The government recently introduced a raft of changes to rental rules – and it’s essential for landlords to keep familiar with these. Below we discuss some of the major changes – and recommend 1 that any, would-be and existing, landlords seek independent advice to stay fully compliant.
Energy performance and gas safety certificates
With the current drive to bring down energy waste and carbon footprints, all new tenancies or renewed contracts must now carry the minimum of an 'E' rating on their Energy Performance Certificate (EPC).
From 1 April 2020 this requirement is being rolled out across most domestic tenancies, with penalties of up to £5,000 2 for non-compliance, although a warning is sent before any fine is issued.
EPC assessors need to be able to see evidence of energy-saving measures. If, for instance, walls have been insulated and skimmed over, this can't be counted, as the assessor won't be able to see the insulation.
It's also now mandatory to serve a gas safety certificate before a new tenancy starts. Be aware that if you don't do this, it could affect your ability to serve notice to end the tenancy.
Mortgage interest tax relief
Landlords used to be able to deduct mortgage interest and other allowable costs from their rental income but the government is now phasing this out.
The tax relief was reduced to 75% in 2017 and then to 50% for the tax year 2018/19. And, from April 2020, all rental income will be taxable – with landlords receiving a 20% tax credit for their mortgage interest.
Tenant Fees Act
The Tenant Fees Act came into force in June 2019. It was introduced to make fees and deposits clear so tenants are fully informed when taking on a new lease in England.
Essentially, all payments are prohibited unless explicitly allowed under the Act. Fees for services such as tenant references, credit checks and inventory aren't permitted.
Now, landlords and agents can only recover reasonable costs from tenants for lost keys or other security devices – and must provide evidence of these costs before imposing charges. They may also charge a default fee in relation to late rent.
Another development is that tenants who have been charged unfairly are entitled to claim their money back.
Please see the government's comprehensive landlords guidance for more information.
Also under the Act, tenancy deposits, which renters are routinely asked to pay before moving in, are now capped. This gives people the legal assurance that, where their total annual rent is less than £50,000, they won't be expected to pay more than the equivalent of five weeks' rent as a deposit. If the annual rent is equal to, or greater than, £50,000 the equivalent of up to six weeks' rent as a deposit is allowed.
At the end of a tenancy, the landlord must pay back a deposit within 10 days after both parties agree on the returnable amount.
Keep tenants informed
Any deposit must be protected by placing it in a government-backed tenancy deposit scheme. On receipt of a deposit, landlords have 30 days to tell a tenant:
- The address of the rented property
- How much deposit was paid
- How the deposit is protected
- The name and contact details of the tenancy deposit protection (TDP) scheme, which is authorised by the government, and its dispute resolution service
- Your (the landlords) or the letting agency's name and contact details
- The name and contact details of any third party who has paid the deposit
- Reasons why you (the landlord) might keep some or all of the deposit
- How the tenant can apply to get the deposit back
- What the tenant should do if they can't get hold of you at the end of the tenancy
- What the tenant can do if there's a dispute over the deposit
To minimise losses if things go wrong, it may be worth considering obtaining Landlords Insurance, which is available from companies such as Aviva. Such policies generally cover various elements of risk – including a default by the tenant.
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