Landlords – can you continue to let your buildings?

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Are you confident your buildings will meet the coming changes to energy performance rules?

Energy Performance Certificate (EPC) legislation has been in statute since 2008. Since then there has been a progression of increasingly stringent regulations to cajole property owners to do their bit for the Government’s net zero 2050 pledge.

Since April 2018, the UK regulations on EPCs stated that commercial and residential properties had to meet a Minimum Energy Efficiency Standard rating of “E” before they could be let. Since 2020 buildings with existing tenancies had to meet the minimum standard and there are now plans to increase EPC ratings still further.

The MEES regulations make it unlawful to currently let a property with an EPC rating below E, subject to various exemptions, which must be registered online. The Government intends to raise this minimum and is currently consulting on how to implement this, so there is still uncertainty there.

There was a change with effect from 1 April 2023 for let commercial premises, such that the current prohibition on new lettings of sub-standard, non-domestic properties is now extended to the continuation of existing tenancies of a sub-standard, non-domestic (commercial) property.

Some confusion about the rules

The complexity of the rules and some changes in Government policy have led to a somewhat confusing situation where landlords don’t always know where they are going on this. Many are worried about the costs involved and how they are to deal with upgrades with tenants in situ.

Robinson & Hall, Land and Property Professionals since 1882, a commercial practice, offer a whole range of residential and commercial property services including renewable energy, architecture and building surveying consultancies. They are attempting to bring some clarity to this situation.

The practice is concerned that landlords / property owners are not all fully aware of their buildings’ requirements for energy efficiency (EPC rating) in the near future. The firm is busy spreading the word and preparing their clients for the coming enhancements to the regulations that might limit the ability of property owners to let their buildings.

The practice, in doing so, has produced a useful summary of the current and expected future legislation detailed in the chart below below. The items highlighted in yellow are not yet set and are pending Government announcements.

[Source: Robinson & Hall]

In March 2023, Grant Shapps MP announced that the residential enhancement of EPC for new leases would be pushed back to 2028.

This is in-line with the target date for implementing enhanced EPC of Grade “C” for continuing leases, which gives property owners five years to consider how they could improve the energy efficiency of their properties.

This announcement will give some respite for residential property owners. But it is proposed that all commercial properties, even those not triggering the need for an EPC, will be required to have a lodged EPC by April 2025.

This move may have big implications as the requirement for a minimum energy efficiency of Grade “C” for all new and continuing leases is expected in April 2027.

There are exemptions that may be applicable. If you are unsure whether you comply, or if you need assistance in checking an exemption or are carrying out works to improve the performance, then firms like Robinson and Hall will be pleased to assist.

The requirements for EPCs and the MEES legislation is now influencing the quality of properties and many landlords are making the most of any void periods to get ahead of the game to start moving towards more efficient buildings. They need to comply with the new rules and also meet modern occupancy requirements post-Covid so that they will let easily in the current economic climate.

Robinson & Hall have recently been involved in a number of schemes to make improvements to energy efficiency in buildings:

• A former vaulted roof chapel building was insulated and a new heating system installed to achieve a B rating for a commercial office.

• A 1960s factory and office in Bedford was re-roofed to incorporate insulation, efficient heating was installed and insulation injected into the cavity walls – predicted to achieve a Grade B.

• Twin skin roof system with spacer bars and fireproof insulation to a factory roof in Bedford.
• An office barn conversion received upgrades to heating and service provision to achieve a Grade A.

• A private dwelling was upgraded from a Grade E to an anticipated Grade B by installing a ground source heat pump, underfloor heating and additional insulation. The client obtained a £6,000 grant under the boiler upgrade scheme from the Government.

• A ground source heat pump and plant room installed for private residential property.

Robinson & Hall says: “be careful not to rely on old EPC information as the calculation methods have changed and the accuracy has significantly shifted.”

It is important that the correct upgrades and installations are used in order to effectively reach the desired EPC rating, and to make the property more desirable and far easier to let.

If you have a poorly performing property that’s difficult to let, has long void periods, then a detailed assessment is probably needed by property experts to asses the building’s future viability.

Perhaps now is an ideal time to look at upgrades that would improve energy efficiency and have the building reach modern occupancy standards.

robinsonandhall.co.uk

View Full Article: Landlords – can you continue to let your buildings?

REPORT: Thinktank says landlords should pay MORE tax to balance inequality

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Landlords should pay more tax to balance inequalities within the tax system, according to the Resolution Foundation.

The think-tank’s new report points out that while the top tax rate for employees stands at 53.4% including employer NICs, only 28% is paid on property gains.

It says property capital gains (excluding main homes) and rental income should be taxed at significantly higher rates; marginal CGT rates on assets other than shares should be 40%, 49% and 53% depending on income.

Increasing tax rates on rental income and self-employment would then enable the rate of employer NICs to be cut by 1%.

The Resolution Foundation explains how Britain needs to move away from its “simplistic and pernicious cycle of promising tax cuts while delivering tax rises, and towards reforming and improving our tax system so that it supports, rather than hinders, economic growth”.

New class of NI

Its report highlights how rental income is taxed at regular Income Tax rates but attracts no National Insurance. Instead, landlords should pay a new class of NI with a basic rate of 20% and a rate above £50,270 of 8%.

It explains: “Raising the overall basic marginal tax rate on rental income from 20% to 40% would clearly be a significant change for lower-income landlords and would no doubt need to be phased in, for example by 2% a year.

“But there is fundamentally no good reason why landlords should not pay NI equivalent to that paid by their working tenants, particularly given a CGT cut to take paper gains out of taxation.”

The 2025 stamp duty rise should also be cancelled, along with halving stamp duty for main homes and non-residential properties.

Read the tax proposals in full.

View Full Article: REPORT: Thinktank says landlords should pay MORE tax to balance inequality

We sell landlord property portfolios in less than 21 days for higher than market value

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This week the NRLA reported that one in three landlords are going to trim down their portfolios. A whopping 33% of landlords are currently selling throughout the UK. Of that 33%, most landlords agreed that they would be willing to take 80% of the value just to get rid of them because mortgage payments are out of control.

View Full Article: We sell landlord property portfolios in less than 21 days for higher than market value

BREAKING: Lisa Nandy confirms Labour has U-turned on rent controls

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Despite previously saying it would consider rent controls, Labour’s shadow housing minister Lisa Nandy has now confirmed that the party now opposes them, it has been reported.

Speaking at the Chartered Institute of Housing’s conference today, Nandy told delegates that the policy would be a ‘short-term fixing plaster’ to solve the housing crisis.

Her comments put her at odds with Labour’s London Mayor Sadiq Khan who has repeatedly said rent controls are the answer to the capital’s high rents.

There is also consternation within that such a key policy has been jettisoned by Labour, with the green party in Scotland and England accusing Nandy of ‘flip flopping’.

Crisis deepends

Nandy said: “As the mortgage crisis deepens – for homeowners and renters alike – it is perhaps inevitable that the debate has turned again to short term fixes.

“And when housebuilding is falling off a cliff and buy-to-let landlords are leaving the market, rent controls that cut rents for some, will almost certainly leave others homeless.”

Ben Beadle, Chief Executive of the National Residential Landlords Association, welcomed Labour’s change of heart, adding that: “We agree with Labour that rent controls would do nothing to address the rental supply crisis that tenants across the country now face.

“What renters need is a proper plan to boost the supply of homes for private rent alongside all other tenures.

“Housing benefit rates should also be unfrozen without delay to support vulnerable tenants who are struggling to access the rental market.” 

Rent controls also attracted lukewarm comments in the Welsh parliament this week when First Minister Mark Drakeford said they were a ‘blunt instrument’ – although his counterparts in Scotland would disagree, where rent controls were recently extended until next year.

View Full Article: BREAKING: Lisa Nandy confirms Labour has U-turned on rent controls

Tenant’s £120,000 claim threatens entire deposits protection system

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A tenant who failed to convince a judge that his landlord did not give him statutory tenancy deposit information is taking his case to the High Court.

Merryck Lowe’s application – relating to a claim for £120,888 against charitable landlord, the Governors of Sutton’s Hospital in The Charterhouse – is pending – and raises issues about tenancy deposit protection schemes.

During the previous case last October, Lowe claimed to have had a sequence of ten tenancies over the course of 12 years, in respect of each of which his £4,029 deposit was taken and held.

He said he had never received the statutorily prescribed information relating to deposit protection; however, it was thrown out by a county court judge.

Unsuccessful

In 2021, Lowe had also tried unsuccessfully to claim that Charterhouse operated an unlicensed HMO and had harassed him.

The landlord argued that the deposit paid was only £3,300, there were fewer than ten assured shorthold tenancies, that the deposit was protected and there was “no material want of compliance in relation to the provision of the statutorily prescribed information concerning the protection of the deposit”.

The judge agreed and said the landlord’s professional agents had sought to comply with the law and that if they had failed to do this, “it was not in the absence of a genuine attempt”. Any issues only related to the final tenancy agreement.

After the previous case, the landlord failed in its attempt to win costs from Lowe and his legal firm when he tried to claim a rent repayment order.

It said he had acted unreasonably in making an application that it operated an unlicensed HMO and had also harassed him because it was “hopeless”. A tribunal had previously dismissed Lowe’s original HMO claims.

View Full Article: Tenant’s £120,000 claim threatens entire deposits protection system

Tenant’s £120,000 claim to throw deposits protection system into confusion

admin    Uncategorized     agents

A tenant who failed to convince a judge that his landlord did not give him statutory tenancy deposit information is taking his case to the High Court.

Merryck Lowe’s application – relating to a claim for £120,888 against charitable landlord, the Governors of Sutton’s Hospital in The Charterhouse – is pending – and raises issues about tenancy deposit protection schemes.

During the previous case last October, Lowe claimed to have had a sequence of ten tenancies over the course of 12 years, in respect of each of which his £4,029 deposit was taken and held.

He said he had never received the statutorily prescribed information relating to deposit protection; however, it was thrown out by a county court judge.

Unsuccessful

In 2021, Lowe had also tried unsuccessfully to claim that Charterhouse operated an unlicensed HMO and had harassed him.

The landlord argued that the deposit paid was only £3,300, there were fewer than ten assured shorthold tenancies, that the deposit was protected and there was “no material want of compliance in relation to the provision of the statutorily prescribed information concerning the protection of the deposit”.

The judge agreed and said the landlord’s professional agents had sought to comply with the law and that if they had failed to do this, “it was not in the absence of a genuine attempt”. Any issues only related to the final tenancy agreement.

After the previous case, the landlord failed in its attempt to win costs from Lowe and his legal firm when he tried to claim a rent repayment order.

It said he had acted unreasonably in making an application that it operated an unlicensed HMO and had also harassed him because it was “hopeless”. A tribunal had previously dismissed Lowe’s original HMO claims.

View Full Article: Tenant’s £120,000 claim to throw deposits protection system into confusion

EXPERT: Landlords buying via personal mortgages facing more ‘stress testing’

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Landlords buying properties via personal buy-to-let mortgages are facing greater ‘stress testing’ of their affordability as economic jitters unsettle lenders, it has been revealed.

Financial expert Louisa Sedgwick (main picture) from broker Paragaon says that, while landlords applying for mortgages through limited companies are often ‘stressed’ at 125%, those applying as individuals must meet a higher 145% figure.

A stress test normally involves the lender assessing a landlord’s rental income in relation to the mortgage payment, and taking into account various variables such as likely changes in rent and interest rates.

Sedgwick says this, along with the ability of limited company landlords to offset mortgage interest against tax, means those buying properties through company structures is on the rise, with a majority of brokers expecting this to continue over the next 12 months.

Best option

She adds: “While limited company structures may not be the best option for every landlord and we’d always recommend seeking professional, independent advice, these advantages are becoming even more evident in the current market where the unsettled economy has made it necessary for lenders to tighten up stress testing.

“This is why I think the brokers we spoke to have got it spot on and we’ll continue to see a shift towards more limited company lending.”

Further Paragon research found that a profitable full-time income is made by 43% of landlords whose portfolios are owned within a limited company structure, compared to 26% amongst investors who hold properties in their personal names.

And as LandlordZONE reported recently, those seeking to remortgage are also facing stress testing problems.

View Full Article: EXPERT: Landlords buying via personal mortgages facing more ‘stress testing’

BTL mortgage brokers predict strong demand for limited company lending

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Buy to let mortgage brokers are predicting a big rise in limited company lending for BTL landlords in the coming year, a survey reveals.

According to Paragon Bank, 49% of brokers expect to handle a larger volume of buy-to-let mortgages for portfolio landlords who operate through limited companies.

View Full Article: BTL mortgage brokers predict strong demand for limited company lending