It’s not the best time to be a private landlord at the moment – it seems that every week brings more new challenges.
Media reports suggest we still have a shortage of affordable housing. Even with ambitious new build policies, house purchase is not going to be the right solution for all, making the need for the private rented sector as strong as ever.
Yet, the market is getting tougher for buy-to-let investors. Here are just some of the recent changes that will impact them:
The Bank of England is proposing that banks and building societies will have to consider landlords’ wider finances and not just their rental income when deciding whether to lend. They will also have to take account of fees and management costs and also the impact of future higher taxes on borrowers’ cash flow.
These proposals are currently under consultation and could make significant cuts in approvals for new lending and also re-mortgaging.
In the 2016 budget, stamp duty on second homes, which includes buy-to-let, has gone up by 3% above the normal rates.
Currently buy-to-let investors can offset mortgage interest against income at the market rate and automatically offset costs to the value of 10% of rental income every year.
By 2020-2021, investors will no longer be able to offset interest directly against income, instead receiving a tax credit to offset 20% of their mortgage costs against income tax, and they will only be able to charge actual incurred costs.
Civil court fees have risen across the board, but this includes increases to the fee for obtaining a possession order and the cost to transfer the order up to the High Court for enforcement under a writ of possession under Section 42 of the County Courts Act 1984 (going from £50 to £100).
Landlord licensing and tenant checks
Many local authorise are introducing licensing schemes for landlords and the “right to rent” legislation is adding further administrative burden on landlords.
Many politicians in opposition to the current Conservative government, including Jeremy Corbyn leader of the Labour party, are said to be in favour of some form of ‘rent control’ restricting landlords on what they can charge tenants. This is something that is currently seen in cities like New York and Berlin.
There is a hint of silver in recent events, however. The Senior Master of the Queen’s Bench division has added further clarification to the process for transferring up a possession order for the eviction of tenants to the High Court.
In early 2015 guidance was issued on the process of transferring up the order under Section 42 of the County Courts Act 1984, with Form N244 identified as the correct one to use.
Last month, the Senior Master ruled that Section 41 may not be used, but has issued a new form for the application for the writ, PF92. This regularisation of the process will make it easier for landlords to use High Court Enforcement Officers (HCEOs) to conduct their eviction if the delay from the County Court bailiffs is, as is often the case, of several weeks duration.
Where does this leave the private rented sector?
There is likely to be more pressure on landlords to ensure their yield is high, which in turn will put pressure on tenants. If the amount of rental property available decreases, which seems likely, this is also likely to increase rents and put tenants under further financial strain.
With this in mind, it should at least become a little easier and quicker for landlords to remove tenants who aren’t paying their rent. I propose that all landlords should have the automatic right to transfer their order for possession to the High Court for enforcement without the need to apply to court for permission to do so.
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance