5 New issues affecting landlords 2020

Instead of allowing landlords some relief from constant regulatory updates, 2019 has been a year of yet more change for the buy-to-let sector.

We’ve seen the introduction of more regulation, such as the Tenant Fees Act, alongside unfulfilled promises including new housing courts.

Tenant Fees Act

Tenant Fees Act was a major piece of legislation that affected new or renewed tenancy agreements signed on or after 1 June 2019.

It removed the charges letting agents could charge tenants and placed a cap on tenant deposits.

Tenants will need to provide five weeks’ rent as a tenancy deposit. This increases to six weeks for properties whose rent exceeds £50,000 per year.

The effect is that tenants now only have to pay their rent and deposit, as most other types of fees are banned. However, charging a fee to replace lost keys or for late rent is still allowed.

With landlords covering the costs of the fees previously paid by tenants, some have increased their rents to try and regain some of their losses.

Section 21 – no-fault evictions

The government has said it wants to ban landlords from being able to evict tenants at short notice with no reason.

Under this so-called Section 21 ban, landlords will have to give a concrete and evidenced reason already specified in law for bringing tenancies to an end.

This would include landlords being able to regain their property if they want to sell it or move into it.

Section 21 is still officially under consultation, but is due to come into effect following the 2019 general election as both the Labour Party and the government say they support the move.

Dedicated housing courts

Alongside the ban on evicting tenants at short notice, the government promised housing courts.

The goal was to reassure landlords concerned about not being able to repossess their property where there’s an issue with the tenant.

The current eviction process can take nearly a year in some cases, as landlords need to follow strict laws. These include issuing notices to request possession of the property and going to court to obtain an order for possession.

There’s still no news on housing courts, but like most decisions in the housing sector, it has been delayed by a host of wider issues, including Brexit and the general election.

Longer tenancy agreements

Similarly on longer tenancies, no decision has been made on whether to introduce minimum three-year tenancy agreements.

The buy-to-let market can expect further changes ahead once the election has taken place and Brexit has been resolved.

What are your hopes for the buy-to-let sector for the year ahead? Let us know in the comments below.

New EU Anti-Money Laundering (AML) amendments

Key points to be aware of:

Lettings agents working in the commercial or residential sector with a property worth over 10,000€ (or currency equivalent) per calendar month are now be subject to the ML Regulations 2017. These legal obligations relate to landlords, tenants, guarantors and authorised occupiers. 

Effective Customer Due Diligence (CDD) must be undertaken on an individual client/customer. 

For tenants, this consists of establishing their identity, proof of address and source of funds. 

For landlords, confirmation of the ownership of the property through the land registry title and identification of the landlord and proof of address needs to be acquired. In the case of a property being owned by a company or a trust, the ultimate beneficial owner of the property will need to be established.  

The CDD for both the landlord and the tenant needs to determine whether either party is a Politically Exposed Person (PEP) or subject to financial sanctions. 

CDD must be carried out at the start of a business relationship. For lettings agents, this is formed with a tenant, authorised occupier, guarantor or other relevant party at the point in which the tenants offer is accepted, and before the tenancy agreement is agreed.

Firms should not be in receipt of a tenancy or holding deposit from a tenant until satisfactory CDD has been undertaken.

On a firm-wide basis, every letting agency falling under the ML regulations must undertake an AML Risk Assessment in line with regulation 18, comprehensive written AML Policies & Procedures in line with Regulation 19 and all staff must undertake AML training in respect of regulation 24.

Those working in lettings are now subject to HMRC inspections to ensure that they are adhering to the latest legislation. 

Rules governing sub-agency will fall in line with sales. A sub-agent or property finder is required to ascertain the CDD undertaken by the main agent. For lettings agents, this is the landlord and ultimate beneficial owner of the property. The main agent is now required to obtain CDD on the tenant, guarantor or authorised occupier.