With most COVID restrictions now ending, the rental market is largely returning to business as usual. This means that all of the rental reforms and legislation related to landlords that was on pause during the pandemic are now back on the table.
With some changes having already happened in late 2021 and more expected throughout 2022 and beyond, there’s a lot for landlords to keep on top of at the moment. The biggest update expected sometime in 2022 is the Renter’s Reform white paper which may be giving more rights to tenants than before. While there haven’t been many specifics released yet, there’s a pretty good idea of what rules will be affected.
We’ll run through the recent and upcoming changes that landlords will need to start preparing for and give a few tips on how to stay ahead of the changes.
What are tenants’ rights?
First, let’s review the existing rights that tenants have. There’s a lot of them so this list may not be exhaustive, but it will give a rundown of the major ones you need to know. The rules may also vary slightly depending on where your property is based, so be sure to double check them against your local government’s rules.
- A tenancy agreement signed by both tenant and landlord
- Protection against unfair rent prices or unfair eviction
- The ability to challenge rent rises that seem unfair
- Knowledge of your landlord’s identity
- To have your deposit protected and the right to challenge any money taken out of your deposit at the end of tenancy
- To live in a property that meets specific standards for safety and liveability
- To have repairs carried out in a reasonable amount of time
- To see a recent Energy Performance Certificate (EPC) for the property and have a minimum rating of ‘E’
- The right to live in the property undisturbed and have notice of any landlord visitations
What changes are being made to tenants’ rights?
COVID -19 adjusted right to rent checks end – IDVT Introduced
In England, the plan is to drop the temporary measures that allowed right to rent checks to occur over video calls. While this was in place, prospective tenants were also able to use photocopies of documents. On 30 September 2022, the plan is to drop these measures.
However, that doesn’t mean going back to the old way of doing things. By delaying the lifting of these measures until September, the government is giving landlords and letting agencies more time to set up the new Identification Document Validation Technology (IDVT) providers. The hope is to make right to rent checks easier in the future, keeping the convenience of the way checks were done during the pandemic. More about the rationale behind bringing in IDVT can be found on the government website here.
Renter’s reform bill
As part of the ‘levelling up’ campaign, the government is looking at making some big changes to the rental laws in England. This bill has been on the docket for a while, but the finer details of it should be coming around midyear 2022. While there’s a lot to cover in this bill, there are five major points that landlords should keep an eye on:
- Abolishing Section 21:
Section 21 allows ‘no fault’ evictions which means that a landlord could serve this notice at any time for any reason with as little as 8 weeks’ notice. Due to the lack of stability that this created for renters, the new rental reform paper is looking to abolish section 21 evictions. Landlords would still have the ability to serve eviction notices under Section 8 but only for specific reasons such as selling the property, landlords moving into the property, or tenants breaking their contract. This give renters greater peace of mind as they’re unlikely to end up unhoused as long as they are meeting their end of the rental contract. - Strengthening of Section 8 notices:
If you’ve only had great tenants you may never have had to look into section 8 notices, but this is another type of eviction notice. To serve this notice, a landlord will have to identify a reason for the eviction and then prove it. In order to balance out the effects of abolishing Section 21 Evictions, the Renter’s Reform Bill is hoping to strengthen the Section 8 Evictions property and ensure that landlords can repossess property easily when necessary and justified. - Start a landlord register:
According to Shelter, England is the only one of the four nations to not have some form of official Landlord Register. Having a single, centralised register can help with ensuring that all landlord have access to updates about their duties and responsibilities. It can also help give renters confidence in their chosen landlord. - Start a redress scheme:
Along with the landlord register, there is talk of a redress scheme so that there is an official way to escalate and deal with complaints against landlords. For the vast majority of landlords who operate ethically, this is no real concern. In fact, weeding out landlords who try to take advantage of tenants could be a good thing if it increases tenant confidence in the rental industry. - Create lifetime deposits:
This may be a welcome change for many landlords as lifetime deposits have the potential to speed up the letting process. The concept behind this is that deposits would simply be transferred from one property to the next, that way renters do not need to save for a deposit every time they move. In the past it may have taken a few extra weeks to fill a tenancy if new tenants had to wait for a previous deposit to be returned before they could start a new tenancy. The one potential drawback to this is how to handle it when there’s a disparity between the deposit levels needed between a previous rental and the new one. For example, if some amount of the old deposit was used to cover damage or rent arrears, the remaining amount may not fulfil the amount needed for the new deposit. Further details on how this issue will be approached will hopefully be included as the bill progresses.
Pet-friendly tenancies
With changes already made to the model tenancy agreement that encourage more landlords to accept pets, it may not come as a surprise that additional measures are being proposed to make renting more pet friendly.
For those that use the government’s model agreements there is now consent for pets as the default, with 28 days to object if you oppose the idea and have a valid reason to but those that don’t use the model tenancy agreement have no such requirements.
The Dogs and Domestic Animals Accommodation Protection Bill is working its way through parliament though and aims at making renting with a pet simpler. Here are the main points:
- Introduction of Certificate of Guardianship:
Those that wanted to keep a pet in rental properties would need to get a certificate which proves they’re responsible animal guardians. In order to receive this from a registered vet there would be criteria such as: microchipping, up to date pet vaccinations, pets being dewormed, and being able to respond to owner’s commands. - Criteria for denying requests:
Tenants don’t automatically have the right to keep pets however, if they have a certificate of guardianship, the landlord will have to prove the animal is a risk or nuisance to others
What other changes are happening?
While all of the above changes have to do with changing rights for the tenant, there are further changes coming for landlords that have to do with taxes, VAT and energy efficiency – basically all the hard work that goes into being a landlord that doesn’t involve a tenant!
Extended reporting time for Capital Gains Tax
Those who are selling a buy-to-let home or a second property usually have to pay the capital gains tax on any profits made from the sale. So, if you’re downsizing your property portfolio you may have to pay this tax. The rates for it tend to fall between 18% and 28% depending on what earnings bracket you fall into.
In the past you had just 30 days to pay this tax, but as of 27 October 2021 you now have 60 days to pay it. According to a report from the Office for Tax Simplification, property sellers were having difficulties paying the tax within the original deadline, so they proposed the new 60-day deadline.
The good news is that any expenses towards the sale such as agent and solicitor fees can be deducted from the taxable amount as allowable expenses, meaning you may be able to pay slightly less tax on your property sale.
Making Tax Digital for VAT
As of 1 April 2022, all VAT-registered businesses will need to keep digital records and submit digital VAT returns using compatible Making Tax Digital accountancy software. By April 2024, those whose income from their properties (rent, capital gains, etc) exceeds £10,000 per year will have to use the Making Tax Digital system as well. Note that the £10,000 threshold is per taxpayer not per property. You may be able to register and start using it early so that you’re familiar with the process by the time it becomes mandatory.
Consultation on the regulation of holiday lets for England and Wales
For those landlords who manage short-term holiday let properties, there may be changes coming your way soon. There is a consultation expected this year in England regarding the regulation of holiday lets and their impact on the housing industry. Some of the proposals which may come out of this are a mandatory register for all of the short-term lets or increasing the council tax for short term rentals. In 2021, the Welsh government have already run a consultation on these topics.
Changes to rules on energy efficiency
While there are no imminent changes coming to energy standards, there will be more stringent requirements coming in 2025, so it’s important that landlords stay ahead of the upcoming requirements and take the time to meet them sooner rather than later. Across England, Scotland and Wales, it is expected that a minimum Energy Performance Rating (EPC) of ‘C’ will be required by 2025.
For those landlords who have a property rated ‘D’ or ‘E’, you may want to start thinking about how to improve the energy efficiency of your property now. Having advance notice gives you time to save up for any changes that need to be made and to plan ahead. If you already had property renovation plans in mind, then energy efficiency improvements can be added in with other changes. Or if you have an unexpected vacancy in the next few years, that may be the perfect time to get energy-related updates done.
How will these changes affect landlords?
While the vast majority of these changes are intended to make things easier for tenants, they undoubtedly can make things more complicated for the landlords. However, as long as you’re always managing your properties in an ethical way, more accountability and oversight shouldn’t be a major issue.
That’s not to say that the changes will be easy – change rarely is. With new requirements and standards coming in place, you should definitely try to prepare as well as possible.
What can landlords do to prepare?
- Carry out tenant checks:
There’s no way to guarantee you won’t face any problems during your tenancy, however carrying out a thorough tenant reference check is good place to start. Tenant background checks will help shed light on your tenant's renting history, financial records and inform you of any criminal convictions they might have. While improvements to Section 8 should make it easier for you to evict a tenant, it only allows you to do so under very specific criteria, so getting to know the tenants background well before you hand over the keys will be more important than ever. - Join professional associations:
Every association will offer different perks, but the support can be a real benefit. Membership often gives you access to things such as a library of free resources including guides and lawyer-approved templates or online forums and run regular networking events, allowing you to share your knowledge and experiences and learn from other landlords. As requirements continually change, having legitimate support from a professional landlord association can help you stay on top of it all. - Create a budget:
With higher standards for energy efficiency coming in 2025, budgeting to make sure you’re able to meet those requirements is important. Meeting these standards could mean replacing windows, updating appliances, or other costly measures. Having an EPC check early is useful to know what level you’re starting from and because it will often give you an idea of measures for improving your rating and their costs. This will help you budget so that you can make all the necessary changes by 2025. The removal of Section 21 could also mean that the eviction process will take longer and cost more in terms of legal fees and unpaid rent. While improvements to Section 8 will hopefully avoid these issues, having a little extra emergency budget set aside may not be a bad idea. - Make a thorough inventory:
Furniture and other household contents you’ve provided should be listed and described in an inventory. Be specific in your inventory, including the age and condition of all the contents. Once this document is signed by you and your tenant, it will provide a quick resolution to any future disagreements over these items. This ensures that, if anything is damaged, you’ll be appropriately reimbursed from the tenant’s deposit or have proof of damage to property should you be seeking eviction of a tenant. - Plan ahead:
For the changes that are yet to come into effect, don’t wait until several months before them to take action. If you start making small incremental changes now, you will be better prepared, and it won’t feel as overwhelming. Proper preparation gives you a chance to find out about any problems and fix them in due course rather than scramble as a deadline looms closer. - Look for grants:
When it comes to creating greater energy efficiency in homes, there may be grants or schemes available to help you fund it. For any mandatory updates to your properties, it is always worth research what kinds of help there is available for these updates.
While these changes may be difficult in the short-term, in the long run they will strengthen the rental industry by improving trust between tenants and landlords. With the proper preparation, you can continue to be a great landlord for all your tenants.
All links are checked and valid at time of publishing, 19 April 2022.
