A guide to changes..
The dawn of 2022 bring with it a raft of legislation and rule changes for landlords to absorb.
1. The Renters Reform Bill
Having been delayed in its journey through parliament by the pandemic, it’s now looking likely that the Renters Reform Bill will become law at some point in 2022.
The Bill is one of the biggest changes to the private rented sector in many years and there are several key proposals within it you need to be aware of…
The end of section 21 evictions
‘No fault’ evictions would be banished under the Bill, with section 21 notices abolished.
This would mean you’d need to seek possession of your property through a court-based section 8 notice or specialist tribunal instead, even if your tenant is at the end of their fixed term or living under a periodic tenancy.
You’d also need to give the tenant not less than two months’ notice that you wish to regain possession of the property.
Because section 8 notices would become the norm under the Bill, it also proposes to improve the court process and reform the grounds for possession, making it easier for landlords to regain their properties through the courts.
The Bill also proposes to introduce lifetime deposits, which follow tenants from tenancy to tenancy.
This means tenants wouldn’t have to save another deposit when they move, when there is often a gap between them receiving their deposit back and having to provide a new one to another landlord.
More details are set to be confirmed about exactly how the lifetime deposit plan will work in practice, but this is an element of the Bill you should keep an eye on as a landlord.
The landlord database
The government’s database of rogue landlords would be made available to tenants, agents, landlords and professional bodies under the Renters Reform Bill.
Consideration is also being given for a landlord register or the introduction of a requirement for landlords to join a redress scheme.
2. Mortgage interest tax relief
The 2020-21 tax year was the first where landlords were unable to deduct any mortgage interest from their income tax bills.
Instead, you must now claim a 20% tax credit on your mortgage interest – with the first tax returns since this came into force due to be filed by January 31, 2022.
3. A rise in interest rates
Having been at a record low 0.1% for almost two years, in December the Bank of England opted to raise interest rates for the first time since 2018.
The rise to 0.25% could mean higher mortgage payments for landlords who aren’t on fixed rate deals and if your deal is due to expire soon, you should start looking for a new rate now.
Further interest rate rises are expected in 2022, with some predictions suggesting they could rise to 0.75% by the summer.
4. The growth of green mortgages
Green mortgages are on the rise – and more lenders are expected to offer them in 2022.
Green mortgages are effectively more attractive interest rates for homeowners and landlords with energy efficient properties. If your rental property has an Energy Performance Certificate rating of ‘C’ or higher, you could qualify for a green mortgage. Lenders such as NatWest and Nationwide are offering these deals now, with more expected to join them this year.
5. Energy efficiency rules
Minimum Energy Efficiency Standards (MEES) rules are set to change again in 2025, with the minimum required Energy Performance Certificate (EPC) rating allowed to let out a property rising to ‘C’.
Currently, rental properties must have at least an ‘E’ rating, but with the new change looming, now is the time to start looking at improvements if your property is in the ‘D’ or ‘E’ categories.
6. The Leasehold Reform Bill
Ground rents can have a big impact on landlords who let leasehold properties, as well as homeowners who own them.
The Leasehold Reform Bill is currently moving through parliament and will effectively ban ground rents on new leasehold properties if or when it becomes law.
Instead, freeholders will only be able to charge or increase ground rent by one ‘peppercorn’ – which is essentially zero, although technically the freeholder could request one single peppercorn as a ground rent payment if they wish!
‘Peppercorn’ rates date from the 16th or 17th century when although the spice was of high value, one single peppercorn was essentially worthless.
7. Tax changes for landlords in 2022
Allowances for income tax and capital gains have been frozen until 2026, so the biggest taxation change landlords will need to get to grips with in 2022 could be the Making Tax Digital system.
If you run your rental property through a limited company, are VAT registered and your turnover is greater than £85,000 per year, you’ll need to switch to Making Tax Digital after April 2022.
Under Making Tax Digital, instead of sending an annual tax return, you would make four quarterly submissions each year and then sign a declaration to confirm your numbers are correct.
If you’re a self-employed landlord with an annual income of more than £10,000, Making Tax Digital rules will apply to you from April 2024
8. Rules on pets in rental properties
The Dogs and Domestic Animals Accommodation Protection Bill could have another reading in parliament early this year – meaning potential changes may be on the horizon for tenants with pets.
The government has already updated its model tenancy agreement to make allowing pets in rental properties the default position.
The Bill takes this step further, while also looking to protect landlords when it comes to making decisions on whether to allow pets or not…
Certificates of guardianship
Under the Bill, tenants would need to obtain a certificate of responsible animal guardianship when making a request to keep a pet.
Vets would issue the certificates and ensure:
- The pet is microchipped if a cat or a dog
- The pet has been de-wormed and deflead
- The pet has had all required vaccinations
- The pet can respond to commands from its owner
These details would also be held on a database.
Although charging tenant fees is no longer allowed under the Tenant Fees Act 2019, the Bill could make an amendment to those rules by allowing landlords to charge tenants a pet insurance fee.
This would help to protect landlords from costs that arise should a tenant’s pet cause damage to their property.
No automatic right to keep a pet
Although the Bill aims to make it easier for tenants to keep pets, they wouldn’t have an automatic right to do so.
However, a landlord refusing a tenant’s request when they have a valid guardianship certificate would need to prove that the pet is a risk or nuisance to others.
Under the Bill, landlords would be able to apply for an exemption certificate if:
- They, or another tenant, has a religious reason for not encountering domestic animals
- They, or another tenant, has a medical reason for not encountering domestic animals
- Their property is deemed unsuitable for domestic animals
9. Rules on carbon monoxide alarms
Carbon monoxide rules state that any rental property room where there is a solid fuel burning appliance must have a CO2 alarm fitted.
Proposals revealed at the end of 2021, however, would extend this rule to include rooms with gas burning appliances, including boilers and fires, but excluding gas hobs or ovens.