Those who’ve been paying attention to our online letting agent’s blog should be well aware of the upcoming changes to energy efficiency regulations. For those still unaware – you’ve got just a few weeks left to make sure that all newly-let properties are certified ‘E’ or higher.
But this isn’t the only new rule that landlords need to watch out for. As part of the government’s self-described ‘crackdown on rogue landlords’, there’s likely to be a range of new legislation and regulations implemented over the coming months and years that could affect honest landlords just as much as their ‘rogue’ counterparts.
Those who want to avoid being suddenly penalised will need to keep on top of the developments in legislation. Here’s our roundup to catch you up to speed.
As we mentioned earlier, all newly-let properties after April 2018 will be required to have an energy efficiency certificate of ‘E’ or higher, in order to be legally rented. This comes into effect from the 1st April 2018. That means if you’ve got a property waiting to be let out, you need to get ahead of this quickly or risk losing out on valuable rent revenue while you wait for the property to be upgraded.
This rule will be extended to existing tenancies from 2020. If your property has, or will have, a tenant who’s lived there since before April 1st this year, you don’t have to upgrade the energy efficiency until the tenant moves out, or April 1st 2020 – whichever comes earlier.
Landlords of properties that are already certified above ‘E’ don’t need to worry about the changes.
If you let your property through a high street letting agent (which we strongly discourage – and here’s why), your potential tenants are likely to be charged a fee by the letting agent that manages your property. Generally, this is designed to cover small administration tasks like referencing, inventories, contract writing and postage.
In June 2017’s Queen’s Speech, however, the government announced that these fees were to be banned. As of yet, it’s unknown when these changes will come into force – though it’s likely the legislation will be tabled at some point this year.
Since its only tenant fees that are being banned – this one won’t affect landlords directly. Nonetheless, those that do use high street letting agents should be prepared for the potential that these fees will be re-diverted towards the landlord since they can no longer be levied on tenants. Landlords who want to avoid higher fees should find themselves good alternative online independent estate agents to avoid sudden hidden fees.
Most sensible landlords will know to take a deposit at the start of a tenancy. This is usually equivalent to one month’s rent – but not in every case. The National Landlord’s Association calculates the average deposit to be worth 4.92 weeks’ rent – meaning there’s a noticeable number of landlords taking more than one month’s rent as a deposit.
Like the ban on letting agent’s fees, the government have announced that they will implement a cap on the value of security deposits. While this was originally planned to be no more than four weeks’ rent, the proposals have more recently been extended to six. Most landlords who charge one month’s rent, or little more, as a deposit, shouldn’t have to worry about these changes.
It is as yet unknown when these proposals will become compulsory.
The changes to mortgage interest tax relief have been phased in since the start of the 2017/2018 tax year, and will continue until 2020/2021. Where before, landlords could claim their mortgage interest repayments as an expense when calculating their tax bill, from 2021, they will no longer be able to do so. The percentage of their mortgage interest they can claim is being gradually reduced in increments of 25 per cent a year.
Currently, landlords can only claim 75 per cent of their mortgage interest rates as tax relief. From April 1st, this will be reduced to 50 per cent. Landlords should make sure they’ve budgeted for these changes going into the new financial year. Those that feel they need to raise the rent to cover the difference in costs should first check they’re able to and ensure their tenants are given plenty of notice.
This one is technically already in effect – but was implemented recently enough that landlords might not be wholly aware of it.
From September 2017, the Prudential Regulation Authority (PRA) will require that potential lenders look at the performance of all properties in a single portfolio before they’re granted any further mortgages. If you own four or more buy-to-let properties, you are considered a portfolio landlord. If not all of the distinct properties in your portfolio are proving profitable, then the lender may be inclined not to grant further mortgages.
Okay, we’ll admit this one isn’t a regulation – but it’s certainly something you should be watching out for. As mortgage tax relief changes begin to eat into landlords’ profits, properties experience a post-Brexit slump in price inflation, and the cost of living continues to increase, landlords everywhere are certainly beginning to feel the pinch. Those who wish to continue making reliable returns through 2018 and beyond will do well to find creative ways of cutting costs through the rest of the year.
One of the best ways of doing this is abandoning old-school high street letting agents and paying a one-time, simple fee for all lettings services.