Coronavirus Act 2020

Last night the temporary legislation to be known as Coronavirus Act 2020 ( CVA 2020) received Royal Assent and became law.

The Act is 358 pages long and covers every eventuality, from Volunteer and worker rights, to births, deaths and marriages, but most importantly this new legislation brings a change to how and when landlords can serve notice on their tenants.

Previously the Government had said it would BAN all evictions for 3 months, however these provisions have been watered down.

S81, Sch 29 details the new notice periods for all tenancy types.
But in summary, from 26th March 2020 any landlords serving notice to a tenant, whether under S21 or S8 must provide 3 months notice, this includes grounds under AntiSocial Behaviour and S8 grounds which would have normally given 2 weeks or 1 months notice. 

S4 of Sch29 I feel is important, because it sets out how a Notice can be served, which is:
a) Leaving it at the property
b) Sending by post
Given that this is new legislation and will no doubt be challenged in court, I would advice landlords NOT to send any notice via any other channel other than that stated in the Schedule, this includes email.

The key point to remember here is that notices CAN still be served on tenants, but those notices will be a minimum of 3 months from today.
Court applications can be made for possession after the expiry of the 3 month notice, but at this stage we do not know if the courts will be open or what capacity they will have to process possession claims.

Rent Holiday - Free Rent period
Contrary to popular belief, the Government have never mentioned a rent free period, this seems to have been a social media phenomenon which evolved from the announcement of Mortgage breaks.

To be clear, within the details of the CVA2020 there is no provisions or interpretation of provisions for any rent holiday or non-payment period.
Rent remains due in full, however as landlords and business owners, it is strongly suggested that you work with your tenants to ensure some if not all rent is paid and where rent can’t be paid, you support tenants to claim all benefits they are entitled too and where necessary, agree a repayment plan for any rent owing, whether that be from and agreed deferment of payment or a lack of income.

Increase to Benefits
S77 of the CVA2020 sets out provisions that working tax credit and Universal credit standard element will be increased by £20 per week.
This combined with the increase in Local Housing Allowance would provided a single person over 25 years old approx £1100 per month income from benefits.

Business premises
S82 (1) provides business premises with protection from forfeiture and re-entry due to non-payment I’d rent during the relevant period, the relevant period being 26th March 2020 until 30th June 2020

All of these provisions are subject to change, as allowed for in the Act, including extending the 3 month notice period to 6 months, but this would be done after Government consultation, so would not happen over night. 

A new S21 form ( 6A form) has been published by the Government, the link is below.




https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/824957/Form_6A_INTERACTIVE__1_.pdf

FILE_5834.pdf

Are the Rent Controls coming?.....

Over the years some of the many changes we have seen effect the Private Rented Sector have had their origins in Scotland

In 2016 The Private Tenancies (Housing) (Scotland) Act was introduced which streamlined the Private Rented Sector and phased out the Scottish equivalent of Assured ShortHold Tenancies, something we are now seeing happen in England in the next couple of years, this legislation also introduced Rent Pressure Zones, giving local authorities powers to cap rent increases in specific areas, mirroring many City rent control policies that can be seen across Europe.
In addition, Scotland also introduced a landlord register, making it a criminal offence for a landlord  to rent out a property if they were not registered.

So could  Rent caps now  be closer that we think for England too?

MSP Pauline McNeill, has laid before the Scottish Parliament her private members Bill named, Proposed Fair Rents (Scotland) Bill

This bill proposes to cap annual rental increases across Scotland to 1% point above inflation (measured according to the consumer price index (CPI)

This would apply to both new tenants (if the property has been let previously) and existing tenants. It would be “grandfathered” for a new tenant where the property has been let previously, meaning when a property is let out to a new tenant, the landlord could only charge the previous rent, increased by 1% point above inflation.

There will be provisions for landlords to request an annual increase which is higher than the cap to reflect improvement works that have been carried out on the property, this work would need to be assessed before the cap restriction is removed allowing a landlord the higher increase.

It is also a requirement of the Bill, that landlords update the Land registry with any changes in rent.
This will have the effect, not only of recording a specific rent to ensure it is not rising faster than inflation, but also of creating a comprehensive database of rents, resulting in a robust dataset of actual market rates.


It is currently a criminal offence for a landlord to rent out a property without registering it on the Scottish Landlord Register. A landlord can be fined up to £50,000.50 It is also a criminal offence to knowingly fail to supply full information in the registration application and a landlord can be fined an amount not exceeding level 3 on the standard scale, which is currently £1,000.51 This Bill would simply expand the duty on landlords to state the level of rent they are charging. This will ensure that when landlords increase the rent it does not exceed one percentage point above inflation.

So if this Bill does receive the Scottish thumbs up and given how quickly we see changes migrate to the English PRS, could we be seeing Rent Controls in England in the next 3-4years? 

Right to rent checks to go digital

The Immigration Minister, Kevin Foster MP, responded to a written question by Alex Norris MP (Labour, Nottingham North) asking what plans the Home Office has to update the Right to work checks and Right to rent document checks guidance to allow digital forms of identification to be accepted.

Kevin Foster, responded: “When an individual undergoes a right to work or right to rent check, they are not just evidencing their identity, they must also demonstrate their entitlement to work or rent.

“The Home Office is transforming the way migrants demonstrate their immigration status and right to work and rent in the UK.

“The digital online status checking service for employers conducting right to work checks was launched on 6 April 2018.

“In January 2019, we amended secondary legislation and issued new guidance to employers which sets out how they can use the online service in complying with their responsibilities under the Immigration, Asylum and Nationality Act 2006 on the prevention of illegal working.

“The Home Office is planning to launch an online digital right to rent status checking service to support landlords in conducting right to rent checks.

“The government is also working to develop proposals for a digital identity system that would enable people to prove their identity easily and securely, without the need to provide physical documents, and to meet the demands of the digital age.”

As of yet there have been no timescales placed on when these new checks might be made available to Landlords or the exact status of current progress, so best not to hold your breath

Source Property118

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.   

State Opening of Parliament Dec 2019

As the world wakes up to the news that only the third ever US president has been impeached the Queen Takes her seat for the State opening of Parliament

This speech has the most legislative changes of any previous speech, with 20 Bills being introduced.

As we expected there will be new legislation with regards to security for tenancies and also an improvement for home ownership.

There will be changes in business taxes which they hope will change the infrastructure of the UK.

As normal there is the increase of the national insurance threshold and the living wage, but no mention of removing of zero hours contracts. 

But what does this mean for property investors and landlords?

We know one of the major pieces of legislation will be the removal of Assured shorthold tenancies being replaced by Assured tenancies. I expect the Rented Homes Bill to be reinstated and commence its journey through Parliament, this Bill holds the key to how the process of removing ASTs will happen, it is expected that this law will come in April 2020 but with a much longer transition period of 3years rather than the normal 12 months.

New grounds for eviction will also be introduced to support landlords who need to regain possession through no fault of the tenant.

It is also expected that combined with the new Assured tenancies will come longer minimum tenancies to bring the UK in line with other European Countries where a standard minimum fixed term is 3years a pose the 6months which we currently have in the UK.

The previous rumbles of rent controls for the UK have not been mentioned for some time but it will be interesting to see if these are brought in as pilot schemes in the highest rental areas of the UKs Cities, again akin to most of Europe. 

Improvements in Home ownership was also mentioned, there hasn’t been any change in this area for sometime, with the Help to Buy scheme proving to be a damp squib with minimal take up and statistics showing that it helped less first time buyers enter the housing ladder than those applying for mortgages in the usual way. 

In addition the Help to Buy ISA which was launched in late 2015 was not published well and when it ended on 30th November 2019 only 256,000 homes had been purchased directly using the ISA, however those who did open the ISA and have not yet used it, can continue to save into it and benefit from the cash bonus until November 2029.

The increase in NI threshold as well as the previously announced thaw of the benefit freeze, tenants will have more disposable income. 

Will this see a rise in rents or will the way tenants are verified need to be brought up to date to avoid landlords having lengthy void periods, at present many tenants on zero hours contracts can’t rent because they fail at the credit referencing stage because they cannot prove continued set income, but if previous rental payment history was set a first priority for affordability would this help improve the market for landlords.

We will now wait to see what Bills are produced by the Government to support their proposals of today. 

Tenants are your customer too

If letting agents want more satisfied clients and fewer disputes they should provide better information to tenants.


That’s the view of PropTech entrepreneur Neil Cobbold, chief operating officer of lettings payment automation provider PayProp
.

He cites research by the National Landlords Association which shows that 79 per cent of tenants need better information on the roles and responsibilities of landlords and letting agents.

"Proactively educating tenants on the rental process from the outset can save agents time from having to mediate unnecessary disputes between landlords and tenants” says Cobbold.

"Some key areas where tenants may lack understanding relate to financial obligations and property upkeep. It’s very important to make sure tenants are kept informed throughout the tenancy. Often tenants are set wondering: ‘Has my rent been received?’, ‘How much do I owe?’, ‘Is my deposit safe?’, ‘Is it my responsibility?’ and ‘Who pays for repair work?’


"If tenants are clear on what to expect, they are more likely to be satisfied and stay in the property for longer – at least as long as those expectations are then met. This can help reduce arrears and void periods for letting agents and landlords” Cobbold adds.


According to the NLA's research, 67 per cent of almost 900 tenants surveyed said that they were not aware of the government's How to Rent guide which is designed to help them understand their rights and responsibilities.



Cobbold says: “Agents could do more to promote the How to Rent guide to consumers. By making sure tenants not only read but understand this guide, letting agencies can manage expectations from the outset of a tenancy and save time and money on creating their own educational materials."

Additionally he says agents should encourage landlords to prioritise good communication and set out roles and responsibilities on both sides of the relationship.


Cobbold adds that key lease terms such as payment dates, tenancy lengths and notice periods should all be set out in a clear and accessible manner so tenants know what is expected of them and when.

"A concerted effort from agencies and landlords to provide renters with more clarity could make for a more harmonious and efficient private rented sector” he concludes.