Everything you need to know

Legislation can be a minefield for landlords. Regulations and laws relating to the private rental sector are increasingly in a state of near constant flux, meaning changes can be easy to miss. And this can be costly for landlords who fail to comply.

The latest government survey into private letting found that many landlords are not compliant with basic legislation. For instance, 38 per cent of those questioned did not check a tenant’s right to rent, while 48 per cent did not issue tenants with the Government’s ‘How to Rent’ guide. Meanwhile, over 30 per cent of landlords failed to provide carbon monoxide alarms. A potentially deadly mistake.

As a landlord, you have to stay one step ahead of changes in the law. Every year brings more stringent legislation and, despite the impact of COVID-19, 2021 is no exception. We’ve included the most recent legislative changes at the start of this guide. There are a number of additional legislative changes that we were expecting later this year, which may or may not happen, such as the Renters Reform Bill and the abolition of Section 21. We will be updating you on these as soon as we hear more news.

While we await further changes, please read on for our comprehensive guide to everything you need to know when it comes to legislation, updated for 2021.

1. Are you aware of COVID-19 measures impacting landlords?

In March 2020, the Government introduced a radical package of measures to protect tenants and landlords affected by coronavirus.

These measures were updated in August 2020 as part of the Coronavirus Act. From that date, landlords have needed to provide at least six months’ notice to their tenants in most circumstances.

Exemptions for complying with this law include where at least six months’ rent has not been paid or where there have been instances of antisocial behaviour or domestic violence. More information can be found on GOV.UK

2. Do you allow pets?

Recent updates to the Government’s model tenancy agreement include the requirement for landlords who do not allow pets to justify the reasons for their policy. From 29 January 2021 the position is that responsible tenants are allowed well-behaved pets.

If the landlord objects to a written request from the tenant they must respond within 28 days, also in writing. 

3. Do you need a landlord licence?

At present, the only UK-wide ruling that requires a landlord to obtain a licence is if a property is let as an HMO (House in Multiple Occupation). A property is classed as an HMO if at least three tenants live there – forming more than one household – and the toilet, bathroom or kitchen facilities are shared. Courts are known to hand out huge fines to HMO landlords, and agents, who do not obtain HMO licences.

Individual councils are able to issue selective licensing, through schemes that tackle poor housing stock or anti-social behaviour. This includes a 2018 ruling that allows them to define what constitutes an HMO in their area.

It is therefore a good idea to check with your local council to see if your property is classed as an HMO to license it correctly. Landlords should also be aware that there are which will impact licensing regulations.

For more information on the exact guidelines for owning an HMO, please check the GOV UK licence details. You can also check the local area to possible purchase on the local government websites

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4. Have you carried out right to rent checks on all tenants?

Landlords must check that any tenant or lodger over the age of 18 can legally rent residential property in England.

A person will have the right to rent in the UK provided they are in the country lawfully, in accordance with immigration laws.

Prospective tenants still need to be checked even if they are not named on the tenancy.

Original documents are required to prove a tenant’s right to be in the UK, such as ID cards or a passport, and with tenants from overseas must provide ID in form of Passport, ID/Residents permit card showing end date which must be logged and chased up prior to renewal for updated Right to Rent documents

Landlords can use the Government’s step-by-step online process to check their tenants’ status for right to rent.

Be warned: failure to check can result in an unlimited fine or up to five years in prison, so it is important to get this right.

5. Have you protected your tenant’s deposit in a licensed government scheme?

Since 2007, landlords have been legally obliged to protect tenancy deposits in a government-approved deposit protection scheme.

There are three government-registered schemes in England and Wales eligible to protect a rental deposit. NMR Lettings & management Ltd us the DPS Scheme Depositprotection.com, one scheme that provides simple deposit protection for landlords, letting agents and tenants. Find out more at depositprotection.com

These schemes ensure that the deposit is kept safe during the tenancy, and they also arbitrate over disputes between tenants and landlords. Deposits can be used to cover damage to the property (not including fair wear and tear) and cleaning issues at the end of the tenancy.

The private rented sector has seen significant changes over the last few years which have changed the rental landscape.

A number of ‘deposit replacement’ options have recently entered the market offering tenants an alternative to traditional tenancy deposit protection. NMR Lettings work with Zero Deposit provided additional protection up to 6 weeks equivalent rent coverage where as a standard deposit is only able to be taken up to equivalent of 5 weeks rent.

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6. Are you compliant with the tenant fee ban?

The Tenant Fees Act (2019) came into force on 1 June 2019, preventing landlords and letting agents in England from charging certain letting fees to tenants. As a result of the fee ban, tenants are only required to pay a holding deposit, which in most cases is refundable, their rent and deposit when signing a new tenancy agreement.

The ban initially only affected contracts that were signed on or after 1 June 2019, and landlords and agents were able to continue charging fees associated with tenancy agreements signed before 31 May 2019, even if the tenancy start date was after 1 June 2019. However, from 1 June 2020, the Act was extended to cover all existing tenancies.

Therefore since 1 June 2020 ALL fees have been banned, no matter when the tenancy agreement was signed, unless they are ‘permitted’ fees, such as to replace lost keys or for late payment of rent.

Landlords or agents found in breach of the Tenant Fees Act and charging fees could be fined £5,000 for a first offence and risk an unlimited fine if they break the rules again within five years. Letting fees are already banned in Scotland and there are moves underway to follow suit in Northern Ireland, while Wales initiated the ban on 1 September 2019.

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7. Are you aware of new planning regulations around minimum space requirements?

In September 2020, the Government announced new planning regulations that will require new homes built under permitted development rights to be over 37 square metres for a one-bedroom flat, 30 square metres with a shower room rather than a bathroom.

These are not included under Building Regulations but act as part of the planning guidelines for councils. 

The changes are part of wider reforms to planning regulations and the planning system, intended to simplify processes and improve living standards.

8. Are you aware of Making Tax Digital?

As part of plans to digitalise tax, the Government is phasing in its Making Tax Digital programme over the next couple of years. The changes are designed to improve accuracy and efficiency and should make it easier for landlords to get their tax right. It will mean that the tax is calculated throughout the year, so instead of completing an annual tax return landlords will send quarterly updates of income and expenses via their digital tax account to HMRC.

From their next accounting period, starting on or after 6 April 2023, self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for income tax.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for income tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send income tax updates to HMRC instead of filing a self assessment tax return.

Commercial landlords or those who have ‘opted to tax’ for VAT purposes, may need to follow Making Tax Digital rules sooner, depending on their property income.

We’ve outlined Making Tax Digital for VAT below, but if this applies to you, we’d advise you to speak to your tax adviser to find out how you are affected by the changes.

Currently, only VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are required to follow Making Tax Digital rules. However, from April 2021 all VAT-registered businesses (including those with a taxable turnover below £85,000) will be expected to utilise Making Tax Digital compatible software to file their tax returns digitally for VAT periods starting on or after 1 April 2022. See here for exceptions.

It’s always best to be prepared, so if you are running your buy to let business as a VAT registered trader but are below the VAT threshold, you can voluntarily join the Making Tax Digital service now.