04 Protect

Have You Missed These Things?

  • Missing key property news or information can be costly
  • Here are 6 must-know things so far in 2019

If property is a part of your life – whether as an investor, landlord or tenant – it is important to keep your eyes peeled for changes in the law or trends which may have an impact on you – for good or for bad. 

Failing to notice important developments can cost you financially or can mean you miss out on valuable benefits. 

So far this year, there have been many changes and developments.

However, here are 6 of the most important to be aware of:

1. Ban on tenant fees
2. Rent deposit limited to 5 week’s rent in most cases
3. Holding deposit capped at one week’s rent
4. Return of the 100% mortgage
5. Signs of a two tier housing market
6. Warnings about capital gains tax

1. Ban on tenant’s fees

As a result of the Tenant Fees Act 2019, from 1st June 2019 there is a ban on most fees charged to tenants in connection with a letting. 

The new law applies to all tenancies created from 1st June 2019.

According to the government’s website:

The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy. Tenants will be able to see, at a glance, what a given property will cost them in the advertised rent with no hidden costs.

Over the years letting agents, and some landlords, increasingly charged tenants for services which righty ought to have been paid by the landlord, or subsumed as part of the normal overheads of the agent.

Such charges were in many cases unreasonably high and many tenants were forced to make payments with no certainty that they would even get a property to rent.

The abuse prompted the government to act, but it is worth noting that the ban is not complete. There are a few non-rent items which can still be charged to tenants.

The government’s website lists the payments that can now be charged to tenants, namely:

  • rent
  • a refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above
  • a refundable holding deposit (to reserve a property) capped at no more than 1 weeks’ rent
  • payments associated with early termination of the tenancy, when requested by the tenant
  • payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment or novation of a tenancy
  • payments in respect of utilities, communication services, TV licence and Council Tax
  • a default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement.

Tenants can no longer be charged reference fees or general admin fees.

The penalty for breaching of the new law is £5,000 – but that could rise to £30,000 in the case of repeat offenders.

It is expected that agents will look to landlords to pay some of the charges which previously were being paid by tenants. Landlords may in turn increase their rents.

It is therefore possible that the overall benefit for tenants will be zero in financial terms.  However, individual tenants will clearly welcome the removal of abusive and unfair charges – and there is no certainty that market conditions will allow landlords to put up rents.

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2. Rent deposit limited to 5 weeks’ rent in most cases

A major development brought about by the Tenant Fees Act is that the amount of rent deposit which can be demanded from a tenant has been capped:

  • If the annual rent is less than £50,000, they can be asked for no more than 5 weeks’ rent.
  • If the annual rent is £50,000 or more, they can be asked for no more than 6 weeks’ rent.

3. Holding deposit capped at one weeks’ rent

Another key provision of the new legislation is that holding deposits must now not be more than 1 week’s rent. Also they must be refundable.

Read: Say no to being a tenant forever

4. Return of the 100% mortgage

In January of this year Lloyds Bank launched its “Lend a Hand” mortgage deal which effectively allowed first time buyers to borrow 100% of a property up to £500,000 – providing a close relative deposits the equivalent of a 10% deposit with Lloyds.

The amount deposited is security for the borrowing by the first time buyer, so Lloyds is not as exposed as it would be if it simply lent 100% of the price – which was the practice of some lenders before the 2007-2008 financial crisis.

Following the lead of Lloyds, other lenders – notably Barclays (Family Springboard Mortgage) and the Post Office (Family Link Mortgage) – have offered “helping hand” products which effectively amount to 100% lending.

The 100% mortgage is back – albeit in a new reincarnation. That is good news for first time buyers who now, with input from others, can again borrow up to 100% of the purchase price, over-coming issues of affordability.

READ: Are you sitting on a mortgage time bomb?

Unknown.png5. Signs of a two tier housing market

There are clear signs that we are now experiencing a two tier housing market, with prices in London and the South East generally falling and prices elsewhere generally rising.

Whether this two tier picture will continue or is permanent is hard to predict; however, it is a trend which has existed for around 2 years so far. 

According to Nationwide data released earlier this month (July 2019), London house prices have fallen for the eighth quarter in a row to June 2019.

That represents a 2.6% fall in house prices in the capital as a whole over the last two years.

READ: 10 easy ways onto the property ladder

In the South East, prices are in negative territory (-0.8%) in the year to April 2019 (according to the Office for National Statistics).

By way of contrast, house price in the North West were up 2.6% in the same period.

If you are looking to buy in London or the South East, it is tempting to think prices will continue to fall and so you are better off waiting before getting into the market.

Unfortunately however, it is notoriously difficult to “time” the market. Further, if you believe in the 18 year property cycle, we may be at the mid cycle wobble point and the next development is for prices to rise aggressively.

Buyers delaying in the hope that prices will continue to fall may end up disappointed.

READ: The pluses of buying in affordable areas

6. Warnings about capital gains tax

If you are an owner of a property affected by capital gains tax, something you absolutely must do is to respond to the warnings from various tax experts about changes to the timeframe in which capital gains tax must be paid.

In the case of sales from 6th April 2020, property owners will have to pay the tax within 30 days of completing the sale – much quicker than under the current rule – where payment is due by the 31st January following the  tax year in which the sale was made.

Late payment will lead to a penalty and interest charges.

The shorter payment period will be an issue for sellers where the net proceeds they receive following a sale is not enough to pay the tax due – for instance, because of the amount of borrowing against the property.

In such cases, sellers will need to ensure that they have funds in place before their sale – and this may mean they will need to raise funds before they can sell.

This could present a number of serious problems for property owners wishing to sell – and in some cases they may not be able to sell when they want or at all.

If you are selling your home, everything should be fine. Generally capital gains tax does not apply on the sale of a main residence due to the availability of Private Residence Relief.

Conclusion

The property landscape is a fast changing one.

Always keep a close eye on developments to make sure you don’t miss something very important for you to know.

Enjoyed this blog? Please share it with friends by clicking on the LinkedIn, Twitter, Facebook or Instagram icon on this page. 

What important 2019 developments do you think I have missed?  Please leave your observations or comments below.

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Dalton Barrett
Rebel Property Coach

Please follow me on Twitter @Dalton1London
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My website is: www.rebelpropertycoach.com


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