In 2020, while most of our thoughts have been consumed by Covid-19, there are significant legislative changes which will impact the rental and buy-to-let markets. It is important that landlords are aware of these when putting a plan in place to move out of lockdown so that their rental portfolios are fully up and running again. If you are looking to stay a step ahead and meet the challenges that lie ahead later in the year, the experienced Lettings team at Hancock and Partners has put together this guide for you to highlight these changes.
Section 21 Abolition
Section 21 was introduced as part of the Housing Act 1988, which is normally the first step a landlord takes to regain possession of their property. However, the government announced a Renter’s Reform Bill in the Queen’s Speech in December outlining their intention to abolish the use of ‘no fault’ evictions by removing Section 21 of the Housing Act 1988 and reforming the grounds for possession. Governments are instead giving landlords more rights to gain possession of their property through the courts where there is a legitimate reason. Court processes will be improved and make it quicker and easier for landlords to get their property back sooner.
ARLA Propertymark were quick to respond promising to consult alongside the government in order to help protect landlords whose properties are needed now more than ever. They will be scrutinising the proposed legislation and proposing reforms to Section 8 so that landlords can regain possession of their properties.
What does this mean for landlords?
To now bring tenancies to an end, landlords must use one of the grounds specified in Section 8 of the Housing Act 1988 – which does already give a clear outline of grounds such as a breach of tenancy agreement, including rent arrears or damage to the property. In order to improve the current process, the government has suggested a number of improvements to Section 8. However, it is unlikely any changes will come into force before late 2020/early 2021 – but it is something that landlords need to take into consideration.
The Government has confirmed they do not plan for the changes to be retrospective, so any existing ASTs on the date the law comes into force will continue and still have use of Section 21. The Government is also proposing to review grounds for arrears, antisocial behaviour and domestic abuse.
The Minimum Energy Efficiency Standards (MEES)
An Energy Performance Certificate sets out the energy efficiency rating of a property with recommendations on improving its energy efficiency. Since 1st April, landlords are no longer permitted to let properties with poor energy efficiency ratings.
How will this impact landlords?
This means that the new minimum energy efficiency standard (MEES) will be E, so any landlords in England and Wales with properties rated F and G could potentially be fined up to £5,000. Scotland already has similar rules in place, where EPC D is already required by 2025 and the Scottish Government is already consulting on an additional target of C by 2030. Landlords will now be required to ensure compliance to these new regulations before a lease is granted.
If a landlord wishes to continue letting the property but it does not meet the criteria, they will need to ensure that energy efficiency improvements are made to meet the minimum E rating. This work can be completed using available 3rd party funding arrangements or can be self-funded up to a maximum of £3,500 in improvement expenses.
Electrical safety regulations
From 1 July 2020 or from 1 April 2021 for existing tenancies, new legislation in place means that landlords and agents will need to ensure electrical installation inspections and testing are carried out by a qualified professional. In a domestic property, equipment such as hobs, ovens, showers and extractor fans are covered by the inspection and testing process. Portable appliance testing is always best practice for landlords, but it is not yet a legal requirement.
What are the responsibilities as a landlord?
The purpose of the testing is to determine if the electrical installation is safe for continued use, which will help to improve the safety of rented accommodation for years to come. As a landlord, you are now expected, more than ever, to provide a safe property at the start and throughout a tenancy. If you fail to do this, and a problem arises in the property, then you may be considered negligent. Landlords should take action now to avoid penalties and protect the value of their assets.
The new regulations require the electrical installation to be inspected and tested at intervals not exceeding five years, with an EICR completed to detail the results of the testing and any observations apparent at the time. For pre-existing tenancies, you will need to have an EICR performed on all existing tenancies before April 1st 2021.
Capital Gains Tax: Private Residence Relief
From April 2020, Private Residence Relief will only be available to those who were letting their property whilst they were still living in the property themselves. It will also be necessary to submit a provisional calculation of the gain to HMRC and pay the tax within 30 days of completion of sale – rather than 31 January in the year following the tax year in which the sale is made.
What do you need to know?
These new changes will be particularly relevant for property owners who are currently letting out their old home. This relief will therefore no longer be available to the vast majority of landlords, preventing them from being exempt from Capital Gains Tax (CGT). This relief will also now only be provided for the final 9 months of ownership, rather than 18 months, halving the CGT relief potentially available. However, the 36-month period for those who are disabled or in care will remain. The overall cost implications should be weighed up carefully if you are a landlord and considering selling your old home.
How can Hancock & Partners help you?
As a business, we have over 100 years’ worth of combined experience in the local property market. We completely understand that as a landlord you may be overwhelmed by the scale of the legislative changes coming into place, so we are always happy to provide you with advice where you need it. Your properties are needed now more than ever with pent up demand from tenants already in evidence, judging by our busy phone lines.
Our team can provide you with a unique understanding of the local market conditions in Chichester and West Sussex as well as the new legislative changes in 2020, so we can help you secure a successful outcome for your investment. If you would like to have a conversation with our experienced lettings staff, please feel free to give us a call on 01243 531111 and we would be more than happy to help you.