By Karl Griggs, Director, CPC Finance
2016 has been a tumultuous year for landlords. Some changes were expected, like the additional rate of Stamp Duty, announced in 2015ís Autumn Statement and brought in April this year. Others, such as the result of the European Referendum in June, were less widely anticipated. Here, we round up the critical events that have shaped the buy-to-let landscape this year.
- European Mortgage Credit Directive
Most second charge mortgages (also known as secured loans) are now regulated in the same way as first charge homeowner mortgages. This gives them FCA protection and means brokers and lenders need to apply for the right permissions to be able to respectively source and provide advice for these loans.
- Additional 3% Stamp Duty
Since April, anyone buying an additional residential property worth more than £40,000 (whether they are a landlord or not), must pay an additional 3% of the purchase price in Stamp Duty. This does not apply to land, commercial or semi-commercial units. This does apply irrespective of whether the property is purchased by an individual or limited company.
- New energy efficiency measures
Landlords in England and Wales must now consent to any reasonable request to make changes to a private rented property to improve energy efficiency. To qualify as reasonable, the request must incur no cost to the landlord and be submitted in writing. The cost can be met through Government funding, a tenant paying or a combination of both. The new regulations also require that landlords raise the Energy Performance Certificate (EPC) ranking of a private rented home to an E by 2018. If landlords fail to comply, they will not be allowed to rent out the property.
- Changes to Wear and Tear rules
The Wear and Tear Allowance for private rented properties has been replaced by a deduction for the replacement of furnishings. Furnishings include furniture, furnishings, appliances and kitchenware. This does not apply to holiday let properties. The deduction amount is the cost of the new replacement item (as long as it costs the same as an equivalent item), if it represents an improvement on the old item (beyond the reasonable modern equivalent), plus the costs of disposing of the old item, or acquiring the replacement, less any amounts received on disposal of the old item.
- EU referendum result: Brexit
As much as the result was unanticipated, the full implications for UK landlords are not yet clear. Many landlords are therefore adopting a wait-and-see approach, whilst the uncertainties around how Brexit will be implemented, the timescales and impact are resolved.
- Letting agent fees for tenants banned
Although there were no major announcements impacting landlords in the 2016 Autumn Statement, the Chancellorís announcement that letting agent fees will move from the tenant to the landlord will affect landlordsí bottom lines. It is another cost for them to account for. However, it is not clear when exactly this shift will happen.
- New buy-to-let underwriting rules
From January 1st 2017, the Prudential Regulation Authority is introducing stricter buy-to-let rules, but most buy-to-let lenders have already started to bring in new stress calculations, since the 19th December.
It is a time of upheaval for landlords, but whatever the changes in the buy-to-let landscape, the industry will pull together to weather them and, at CPC Finance, we are here to support our clients every step of the way.