Legal Compliance: Help for Landlords

If you’re a landlord or a property investor and you keep an eye on the property media, you’ll know what a tightly regulated sector this is.

To begin with, there are many well-established and largely well known regulations governing the fitness and safety of properties in the private rented sector; important and necessary regulations that exist to protect lives and wellbeing. In addition, there are numerous financial regulations that affect everything from buy-to-let mortgage applications to tax relief, tax reporting and the timeliness of payments.

Any landlord operating in Britain will soon become be familiar with most of these. Nevertheless, stories about prosecutions often make the news, so there are clearly still those who fail to comply with everything they should.

Some prosecutions will doubtless be deserved, yet the resulting media coverage can paint a very distorted picture. ‘Rogue landlords’ represent only a tiny fraction of the sector as a whole. The vast majority of housing providers are diligent about meeting their many obligations, and they want nothing more than a settled, happy relationship with their tenants. No one wants to face disputes, void periods or legal action, so mutual respect is in everyone’s best interests.

Landlord regulations: a changing landscape

However, legal difficulties do sometimes arise, particularly when new regulations are introduced. Sometimes, especially in the case of small-scale investors who might well have many other family and professional responsibilities, staying abreast of all the legal requirements can be a challenge.  It’s certainly not an impossible task – many thousands of people do it every year – but keeping yourself informed is an important and ongoing responsibility.

Since 2016, the private rented sector has faced a barrage of new tax rules, some of which have been politically motivated, with the undoubted aim of skewing the market in favour of home buyers rather than investors. However, while measures such as the 3% hike in Stamp Duty might have put a new focus on tax costs and profitability, they are at least relatively easy to recognise and to follow.

More tricky are introductions of new sector-specific landlord regulations, many of which occur at the start of each new tax year. In April 2017, for example, new rules came into effect under the Housing and Planning Act 2016. They allow local authorities to impose fines of up to £30,000 for various offences – including (amongst others) failing to apply for an HMO licence, and breach of a Housing Health and Safety Rating System  enforcement notice.

This new ruling came into effect at the same time as several other changes, including the much more widely publicised reduction on mortgage interest relief. These changes followed others in October when, amongst other things, landlords were required to install smoke alarms on every storey of their rented living accommodation, and a Carbon Monoxide alarm wherever a solid fuel appliance is used.

Keeping constant tabs on every changing regulation is difficult, and what’s more, the requirements vary across the UK. Rules that apply in England may very well be different in Scotland or Wales.  Only this month, the Scottish government published new guidance for local authorities explaining new landlord registration enforcement rules. The Landlord Registration Statutory Guidance seeks to raise standards in the sector by requiring local authorities  to maintain a register of ‘fit and proper’ private landlords. Those that fail to register – or to meet the necessary standard – can expect difficult times ahead.

Getting Support:

Fortunately, the challenges that landlords face are not being ignored. A number of important public and professional bodies have published tools to help the hard-pressed investor.

The Gov.uk website features many useful tools, tips, webinars and advisory notices for landlords. For example, its “Help and support for landlords” page features webinars on subjects including property income, expenses, profits and losses, and tax relief on loans and mortgages. There are also online courses and links to videos about self assessment and property-related tax returns. The HMRC’s Property Rental Toolkit is also freely downloadable; a PDF that sets out advice for tax advisers and offers advice on risk mitigation as well as a checklist for property rental income.

The Residential Landlords Association (RLA) also offers various forms of support. For example, in the wake of the Grenfell Tower disaster, it produced a fire safety foundation course that can be studied online. (The cost is £14 for non members and £11.20 for members.) It notes that: “legislation on fire safety is complex with different buildings/property types being subject to different laws and regulations.” In an effort to clarify things, it has devised a course that provides a basic overview of legislation and how the different forms relate to different types of property. It also suggests some practical fire safety tips and shows how to conduct a meaningful fire risk assessment.

This is just one of many online courses available on the RLA website. They also examine other landlord regulations such as the laws on deposits, lettings compliance issues, immigration law and ‘right to rent’.

Online tools such as ‘Landlord Secure’ and ‘LateRent’ are also now available to help landlords to conduct credit checks on prospective tenants, and to track those with a history of late payments.

In short, landlords face a continuing obligation to understand and comply with all the relevant legislation within their sector, but there are resources available to help them cope. Nevertheless, it does require a conscious effort to recognise regulatory changes, and this effort must constantly be maintained.

Future Changes:

Looking ahead, there are more changes in the pipeline. In June, for example, the Government published proposals to limit tenancy security deposits to a value not exceeding one month’s rental payments – half the amount currently allowed.

Tax reporting will also change. The government’s plans to introduce quarterly tax reporting this year were postponed due to its unexpected failure to secure a Commons majority, but its imposition seems to be a matter not of ‘if’ but ‘when’. Certainly, elements of it are already scheduled to come into effect in 2019 with respect to VAT-registered firms. The Gov.uk website notes:

“A number of concerns about the pace and scale of change have been raised. As a result, the government has announced that the roll out for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes. Businesses will not now be mandated to use the ‘Making Tax Digital for Business’ system until April 2019, and then only to meet their VAT obligations.”

By 2020, the majority of businesses and self-employed landlords will be expected to submit quarterly self-assessment tax returns using HMRC software.

These are two examples of forthcoming changes but the sector can expect more. The Grenfell fire disaster might well prompt new guidance on fire safety and, with party conference season approaching, property investors can expect the question of housing to be high on all the main parties’ agendas.

Compliance and Confidence:

For those investors who lead busy lives – or for those who just don’t want the burden of having to stay on top of all the associated legal obligations – one obvious answer is to appoint a lettings agency. As property experts with a vested commercial interest in maximising their clients’ profits, lettings agents are ideally placed to identify (and provide solutions to) any legal compliance issues.

Delegating responsibility for compliance can be simple, convenient and cost effective. A good agent will keep you free from the threat of fines or prosecution, and ensure that your tenants stay happy – thereby minimising the risks of voids or late payments. What’s more, reputable agents know that their credibility rests on staying ahead of the game, so they’ll give their clients useful advance notice about forthcoming changes, and advise them accordingly.

For those who feel able to take more of a hands-on role with respect to rental collections, property maintenance, marketing and legal compliance, lettings agents can still be a valuable ally – an experienced advisor to call upon whenever a specific need arises.

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If you’re uncertain about the impact of current legislation or any proposed new regulations, please call our lettings team on 01244 343 355.

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