How to Prepare for Upcoming Rental Reform
Landlords, change is coming!
Well, you know the old saying that a change is as good as a rest… keep that one in mind, because there’s plenty of change coming for landlords as we move through 2023.
In this episode:
- We’ve got the legal know-how of CEO and founder of Woodstock Legal Services, Carly Jermyn, specialist in all things landlord and tenant law.
- We’ll be looking at rental reform (yes, we know it’s been knocking around for YEARS, but some changes finally seem to be on the horizon)
- The new legislation loops that landlords will have to leap through
- What to expect with regards to mortgage changes in 2023
- Managing your portfolio
Being a landlord is many things, but it’s never boring is it? But don’t panic, we’ve pulled together a top team to help guide you through the upcoming upheavals, and we’ve got a series of programmes in place to tackle your forward planning for the year ahead.
We’ll be chatting with CEO and founder of Woodstock Legal Services, specialist in resident and landlord tenant law Carly Jermyn – a top rental lawyer and landlord herself – for her take on the new legal requirements in the PRS world, as well as Mashroom’s very own George Sinclair, who will be giving us his thoughts on how landlords can help manage the changes, and what we’re expecting with regards to mortgages.
So, what are the key rental changes for 2023?
Well, you can never say being a landlord is boring. Strap yourself in, there’s a few changes on the way in 2023! So, what are we expecting?
- The Decent Homes Standard: A policy to increase the quality of rented homes, making them safe for tenants.
- The axing of Section 21 evictions: Controversial and not universally popular, landlords will need grounds to evict their tenants (like a Section 8)
- Landlords are encouraged to let to tenants with pets, and must provide a good reason to refuse
Why are these changes being made?
Rental reform has been being tabled since back in 2019 when Theresa May was in power (remember her?), but it looks like 2023 may be the year that these changes start to roll into action.
In late 2022, Michael Gove, the Secretary of State for Levelling Up stated that the country needs to ‘empower tenants’ to ensure ‘their voices are truly heard’. He green-lighted the Rental Reform Bill to be brought in this year, aiming to give both landlords and tenants more rights.
Will any of the changes benefit landlords, or just tenants?
I know what you’re thinking: What’s in it for landlords?
Just sounds like more cost and paperwork, right? Whilst there may be a little legwork initially, in the long term these changes could be a great thing for the entire industry.
A landlord herself, Carly says she isn’t panicking about the changes, and maintains that for landlords who have got their house in order, there’s honestly nothing to worry about:
We need reform. The aim is to have a fair rental sector. I think the system is a little bit fragmented, a bit broken. It needs work, we do need reforms.
What changes will landlords need to be made to be compliant?
The Decent Homes Standard
‘We’ve seen a push over the years about increasing the standard of accommodation. And this is another move towards that’, explains Carly.
What are the key criteria?
There are four key criteria that a property has to meet, which are:
- Meeting the current statutory minimum standard for housing
- The property is in a reasonable state of repair
- The property has reasonably modern facilities and services
- The property provides a reasonable degree of thermal comfort
As long as your property is warm, dry, has a modern and functioning kitchen and bathroom, working and safe utilities, you are keeping on top of maintenance and there are no major safety risks you are likely to be compliant.
The current guidelines are assessed under the housing health and safety rating system (HHSRS), which provides clear guidance on how to minimise hazards and ensure a safe and compliant property.
Transparency is key (eventually)
Private landlords must register their property on an online Property Portal, which will give current and prospective tenants visibility of the standard of the property they’re renting, as well as allowing councils to see if any issues arise.
However, don’t hold your breath on this one, it’s not up and running yet.
Section 21 changes
The changes to Section 21 have been a long-debated issue, however there will be changes made to the system as you know it now.
Plans suggest that Section 21 notices will be replaced by an extended Section 8, which will be expanded to incorporate more clauses. The system has been working in this format in Scotland for years.
‘We know the rough boundaries of the legislation, what they’re proposing and what those grounds will be. And on the face of it, most of those grounds look okay, but the devil will be in the detail’, explained Carly.
QUOTE: What landlords need to do is to make sure they’ve got systems and processes, so that if they need to rely on one of those grounds, they’re able to properly evidence that evidence to the court.
Goodbye to no-cause evictions
It is true that with this process a landlord cannot evict with no cause, but how often have you had to do so anyway? If your tenant is troublesome, there are rent arrears, you need your property back to sell or move into, there are clauses available to allow for this.
‘The reality is people have always had a reason for doing so – no sensible landlords is going to evict somebody for no apparent reason. But now they will have to prove that ground at court,’ agrees Carly.
Welcoming pets
The final major change for landlords is that blocking tenants with pets is set to become a no-no, something Carly believes is a positive move for everyone.
‘As a landlord, and actually, as a lawyer, I don’t really always understand why pets are such a concern for landlords,’ laughs Carly. ‘We don’t see that much litigation surrounding damage caused by pets – if I’m honest, it’s quite rare… I don’t think pets are particularly an issue.’
The new reform looks to state that you will no longer be able to refuse a tenant having pets, unless there are reasonable grounds to do so, with reasonable grounds dictated by a healthy dollop of common sense on both sides.
Reasonable grounds could include elements like:
- If your property is in a block of flats, and having a pet would be a breach of the lease
- If the welfare of the animal would be at risk (for example 10 dogs in a one-bedroom flat with no garden)
- Concern for other tenants – if an existing tenant has an allergy that would make living with the pet a problem.
Landlords need to get organised
Plenty to get your teeth into, and it can feel a little overwhelming at first. One of Carly’s takeaway tips is to not be afraid to call in the professionals when you need a bit of help:
QUOTE: Get the experts in so that they can confirm whether they think your property does comply with the standards that are coming in, so that you can plan the work across your portfolio budget for it.
So, with that in mind, we caught up with Mashroom’s George Sinclair to get his top tips on how we help our landlords manage when new legislation makes managing their portfolios that little bit more tricky:
- Make sure your landlord insurances are up to date. Maintenance is key to complying with the Decent Homes Standard, and ensuring you have rock-solid insurances in place to cover home emergencies will help should anything go wrong. You can’t predict a hiccup, but you can prepare for it!
- Times are tough for everyone financially right now, so Rent Guarantee Insurance can help keep the wolf from the door if your tenants find themselves in hot water.
- Make sure you have all your paperwork in place. There’s about to be an awful lot more to remember, so getting your paperwork organised is a must. Mashroom landlords get nudges to remind them to get all of their important certificates renewed, insurances organised, and dates hit via our online reminder tool, giving them one less thing to worry about.
- Ask for help! If you’re confused by anything, don’t hesitate to ask. Whether it is giving our team a call or checking in with other landlords on a group like the Mashroom Landlord Community on Facebook, no question is too daft!
Future planning for landlords
So, you’re sorted for your existing portfolio. But what will 2023 bring for landlords looking to expand their portfolio, or even those having to remortgage? With interest rates changing more than the residents of Number 10, it feels a little daunting at the moment.
Our mortgage advice specialist Neil Ambrose reassures us that although it can feel nerve wracking, securing a buy-to-let mortgage really doesn’t have to be a nightmare, no matter what the papers are telling you.
There are certainly changeable times ahead, but by having a clear plan for what you hope to achieve, and a trusted team by your side to help navigate the turbulent waters, there are still some great deals to be had. After all, there is real demand for rental properties, it is in everyone’s interest to encourage landlords into the market and help you provide the high-quality homes that tenants are crying out for (in line with all of the new legislation, of course)!
Here at Mashroom the specialist mortgage team are able to offer bespoke advice, whether you’re remortgaging or investing in something new, and our handy calculators will help you work out your finances too.
Latest landlord news
Nobody can say that 2022 wasn’t a busy year news wise. And what better way to kick off our first 2023 Mashroom Show than with an update to the stories that got us talking from last year.
Selective Licensing scheme extension in Nottingham
Licensing is a real landlord bug-bear, and the landlords of Leicester certainly had something to be peeved about in October.
Three areas of the city had their selective licensing scheme extended, with landlords copping bills of £1,090 per property, making Leicester the priciest location in the Midlands.
Not to be outdone, Nottingham is following Leicester’s lead. A new proposal has been launched with a bid to extend the region’s current scheme, and if given the green light, properties in Broxtowe and The Park would be set to fall under it too. The current scheme was due to finish its run in August 2023, when it is likely to be renewed, and the proposed extension could also come into force.
Talking about the plans for the scheme, local councillor Toby Neal has been positive about the proposed change, hoping that it will raise standards in the 45,000 privately rented properties in the area.
If you have a property in Nottingham, you can keep up to speed with the latest on the new licensing laws here, and see if your property is located within the proposed extension.
Rental rates rocket into 2023
The cost-of-living crisis is no surprise to anyone, and everyone is feeling the pinch. From electricity to eggs, costs are rocketing and money just doesn’t stretch as far as it did this time last year.
Average rents across the country have crept up, with private rental prices paid by tenants across the UK rising by 4.2% between December 2021 and December 2022 (according to the ONS’s Index of Private Rental Prices).
Whilst high, 4.2% pales into insignificance compared to the prices faced by tenants in the capital though – according to Foxtons Lettings Market Index, London prices were 20% higher at the end of 2022, compared to the same time in 2021.
With less than 20,000 properties available in the capital at the end of the year, competition forced prices through the ceiling. In fact, there were an average of 18 tenants competing for every property within London. It wasn’t just London facing this issue. On average nationally, there were 32% fewer listings in 2022 compared with 2021, whilst in comparison, there were 14% more tenants looking for their perfect pad. Now is a great time to be a landlord with supply and demand definitely on your side.
That said, whilst it can be tempting to hike rents to take advantage of the market, take care – times are hard and finances are stretched.
Whilst signing up a tenant on a sizable rent looks great on the bottom line, make sure you do your due diligence and protect yourself against rent arrears. Nobody can predict the future, so a belt and braces approach to keeping your own finances secure (whilst always being sure to remain understanding to the plight of your tenants) is an absolute must.
