Thursday 9 December 2021

Should Landlords be worried about these new rental regulations?

Everyone should be doing their bit to help reduce the UK’s carbon footprint on the globe – yet the question is, is that burden being put too much on the shoulders of landlords with potential bills of £7,600+ in the next four years?

The background - the UK has obligated itself to a legally binding target to be carbon neutral by 2050. One of the biggest producers of greenhouse gasses is residential homes. 


To hit that carbon-neutral target (as one-fifth of the UK's carbon output comes from residential property), every UK home will need to achieve a minimum grade of ‘C’ on their Energy Performance Certificate (EPC) by 2035. Each EPC has a rating between ‘A’ and ‘G’ - 'A' being the best energy rating and 'G' the worst – like an energy rating on a fridge or washing machine.


All UK rental properties have required an EPC. Yet, from April 2020, the Minimum Energy Efficiency Standards (MEES) regulations have required all private rental properties (including rental renewals) to have a minimum EPC rating of ‘E’ or above. 

Yet new legislation being discussed by the Government’s Climate Change Committee has suggested that landlords should play their part and increase the energy efficiency of their private rented homes. Sounds fair until you dive into the details.

The Government is muting the idea that all new tenancies (i.e. when a new tenant moves in) in private rented properties should be at an EPC rating of 'C' or above by 2025 (and all existing tenancies by 2028). The issue is …


70.63% of all private rented properties in

Tunbridge Wells have an EPC rating of ‘D’ or below.


The problem is some of our local landlords will find it very expensive, neigh impossible, to improve the energy efficiency of their rented properties, especially those landlords who hold older housing stock such as terraced properties built in the 1800s. These Victorian terraced houses never perform well on EPC ratings as they have solid walls.  

Now, of course, you can improve the EPC rating of a terraced house by improving roof insulation, boiler replacement, solar heating, and high-grade uPVC windows. Yet, with some terraced houses, there will come the point where you will be unable to get to the haloed 'C' rating without installing external or internal wall insulation, sometimes even floor insulation.

With wall insulation costing between £5k and £15k and floor insulation around £5k …


the bill to improve all Tunbridge Wells’ private rented

properties will be a minimum of £40,560,760.


But before I talk about what the options are for landlords, here’s the weird part of EPCs. An EPC rating is calculated on the cost of running a property and not the carbon output or energy efficiency, despite its name. 


My advice to Tunbridge Wells landlords - although it’s correct to create a future strategy, all I can say at this point is 'more haste less speed'. These rule changes are only a discussion paper, and it remains open for consultation by any member of the British public until 30th December 2021. That means the Government's strategies and tactics may change. 


Given that 57% of private rented properties are below a ‘C’ EPC grade, it is hard to believe the Government could achieve this without making big cash grants available.


For example, there is presently a cap of £3,500 for energy improvements that Tunbridge Wells landlords have to spend to get it to the existing EPC ‘E’ target grade on private rented homes (i.e. if you have a privately rented home at an 'F' or 'G' EPC rating, you only need to spend a maximum of £3,500 as a landlord on improving your EPC rating and still being legal even if those £3,500 don't get you to the current 'E' rating minimum). So, if the current rules allow an exemption to the EPC renting rules, if a Tunbridge Wells landlord can’t improve their Tunbridge Wells property enough, conceivably, could this be extended?


So, what are Tunbridge Wells landlord’s options?


One thing you could do is put your head in the sand and hope it all goes away!


Another thing some savvy landlords do (be they my client, clients of other letting agents in Tunbridge Wells or even self-managing landlords) is to sit down and plan a strategy for their rental portfolio. I print off all the EPCs of their rental portfolio, look at the recommendations, then discuss a plan to ensure they are covered whatever the Government decides to make the new EPC rules. Like all things in life, plan for the worse and hope for the best.


If your agent isn't offering that service, please drop me a line because I would hate for you to miss out on the advice and opinion that so many Tunbridge Wells landlords have already had from me.  


Sunday 5 December 2021

With Royal Tunbridge Wells Tenants Deposits Totalling £7,065,960, How Will ‘Lifetime Deposits’ Change the Local Rental Market?



The Government’s scheduled publication of their White Paper for the Renter's Reform Bill, which incorporates proposals to forbid Section 21 evictions and introduce ‘Lifetime Deposits’, has been suspended until 2022. 

The additional time is required to give a chance to create a level playing field to reforms for both landlords and tenants in the private rented sector in England.


In this article, I want to look at these lifetime deposits. How could the Lifetime Deposit Scheme work, and how could they benefit both landlords and tenants? 


When a tenant moves between rented homes, they need the deposit for their new home before being released from their old home. 

The average deposit for a Tunbridge Wells rented home stands at £1,320

This means finding that amount of money at the time of moving home can be difficult for many tenants; thus, they become stuck in their existing rental.

Therefore, Westminster wants to propose in this White Paper a new deposit choice for tenants. A deposit is transferred from the old landlord (letting agent) to the new landlord (letting agent), thus making life simpler as the tenant doesn't need to save for an additional new deposit every time they move home.

Now, of course, it's vital that any new ‘deposit scheme’ does not dissuade Tunbridge Wells landlords from making valid claims for damage to properties. Landlords cannot be expected to give up their right of recourse to a security deposit until such time that they are satisfied there will be no need to claim it.   

So how would Lifetime Deposits work?

There would need to be some form of system safeguarding that the new landlord is protected by a whole deposit, even if the deposit on the old home comes into dispute. 

This will be critical and central to landlords having conviction in the Lifetime Deposit Scheme. That could be something like an interest-free loan for the tenant on the crossover between the properties.

Another advantage to the scheme is that ‘lifetime deposits’ could be used for tenants to build a deposit for a house for the future.

What about the existing system of deposits?

The rules regarding the amount of deposit held by a landlord were changed a couple of years ago, where only five weeks’ worth of rent can be held as a deposit. 

The deposits tenants have had to save for certainly raises the cost of renting a home. 

Some say this extra burden puts another nail in the coffin of the dream of homeownership for many local renters. To give you an idea of the level of deposits held for Tunbridge Wells rental properties …

The total of all the tenants’ deposits in Tunbridge Wells is £7,065,960.

Yet the other side of the argument contends that if the Tunbridge Wells tenant misses more than one month’s worth of rent, the landlord is immediately out of pocket, even before they’ve got the costs of solicitors and any improvement works from the tenant trashing the place.

Does a deposit of just over one month provide Tunbridge Wells landlords with a decent level of protection against unpaid rent or damage to the property? When you consider …


The total value of all the privately rented properties in Tunbridge Wells is £2,819,157,450


Before I conclude my thoughts to the initial question of ‘lifetime deposits’, the need for decent landlord insurance to ensure you are adequately covered as a Tunbridge Wells landlord is vital. 


So, what are my thoughts on ‘Lifetime Deposits’?


It is my opinion the common need for Tunbridge Wells tenants to stump up a ‘two-fold deposit’ is not helping many renters when moving home. It’s clear the standard cash down deposit is not fit for purpose for the 21st Century. 


One might suggest the Government’s quest for the ‘lifetime deposit’ could open the door to other deposit alternatives that have come onto the market for tenants in the last few years. 


Some landlords don’t require a deposit yet are compensated by asking the tenant to pay a higher rent to cover the risk. Also, there are companies that offer insurance backed deposits where the tenant pays one week's rent to an insurance firm, and the insurance firm pays out if a loss is incurred by the landlord.


Interestingly, other countries are already offering deposit loans and guarantee schemes. Could this be something for the British Government to contemplate?


We must wait until at least the spring of 2022 for the Renter’s Reform White Paper to be published. Then every stakeholder involved (tenants, landlords and agents, et cetera) can look at it in the cold light of day and decide how this will affect the way they view the landlord/tenant/agent relationship.


Many will say the bigger issue isn’t ‘Lifetime Deposits’ in the White Paper, but the removal of no-fault Section 21 evictions. The removal of Section 21 is something the current Government have pledged to bring in during this parliamentary cycle (i.e. before Q4 2024).  

I am not concerned about removing no-fault Section 21 evictions, but what will replace it to ensure there is suitable redress for landlords if the tenant doesn't pay the rent?

Of course, a handful of Tunbridge Wells landlords will decide to sell their rental portfolio because of the White Paper. The same happened in 2016 when the increase in landlord taxes were announced.  

However, this will reduce the supply and availability of Tunbridge Wells rental properties, meaning rents will rise (classic textbook supply and demand), thus, landlords return and yields will rise.



Yet, because tenants still can’t afford to save the deposit for a home and we are all living longer, the demand for rental properties across will continue to grow in the next twenty to thirty years. The reason being we are still not building enough homes to accommodate our growing and ageing population. This means we will turn to more European ways where the norm is to rent rather than buy in their 20s and 30s. 

This means new buy-to-let landlords will be attracted into the market, buy properties for the rental market in Tunbridge Wells and enjoy those higher yields and returns. Isn't it interesting that things mostly always go full circle?