Category Archives: Thrapston Branch

Election Manifesto – The Impact on Private Rental Sector

 

TIME TO MAKE A CHOICE – MAKE IT COUNT

With the General Election just a week away, you may be wondering exactly what each of the three main political parties are proposing for the Private Rental Sector and how it might affect you if they were to win. To help you gain some clarity, which may potentially help you choose where to cast your vote, we’ve looked at what each of their manifestos have to say about their plans for the rental market.

Whilst many of their intentions are noble and could greatly benefit many tenants, unfortunately none of the parties appear to be making plans that will please many landlords.

CONSERVATIVE

In its manifesto entitled Forward Together,’ the Conservative party confirms that it will continue with the ban on letting agent fees but is otherwise light on detail and content with regards the Private Rental Sector, saying only that it intends to:-

Improve protections for those who rent, including by looking at how we increase security for good tenants and encourage landlords to offer longer tenancies as standard.

Compared to Labour and the Liberal Democrats, the Conservatives are offering fewer policy pledges aimed at the PRS but in other areas of its manifesto, they propose to:-

  • Reform and modernise the home-buying process so it is more efficient and less costly.
  • Crack down on unfair practices in leasehold, such as escalating ground rents.
  • Halve rough sleeping over the course of the parliament and eliminate it

altogether by 2027

  • Set up a new homelessness reduction taskforce on prevention and affordable housing
  • Pilot a Housing First approach to tackle rough sleeping

The party recognises that not enough homes have been built in this country for generations and that both buying and renting has become increasingly unaffordable. As a result, they plan to fix the dysfunctional housing market so that housing is more affordable and people have the security they need to plan for the future. The key part of their plan is to build enough homes to meet demand as they hope this will slow the rise in house prices and bring the cost of renting down, so in the long-term it could mean rents will stabilise or even reduce.

To achieve this, the Conservatives say they will:

  • Meet their 2015 commitment to deliver a million homes by the end of 2020 and deliver half a million more by end of 2022
  • Free up more land for new homes in the right places and speed up the process
  • Build better houses to match the quality of those inherited from previous generations
  • Support high-quality, high-density housing like mansion blocks, mews houses and terraced streets
  • Build 160,000 houses on government land
  • Support specialist housing where it is needed, like multi-generational homes and housing for older people
  • Enter into new Council Housing Deals with ambitious, pro-development, local authorities to help them build more social housing
  • Continue £2.5bn flood defence programme to protect 300,000 existing homes by 2021

The Conservatives say these policies will take time, but they will in the meantime continue to support those struggling to buy or rent a home, including those living in a home owned by a housing association.

LABOUR

With a manifesto entitled For The Many Not The Few,’ Labour says it will end insecurity for private renters by introducing controls on rent rises, more secure tenancies, landlord licensing and new consumer rights for renters.

In line with The Conservatives and the Liberal Democrats, Labour will also legislate to ban letting agency fees for tenants and further proposes to:-

  • Make three-year tenancies the norm with an inflation cap on rent rises
  • Give the Mayor of London power to offer renters in London additional security
  • Empower tenants to call time on bad landlords by giving renters new consumer rights
  • Introduce new legal minimal standards to ensure properties are fit for human habitation
  • Empower tenants to take action if their rented homes are sub-standard
  • Reverse the decision to abolish housing benefit for 18-21-year-olds, which they say risks putting even more vulnerable young people on our streets

Labour says soaring rents are a real problem, leading to more families living in temporary accommodation and more people sleeping rough. The party says homelessness has to end, full stop, and plans to make available 4000 additional homes reserved for people with a history of sleeping rough.

Labour’s pledges also include:

  • Creating a new Department for Housing to tackle the UK housing crisis
  • Building at least 100,000 council homes a year as part of a move to build over a million new homes

LIBERAL DEMOCRATS

In its Change Britain’s Future manifesto, The Liberal Democrats says it wants to keep our country green and support families and communities. It plans to do this by setting new energy-efficiency targets, including a long-term ambition for every home in England to reach at least an energy rating of Band C by 2035 with priority given to fuel-poor households. It also aims to reach a housebuilding target of 300,000 homes a year by 2022, including half a million affordable and energy-efficient homes.

Like Labour, The Lib Dems back the Conservatives proposed ban on letting agent fees, capping upfront deposits and increasing minimum standards in rented homes. It is also calling for additional controls on the Private Rental Sector (PRS), claiming the housing crisis in Britain has become an emergency.

On the subject of the PRS, the party proposes wider measures to help tenants, including plans to:

  • Help people who cannot afford a deposit by introducing a new Rent to Own model where rent payments give tenants an increasing stake in the property, owning it outright after 30 years
  • Promote longer tenancies of three years or more with an inflation-linked annual rent increase built in, to give tenants security and limit rent hikes
  • Improve protections against rogue landlords through mandatory licensing and allow access for tenants to the database of rogue landlords and property agents
  • Increase Local Housing Allowance (LHA) in line with average rents in an area, ensuring that families have enough to pay their housing costs no matter where they live
  • Give tenants first refusal to buy the home they are renting from a landlord who decides to sell during the tenancy at the market rate according to an independent valuation
  • Help young people into the rental market by establishing a new Help to Rent scheme to provide government-backed tenancy deposit loans for all first-time renters under 30
  • Allow local authorities to end the right to buy if they choose

As well as doubling the current level of housebuilding, the party pledges to:-

  • Reach a housebuilding target of 300,000 homes a year through a Government programme to build homes for both sale and rent
  • Ensure that half a million affordable, energy-efficient homes are built by the end of parliament

The party proposes to end the scandal of rough sleeping by increasing support for homelessness prevention and adequately funding age-appropriate emergency accommodation and supported housing.

The General Election

Regardless of which political party is elected on June 8th, it seems the private rental sector can expect to see some significant changes in legislation. However, whatever may come our way, we will always be looking for new ways to support you to ensure both your investment and your rental income is protected now and in the future.

Government Could Cap Deposits as Well as Ban Tenant Fees

GOVERNMENT COULD CAP DEPOSITS AS WELL AS BAN TENANT FEES

With the Government finally announcing its long-awaited consultation on the ban on tenant fees and then deciding to scrap its proposed workshops to consult with the sector as soon as news of a General Election was announced, the industry is understandably all at sixes and sevens at the moment.

The Association of Residential Letting Agents (ARLA) is already calling on the Government to either extend the consultation period for the proposed ban in England – or scrap it completely until after the election. Chief Executive David Cox is also calling for the cancelled agents’ workshops to be reinstated. The current consultation period is due to end on June 2nd, six days before the election.

Whatever the outcome, the Government’s consultation paper makes for interesting reading as it suggests additional measures, as well as the ban on fees, might be implemented. This includes the proposed introduction of a cap on deposits or the way they are paid, how the new legislation will be implemented and some tough penalties for those who flout the rules.

Whilst ARLA and other industry bodies campaign voraciously against the overall ban, we pose the question: Would these proposed new measures be such a bad thing for the industry? Or will small agents drown in government interference, as is being suggested.

 The Devil is in The Detail

Although most agents have accepted that the proposed ban on fees, which is likely to be in place as early as next year, is a done deal, the debate shows no sign of letting up. However, there are a few finer details within the consultation paper that aren’t currently making the headlines but are worthy of a closer look.

For instance, management service charges that arise because of the direct action of the tenant or that are carried out at the request of a tenant are considered exempt, and therefore chargeable. It is anticipated that these charges will be limited to services such as arranging replacement keys, repairs carried out as a result of deliberate damage or breach of tenancy and for late payment of rent.

It also suggests that agents might be able to charge for premium services, for example when arranging a rental property for someone currently living in another country that is relocating to the UK. It is anticipated that these non-standard chargeable services will probably be more applicable to the top end of the market.

In addition, the Government doesn’t raise any objection to tenants choosing to undertake their own reference checks or obtaining a tenant passport, but it does stipulate that no agent or landlord can insist on them doing so, either via the agent or a third party. Once again, the Government has stated quite clearly that it proposes to ban any letting fees charged to tenants by landlords and any other third parties to ensure that letting agent fees are not paid by tenants through any other route. Tenants should only be required to pay their rent and a refundable deposit, which means no agent will be able to charge fees relative to the granting, renewing or continuation of any tenancy.

Our research suggests that in order to protect their landlords as much as ever, agents will continue to carry out the same vital business practices as before, even though tenants can no longer be charged for these services. As we haven’t yet come across a single agent who plans to stop carrying out reference checks on tenants it will be interesting to see how the process evolves over the next year or so. As always, you can rely on us to keep coming up with innovative solutions to help you along the way, so watch this space!

Capping Deposits

In its white paper the Government says it recognises that a deposit (usually equivalent to up two month’s rent) is a significant amount of money for a tenant to find at the outset of every new tenancy and is keen to explore ways of minimising this financial burden. Due to the fact that deposit levels have been increasing, making it harder for people to move home, they want to examine the option of capping the amount that can be requested.

They are also considering wider possibilities to address the problem, such as enabling tenants to pay their deposits in instalments over the first few months of their tenancy or using a line of credit approach where an agreed deposit amount is blocked on a tenant’s credit card.

Here is what Vicky Spratt, Deputy Editor at online magazine The Debrief who led a petition in April 2016 demanding letting agent fees to tenants be banned in England and Wales, had to say on the subject:

“For people who rent, instability is a key issue. If you move often, because a landlord increases rent, your contract runs out, or your housemates change – you may find yourself regularly paying out for deposits. They vary from agent to agent and can be several months’ rent. This can be particularly challenging when the deposit from your previous property is not released before you have to make a down payment on the next. Figures from Shelter show that tenants are often having to get into debt to cover upfront moving costs. A cap on deposits would standardise them and allow tenants to plan and save, they would know what to expect when moving.”

Whilst the Government has suggested that holding deposits might also need to be capped, it plans to allow agents to continue to collect them in order to ensure there is equal commitment on the tenant’s part when reserving a property. It also agrees that deposits should be forfeited if the applicant fails to uphold their side of the agreement by providing false information or withdrawing from the tenancy.

We asked Nick Griffiths, Director of Lettings and Sales at Manners Residential, what impact this new ruling is likely to have on the independent Woking agency and this was his response:

“I am fully supportive of any new regulations that will improve the Private Rented Sector for tenants and landlords, but the proposal to cap or ban deposits is going a step too far in my opinion. The majority of deposits are 1.5 times the monthly rent, and we rarely come across a tenant who has been unwilling or unable to pay this, and when we do we try to find a workable solution. Deposits are held to protect Landlords against damage and non-payment of rent, and help ensure that tenants take care of the property they rent. Tenants do get this money back at the end of the tenancy provided they have looked after the property and have kept up to date with their rental payments and other conditions of the tenancy agreement. Should the Government implement a ban, or cap deposits at a lower level than 1.5 times the monthly rent, some tenants may feel less inclined to look after the property. Let’s not forget that the deposit money is there to protect the landlord against damage and unpaid rent at the end of the tenancy, and reducing the size of the deposit could lead to rental increases.”

Nick, who has a wealth of estate agency experience, as well as a fantastic knowledge of the Woking and surrounding areas added:

“We always look towards minimising Landlords exposure to any loss or liability by securing a deposit on all tenancies as well as utilising the experience of The Lettings Hub for comprehensive referencing which helps us minimise risks to landlords by carrying out thorough checks on all our prospective tenants.”

So How Does The Government Plan to Implement The Ban?

We know that the consultation paper invites views and comments from tenants, landlords, letting agents and other interested parties on how the ban should be implemented and enforced and that an impact assessment will be completed following the consultation, but in its paper it already proposes the answer – that the ban should be enforced by local authorities, primarily Trading Standards.

In its vision for a ban that is clear and simple for all involved, it also proposes that the empowerment and education of tenants regarding their rights in the lettings process will be a useful tool in enforcing the ban; thereby reducing the burden on local authorities. Are we to take it then that the tenant is expected to proactively police agents?

Enforcement

Trading Standards may require additional support to ensure that enforcement of the ban is effective and the Government plans to seek the view of the sector on the following:-

  • The introduction of a lead enforcement authority
  • Increased data sharing to assist enforcement
  • Further regulation of the sector

Consideration will be given as to whether to make noncompliance with the ban on fees a civil or criminal offence. A civic penalty is incurred at the moment through non-compliance of the redress scheme, resulting in maximum fines of £5,000 which could be adopted but the Government isn’t ruling out tougher penalties, such as criminal prosecution.

Under the Housing and Planning Act 2016, the Government is introducing civil penalties of up to £30,000 for breach of banning order and a similar level of fine for agents who fail to comply with the ban on fees would arguably act as a considerable deterrent. Non-compliant agents could be subject to a fine as well as being banned from operating and placed on the database of rogue agents.

To read the Government’s full consultation paper, click here:

https://tinyurl.com/ktsco4a

To respond to the open consultation by completing an online survey, click here:

https://www.surveymonkey.co.uk/r/dclglet

Energy Performance Regulations – Be Ready For The Change

Prepare early for EPC Regulations changes

From April 2018, new laws will make it an offence to let out properties with the worst energy efficiency ratings. The new legislation, brought about by the Department for Energy & Climate Change seeks to ensure that all tenants have the right to live in an energy efficient home. It will also target the reduction of CO2 emissions for all buildings to around zero by 2050.

New minimum energy efficiency standards for England and Wales (MEES), passed in 2015, applies to both domestic and non-domestic sides of the Private Rental Sector (PRS); meaning that letting out a commercial property or a house to a tenant with an Energy Performance Certificate (EPC) rating of below E (so F & G), will be unlawful. Commercial property is being based on CO2 emissions whereas the domestic rating is based on fuel costs.

These regulations will make it unlawful for you to grant a new lease if your property has an F or G EPC rating, with the rules phased in over the next five years. Phase 1, which commences on 1st April 2018, will mean any property subject to a new tenancy (either to a new tenant or an existing tenant) will need to comply with the minimum E rating. By April 2020, Phase 2 will have kicked in, which means the regulations will then apply to all privately rented homes that require an EPC.

If a property does not meet the minimum standard, then it cannot be let or even marketed, unless it has been granted an exemption. You could face financial penalties of £5,000 for non-compliance.

With the threat of this new legislation just over a year away, nearly 17%* of all homes currently let out may suddenly find they can no longer legally be rented; unless the property is registered as an exemption (more about this later). This data is backed up by an English Housing Survey report, which claims 1.8 million dwellings had a rating of F or G back in 2011.** The key findings of this report also indicated that the vast majority of these homes were in the PRS, that almost half were built before 1919 and that improving the energy efficiency of them would not always be straightforward or inexpensive. The cost of getting so many failing properties up to an acceptable standard in such a short space of time is likely to be astronomical.

What properties do not require an EPC?

Most residential properties will require an EPC. The exemptions are:

  • Listed buildings – (seek advice from your local authority if any work would alter the building’s character)
  • Churches and other places of worship
  • Holiday accommodation (rented out for less than 4 months a year)
  • Temporary buildings (used for less than two years)
  • Buildings that are due to be demolished
  • Standalone buildings with a floor area of less than 50 metres square that aren’t used to provide living accommodation for a single household
  • Industrial sites, workshops and non-residential agricultural buildings that don’t use a lot of energy
  • Residential buildings (intended to be used less than 4 months a year)

The importance of planning early

Demand for loft insulation services and other improvements are likely to increase as we get closer to the deadline. Thinking ahead and enlisting the services of local tradesmen now, could save you lengthy void periods later on; especially if rental properties start to become categorised as unlawful.

To avoid a potential bottleneck, we suggest you shop around now to see what resources and help are available to help with upgrading properties to suitable EPC levels. It may also be worth talking to your tenants to see if they are eligible for any Energy Company Obligation scheme or renovation grants that will help improve their living conditions.

What will the cost be?

Getting to grips with this new legislation early on is essential if you are to comply effectively. For instance, contrary to popular belief, you will not be expected to improve your property if it means incurring upfront costs. This is because savings resulting from the work carried out should end up repaying their costs over the expected lifetime of the works. In certain circumstances, where this is not possible, you may be entitled to apply for an exemption on your property.

What is an exemption and can I apply?

The same cost-effective measures approved under the Government’s now defunct Green Deal will apply to the new regulations when they come into force on April 1st 2018; protecting landlords from having to face upfront or net costs for improvement works. This means you may still be eligible for an exemption from reaching the minimum energy efficient standard if you can provide evidence of the following:

  • Steps were taken to try to make the property more cost-effective but it still remains below an EPC rating of E
  • You are unable to carry out improvements without upfront costs because you or your tenant fail the relevant credit checks required to obtain private funding from Green Deal providers
  • A third party’s consent or permission is required to undertake the improvements relating to the minimum standard but consent is denied or was provided with unworkable conditions
  • The occupying tenant withholds consent to the work being carried out
  • When a suitably qualified independent surveyor (Royal Institution of Chartered Surveyors or similar) expects the measures to devalue the property by more than 5% if the work goes ahead
  • Where wall insulation is required but you have obtained a written opinion, from a suitably qualified person, advising that this will cause a negative impact on the structure of the property (or the building of which it forms part of)
    Registration of exemptions

It is anticipated that the PRS Exemptions Register, which will be open to public inspection, will commence from 1st October 2017. Any exemption to the legislation must be registered, otherwise the property will be considered non-compliant. Supporting evidence of any applied exemption will be required and landlords could be in breach of regulations if they claim an exemption to which they are not entitled. It is understood that exemptions will be valid for five years, after which they will need to be reviewed to see if they are still upheld.

What resources and help are available to landlords?

There has been a lot of confusion around what green energy deals are available to landlords to finance these energy-saving improvement costs. Although the Government has stopped funding the Green Deal Finance Company, which was set up to lend money to Green Deal providers, you may still be able to get Green Deal funding from those providers who are now financing the scheme themselves.

In January, Greenstone Finance and Aurium Capital Markets announced its acquisition of the business and assets of the Green Deal Finance Company. The new ownership will continue to service the existing Green Deal loans and is due to commence financing of new

Green Deal loans in Q1 of this year.

Green Deal loans can help with the cost of a boiler or other essential measures for landlords who cannot otherwise afford upfront fees. They typically offer competitive interest rates but are more easily managed as they are paid by the bill payer (in this case the tenant) who benefits most from the arrangement.

Simple exercises such as changing lightbulbs to LEDs can be highly effective when it comes to improving an EPC rating and tenants will also appreciate the saving on their energy bills. However, the most effective energy-saving improvements you can make to a property could include any or all of the following:-

  • Insulation (solid wall, cavity wall or loft)
  • Double glazing
  • Heating
  • Draught-proofing
  • Renewable energy (solar panels or heat pumps)

It is worth noting that so long as the minimum E rating is achieved, it is up to you to decide which work needs to be carried out.

When replacing a boiler, we strongly advise going to the extra expense of fitting an A-rated one that comes with a 10-year warranty. The reason for this is that the Government’s long term goal is to raise standards even further, so the minimum EPC rating is likely to rise to a D by 2025 and a C by 2030. Putting in the extra effort now, exceeding the required standard could mean you will save money in the long term, by not having to do further improvements.

If your property is in breach of the regulations, although you may be liable, it will not affect the validity of the tenancy itself, so the rent still continues to be payable to you.

How improved EPC ratings will benefit landlords

Any improvement to a property, in terms of energy efficiency or otherwise, will always have a positive impact on its rental appeal. Clued up tenants looking to check out the best properties on the market are increasingly likely to do a postcode check on every property they search; reviewing the EPC energy ratings as standard. After all, who doesn’t want to live in the warmest, most comfortable and energy-efficient home?

If only half of the 17%* of privately rented properties previously mentioned are removed from the rental market, even temporarily, this could have a significant impact on the industry. By planning ahead now, you could be saving yourself untold worry and financial concern.

*according to data released by Urban.co.uk
** English Housing Survey report 2011