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Looking forward to 2020

Posted by Andrew on December 13, 2019
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As 2019 draws to a close, we have been reflecting on (and recovering from) what has been a rather busy year for legislative change. The focus this year has of course been on what is one of the bigger changes to hit the lettings market in recent memory, the Tenant Fee Ban. Along with this and amongst many other changes, there has been the introduction of mandatory Client Money Protection and the Homes (fitness for Human Habitation) Act which came into force in the spring.

As the dust settles on last nights election drama, with the Conservatives remaining in power, we don’t anticipate many changes to the Government’s plan for the letting market, so with this in mind we take a look ahead at 2020.

Minimum Energy Efficiency Standards (MEES)

No, its not a typo, there are further changes afoot in the quest to ensure that the housing stock in the UK is as efficient as possible. As of 1st April 2020 the existing requirement for properties which are let on new tenancies to have an Energy Performance Certificate (EPC) rating of “E” or above will be extended to include all properties which are currently let. This means that all rented properties will need to have an EPC in place and if the rating is below an “E” then works will need to be undertaken to bring the energy efficiency of the property up. There are a few exemptions which may apply, for example where it is not possible to do the necessary works, but these exemptions need to be registered.

We have already looked at the EPC’s for all of our managed properties and are strongly recommending that landlords put plans into place now in order to ensure that their properties are complaint, as it is very likely that EPC Assessors are going to be very busy indeed come March / April.

For further reading and information about this including possible exemptions please see below:

https://www.gov.uk/guidance/domestic-private-rented-property-minimum-energy-efficiency-standard-landlord-guidance

Regulation Of Agents

This is something which we feel is an incredibly positive step forward, and although this is not currently confirmed, we do hope to see the introduction of a regulatory body for the lettings industry at some point in 2020.

A governmental working group issued a report in July 2019 setting out the framework and scope of the proposed regulation of letting agents, which if executed correctly should benefit landlords and tenants by introducing a mandatory code of practice and ensuing that anyone working in the industry is qualified to do so, hopefully removing rogue agents from the lettings industry altogether.

Hazells are already regulated by the RICS and are also voluntary members of ARLA Propertymark which means we already qualified and work to a code of practice and ethics, but there are still many agents out there who do not.

Pollution levels

This is not something that is widely publicised, but as of next year Trading Standards will require that when advertising a property for let, landlords and agents will need to advise if there are high levels of pollution in the area which the property is situated.  The most recent report on air quality (2018) for Bury St Edmunds can be found below:

https://www.westsuffolk.gov.uk/environment/upload/West-Suffolk-ASR_2018_final.pdf

Mortgage interest tax relief for landlords

2020 will see the final step in the phased removal of tax relief on the interest on buy to let mortgages. By April 2020 you will no longer be able to deduct any mortgage expense from rental income to reduce your tax bills. There will however be a tax credit available based on 20% of your mortgage interest payments, but this means that higher rate tax payers will be worse off than they were before. Further information including some worked examples can be found below:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782

Section 21 Reform

Okay, this isn’t legislation which is definitely coming into force in 2020, and indeed may not be passed at all, however this is something that we feel is definitely worth mentioning. The Government are proposing the removal of Section 21 of the Housing Act, which means it will no longer be possible to serve two months’ notice to terminate a tenancy at the end or after the expiry of the initial fixed term without giving a valid reason for termination.

The thinking behind this is that this will offer tenants more security as it will only be possible to terminate a tenancy using a Section 8 notice, which requires specific grounds (reasons) to be given in order to terminate the tenancy. The existing grounds will be updated in order that they are improved and there are more grounds that can be used.

The possible impact that this may have on the lettings market could be significant, as Section 21 was originally introduced in order to encourage landlords to let property due to a shortage of rental stock, and the removal of Section 21 may mean people are reluctant to let their properties again.

It remains to be seen as to what the proposed changes to the Section 8 process and the court system (which would struggle to cope with the additional demand placed on it) are. This needs to be done well in order to ensure that landlords are still confident, otherwise the legislation is going to inadvertently cause more harm than good for tenants.

This is definitely one to keep a keen eye on during 2020.

 

The above is by no means an exhaustive list, however, we hope offers some insight into what is in store for the legislative side of the rental market in 2020.