In the past few years many changes to the legislation pertaining to the property industry have come in force and have in many ways affected the UK property market. Some affected renters, others affected landlords, but in the grand scheme of things some of them affect every side of the dice.
I am going to concentrate on the non-Brexit related issues and regs in the current property market. Brexit, regardless of its outcome, is a whole other kettle of fish. Its impact can be tackled at a later date once its outcome is clearer.
Changes to the stamp duty regulations meant that landlords (anyone buying a second, third or fifth property and not their first) would need to pay an extra 3% stamp duty on their purchase.
The idea behind this was to make it harder for landlords and investors to buy. It would then free up properties for first time buyers. If those landlords or investors decided to sell, due to diminishing profits, the influx of new properties on the market would in turn push prices down. This has to some extent happened.
The unintended consequence, however, is that with more properties being snapped up by first-time buyers, the supply of rental properties has fallen. With the limited supply, rental prices of these properties have started to increase.
Right to Rent
Tenants need to have the right to rent when a new tenancy is granted. This is basically the government outsourcing ‘immigration checks’ to landlords in respect of the tenancies they are granting to their future tenants.
Landlords and/or their agents need to check the tenant’s passport or government issued ID and, if applicable, their VISA in person. These documents must be valid at the time the tenancy is granted.
Not checking could result in fines as well as imprisonment. Prinsegate Chartered Surveyors has always been a front-runner with implementation of new regulations in UK property management services and will keep ensuring that all future tenant ID-s are checked as per regulations.
Whilst still Chancellor of the UK, George Osborne announced section 24, which would be phased in by 2020.
What is Section 24? Landlords were previously able to offset their mortgage interest as a cost to their ‘business’. However, this will now be replaced by a fixed 20% deduction. The resulting effect is that many properties suddenly became loss-making. Landlords effectively started being taxed on the gross (minus 20% interest rate relief) rather than the net (rent minus mortgage interest, wear and tear and other costs of running the property).
So, what was previously a profitable property, suddenly had a very different looking profit & loss spreadsheet with a final annual value in the red. Estate agent fees can, however, still be offset as a cost. Therefore, the 10-12% you would pay Prinsegate Chartered Surveyors to fully manage your property would be deductible as an expense.
Wear & Tear Allowance
Simultaneous to Section 24, the Government announced that the 10% annual wear and tear allowance would be scrapped. Less deductibles at the end of the year, thus increasing losses further.
Energy Performance Certificate
Probably the most beneficial in practical terms to tenants have been the changes to the EPC regs. Where a property doesn’t meet a minimum EPC of E it cannot be rented out anymore.
The better insulated your property is, the lower the energy bills each month. This results in a higher EPC.
Prinsegate Chartered Surveyors not only advises on how to make your property more energy efficient, but it can also arrange for the work to be done. Once compliant, a new EPC should be issued for your property.
Agent Fees Ban
The latest change of them all is the agent fee ban.
From proposal to implementation, a couple of years went by. The background to this was that many agents (a small percentage but many nevertheless) were charging tenants ridiculous amounts for items that were inevitable.
Examples include contract drafting, reference checks, end of tenancy cleaning, end of tenancy check out reports, renewal of contract, etc.
Each of the above items added up and with some extremely overpriced. This would add up to a huge cost to tenants, who argued that they would not be able to save up to buy their own place when all their savings went to covering agent fees.
So, it was arguably a good move made to benefit the tenants. The question that remains is where will agents get their fees? For some agencies this would have resulted in closure or cutting down staff and branches. We operate differently, though.
At Prinsegate Chartered Surveyors we are chartered surveyors first and foremost. We never needed to rely on agent fees to stay afloat and we deemed such fees unethical in the beginning anyway. We have therefore been able to concentrate on building up a very satisfied clientele through work as a chartered building consultancy.
Thankfully, a lot of our current business also comes from referrals which is a testament to the satisfaction of our clients.
The latest announcement in regard to changes in regulations has been the potential abolishment to section 21 – no fault eviction.
Until now, the only way to guarantee that a tenant would vacate your property was to serve them with a section 21 notice. No reason needs to be given here, but it can only be served two months before the end of the fixed term of the tenancy. So, on a six month tenancy, this would mean month four – with the notice expiring on month six.
If the tenant has not vacated, the landlord would then start court proceedings to have them evicted. Landlords need to safeguard their position too. Imagine if the property has been vandalized or the tenant hasn’t being paying rent every month.
According to the Government, many landlords across the country were serving s.21 notices in retaliation for tenants asking for things to be repaired. Why fix something when the next person will take the property in its existing condition? This was the mentality.
Hence, new proposed changes to abolish s21.
To compensate for this abolishment, there are proposals to just speed up section 8 notices, which have thus far been much slower to implement and have not been able to guarantee eviction. Whether this is the right thing to do or not is debatable.
What is clear, however, is that these are fast changing times, where it is very risky for landlords to manage their own properties whilst adhering to the over 150 plus regulations agents adhere to on a daily basis. That’s why having a property management company such as Prinsegate Chartered Surveyors to manage you property is crucial in the current times. There are just too many things that could go wrong otherwise.
We can source tenants for you, make sure they are all fully referenced, etc. We work with insurers who could provide you with a rent guarantee insurance and this would cover each tenant who is referenced and living in your property.
We would also conduct regular checks on the property, arrange for repairs, and are even able to advise you if you decide to sell up one day and take an early retirement.
Our packages are hands-free for our landlords and investors, where we take on the day-to-day pressure of dealing with calls, repairs, paperwork and all the new regulations. This allows you to focus on sitting back and doing what you do best: looking for the next opportunity and enjoying the rent come in each month without the hassle.
To discuss our property management packages give us a call today and one of our fabulous team members will be able to answer all your questions.