Legal Update – April 2017

The legal landscape for landlords and letting agents is ever-changing and here is a summary of what we have encountered in the last month:

Landlords lose mortgage interest tax relief – Effective April 5th 2017, landlords lost the right to claim full tax relief for mortgage interest payments.

Despite a year of protests and a High Court legal challenge, the government has stood firm on the proposals made by former Chancellor George Osborne and has resolutely refused to even water them down.

The Government estimates around 440,000 landlords will pay more tax because of the change.

HMRC plans new tax burden for landlords with licences – Landlords face a new regulation threat as anyone letting a property with a local authority licence may have to prove they file tax returns before moving in a tenant.

HM Revenue and Customs (HMRC) is moving forward with efforts to tackle the black economy with a new compliance tool called ‘conditionality’.

The idea is any landlord who must apply for a house in multiple occupation licence or register with a landlord licensing scheme must show they are also tax registered with HMRC before the licence is granted.

Part 3 of the Housing and Planning Act – Expected to come into force in October 2017, Section 216 of the Act will permit private landlords in England of properties let under an Assured Shorthold Tenancy to seek possession without a court order where the tenant has abandoned the premises.

Part 5 of the Housing and Planning Act – Will allow for regulations to be made requiring Electrical Safety testing by landlords.

At present under the Landlord and Tenant Act 1985 landlords only need to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity. Under the new provisions in Part 5 of the Act this will change.

The Electrical Safety Standards that the Secretary of State may impose are in relation to:

the installation in the premises or the supply of electricity; or
electrical fixtures, fittings or appliances provided by the landlord.

The landlord’s obligations are expected to include duties to ensure that a suitably qualified electrician has checked that the standards have been met, that they obtain a certificate confirming this with a copy provided to the tenant or any other relevant person.

Homelessness Reduction Bill – Expected to come into force in early 2018 this provides real hope that one of the most frustrating issues for both landlords and tenants, that of local authorities insisting on eviction before offering alternative housing, will be eliminated by this Bill.

As the private rented sector adapts to new pressures hopefully the Homelessness Reduction Bill will help landlords to have confidence in their investment and help tenants to feel more secure in their homes.

Banning letting agent fees paid by tenants – The Government has published its consultation paper on banning letting agent fees paid by tenants. The consultation is expected to last for 8 weeks until the 2 June 2017. My personal take on this is the ban is going to happen (probably not until late 2018) and that in order to compensate for the loss of income many agents will pass on some or all of the fees to landlords and this will ultimately put upward pressure on rents. For those agents who were making lots of money from tenant fees they will require a paradigm shift if they wish to flourish.

Compulsory money protection on the way for letting agents – Housing minister Gavin Barwell has confirmed that the government is ready to consult on compulsory money protection in the letting industry after years of misery for renters and landlords who have seen a succession of rogue agents run off with their money.

Tobacco tax evasion – In February, HM Revenue and Customs published a consultation paper on further measures to help tackle tobacco duty evasion and other excise duty evasion.

Part 6 of the consultation paper discusses imposing a statutory duty of care on landlords where a tobacco offence has been committed. A tobacco offence includes the importation and sale of illicit tobacco, which is tobacco that has been imported without the proper declarations being made or duty paid.

With so many changes in the industry it is more important than ever that landlords use a letting specialist to let and manage their property or have some means, such as membership of a trade association, to keep up-to-date with the changes.

This article is provided for information only and does not constitute legal advice.

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