Welsh landlords get details on upcoming PRS shake-up

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The Welsh government has provided more details of its sweeping new renting reforms which aim to simplify the sector. 

Renting Homes means tenants – contract-holders – will soon have improved succession rights, setting out who has a right to continue to live in a property after the current tenant dies, and it will also be easier to add or remove people to the contract.

Electrical testing

Landlords will have a strengthened obligation to ensure that properties are fit for human habitation, including electrical safety testing and ensuring working smoke alarms and carbon monoxide detectors are fitted. Landlords will have to provide contract holders with a written copy of the contract, setting out the rights and responsibilities of both parties. For new rentals, the written statement must be issued within 14 days of occupation under the contract, while existing tenancy agreements will convert to the relevant occupation contract on the day of implementation. Landlords have a maximum of six months to issue a written statement of the converted occupation contract. 

Minimum security

Landlord break clauses will only be able to be incorporated into a fixed term occupation contract if it has a fixed term of two years or more; they won’t be able to exercise a break clause within the first 18 months of occupation. Meanwhile, the no fault notice period will remain at six months, meaning that all contract-holders will have a minimum 12 months of security at the start of their tenancy. If a landlord issues a no fault possession notice in response to a request for repair, the court can refuse to make a possession order and they won’t be able to issue a similar notice for another six months. Landlords will also need to be registered and licensed by Rent Smart Wales to give notice.

Climate Change Minister Julie James says these changes replace various, complex pieces of existing legislation and case law with one clear legal framework. She adds: “When in place, contract-holders in Wales will have greater security of tenure than in any other part of the UK.”

The Welsh Government has launched a national awareness campaign to tell landlords and tenants about the changes which take place on 15th July.

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Landlords told to expect clampdown on unfair rent rises

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Landlords will not be able to include clauses to hike up rents just before tenancy agreements are due to expire, as part of a government pledge to address renter insecurity in its upcoming White Paper.

During a Commons debate, Housing Minister Eddie Hughes said while it was for landlords and tenants to agree the amount of rent that should be charged at the outset of a tenancy, it was keen to avoid any unintended negative consequences related to abolishing Section 21, including the use of a mechanism to force tenants out. However, Hughes would not be pushed on the timetable for introducing the Renters Reform Bill which was delayed last year. Labour’s Catherine West MP said there was a huge power imbalance between private landlords and their tenants, which was upheld by existing housing legislation, and urged the government to end Section 21 notices.

Sector consultation

Hughes confirmed the Bill would be published later this year but said it was important to consult widely with people from across the sector to ensure it got it right. “Hearing and listening to these views would not only ensure that the White Paper and future legislation actually address the challenges that exist, but help to create a system that works for everyone.”

He stressed he was committed to rebalancing the relationship between tenants and landlords to deliver a fairer, more secure and more desirable private rented sector. “We get it: we understand the challenges that exist in the sector, and we are open to dealing with them. That is why it is so important that we continue to drive through our reforms to ensure that we deliver on our aims.” Added Hughes: “We are aware that we need the support of the entire private rented sector if we are to achieve these goals.”

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Osbourne’s private landlords mortgage interest trap, but?

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Osbourne’s private landlords mortgage interest trap, but what if there is a way of changing this by releasing equity to purchase holiday or commercial property?

I have three private buy to let properties, that push me into the 40% tax band every year.

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Major works gone bad – Decisions?

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Following a couple of years of ‘major works’ costing so far £1m in a block – it has as expected by the leaseholders gone very badly wrong! Covid didn’t help, but the major issue was with the works to the 1930’s critical windows.

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Commercial Tenancies – What can be charged?

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I have a tenant who wants to retire from his business, and he has an employee who wants to purchase the business/goodwill and goods and take over the lease. It has been established the lease cannot be assigned, so I have agreed in principle that I will accept a new lease with the proposed new tenant.

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Environmental concerns have big impact on rental property ownership

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Just as residential landlords are contemplating the costs of bringing older properties up to the proposed new standard – very likely EPC band “C” required by December 2025 – so too are commercial landlords.

See: Compulsory EPC band “C” by 2025 causing confusion

Covid friendly

Those with office and retail investments, and some industrial buildings, also face having to pay out the substantial additional costs involved in making their buildings Covid friendly.

These prospects will in the meantime have a negative impact on the valuation of those properties needing this additional work, costs which will inevitably be factored into any purchase decision when buyers do their sums.

New research* conducted by international environmental consultants Deepki shows how environmental sustainability in buildings can have a dramatic affect on their value.

Valuation concerns, commercial property

Deepki claims to be the only company in the world offering a fully populated Environmental, Social, and Governance (ESG) data intelligence platform to help commercial real estate investors, owners and managers improve the ESG performance of their real estate assets, and therefore enhance value.

Deepki’s recent research finds the majority of respondents predicting that commercial real estate assets will depreciate by over 20% when they have poor ESG credentials. Around 66% of UK institutional commercial real estate investors and property professionals say they have seen a decrease in both the capital and rental value of their portfolios due to poor sustainability performance.

This, coupled with the hit that office and retail property has sustained as a result of Covid-19, and their effect on values has been quite dramatic. For example, rental values on some high street retail units have fallen by over 50% in the last year or two.

Over three-quarters of the respondents to the Deepki surveys predict the capital value and rental income of their real estate assets will depreciate by over 20% just on their ESG performance alone, highlighting the growing importance of commercial real estate sustainability in the UK.

A high carbon footprint

The research also draws attention to the scale of the ESG challenge facing UK commercial real estate. Around 12% of those owners questioned reported that 5% to 10% of their real estate portfolio has poor energy efficiency or a high carbon footprint. A further 21% and 42% said that this was the case for 10-15% and 15-20% of their assets respectively.

Action being taken to address poor ESG performance

Here is a list of the actions the survey respondents said they were likely to take to address the poor ESG performance of their real estate portfolios in the future:

• 72% said that they would actively engage with the property management team to make improvements

• 61% said they would invest in improving energy efficiency

• 45% said they would work with a third party to develop an ESG strategy and measure performance against KPIs

• 28% said they would demolish and rebuild failing assets

• 10% said they would sell their assets

Katie Whipp, Head of Deepki UK, said:

“ESG performance is now fundamental to the financial performance of assets within the UK commercial real estate sector, affecting both capital value and rental income. Real estate investors and owners recognise that they will see the value of their assets decline if they do not make the transition to net zero. However, this path is often complex and requires data intelligence, analysis and the expertise to take the appropriate action.”

Deepki says its scalable SaaS platform enables clients to collect ESG data, get a comprehensive overview of their portfolio’s ESG performance, establish pathways, assess their performance and report to key stakeholders, facilitating their transition to net zero. The platform is supported by carbon and ESG experts who partner with clients across data collection and analysis, through to ESG strategy definition and implementation.

The RICS Red Book and sustainability

RICS now say that effective from 31 January 2022, specific good practice reporting requirements on sustainability have be included as part of the Red Book.

“To further deliver the practical application of these standards we will be launching a new guidance note Sustainability and ESG in commercial property valuation and strategic advice.

“The updated guidance provides practical and globally relevant principles for the delivery of the sustainability and ESG requirements required by the Red Book.”

This new global Guidance Note will, RICS says:

• Put RICS professionals at the forefront of market trends and deliver on client demand for sustainability and ESG reporting in valuation and strategic advice.
• Provide a practical framework for delivering on ESG reporting requirements in professional valuation advice.
• Empower our professionals to give practical valuation advice informing sustainable, socially responsible investments.

*Research conducted by Pureprofile with 100 institutional commercial real estate investors and commercial real estate professionals in October 2021. Read the full report, here.

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Holiday lets loophole to be closed to prevent tax evasion

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Landlords and second-home owners have been told to pay council tax if they can’t prove that their properties are genuine holiday lets after the government announced it was closing a tax loophole.

Some owners currently claim their often-empty properties are holiday lets to avoid paying council tax and access small business rates relief by declaring an intention to let the property out to holidaymakers.

Following concerns that many never actually let their homes and are unfairly benefiting from the tax break, from April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, by providing evidence such as the website or brochure, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Privileged positions

Secretary of State for Levelling Up, Michael Gove (pictured), says: “We will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

A government consultation revealed that the overwhelming majority of respondents agreed that the current criteria should be strengthened.

Some tourism trade bodies argued that it gave second homeowners who might let out their property on an ad-hoc basis, an unfair commercial advantage over professional businesses.

Owners of holiday lets that can’t meet the strengthened criteria have been warned to notify the Valuation Office Agency as soon as possible so that their property can be assessed as domestic and revert to a council tax valuation – or risk a large, backdated council tax bill.

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HMRC gives Self-Assessment taxpayers more time to ease COVID-19 pressures

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HM Revenue and Customs (HMRC) has decided to waive late filing and late payment penalties for Self-Assessment taxpayers for one month – giving taxpayers the extra time, if they need it, to complete their 2020 to 2021 tax return and pay any tax due.

HMRC says it recognises the pressure faced this year by Self-Assessment taxpayers and their accountant.

This years as a one-off the penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.

The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February

For anyone who cannot afford to pay their Self-Assessment tax by the 31 January deadline, they will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April.

Interest will be payable from 1 February, as usual, so it is still better to pay on time if possible.

See: HMRC gives Self Assessment taxpayers more time to ease COVID-19 pressures

If you cannot afford to pay your latest bill then you can set up a payment plan to spread the cost of your latest Self-Assessment bill if all the following apply: you owe £30,000 or less you do not have any other payment plans or debts with HMRC your tax returns are up to date it’s less than 60 days after the payment deadline.

You can choose how much to pay straight away and how much you want to pay each month. You will have to pay interest.

See: Pay your Self Assessment tax bill

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BREAKING: Landlords left out of cladding remediation fund initiative – for now

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Housing secretary Michael Gove has revealed that landlords will not be included in the cladding remediation fund initiative for affected residential tower leaseholders announced this week.

A hint of this was given in the original announcement that the £4 billion ‘fund’ to remediate cladding on towers under 18.5m but over 11m tall would be for ‘leaseholders living in their own flat’.

But his officials have now confirmed that Gove has decided that the funding will be targeted initially at owner-occupiers and that ‘negotiations…will explore whether this support should extend to other leaseholders such as landlords’.

In a statement released today, Gove says: “We have scrapped the proposal for loans so that leaseholders living in their own medium and high-rise buildings should not pay a penny to fix dangerous cladding.

“We will work with industry to ensure that the support is directed firstly at those leaseholders living in their own homes.

“Working with members of both Houses, we will look to bring a raft of leaseholder protections into law through our Building Safety bill.
“And we will restore much needed common sense on building safety assessments, ending the practice of too many buildings being declared unsafe.”

“More than 4 years after the Grenfell Tower tragedy, the system is broken.

“Leaseholders are trapped, unable to sell their homes and facing vast bills.

“But the developers and cladding companies who caused the problem are dodging accountability and have made vast profits during the pandemic whilst hard-working families have struggled.”

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Gove closes business rates for nonholiday holiday homes

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Homeowners who leave properties empty while pretending to let them to holidaymakers will be targeted by HMRC under the new rules that holiday lets must be rented out for a minimum of 70 days a year to qualify for business rates.

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