Unless you’ve been hiding away in an exotic holiday retreat for the last couple of years, you may have noticed that the legislation around letting a UK property is getting tougher for landlords.
According to the Residential Landlords Association (RLA) there are some important pieces of legislation to look out for in 2020.
1) Extension of Homes (Fitness for Human Habitation Act) Act 2018
This legislation was introduced to make sure that rental properties in England are safe and secure. Landlords can be forced to make improvements to their properties and if they default, may be taken to court by the tenant. Last year when this came into force it applied to new tenancies only, but as of March this year the rules will be extended to existing statutory period tenancies.
2) Minimum energy efficiency standards are tightened
As of April this year, if your Energy Performance Certificate (EPC) shows an F or G, you will no longer be allowed to rent out your property. Under the new energy efficiency rules, landlords are expected to pay up to £3,500 towards making improvements to a property, but if the cost is higher they may be able to apply for an exemption.
3) Capital Gains Tax changes
According to the RLA if you currently let out a property you once lived in, you can apply for ‘lettings relief’. You won’t be taxed on the years you lived at the property, nor for the last 18 months (whether you lived there or not). From April 2020, however, landlords will only be able to claim lettings relief if they share a property with a tenant. The ‘final exemption’ period will also shrink from 18 months to nine in April, as will the time allotted to pay the Capital Gains Tax on a sale (now just 30 days).
4) Extension of the Tenant Fees Act 2019
The Tenant Fees Act, which came into force in England last year, is being extended to all existing tenancies in June 2020. Under the Act, landlords and letting agents are forbidden to charge any fees other than for rent, deposits, the holding of deposits and any charges for defaulting on the contract (with limits on the amount tenants should pay).
5) Tenant Fees Act 2019 and Deposits
Deposits for new or replacement tenancies under £50,000 per year are already limited to five weeks’ rent (rising to six weeks above £50k). However one way to increase your cover to six weeks on a lower rental income is to opt for a no deposit scheme. No deposit rentals can offer a range of benefits to landlords, including fewer void periods and the opportunity to attract a wider range of tenants. One of the best examples of these schemes is the FCA regulated Zero Deposit™ Guarantee, with cover provided by Great Lakes Insurance SE. Insurance is paid for by the tenant, not the landlord, and Zero Deposit landlords can enjoy six weeks’ rent cover, with any disputes handled by The Dispute Service (TDS) government-backed, independent dispute resolution service.
The recent wave of new legislation may feel like a disincentive, but 2019 saw rents increase by 3.5% on average and higher growth is predicted this year. Increasing rewards, combined with innovations such as deposit-free renting, could ultimately prove a game changer for private landlords.