This September’s letting fees ban was big news, but the changes to the buy-to-let property sector aren’t likely to come to an end any time soon.
The UK government appears to be pursuing a gradual legislative overhaul of the field, and it’s vital that landlords – both new and experienced – are able to keep up with the resulting adjustments.
On top of the uncertainty of Brexit, these revisions have the potential to add to the confusion that currently abounds within the UK property market.
So what do the new and impending regulation changes mean for property owners and tenants? Will they make a difference that is positive or negative? In this article, the team at Property Solvers will explore their pros and cons…
Levelling the playing field
The letting fees ban and deposit cap mean landlords cannot demand deposits equating to more than five weeks’ rent (or six where rent will total more than £50,000 annually) and can only charge fees for tenant-requested contract changes or terminations, utilities, services and council tax and costs for which the tenant should be held accountable.
This is, in simple terms, a crackdown on unscrupulous landlords taking advantage of the saturated rental sector and means that morally sound property owners will not feel the pressure to compete in an increasingly unethical field using distasteful methods.
It also makes rental housing more accessible for members of the general public on lower than average wages or with only a small amount of savings and helps to tackle homelessness as a result.
Until now, the rental sector has only been very loosely regulated.
While some landlords have used this as an opportunity to make a considerable profit by inventing their own rules and charges to extort cornered tenants, those planning to make an honest living and those new to the business have often struggled to find the boundaries and understand what they were and were not allowed to do.
As more and more proposed changes make their way into law, a clearer framework for the buy-to-let sector may emerge and something closer to a “rulebook” will be possible.
With so little regulation, rent and tenancy fees have been gradually climbing higher with no ceiling in sight – particularly in densely populated regions such as London.
With the very real result of significantly contributing to the homelessness, many landlords have been demanding prices that can only be afforded by the rich.
More regulation means greater control. With boundaries and caps in place to prevent this explosive inflation, the rental market will hopefully become less of a free-for-all.
A nationwide “rogue landlords database” has also been launched – with the potential of access being extended to tenants soon – so those who act immorally can be named and shamed.
Ensuring that rent and fees are more affordable may, in a way, prove somewhat more profitable for landlords. To a certain degree, it’s a way of ensuring that tenants are less likely to default on what they owe.
New Client Money Protection schemes also mean that landlords are guaranteed to receive the amount they are owed from tenants, even if the letting agent goes out of business – although these schemes are not necessarily able to cover the full amount.
Confusion and uncertainty
Some new regulations have been discussed and then seemingly swept under the rug – perhaps abandoned, perhaps waiting to be sprung on landlords at any time.
These include proposed minimum three-year contracts with six-month break clauses, which would potentially provide more long-term financial security and assurance for landlords.
A possible overhaul of eviction legislation – including a ban on no-fault evictions – is also ahead, though it is not clear when this will come into effect. The same applies to the proposed leasehold reforms.
These potential changes mean that landlords will have to be constantly wary of adjustments to the way they work and what they are allowed to do in order to avoid prosecution.
Landlords at the bottom of the pile
While it is vital that the buy-to-let sector is overhauled to prevent the exploitation of renters, the potential exists for a legal backlash that will significantly and negatively affect landlords, leaving them entirely at the mercy of the government, general public and local authorities.
The motives for this are understandable, as, over the past few years, the number of greedy landlords fleecing struggling tenants has grown considerably and contributed directly to booming levels of homelessness.
However, there has been a significant accumulation of changes – and a number of additional propositions – made over a short space of time.
- The extension of House in Multiple Occupation (HMO) licensing rules
- The continuation of selective local licensing
- New minimum space requirements
- The 3% stamp duty surcharge
- The aforementioned fee bans, deposit caps and changes to eviction rules
- Additional energy efficiency requirements applicable to both new and existing tenancies
Furthermore, these changes and proposals have come at around the same time as cuts to the likes of mortgage interest tax relief.
While it is clear that the sector needs drastic reform, implementing all of these adjustments and new laws virtually simultaneously makes it more likely that some landlords will fail to keep up and will therefore be heavily prosecuted.
It may also mean that property owners will end up significantly out of pocket, and that the buy-to-let industry will no longer be seen as a viable option for many potential investors.
It is vital that balance is achieved between ensuring that the buy-to-let sector is properly regulated and empowering landlords to continue doing honest business unimpeded.
While there have been many damning cases in recent years of the exploitation of renters in an increasingly saturated market, this does not apply to the approach of all buy-to-let property owners – and it is vital that this is taken into account.
Hopefully, once the dust clears from this recent flurry of legislative overhauling, adjustments and tweaks can be made to finalise a system that is fair to all parties.
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