All change for the property market

Over recent months, the Government has put out a number of consultations on various aspects of the property market. Although it could be some time before any of the proposals become law, it’s good to know what’s currently being considered, in case you’d like to have your say on any of it.

It’s also helpful to have a ‘heads up’ on issues that might affect how you run your buy-to-let portfolio.

What is a consultation?

Before putting a final Bill together for consideration in parliament, the government outlines its proposals in a ‘consultation’, inviting feedback and views from both the industry and the public. Anyone who has an interest can contact the government – via its website, by email or in writing – to put forward their opinion.

In the case of property market consultations, they’re usually looking for responses from estate and letting agents, solicitors, surveyors and mortgage lenders, as well as the wider public. A closing date is set, after which the responses are taken into account in creating any new legislation.

Here are the most recent consultations that should interest you. Some are ongoing, while others are closed, but none has yet been legislated or got a firm date for coming into force.

April: Banning letting agent fees paid by tenants. This consultation was driven by an intention to improve affordability for tenants at the start of a tenancy. Letting fees were banned in Scotland in 2012 and this is the next step in bringing legislation to England.

The consultation closed on 2nd June and the intention to ban tenant fees was announced three weeks later, in the Queen’s Speech at the opening of parliament. The government published its full response to the consultation on 1st November, which proposes:

  • A ban on landlords and their agents requiring tenants to pay any fees or charges on top of their rent, with the exception of deposits and default fees (e.g. the cost of replacing a lost key). This includes asking tenants to pay for any third-party services or make a loan.
  • Capping tenancy deposits at no more than six weeks’ rent
  • Capping holding deposits at no more than one week’s rent
  • The penalty for breach of the ban should be a civil penalty of £5,000 in the first instance; any subsequent breach within 5 years would be a criminal offence, with a civil penalty of up to £30,000 as an alternative to prosecution.

They also stated their intention to regulate all letting agents, requiring them to satisfy minimum training standards and comply with a code of conduct.

A draft Bill will be put forward to parliament in due course.

October: How to streamline the buying and selling process. In October, the DCLG published details of its consultation calling for views on how to make the process ‘cheaper, faster and less stressful’. They state that, as it stands, buying and selling is not an easy process to navigate, with more than 70 steps and procedures that need to be followed (according to the Law Society’s Conveyancing Protocol) meaning transactions can take months to complete.

They are also concerned that the process has too high a failure rate, with their research showing that currently around one in four transactions fall through, at a cost to buyers of between £695 and £744; between £582 and £740 for sellers.

They’re looking to address concerns around:

  • how the overall process operates
  • standards and regulation of estate agents
  • the conveyancing process – looking to modernise it
  • mortgages
  • buying leasehold and new build properties.

They’re also keen to receive suggestions on how both buyers and sellers could be better informed and able to fully commit to a sale and purchase at an earlier stage in the process.

The consultation closes on 17th December, after which the responses will be used to develop a programme of action that will be tested with the sector and the public.

November: Review of the Smoke and Carbon Monoxide Alarm (England) Regulations 2015. Since October 2015, landlords have been legally obliged to install smoke and carbon monoxide (CO) alarms in all their rented properties. To comply, there must be a working smoke alarm on each floor and they must be tested at the start of each tenancy. Carbon monoxide alarms need to be installed in rooms considered ‘high risk’, where a solid fuel heating system is installed, for example, a gas boiler, gas fire or coal fire.

At the time this law was passing through parliament, ministers made a commitment to review it and the purpose of this consultation , which was published on 7th November, is simply to gather evidence on the effectiveness of the regulations to date.

The findings of the consultation, which closes on 9th January 2018, will be taken into account as part of an independent review of building regulations, commissioned by the Government following the Grenfell Tower fire tragedy.

 

November: Electrical safety standards in the private rented sector: working group report. As it stands, the law around electrical safety in the PRS is grey, to say the least, with very few clear obligations on landlords to check and service electrical installations. This has long seemed to defy sense, given the way in which any gas equipment and supply must be checked and certified annually.

Although not put out to public consultation, in a step towards legislation, a group of relevant experts – including landlord, letting agent and tenant representatives – was asked to provide recommendations on what, if any, legislative requirements for electrical safety should be introduced in the PRS. The full report was published on 7th November.

The group agreed that legislation was necessary and mandatory electrical installation checks in PRS properties should be introduced, with the aim of ensuring safety. Landlords would have to obtain an Electrical

Installation Condition Report (EICR) and carry out any remedial works required to meet the standard for certification. Once secured, the group proposed that a copy of the electrical installation certificate should be issued to the tenant at the start of the tenancy and made available to the local authority, on request.

With the average inspection and test deemed likely to take around four hours, the cost to the landlord was estimated to be around £250. The group decided that requiring a full EICR to be made every five years would help ensure electrical safety while not placing an unreasonable financial burden on landlords. They recommended legislative requirements should be phased in, beginning with new tenancies, followed by all existing tenancies.

I will, as always, try to keep you up to date on any pending legal changes, but you can always sign up to alerts from the .gov website.

This information has been provided by our partner Mortgage Advice Bureau. For more information relating to Mortgages or for Mortgage Advice please visit Mortgage Advice Bureau.