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The 2015 Landlord Review

Landlords there has been a lot of changes in 2015. This is not legal or financial advice - its a review of what the Government, Its Quangos and the Banks have been up.

Get out your notepad, start of 2016 by establishing procedures and make changes to your small business were appropriate.

Your Legal Notices are Rubish!

In 2015 the Government changed the required wording of Section 8 , Section 21 and Section 13 notices.

As of April 2015 any old templates should not be used and will be invalid.

Section 8 - Is used for Fault Based Possession such as rent arrears or anti social behaviour.

Section 13 - Is used for rent increase notices.

Section 21 - No Fault Based Possession notice.

Landlords should replace any documents that they have saved or are currently using with the new forms.

Tell your Tenants How to Rent!

In late 2015 it became a legal requirement for Landlords to provide any new tenants a "How to Rent Guide", Energy Performance Certificate and Gas Safety Certificate.

The guide can be printed from the Government Website.

Failure to provide the guide will make it harder to evict tenants.

Landlords should ensure your Tenants sign to confirm they have received al the documents.

(Whilst we are at it, remember to supply the "prescribed information" for deposit protection too.)

Landlords must provide to new tenants a "How to Rent Guide" this can be printed from the government website.

Ref: [1][2]

Smoke Alarm Law

You are already required to have smoke detectors in rented properties under HHSRS.

The government has decided to put it simpler in law to standardise and clarify the responsibilities.

You must ensure that there is at least a smoke alarm on every floor.

You must ensure that carbon monoxide alarm is in any room that contains a solid fuel burning appliance.

There is no rule for them to be interlinked or mains powered, although best practice.

Landlords should check rented property, keep a record of the location and the dates you check they are working. Failure to have adequate fire safety precautions can result in a fine of up to £5,000 per property.

Retaliatory Eviction

At the end of 2015 new regulations came in to prevent landlords evicting a Tenant if they have complained about the condition of the property.

A requirement as tenants who complained to Local Council about the condition of a property was getting evicted.

If a tenant raises a written complaint and did not receive a response within 14 days - you can not issue a section 21 notice for six months

If your response is not adequate - your section 21 may be invalid for up to six months.

If a tenant raises a complaint with the council - you can not issue a Section 21 notice for six months.

Four Months for a Section 21

At the end of 2015 new regulations came in changing how you serve a Section 21 Notice   ("no fault possession notice").

You can no longer serve a Section 21 notice within the first four months of a tenancy.

Previously the RLA and others recommended serving a Section 21 in early months. This enabled at the end of the six month tenancy to obtain possession or require a new tenancy. No Longer!

Universal Credit is Coming

Changed in 2015! and Coming Soon.

Universal Credit is simplifying the benefits regime, no more individual payments. It will be one claim and managed digitally online.

Universal Credit is being introduced in stages, your Tenants may be already required to claim this route depending on your area.

Universal Credit is different from Local Housing Allowance, in a variety of ways such as being paid monthly not four weekly.

It is more difficult to get direct payment although an application can be made if tenant is more than two months in arrears or in a vulnerable group.

Landlord providing housing to low income households may need to learn a new scheme and until full still manage LHA.

Benefit Cap and Benefit Instability

Changed in 2015!

In 2015 the Government introduced a Benefit Cap and minimum requirements

Landlord providing housing to low income households may find that the Housing Element of Universal Credit or their Local Housing Allowance of the tenants is reduced to as little as 50p.

A tenants overall benefit claim may be capped to £500 a week (or £350 a week for single persons).

In addition the government introduced requirements for unemployed tenants to seek employment for 35 hours a week.

Claimants must sign a "claimant commitment" which will be reviewed fortnightly.

Benefits may be suspended - the government is using market forces such as being unable to pay rent or pay for food as incentive. Inspiring?

European Tenants Only

Starting February 2016.

Landlords will be joining the border force, no pay but bad performance could lead you with £3,000 penalty.

You can only rent to Tenants whom have a "right to stay" in the UK and must prove you have obtained evidence of that right.

If someone is from Europe they have a "right to rent" so obtain a passport copy as proof. If they are from anywhere else - revert to your border force training.

You remember your training right?

If your letting agent fails to take all steps such as obtaining evidence. or checking every 12 months. You will be held liable!

To avoid becoming responsible for a letting agents inaction. Ensure you obtain from your letting agent in writing they will be carrying out checks on your behalf.

A Ban on Draughty Homes

Starting in April 2016 tenants residing in properties currently rated F or G will be able to request energy improvements to a property.

A Landlord will not be able to refuse a tenants 'reasonable request' for energy efficiency improvements.

In 2018 properties currently rated F or G will be banned from being rented - until you improve them to a E rating.

Letting Agent Ombudsman

In late 2014 - Letting Agents were required to be members of a consumer redress scheme and have Professional Indemnity Insurance.

This gives Tenants and Landlords a right route to complain if they are unhappy about the service or contractual obligations.

Landlords check your contracts and agents Code of Practice these two documents are primarily what the redress scheme will base its decision on.

Letting Agents are also required to display their fees transparently on websites and offices.

Labours Tax Proposal becomes Conservative Legislation

In the run up to the election Landlords were weary of Ed Miliband - his landlord tax plans and rent control. The Conservative party was the safe choice for their business.

The 1.4m private landlords are proving to be a soft target for George Osborne.

From April 2016 Landlords will pay an extra 3% on their stamp duty dubbed the "landlord tax".

The worse is to come in 2017 as tax relief for buy to let will be reduced to a flat rate of 20% compared with the 40% or 45%.

Landlords are launching legal action in the form of a Judicial Review of Clause 24.

The National Landlords Association estimates the change could affect as many as 700,000 landlords.

Estate agent Savills said a higher-rate taxpayer buying a property worth £300,000 with a 35% deposit and a yield of 5% would currently make £3,000 a year profit, but no profit whatsoever by 2020.

RLA chairman Alan Ward said: “On the face of it the impact could be to push up rents as landlords have to recover their extra costs."

Rogue Landlords

Coming Soon - to a local authority near you ! The Housing and Planning Bill 2015-16 will introduce banning orders, rogue landlord database, rent repayment orders and management orders.

Local Authorities will wake up to a Financial Incentive to prosecute landlords. Fines and repayment orders can be retained by the local authority.

The council can apply to the Tribunal to ban you from managing the property and take over management. They can make you repay rents for up to 12 months.

Your details then put on a list, so other local authorities can follow suit.

Banning Orders

Your Local Authority can ask a Tribunal to Ban you (and associates or family) from running or managing your lettings business.

A banning order will prevent you from letting a house, engaging in letting agency work and engaging in property management work.

You must first be convicted of a "banning order offence" such offences are not yet listed.

To notify other local authorities that you have been banned your details are  entered on the Rogue Landlord Database.

Rogue Landlord Database

To get your name on this exclusive list you must first be convicted of a "banning order offence" such offences are not yet listed.

You can be on database if you have committed an offence but have not been banned. If you have been banned you will be on the database.

The database of dodgy landlords will not be made public.

Its purpose is to inform all local authorities of your landlord staus; good, bad or banned.

Rent Repayment Orders

A tenant or local council can ask a tribunal for up to 12 months of rent to be repaid.

A rent repayment order can be granted if you have been convicted of illegal eviction, harassment, breach of banning order, control of an unlicensed HMO or failure to comply with a prohibition or improvement notice.

A tenant or the local council can then ask for up to 12 months of rent to be repaid from a Tribunal.

Easier Possession of Abandoned Properties

Coming Soon.

The Housing and Planning Bill 2015-16 will introduce new powers for landlords to gain possession of abandoned properties.

The new powers will involve at least three legal notices, served on the tenant in different methods (one pinned to the door!).

If a tenant fails to take action and respond the landlord can safely obtain possession - the time scale is eight weeks or more.

Bank of England (BoE) declined your Mortgage

Coming Soon.

The Bank of England (BoE) is worried that data shows if interest rates rise by 3% then 60% of landlords will have mortgages greater than the rent they collect.

The Financial Planning Committee at the Bank of England has therefore asked for powers to regulate Buy-to-Let.

Regulators constantly ask for powers to control Buy-To-Let and constantly turned away due to being commercial transactions.

This time George Osborne has already given consent, prior to any consultation or debate.

We do not know what powers or when they will get them.

It is speculated that powers will include the Minimum Rent Formula. Preventing large loans from being able to taken out if the rent is unable to meet mortgage plus a significant buffer.

This may result in landlords increasing rents prior to remortgaging to ensure a high enough loan and on purchases may limit the Loan achievable.

Rent to Interest

Buy to Let Mortgage affordability is calculated by ensuring that the rent payable is over the minimum mortgage that will be required to be paid AND in most cases your personal income.

At the end of 2015 lenders starting increasing rental calculations.

They did so after signals from the Bank of England about the risk of landlord affordability of mortgages. Some lenders outlined they have done so because of the Governments Tax Changes.

Moving into 2016 we may see more lenders change there rental calculations, requiring landlords to increase rents to ensure they can remortgage at a later date and on purchases perhaps limiting the loan to value achievable.

Find out How Buy to Let Affordability is Assessed and the formulas lenders currently use.

Limited Companies Good, Private Landlords Bad

The government has given the nod to Landlords holding properties in Limited Companies whilst shunning private landlords.

LTD Companies with 12 or more properties will be exempt from the higher Stamp Duty Land Tax (SDLT).

After the Tax reforms LTD Companies  have certain Tax Benefits such as retained profits. The rate of Corporation Tax is currently 20% which means your tax liability is reduced compared to if you are paying income tax as a higher rate tax payer at 40%.

Mortgage Lenders have been reforming there Buy to Let products for Limited Companies and other lenders have entered this sector.

2016-2017 may well be the year of the Limited Company Landlord.

Unfortunately transferring properties from personal name to a limited company can incur Capital Gains Tax and Stamp Duty Tax.

2015 the Year of Selective Licencing

Throughout the United Kingdom councils have been jumping at the chance of charging landlords hundreds and imposing new legal requirements.

In 2016 you should be checking with your local council if there is a Licencing Scheme operating in that area. Some are city-wide whilst others are to select areas - if you fail to register you can get penalty of £20,000.

The London Borough of Newham charges £500 for a new licence and £850 for additional properties, for example, since adopting the devolved "Landlord Licensing Scheme" in 2013.

Mortgage Lenders do not like it and often decline refinance or purchase.

You may find some rather odd requirements put on you - such as councils requiring you to maintain the garden instead of the tenant.

Explaining Selective Licencing Councillor Athwal of Redbridge Council said it "is vital to hold landlords to account for the actions of their tenants" - what?!

Will National Landlord Association (NLA) revive?

Landlords have been putting the National Landlord Association (NLA) under greater scrutiny. As the conservative party attacks Landlords the NLA has been found wanting.

The NLA in recent years has been running a deficit. With only £2m of Landlord Subscription Income and £3m of Administrative Expenses alone.

They have chosen a bad time to restructure the organisation with a increased additional services upsell to finance itself.

In 2016 can the NLA continue its financial improvements become again the leading landlord association and work on behalf of its members.

Vacant Properties

In 2016 the government is set to grant Local Authorities extra powers to use Compulsory Purchase Powers.

Empowering them to force you to sell vacant or abandoned properties.

Other Things

Well that is a long post - covered a lot of bases. Tell you what as well.

Remember to secure your deposits in a scheme.

We've talked about Gas and EPC Certificates but every five years you will also need an electrical certificate.

In April 2016 we should get new Local Housing Allowance Rates.

In Conclusion

The Conservative Party is focusing on housing and landlords are an easy target.

With the many legislative changes to Lettings since Conservatives took power we can say it is open season on small landlords.

Many changes are bureaucratic  but failure to comply will result in being unable to evict a tenant. The biggest change is removal of Tax Relief.

As we move into 2016, a failed petition behind us. We should see more tax schemes and more moves to put the government under pressure to reverse the severity.

Landlords have no union but we can finance lobbying. All landlords should join the Residential Landlord Association (RLA). Even if you dont need their documents or help.

As we move into 2016 Landlords New Year Resolution should be on maintaining their portfolio spreadsheet.

Now go print of some "how to rent guides", new legal notices, get those gas and EPC in order and check those smoke alarms.

Have a prosperous 2016 landlords....

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