Each new year brings with it a set of changes that landlords need to be aware of. The disruption caused by Covid-19 led to policy changes impacting many aspects of society and the private rented sector (PRS) was no different.
When combined with legislation that has altered as a result of Brexit, 2021 will usher in many changes in the way landlords operate.
Here, we highlight some of the key fiscal and regulatory developments that are on the horizon for the year ahead.
Notices seeking possession
As a result of an extension of the provisions in the Coronavirus Act 2020, from 29 August 2020, landlords have been required to provide six months’ notice to their tenants in most circumstances, including Section 21 notices.
Landlords are able to start progressing within a shorter timeframe in some serious cases, such as notices in relation to anti-social behaviour, domestic abuse, rioting and false statement, where the required notice periods have returned to their pre-Coronavirus Act 2020 lengths.
Rent arrears is also deemed an acceptable reason to seek a possession order but the notice period is dependent upon how many months’ rent is unpaid.
Where at least six months of rent is unpaid, a minimum four-week notice period will be required. If less than 6 months of rent is unpaid, then the notice period is six months.
Changes to Right to Rent
It is the responsibility of landlords to check that a tenant or lodger can legally rent their residential property in England.
The introduction of a new points-based immigration system, introduced from the beginning of this year following the end of the Brexit transition period, may lead to changes to Right to Rent checks but no official decision has been shared at present.
Until 30 June 2021 landlords should continue to accept passports and EU national identity cards as evidence of right to rent.
Deadline for electrical compliance
Electrical safety standards require landlords to have the electrical installations in their properties inspected and tested by a person who is qualified and competent, at least every five years.
This is to ensure national standards set out in the 18th edition of the Wiring Regulations, which came into effect in 2019, are met. Any investigative or remedial work recommended has to be carried out if the report requires this.
Landlords have to provide a copy of the electrical safety report to their tenants within 28 days of the inspection, to a new tenant before they occupy the premises and to tenants who have requested it, also within 28 days. The report must also be made available to your local authority if requested.
The regulations came into force on 1 June 2020, they apply to new tenancies from 1 July 2020 and existing tenancies from 1 April 2021.
End of Stamp Duty Land Tax break
The Stamp Duty Land Tax break, which came into effect from 8 July 2020, is scheduled to end on 31 March 2021.
The scheme, introduced as part of chancellor Rishi Sunak’s Summer Statement, means that no stamp duty is payable on residential properties up to the value of £500,000, although 3% is charged on additional properties.
The significant savings on offer have helped to stimulate record breaking property transactions that have provided a significant boost to a UK economy hit hard by the Covid-19 pandemic.
A wide range of voices have called for the break to be extended, or be lifted gradually to address widespread concerns about mass withdrawals from transactions that miss the deadline. However currently the government has not indicated that it is minded to do so.
Stamp duty surcharge for overseas investors
Overseas buyers purchasing property in England and Northern Ireland will be required to pay a 2% stamp duty surcharge from 1 April 2021.
Applying to all non-UK residents, the stamp duty surcharge will apply in addition to the existing 3% surcharge that applies to all purchases of additional properties.
To be classified as a UK resident, you’ll need to have spent at least 183 days (six months) in the UK in the year before or the year after you buy the property.
New standard tenancy agreement – pets
Under the new Model Tenancy Agreement, announced on 28 January 2021, landlords will no longer be able to issue blanket bans on pets.
Instead, consent for pets will be the default position, and landlords will have to object in writing within 28 days of a written pet request from a tenant and provide a good reason, such as large pets in smaller properties or flats, or otherwise properties where having a pet could be impractical.
If consent is given on the condition that additional deposit is paid by the tenant, the total deposit must not breach the deposit cap introduced under the Tenant Fees Act 2019 and must be protected in an authorised tenancy deposit scheme.
A responsible pet owner will be aware of their responsibilities in making best efforts to ensure their pet does not cause a nuisance to neighbouring households or undue damage to the Property.
Client money protection
After being introduced in 2019 and following a year-long extension to the compliance deadline, new client money protection rules come into force in April.
These require private rented sector lettings and property management to join a ‘client money protection scheme’ if they hold clients’ money.
This is relevant to landlords because the schemes are being introduced to make sure landlords and tenants are compensated if agents are unable to repay their money.
Fines of up to £30,000 could be given out to agents who fail to join one of the government’s six approved schemes and hold money in accounts registered with the Financial Conduct Authority (FCA).
Although similar, the rules are different for agents operating in Scotland and Wales and no regulations of this type exist in Northern Ireland.
New smoke alarm law – Scotland only (new date)
Changes to the law in Scotland require smoke and heat alarms to be installed in all homes as follows:
- one smoke alarm installed in the room most frequently used for general daytime living purposes
- one smoke alarm in every circulation space on each storey, such as hallways and landings
- one heat alarm installed in every kitchen
- All alarms should be ceiling mounted and interlinked.
The deadline for implementation was originally February 2021 but due to the difficulty in meeting the new standard caused by Covid-19, the date has been pushed back to February 2022.
Future changes to be aware of
Renters’ Reform Bill – England only
Described as ‘a package of reforms to deliver a fairer and more effective rental market.’, the Renters’ Reform Bill will deliver a series of reforms that change the grounds upon which landlords can seek eviction of their tenants.
As part of this, the use of ‘no fault’ evictions will be abolished through the removal of Section 21 from the Housing Act 1988, and a number of other changes will be made to Section 8 to reform the grounds upon which a landlord can legally seek possession.
The government says that reforming the current legislation will make it quicker and easier for landlords to gain possession of their property through the courts where there is a legitimate need for them to do so.
In addition, the database of rogue landlords and property agents will be expanded and made more accessible.
Although no date for the introduction of the Bill has been confirmed at present, ministers have recently committed to publishing the Bill ‘soon’.
The government has signalled that there will be a transition process of up to six months, however, so any new requirements may not come into force this year.
It is also understood that the changes will not be retrospective, and will apply only to new tenancies created after the legislation comes into force.
Regulation of property agents – England only
In July 2019, The Regulation of Property Agents’ working group made recommendations for a new regulatory framework for property agents.
The recommendations include an independent property-agent regulator, a mandatory and legally enforceable Code of Practice, mandatory qualifications for property agents and a clarification of processes and charges for leaseholders.
Again, no date has been set for any new regulation to come in to effect, but with the new regulatory framework likely to have an impact on which agents landlords choose to work with, it is worth keeping up to date with the progress of the implementation.
Richard Rowntree is managing director of Mortgages at Paragon Bank
