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.

AirBnB Not your average estate agent... say the French

EU Supreme Court rules AirBnB are NOT an Estate agent and will not require a license to operate in France.

The French Tourist association had filed a complaint that AirBnB did not comply with French property law.

Had this ruling gone against AirBnB then this would have set a President for the operator in all European Countries.

This comes on top of a €14m fine imposed on the company for publishing 1,000 illegal rental adverts in Paris. 

These charges at Airbnb came into existence because they violated French Law. Under French law, “Homeowners can rent their places for a short term of 120 days per year and advertisements for rent should have a registration number to ensure properties are not rented for a longer time.”

France passed a law in 2018 which puts fines of 12,500 Euros per illegal posting on rental companies like Airbnb for violating it.

Abolition of Section 21…..Private rented Armageddon?

The Government are currently seeking consultation on their  decision to remove section 21 notices from the eviction  process and this has created waves of panic across the industry, with the media having us believe landlords are evicting tenants on mass for fear they will never be able to get their property back once the law comes into force.
But what does it really mean for landlords, will your property be lost to your tenant forever?

Until the Bill is produce after the consultation period we will not know for sure what the new regulations will be, but what we do know is no fault eviction notices will be no more, this will mean Assured shorthold tenancies (AST) will be no more and as a knock on effect deposit protection regulations, technically, will be no more as landlords only need to protect a deposit for an AST

To give us the best indication of how this shake up will effect the private rented sector as we know it, we don’t have to look far. In 2017 Scotland went through a similar change, removing no fault notices and streamlining their private rental industry with the introduction of the  Private Residential Tenancy (Private Housing (Tenancies) (Scotland) Act 2016

Any tenancy that started on or after 1 December 2017 will be a private residential tenancy. This new tenancy replaces  the assured and short assured tenancy and provided the filling changes:

No fixed terms - private residential tenancies are open ended, meaning a  landlord can't ask a tenant to leave just because they have  been in the property for 6 months as they can with a short assured tenancy.
Rent increases – Rent can only be increased once every 12 months and if the tenant thinks the proposed increase is unfair they  can refer it to a rent officer. – It is the same in England, if a tenant believes a rent increase is too high they can appeal to the rent tribunal
Longer notice period - if your tenant has  lived in the  property for longer than 6 months you will have to give you at least 84 days notice to leave (unless they have broken a term in the tenancy).
Simpler notices - the notice to quit process was scrapped and replaced by a simpler notice to leave process.
Model tenancy agreement - the Scottish Government published a model private residential tenancy that can be used by landlords to set up a tenancy.
If a  tenancy started before 1 December 2017 it will continue as normal until tenant or  landlord bring it to an end following the correct procedure.
If renewed then a new tenancy this will be a private residential tenancy.

Deposits
Scotland operate a deposit protection scheme similar to England, the difference is all deposits must be protected in one of the 3 government approved schemes and if the deposit is not registered a tenant can complain to the First-tier Tribunal for Scotland, and the tribunal can order the landlord to pay you up to three times the amount of the deposit paid. Tenants  can only  do this up to three months after the tenancy has ended.

Giving notice
If a tenant wishes to vacate and they have a private residential tenancy tenant, then this is normally 28 days’ notice.

Evictions
A landlord will need to give a tenant  either 28 or 84 day’s notice that they intend to apply for an eviction notice. The period of notice will depend on how long the tenant has been in the property and which ground their are applying for eviction. The form a landlord needs to use is called a ‘notice to leave’.

If the tenant is still in the property after the notice period is over, then the landlord will have to apply to the Housing and Property Chamber of the First Tier Tribunal for an eviction order.
The notice to leave is valid for 6 months, if no application for an eviction order is made, then another notice to leave would need to be issued.
If a tenant does not leave on the expiry of the Notice to leave, then the landlord must apply to First Tier Tribunal for an eviction
The landlord must also serve the local authority with a notice advising of the potential eviction.

What are the grounds?

There are 18 grounds for possession that a landlord can use to apply for an eviction order.
The grounds are divided into 4 areas:

• the property is required for another purpose,
• the status of the tenant,
• conduct of the tenant,
• there is a legal reason why the tenancy can't continue.

There are 10 mandatory grounds, where the tribunal has no discretion to refuse the eviction if the ground is proved, and 8 discretionary grounds, where the tribunal should consider whether it is reasonable to grant an eviction order.

The property is required for another purpose
• Ground 1: Landlord intends to sell
• Ground 2: Property to be sold by lender
• Ground 3: Landlord intends to refurbish
• Ground 4: Landlord intends to live in the property
• Ground 5: Family member intends to live in the property
• Ground 6: Landlord intends to use for non-residential purposes
• Ground 7: Property required for religious purposes
Tenant's status
• Ground 8: not an employee – tied accommodation
• Ground 9: No longer in need of supported accommodation
Conduct grounds
• Ground 10: Not occupying let property
• Ground 11: Breach of tenancy agreement
• Ground 12: Rent arrears
• Ground 13: Criminal behaviour
• Ground 14: Anti-social behaviour
• Ground 15: Association with person who has relevant conviction or engaged in relevant anti-social behaviour
Legal impediment to the let continuing
• Ground 16: Landlord has ceased to be registered
• Ground 17: HMO license has been revoked
• Ground 18: Overcrowding statutory notice

From 1 December 2017, most types of legal applications about private sector tenancies are dealt with by the Housing and Property Chamber, rather than the Sheriff Court, this removed a lot of pressure from the courts and not only streamlined the eviction process but also sped up the time it takes to evict a tenant from a property.

So while we wait to see how the new legislation will be presented, it is worth taking a calming deep breath to know that the lack of a S21 will not bring private rental Armageddon and landlords will still be able to gain possession of their properties.
Because let’s face it, a Landlord has never served a S21 for no reason, all the new rules will mean is that you will now have to state your reason and match the ground to it.

Benefit tenants to come out of the cold

The Government has confirmed the freeze on benefit payments which came into force in April 2016 will end next year.

The freeze on increasing benefit payments inline with inflation has been controversial from the beginning, this combined with the introduction of Universal Credit has been blamed with the increase of both  rent arrears and homelessness for many people on low incomes.

So will the freeze open the housing market up to people who have been trapped in poor quality accommodation because they have been unable to afford to move to improve their circumstances.

The change in benefit payments is set to increase the money claimants receive by 1.7% meaning the average single person with no dependants will be entitled to £322pm rather than the £317pm they currently revive as either Job Seekers Allowance (JSA) our Standard Element of Universal Credit (UC).

Housing benefit or Housing element rates are expected to rise by the rate of inflation which is predicted to be 2% and will see local housing allowance rates for a 1 bed property in Central London rise from £276.51p/w to £282.04p/w but with average monthly rental price for a 1 bed property currently at £1555pm even this increase will leave many people struggling to pay rent.

Overall since the benefit freeze was introduced the average family has lost £560pa year on year, driving many people into poverty and the increase in the use of food banks has risen steadily making this temporary assistance a normal part of life for many including those in employment.