It’s a somewhat disorienting time to be a landlord or an agent, with 2019 bringing multiple new regulations and programmes – from the tenant fees ban, to the client money protection scheme, to new standards on space and electricity.
With a number of these changes likely to have a substantial impact on the way agents and landlords act, you’d be forgiven for feeling overwhelmed by it all. So, what are the key rules and regulations for this year, and what’s in store for 2020 and beyond?
Tenant Fees Ban
Coming into force from 1 June 2019, the Tenant Fees Act aims to ensure that tenants will be able to see at a glance what a given property will cost them in the advertised rent with no hidden costs.
The new rules also mean that deposits will be capped at five weeks’ rent (or six for tenancies that cost more than £50,000 a year), and agents and landlords will be banned from charging fees for anything other than contract changes, council and utilities tax, changes to the tenancy, and issues for which the tenant is at fault.
The tenant fees ban is set to affect both landlords and agents, who won’t be able to pass on the cost of activities such as inventories, tenant referencing, and credit checks to tenants. This is a problem, because these processes all involve time, people and systems, and hence generate a cost.
Many agents won’t be able to absorb these costs, and so although tenants will have to pay much less in up-front fees, the knock-on effect of the bill will almost certainly lead to rents being raised as a means to recover losses.
- Homes (Fitness for Human Habitation) Act
Having come into force on 20 March, this requires that landlords ensure their property is free of any hazards and fit for human habitation, and properties breaching the updated legislation will be liable for court action from tenants. The Act amends the existing Landlord and Tenant Act 1985 by extending the obligations in that legislation.
The law is designed to empower tenants to take legal action if their property is found to breach the guidelines, and to improve property conditions within both the private and social sectors.
There are warnings that the legislation may encourage some tenants to take legal action just to win compensation, and the Residential Landlord Association has expressed concerns over “vexatious cases” being brought against landlords.
However, agents and landlords have plenty of ways to remediate, such as limiting telephone and email contact. Through the Anti-Social Behaviour, Crime and Policing Act 2014 Act, agents and landlords can also rely on the “nuisance to landlord” ground, which can help to tackle vexatious complainants.
- Client Money Protection scheme
Under a new law taking effect from 1 April 2019, private-sector agents will be required to join a government-approved Client Money Protection (CMP) scheme or face up to a £30,000 fine.
The new law will ensure that the client funds, including landlords’ rental payments and tenants’ deposits, will be protected. This should bring reassurance to people across the industry that their money is safe while with their agent.
Agents will need to meet a number of standards to join a CMP, such as having a separate client bank account and having professional indemnity insurance. However, most agents should already have access to a CMP scheme through their membership of agency bodies such as ARLA, RICS, NALS, or UKALA.
- HMO licensing extensions
Last October, changes to the law mean that thousands of landlords letting shared properties will now come under House in Multiple Occupation (HMO) licensing rules.
It used to be the case that a property was only classified as an HMO if it was rented to five or more people in one household with shared facilities; and was at least three storeys high.
But these rules have recently changed, and households of that number – regardless of the number of storeys – now require an HMO license.
- Minimum space standards
Since October of last year, there are new requirements for the minimum size of bedrooms. The regulations depend on how many people occupy the bedroom.
Breaking those rules puts landlords on a timer of up to 18 months to rectify the problem, with those who fail to rectify the problem liable to be fined up to £30,000.
- Mortgage interest tax relief
Under the old rules, you could deduct your mortgage interest (plus other related costs including arrangement fees) before determining your taxable profit. But under the new rules, that interest rate relief will be cut in a phased process that will end April 2020.
From this date, it will no longer be possible to deduct mortgage interest costs from taxable profits if the property is owned by an individual.
Changes to expect after 2019
- Rent controls in London
The proposition of rent controls began back in 2017 with Labour’s general election manifesto.
While not yet confirmed, the London mayor Sadiq Khan has made rent controls a central policy in his 2020 re-election bid, pledging in January to develop a “blueprint for stabilising or controlling private rents in the capital.”
- Minimum energy efficiency standards
The minimum threshold of an E on an EPC certificate came into force on 1 April last year and applies to all new lets and renewals. The rules will be extended to all tenancies come 1 April 2020, and all existing tenancies must be brought up to this new standard by the 2020 deadline.
- Complaints Resolution Service
Back in January, the government announced a new housing complaint service for the entire market.
There are currently several different complaint bodies, making it difficult for people wishing to register a complaint against a builder or landlord.
For homeowners and tenants, to private landlords and developers, this new service is designed to provide a straight-forward way for everyone to receive help with unresolved disputes.
- Electrical installation checks
While the implementation date isn’t yet known, the government appears committed to introducing mandatory five-year electrical installation checks on private rented housing in England.
From what has been revealed thus far, this will likely be introduced in a phased manner, and agents and landlords should have at least six months to familiarize the new legislation before it comes into force.
- Originally posted on Forbes