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Landlords: Abide by UK Energy Efficiency Law or Face Fines

Categories:Reading and Research
UK residential and commercial property landlords must abide by minimum energy efficiency standards effective today or face fines.

Hundreds of thousands of UK residential and commercial landlords could face fines for failing to make their rental homes more energy efficient once legislation comes into force. The regulation takes effect today (1 April) for new rental lets and renewals of tenancies, and for existing tenancies, on 1 April 2020.

A fine of up to £5,000 can be issued for those renting out homes that fall under the lowest F or G rating in the Energy Performance Certificate (EPC). Under the law, it is illegal for landlords to rent out property that breaches the requirement for a minimum E rating unless exemptions apply.  

Like the Landlord Licensing scheme (if you are a landlord, read about the scheme here), the requirement for energy-efficient homes is not news, having been set out in The Energy Efficiency (Private Rented) Property Regulations 2015, and the onus for compliance rests with property owners and landlords.

The older the property, the poorer its energy efficiency is likely to be. Landlords with homes built in the Victorian era and early part of the twentieth century ias particularly at risk of being caught out as these types of property are often most lacking in insulation. The Department for Energy and Climate Change said when it announced the move that 65% of F and G EPC rated private rentals were built before 1919.

Many properties that are F or G rated could be made compliant just by making one change. For example, 40% of privately-rented properties could be improved above an F or G category just by installing loft insulation.

Energy Efficiency Regulation Impact on UK Rental Market

Chief executive of ARLA Propertymark, David Cox, says: “There isn’t a huge amount of awareness among  UK landlords and tenants on the energy efficiency laws.

“However, over the last five years, the number of properties which are EPC rated F or G has gone down from around 700,000 in 2012, to less than 300,000. Therefore, even without statutory enforcement, UK landlords are responding to tenants’ demands for better quality, and better insulated properties.”

However, statistics seem to suggest that landlords are behind in getting their properties ready for the deadline. Monthly data by the Association of Residential Letting Agents (ARLA) show that overall rental properties managed by letting agents fell by 5% in February compared to January, the lowest level since May 2016.

Cox explained that the drop in rental supply indicates that UK landlords are cutting it fine and removing their properties from the market to make the necessary changes before the regulation takes effect.

“We could see up to 300,000 properties taken off after the deadline passes because they don’t reach the minimum requirements,” he warned.

It will, however, be difficult to know how UK landlords will be policed, says Cox, adding that less than 500 landlords are prosecuted every year and adding new laws is unlikely to improve prosecution rates.

UK property landlords can find out about recommended improvements for their property by checking their Energy Performance Certificate Recommendations Report, or obtaining a Green Deal Advice Report. There are many options for financing under the Green Deal and even receiving free insulation work under the Energy Company Obligation.

Benefits of Compliance for UK Landlords

The Department of Energy and Climate Change claims that increasing a property’s energy efficiency could increase its market value.

Data shows that the average annual cost of energy for an EPC band G property is £2,860, and £2,180 for an F rated property. This contrasts with an average annual cost of £1,710 for an EPC band E property.

Therefore a tenant whose home is improved from EPC band G to band E could expect to see their energy costs reduced by £1,150 a year so long as there were no wider changes in how they use energy in the property.

Research by AXA Business Insurance found the improvements most sought after by tenants were enhanced energy efficiency, through tools such as insulation, newer boilers or double-glazing.

Ultimately, it will result in cheaper heating and better quality of homes for tenants. However, at a time of consistent government change, increasing ambiguity and various tax increases, the proposed cost of changes at £2,500 per property is going to put further pressure on landlords, especially those outside the prime rental markets in London and the South East,” said Cox.

For detailed information about the new regulation, read: www.rla.org.uk/landlord/guides/minimum-energy-efficiency-standards.shtml

By Ian Choong

Source:

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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What’s Trending: Becoming a Landlord in the UK

Categories:Reading and Research
In the UK, becoming a landlord has become increasingly popular with recent data indicating an average increase of over 100,000 new landlords every year over a four year period since 2011/2012. Image by Simon Stannard from LinkedIn.

The reason behind this sharp upswing in landlords is greatly credited to the fact that they receive good income from rental property.

In the UK, letting out property has become increasingly prevalent. Recent data provided by HM Revenue & Customs (HMRC) indicate an average increase  of over 100,000 new landlords every year over a four year period since 2011/2012.

The reason behind this sharp upswing in landlords is greatly credited to the fact that they receive good income from rental property. With savers receiving lacklustre returns from banks and building societies, thousands more people are turning to the buy-to-let sector to fetch lucrative returns.

The figures prove this: according to HMRC, more than 1.9 million people received an income from property in the financial year 2015/2016. The total income earned by landlords in the UK reached £16.2 billion, an increase of £4.1 billion over a short span of only four years!

The annual personal income statistics published by HMRC also show that total income from property dividends almost doubled over the same period, from £42.5 billion to £83.8 billion, as the average income soared to £17,000 per investor.

Recent statistics released by the Office for National Statistics (ONS) on house price growth in the UK reveals a thriving property market. Additionally, the UK property outlook for 2018 illustrates the stability of the economy in the UK — it is no surprise that many have turned to the property market as a means of supplementing their income.


UK Landlords & The Rent Control Debate: It Isn’t Bad

Accompanying this spirited news, however, is talk of Labour leader Jeremy Corbyn’s pledge to enforce a cap on rent rises. Taken at face value, the news is bound to unsettle those involved in the property market, but, a closer look at long-term effects of the regulation could prove it to be quite advantageous for investors, tenants and renters alike. Investors, it appears, could find either condition advantageous.

Amid opposing views on rent control exists neutral ground where a notable point is made: with the number of renters continuing to rise, increasing the number of homes available should be higher on the priority list than capping rent rates. The British government, aware of the housing crisis plaguing the nation, has committed to a target of building 300,000 homes a year. But dissenters question if these homes will be affordable, and the realisation of this pledge remains to be seen.  

But, back to the subject at hand. The current state of rent rates are as follows: there is no limit as to how much landlords can increase rent rates across England. One of the proposed methods for bringing rents under control would be to ensure it can be increased at no more than the level of inflation.

Bricklane chief executive Simon Heawood, who supports the idea of rent controls, explains the bright side to the implementation: “Capped rent rises inside longer tenancies make a lot of sense. Renters get certainty that they’re not going to be priced out of their property on a whim, while UK landlords get happier tenants that stay longer and, therefore, improving returns. Indeed, rent rises could be lower than inflation if the market dictates, in which case we don’t believe tenants would be worse off.”

Whether or not Corbyn’s plans for rent control is implemented depends on Labour’s performance in the next general election. Ultimately, with or without the regulation, the property market continues to grapple with undersupply and a growing Generation Rent population, giving rise to opportunities for savvy investors.

 

Not the First Time, Not the Worst Time

Rents have been capped in the UK in the recent past. The Valuation Office Agency used to set a “fair” level of rent for each property, as well as calculating the amount by which rent could be increased, until the 1988 Housing Act came into play and reduced regulation in the sector.

Worth noting are other superpowers in Europe currently practicing rent control. Paris, Berlin, Munich and Scotland are all home to different types of rent control, yet their economies  continue to thrive. Paris, in particular, continues to be one of the most desirable property markets in Europe despite the cap!

What are your thoughts on rent control? Ever thought of investing in UK property? If you feel the urge to jump onto the landlord bandwagon in the UK, contact us!

Sources:

www.csiprop.com/regional-uk-property-tops-price-growth/

www.csiprop.com/uk-property-outlook-2018/

https://www.ft.com/content/134a8a32-cf73-11e7-b781-794ce08b24dc

www.buyassociation.co.uk/2017/04/20/build-rent-developers-investors-make-three-year-tenancies-norm/

https://www.propertywire.com/news/uk/becoming-landlord-becoming-increasingly-popular-uk/

https://www.buyassociation.co.uk/2018/03/06/rent-control-debate-caps-help-hinder-uk-tenants/

By Nimue Wafiya

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CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

 

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UK Landlord Licensing

Categories:Reading and Research

The Landlord Licensing scheme has recently taken effect in several cities and boroughs in the United Kingdom.

The scheme, which is also known as selective licensing, sets out to ensure that landlords are “fit or proper persons”, and that the buildings being let out are fit for occupation. If someone cannot meet the ‘fit and proper’ landlord criteria the scheme sets out, they will be refused a licence.

Despite having been introduced in certain areas recently, it is not new, and was provided for by the UK Housing Act 2004. Nonetheless, enforcement of Landlord Licensing is still in its infancy. Several city councils, for example, Bradford, Luton, Stoke & York have yet to implement the scheme (as at time of publication), whilst Liverpool and Manchester enforced the scheme in 2016 and 2017, respectively.

Selective licensing really is an attempt to improve the rental market by raising standards and helping to identify non-compliant landlords and management agents who do not invest in their properties or manage them properly.

Areas are designated for selective licensing upon the discretion of the local council. Often a scheme will only cover certain wards or areas of a city, and under new rules only 20% of a council’s area can be selectively licensed without a special application being made.

A scheme lasts for five years and can be renewed if the local council deems it necessary.

Right now Liverpool is running the scheme citywide, while Manchester has introduced licensing in only some parts of the Crumpsall, Moss Side and Rusholme areas.

Landlords in London can use the London Property Licensing website to find out whether they are in an area covered by a scheme, but there is no countrywide list of schemes. Checking with the local council is the safest strategy.

Where selective licensing applies, then normally all houses within the private rented sector for that area must be licensed, except where they require to be licensed as HMOs (houses in multiple occupation). Licensable HMO properties are properties with three or more storeys, and are occupied by five or more tenants not from a single household. Non-licensable HMOs must be licensed under selective licensing.

Some properties are exempt from selective licensing. These include:

  • Holiday lets
  • Business premises
  • Student premises where the university is the landlord/manager
  • Premises where the tenant is a family member

Each local council sets their own licence fees and discounts, and the licences last until the end of the 5-year period. In Manchester the licence costs £650, with each additional licence costing £550. Liverpool charges a fee of £400 for the first, with each subsequent licence costing £350.

In Liverpool, properties managed by professional managers who are members of one of the council’s approved co-regulation organisations (e.g. the Association of Residential Lettings) are entitled to a 50% discounted fee. This means that investors of property developments like Queensland Place and Parliament Place need only pay £200 for the licence.

If the property consists of en-suite units in a cluster sharing a common living area, only a single licence is required for the whole cluster. Student accommodation is a good example of this. This means that cost of one licence can be divided amongst the individual units, greatly reducing the price of licensing.

This is good news for investors in student accommodation. The more units one cluster has, the greater the division, and the lower the cost of licensing. However, studio apartments with no common living area will require a single licence for each individual apartment.

The local councils are taking this very seriously. In October last year, a landlord in Liverpool was fined £1,500 due to his failure to obtain a licence.

“The punishments can be very high,” says Richard Tacagni, founder and managing director of property consultancy London Property Licensing. “Landlords can be forced to pay 12 months’ rent back to a tenant, or could be told that they are unable to rent out a property in future.”

Article by Ian Choong

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260