Scotland to License all Airbnb.... will England be next

Regulation of short-term lets, including the likes of Airbnb, is to be introduced in Scotland. Taxing Airbnb hosts is also to be put under urgent consideration.

From spring next year, local councils in Scotland will be able to run licensing schemes, allowing them to introduce measures where they decide it is in the interests of local communities.

The licensing schemes could involve huge numbers. According to the Scottish government, there are 32,000 properties in Scotland registered with Airbnb alone.

A new safety requirement will be mandatory across Scotland, covering every type of short-term let and almost certainly involving an HMO-style inspection.

Councils will also have optional powers, enabling them to designate control areas to ensure that planning permission will always be required for the change of use of whole properties to short-term lets.

Such powers will not be able to be used for home sharing – where people rent a room in their home.

Additionally, Scottish ministers are to urgently consider how short-term lets will be taxed in the future.

Local government minister Kevin Steward said that in some areas the numbers of short-term lets were causing problems, and making it difficult to people to find homes to live in.

The burgeoning short-term lets industry has expressed disappointment at the move, which could set a precedent for other UK countries.

Shomik Panda, director general of the UK Short Term Accommodation Association, said: “Whilst we are disappointed that the Government has felt it necessary to introduce a mix of initiatives that could lead to an uncertain and fragmented regulatory environment in Scotland, we remain positive about the industry and will work constructively to ensure that the new rules will be workable when they come into effect next year.

“We will work with stakeholders and hosts to ensure there is compliance with the new regulations and continue to represent the interests of a maturing industry that wants to grow responsibly.”

Stephen McGowan, a licensing expert and partner at law firm TLT, warned that there could be a ‘massive’ flood of licensing applications which would put strains on local government resources.

Meanwhile Airbnb is planning a six-month roadshow to key cities in the UK, including Bath and Bristol, to discuss local concerns and possible licensing systems. In some areas, local bed and breakfasts say their business has suffered because of the growth of Airbnb, where hosts do not have to pay business rates.

There are also concerns about short-term lets being used for noisy stag and hen parties and pop-up brothels.

Source: propertyindustryeye

20:20 vision of the PRS in 2020

As the New Year ringsin and we leave 2019 behind, a year that for landlords can only be described as the most challenging, we take a look back at what legislation 2019 gave us and look forward to what 2020 has in store for the Private Rented Sector.

March 2019
On 20th March The Homes (Fitness for Human Habitation) Act came into force, stating that all privately rented homes must meet a “basic standard” and maintain that standard throughout a tenancy. It also allows tenants to claim compensation if they feel they are being forced to live in housing that falls below habitable standards

April 2019
In April it became  mandatory for landlords and letting agents to join an approved client money protection scheme. Protecting  both landlords and tenants against theft or misappropriation of their money by the owners of a letting agent whilst client money is in their custody. This could include tenants’ deposits and landlords’ rental payments, or funds held for repairs and maintenance to a property.

June 2019
On the 1st June the Tenant Fee Ban Act came into force, with a double whammy,  not only did it remove the administration fees a landlord or letting agent could charge a tenant but it also introduce a cap on security or damage deposits, meaning landlords and agents could only charge a maximum of 5 weeks rent for a deposit and additional ‘pet deposits’ could be no more.

August 2019
August saw the end of an era as two of the largest landlord associations in the country joined forces, with the merger of the National Landlords Association (NLA) and the Residential Landlords Association (RLA). The new organisation –  the National Residential Landlords Association (NRLA), will, when it launches in January 2020.

2020
What does 2020 hold for landlords, as we know from the Queens Speech on 16th December, there will be even more changes coming to the PRS in 2020 and beyond.

The announcement of new legislation in the form of The Renters Reform Bill which will remove Assured shorthold tenancies replacing them with Assured tenancies meaning landlords will no longer be able to evict tenants using Section 21 notice.

Life time deposits are to be introduced, the idea being that tenants will not have save for a security deposit each time they want to move instead one initial deposit will follow them from property to property, it is unclear how this will be administered if deductions need to be made from the deposits.

The Government is also proposing that all new homes sold, whether flat or house will be freehold only, this could impact heavily on the buy to let market with flats providing a higher financial risk for the future.

What do landlords need to know……

March 2020
Extension of Homes (Fitness for Human Habitation) Act
Under the Fitness for Human Habitation Act landlords can be forced to carry out improvement works to their properties and be sued for damages for the entire length of the contract.
It was introduced in March last year to ensure rented homes are safe and secure. Tenants  can take their landlords to court if this isn’t the case.
Tenants who signed contracts on or after 20 March 2019 were able to use the act right away –  and as of March 20, 2020 rules will be extended to cover existing statutory periodic tenancies.

April 2020
The most important change to renting privately will be the extension of the Minimum energy efficiency standards (MEES).
We should all be familiar with the minimum energy efficiency standards that came into effect in April 2018, which stated that new tenancy agreements and renewals (other than some HMOs such as bedsits) must have an energy performance certificate (EPC) rating of E or above.
By April 1, 2020, the regulations will be extended to also cover existing tenancies. This means that, under the new legislation, properties with an energy performance certificate (EPC) rating of F or G will be classed as unrentable from that date on. It is also expect that this will rise to a D rating in the future.

Compulsory CMP for agents
New rules on money laundering have been extended to cover letting agents, with an April 2020 deadline for agents to become members of an official Client Money Protection scheme.
Rules were introduced making membership of a scheme compulsory in April 2019, however agents were given a ‘grace period’ of 12 months to set up a client account, following technical issues.

June 2020
As of 1st June the Tenant Fee Ban will be extended to all existing tenancies in the PRS, this means that even periodic tenancies whose contracts clearly state fees can be charged can no longer charge any form on administration fee, such as check out fee or late rent letters, landlords need also be aware that the cap on security deposits will also effect existing tenancies and any amount held over the 5 week cap must be returned to the tenant, landlords face a £50,000 fine if they fail to adhere to this legislation.

5 year electrical test
In October mandatory five-year electrical installation checks on private rented housing in England became available to law, this means that the Secretary of State must now put forward the legislation that will govern this requirement, as yet no Bill has been introduced to Parliament, but we expect the requirement for 5 year electrical test in all Privately Rented homes, would be introduced over a transitional period of two years. The first year would see all new private tenancies subject to the checks, while the second year would encompass all existing tenancies too.
However, the implementation date has not yet been clarified so, while it is still unconfirmed as to exactly when this will begin, there is a good chance that the legislation could be introduced at some point in 2020.

New tax relief rules
There was a time when private and individual landlords could claim tax relief on mortgage interest payments and fees, as well as fees and interest incurred on loans to buy furnishings.
Then, in 2015, the government made property rentals a much less viable option for many when they announced that this was to be phased out.
In 2017-18 the process began, with claimable tax relief reduced to 75 per cent, and so the reduction continued through 2019-20. In 2020-21, landlords won’t be able to claim any tax relief on mortgage interest payments at all.
Instead, from April 2020, landlords will receive a 20% tax credit on their interest payments; not great news for those in the higher tax bracket – which could now include landlords who will have to declare the rental income that they previously used for interest payments.
Many landlords are now setting up limited companies when buying new rental properties in order to avoid the higher individual rates, but there’s no guarantee that the rules won’t change to affected limited companies in the future.

Private Residence Relief
From April 2020, changes to Private Residence Relief mean that landlords will lose nine months’ worth of Capital Gains tax relief when they come to sell.
While at the moment landlords can claim Private Residence Relief for all the time they lived in their property before letting it to tenants, plus an extra 18 months after moving out, this final exemption period will be reduced next April to the time they lived in their property plus just nine months post-moving out.

Lettings Relief
In addition, landlords who rent out a property that was once their main home will see the £40,000 worth of lettings relief they currently enjoy scrapped as, from April, only landlords who share an occupancy with their tenants will be able to claim. The deadline for payment of the Capital Gains Tax bill will also change from April 2020, from January 31st in the year after the tax year they made the sale, as it is now, to within 30 days of the completion of the sale.

With the minefield of legislation only increasing for 2020 landlords would do well to seriously consider joining a local property network group and attending specifically Tailored seminars to help keep them fully up to date with all the ever changing legislation.