The property industry is ever-changing, with constant new challenges and issues to overcome – not least because of legislative changes, but in 2019 the UK is still facing an uncertain economic outlook and, of course, Brexit.
A recent Upad survey looked into the issues keeping landlords awake at night; here’s what they’re worried about at the start of 2019.
Over 32% of landlords said tax changes are their biggest concern heading into 2019. Big changes already took place in 2018 and more are on the way for 2019.
One of the major things landlords are still getting used to is the reduction in mortgage tax relief. Last year, the relief was reduced to 50% with landlords receiving a 20% tax credit on the remaining 50% of their payments. In 2019, the relief will drop further down to 25%, before being scrapped altogether in 2020. This can have a big impact on rental profits and leave landlords no other choice than to increase rents.
The other big concern for the coming year is possible further changes for those landlords looking to sell. According to the Government’s plans, those who have ended up as ‘accidental landlords’ might be faced with a bigger tax bill than previously. This is due to the proposed changes in the way private residence relief (PRR) and capital gains tax (CGT) operate. While these changes are not expected to come into effect until 2020, it’s definitely something landlords and those with a second home will have to consider.
If you’re worried about taxation, it’s a good idea to talk to a tax adviser about your concerns. If you’re part of the Upad Landlord Club, you can receive guidance in tax planning. We also have a great mortgage interest relief calculator to check how you might be affected by these changes.
Landlords were also worried about compliance issues, with 22% mentioning it in our survey. Compliance is a big issue for landlords, as you can find yourself in a heap of trouble if you don’t take care of it. With the Government constantly updating rules and regulations, staying on top of compliance issues can get daunting.
What are the big compliance concerns in 2019 landlords have to keep an eye out for? The big regulatory changes include:
- The Tenant Fees Bill that removes letting agent charges to tenants and a five-week limit on tenancy deposits for properties with an annual rent of below £50,000.
- Letting agents must register with an approved Client Money Protection Scheme (CMPS).
- Homes Fitness for Human Habitation Act that poses tighter rules on the condition of the property.
There are also plenty of further potential developments that could have an impact on compliance. The Government is talking about introducing longer tenancy agreements, which would see tenancies having a minimum three-year term. There has also been a consultation on the creation of a new housing court, which would be in charge of dispute resolutions.
The good news is that there are tools to help you ensure compliance, even in the midst of constant change. Our Tenancy Compliance Service can ensure you provide the correct and up-to-date legal paperwork when taking on new tenants. Landlords should also consider joining the Upad Landlord Club, which gives access to a wealth of information and professional, free guidance on many issues concerning compliance.
It goes without saying that landlords want to be paid on time and without worry. Time and again, rent arrears score high on lists of landlords’ biggest worries. In our recent survey, 18% mentioned it as their top concern.
This isn’t much of a surprise considering what National Debtline has said about the issue. According to the charity, enquiries relating to rent arrears have increased by 84% in the past four years. The cost of living is rising and wages are not increasing fast enough to keep up.
When tenants do end up having problems with late payments, the answer is not just to show them the door straightaway, although you might end up having to do that eventually. There are ways to prepare for rent arrears and resolve these situations without having to look for new tenants.
Communication is key; it’s important to talk about the issue with your tenants and find solutions. This can be easier if you can act quickly – for this it’s a good idea to have a system in place that alerts you if payments don’t get through. You don’t want to start talking after the tenant misses their third or fourth month’s rent in succession – and yes, some landlords will wait that long!
You should also consider protecting yourself with rent guarantee insurance. This will protect you from rent arrears and non-paying tenants.
Not being paid on time is the least of your worries when you don’t even have a tenant. Void periods were the biggest worry for nearly 14% of our landlords, and according to the Official for National Statistics, landlords often choose to charge lower rent in order to avoid void periods. The thought of void periods can be daunting because a little money is usually better than no money.
The best way to avoid void periods is to create lasting relationships with your tenants. If you can keep them happy by keeping the property in order and maintaining rent that matches the value, you are less likely to find yourself with void periods, as even when tenants do leave you’ll have an attractive rental to advertise.
Of course, many people don’t want to rent forever and circumstances will force people to move. This is why you want to ensure:
- You always have paperwork ready for when you have to let out the property. This includes things like EPC’s, photos of the property, and your property description.
- You maintain the property in good condition. You regularly check that it’s clean and everything is working as intended.
- You keep an eye on the market. You want to get the price and target audience right, so stay on top of property market developments and trends even when you’re not looking for new tenants. If you suddenly find yourself needing to look for tenants for the first time in five years, you might be surprised by how much the market has changed!
Other Worries Include Brexit and Universal Credit
Our survey also allowed landlords to pick other big worries they might have in 2019. Unsurprisingly, Brexit was a common concern. Brexit could not only impact the house prices but also change the rental market by reducing demand. There have even been reports of some landlords already refusing to let to EU nationals on the basis they are looking to avoid potential future disruption.
One other major concern is Universal Credit. One respondent talked about the uncertainties and confusion the switch is causing, writing, “The landlord can’t speak to UC easily and has to keep trying to get the tenant to explain what they need and they often don’t understand what that is”.
We’ve written extensively on it before and tried to help landlords make some sense of it. It’s important to be proactive in this matter and learn about the impact. You should then talk about it openly with your tenants to ensure you can deal with the issues before they cause trouble – such as causing rent arrears.
Tenant Fees Ban not a Major Concern
What’s interesting is how few landlords – just 2% named the upcoming Tenant Fees Ban as a big concern for the coming year. This might be for various reasons.
First, landlords might already be dropping traditional letting agents and instead choosing to self-manage their properties. This reduces the need to impose major charges, as self-management tends to be a cheaper alternative and means a higher rent is not needed to cover what is paid as a management fee. Landlords, in general, are switching from traditional letting agents to online platforms that often come with much cheaper fees.
As a result, landlords might have already reacted to the possible change. This could have happened in the form of increasing rent to cover up the charges. Landlords are already preparing for having to pay the fees themselves and therefore, adjusting rents or simply soaking up the cost and accepting a reduced rental yield.
Register with Upad today to save money on the fees you pay and enjoy a healthier rental yield.