More change ahead for the buy-to-let market – Syms

There are currently 15 different government consultations underway that may affect your landlord clients in one way or another.

In addition, the amount of mortgage interest that landlords can offset against tax will decrease again to only 50% of the full cost and 50% at lower rate tax. This will continue to decrease until all finance costs can only be deducted at the lower 20% tax rate in 2020.

EPC regulations imminent

However, the biggest thing on the immediate horizon to be aware of is coming in on the 1st April 2018. From this date it will be unlawful to rent out a property which does not have an energy performance certificate (EPC) with a minimum of an E rating. A civil penalty of up to £4,000 will be imposed on landlords who breach this, this will apply to all new lets, new tenancy agreements and even the extension of existing tenancy agreements.

What this means is your landlord clients may need to have work done on their building now to ensure that each property meets these minimum standards on insulation and energy performance. Where it could get trickier for these clients is if they let out a flat or a bedsit where they only own a part of the building. For a flat the individual unit will need the EPC, but if they let a bedsit, the whole building will need to have one.

There have been no plans announced by lenders saying they will need to have sight of the EPC during application for a buy-to-let mortgage, however this may well be introduced. This is because any building that doesn’t have a valid EPC is likely to face a void period with no tenants while the work is being carried out; this in turn could affect a landlord’s ability to pay their mortgage and will have to be considered by lenders especially for portfolio landlord applications. An EPC is valid for ten years so landlords won’t need to rush out and get one if they got a certificate in 2016 when the requirement came in, they will however need to carry out work and get a new EPC issued if the results came out as an F or a G and they are about to re-let their property.

Client communications

As with all of the changes being introduced, it is highly likely that unless your client is a more hands on landlord they may well be unaware of the impending changes or what action they need to take. It does provide the perfect opportunity for brokers to get in touch with their clients now at the start of the year to let them know what the year holds and what they can do to prepare. It will position you as a valuable source of advice and put you front of mind for any refinancing or new buy-to-let purchases that the client may be about to do.