What are The Upcoming Legal Changes Timetable for 2020?
We have got a few big legislative changes coming this year that affect landlords to varying degrees. While you are all probably aware of these, we thought having it laid out in chronological order could help sort the priority of any changes you have to make to your portfolio. We will also go over the specifics of the new laws and changes to existing ones just in case you need a reminder. Some of these are in consultation still so are yet to be confirmed, we will add an indication whether this is the case on each change.
- [Confirmed] Introducing Article 4 Direction in Swinley and central Leigh, Wigan – although this has already passed, we thought it important to bring up as changes to the ranges of Article 4 areas are going to be a big part of this timetable. There are so many new locations article 4 is being applied to this year as councils meet on this topic every five years and 2020 happens to be the anniversary for many councils. The sheer number of range changes mean that, although we have tried our best to find them all, we are sure we have missed some. So, if you are planning on converting a property to HMO then make sure you have checked the most recent update on the council website. The penalty for failing to get permission can be up to £20,000 and will be on record, so definitely don’t risk it.
- [Confirmed] Introducing Article 4 Direction in parts of Croydon.
- [Confirmed] Expanding the Homes Act to include existing tenancies – also called the ‘fitness for human habitation’ act, this was implemented for new tenancies last year. on March 20th last year. A year later this will be enforced for existing tenancies. The criteria for a property being deemed ‘fit’, as laid out by the government website, are as follows:
- the building has been neglected and is in a bad condition.
- the building is unstable.
- there’s a serious problem with damp.
- it has an unsafe layout.
- there’s not enough natural light.
- there’s not enough ventilation.
- there is a problem with the supply of hot and cold water.
- there are problems with the drainage or the lavatories.
- it’s difficult to prepare and cook food or wash up.
- or any of the 29 hazards set out in the Housing Health and Safety (England) Regulations 2005.
You can have your property assessed by the ‘Housing Health and Safety Rating System’ (HHSRS) if there is any doubt but it is not necessary. The penalty for failing to meet these criteria will be compulsory improvement of the relevant property and compensation to the tenant at the discretion of a judge, and could include the tenant’s legal costs.
- [Confirmed] ‘Minimum Energy Efficiency Standards’ to apply to existing tenancies – in April 2018 a minimum energy efficiency, of E, was applied for all new tenancies. This will be extended to cover all tenancies on April 1st. It will be compulsory to make upgrades to properties with efficiency of F or G up to the cost of £3,500. If the changes would cost above this amount or reduce the value of the property by more than 5% (and you can prove it) then you can get a ‘high cost exemption’ of up to 5 years. However, this exemption won’t last forever and the minimum rating is expected to continue creeping up over the next few decades so getting ahead of the curve with some energy saving features may be more cost effective in the long run. You will get 3 months leeway to carry out any upgrades after April but fines can vary between £5,000 and £10,000.
- [Confirmed] Reduced availability of ‘Private Residence Relief’ – PRR can be claimed for exemption from Capital Gains Tax, up to £40,000 per person, when selling a property the landlord lived in. This relief was for any gains made in the final 18 months of ownership plus the time the landlord lived there. However, in April of this year this relief will see one of the biggest changes this year. First of all the period that gains are exempt has been reduced to 9 months plus the time the landlord lived there. Next, the biggest change, is that this relief will only be available to landlords who are living in the property with their tenants. This will make PRR much harder to claim.
- [Confirmed] Introducing Article 4 Direction in Hymers Avenue and Sunny Bank, Hull.
- [Possible] Introducing Article 4 Direction in Waverley Borough Council, Surrey.
- [Confirmed] The Tenant Fees Act 2019 for existing tenancies – this act was introduced last year for all new tenancies and was designed to protect tenants from unnecessary costs. It will now be applied to all existing tenancies. The list of things that landlords can charge tenants for, as laid out on the government website are:
- 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 week’s 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.
- [Confirmed] Introducing Article 4 Direction in Raikes Hall, Blackpool.
- [Confirmed] Introducing Article 4 Direction city-wide in Birmingham.
- [Confirmed] Introducing Article 4 Direction in parts of Cheltenham.
- [Possible] Introducing Article 4 Direction in Avonmouth Village and parts of Bristol.
- [Confirmed] Introducing Mandatory Electrical Instillation Safety Checks – 2 years ago a consultation was published by the housing minister to determine whether new rules for landlords should be introduced requiring them to check rental property for electrical faults every 5 years. The idea would be to reduce electric shocks and fires. This is now going to be put into place this July. Landlords will be required to organise these checks and provide safety certificates to tenants or face a penalty of around £30,000. Checks generally cost a few hundred pounds.
- [Confirmed] Introducing Article 4 Direction in parts of Northampton.
- [Confirmed] Introducing Article 4 Direction in Noel Park, Peabody Cottages, Rookfield Estate and Tower Gardens, London Borough of Haringey.
Late 2020/ Early 2021:
- [Possible] Abolition of Section 21 of the Housing Act – last year the government conducted a consultation between July and October last year on whether section 21 of the Housing Act 1988 should be abolished. A Section 21 notice, often called a ‘no-faults eviction’, gives landlords the right to evict tenants for any reason as long as they provided two months’ notice. The government has been claiming they will get rid of the section for a while now but as nothing has been said since the consultation, we wouldn’t expect any concrete changes until very late 2020 but more likely 2021 even if it was announced tomorrow. To evict without section 21 you will need to issue a section 8 notice. The grounds for which a tenant can be evicted under this section include; failure to pay rent, consistent late rent payments, beaching the tenancy agreement and damage to the property amongst other things.
Tax Year 2020-2021:
- [Confirmed] Removal of tax relief on mortgage interest payments – up until April 2017 you could claim tax relief on mortgage interest payments. This has slowly been reduced in the following years until the tax year ending this April being the last time relief can be claimed in this way. From this point on you will be able to claim a 20% tax credit, based on 20% of your mortgage interest payments. So, some relief will still exist but in a different form.
More information on all of the upcoming changes can be found in the links below (for individual councils’ statements on article 4 you will need to visit their specific website). Make sure you put any events relative to you down in your own diaries or print this off and stick it in. This year is shaping up to be a busy year for the property market, in regards to activity and legislature, so make sure you stay up to date with future news.