Coronavirus; next in a long line of difficulties facing residential landlords in Wales?

Coronavirus; next in a long line of difficulties facing residential landlords in Wales?

With an ever increasing number of hurdles for residential landlords to jump over, Ceris Clift, property lawyer at Greenaway Scott considers if the Coronavirus pandemic could be the last straw for many private landlords.

According to the Office for National Statistics, in 2018 the percentage of people living in private-rental properties in Wales was lower than the UK average. There was a reported increase from 9% in 2007 to 13% in 2017; however constantly evolving laws together with recent tax changes and pandemic may now be putting some individuals off from becoming residential landlords.

Private tenancies in Wales have historically been governed by legislation from Westminster though in September 2014 the Welsh Assembly introduced the Housing (Wales) Act 2014 or 'HWA 2014' which established the first set of rules applying exclusively to private landlords in Wales. Part 1 of the HWA 2014 made it compulsory for all landlords in Wales to be registered with the Rent Smart Wales scheme, as well as becoming licensed in order to carry out property management services.

All landlords in Wales must now be registered; however they can avoid the time and costs incurred in becoming licensed by employing agents to carry out the property management services on their behalf, although this comes at a cost to the landlord. Landlords who fail to register with the Rent Smart Wales scheme or who carry out property managing services without a valid license can be brought before the Magistrates Court and face various penalties including fines in excess of £1,000. Whilst these penalties are imperative for rogue landlords, some landlords are at risk of operating illegally without even realising it.

Less than two years after the enactment of the HWA 2014, the Welsh Assembly passed an even more ambitious piece of legislation: the Renting Homes (Wales) Act 2016 or 'RHWA 2016'. The statute was intended to amalgamate the existing variegated laws surrounding residential tenancies by creating a completely new framework in Wales. The Act provides for two types of residential tenancy agreements; secure and standard. Whilst the Act will also introduce various other obligations on landlords (which could alone have their own blog), it must also be noted that it is still undergoing amendments before it has even been largely implemented.

In February 2020 the Welsh Assembly proposed a Bill to amend the RHWA 2016. As currently enacted, s.173 RHWA 2016 stipulates that landlords must give their tenant 2 months' notice if they require possession of the property after the initial 6 month period (which is akin to the s.21 notice currently served under the Housing Act 1988). The Bill would extend the notice period under s.173 RHWA 2016 from two months to six months. This would effectively give tenants a minimum of 12 months in any property before a landlord can remove them. Landlords in Wales must therefore remain vigilant and up to date with current changes as these laws will have a substantial impact on their obligations to tenants.

Whilst the legislative landscape in relation to private lettings might be steadily evolving, nothing has brought faster change than the coronavirus pandemic. The pandemic has seen unprecedented moves by institutional lenders to provide mortgage holidays to borrowers facing financial hardship during lockdown. Whilst welcomed by many homeowners, it was clear that private tenants would not be automatically entitled to the same relief, despite the fact that their landlords may well be benefitting from a mortgage holiday.

The UK Government's Coronavirus Act 2020 was passed on 25th March and Schedule 29 was enacted to protect private tenants during these times by extending notice periods for evictions. On 5th June the housing Minister Robert Jenrick announced a further two months extension to this period of protection, preventing landlords from issuing possession proceedings until 23 August 2020. Whilst this has come as a huge relief to many private tenants, landlords have been left with serious concerns. Those landlords looking to evict tenants will be faced with a substantial backlog in the courts, come the end of August and those landlords who are minded to pass on their mortgage holidays as rent holidays to their tenants are also at risk. When the landlord's mortgage holiday comes to an end and the landlord is required to repay those months with interest, some landlords are concerned about whether they will be able to recover the lost months' rent from their tenants, or whether they will they be picking up the bill themselves.

One final and perhaps most important consideration for any person considering becoming a private landlord, is the recent changes to tax. From 2016 the purchase of any secondary property which is not your main residence has attracted a starting Land Transaction Tax (previously Stamp Duty Land Tax) band rate of 3% for properties with a value up to £180,000 and increasing up to 15% for a property with a value over £1,500,000. This can therefore see substantial costs up-front when purchasing buy-to-let properties. In addition to this, and as announced in the 2018 Budget, 'lettings relief' was also abolished on the 6th April 2020 resulting in an increase of tax at the time of sale of a secondary property. It is therefore imperative that landlords take comprehensive financial advice as well as legal advice when venturing into the world of private lettings.

With the frequently changing landscape that private landlords face, it is increasingly important to surround yourself with the right professional advisers. To speak to the property team at Greenaway Scott, please call 029 2009 5500 or click here for one of our team to call you back.

Related Articles