The assault by the current Government on private landlords seems to be continuing at pace with further legislation coming to pass and others in the pipeline for the future which will make renting property more costly.
Firstly, Southend Borough Council have introduced a license for private landlords within certain areas of Southend & Westcliff.
Currently, anybody can rent out a property without any checks having to take place. Southend Borough Council is to introduce a license for private landlords to keep a check on them and ensure that they play by the rules. Declarations will have to be made to obtain the license including stating ownership, type of property, condition, and rent achieved. Any false statements or breaches can see licenses removed and therefore the landlord would not be able to rent the property again or see the council dishing out some hefty fines.
I completely understand the logic behind it (anything to give unscrupulous landlords a kick up the backside must be applauded), but it is another layer of bureaucracy for those that just want to top up their pension pots or are purchasing properties to rent out to help their own children in the future.
It is not just the inconvenience of filling out some incredibly detailed forms that you will have to worry about though. This license comes at quite a considerable cost – £668 for a 5-year license to be exact. This, on top of your service charge for a leasehold property, plus your ground rent and your managing agents’ fees, plus the fact that you can’t now claim back the interest on your mortgage payments – the prospect of a buy to let investment is now very different!
Additionally, a license is required per property a landlord owns. Meaning a landlord with a rental portfolio will have a considerable cost to front. Investors I know that have bought multiple properties in the new developments in Victoria Avenue are certainly going to feel the pain. They weren’t making a lot anyway on a monthly basis and with new developments being built there, they weren’t even seeing the capital growth either.
I think it’s inevitable that I am going to have to help my daughter get onto the property ladder in 15-20 years. I hoped to invest in a buy-to-let property now, so whatever profit I make in those years can help her buy her first property. Now, however, I must factor these new costs into my decision! I certainly won’t be looking in the areas currently highlighted for the licensing scheme though and would probably think twice about the areas just outside just in case the council sees this as a bit of a cash cow and extends the areas further.
The second large change for landlords that will be coming into force in 2025 are the changes proposed for the EPC’s (Energy Performance Certificates). Currently, the threshold for rental properties is an E band. This means that it is currently illegal to rent any property with an F or G rating. This is to ensure that rental properties are efficient and fit for purpose.
The new legislation will state that the threshold is raised to a C band. This might not seem like much but will make a huge difference to landlords and their properties. The majority of the stock we have to rent tends to be converted flats and whilst these are probably the most desirable types of properties for prospective tenants, they aren’t actually that efficient.
Provisions can be made with double glazed windows and modern boilers but things like cavity wall or additional roof insulation may not be possible even if the intention is there from the landlord. Those in older purpose-built apartments may also have problems. They won’t have responsibility for the fabric of the building and therefore may not be able to get the windows changed, upgrade heating systems or upgrade insulation.
This is why I am highlighting it now. Some properties may need some substantial changes and they may not be possible to be carried out with tenants in situ. It may be worthwhile that the next time your rental property is empty, and a tenant has vacated before you rush to get another tenant in have a look and see what you may need to do, how long it will take, and probably most importantly how much it will cost!
There is talk that after the law has changed and the threshold is raised to a C band that they will increase it further in the years afterwards to a B band so any work that you have to carry out should probably be future-proofed in order to take this into consideration.
As ever it all seems like doom & gloom for private landlords, but it hasn’t deterred me. I will probably get something this year to rent out. Inevitably though, everything I look at is just above my budget. By the time you take into consideration the deposit required for buy to let mortgages, additional stamp duty for buyers of second homes, solicitors’ fees, possible void period to get a tenant in, service charges, and all the other fees it is a very big initial investment that has to be considered very carefully.