The 2016 Landlord Lashing.

The 2016 Landlord Lashing.


This year, more landlords have been evicting tenants in order to sell, rather than to re-let, according to Landlord Action, the UK’s first regulated eviction specialist. Given the increased pressure on landlords, their desire to sell is not altogether surprising.

2016 was the year landlords were given a repeated lashing. They were hit again and again. Over these twelve months, the private rental sector was hit with a surge of legislative and taxation changes. This has resulted in landlords not only paying more on purchases and receiving less on income, but also being put at greater risk of facing fines and even prison for non-compliance. 2016 might turn out to be a turning point for many landlords, letting agents, mortgage lenders and the whole rental sector.

Below are some of the main changes brought in this year that will challenge rental profitability.

February 2016 – Right to Rent

From 1st February, Right to Rent checks for all adult occupiers with new tenancies in England became mandatory. This legislation made it an offence for a landlord to allow a person who does not have a ‘right to rent’ to occupy premises in England. A person now has an ‘unlimited right to rent’ or a ‘time limited right to rent’, depending on their circumstances. If a landlord allows a person to occupy their property who does not have a right to rent, they may be liable for a fine of up to £3,000 per adult in occupation.

A letting or managing agent may conduct the right to rent checks on behalf of a landlord but only if an agreement exists between the landlord and agent in writing. Where there is no written agreement, the landlord will be liable for the checks and any penalty if one is imposed.

March 2016 – Court fees for possession claims increased

On 21 March 2016, court fees for possession claims increased by £75.00 delivering a further financial blow to landlords. Landlords have no option but to obtain a court order to recover possession of their property if a tenant defaults on the terms of their tenancy agreement, or if they refuse to vacate the property at the end of the term. Increases are as follows: –

Accelerated possession claim (section 21 only) from £280 to £355

Standard possession claim (commonly used for section 8 claims) from £280 to £355

Possession claim online (PCOL) (section 8 rent arrears only) from £250 to £325.

The fee to issue a Warrant of Possession (Recovery of a Property or Land) remains the same at £110.

April 2016 – Stamp duty up, ‘wear and tear’ allowance down

From April 2016, the government imposed an additional 3% stamp duty on anyone purchasing property as a second home or buy-to-let investment. Stamp duty for investors now starts at 3% on homes worth £40,000, and rises in bands from there.

Landlords were hampered further with the announcement that they had lost the old 10% ‘wear and tear allowance’ for furnished properties, in favour of a new replacement relief for white goods, furniture and furnishings. The effect is instead of claiming regardless of spending, landlords can only claim for like-for-like replacements.

June 2016 – Tougher lending criteria

Following intervention by the Bank of England, many buy-to-let mortgage lenders tightened measures concerning mortgage affordability, forcing them to consider other costs incurred by landlords, such as tax. This means that mortgages have been harder to come by. Still, buy-to-let appears to be holding up well following Brexit.

Some landlords will find they need to budget for higher rent to prove the income generated from their property is enough to cover the mortgage and other expenses. Since lenders are also now looking at future taxation liabilities, more landlords will need professional, independent tax advice.

August 2016 – Review into Client Money Protection

The Government launched a review into how CMP currently operates in the private rented sector to determine whether to make it mandatory for letting and managing agents. The clock is ticking for unscrupulous letting agents who steal cash from landlords and tenants. Agents who hold CMP should be displaying it proudly and educating consumers on its importance and value. In our opinion, mandatory Client Money Protection would be valuable – but again, it will be another cost that will have to be paid for.

October 2016 – No judicial review into Mortgage Interest Relief tax changes

A new law, set to be introduced in April 2017, will take away the ability of higher and additional-rate taxpaying landlords to deduct their mortgage interest from their rental income before calculating their tax bill. Two landlords, Steve Bolton and Chris Cooper, decided to challenge the new rules in court. However, just when it seemed there could be light at the end of the tunnel, the pair lost their legal battle for a Judicial Review.

Without a government U-turn, the process of capping the amount to 20% will be phased in from next April as planned, meaning many landlords will pay extra tax of 20% or more on their mortgage interest.

Hopefully this is not the last we will hear from Steve and Chris, who have campaigned hard to fight on behalf of landlords. If these changes to taxation come into force as planned, the tax that some landlords pay could be greater than their real profit, leaving them with losses. This will see a high volume of landlords quitting the PRS which would be disastrous for an industry already starved of supply.

October 2016 – New HMO Rules announced

It was announced that councils in England are to get new powers to tackle landlords squeezing too many tenants into overcrowded homes.

The new rules will impose a minimum room size of 6.52 square metres in a shared house of multiple occupation (HMO) where five or more people live.

The aim is to stop landlords from cramming tenants into small shared homes. Mandatory HMO licensing currently encompasses around 60,000 homes in England. This number is expected to grow by at least 170,000 more shared homes when the changes come into effect in 2017.

November 2016 – Rent Smart Wales – Councils tighten regulation

November marked the introduction of Rent Smart Wales. This demands that all landlords renting out properties in Wales should hold a licence. The licence is for landlords living anywhere in the world who have rental property in Wales, not just for landlords living in Wales.

The government is also encouraging local authorities across the country to start licensing schemes to tackle poor conditions, such as overcrowding, and rip-off landlords.

November 2016 – Autumn Statement bans letting agent fees to tenant

Although the date in which this will come into force has not yet been announced, Chancellor Philip Hammond declared that letting agents in England and Wales will be banned from charging fees to tenants. It is realistic to assume that this ban, which will leave a black hole in agents’ profits, will need to be partly recuperated through higher letting and management fees.

December 2016 – Immigration Act 2016

From 1st December 2016, under The Immigration Act 2016, there is a new maximum criminal sentence of 5 years’ imprisonment for landlords or agents who fail to carry out ‘Right to Rent’ checks or remove illegal migrants from their property.

However, under the new Immigration Act, it will also be easier for landlords to evict illegal migrant tenants, sometimes without a court order.

The effect of the 2015 Deregulation Act kicked in

Over 2016 we really started to see the ramifications of The Deregulation Act 2015. More and more landlords are failing to fulfil their obligations, even from the start of tenancies i.e. Protecting tenants’ deposits, serving Prescribed Information, providing an EPC, Gas Safety certificate, working smoke and carbon monoxide alarms and the government’s ‘How to Rent’ guide. Failing on these points has resulted in serious consequences for landlords. The most obvious set-back has been the more difficult eviction process, caused by non-compliance earlier in the tenancy.

Heading into 2017

It’s been a tough year for landlords and there are uncertain times ahead.

Michael Kaplan, one of the founders of Landlord Action, predicts that more intervention from the Chancellor will see more private landlords selling up. “If capital gains tax on property is reduced to be more in line with other capital gains, it will become the carrot to partner the stick that landlords have just been lashed with. And a few more landlords will pack it in.”

With more changes on the way, it is more important than ever for landlords to fully understand their obligations. Landlords need to protect their investment and tenants, and ensure they are adhering to the law and employing professional letting agents.

Pressure on agents may result in increasing fees to landlord. Rising costs for landlords may force them to increase rents, and we could see a surge of landlords opting to self-let and manage.

For those who are serious, landlording will still be a good business and a better investment than the alternaives. If sums are done correctly and compliance is taken seriously, rental property can still be financially rewarding.

Serving a notice is actually the most important part of the possession process.

It isn’t complicated but one tiny error can cause dreadful problems.

That’s why we say, don’t DIY and don’t use internet amateurs. It’s not worth it.

1. Compliance Errors
If the tenant doesn’t leave at Step1, the notice had better be valid. Because then it has to go to court. Any little error can get a case thrown out. And you have to start all over again.

2. Attempting Short-Cuts.
In an effort to be quick, some internet services aimed at landlords are using short-cuts around the process. But if the tenant doesn’t leave (50%) these practices can backfire at court and the case thrown out.

3. Trying to Save Pennies.
Internet services have mushroomed and landlords can expect to get what they pay for. To get the process done PROPERLY it takes a certain amount of time for an expert to look over a file and be accurate. Our fees cover that expert time.

Chasing courts for dates, arranging advocates and preparing court papers is time consuming. Especially if you’ve never done it before.

Some landlord and agents have served notices themselves. They believed they were saving a few pounds but it often ended up costing them more.

If you lose a claim, the court can order you to pay the tenant’s defence cost, which can run to hundreds or thousands of pounds.

Our in-house Solicitors are there to get your property back as fast as they can. And we protect landlords and agents from themselves.

As experts, we know that in the rush to get things done, errors can happen. And those errors can can come back later to mess up your case – and the whole process has to start again.

You can speed things up – give us accurate information quickly. Help us to help you.

There are services on the web who will prepare papers BUT they get you to pay the court-fee separately and get you to sign the court papers – so in fact they don’t represent you!

If your notice (at Step1) wasn’t drafted or served correctly you risk wasting your court fees and losing a whole lot of time because of a small error.

We won’t let your case anywhere near a court until we have checked every little detail. To make sure you don’t waste time or money, at Step-2 we first only charge part of the fee.

If your notice is fine, then you just pay the balance of the fee and we issue the claim. If there is a problem with your notice or paperwork, we will advise you what to do next.

Courts take the view that possession proceedings can make someone homeless. So they are very careful. If there’s any error in the notice, they throw the case out. It’s the process. Get it right or lose.

If the notice is invalid, you have to start all over again. The weeks or months you’ve waited are wasted. If there were rent arrears, there are now more.

If there weren’t rent arrears, they might now start. More fees. More lost rent. And still no possession. Tenants can be alerted to making a counter-claim.

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