Q&A: 7 of your top lettings legislation questions answered

27 February 2023

A recent Goodlord webinar highlighted some audience questions around upcoming lettings legislation - and here's what the experts had to say in response.

In a recent Goodlord webinar, William Reeve, Goodlord's CEO, interviewed Robert Bolwell, Senior Partner at Dutton Gregory, and Megan Eighteen, Business Development Manager at Haslams, to hear their expert views on a range of topics.

From Making Tax Digital to the Decent Homes Standard, agents need to keep track of what could be changing around legislation in the near future for their businesses and landlords - so here are the answers to some of the questions asked around the big legislation topics:

  1. Making Tax Digital
  2. Renters' Reform Bill timeline
  3. Pets in rental properties
  4. Tenancy deposit schemes
  5. The Decent Homes Standard
  6. Rent increases and reviews
  7. Housing benefits and periodic tenancies

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There's been more news on Making Tax Digital recently - can you set out what's changed?

Robert Bolwell: In the not too distant future, you'll have to file your tax returns online with compatible software. If you're in a business where you file a VAT return every quarter, you'll probably be aware that since November of last year you've had to do that digitally.

That's now coming to landlords. The latest announcement from the HMRC is that digital taxation will come to landlords in April of 2026. 

That means that landlords will have to file not just their annual return online, but a quarterly return. This is just like the VAT return and it would apply to any landlord who had a rental income of £10K a year or more. You don't need many properties in your portfolio to go beyond that threshold.

The latest suggestion is that, from April 2026, the threshold for landlords will be £50K. But it's not £50K just in rental income, it's £50K in income from your business and/or from your rental portfolio.  So, watch this space -  the numbers may change [and] the date may change.

What's the latest state of play for the Renters' Reform Bill? When can the industry expect this?

RB: Early summer of last year we had the white paper, which is going to form the basis of the Renters' Reform Bill. At that stage they were talking about getting the bill out for us all to have a look at sometime within a 12-month period.

When Michael Gove last was quizzed on this, he said by the end of 2024. In other words, by December of 2023, he's likely to have that bill.

The problem is that it may have cross-party support in its embryonic stage - but when MPs and those in the House of Lords start looking at the bill in detail, it's going to be the best part of the year to get through all the stages the bill has to get through before it becomes law.

If it doesn't make it through parliament by the time this parliament comes to an end - and we have a general election - all bets are off.

If we get the bill introduced in December of '23, and it's passed into law in '24, fine. But, of course, we all know we're going to have to have an election sometime before the first weeks of January '25. So, it's a bit up in the air.

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What may be on the horizon for pets in rental properties?

RB: Before we had the tenant fees ban legislation, if somebody wanted a pet, landlords would simply increase the deposit. That option is not available to us now. Now what we tend to say is, if you want a pet, we're going to put the rent up, to offset the risk of damage by the pets.

There's a move from various organisations favouring dogs and cats, to say, well, that in itself is a bit unfair. Why should a tenant with a pet pay more rent? Our response is:  because it's likely to cause damage.

What Michael Gove's suggesting in his white paper is that insurance might be one way around this. Whether this makes it into the famous Renters' Reform Bill, I simply do not know.

The suggestion last June was that you should have a right to have a pet if you are a tenant, but you would then need to then take out some sort of insurance to cover against the additional damage that pet might do to the property. The beneficiary of that insurance policy would be the landlord. 

That's got all sorts of implications, from insurance premiums in the tax you pay on insurance, and under the Tenant Fees Act, because at the moment you cannot charge a tenant for that sort of insurance premium.

Will there be any changes around tenancy deposit schemes in the Renters' Reform Bill?

RB: No. If we turn the clock back five years, the government was keen on having a single deposit that would follow a tenant from property to property.

That seems to have died a death. We now have insurance policies that will provide that deposit. We're not going to go back to the days where the deposit could be anything at all - so probably no change to deposits.

What does the Decent Homes Standard involve?

RB: The Decent Homes Standard was brought in years ago for properties in the public sector.  It brought in a set of slightly higher standards for an individual home than we have in the private rented sector.

In Gove's white paper, he saw no reason why this slightly higher expectations shouldn’t apply to the private sector, too. Last September, the government announced a whole review of the Decent Homes Standard.

When it is published sometime in 2023, watch out, because in the Renters' Reform Bill we could see a situation where those standards in the public sector are now put onto the private sector.

Megan Eighteen: The current Decent Homes Standard policies that are in place are so vague and so unhelpfully clear, that we just need clear guidance.

Letting agents are sticklers for detail, and we want to know exactly what that means. Agents have to push back and say, look, we need a clear definition of how many people can live in this property to make it safe - and I welcome safer housing.

Have rent reviews always been in tenancy agreements or is this a new thing?

RB: Most landlords will have a fairly standard tenancy agreement, with an automatic rent review clause. You rely on your tenancy agreement, and if you have a clause in there, that's the way you've got to go. 

If you don't have an automatic increase clause in your tenancy, you've got to wait until the end of the fixed term, and either you then renegotiate the whole package, where you renegotiate the rent too, or you serve a section 13 notice, which you can do once a year. You can't do it during a fixed term, you've got to wait until your fixed term is up.

That raises the question, what is a market rent? Typically, you'll have the Retail Price Index or Consumer Price Index in there, and you apply that to become the new rent.

There wasn't a great deal in the white paper about going forward, but what Michael Gove thinks should be in the future is the inability to raise rent more than once every two years.

Any advice around how you'd advise landlords to handle housing benefit tenants who've moved onto a periodic?

ME: It's a delicate situation. We can’t control Retail Price Index (RPI) increases. But we've had situations where landlords didn't use their RPI increase and then two years later wanted to - and it was so far off where the current market value was.

RB: I would always compromise, for a couple of reasons. Number one, to see your tenant go and to find another tenant is time-consuming and costly. So, from a landlord's point of view, you've got to be reasonable.

If you go back to when the legislation for ASTs was first introduced in 1988, the tribunal always has the ability to intervene if someone's paying more than the market rent.

So in theory, even if you insist on a whacking great big rent increase, it's possible that if you are way out of kilter with the market, you're way above the market, your tenant could take you anyway to a first-tier tribunal.

It's better to have a tenant paying slightly less, who is someone you trust and know the rent's coming in, rather than pushing your property out of the tenant's affordability.

The other issue of course with housing benefit claimants is the local housing allowance. If you are saying I'm entitled to a 10% increase, and that takes you way outside the local housing allowance, what's the point? All you're doing is creating a problem further down the line.

This article has been edited for clarity, and is based on the webinar Q&A in "What can agents do about unsustainable pressures in the private rental sector?"

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