BTL Changes. Are you prepared?
After a busy 2017 for landlords, it may come as no surprise to hear that 2018 has more in store for the buy to let sector.
As well as the second phase of tax relief reductions coming into force, there are two other new changes heading the way of landlords relating to HMOs and EPC ratings - and they come into force this month.
Changes to HMO licensing
From April 2018 many landlords of Houses of Multiple Occupancy (HMOs) will require new licenses. At the moment, some 60,000 HMOs require a license, which may now increase by a further 174,000. Since 2004, a landlord with a property housing 5 or more unrelated occupants, or with over 3 stories, had to apply for a license from their local authority. This will now apply to all HMOs, and will require a set of minimum standards on room sizes, waste disposal and storage to be met. Those not prepared could find themselves needing to do work on their property in order to comply. As well as possible fines, Landlords who fail to catch up to the new rules in time may also find themselves with rooms they can no longer rent out. These new changes could also create an income gap that will put even more pressure on landlords already dealing with several recent financial headwinds. Fortunately, there is likely to be a grace period of six months to adapt to the new rules.
New standards for EPC ratings
As of April 2018 it will be unlawful to let or lease a residential or commercial property that has an Energy Performance Certificate (EPC) rating of F or G. These changes are designed to improve the efficiency of homes in the private rentalsector. Although this will be a requirement of all new lets and renewals of tenancies, it will not be until April 2020 that the rules will apply to all tenancies. Landlords letting out a commercial property, or a house to a tenant, could face fines of up to £5,000 for non-compliance. Older properties are likely to need the most work to bring them up to standard. Many will lack double glazing and are likely to have solid walls with no cavity for insulation. Landlords can often improve their EPC rating through insulation, boiler replacements, double glazing and cutting out draughts. Problems may arise if a landlord is letting out a house or flat after April that does not have the required EPC rating of E, which may include renewing a commercial lease. This may cause issues as an EPC survey for the period between Q1 2008 and Q1 2015 showed that 35% of commercial buildings and 26% of domestic properties had a rating of E, F or G.
If you're reading this and you'd like to discuss these changes and what it might mean for your investment plans then please don't hesitate to contact us!