How will the election result affect your buy-to-let?

Wed 27 May 2015

By Mortgage Advice Bureau

For landlords, the outcome of the election was mostly good news. Unlike Labour and the Green Party's plans to clamp down on landlords and letting agents by banning tenant fees and capping rents, the Conservatives were, prior to the election at least, relatively happy with the way the private rented sector (PRS) worked.

Some of the changes made before the election, however, are still working their way through the legal system, so there is more legislation on its way.

Just a few months ago, all letting agents were made to join a property ombudsman scheme. Although 60 per cent of agents were already part of such a scheme, regulation now means that both landlords and tenants can complain to a third party free of charge if they are unhappy with the service.

Currently being tested in the West Midlands, we are also expecting a national rollout of the requirement for landlords (or your agent) to carry out immigration checks on tenants, making sure that they are in the country legally.

By October 2015, all landlords will need to have working smoke and carbon monoxide alarms in England and new rules are also coming in which may make evicting a tenant easier if the property is being let legally and in good condition.

The one rule that the final outcome is yet to be decided upon is whether or not landlords can continue to include a clause in their tenancy agreement that prevents the tenant from sub-letting a property. It is likely that most of the industry will be against this rule, as it could potentially cause unnecessary conflict for landlords who refuse tenants permission to sub-let, especially if it is to their friends or family.

Another potential issue for individual private landlords is the Conservative policy put forward to attract and support large scale institutional investment sites that support the PRS with a minimum of 100 new build rental properties.

Institutional investment is where landlords, often using funds from major pension providers, purchase residential properties which they let for the long term. Whilst this is very normal in Europe, particularly in Germany and the Netherlands, in the UK, many properties rented in the PRS are provided by individual buy-to-let investors.

Although long-term, these properties are likely to be absorbed into the private sector as demand grows, possibly dampening the demand and rental growth if one of these sites is near a landlord’s property.

With the Conservatives planning to abolish housing benefit to those under the age of 21, landlords may be adversely impacted if they have a property which is a house in multiple occupation and rent to young tenants who are funded through these benefits, and this could be the case in areas where unemployment is high, causing a serious blow to demand in the PRS.

However, with the current private rental market experiencing increased nationwide demand, it is expected that over the next five years, most landlords can look forward to a healthy private rental market, despite the increased legislation and competition.

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