As the worst of the pandemic is hopefully over, I’ve been reflecting on what we as landlords have learned over the past year. The top issue for me has been the importance of a positive relationship with tenants. It has helped me enormously around burgeoning numbers of unexpected moves, tenant mental health crises and requests for rent reductions. We have also seen unusual contrasts in the lettings market with rents tumbling in central London, but holding up well in the leafy, fashionable neighbourhoods of zones 2 and 3, where property with gardens are like gold dust. I’ve experienced letting to tenants on benefits for the first time as some of my cohort of employed customers have been bounced into making claims. I have been lucky. 7% of tenants have built up arrears since March 2020, according to NRLA research. Most landlords do all they can to work with tenants in genuine financial difficulty, but we have also seen a small number of tenants that have exploited the eviction ban and simply stopped paying rent - months ago in some cases.
The 1st of June marked an important date when the ban on enforcement of possession orders was lifted. For landlords planning to use eviction as a last resort, the notice period for section 8 and section 21 possession proceedings has been reduced from six months to four months – or four weeks if the tenant is more than four months in arrears. There was a flurry of press on the topic at the start of June with the Joseph Rowntree Foundation (JRF) citing research, which suggested that 400,000 tenants were at risk of eviction. The courts have a huge backlog. For landlords serving notice today and expecting to take their case to court, they are unlikely to get a judgement until a year from now. I think the JRF figures were alarmist and unrealistic.
The notice period for section 8 reduces to two months from 1 August, so landlords might well be advised to wait until then before taking action. From 1 October 2021, section 21 notice periods will go back to the usual two months and section 8 notice periods will revert to standard. This was a big victory for NRLA lobbying, which persuaded the Ministry of Housing to taper notice periods back to pre-Covid levels rather than maintain extended notice periods until the abolition of no fault evictions in the pending Renters Reform Bill.
Landlords came away relatively unscathed from the Budget on 3 March 2021. Corporation tax remains at 19% for profits up to £50,000 but then tapers up to 25% for profits over £250,000. This could affect landlords who are buying through a limited company, as part of such a strategy assumes a low 19% rate of tax. A warning of the perils of dancing to the tune of the tax man, he may unexpectedly change his tune, regardless of how much you have spent on incorporating your business – or might have to spend to unincorporate it. The rumours of Capital Gains Tax (CGT) rates being increased from 18% and 28% to 20% and 40% thankfully did not come to fruition. However, since 6 April 2020, second-home owners find themselves having to pay CGT within 30 days of the completion of the house sale. 16,000 taxpayers have failed to comply with this new rule according to reports in The Daily Telegraph and The Office For Tax Simplification has sensibly called for an extension to 60 days.
The Queens Speech on 11 May 2021 mapped out three bills of interest to the private rented sector (PRS) in this session of parliament. The Building Safety Bill is a response to the Grenfell fire. It aims to establish a Building Safety Regulator, make changes to Building & Fire Safety Regulations and may introduce a levy on developers to finance the removal of cladding. Look out for the possible introduction of compulsory carbon monoxide detectors. A Leasehold Reform (Ground Rents) Bill will seek to end the practice of charging a financial ground rent for new leaseholds.