Posts with tag: landlord law

What the Changes to Mortgage Interest Tax Relief mean for Landlords

Published On: May 13, 2019 at 9:00 am

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Alexandra Morris, the Managing Director of MakeUrMove, shares everything landlords need to know about the recent changes to mortgage interest tax relief.

The new tax year, which started last month on 6th April, has seen a host of tax changes, including amendments to Capital Gains Tax and Income Tax. 

There were also changes to the amount of mortgage interest tax relief that landlords can claim, but do you know how this will affect you as a landlord?

Here’s what you need to know about the reduction in mortgage interest tax relief: 

How the changes to mortgage interest tax relief came about 

In April 2017, the Governmentintroduced plans to reduce the level of mortgage interest tax relief to make a fairer tax process. 

Before this, landlords would be able to deduct mortgage interest and other costs associated with their rental property before they could work out the taxable profit. 

Since its introduction, the Government implemented a phased approach to the reduction in mortgage interest tax relief. From 100% in the financial year of 2016/17, it has reduced to 75% in 2017/18 and 50% in 2018/19. 

The latest changes to mortgage interest tax relief 

From April 2019, the level of mortgage interest tax relief landlords are entitled to has been reduced to just 25%. In the 2020/21 tax year, landlords will no longer be entitled to any tax relief. 

The loss of mortgage interest tax relief obviously brings extra financial pressure for landlords. This is at a time when landlords are already facing increased costs as a result of new measures by the Government, such as the tenant fee ban and the Fitness for Human Habitation Act. 

As a result of these financial burdens, landlords may be concerned about their profit margins, and may have no option but to increase rents. 

Expenses landlords can claim 

While landlords are losing their mortgage interest tax relief, there are still plenty of expenses that landlords can claim back against tax to mitigate their costs. 

Such expensesinclude Council Tax, water and energy bills, insurance, letting agent fees, legal and accountancy fees, and maintenance fees, such as gardening and cleaning. 

Tenant fee ban 

Don’t forget that the tenant fee ban is fast approaching and comes into force on 1st June.

In essence, the tenant fee ban means you’ll no longer be able to charge tenants for aspects such as referencing. 

Private Landlords Looking to Repossess a Property Left Waiting by Courts

Published On: May 10, 2019 at 9:57 am

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Private landlords are finding that they are waiting longer to repossess a property for legitimate reasons, according to new data.

Private landlords are finding that they are waiting longer to repossess a property for legitimate reasons, according to new data.

It has been confirmed by the Ministry of Justice that the average time a private landlord has had to wait, after making a claim to the courts to repossess a property, is now at 17.3 weeks.

This data has been calculated using information from the first quarter of 2019. It shows that the process is now taking one week longer than it did in the final quarter of 2018. These figures have been based on the Government’s preferred measurement.

It was in April 2019 that the Government announced its intentions to scrap Section 21 no fault evictions. The RLA, however, believes that the court processes must first be fixed to ensure landlords are not left unduly frustrated when wanting to reclaim their property for a legitimate reason, such as tenants failing to pay their rents or committing anti-social behaviour.

The Association has called for a properly funded and dedicated housing court to be established. Such a court would be brought in to improve and speed up justice for both landlords and tenants when and where needed.

David Smith, Policy Director for the Residential Landlords Association, has commented: “The courts are simply unable to cope when landlords seek to repossess property for legitimate reasons.

“Before seeking to scrap Section 21 repossessions Ministers urgently need to give confidence to landlords and tenants that the courts will first be substantially improved to speed up access to justice. That means establishing a full and proper housing court.”

There is currently a consultation underway, hosted by the RLA, inviting the landlord community to make suggestions on how the existing process for those looking to repossess a property can be improved.

The option of Section 8 also exists, but is known to take even longer than Section 21, and so adjustments will be needed, if it is to be considered a replacement.

“Assault” on Landlords “Contradicts Basic Principles of Sound Tax Policy”, Insists Think Tank

Published On: May 9, 2019 at 8:08 am

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The Government’s “assault” on buy-to-let landlords “contradicts the basic principles of sound tax policy” and penalises investors for the housing crisis, insists the Institute of Economic Affairs (IEA). In a new report, the think tank claims that the Government’s recent tax changes for buy-to-let landlords defy “any basic economic analysis”. The publication, seen exclusively by Telegraph Money, calls for a major overhaul of the way that properties – particularly homes in the private rental sector – are taxed, especially as the IEA believes that landlords are being “discriminated against” compared with homeowners.

The organisation points out that, in some instances, landlords will face an effective tax rate of more than 100% after 2021, when tough new rules fully take effect. The authors of the report, Rosalind Beck and Philip Booth, two academics specialising in the property market, warn that the changes are likely to result in higher rent prices for tenants and a fall in the supply of rental housing, as some landlords leave the sector altogether. The document warns that decent landlords are likely to be replaced by less reputable investors as a result of the tax changes.

Booth believes: “Recent tax changes to private rented housing will raise rents and reduce the supply of houses for rent.“The Government, under policies set in train by Mr. [George] Osborne, is subjecting private landlords to a sustained assault, by increasing Stamp Duty and not allowing finance costs to be fully deducted for tax purposes.” He adds: “This policy contradicts the basic principles of sound tax policy, and the Treasury’s justifications are disingenuous. The policy may create situations in which over 100% of a landlord’s profit is due in tax.” The report suggests that the Government should reverse the changes to Stamp Duty and mortgage interest tax relief. Such changes have made the tax system “more complex and less economically coherent”, it insists.

The IEA says that discrimination between types of property should end; this means that homes held in corporate vehicles should not be treated in a more beneficial way than those owned by an individual landlord.Even if it were replaced by another form of property tax, the think tank would like to see Stamp Duty abolished altogether. “The Government has changed the tax system in a way which leads to private landlords being taxed more harshly than other forms of business,” the report claims.

It’s less than 4 Weeks until the Tenant Fees Act comes into Force

Published On: May 7, 2019 at 9:30 am

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It is now less than four weeks until the Government’s Tenant Fees Actcomes into force across England.

From 1stJune 2019, landlords and letting agents will be banned from charging upfront fees to private tenants, except for charges relating to replacement keys (or a respective security device) and late rent payments.

Under the Tenant Fees Act, holding deposits will be capped at one week’s rent, while security deposits will also be capped, at five weeks’ rent. 

ARLA Propertymark (the Association of Residential Letting Agents) has warned agents to “act now”, as the implementation of the ban is less than four weeks away.

David Cox, the Chief Executive of the organisation, gives his advice: “[Saturday 4thMay] marks the four-week countdown to when the Tenant Fees Act comes into effect, and the industry must face the realisation of preparing doe a post-tenant fees world.

“With no time to waste, agents need to ensure they’re compliant with the law and understand how the ban will impact their business. To help members overcome the legal challenges of the Act and comply with the ban, we launched the Tenant Fees Toolkit last month, providing practical tools and materials to support our members through every step of the transition and beyond.”

ARLA Propertymark recently added frequently asked questions to the toolkit, to better answer any queries letting agents and their landlords may have about the ban.

“We also have a series of upcoming road shows, which will update on the legislation and provide key insights on how businesses can thrive post the ban,” Cox adds. “We urge members to attend, as we rapidly head towards 1stJune.”

He gives a final piece of advice: “Agents can help reduce the impact on their business by being prepared, and, with the date fast approaching, they must act now.”

Whether you’re a landlord or a letting agent, you must assess how the tenant fee ban will affect your business. 

Seaward Electronic Call for Mandatory Electrical Appliance Testing by Landlords

Published On: April 26, 2019 at 8:08 am

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Landlords may see tough new rules enforced to keep private tenants safe, as part of a campaign by UK electrical safety testing expert Seaward Electronic.

This campaign was also backed by Easington MP Grahame Morris. The MP has sponsored an Early Day Motion that calls for this topic to be discussed in parliament.

Policy makers have been urged to change the law to require landlords to carry out regular electrical testing in their rental properties.

MP Grahame Morris said: “Seaward’s successful campaign, which has been instrumental in changing Government policy, will help to save lives – as well as save families the hardship and pain caused by domestic fires.”

However, Morris believes that there is still further to go for the Government to ensure the legislation is implemented as quickly as possible.

Seaward Electronic also believes that the rules need to be taken further so as to include portable electrical appliances as well as fixed installations.

Various measures have been announced by Housing Minister Heather Wheeler MP that should bring England’s policy in line with Scotland’s.

  • Landlords will be required to undertake five-year safety checks
  • New guidance will be published to set out minimum levels of competency and qualifications for inspectors

Andrew Upton, Managing Director of Seaward, said: “The new rules are an encouraging step in the right direction and I’m pleased the Government is taking the safety of tenants seriously.

“However, it’s disappointing to see that electrical appliances aren’t included in the legislation this time – and we will continue campaigning to ensure this happens.  

“I am also keen to see the outcome of the social housing green paper consultation and hope to see similar rules introduced for those tenants.”

He went on to explain that quick and simple measures, such as portable appliance testing (PAT) can highlight a problem that tenants or landlords may not be aware of. For example, it could bring attention to simple wear and tear and appliances that don’t meet UK safety standards.

According to Government statistics for 2017-18, faulty electrical appliances were the second largest cause of fires in the UK. However, despite this data, there are no legal requirements in place for landlords to regularly test portable electrical appliances included in rental properties.

Grahame Morris added: “I welcome the Minister’s announcement; however, we need a clear commitment on when the new legislation will be brought forward and assurances that any phasing of new electrical safety standards will not be prolonged and leave vulnerable families in dangerous sub-standard housing.

“The Government should adopt a standard that all homes should be safe homes and while I welcome the introduction of electrical safety checks within the private rented sector, the same standard should also cover social housing.

“I will be asking Ministers these questions in the weeks ahead, but today we should acknowledge the achievement of the electrical safety campaign run by Seaward.”

The Government must get Removal of Section 21 Right, Insists the NLA

Published On: April 17, 2019 at 9:00 am

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The Government must get its proposed removal of Section 21notices right, the National Landlords Association (NLA) has insisted.

The organisation has lambasted the Government’s proposal to remove Section 21 evictions, essentially creating indefinite tenancies in the private rental sector.

Section 21 was originally designed to allow landlords to regain possession of their properties to sell or move into themselves. The NLA has long argued that it has become a backstop to overcome the ineffective Section 8 process, whereby a landlord must go to court to regain possession when a tenant is in breach of their tenancy agreement, as it is seen as slow, costly and inefficient.

Research conducted by YouGov, on behalf of the NLA, in December 2018 found that, of the 11% of landlords surveyed who had sought possession over the last five years where the tenant was in breach of their contract, 44% used only the Section 21 process, while a further 22% used both Section 21 and Section 8.

According to the Government’s own figures, tenants end tenancies in 90% of cases. Of the tenancies ended by the landlord, the majority are terminated due to tenant rent arrears.

Richard Lambert, the CEO of the NLA, says: “Landlords currently have little choice but to use Section 21. They have no confidence in the ability or the capacity of the courts to deal with possession claims quickly and surely, regardless of the strength of the landlord’s case. 

“England’s model of tenancy was always intended to operate in a sector where Section 21 exists. This change makes the fixed-term meaningless, and so creates a new system of indefinite tenancies by the back door.”

He insists: “The onus is on the Government to get this right. It’s entirely dependent on the Government’s ability to re-balance the system through Section 8 and court process, so that it works for landlords and tenants alike. The Government should look to Scotland, where they reformed the court system before thinking about changing how tenancies work. If the Government introduces yet another piece of badly thought out legislation, we guarantee there will be chaos.” 

The Managing Director of online letting agent MakeUrMove, Alexandra Morris, agrees: “The decision made by the Government to scrap Section 21 evictions is short-sighted and farcical. Tarring a Section 21 with the no fault eviction name is incorrect, as many landlords who heavily rely on the income from their properties use this, as well as the Section 8 notice, to evict tenants for non-payment of rent, ant-social behaviour, or the need to sell or refurbish. Section 8 evictions are time-consuming and a lot of money can be lost in this process.

“I believe that more research needs to be done on the wider issues in the industry before abolishing Section 21. Abolishing it before addressing these could leave both tenants and landlords in a worse position. Instead of tinkering with issues, the Government needs to fix them.”