It is difficult to know exactly what Theresa May’s premiership will be remembered for when it finally comes to an end in July. Will she go down in history as the lady who failed to deliver Brexit, the Prime Minister who snatched defeat from the jaws of victory or the politician who presided over a huge change in private rental market regulations?
Private landlords struggling
It is fair to say that recent changes to the private rental market came about as a consequence of the Conservative party seeking to curry favour with middle ground to left-wing voters. At a time when the Conservative party was literally tearing itself apart, Theresa May saw an opportunity to introduce tenant friendly regulations and hopefully win over some of the popular vote. However, just a couple of years down the line from the start of the regulatory changes there is confusion and many private landlords are not fully up to speed with the changes.
Recent changes to private rental market regulations
It may be helpful to recap the most recent changes in the private rental market and how they will impact private landlords:-
New Tenant Fees Act
While the New Tenant Fees Act was supposed to simplify the cost of renting property it is more likely that the historic fees which are now deemed “illegal” will simply be passed on to tenants via increased rent. All but the most basic of historic fees have been outlawed at an estimated cost of more than £80 million to private landlords. How can they afford this?
Abolishment of Section 21 Eviction Notices
Section 21 eviction notices are commonly known as “no fault” evictions although the government is currently in consultation regarding their potential removal from the statute books. This comes at a time when authorities are also looking to create open-ended tenancies to give private tenants in England and Wales more security. The idea is that Section 8 notices, currently used to evict antisocial and troublesome tenants, would be adjusted to allow the removal of tenants if the landlord wishes to move into the property themselves.
Section 8 eviction notices take an average of five months to complete against anything from eight weeks for Section 21 notices. We know that some landlords currently use Section 21 notices to remove troublesome tenants and reduce their periods of reduced income. It is fair to say they would be significantly worse off if the Section 8 eviction notices were the only means of eviction.
Changes to Mortgage Interest Relief
The amount of mortgage interest which can be offset against rental income is slowly being reduced and will eventually be removed. It will be replaced by a basic rate tax allowance which will see no change for basic rate taxpayers but an increased tax charge for higher rate taxpayers. As there are many private landlords with multiple properties, and additional income streams, they could see a significant increase in their tax charge.
If you have any concerns regarding the calculation of your tax liability you should seek the advice of your accountant to ensure your returns are correct.
New Homes (Fitness) Act
In theory, the New Homes (Fitness) Act is unlikely to have an impact on the vast majority of private landlords who abide by current regulations. However, in the event there are repairs to be made to a property which are delayed or ignored then tenants now have the right to take their landlord to court. This could leave a landlord with a significant legal bill in the event that the allegations are upheld by the courts.
There are some exemptions to protect landlords from legal action where the tenant may be at fault, damage was caused by weather conditions or where repairs may breach laws such as planning permission. However, the decision to give tenants a more defined route for legal action could turn relatively minor issues into very expensive affairs.
There are optimistic hopes among some private landlords that a change in the Conservative party leadership, with a likely more right-wing approach, could see some of the recent property regulatory changes reversed. It does seem inevitable that the Conservatives and Labour will become more polarised in years to come. If this was the case, is it beyond the realms of fantasy to suggest that the Conservative party will be more pro-business and pro-private landlords?
Let’s not forget, the right to buy scheme which began in the 1980s led to the UK housing boom. The main downside was the gradual reduction in local authority social housing and a greater need for private landlord facilities. However, with the UK government strapped for cash after a period of austerity it would appear that private landlords were an easy target for a new tax income stream.