In light of the impact of the Covid-19 pandemic, 2020 has certainly been a time for great change in the private rental sector in Liverpool. To gain some perspective, let’s cast an insightful eye over the last several months, exploring what kind of year it’s been and what 2021 could hold for landlords.
- In January 2020, Communities Secretary Robert Jenrick turned down an application to keep the Liverpool City Council citywide landlord licence scheme going from April 2020. He claimed the council did not provide robust evidence to show low housing demand across the city despite it being backed by Merseyside Police, Mersey Fire and Rescue Service as well as most residents who responded to the consultation. However, this was great news for Liverpool landlords as there is already enough legislation to protect tenants in their homes.
- The tenant eviction ban was the first direct action taken as a result of the pandemic. This emergency legislation (the first of many) suspended all new evictions during the first national lockdown. The Government advised that landlords and tenants should work together to establish an affordable repayment plan, taking into account tenants individual circumstances.
- Landlords were allowed a three month mortgage payment holiday on all buy-to-let mortgages to make up for potential lost rental payments.
- On 1 April, the remaining provisions of the Minimum Energy Efficiency Standard (MEES) came into force. This meant that, even in existing tenancies, landlords owning homes with an EPC rating of F or G were asked to improve their property rating to at least an E if they were to be legally allowed to continue letting it out.
- As of April 2020, Landlords are no longer able to deduct any mortgage expenses from rental income to reduce their tax bill. Instead, they'll receive a tax-credit, based on 20% of your mortgage interest payments. To get around this, many landlords set up their own limited companies, as the changes only applied to private and individual landlords
- In June 2020, the Tenant Fees Act came into force, stating that landlords and letting agents can’t charge any additional fees such as those relating to cleaning, pets, inventories, admin and referencing. It also meant that deposits were limited to a maximum of five weeks’ rent if the annual rent is below £50,000. This year, the act was extended.
- The new Electrical Safety Standards in the private rented sector also came into force on the 1 June. According to the Government, the new regulations were intended to bring electrical safety standards in line with the more stringent gas safety standards.
- On 8 July 2020, the Chancellor of the Exchequer announced a temporary stamp duty holiday that cut the rate of stamp duty to zero per cent for all properties £500,000 or under until 31 March 2021. However, Landlords buying new buy-to-let investments were still subject to a 3 per cent SDLT surcharge
- Another boon from Chancellor Sunak arrived in the form of the Green Homes Grant, which introduced a grant for homeowners and landlords to make their homes more energy-efficient. The deal meant the Government would pay at least £2 for every £1 spent up to a maximum of £5,000.
- Liverpool City Council cabinet approved a plan to start consultation on a new Landlord Licencing Scheme, which would cover around 80% of privately rented properties. The three-month consultation ran until October with a submission made to the Government for ministerial consideration in December 2020. We will keep you updated.
- A new Section 21 form came into effect in September, adding further delays to the already lengthy possession order proceedings. The new 6A form requires landlords to now give a minimum of six months’ notice instead of two. Section 21 notices now also expire after 10 months instead of six. This means landlords that hadn’t issued possession proceedings in that time would need to serve a new notice. As a result, the Section 21 notices are no longer a straightforward route for landlords seeking possession.
- The government asked bailiffs not to enforce court possession orders in areas with the highest Coronavirus restrictions. So, although evictions can still proceed through the courts, bailiffs will not enforce court orders in Tier 2 and 3 areas. The High Court Enforcement Officers Association has agreed to the request, which means that in effect tenants in Tier 2 and Tier 3 areas will not be evicted until at least 12 January 2021.
- The Nationwide reports property prices are 6.5% higher than a year ago.
...So what’s in store for Landlords in 2021?
1 January: Brexit
- Brexit will naturally bring new legislative changes for UK landlords including right to rent checks and mortgage interest rates.
29 January: Second reading of the Dogs and Domestic Animals (Accommodation and Protection) Bill
- For landlords, the new year starts with the second reading of a proposed new law which would allow tenants to have a pet without their landlord’s approval. If passed, this would mean (as long as renters can prove they are responsible owners) tenants would have an assumed right to take a pet into any rented accommodation.
1 March: Changes to Eviction Legislation
- Due to the pandemic, landlords are currently legally obliged to give tenants six months’ warning for all evictions. While there are caveats for certain circumstances – (domestic abuse, anti-social behaviour, and more than six months’ worth of rent arrears) – this law has made eviction much more difficult and lengthier. The good news for landlords is that this rule is set to end in March 2021.
1 April: Stamp duty changes
- From 1 April all non-UK residents purchasing property in this country will be liable to pay an additional two per cent stamp duty surcharge. However, if you pay the stamp duty surcharge and then go on to become a UK resident within 12 months, you may be eligible for a refund.
1 April: Deadline for electrical compliance
- All Landlords must have an electrical safety compliance certificate by the 1st April otherwise you will be breaking the law. The certificate proves that fixed electrical installations have been safety tested by a qualified electrician, ensuring the safety of your tenants.
Other potential changes without any fixed dates
Deadline for landlords to implement MTD
- If you’re a landlord with a turnover of more than £85,000, you should be using MTD (making tax digital). The system requires you, the landlord, to send HMRC quarterly updates of income and expenses via your digital tax account. This works out your tax as you go, so at the end of the year, rather than completing a tax return, you simply sign a declaration to say the numbers are accurate.
Abolition of Section 21
- It looks like 2021 may be the year of the abolition of Section 21. Currently, S21 allows landlords to evict tenants with a notice period of six months either after a fixed-term tenancy ends, or during a tenancy with no fixed end date. Part of the Government’s planned Renters’ Reform Bill, the abolition of S21 would essentially mean that all evictions would need to go through the courts.
Potential increase in Capital Gains Tax
- While there has been widespread speculation that there would be an increase in capital gains tax (CGT) this year, Rishi Sunak made no mention of it in the November mini-budget. However, he did comment that tax increases in 2021 were now ‘inescapable’, leading many to believe that the predicted rise in CTGT isn’t off the cards but rather postponed until next year.