MUST KNOW LEGAL STUFF

Here are some key matters those in the residential rental sector should be aware of this year:

Energy Performance certificates
From 1st April 2018 landlords (residential and commercial) must not renew a tenancy or grant a new tenancy where the EPC rating is below E, unless an exemption applies.

From 1st April 2020 a residential landlord must not continue to let a building which has an EPC rating below E, unless an exemption applies.  In the case of commercial property, the compliance date is 1st April 2023.

Breach by a landlord can lead to a penalty of £5,000 to £150,000 

Year 2 of the restriction of mortgage interest relief
This year, we will be into the second year of the phased reduction of mortgage interest relief for BTL landlords owning property in an individual capacity. There will be further upward pressure on their tax bill as a greater share of their profit becomes taxable.

Such landlords, if they have not yet done so, would be well advised to seek expert advice as to whether it would be beneficial to hold their properties in a limited company structure – which retains the tax benefit of full deduction of mortgage interest.

Limited company mortgages
The availability of mortgages to limited companies is set to improve further in 2018. In November of last year, one of the big high street lenders Nationwide (through its BTL arm TMW) began a pilot to lend to limited companies.

As more and more BTL investors are operating through limited companies, other major players can be expected to join TMW, increasing competition and reducing the cost of corporate mortgages, both in terms of interest and fees.

Extension of HMO licensing
From 1st October 2018 the definition of a HMO will be widened to cover any property occupied by five or more people forming two or more households.

The new definition will apply to many two-storey student houses which previously were not affected.

The owners of all affected properties will need to prove that they are ‘fit and proper’ to hold a licence and the properties will need to meet strict minimum requirements, aimed at improving overall standards and safety of lettings.

If you own a property to which the new rules may apply, it is obviously sensible to plan now for the likely financial expense of compliance.

Ban on leasehold houses
The government has decided to ban the controversial practice of selling new houses as leaseholds – often with rapidly escalating ground rents. The practice caused public outcry when exposed by the media as little more than a device to add additional income streams for developers and builders.

New home buyers will no longer be obliged to pay a ground rent.  The changes will require legislation, and that seems likely later this year.

Ban on letting agent fees
It seems very likely that the planned ban on letting agent fees (payable by tenants when looking for a property to rent) announced in 2016, seems likely to take place next year (2019).

 

 

 

 


 

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