The Renters Reform Bill is the latest of many factors leaving little choice for some private buy-to-let landlords but to sell up, a legal expert says.
Gina Peters, Head of Landlord and Tenant at Dutton Gregory, says "many landlords have been asking whether it is actually beneficial being a landlord in 2023, due to all the constraints, lack of Government help, plus introduction of the Renters Reform Bill. Savills has found that 25,000 homes sold in the UK between April and May of this year, were by landlords. The recent increase in buy-to-let landlords selling their properties could see an alarming reduction in the number of privately rented homes, with private landlords expecting to bank more than if they were to keep their portfolios. However, with more of the population being unable to afford to buy their own home, the UK’s dependency on the rental market is more so than ever. This is a really uncertain time if you are a private landlord. Up to the year 2000, property owners were eligible for mortgage interest relief at source, which provided valuable tax relief for higher- rate taxpayers.
More recently, changes have also been made to capital gains tax thresholds, and in April 2023 the capital gains tax-free allowance was reduced from £12,300 to £6,000. In April 2024, this will be decreased to £3,000, meaning landlords will have to pay out more in capital gains tax when selling a property. Official figures from HM Revenue and Customs, based on capital gains tax data, saw that between 2021-2022, the sell up of properties by landlords was 8.5% higher than what was expected, with 153,000 properties sold. It was also reported that 95% of letting agents had experienced their landlords selling at least one of their properties.
Meanwhile, the Renters Reform Bill is expected to create a big change to the way landlords can regain possession of their properties. This comes at a time when the backlog in repossession cases to be heard at court is already at record levels. Many of our clients are asking what’s next?
The Government needs to step up and find a solution so that it remains financially viable for landlords to retain their buy to let portfolio, as it’s critical to a healthy property market.”
Peters has specialised in residential landlord and tenant law for 22 years. She has advised clients through the Landlord and Tenant Act 1985, the Housing Act 1988 and 1996, and the Deregulation Act 2015 and now the 2023 Renters Reform Bill.
Government has ‘spooked’ landlords over the Renters (Reform) Bill
A buy to let mortgage expert has accused the Government of needlessly ‘spooking’ landlords over the proposed Renters’ (Reform) Bill with its language aimed at pleasing tenants.
Gavin Richardson, the boss of Mortgages for Business, says "the Government’s proposals to change evictions, including scrapping Section 21 notices, are not as bad as many fear."
He was reacting to reports in some newspapers that some Tory MPs, including some in the Government Whips’ office, want to weaken the Bill. One newspaper reported ‘there are a number of landlords in the Whips’ office who are amplifying the level of concern among Tory MPs and holding things up’.
Mr Richardson said “I want to reassure the Whips that we don’t think the reforms will prove to be that bad for landlords. First, sensible landlords — even those working in the Conservative Whips’ office — rarely turf out good tenants who pay their rent as they want them to stick around. So, this reform will disproportionately hit the minority of bad landlords who have abused Section 21 notices, rather than the reputable end of the market. Second, tenancies can still be ended if there has been a breach of the tenancy by the tenant and the government has said it will introduce a new ombudsman to settle disputes between tenants and landlords without the need to go to court. The government has also promised to digitise the courts’ agenda ahead of these reforms to ensure a swift resolution to these cases. That will speed up processes where possession cases require them.
Thirdly, the Whips will always be able to end a tenancy if they plan to move back in or sell it — that was the real danger of this reform, anything that inadvertently risked landlords’ ability to realise the value of their housing assets through disposal. The loss of full tax relief on mortgage interest payments for individual landlords, and the stamp duty surcharge on additional property purchases were far more significant for landlords. The fact that the Whips are nervous is understandable, given their own government’s rhetoric. I don’t think for a moment that Section 21 exacerbated homelessness as one Tory communities secretary has claimed. The government has needlessly spooked landlords — including their own backbenchers — in a bid to curry favour with tenants.”
Mr Richardson says "there are 87 MPs from all parties who are landlords who run 167 rental properties with each MP earning more than £10,000 in rent – the level at which such income must be reported in the ‘member’s interests’ register."
Renters’ Reform Bill creates a ‘purposefully uneven playing field in student rental market’
As Freshers week has now passed for thousands of students, one association is warning of the effects the Renters Reform Bill will have on the student rental market. York’s Residential Landlord Association (YRLA) warns that there are massive shortages in the student accommodation sector.
According to the association, in York, purpose-built student accommodation only accommodates 30-35% of students while the PRS houses more than 50%.
Students will suffer
The YRLA says it is unfair that purpose-built student accommodation (PBSA) will still be able to grant fixed-term tenancies. In a statement, the association said “the Bill creates a purposefully uneven playing field. The PBSA sector who have signed up to the Unipol Code of Practice will be permitted to exempt themselves from the Bill and grant fixed-term tenancies. PRS landlords, even those signed up to the Unipol code, will not. There is no justifiable reason for this approach. There is no evidence of lesser quality or standards in the student PRS as compared to PBSA.”
The group argues that landlords in the PRS could sign up for a similar code.
“Ultimately, it is likely to be students who will suffer as they will be confused by the difference between accommodation in PBSA which will be for a fixed term with no notice requirement and accommodation in the PRS which will require them to give two months’ notice, or they will continue to be liable for the rent.”
Unrealistic and unfair
The group warns that landlords will not be able to guarantee student accommodation for the next academic year which leaves thousands of students in limbo looking for places to live.
The YLA said “the loss of fixed term tenancies in the Bill will effectively destroy the current arrangement between students and PRS landlords. As the Bill stands, landlords will have no certainty that students are going to leave on any specific date unless those students have given two months’ notice of their intention to do so. This is a stressful time for students when they will be preparing for or taking part in exams. What seems like a simple administrative activity will therefore not take place as intended as this will not be a priority for outgoing students heading towards exams. Without that certainty, landlords will be unable to accede to student’s desires to enter into a tenancy. Indeed, they are unlikely to be in a position to do so until April in each year at the earliest, assuming notice is received from the outgoing students. Similarly, incoming students will be busy with exams of their own and expecting them to identify and enter into a tenancy for a rental property, often for the first time, alongside these pressures is unrealistic and unfair.”