the Minimum Energy Efficiency Standards (MEES).

April next year (2020) sees the regulation extended to existing tenancies, too. This means that if a landlord’s property is currently rated at ‘F’ or ‘G’, it will no longer be rentable from 1 April 2020.

Landlords should be taking action now to ensure their properties are compliant.

Mortgage interest tax relief

This may seem like old news, but the 2019-20 tax year begins in April, meaning landlords will only be able to claim 25% of their mortgage tax relief when filing their taxes (down from 50% for the 2018-19 tax year).

This has led to increased tax bills for many landlords and some will find that it is no longer profitable to be a landlord, which may lead to them exiting the market.

Many landlords are looking at how to change their business entities to either an LLP partnership or a limited company.  Please make sure you advise your landlord to seek advice from a specialist property tax accountant.

Mandatory electrical safety checks

Although a date for implementation has not yet been announced, the Ministry of Housing, Communities and Local Government (MHCLG) announced in 2019 that mandatory five-year electrical installation checks on private rented housing in England would be introduced.  It is highly likely that this legislation could be introduced at some point in 2020. After a year of uncertainty and ever increasing legislation in the PRS, 2020 looks likely to bring both fresh challenges and new opportunities for landlords and letting agents. As I wrote in my recent blog for LandlordZONE, Landlords no more excuses, education is one of the most important tools landlords and letting agents have at their disposal. In today’s highly regulated climate, it is your responsibility to educate both yourselves and your tenants. Those who do will stand a much better chance not just of surviving, but of thriving.

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