Important changes to lettings legislation

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15 Jan 2017

Important changes to lettings legislation for 2017 and beyond

Author: Daniel Dowling

Landlord legislation has been making the headlines throughout 2016 from 3% stamp duty surcharge to the update’s in EPC regulations. The on-going changes mean it is more important than ever for landlords to understand the regulations fully and to work with an established lettings agency that will protect their investment and tenants, ensuring they are adhering to the law.

Romans’ lettings experts have reviewed the recent changes and highlighted some key things to look out for in 2017 and beyond. 

From April 2017 mortgage interest tax relief will start to be restricted to 20% for buy-to-let landlords. The relief could affect landlords who are both basic rate and higher rate tax payers. The changes will impact on  higher rate tax payers and landlords with high mortgage costs and low rental income. Due to the tax relief changes landlords could move into a higher rate tax band.

The changes will be gradually phased in starting from April 2017:

Stage One

From 6th April 2017, the existing system can still be claimed on the first 75% of your mortgage interest costs. The remaining 25% will have the new system (basic rate of tax relief) applied.

Stage Two

From 6th April 2018, the amount of tax relief you can claim on the existing system will drop to 50% of your mortgage interest costs. The remaining 50% will have the basic rate of tax relief applied.

Stage Three

From 6th April 2019, the tax relief using the existing system can only be applied to 25% of your mortgage interest costs. The remaining 75% will be at the basic rate.

Stage Four

From 6th April 2020, you will only be able to claim tax relief using the new system (basic rate level). The tax relief will be given as a reduction in tax liability instead of a reduction to taxable rental income.  

If you need more information on tax restrictions please contact your local branch

This act became law in May 2016 and is expected to be in action by April 2017 once the second legislation has been drafted. The purpose of the database is not to ban landlords and letting agents from operating. The idea is to enable local authorities to monitor the activity of rogue landlords and letting agents and effectively target enforcement action.  The ‘act’ covers four points; electrical safety requirement, client money protection, rent repayment and banning orders.

Electrical safety requirements

There will be regulations imposing a PAT (portable appliance testing) test and an electrical safety check of wiring.  Timeframes have not been confirmed or which tenancies these regulations will apply too.

There will be penalties for non-compliance probably a penalty fixed by environmental health.

Client money protection

This will mean that all letting agents must have CMP (client money protection)  which will protect landlords and tenants. A date has not been agreed. 

Banning orders

Where a local authority believes that a landlord or letting agent should be banned from being involved in renting out or managing a property, it should apply to the first tier tribunal for a banning order. The ban will last for a fixed term of 12 months, it will be a criminal offence if the ban is breeched you could be imprisoned for up to 51 weeks or be fined up to £30,000.  The rules are expected to be in force by April 2017.

Rent repayment

If a landlord is convicted of not having a compulsory licence for a House in Multiple Occupation (HMO) under the Housing Act 2004, they could be ordered to pay the tenant or local authority up to 12 months’ rent.

The application is made to the FTT (first tier tribunal) by the tenant or the local authority similar to the above system of an HMO.

Examples of when an order may be made are:

  • Failing to comply with an improvement or prohibition order 
  • Unlawful eviction or harassment of a tenant
  • Not complying with the banning order

Further guidance is expected from the Government before the database of rogue landlords and letting agents is implemented which is expected to be from 1st October 2017. 

Tenants are now able to request consent from their landlords to carry out energy efficiency improvements to privately rented properties, and landlords are not able to unreasonably refuse consent.

Learn more about the EPC legislation changes

It’s also important to note that from 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). A penalty of up to £4,000 will be imposed for breaches of this regulation. The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020.

So how can landlords stay on top of the legislation changes?

Working with a licensed letting agent will help ensure you’re always kept up to date with the latest legislation changes and your rental properties are compliant with the law.

Romans’ Fully Managed landlords relax in the knowledge that their investments are looked after by Romans on a day to day basis, including checks to ensure lettings regulations are being adhered to.

To find out more about any of the recent or forthcoming legislation changes and for expert property investment advice talk to the team at your local Romans’ branch on 01344 985 870, or register your interest in Romans’ investment services.

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