Television programmes such as BBC's 'Homes Under the Hammer' may lead would-be investors to assume that property development and letting is straightforward. But the reality is that it's not and this Government is determined to raise standards and drive out rogue landlords.
The changes in the tax regime which come into effect next April will reduce the amount of tax relief on mortgage payments to just the basic rate of 20%. The loss of the automatic 10% annual write down on repairs/wear and tear announced in the last Budget will also make letting property a less attractive option for private investors.
In addition, from 1 October 2015, The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 have imposed new requirements on all landlords to follow which, if not observed, will have serious consequences. These regulations require a landlord to supply yet more prescribed information to prospective tenants on top of the existing requirement to protect any deposit and to supply prescribed information on how it is protected.
Landlords will also now have to supply an Energy Performance Certificate (EPC), a gas safety certificate (if the property has a gas supply), and a copy of the Government’s "How to rent: the checklist for renting in England". This guide can be given by hard copy or by email. There is no need to give the tenant another copy if the guide changes or if the tenancy is renewed – just one copy at the outset is sufficient.
The regulations have also changed the section 21 notice, with the new form being required after 1 October.
When these change are rolled out throughout England, the requirement to check the immigration status of prospective tenants will also increase the amount of work required before a letting can commence and income starts to come in.
Martin Codd, head of the Penningtons Manches property entrepreneurs group, says: “One area where we find investors get into difficulty is when they come to us seeking to evict a tenant and we ask if they have complied with the preconditions before an application for possession can be made.
“The consequences of not following these new regulations mean that no application for possession can be brought because a section 21 notice seeking possession cannot be served until they have been complied with. As a result, before solicitors are instructed to seek possession, landlords must ensure they have all their paperwork in order.”