The Landlord Law Changes You Must be Aware of
If you work in the property industry, you’ll be quite aware of the new buy-to-let measures that have plagued the sector over the past year. But are you familiar with the forthcoming landlord law changes that will affect investors this year?
Buy-to-let landlords don’t just have a higher rate of Stamp Duty to pay when they purchase a property, but they also face some hard-hitting measures that could hit their businesses and finances this year.
When advising and assessing property investment with your clients, here are a few prominent landlord law changes that you should be able to discuss:
April – Tax relief
From 6th April 2017, the amount of tax relief that buy-to-let landlords can claim on their finance costs (such as mortgage interest) will be gradually restricted to the basic rate of Income Tax (20%).
The reduction will mean that some landlords may make losses on their lettings businesses. However, be aware that the change will not affect every landlord.
If a landlord is currently on the higher rate of Income Tax and has a mortgage at over 50% loan-to-value (LTV), they may want to consider measures to mitigate the changes. Some landlords are setting up limited companies, which are exempt from the changes. While many landlords will benefit from this change, some may naively believe that it is the right option for them. Speak to any landlords that do not fit the criteria mentioned above.
Spring – Lettings fee ban
While no specific date has been set for the introduction of the Government’s letting agent fee ban for tenants, the Housing Minister did confirm that ministers would begin consulting on the plan in spring.
In last year’s Autumn Statement, the Chancellor revealed that letting agent fees charged to tenants would be banned. It is believed that these costs will be passed onto landlords, which could greatly increase the charges they incur.
All landlords that use letting agents to manage their properties should be aware of all the options available to them in order to cut costs where possible. For example, they may choose to go for a cheaper option on offer from the same agent, which could balance out the increased costs, or they might decide to start self-managing their portfolio.
Either way, there are benefits to both options, and all costs (and time!) should be taken into account.
October – Blacklist of rogue landlords
On 1st October 2017, the Government’s blacklist of rogue landlords and letting agents will be in operation. This database will be available to local and central government, which will ensure that those landlords and agents that have been served banning orders or have breached the law are included on the blacklist.
The database will include the details of landlords and agents that have been served a banning order, been convicted of a banning order offence, or have received two or more civil penalties.
If a landlord is placed on the list, they will be banned from letting property for a minimum of 12 months, meaning it could greatly affect their businesses. Always remind landlords to stick to the law and keep up with their responsibilities.
While all landlords should already be aware of their obligations and forthcoming landlord law changes, some may not be completely comfortable with the measures. Simply understanding a little about this year’s changes will help you paint a clear picture for anyone considering an investment.