If you are thinking of becoming a landlord, or already own residential property in the UK as an investment, this article provides you with a brief overview of the recent changes in legislation which landlords should be aware of.
Homes (Fitness for Human Habitation) Act 2018
On 20 March 2019 the Homes (Fitness for Human Habitation) Act 2018 (Act) came into effect and is intended to improve the standard of living for tenants in privately rented accommodation.
The Act applies to all new residential leases with a term of less than seven years and implies an obligation into the tenancy agreement that the property must be fit for human habitation at the start of the tenancy and that the property will remain so for the duration of the tenancy. Existing landlords should note that the Act applies to periodic tenancies which began prior to 20 March 2019, such tenancies will have a grace period of one year and will be required to comply with the Act starting from 20 March 2020.
When determining whether a property is fit for human habitation, there is no set definition. Consideration, however, will be given to matters such as but not limited to; freedom from damp, ventilation, water supply, drainage and sanitary conveniences at the property. Regard will also be given to the Housing, Health and Safety Rating System as introduced by the Housing Act 2004. A landlord’s obligation to ensure a property is fit for human habitation extends to the communal areas of a building which are enjoyed in common with the other tenants or occupiers for example, the entrance halls and stairwells.
If a landlord fails to comply with the Act, the tenant is entitled to file court proceedings against the landlord for breach of the implied term. The court is able to not only order the landlord to undertake any required remedial works but is also able to grant an order for damages.
Landlord Licensing Scheme
Whilst there has always been a requirement for landlords of houses with multiple occupation to obtain a licence before they were able to let their property legally, a number of local authorities have now launched additional licensing schemes across the private rented sector, with a view to improving standards within the sector.
If a property is within a local authority which has implemented a landlord licensing scheme, the landlord must apply for a licence for each property they own prior to renting it out. The local authority will charge a fee for the licence which will be valid for approximately five years. Under the scheme, landlords are expected to comply with certain mandatory conditions, for example the maintenance of electrical appliances supplied at the property. In addition to the mandatory conditions, local authorities can impose their own licence conditions.
Therefore it is important that if you are considering buying an investment residential property in the UK, your solicitor carries out the appropriate searches with the local authority to establish whether the property falls within a local authority which has implemented a landlord licensing scheme. Failure to obtain the required licence can result in punishment which may include paying up to 12 months’ rent back to the tenant or the landlord may be prevented from renting out a property in the future. In addition, failure to comply with the terms of the licence means that a landlord could be prosecuted or face a civil penalty of up to £30,000.00.
Stamp Duty Land Tax
On 11 February 2019, the government published a consultation proposing a 1% surcharge on the amount of Stamp Duty Land Tax payable by non-UK residents on the purchase of residential property in England and Northern Ireland.
Helen Coward, a Senior Associate in our Corporate Tax department has prepared a note which looks at the impact of the proposed surcharge in more detail which can be found here: https://www.charlesrussellspeechlys.com/en/news-and-insights/insights/private-client/2019/buyers-beware-even-higher-stamp-duty-land-tax-on-purchases-of-uk-residential-property/