Does Buy to Let still work?
As I write this, we have just received confirmation that the Tenant Fees Ban is due to become law on 1st June leaving landlords, who have their properties managed, with the potential of increased letting agent fees as Letting Agencies try to balance their books. In the alternative, self managing Landlords are charged with the task of preparing for a tenancy without the ability to be remunerated for the considerable work involved.
In addition to this is a further announcement due which is likely to require private landlords to be registered with a redress scheme. The Government are setting up a Redress Reform Working Group to look at the practicalities of implementation and it is considered that this is just the latest in an onslaught of laws and regulations aimed at tightening up the private rental sector. Failure to comply is likely to result in a fine of up to £5,000.
These proposals are in addition to the various changes which have been recently implemented such as the introduction of rent repayment orders and the new ability of local authorities to impose civil penalties of up to £30,000 against landlords. Indeed since April 2018 local Councils are also able to seek banning orders against landlords and agents who commit certain offences.
The landscape for the Buy to Let landlord has certainly changed significantly over the last few years and it is my belief that further changes are going to be revealed in the near future. Indeed there is already talk of Rent Caps being introduced.
For those of you considering getting started in Buy to Let or indeed for those of you already heavily immersed in the business, now is the time that you must review your working practices and understand how to succeed in this new regime.
There is doubtless going to be more policing of the current and new regulations and therefore it is more important than ever that you have the required knowledge to operate in this sector. Falling foul of the rules can have significant consequences.
By way of an example the recent case of Caridon Property Ltd highlighted the need for meticulous attention to detail for those involved in the private rented sector. In this case, a tenant successfully defended a Section 21 Notice on the basis that the landlord could not demonstrate that the tenant was provided with the Gas Safety Certificate at the outset of the tenancy. It was argued that Section 21a of the 1988 Housing Act provides that a s.21 Notice ‘may not be given in relation to an assured shorthold tenancy … at a time when the landlord is in breach of a prescribed requirement.’
I have seen similar cases involving the failure to serve the tenant with a copy of the EPC too.
These are sobering lessons for landlords and Agents alike. During a period where it feels like us property folk have a target on our backs, I suggest attention to detail, absolute compliance with legislation and that you ensure that your knowledge is up to date. Given there are over 150 pieces of legislation which impact the Buy to Let sector there must be something that you could brush up your knowledge on!
For those who have neither the time nor perhaps the inclination to get to grips with the new rules of the game, it would be prudent to consider having your property assets professionally managed. Indeed time may be of the essence as you are likely to be able to negotiate a better deal with Agents before the end of May when their charging policies will likely be entirely overhauled with the advent of the tenant fees ban.
It is doubtless a more litigious environment in which we live. Consequently a failure to comply with legislation is likely to lead to a more punitive consequence. Some time undertaking additional reading, training, participating in webinars or listening to podcasts will doubtless pay you a handsome dividend.
Landlords are going to have to present a far more professional business in order to succeed going forward. A closer eye on costs is required having regard, not only for increased compliance costs but also for the changes in tax rules regarding mortgage interest. It may mean scrutinising the figures a bit more closely on every acquistion or it may result in you coming up with more creative strategies.
You may find that the changes force some out of the market or see them switching to commercial property or indeed other assets. You may therefore be able to profit from the adage of observing the masses and doing the opposite!
Regardless of the current position it is my view that Buy to Let does still work – but only if it is done properly and professionally. lsdlocked0Back