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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Managing Residential Rentals in 2016

Tom Entwistle of Landlordzone takes a look at the Licensing and Regulation of the Private Rented Sector

The private rented sector (PRS) up until the early 1990s had been legislated almost to extinction. Rent controls and other regulatory restrictions under the Rent Acts saw to that. What transformed it however was the regulatory reform agenda of the Thatcher government, with the introduction of the assured shorthold tenancy (AST) in the 1988 Housing Act, and later the buy-to-let (BTL) mortgage, once the finance industry had realised the growing demand for BTL, and the lower than expected risk in these mortgages.

A key feature of the AST, one which the social reformers fail to appreciate the importance of, is the Section 21 no-fault eviction process. When a tenancy turns sour, as some inevitably do, responsible landlords want the certainty of getting their property back, writing off their losses and starting again, otherwise they will just not invest in rental property. There is a debate on this issue in Scotland right now; will the new Scottish housing legislation destroy BTL in Scotland?

The success of BTL, and the growth of the lettings industry stemming from this, brought its own problems. Yes, it boosted rental housing supply just when an increase in demand required it, but it also brought landlord envy, accusations of creating a housing bubble, with the pricing-out of first time buyers, and bad practices from rogue operators, which focussed negative media attention on the whole industry.

Enter the social reformers, the homelessness charities driving public opinion through strong media campaigns, and governments have reacted to all of this with punitive regulation: regulations which make the task of being a landlord or agent a whole lot more difficult, and a tax regime which reduces the attractiveness of BTL investment.

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