Following more than a decade of prosperity in which rents and yields rose and market conditions remained ever-positive, 2016 saw our government impose further restrictions on landlords. Then Chancellor George Osborne’s three per cent stamp duty surcharge on second homes, which also indirectly caused house prices to surge immediately before the change was implemented, reduced yields and created new barriers to entry into the buy-to-let market.
New affordability checks from lenders also came into place as a result of the abolishment of mortgage interest tax relief for higher rate taxpayers in 2015. The impact of these changes is already widespread. 60% of current UK landlords have agreed that they’ll be impacted by these changes. The number of landlords in London who own properties in a company name has risen in the last year, and well over half of investors see this as their preferred purchasing method going forward. In spite of these market shifts, almost half of existing UK landlords still expect to expand their portfolios this year.
Restrictions on unsolicited short-lets/Airbnb
Airbnb made headlines recently when they revealed that 23 per cent of their hosts’ activity in London during 2016 breached the law. Councils have begun to crack down on time limits and property usage conditions. In fact, one landlord in North Kensington was recently served with an enforcement notice by their RBKC council following complaints from neighbours that the property was frequented constantly by tourists – and Airbnb places this responsibility firmly on the host. As such, landlords and tenants alike are open to liability.
Indeed, UK law states that private homeowners are only allowed to rent their properties out using portals like Airbnb, for a total of 90 days out of the year. Moreover, in Westminster, Airbnb is banned entirely. Homeowners and landlords are at risk of breaching their own mortgages, whilst tenants who sublet to Airbnb guests may invalidate their own tenancies.
The simplest solution to the ambiguities surrounding unsolicited short-lets is to avoid such activities altogether, but, if you like the allure of potentially higher short-term rental returns, be sure to understand your rights and responsibilities. Our local branches are happy to advise you on this.
Changes to Section 21 Notices
Section 21 sets the terms and obligations of landlords and agencies should they require their tenants to leave their property. A Section 21 Notice is the legally binding declaration to a tenant that they must vacate a property. Under legislation that came into place in October 2015, the following changes apply to the serving of a Section 21 Notice:
- The Notice may not be served within the first four months of a new tenancy
- The Notice lasts for a maximum of six months
- Failure on the part of a landlord or their agent to provide the required information to tenants will also invalidate the Notice
- Failure to follow the prescribed and time-limited repairs process set out in the Notice can both invalidate it, and prevent another from being served for a further six months
Working with Marsh & Parsons’ experienced Property and Tenancy Management departments, a landlord can be safe in the knowledge that their properties are protected. Should there ever be a need to serve a Section 21 Notice, we can help you to ensure the Notice is fully compliant under the new legislation.
In summary
In contrast to the stable lettings market, sales has taken an ambiguous turn of late and many are looking to take advantage – a third of sales in prime London are now to first-time-buyers. However, clearly the opportunities in the current sales market have done little to dent the number of tenants still searching for lettings properties. In 2016, we found that demand in the lettings market rose by 14.3 per cent on the previous year, outstripping supply which rose by 6.4 per cent annually. The fact that increased demand in sales has been less pronounced also means that the opportunities for buy-to-let investors will remain for the foreseeable future.
2017 presents a huge opportunity for landlords and investors to expand their portfolios, and many will be keenly watching how the sales market develops over the next few months. There are many improvements landlords can make to maximise their return on investment. For advice on letting your property, please contact your local Marsh & Parsons branch.
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