Lettings a bright future
The family farm has evolved and as a result within our 800 acres we have two let cottages, three barn conversions and a farm house which are all currently let. How will legislation surrounding let properties affect me and would I be better off selling?
Charlotte George, head of lettings at Balfours replies: For those focusing on the long term gains, investments as a landlord are still a good business. Nevertheless with a record number of government consultations relating to the private rented sector, 2017 was another challenging year for landlords.
April 2017 marked the beginning of mortgage interest tax relief being slashed; gradually from 100 per cent to zero by April 2020. So, for the 2017-18 tax year, landlords can still claim 75 per cent of the finance costs at the higher rate, with the remaining 25 per cent being deducted at the basic rate. From 2018-19 this will fall to 50 per cent, in 2019-20 25 per cent will be deducted, with the other 75 per cent receiving basic-rate tax reductions.
April 2018 sees the Minimum Energy Efficiency Standards (MEES) come into force with any property rented out in the private rented sector requiring a minimum energy performance rating of E on an Energy Performance Certificate (EPC). This will apply to all new lets and renewals of tenancies with effect from April 1, 2018 and for all existing tenancies on April 1, 2020. There are exemptions, also the EPC system, through which all ratings are made, has recently been updated acknowledging that solid walls are more efficient than originally credited.
MEES are arguably one of the most significant pieces of legislation to affect our existing building stock in a generation. I would urge landlords to take advantage of void periods and lease breaks to ensure you are compliant.
Currently, tenants usually foot the bill for tenancy agreements, referencing and credit checks. However the government is planning to ban tenants letting fees and released a Draft Tenants Fees Bill in November 2017. This revealed details that the charging of fees to tenants will be an offence, also to make it compulsory for agents to be a member of a client money protection scheme.
Under the proposed legislation tenants can be asked to pay only their rent and a deposit; this will also limit holding deposits to no more than one week’s rent, and security deposits at no more than the equivalent of six weeks’ rent. This is likely to come into force next year. Landlords dealing directly with tenants will also be in the grip of this bill.
Finally, the government is currently considering whether all letting and managing agents in England must be qualified and regulated to practice and all landlords’ members of a redress scheme to help protect tenants from unfair practices; Wales already has similar legislation in place. We are also hearing suggestions that incentives for landlords who offer longer tenancies may be introduced sometime next yearl.
For landowners who own rural properties, it is not just a question of rental income versus cashing in an asset. As landlord you do retain control and an allegiance from your tenant. Once a property is sold there is no such control and you may find yourself on the wrong end of complaints from tractors passing to smells and noises that are part and parcel of your farming enterprise.