The Buy to Let Market is Changing Discover How


Recently, there have been significant changes to the buy-to-let property market that will concern you if you’re a landlord or investor.  These changes have altered the playing field considerably and more are coming down the pipe this year.  This includes changes to tax, what fees can be charged for, and a rogue landlord list. The market is not as it once was.

So much so, that finding a life tenancy investment via a company like becomes more viable every day as a sound property investment.

Let’s take a closer look at the changes.

Mortgage Interest Tax Relief Cut
In the tax year 2017 to 2018, landlords benefited from a mortgage interest tax relief of 50%. Come April and the 2019-20 tax year begins, this will be slashed to 25%. A significant difference.

Letting Fees Ban in England
Come 1st June and letting agents are going to see most of their fee income evaporate. England is coming into line with Scotland and putting into place a ban on most fees that can currently be charged for.

The ban applies to all fees except the following:

  • Contract changes or termination at the tenant’s request
  • Council tax, communications services and utilities
  • Issues where the tenant is at fault such as lost keys

In addition to the fees ban the maximum deposit that can be taken is limited to five weeks rent unless the total rent is £50,000 a year or higher. In these cases, the maximum deposit is six weeks rent.

Wales are considering implementing a similar ban.

House in Multiple Occupation Licensing Change
Prior to October 2018 the rule criterion was as follows:

  • House had five or more occupants
  • Had shared facilities
  • Three storeys or higher

Now the three storey rule has been removed. This means that more and more landlords need to purchase an HMO license.

Increase in Stamp Duty
With the rise in stamp duty to 3%, many landlords are feeling the strain. In Scotland, the Land and Building Transaction Tax (LBTT) is now 4%. If you are considering investing in property this is all very off-putting.

Some are getting around the tax by investing in a life tenancy property. Here, you purchase a property with a lifetime tenancy lease. The current tenant who has to be aged 60+ is allowed to live in the property rent-free until they pass or move out. At this point the property becomes yours.

As well as avoiding the stamp duty increase, properties are normally purchased considerably cheaper than RICS valuations. Sometimes this can be almost 50% less.

This kind of investment drives capital growth.

Energy Efficiency Bites
Last April Minimum Energy Efficiency Standards (MEES) were introduced. This stated that newly rented homes or renewed tenancies had to obtain an energy performance certificate (CPC) rating of E or higher.

Form 2020, however, MEES is going to be rolled out to all rented properties. If you were hoping for government funding to make the change then you will be disappointed to learn that a recent announcement made clear that landlords would be expected to pay the first £3500 of any costs in improving MEES.

It is worth exploring if your property is exempt from MEES.

Rogue Landlord Database to Step up
The Rogue Landlord Database was introduced in 2018 but a Guardian Newspaper investigation revealed that in October 2018 not a single landlord was on the list. Also, at the moment it is only available to central and local government staff.

This is all set to change in 2019. Rogue landlords will start to be put on the list and it will freely be available to tenants.

Minimum Space Bedroom Regulation Change
In October 2018 the rules concerning minimum space changed where bedrooms are concerned.

The rules are:

  • One person under 10-years of age – minimum of 4.64 square metres
  • One person over 10-years of age – minimum of 6.51 square metres
  • Two people over 10-years of age – minimum of 10.22 square metres

If your room sizes fall short you have up to 18 months to rectify. Fines will follow if you fail to increase the square meterage of your bedrooms.

Reforms to Leaseholds
In 2019 more stringent rules designed to curb high ground rent and permission fees will be introduced. The smart money is on a ban on a house being sold as a leasehold and possibly caps on service charges, permission fees, and ground rents.

It is unclear if the changes will be rolled out to existing leasehold properties although again, it is likely to be rolled out at some point.

If you’re investing in buy to let in 2019 pay close attention to the tenure of properties.

Investing in property is still viable but it is imperative that you arm yourself with the facts. Also, explore life tenancies as they may avoid many of the headaches and brick walls you are sure to hit.

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