Looking Backwards Moving Forwards
06 Feb 2016
Looking Backwards Moving Forwards: 2015-2016 Government changes for Landlords Letting Agents to observe:
Looking Backwards Moving Forwards we at Leydon Lettings, ensure that we act swiftly to all legal changes enacted by the government. In 2015 several important legislative changes were announced by George Osborne in his budgets. In light of such important changes, as well as the knowledge that several more changes will be made in 2016, we have provided a breakdown of the key legislative changes that were made and will be likely to be made. We want all our landlords and tenants to feel comfortable with the knowledge that we remain up to date, and ahead of, any changes.
2015 in a Nutshell:
Two Chancellor Budgets delivered (Brown-like) bombshells to the lettings industry:
A reduction in MIR (Mortgage Interest Relief) in the Spring Budget.
This will see some portfolio landlords paying tax on a loss. Impossible!? No actually very probable, if you are a highly geared landlord and interest rates go up even slightly. Consequently, many landlords are creating limited companies to mitigate their losses. However, there is no guarantee that this step will protect landlords from bankruptcy. The government could so easily apply the same rules across limited companies – landlords could lose not only the loss of tax relief but also the significant cost of transferring properties to the limited company to try and reduce their liability – ironic or what?
An increase in the second home stamp duty in the Autumn Budget.
This has created a sellers market pre-April 2016 when implemented, but it is possible that a slump will follow. If that happens the new stamp duty will make it more difficult to sell one’s way to solvency.
The Consumer Rights Act (CRA) now requires
Transparent fees (both to tenants and landlord clients)
Compulsory Redress Scheme Membership e.g. TPO.
Sections 8 & 13(2) of the Housing Act 88 (HA ’88) were amended.
(s.8 seeking possession and s.13 applying for a rent increase). S.8 still has 17 grounds – the first 5 grounds require prior notice to enforce; the first 8 grounds (including the first 5) are compulsory grounds and the latter 9 are discretionary grounds. However a number of sub sections have been added regarding tenant conduct and grounds for eviction.
Section 21 HA’88 was also amended and is now in prescribed form and can only be served after 4 months of the initial tenancy.
So now, like s8 & 13, any s.21 NTQs must be in prescribed (exactly laid out as statute states) format.
The Deregulation Act introduced:
A compulsory Help to Rent Guide (8 page booklet) must be provided to tenants at the earliest possible point, ideally before viewing. This has already been amended to include Right to Rent rules in place since 1 February 2014.
The restricted use of section 21 notices (permitting eviction) in conjunction with rules prohibiting Retaliatory Evictions means landlords and their agents must respond adequately to maintenance matters within 14 days or risk tenant resistance to a s21 NTQ (notice to quit) supported by the courts.
Compulsory smoke detectors are now required on every habitable floor, in all rented houses (not just HMOs as previously required).
Compulsory carbon monoxide (CO) detectors are now required in any rented houses with solid fuel burners: coal and log fires (but not gas boilers!). CO detectors must be located within the room affected. If there are decorative fireplaces prohibited from use it would be prudent to ensure these areas have CO detectors fitted.
HHSRS rules remain the same but a number of LAs (local authorities) have prosecuted non-compliant landlords. In this regard Legionella is seen as a low risk but is covered by the 29 points – under hydroscopic (water-born) diseases – risk assessments are compulsory for all HMOs. A number of landlords and agents have been prosecuted for failing to provide adequate or any risk assessments. Often a minor complaint triggers a local authority inspection – resulting in prosecutions. The moral here is to be proactive and if in doubt; check it out!
The case of Edwards v Kumerasamy highlighted the importance of risk assessing common areas now held to be the responsibility of the landlord of the tenant injured by the danger (even where there are many landlords owning a block of flats all separately responsible for injury to each of their own tenants).
The Immigration Act is the first change of 2016 on 1st February 2016.
This now requires landlords to check a new resident’s right to rent in the UK or face fines of £3000 per illegal tenant (yes… per person).
2. Resident card
3. Biometric immigration document issued by the Home Office
Tenant enquiry forms must include reference to:
a. Number &
b. Expiry Date
c. Country of issue
c. Start and End Date (if applicable)
4. Details relating to other documents presented by prospective tenants
Article 4 Directions (A4Ds)
A4Ds will follow Right to Rent (unrelated) on 26th February 2016, restricting the number of new HMOs in the Canterbury area as well as some surrounding villages.
The Housing and Planning Bill
This will likely see restrictions for landlords and letting agents. Described as “A Bill to make provision about housing, estate agents, rent charges, planning and compulsory purchase“. David Cameron intimated nationwide Compulsory licensing of all HMOs (not merely mandatory licensing of large HMOs S. 54HA 2004) but how would this compare with existing Compulsory licensing of Additional Licensed properties S.80HA 2004?