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Who would want to be a Buy to Let Landlord?

23rd November 2021

Who would want to be a Buy to Let Landlord?

It’s been a tumultuous year for buy to let landlords – and now they face being hit with new energy efficiency rules. Nyree Applegarth, Partner in the Higgs LLP Dispute Resolution and Litigation team, takes a look at the rocky road ahead.

Many people have purchased a second or third property over the last 20 years and let them out as part of their pension planning. With mortgage rates at an all-time low, being a landlord was seen by many as an easy way to secure an income. Of course, it can be a positive experience but undoubtedly in recent years pressure has been piled on buy to let landlords. Tax benefits have been phased out by the Government and, as a result of the pandemic, many tenants have not paid rent since March 2020 and considerable arrears have now built up.

Most buy to let landlords do not purchase the property outright and also have borrowing that they need to service and when their tenants do not pay, that means that they have to continue to pay their mortgage and suffer the lack of income from the tenants.  A recent government housing resilience service study found that 7% of tenants were in arrears between April and May 2021, which was up from 3% in 2019 to 2020.  It is also expected that another 9% are going to fall behind over the forthcoming year.

The Government stepped in and imposed restrictions on landlords being able to evict tenants as a result of unpaid rents between March 2020 and June 2021 and have only recently reinstated a landlord’s right to give a tenant two months’ notice to bring a tenancy to an end.  It is thought that around 30% of landlords have agreed some form of rent reduction during the pandemic - but one in five are still owed rent arrears.

As if all that was not a big enough of a burden on landlords, it is now being reported that landlords are going to be banned from letting out properties unless they make them more energy efficient and are going to require all privately rented homes to have an EPC C rating to all new lettings from 2026 and all existing lettings from 2028.  This move is expected to affect three-and-a-half million landlords whose properties currently have an EPC rating of D or below. 

Whilst it is laudable that the Government wishes to improve the energy efficiency of UK properties, it is expected that making the required energy improvements are going to cost a buy to let landlord, on average, around £5,000 per property.  The Government will introduce a cap of £10,000 on spending, but it is very doubtful that the average buy to let investor will have £5,000 let alone £10,000 of free cash, particularly after the last two years, with which to improve energy efficiency.

If you do have a buy to let property and wish to understand the intended energy efficient requirements, do contact me on 01384 327151 or nyree.applegarth@higgsllp.co.uk

 

 

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