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New Lettings Legislation Expected in 2020 Agents Should Know About

Rent Guarantor Jan 15, 2020

Any lettings and estate agents who thought the Government would ease up on new legislation for the residential sector are likely to be disappointed. Trade body The Residential Landlords Association warns that at least five pieces of legislation in 2020 will affect landlords and letting agents.

While the majority of new rules are there to benefit and protect both landlords and tenants, there’s no denying that many of them result in additional work and costs for landlords, in the short and long-term. That being said, the UK’s rental market has expanded greatly in recent years and is expected to continue doing so for some years to come.

To help ensure property investors, landlords and letting agents are prepared for the new raft of lettings-related legislation due in 2020, here are the main ones identified by the RLA as coming into force over the coming months.

Extension of Homes (Fitness for Human Habitation) Act

This Act initially came into law in March 2019 across England and can be used to force a residential landlord or managing agent, to carry out works to improve their property and make it safe for tenants to live in.

Right now, the Act only applies to tenancies signed on or after March 20th 2019. But from March 20 2020, it will apply to all tenancies regardless of when they were agreed. That means if you know if any existing issues with your rental property that need fixing and improving, you should put plans in place to do so. Otherwise, in less than three months-time, your tenants will be able to take you to court in order to force you to do the required works.

Minimum Energy Efficiency Standards

April is typically a busy month for new regulations in the property sector and 2020 will be no different. This is another extension of an existing rule. Since April 2018, landlords letting a property to new tenants had to ensure the property had an energy efficiency rating of at least an E. From April this year, this rule applies to all tenancies, unless the property has been made exempt.

It’s worth noting that the EPC ratings only go down to a G, so in many cases this shouldn’t be a problem. It’s also useful to know that if works to improve the EPC rating of your rental property to an E or above are particularly expensive, a landlord can apply for an exemption.

Capital Gains Tax, Lettings Relief

Also in April 2020, will be a change to the way Lettings Relief can be claimed, with regards to Capital Gains Tax (CGT) calculations upon the sale of your rental property. CGT is a tax payable on the profit you make on an investment property, when you sell it.

Until now, for those landlords who initially lived in their property before moving out and turning it into a rental home, it was possible to claim Lettings Relief and only pay CGT on any profit made on the property after the landlord-owner moved out and also in the last 18 months before the sale.

Now, it’s only possible to claim Lettings Relief against CGT if you share your rental property with your tenants and on the final nine months you own the property before the sale.

In addition, from April 2020, property investors must pay their CGT bill within 30 days of selling the property, rather than having until the next tax year to do so.

Compulsory CMP for Letting Agents

In a bid to clamp down against money laundering through property, from April 2020, all UK Letting Agents must become members of an official Client Money Protection Scheme. This scheme insures any monies paid in relation to rental properties by both the landlord and the tenants.

That way, if an agent steals that money, the landlord and tenant are both covered and will be able to reclaim their funds.

Tenant Fees Act Extension

Following the initial introduction of the Tenant Fees Act in June 2019, where all new tenancies had to follow the rules in this legislation, from June 2020 ALL tenancies, regardless of when they were agreed must also be in line with the Tenant Fees Act.

Here is a handy rundown of the rules of the Tenant Fees Act you need to adhere to and also, the differences for landlords and letting agents operating in England and Wales.

These five pieces of legislation might already be on your radar and under control. However, if they’re not don’t panic, you still have enough time to get yourself up-to-date and operating within the rules before they’re extended or come into force.

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