2020 marks another year of changes for the buy-to-let market. Landlords are advised to keep abreast of their legal duties as added responsibilities are set to be imposed and debated across various areas of the industry.
Below are some of our top legal points to note for buy-to-let landlords in 2020:
Section 21 Notices
Section 21 notices are served to terminate a tenancy after the fixed term of a tenancy comes to an end. Or, during a periodic tenancy where there is no fixed end date. Section 21 evictions are commonly known as ‘no-fault’ evictions. These were hotly debated throughout 2019. With government proposals indicating that a possible abolition of such evictions was a distinct possibility in the near future.
It is the governments’ position that, by repealing Section 21 of the Housing Act 1988, tenants will benefit from greater security of tenure. The changes aim to shift the balance of power away from landlords where evictions are no fault of the tenant. However, with a possible abolition of the entirety of Section 21, landlords may find that they are left with difficult and unreliable tenants. Also with limited means of regaining possession of their property. Other than through applying to the courts to repossess. This would mark a significant sea change in the private rented sector.
If implemented in its current form, tenants will be able to end their tenancy after giving their landlord two months’ notice. On the other hand, landlords will only be able to end the tenancy where they are able to satisfy one or more of the legitimate grounds for possession under Section 8 of the Housing Act 1988. Section 8 does confer a number of grounds to assist landlords in dealing with troublesome tenants should Section 21 evictions be prohibited. For example, if the tenant breaches the terms of their tenancy agreement. Or defaults on rental payments, then landlords can seek to repossess.
However, Section 8 does not currently include legitimate grounds to evict a tenant where the landlord wishes to move into their own property (unless they have lived in it previously). Or where they wish to sell the same with vacant possession. Government proposals are expected to take these factors into consideration at a later date.
Government has yet to respond to the public consultation. So this is an area landlords (and lettings agents) will need to monitor closely going forward.
Landlords who invest in Houses in Multiple Occupation (HMOs) should already be aware of licensing rules implemented at national and local authority level.
HMO schemes are constantly evolving. Landlords must keep up to date with any new legislation or rules introduced. That might otherwise affect any existing HMO, or where licenses are due for renewal.
Landlord’s will also need to be aware of any Article 4 Directions in place. Which are restrictions imposed by the local authority to limit certain development activity in a specified area. Article 4 Directions can also cover much large areas and, in some cases, are city-wide.
Investors will be keen to ensure that any new properties they are purchasing (or any existing properties which they are planning on developing) for use as an HMO, will not be restricted by an Article 4 Direction limiting HMOs in that area.
Minimum energy efficiency rules
In line with the introduction of the Minimum Energy Efficiency Standards (MEES) regulations, landlords are required to ensure that any rented property has a minimum Energy Performance Certificate (EPC) rating of an ‘E’ or higher where a new tenancy is granted (which includes renewals). This applies to both residential and commercial let premises.
From April 2020, these new standards will be applied across the board. They will cover any existing tenancies, irrespective of how long the tenancy has been in place. This will also apply to buy-to-let properties.
Investors looking at purchasing in the near future will need to ensure the EPC rating of the property is at least an ‘E’. But are reminded to check the date of expiry of the EPC itself. If the EPC is historic, you may find that the property is no longer compliant with the MEES regulations. Then a new EPC should be insisted upon. If you are aware that the property has been let or modified since the date of the last EPC, then a new EPC test should be arranged before agreeing to exchange contracts.
This new introduction means that, after 1 April 2020, any property with an EPC rating of an ‘F’ or ‘G’ will be deemed unrentable. As well as in breach of the MEES regulations.
As such, landlords who let properties which are currently in breach of the MEES regulations should now be looking to carry out energy efficiency improvements on their properties as soon as possible. The figure that a landlord is expected to spend on such improvements is capped at £3,500 per property, including VAT. Landlord’s will not therefore be expected to spend more than the regulation cap.
If, after spending up to the maximum cap, a property is still not able to achieve an EPC rating of ‘E’ or higher, landlords will be required to register an ‘all improvements made’ exemption. Legal advice should be sought in this regard.
Failure to comply with the MEES regulations can result in hefty penalties if not adhered to.
You may recall that the government announced proposals in 2018 to require landlords to carry out regular electrical safety checks on their rented homes. This was suggested at being every 5 years.
Whilst not formally announced, 2020 may be the year these plans are introduced. Perhaps to coincide with other changes. It is expected that a period of notice will be required before any such proposal are implemented.
Once implemented, it is then expected that a 2-year transitional period will apply. This means that any new tenancies will be brought in line with the requirements first. Followed by existing tenancies later on. Similar to the implementation of the new energy efficiency standards on rented properties.
Hart Reade Solicitors are a full-service law firm with offices in Eastbourne, Hailsham, Polegate and Meads. We hold both Lexcel and Conveyancing Quality Accreditation from the Law Society of England and Wales. As well as being an ALEP member. To make an appointment with one of our commercial property Solicitors, please phone our office on 01323 727 321.