The effects of the Budget and future of licensing schemes
The start of July saw the first Budget from the Conservative Government and despite pleas to the Chancellor ‘to seize the opportunity to encourage growth in the sector by introducing changes to the tax system to adequately recognise small scale landlords as undertaking a business activity’, the PRS was left disappointed. Not only was it announced that mortgage tax relief for buy-to-let home buyers was to be restricted to the basic rate of income tax, currently 20%, with the measure being phased in from 2017 but also that from April 2016 landlords will no longer be able to claim a 10% allowance for general wear and tear of furnished properties. The full impact of these changes will only be seen with time but many are predicting that the change in mortgage tax relief will see ‘rents increased to cover the financial hit of the new tax rules’.
However, this month also saw the announcement from the Welsh Government of a new compulsory licensing and registration scheme for landlords to be launched this autumn. Although hailed as a way for local councils to fully identify all of the private rented properties within their local area and help them to work more closely with landlords to ensure high standards are being met for private rental tenants in Wales, others, such as Douglas Haig, vice-chairman for the Residential Landlords Association (RLA) in Wales felt that “this will detract local authorities’ attention away from tackling the minority of landlords who are criminals and stretch resources further. We believe that existing regulations in the private rented sector are sufficient to tackle the criminal landlords, however we do not see adequate enforcement of the powers that already exist.”
Throughout this month there has been a number of stories in relation to licensing. At the beginning of the month it emerged that a landlord who failed to license their property under Carmarthenshire council’s selective licensing scheme became the first to be prosecuted for not doing so. On top of the fine that the landlord received the council also claims that his tenant may now be able to claim back all the rental payments made during the period the property was unlicensed, thus proving to be a very costly exercise for the landlord in not keeping up with legislation and will hopefully be a deterrent to other landlords. In this case a ‘bad’ landlord may have been justifiably caught however good landlords can also fall victim to being criminalised by a selective licensing scheme.
In Croydon the council is planning to bring in mandatory licensing for all properties on October 1. This however has left one pensioner landlord with no option but to sell her property or risk being criminalised. The pensioner’s property only brings in £450 a month and with the licensing fee costing £750 up front she says she simply can’t afford this and will either have to raise the rent on a good tenant who most likely will then leave or sell her property. Having only found out about the licensing scheme through the local newspaper, she has now put £50 into a fighting fund being raised by Croydon Property Forum Ltd, which has been set up by landlords and agents to fight the council’s proposals and are currently waiting on a hearing on this matter which is due to take place on Tuesday August 4. The result of this hearing will be interesting particularly taking into consideration that this month, Enfield Council, one of the pioneers for landlord licensing schemes, appears to have given up on any attempt to introduce one. This came about after a case last year that found part of the scheme was ‘arguably unlawful’ and then a ruling in December that insufficient consultation had taken place in order for the policy to be lawfully implemented. The council is now having to re-think it proposition due to the law changing just before the General Election which means any such schemes will now require ministerial approval.