Renters Reform Bill – what it means for landlords

Buy-to-let landlords could be forgiven for feeling a little persecuted.

A succession of tax changes – in particular the restriction of finance reliefs since 2016 – has made it more difficult to make a profit from letting property. This year the Renters (Reform) Bill threatens to change the letting landscape even further.

Media coverage has centred on the abolition of ‘Section 21’, which gives landlords the right to evict tenants on a no-fault basis with two months’ notice. However, if you look under the bonnet of the new regime, there are other reasons for landlords to pay attention to the changes. While the abolition of Section 21 makes headlines and is unsettling for landlords, they can still recover possession of the property in specific circumstances, including where they want to sell or if they or their family want to occupy it. So the reality may be more benign than the headlines indicate. That said, other measures, as outlined below, are set to impact residential landlords.

Private Rented Sector Database

Welsh and Scottish private-sector landlords are already required to register on a landlord database, and many English landlords are subject to selective licensing by local authorities. The new proposals will see the registration requirement extended to the rest of the UK. Landlords will be required to register their property on a government property registration portal before letting or marketing a property. Failure to do so will result in fines. Landlords will be allocated registration numbers for properties and these must appear in any advert for the property.

The exact information required to register is not yet known, neither is the extent to which the information will be publicly available – although the government says that it is sensitive to the privacy concerns of landlords. However, the database is expected to include information on property standards to help tenants make more informed decisions, and landlords will almost certainly be required to reveal their identities.

HMRC will undoubtedly be keeping a close eye on the new database. Despite running a campaign since 2013 to bring non-compliant landlords into the tax-paying fold, it is suspected that many private landlords either don’t declare their rental income or, if they do, under-declare it. Compulsory registration on the database should help HMRC clamp down on those landlords that fail to declare their full rental income.

Private Rented Sector Ombudsman

The new legislation will also see the launch of a Private Rented Sector Ombudsman. This will ensure that all tenants will have access to a redress service that is an improvement on the current court system in terms of cost and speed. Like the Private Rented Sector Database, all landlords will be expected to join and, like the Private Rented Sector Database, there will be a fee to do so. On that basis, you might expect landlords to be able to complain to the new Ombudsman about their tenants, but that isn’t the case despite landlords being asked to pay for it.

What happens next?

The Renters (Reform) Bill is only at the second stage of reading in the House of Commons and so the proposals could change between now and the bill becoming law. Nevertheless, the principles seem to have cross-party support and it’s hard to see any of the major elements being dropped. This will mean more administration for private sector landlords and, it seems, additional fees and regulations.

Despite the increasing burdens there remain advantages to holding rented property as part of a diversified asset portfolio. Assuming that landlords want to stay in business, it makes sense to review compliance in preparation for the new regime. Anyone who isn’t tax compliant needs to get up to speed, but otherwise, a review of matters including electrical and gas certificates, EPC status and deposit protection would be a sensible place to start.