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Guide for Landlords – 5 letting legislation changes in 2020

Guide for Landlords – 5 letting legislation changes in 2020

| Published on June 15, 2020

Every year brings changes to legislation and taxation for a range of industries, and the property market is no exception. In 2020 we have already seen five new letting legislation changes for landlords that cover topics such as tenants fees and energy efficiency.

If you are a landlord of domestic rented properties, you are obligated by law to meet certain requirements and keep up to date on all of these changes. Read our Guide for Landlords below to find out how these changes affect you.

To conveniently find the information you require, please use the below links to skip to a specific section of interest:

Alternatively, if you would prefer to speak to one of our property experts, please visit our contact page to find your local office.

Extension of Homes (Fitness for Human Habitation) Act

On 20th March 2019, the Homes (Fitness for Human Habitation) Act came into place to ensure that any property in new tenancies, including renewals, were fit for purpose. This required landlords to carry out improvement works to their properties. Failure to do so could result in landlords being sued for damages for the entire length of the contract.

On 20th March 2020, the Act was extended to all private and social periodic tenancies that existed before 20th March 2019. The only exceptions to this are tenancies that are on a fixed term that began before 20th March 2019 – the Act won’t apply in these few cases until the end of that fixed term.

As a Landlord, you have to choose whether to undertake improvements to the property or face the fines, but bear in mind that you are prohibited from continuing any existing tenancy if the property is deemed substandard.

Find out if your property meets legal requirements in our article Is your rented property fit for human habitation?

Minimum Energy Efficiency Standards (MEES) Regulations Extended

Landlords should be familiar with the Minimum Energy Efficiency Standards (MEES) that came into effect in April 2018. It states that new tenancy agreements and renewals (other than some HMOs, such as bedsits), must have an Energy Performance Certificate (EPC) rating of E or above. If the EPC produces an energy rating band below ‘E’, the property is ‘substandard’ and as such, landlords can be liable for financial penalties up to a maximum of £5,000 per breach. Landlords may also be named and shamed on a public register.

It is a good idea to obtain an Energy Performance Certificate anyway because without it you cannot serve a notice to end an assured shorthold tenancy on expiry of its fixed term. For all such tenancies, Landlords need to comply with the requirements of giving prescribed information to your tenant; such as:

  • Provide the tenant with an energy performance certificate, free of charge;
  • Provide the tenant with a gas safety certificate;
  • Provide the tenant with a copy of the current version of the Government’s How to Rent Booklet; and
  • Provide the tenant with certain prescribed information regarding the deposit which you must have protected in a government-approved tenancy deposit scheme.

If you are concerned about the impact that COVID-19 could have on letting legislation as well as tenants rights, please read our COVID-19 Update for Landlords.

CMP (Client Money Protection) Legislation – extended to April 2021

Agents who manage property lettings in England are required to belong to an approved Client Money Protection scheme that keeps client money in a segregated client account. The CMP legislation, which came into place in April 2019, has now been extended to 1st April 2021 due to issues setting up the necessary client accounts with banks and building societies.

Despite the extension, if you have a letting agent working on your behalf, it’s advisable that you check if your agent is a member of a CMP scheme. This gives you a route to reimbursement should your agent go out of business or misappropriate client funds.

Find out more about the Client Money Protection deadline extension.

Further Changes to Mortgage Interest Tax Relief

In recent years, letting landlords have seen increased tax bills due to a considerable decrease in tax relief. In the 2017-2018 tax year, landlords could claim 75% mortgage tax relief but in the 2018-2019 tax year, landlords could only claim 50%. By the 2019-2020 tax year, it was down to 25% – and the rise is set to continue. In 2020-21, landlords won’t be able to claim any tax relief on mortgage interest payments at all.

Instead, from April 2020, landlords will receive a 20 per cent tax credit on their interest payments. This will impact those in the higher tax bracket, which could now include landlords who will have to declare the rental income that they previously used for interest payments.

Source: www.which.co.uk

Changes to Capital Gains Tax and Lettings Relief

Private residence relief is a Capital Gains Tax relief which shelters gains arising on the disposal of a property which is currently, or has previously been, the owner’s only or main residence.

Previously, Private Residence Relief was available for the amount of time you lived in it together with an 18 month grace period up to when you sold it, regardless of whether you lived in the property during this period or not (for example, if it was rented out during this period). As of 6th April 2020, this relief has been reduced to just 9 months, effectively halving the grace period immediately before a sale.

Also, since April 2020, the deadline for payment of the capital gains tax bill changed. Previously, payment was to be made by 31st January in the year preceding the tax year the landlord made the sale. Now, Capital Gains Tax must be paid within 30 days of the completion of the sale.

If you are a landlord who rents out a property that was once your main home, you used to receive £40,000 worth of Lettings Relief. From April 2020 onwards, only landlords who share occupancy with their tenants (such as room lets) will be able to claim.

Source: www.gov.uk

We’re here to help you

For further information about changes to letting legislation, or residential property in general, please, contact Michelle Dixon in the Litigation team on 01202 725400 or email her secretary, Ruth Gibbons at r.gibbons@hklaw.uk

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