The Covid-19 pandemic has caused considerable losses to many Investors as well as impacting relations between Landlord and Tenant.
Thanks to Government intervention, financial assistance and the Furlough Scheme has helped to avoid mass-unemployment and a high number of mortgage defaults. The extension of the Furlough Scheme was welcome news as it has helped to ease the burden, but only slightly.
Many Landlords are facing significant losses and have slim chance of recovering debts, despite mortgage holidays. A lot has changed this year, and the question is, what has caused this ? Is it all because of the pandemic or has it been down to a range of other factors ? To gain some clarity, lets roll the clocks back to the past few months to look at what kind of a year its been and what 2021 has in store for Landlords.
The Homes (Fitness for Human Habitation) Act 2018 came into force for all tenancies signed before March 2019 for tenants based in England.
This law is to ensure that fitness for human habitation means homes must be safe, secure and pose no serious health risks to the occupants. Landlords must offer homes that are fir to live in see the GOV.UK page detailing the specifics.
The tenant eviction ban was the first direct action that was taken in response to the pandemic and implemented at the time of the first National Lockdown. All evictions were suspended for 6 months.
Government guidance was “landlords and tenants should work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances” at the end of the emergency period. We are now at the end of the year and there is a huge backlog of cases. In practice, this shall leave some Landlords forced to house defaulting tenants for periods up to 15 months. This is because cases of reported domestic violence and unsociable behaviour are prioritised over Covid-19 related arrears.
The 3-month payment holiday on buy-to-let mortgages has given Landlords room to breathe and cases are now starting to be heard.
On 1 April, the remaining provisions of the Minimum Energy Efficiency Standard (MEES) came into force. This means that Landlords with properties that had an F or G rating had to improve this to an E to continue letting out their property. Landlords were asked to spend around £3000 on average, very harsh on those renting out older properties.
The final part of buy-to-let tax relief changes also occurred from April 5th. Tax relief on mortgage interest payments has been now been phased out and can no longer be deducted from income. These changes applied only to Private individual Landlords.
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 became law on June 1st. This was to ensure that electrical safety standards were brought up to the same stringent level as gas safety. The key fact is that there must be a visual inspection and test carried out every 5 years with any remedial work needed to be done within 28 days of re letting.
As the summer got underway and the pandemic showing no signs of abating, The Chancellor, Rishi Sunak announced a Stamp Duty holiday on purchases up to £500,000 in a bid to stop the Housing Market from stalling.
Buy-To-Let Investors were still liable for a 3% Stamp Duty Surcharge for properties under £500,000, significantly, less than the 8% charged on second homes valued between £250,000 to £925,000.
Later on in the month, the Chancellor introduced The Green Homes Grant to help Landlords improve the energy efficiency of their properties up to a maximum of £5000. Improvements such as double glazing and Eco-friendly boilers were included in the concessions.
A new Section 21 form was introduced that added significant delays to an already lengthy process.
Form 6A requires landlords to now give a minimum of six months’ notice instead of two. Section 21 notices now expire in 10 months instead of the usual six.
In practice , Landlords that had not served a Section 21 notice during this time , would have to serve a new Notice. The knock-on effect is that serving of Section 21 Notices is no longer a simple or quick route for the eviction process.
What has all this meant for Landlords in 2020?
In the main , the pandemic has left many Landlord’s in a precarious position, despite having gone to great lengths to accommodate their tenants by deferring rental payments and offering other practical help. Looking at the numbers, the financial impact on Landlords has been very severe. Data from the Office of National Statistics (ONS) shows that Landlords have lost more than £430 million so far, and more than 285,000 tenants have defaulted on the rent because of the lockdown.
What changes will we see in 2021 ?
Whilst it is a little too soon to predict after such a tumultuous year, there is some good news on the horizon with the introduction of a vaccine. We certainly need to remain cautious as we are not out of the woods yet, with things likely to remain the same until March. As the year progresses, we shall see changes in the Renters Reform Bill with Government abolishing Section 21. The National Residential Landlords Association (NLRA) and National Federation of Property Professionals (NFOPP) have said they will be working alongside Government to ensure there is a fair system that protects Landlords.
There is also support for the Dogs and Domestic Animals bill that is due for a second reading on January 29th. This will allow tenants to keep a cat or dog on the premises without Landlord approval.
We will also see deposit protection overhauled at some point. Boris Johnson’s pre-election pledge of a “Lifetime Deposit” will be opened up for debate. The idea is that tenants pay a deposit that they can transfer from one tenancy to the next.
In other news, we will see the abolition of the Section 21 Notice, though that is likely to be at the end of the year. This will see the formation of Housing Courts specifically set up to handle evictions with new rules and procedures put in place.
With Brexit back on the political agenda, we can expect changes in the Right to Rent checks introduced in June. Changes to Capital Gains Tax may also be introduced around this time, though no fixed date has been given as yet. The changes could mean another tax hike for Landlords and second homeowners. The Stamp Duty Holiday will end in March. Between now and then we are likely to see high levels of activity in the lower to middle end of the wider market.
In essence, 2021 will be as eventful as 2020, the one positive emerging trend is the move towards greener properties with the introduction of the Greener Homes Grant. Going into next year this could have a significant financial impact. Landlords have gone to great lengths to accommodate their tenants in the most difficult of times. Perhaps the pandemic has changed the perception Landlords and Tenants have of each other? The new year will be an opportunity to make a fresh start and its vital that Landlords and Tenants work together and on agree affordable repayment plans.