This year is looking like another big 12 months of change for London landlords – and we’re here to help you through it.
This guide outlines all the important legislation you need to know about in 2022…
1. The Renters Reform Bill
The Renters Reform Bill has been on the agenda for some time but was delayed due to the pandemic.
Now, though, it’s looking more likely to become law in 2022 – and heralds one of the biggest private rented sector shake-ups for decades.
Here are the main elements of the Bill you need to be aware of…
The end of section 21 evictions
Under the Renters Reform Bill, section 21 ‘no fault’ evictions would be banned.
This means you would need to seek repossession of your rental property through the court system or a specialist tribunal, even at the end of a fixed term tenancy or during a periodic agreement, as well as giving not less than two months’ notice that you wish to regain possession of the property.
However, the Bill also includes plans to revise section 8 eviction rules and improve the court process so you can get your property back quicker despite having no section 21 process to do so.
Under current rules, you have 30 days to lodge your tenant’s deposit with a government-approved deposit protection scheme.
That will remain the case under the Renters Reform Bill, but instead of a tenant’s deposit being returned to them at the end of their tenancy, it will be passed to their new tenancy and can follow them from property to property.
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.
A landlord register or the requirement for landlords to join a redress scheme are also being considered as part of the Bill.
2. Mortgage interest tax relief
Since 2017, landlords have been unable to offset 100% of their mortgage interest payments against their income tax bill, with the changes phased in up until April 2020.
Instead, you’ll be able to claim a 20% tax credit.
Tax returns for the 2020-21 tax year – the first year of the 20% credit – are due to be filed before January 31, 2022.
3. A rise in interest rates
Interest rates increased for the first time since 2018 in December, when the Bank of England rose its base interest rate from 0.1% to 0.25%.
Because mortgage interest rates generally follow the Bank rate, you may wish to start looking for a new buy-to-let mortgage deal if your current deal is due to expire soon.
Further interest rate rises have been predicted for the rest of 2022, which many commentators suggest they could increase to 0.75% by the summer.
4. The growth of green mortgages
Several high-profile mortgage lenders are rewarding homeowners and landlords with lower interest rates for energy efficient properties.
If your rental property is rated ‘C’ or above on its Energy Performance Certificate (EPC), you may be able to secure a more attractive ‘green’ mortgage rate.
Lenders offering green mortgages include NatWest and Nationwide, with others expected to follow suit in 2022.
5. Energy efficiency rules
Properties with an Energy Performance Certificate (EPC) rating below ‘E’ can’t be legally rented out.
And as energy efficiency continues to dominate the political agenda, even stricter Minimum Energy Efficiency Standards (MEES) are on the way in the next few years.
In England, Wales and Scotland, the minimum rating for a privately-rented property will rise to ‘C’ in 2025 – so now is the time to start looking at improvements if your rental property is rated ‘D’ or ‘E’.
6. The Leasehold Reform Bill
Leasehold properties often come with hefty ground rent charges – and this is something the Leasehold Reform Bill is looking to change.
The Bill is currently making its way through parliament and is likely to become law in 2022.
If it does become law, ground rents for new leasehold properties would only be able to rise by ‘one peppercorn’ per year – effectively zero.
Existing leasehold properties where the lease is being extended may also fall under the new rules, which could mean big savings for landlords renting out flats and apartments or considering buying a new leasehold rental property.
‘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
With income tax and capital gains tax allowances frozen until 2026, the biggest tax change for landlords in 2022 is the introduction of the Making Tax Digital system.
If your rental property, or properties, sit in a limited company and you’re VAT-registered with a turnover in excess of £85,000, you’ll need to switch to the Making Tax Digital system after April 2022.
The system means you would send four quarterly submissions on income and expenses rather than an annual tax return and then sign a declaration to confirm their numbers.
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
In 2021, the government updated its model tenancy agreement to help more tenants with pets secure rental properties.
The model agreement now includes consent for pets as a default, with landlords required to provide a written reason for declining a pet within 28 days of a tenant’s request.
Further rules on pets in rental properties could come into force this year, through the Dogs and Domestic Animals Accommodation Protection Bill.
This Bill is expected to have its second reading in parliament early in 2022 and includes proposals on:
Certificates of guardianship
Certificates of responsible animal guardianship would be introduced if the Bill becomes law, with tenants required to produce a valid certificate when requesting to keep a pet.
The certificates would be issued by vets and include confirmation that:
- 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.
The Bill also proposes to allow landlords to charge tenants a pet insurance fee – covering the cost of any damage caused by a pet.
Under the Tenant Fees Act 2019, landlords or their letting agents are unable to charge additional fees to tenants, other than holding deposits, deposits and rent payments.
But if the Bill becomes law, the pet insurance fee could become chargeable.
No automatic right to keep a pet
Under the Bill, tenants would have no automatic right to keep a pet.
However, you would need to prove their pet was a nuisance or risk to others should the tenant have a valid guardianship certificate
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
Currently, you must fit a carbon monoxide alarm in any rental property room where there is a solid fuel burning appliance.
New proposals, however, extend those rules to apply to any room used as living accommodation where there is a gas boiler or fire.
A reminder of changes from 2021
There were a number of important landlord law changes in 2021, so here’s a reminder of what you may have missed…
Stamp duty for foreign investors
Buy-to-let investors from overseas must now pay an additional 2% stamp duty surcharge under rules that came into force in April 2021.
Stamp duty rules for property in England and Northern Ireland also reverted to pre-pandemic rates in October 2021 following the stamp duty holiday introduced by the Chancellor in 2020.
Mandatory electrical safety
Electrical Installation Condition Reports (EICR) are now mandatory for all tenancies and a new report must be carried out every five years.