This post was last updated on November 11th, 2021 at 12:54 pm
There are a few things that are changing in the private rental sector over the coming months. To make things easier for you, we’ve put together a list of what’s coming your way and what you can do to prepare for the changes ahead.
1. Extension of The Homes (Fitness for Human Habitation) Act
In March 2019, The Homes (Fitness for Human Habitation) Act was introduced in England. This new ruling aims to ensure that all rental properties are safe and suitable for tenants to live in and gives landlords a legal responsibility to keep their property fit for human habitation by carrying our required maintenance.
The Act originally applied to new tenancies and renewals only, however, as of 20th March 2020, it will be extended to include all tenancies in England. Landlords will be expected to resolve issues – such as problems with the water, gas or electrics, poor ventilation and mould and pests – within a “reasonable amount of time”. Landlords that fail to fulfil their obligations under the Act may face court proceedings and risk being sued.
2. The EPC rules are changing
In 2018, the Minimum Energy Efficiency Standards came into force, requiring rental properties of new tenancies and renewals to have a minimum EPC rating of ‘E’ or above.
As of 1st April 2020, the rules will be extended to all tenancies – not just new ones. If your property does not have a valid EPC rating, it cannot be legally let. You must supply your tenant with a copy of your EPC – along with your Gas Safety Certificate and How to Rent Guide – at the beginning of their tenancy or as soon as you get it renewed.
The assessment itself doesn’t take long (usually around 30 to 40 minutes) and is carried out by a professional energy inspector. Once completed, your inspector will give you a report containing your property’s EPC rating and any suggested improvements that need to be made.
Find out more about the changes to EPC rules here.
3. Changes to mortgage interest tax relief
Since 2017, the amount of mortgage tax relief landlords have been able to deduct from the tax bill has slowly been reduced.
From 1st April 2020, private landlords will no longer be able to deduct any mortgage expenses from their annual tax. Instead, landlords will receive a 20% tax-credit based on their mortgage interest payments.
This particularly affects landlords in higher tax bands that previously received 40% mortgage tax relief. If you fall under the higher (£50,000) or additional rate (£150,000) tax brackets, this means that you won’t get all your tax back on your mortgage repayments as the tax-credit is at the basic rate of 20%.
4. Changes to private residence relief
Private residence relief allows landlords to reduce their capital gains tax when selling their rental property. At the moment, you can claim up to £40,000 in capital gains tax relief if you have once lived in the rental property you are selling.
However, as of 6th April 2020, landlords must be in shared occupancy with their tenant at the time of sale in order to claim private residence relief.
So, if you’re planning to sell your rental that you once lived at some point this year, you’re likely to face a bigger capital gains tax bill.
Read more: How to Tackle Your Landlord Tax Return.
5. Mandatory electrical checks are on the way
Back in January, the government announced that mandatory electrical safety inspections will be coming into force in this year.
In 2018, the Electrical Standards Working Group held a consultation regarding electrical safety in the private rented sector. The government responded to this consultation with a number of recommendations, one which was the future introduction of mandatory requirements for landlords to carry out electrical safety checks every five years.
This recommendation has now materialised before parliament as “The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020” and is awaiting government approval.
Find out more about the mandatory electrical safety checks here.
If approved in the coming weeks, the regulations are expected to come into force from April 1st 2020. But don’t panic! The regulations will not apply to new tenancies in England until 1st July 2020 or existing tenancies until 1st April 2021 – so you have a while yet.
This being said, if you’re planning on letting your property out this summer, it’s probably best to book your electrical inspection sooner rather than later and tick it off your list. Once it’s done, you won’t need to worry about it for another five years.
Book your EICR today from £149 (inc VAT)
“Referendum on rent controls”
The Mayor of London, Sadiq Khan has called for an introduction of rent caps in London. He believes that “the case for rent controls is now absolutely undeniable” and recently announced that he is making the mayoral election on 7th May “a referendum on rent controls”.
Both the RLA and NLA have deemed this a disastrous proposal for the private rental sector. The introduction of rent caps may drive landlords out of the PRS, shorten the supply of properties and make securing a home even more difficult for tenants in the UK.
This being said, Berlin’s parliament introduced a rent cap in the capital last month.
With rents in Berlin doubling over the last ten years, the rent cap hopes to combat the rapid increase of residential rent prices and make city-living more affordable.
The law – which is the first of it’s kind in Germany – has frozen rents until 2025 – affecting around 1.5 million apartments in Berlin.
What else can landlords expect from 2020?
Spring is set to be be a turbulent time for landlords and letting agents, but there’s more to follow.
Last year, the introduction of the Tenant Fee Ban rocked the boat of the private rental sector. The law has meant that tenants are no longer able to be charged letting fees and that rental deposits are capped at 5 weeks’ rent ( or 6 weeks for properties with an annual rent over £50k).
This year, the Tenant Fee Ban will be extended from 1st June 2020 and apply to all existing tenancies – not just new tenancies and renewals.
Changes to Section 21 are also coming. In the Queen’s Speech last December, it was announced that the government hope to abolish Section 21 and “introduce a package of reforms to deliver a fairer and more effective rental market”.
No formal dates for the new Renters Reform Bill have been released as of yet, so keep an eye out for government announcements later on this year.
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What are your thoughts on the upcoming changes in the private rental sector? Let us know in the comments below!