Buy to Let - the new England property letting laws -

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RIGHT OF RESIDENCE - All landlords in England and Wales are required to check that all adult tenants or lodgers have a legal right of residence for the term of any applicable tenancy even if they are not named on any tenancy agreement. The only way a landlord can avoid liability for such checks is by using a letting agent that agrees in writing to take this responsibility.
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DEPOSITS - any landlord in England and Wales using an assured shorthold tenancy that started after 6 April 2007 and taking a deposit from a new tenant, MUST legally be in one of three government-approved Tenancy Deposit Schemes or face big fines and void their tenancy contract so it is no longer Shorthold ;
1. use the free-to-all deposit-custody scheme by
2. or use the landlord-fee deposit-insurance scheme by
3. or use the landlord-fee deposit-insurance scheme by

The main laws now dealing with landlords and their tenants in England and Wales are in the Housing Act 2004.

Without doubt, the Housing Act 2004 having been fully enacted has been the biggest change for landlords since assured shorthold tenancies started in 1989. There are different 'provisions' and some of its changes may affect you. For now, here is a brief overview of the parts that can most affect landlords. The key points are ;
1. A change to the house in multiple occupation (HMO) definition so that where three or more unrelated tenants share a property it is now classed as an HMO.
2. A mandatory new property license system for all HMOs with three or more storeys AND five or more occupants.
3. Local authorities can also extend letting licensing to include other HMOs.
4. In some areas, local authorities can license all private landlords to ensure basic standards of management are being met.
5. The old 'fitness standard' is replaced by a new Housing Health and Safety Rating System (HHSRS) to help councils identify houses in an unacceptable condition.
6. All landlords have to join government approved Tenancy Deposit Schemes (TDS).

In addition to these Housing Act changes, it now seems likely that the government will extend nationwide the Local Housing Allowance pilot paying Housing Benefit to tenants.

Some further details ;

1/2. Where more than two people occupy a property but don't form a single household, usually because they are not related, the property is classified by the government as an HMO. In England and Wales, private landlords with HMOs of three or more stories AND with five or more tenants have to get a letting license. These impose tough standards on fire and electrical safety, the number of people in occupation and even the kind of person who can be a landlord. The licence is to be issued to 'fit and proper persons' operating HMOs who may have to demonstrate good management for a period of maybe 5 years.

3/4. Local authorities can also 'selectively extend' licensing in part of their area to ALL properties (not just HMOs) if they think there is a need, say if a local problem with antisocial behaviour exists or they think the standard of housing justifies it. In many areas now it is being applied to ALL HMO's.

1/2/3/4. Each local authority can set its own license fee (in different areas now varying from £0 to £2,000 per property), and landlords covered who don't register can be fined up to £20,000 and having to repay rent received whilst not registered. However, there is likely to be a 3 month grace period when the scheme starts.

5. With the new Housing Health and Safety Rating System (HHSRS) the focus shifts to whether a house in poor condition is likely to damage the occupants health. This is slightly different to the old 'fitness standard' which looked more at issues to do with the building. Under the new HHSRS, inspectors now view health and safety hazards according to A. how likely a risk (e.g. fire) is to occur and B. the likely impact it would have should it occur. For shared HMO houses inspectors have to consider if there is an increased risk because it's shared, but behaviour of occupants won't be taken into consideration. The potential hazards include fire, damp, overcrowding, poor lighting, pests etc. Inspectors will examine if the property is fit for the widest range of occupants, so even if you let to students, they will have to consider risks if the occupiers were elderly people or children instead. Inspectors have a range of powers. For serious problems, they can issue Emergency Remedial Action and Emergency Prohibition Orders requiring immediate action. HHSRS applies to all lettings not just HMOs. However, all HMOs which need a license also have to be inspected for hazards within 5 years of an HMO license being granted. Local authorities cannot use license conditions to deal with health and safety hazards. So, while it is possible a local authority may assess an HMO license application at the same time as doing an HHSRS inspection, the HMO application would only depend upon the person applying being a fit and proper person, the management of the building being OK and the property being suitable for the number of occupants. The HHSRS focus has switched to whether a house in poor condition is likely to damage the occupants.

6. Tenancy deposits now require an authorised Tenancy Deposit Scheme (TDS) of which there are two types - a single custodial scheme and an insurance scheme. In the custodial scheme landlords pay deposits into a special account where it stays until the tenancy ends, when either the landlord or tenant can apply to have it returned. If both agree on how it should be split, the scheme administrator pays within 10 days of receiving a request. In the insurance scheme deposits are kept by landlords on the basis that when the tenancy ends, the amount agreed between landlord and tenant will be paid out to the tenant. The insurance only comes into effect if, at the end of a tenancy, the landlord does not pay back part or all of the deposit within 10 days of the tenant asking for it. Should this happen, the tenant approaches the scheme administrator. The landlord will then have to pay the amount into a special authorised account within a further 10 days. Once a dispute is settled the administrator has to pay the tenant within 10 days. The insurance comes into effect if the landlord fails to pay the deposit into the account as requested. Landlords will have to pay to join a scheme and there are penalties for landlords who don't join a scheme. It will also be impossible to get possession if you are not in one.

The government has also said that it intends that Local Housing Allowance (LHA) will replace the current Housing Benefit arrangements, possibly nationally from 2008. LHA is currently being piloted in various parts of the UK, with DSS Housing Benefit being paid to tenants rather than to landlords. The aim is said to be to engender tenants financial responsibility by paying an allowance that can be spent on housing of their choice. The obvious risk is that the tenants spend the money on something other than rent. Also, since many DSS tenants don't have bank accounts, landlords may have to collect rents in person, which is a real hassle, especially where the property is not nearby. Tenants will be encouraged to open bank accounts, but many don't understand how to and banks often don't want them as customers. When dealing with DSS tenants, especially under LHA, landlords should insist on them having an employed person as guarantor and if rent arrears accumulate to more than 8 weeks, serve a section 8 notice, and then try to get the DSS to pay direct to you.

There is of course some other general law that also applies to renting property, especially discrimination law and tax law.

Buy To Let Tax.

1. Income Tax. Buy To Let profits are part of your income liable to income tax. But with Buy To Let mortgages, interest payments like other costs can be deducted from rent income for tax liability (this does not apply to a mortgage on the home you live in).

2. Capital Gains Tax applies if you sell a Buy To Let property or holiday home (but you can consider transferring such property to you pension with a SIPP). From April 2008, a new UK Tax Break effectively applies in these Capital Gains tax rates being reduced from 40% to only 18%.

3. Inheritance Tax applies if you leave Buy To Let property to children (but you can considering transferring ownership, or joint ownership, of such property to older children).

Requirement for HIPs and EPCs.

SELLING a home in England and Wales with 3 or more bedrooms since 21 May 2010 no longer requires a Home Information Pack (HIP). But the requirement to have an Energy Performance Certificate (EPC) as explained below will be retained.


SELLING, LETTING OR BUILDING any property in England and Wales will from 2008 require Energy Performance Certificates (EPCs).
Energy Performance Certificates were first introduced as part of the now cancelled Home Information Pack, and remain a legal requirement. Sellers are required to commission an EPC, but won't need to have received it before marketing a property. They are legally required from 2008 for all construction, sales and lettings of property in England and Wales - to be prepared at the expense of the landlord or owner.
1. From its EPC, a potential tenant or buyer can estimate how much it is likely to cost to heat and run the property and this will be publicised so that potential tenants or buyers will come to favour greater energy efficiency.
2. The EPC scheme will apply to commercial property sales and lettings from 6 April 2008 if 1000 m2+, from 1 July 2008 if 500 m2+ and from 1 Oct 2008 for all - and it will also apply to all residential property sales and lettings from 1 October 2008 including social housing. It applies to all construction from 6 April 2008. It will not apply to long lease lettings made before October 2008.
3. All EPCs are to be held on a central register that can be accessed by the landlord or owner responsible for commissioning the EPC, and must be made available for viewing by prospective buyers or tenants.
4. EPCs will be valid for ten years on let property, but if changes are made to the property which may affect its energy efficiency then a new EPC should be commissioned before a new letting takes place. BUT residential property sales must have an EPC that is less than 12 months old when the property is first marketed.
5. An EPC can be produced only by an accredited EPC assessor on the list of Accredited EPC Assessors. Better assessors will often also be registered Chartered Surveyors or members of appropriate professional bodies.

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IF you are in money difficulty and thinking of letting out your own home and moving in with parents ;
1. You should get landlord insurance before taking tenants, as it is too risky without.
2. If your home is on a mortgage then it probably has a legal requirement to inform the lender, who is then likely to raise
.. your mortgage cost.

PS. if you rent through a Letting Agent, then they can handle most letting law for you, but if you want more advice on UK letting laws try Landlordzone.

PS. If you are thinking of letting your property yourself, then you could also read Letting Homes USA.

AND if you have access to a PC with Excel then see here for the best Mortgage Cost Calculators.

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