There is no doubt that politics have proven to be divisive over the past few years but regardless of your political perspective, we have reviewed the current outlook for us landlords to ensure we are prepared for any and all eventualities over the coming landscape.
The Conservative Party were victorious with a large majority in last week’s election – but what does this mean for landlords and the private rented sector?
In short, the tories made a commitment to abolishing Section 21, introducing a stamp duty surcharge on non-UK residents and lifetime rental deposits were all key elements of the Conservative manifesto.
Scrapping of Section 21 Notices:
The Conservative’s manifesto highlighted the party’s plans to scrap Section 21 if they were to win the election. (A Section 21 notice enables landlords to pursue fast-track “no fault” evictions) however, the party also said that it aimed to “strengthen landlords’ rights of possession”.
In response to this, The National Landlord Association has urged the Conservative government to strengthen landlords’ rights in two ways, in order for this to be effective:
a) Create a housing court that would help to resolve possession cases that would almost inevitably build up when Section 21 is abolished.
b) Update the terms of Section 8 which allows landlords to pursue complex “fault-based” evictions so that landlords can swiftly reclaim their property when tenants fail to pay their rent or commit antisocial behaviour.
The RLA believes that without significant changes to allow landlords to regain possession of their property (where they have a legitimate reason to do so) landlords may choose to leave the sector, thus reducing the provision of rental properties, something that is already being seen.
From our perspective we have always had the option to serve section 8 and 21 notices and the landlords right to obtain possession of the property cannot be refused under new proposals. The change however is that the government have found that the majority of section 21 notices served, result in a subsequent application for rehousing under social housing schemes and it is this influx that the government is incentivised to reduce.
Plans were also presented for a 3% stamp duty surcharge for non-UK tax residents which would apply to companies as well as individuals – and also to expats wanting to move back home. It said as many as one in eight new London homes were bought by non-residents in 2014-16.
These figures have reduced in more recent years and this will need to be taken in to account when any legislation is introduced.
Lifetime Deposit Scheme:
There are also plans to encourage a 'lifetime deposit' system. This would replace the current system, which sees many tenants having to raise a deposit twice when moving.
As it stands, one deposit is usually tied up in the property a tenant is leaving, giving them no other option but to raise a second one to secure a new home.
The Conservative lifetime deposit suggestion would instead see one deposit transfer from tenancy to tenancy – though the Tory manifesto was not heavy on the details regarding how this would essentially work in practice.
However, the manifesto does not mention whether there could be a possible ‘topping up’ of lifetime deposits, for example, if the tenant’s first rental home was a studio but then the tenant progressively moved to larger and more expensive rental homes.
The lifetime deposit scheme was a vote winning tactic and does not work in reality, and this is born solely out of two of the interested parties (the vacating property owner) and the (incoming property owner) having equal and opposed interests over the same fund. The industry has already acted in response to this with the introduction of the £0 deposit schemes whereby the deposit is an insurance-based provision and this is likely to become more wide spread as a reduced barrier to entry to the market regardless of the manifesto.
Tax relief on mortgage interest payments:
From 2020, landlords will no longer be able to claim any tax relief on mortgage interest payments. Instead, they'll receive a 20 per cent tax credit on their interest payments.
Private Residence Relief will also be changed, affecting 'casual' landlords.
Currently, homeowners who previously lived in a property but went on to let it out can claim capital gains tax relief on property sales for up to 18 months after they move out, from April next year this will be reduced to nine months.
As always, Belvoir will be sure to always stay on top of the latest changes and updates to landlord laws and regulations.