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Labour wins the next election? – Consequences for buy to let landlords

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. The below is a basic outline only and is intended only as a general guide. Nothing herein constitutes financial advice.

It is not clear what Labour would do if they were in power but it is inevitable changes will be made. Here are a few possibilities. The message is to aim for quality tenants who can afford the rent comfortably and to ensure your properties are kept in good condition. This article expresses no political views.

Three year tenancies the norm

Labour favours longer minimum leases of say 3 years. These will probably also allow tenants to leave earlier so will favour tenants.

Top tip Look to get quality tenants as they could be in your property for a long time.

Rent Control

Labour is keen on rent caps. This could be a return to the ‘fair rents’ regime which used to exist until the 1980’s which allowed tenants to apply to a local tribunal if they thought their rent was too high. Alternatively rent increases could be capped to the rate of inflation.

Top tip Look for tenants who can afford the rent and who will not want to go to a tribunal.

The right to buy

A form of ‘right to buy’ which allows council tenants to buy their homes, could be extended to the tenants of buy to let landlords forcing landlords who want to sell their properties to have to offer them to their tenants first. This could be a big problem if you want to sell as you will have to serve notice on the tenant after you have found a buyer and probably wait 2 months to see if they want to buy.

Top tip This has been dropped for now but keep an eye out for any proposals. This could spark a sell off of buy to lets.

Minimum standards for human habitation

Some properties which are privately rented do not meet basic standards for human habitation. Labour proposes to introduce new legal minimum standards and rights for tenants to take action.

Top tip Keep your properties in good condition.

Repairs

Tenants could be given a right to withhold rent and use the money for certain essential repairs if the landlord has not carried out the repair e.g. fixing a boiler.

Top tip Respond to repairs in a reasonable amount of time.

Deposits

Labour may put a cap on the amount of deposit payable. This could be less than a month’s rent. Some tenants do not pay their final month’s rent, so this plus the cost of repairs could mean Landlords risk being left short.

Top tip Look for tenants who are likely to pay their final month’s rent and who will not leave the property in bad condition.

Landlord licensing

Landlords may be required to be licensed by the local authority which will be able to ban them from renting properties if there are serious complaints against them by tenants.

Top tip Respond to tenant complaints and look for quality tenants who are less likely to complain.

Evictions

In some EU countries you cannot evict a tenant during the winter months. This has not been discussed yet but must be a possibility.

Taxation

Most likely that collection and enforcement will be increased. Requiring landlords to be registered as above will make collection of tax by HMRC much easier. The rates of capital gains tax may be increased to match income tax.

Top tip Keep an eye out, this may cause a buy to let sell off before capital gains tax is increased.

June 2018
David Anderson
Solicitor-Advocate and Chartered Tax Adviser