2016 Regulation Round Up

2016 was a busy year for the BTL industry - with many ups and downs, right up until the very last minute! Read our guide to the changes throughout the year to make sure you're ticking all the boxes with the latest lettings legislation.

February 1st – Right to rent

The year kicked off with the controversial introduction of the Right to Rent checks – a new legislation introduced to help identify individuals who do not have a legal right to reside in the UK.

Right to Rent has changed the way private lettings operate within England, and many landlords and tenants found the changes to the system confusing, however with guidance and support (and a few tweaks to the way the system operates as the year has progressed) it has quickly become second nature to the standard letting checks, with most tenants happy to comply.

Failure to carry out Right to Rent checks properly could land a landlord in hot water. Landlords could be fined up to £3,000 for each adult found to be renting a property to who aren’t legally allowed to live in the UK, and cannot prove that their 'right to rent' had been checked.

As the year has progressed, the Right to Rent legislation has developed, and it is likely to continue evolving. For more information on current Right to Rent legislation, read our guide hereor contact the team who can arrange your checks for you.

Buy to let mortgage rules for consumer landlords – March

With property prices creeping up as the year moved on, the last thing investors wanted to hear was that mortgage lending was going to get stricter. However, in march 2016, tougher sanctions were imposed on BTL borrowers in line with European Mortgage Credit Directive, enforcing stricter affordability rules on buyers purchasing properties to rent. It is estimated that 11% of borrowing will be impacted by the changes.

The rulings categories borrowers as either consumer landlords, or a commercial landlord.
Consumer landlords must prove they can afford to pay the mortgage on a rental home if the property has no tenant, and under the new regulations, will have similar rights to home owners, including access to the Financial Ombudsman and more reasonable treatment if they fall into arrears.

By contrast, anyone who owns several properties would be considered a commercial landlord, or ‘buy to let investor.’ They wouldn’t have any consumer rights as the transaction would be for business purposes.

Both consumer and commercial borrowers must undergo a series of ‘stress tests’, similar to those undertaken by someone applying for a residential mortgage, in order to prove affordability.

Consumer landlords must show they can cover mortgage costs from income or savings, while commercial landlords continue with the rent cover test.

This test demands a multiple of the rent covers the mortgage payment at the lender’s standard variable interest rate – typically 125% of the rent at a 5% interest rate.

Minimum EPC ratings introduced – April 1

Despite the weather starting to warm up, there was a definite chill in the air when a further raft of legislation was announced in April.

The shock statement saw the introduction of an environmental regulation, designed to prevent poorly insulated properties coming to market, resulting in costly utility bills and high carbon emissions.

Currently, the legislation states that tenants living in F and G rated homes are legally able to request improvements to the energy efficiency for their property, such as more insulation. Their landlord is then legally bound to provide this, and carry out enough improvements to up the property’s rating to an E.

The regulations highlights, which fully come into force in April 2018, will force landlords to take stock of the energy efficiency of their rental properties, and seek to upgrade their EPC rating in order to comply with the legislation. By the time the regulations are fully rolled out, it will be illegal to rent a property below the E rating, which will impact 4.2 million homes in the UK.

New Section 8 and Section 13 Notices – 6 April

It is vitally important if you require legal documents that you are using the correct edition, and in April 2016 updates were made to two regularly used notices.

The Section 8 notice, which is used when a landlord is seeking possession when a tenant is two months or more in arrears, was updated in April. It is important to note that the change is only relevant for use in England, the previous version is still in use in Wales.

The Section 13 notice, which can be served if you are planning to make an increase to the rent of an assured shorthold tenancy was also changed in April, also only for England.

If you require any further information about any of these documents, contact a member of the team here.

June 24th – Vote for Brexit

The country was on tenterhooks on June 24th as we all sat glued to the screen waiting for a result that would change the future of the nation forever.

Once the result was announced, the buzz started – and there was plenty of talk around how a Brexit would impact the property market.

However, once over the initial shock, it seems that it might not be as bad as originally feared. Subsequent research by the National Landlords Association (NLA) has revealed that whilst around 35% of landlords are concerned that leaving the EU will have a negative effect on tenant demand in their area, 39% believe that it will have no impact. Just over 20% are still unsure, and a positive 5% think the move will be a good thing.




East Midlands14%35%
Yorks & Humber12%24%
North West8%34%
East England7%34%
South West6%33%
South East6%38%
North East5%22%
West Midlands4%28%
London Outer3%46%
London Centre2%55%

*Results from the NLA Quarterly Landlord Panel – Q2 2016 (777 respondents)

Stamp duty to be scrapped in Wales – September

The spotlight has been on Wales this year. As well as Welsh landlords having to organise their licensing requirements in order to comply with Rent Smart Wales, there was exciting developments with regards to property taxation, with the halls of Westminster and the Welsh Assembly abuzz in September with talk of replacing stamp duty in Wales with a new land transaction tax.

Landlords will pay the tax, the rate of which will be announced closer to the start date in April 2018, upon buying, leasing or acquiring land or property over a certain value.

A similar principle operates successfully in Scotland, and the move is being considered the first step towards moving power from Westminster to the Welsh Assembly in Cardiff.

New laws to tackle HMO overcrowding - 19 October

As one of his first roles in his new job, Housing minister Gavin Barwell jumped straight in to the contentious issue of HMO overcrowding, announcing a new legislation in October.

He decreed that councils in England would receive new powers to prevent landlords squeezing too many tenants into HMO’s, and imposing a minimum room size of 6.52
square metres in a shared house where five or more people live.

Other measures included:

  • Extending mandatory HMO licensing to all homes shared by five or more people making up at least two households
  • Making flats above shops and businesses part of the mandatory licensing regime
  • Insisting HMO landlords provide facilities to store
    and dispose of rubbish
  • Carrying out criminal record and ‘fit and proper’ person checks on HMO landlords and managers more diligently

With around 60,000 HMO’s currently licensed in the UK, the new guidelines are expected to increase the amount to around 170,000 when the changes come into effect. Mandatory HMO
licensing currently encompasses around 60,000 homes in England. This number is expected to swell by at least 170,000 more shared homes when the changes come into effect.

Penalties for any landlords who fail to comply with the new standards could include a prison
sentence and fines of up to £30,000.

New housing benefit cap – 7th November

November saw news of a benefit cap for over 100,000 household – bad news not only for the
tenants, but also for thousands of landlords reliant on their rental income.

Previously set at £26,000 a year it is being lowered to £23,000 a year in London, and
£20,000 outside the capital. Some households lost as much as £115 a week.

HSE consults on improvements to Gas Safety Checks – November 8

Despite many of the changes in 2016 set to cost landlord’s money, one announcement in
November looks likely to be beneficial!

The Health and Safety Executive published a consultation on changes to the Gas Safety
(Installation and Use) regulations 1988, which promotes more flexibility as to when a gas safety check may be carried out.

The consultation document states that the current regulations are unfair for landlords who carry out their gas safety checks early in order to ensure that their checks are completed well within the strict 12-month time frame. The current rules state that: landlords are required to carry out checks on their properties “at intervals of no more than 12 months since it was last checked for safety”.

According to research by CORGI Technical Services, many landlords start the process for
gaining access to properties at around 10.5 months after the last check.

However, since in about 75% of cases landlords do gain access promptly, this leads to a shortening of the safety check cycle year-on-year. If landlords carry out a gas safety check every 10.5 months this results in 10 annual gas safety checks being completed over a nine-year period, instead of the nine that is required.

The HSE are proposing that the regulations are amending that will allow landlords’ gas safety checks to be carried out in a window of between 10 and 12 months after the previous check, but to be treated as if they were carried out on the last day of that 12 months’ validity, thereby preserving the existing expiry date of the safety check record.

There is a further proposal to clarify that only “gas safety defects need recording at the time of the check.

The consultation estimates savings for both social and private landlords in the region of £22
million per year. You can view the consultationhere and replies must be made by 27th January 2017.

Rent Smart Wales introduced – November 23rd

November saw the deadline for Welsh landlords to have signed up for Rent Smart Wales, which has been on the horizon since November 2015. The scheme, which is designed to drive up the quality of rented accommodation in Wales, represented a major change for the Welsh private rental sector and requires all landlords and letting agents to register their
properties and undergo training to obtain a licence if they wish to self-manage their rental investment.

It’s now a criminal offence to continue to let a property in Wales without the correct licenses after this date.

Tenant fee abolishment announced - November 23rd

In a bold move, the autumn statement announced that letting agents will no longer be allowed to charge any fees to tenants. In a statement aimed at making life better for the ‘Just-About-Managing’, this move designed to help enable tenants to save, brought England, Wales and Northern Ireland in line with Scotland, where tenant fees were banned in 2012.

The Chancellor stated that ‘as landlords appoint letting agents, landlords should pay the fees’, and hopes to bring in the ban ‘as soon as possible,’ however nothing will be introduced until a full consultation. Letting agents are already legally obliged to publicise their fees, however Chancellor Phillip Hammond noted that ‘we’ve (the Government) seen these fees spiral despite attempts to regulate them.’ Despite this, the move is shock, as the government has previously been ‘anti-ban’, with housing minister Gavin Barwell calling it a ‘bad idea’, and Theresa May voting against it.

It is still too early to predict the Government’s next steps on this bold statement, however it is sure to be a hot topic for 2017.

Criminal Offence not to carry out Right to Rent checks – December 1

In order to finish the year with a bang, further changes have been made to the Right to Rent legislation. From the first of December, it became a criminal offence for landlords to knowingly let property to people who have no right to be in the UK. Landlords found to be
doing so could face a prison sentence.

Previously, the punishment for failing to carry out Right to Rent checks properly was a fine of up to £3,000 per adult found to be renting a property. However, with the changes to the legislation, if the landlord cannot prove that a tenant’s Right to Rent has been checked they could face much stricter penalties.

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