Has 2020 been another landmark year for landlords?
The COVID-19 pandemic has definitely impacted the relationship many tenants have with their landlords.
NRLA Chief Executive Ben Beadle praises landlords for their efforts to look after their tenants during this difficult time, and continues to call on the Government to provide them with support.
“Landlords have gone above and beyond to keep tenants in their homes in the dark days of the pandemic, but they need help. To that end we will be continuing to campaign for a comprehensive financial package from the Government to support the sector and allow tenants to pay off rent arrears built as a result of the pandemic.”
– Ben Beadle, NRLA Chief Executive
However, a recent Hamilton Fraser Total Landlord Insurance poll found that 33.3 per cent of tenant/landlord relationships are now perceived as being worse than they were before the pandemic.
It’s a situation that, according to Hamilton Fraser CEO Eddie Hooker, was eased somewhat by government support. He explains: “Rishi Sunak’s measures to stave off a potential tsunami of mass unemployment and mortgage defaults with the extended furlough scheme were largely welcomed.”
But despite the Chancellor’s interventions, inevitable rent defaults have still had a huge impact on landlords, many of whom went to great lengths to help out their tenants. He adds: “Whilst owner-occupiers were offered mortgage holidays and debt management services, many landlords are now facing huge financial losses and little ability to recoup.”
It’s been a time of great change, to say the least. But what has catalysed this change? Is it just COVID or are there other subtle factors that have had something of a cumulative effect? To gain some perspective, let’s cast an insightful eye over the last seven months, exploring what kind of year it’s been and what 2021 could hold for UK landlords.
The Homes (Fitness for Human Habitation) Act 2018 came into force for all contracts signed before March 2019 for tenants based in England.
The law exists to ensure that all rental properties are ‘fit for human habitation’, meaning they are safe, secure and healthy. In practice, it means that landlords must ensure homes are fit to live in, with this GOV.UK page detailing the specifics.
The tenant eviction ban, meanwhile, was the first direct action taken as a result of the pandemic. This emergency legislation (the first of many) suspended all new evictions during the first national lockdown.
The official line at the time was that “landlords and tenants should work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances” once the emergency period was over.
Fast-forward eight months, however, and the emergency period is still ongoing and there are still court proceedings backed up from not only the initial March lockdown but before that too.
Landlords were, however, thankfully allowed a three-month mortgage payment holiday on all buy-to-let mortgages to make up for potential lost rental payments.
Court cases are now also finally starting to happen, with Ben Beadle adding that the NRLA did their part to “persuade ministers to prioritise cases going through the courts.”
Although he adds “the six-month closure and resulting backlog had serious consequences for landlords whose tenants had built up serious non-COVID related arrears, or whose bad behaviour was making neighbours’ lives a misery.”
On 1 April, the remaining provisions of the Minimum Energy Efficiency Standard (MEES) came into force. This meant that, even in existing tenancies, landlords owning homes with an EPC rating of F or G were asked to improve their property rating to at least an E if they were to be legally allowed to continue letting it out.
There were exemptions, but generally speaking, landlords were asked to carry out up to £3,500-worth of work to improve their energy efficiency, which was particularly hard on those renting out older properties.
Five days later, on 6 April, changes in relation to Principal Private Residence (PPR) meant that, from that point onwards, any landlord renting out properties they previously lived in would face a higher tax bill if and when they sold the property.
This might have had an impact on landlords who were on the fence about selling.
Changes to buy-to-let tax relief were also made later in the month. Before 2017, any interest a landlord paid towards mortgage payments could be deducted from rental income before tax was paid on it.
By April 2020, the new 20 per cent tax credit system had finally been fully phased in.
This means that landlords can now no longer deduct mortgage interest payments from rental incomes.
To get around this, many landlords set up their own limited companies, as the changes only applied to private and individual landlords