2020: The drive towards more tenant-friendly regulation

The past decade has seen many companies that converge property portfolios, hospitality and travel benefit from an unprecedented pace of growth.

Landlords have long been sat at the head of the table, with the market enabling them to best capitalise on and diversify short-term rental demand across their portfolios. As we head into 2020, however, the market will see a notable shift to better ensure tenants are also given a seat at the table. With change comes complications, though if armed and prepared, the result can usher in a new and improved trajectory.

Regulatory changes are poised to shake up the UK property market in the year ahead, heralding in a new benchmark for the future of landlords. To help assess how to survive, thrive and turn a profit in 2020 and beyond, here is a deep dive into the regulation that lies ahead…

Tenants to be freed from fees

From June 1 2020, The Tenant Fees Act will apply to all private shorthold tenancies, including those entered before June 2019 when the Act was first introduced. This legislation was designed to restrict the type of fees landlords and letting agents could charge tenants, meaning costs such as check-out fees are no longer enforceable by law.

Buy to let property

The push towards banning letting fees comes as no surprise given that, for some time now, tenants have been tasked with paying fees that solely benefit landlords. A key focus for landlords and letting management services should be to ensure that clauses in older agreements will accurately reflect shorthold tenancies. Another core component of this Act for landlords to take note of involves deposits now being capped at five weeks’ rent, or six weeks’ rent on tenancies where the annual rent exceeds £50,000. While existing agreements are still applicable, landlords will need to
reduce deposits to be in line with legislation before the tenancy renews and certainly before June 1.

Bringing all deposits in line with legislation well in advance will help landlords avoid fines ranging from £5,000 to £30,000. Failure to comply isn’t in your back pocket’s best favour.

Existing letting management services will turn to tech solutions to ensure landlords are able to effectively monitor and adapt to regulatory changes.

Fit for a king

Falling short on quality is no longer an option. While The Homes (Fitness for Human Habitation) Act is not new to landlords, it will see a heftier addition on March 20 this year. All existing tenancy agreements will now become subject to the Act. While buy-to-let properties may not have traditionally been the focus under this new Act, they will have to ensure they meet the correct standards or risk facing a claim larger than the required repair.

Up until now, the ability to get away with significant flaws or substandard offerings was easier, particularly in London where demand for short-term lets is especially high. With the reality now changing course, landlords must pledge to improve the quality and consistency of tenant experience.

With the spotlight now sharply on landlords to deliver, the pressure of looming deadlines and repair requirements can be a struggle to manage alone. With the help of an integrated management service, advice and support will provide not only how to adhere to the Act but how best to optimise space and the repairs able to stand the test of time and taste.

Efficient energy or else

From April 1 2020, The ‘Minimum Energy Efficiency Standards’ (MEES) will see some additions come into effect. Landlords with residential properties let on existing shorthold or fully assured tenancies must improve their rating to E- by April 1 otherwise an exemption is filed.

The penalties for renting out a property that fails to meet the rating for up to three months will be met with fines up to £5,000 and those over three months may be fined up to £10,000. It won’t stop there, those that provide false or misleading information will also face a £5,000 fine. It is important however to bear in mind that landlords can still legally avoid the regulations if certain special circumstances apply. For one, if landlords can prove that installing energy efficiency measures reduces the value of their property by 5% or more, they can be exempt.

A six-month respite is also on the table for those that have recently become the owner of a rental property.

Buy-to-let set for a bright future

As the introduction of more tenant-friendly regulation picks up momentum, landlords will have to adapt to become more strategic in their portfolio approach. Though this doesn’t necessarily mean the division between landlord and tenant needs to further widen. Instead, it can be an opportunity for all parties to see what can be done to make the market more attractive.

Landlords with multiple properties can effectively tap into or enhance their portfolio in this new landscape with a well-targeted and responsive management service to enable them to optimise their yields across short, medium and long-term lets. Change might be on the horizon, but one thing is for sure, the next decade will see a healthier balance of treatment between tenants and landlords. Property players will move towards a new chessboard strategy and the resources available to help navigate that change in growth are raring to go.

Investors – is it worth buying a property in a flood-prone area?

Britain has faced a challenging winter so far. Flooding has affected most parts of the country, submerging entire villages and forcing people out of their homes over the festive period.

Floods can occur out of nowhere. Burst riverbanks, storm surges and heavy rainfall all cause terrible destruction. Last year, one of our properties was even flooded in London when a waterpipe burst in Finsbury Park. But while flooding could affect every property investor, certain areas are naturally more predisposed to face flooding than others. The question for an investor is, as floods continue to plague our winters, is it worth investing in a flood-prone area?

What are the risks?

Certain areas naturally face greater flood risks. Low-lying areas such as The Fens in East Anglia and the Somerset Levels will often face flooding, with heavy rainfall quickly leading to serious damage to properties.

Coastal areas are also at risk of floods, with coastal erosion and rising sea levels all putting brick and mortar at risk. There are, of course, payoffs to living in these areas. Coastal areas are highly sought after and can make great investments as holiday lets.

Assessing and understanding the risks will, ultimately, give investors a better understanding of whether it is worth their while investing in areas of the country that are likely to flood. Before investing, it is worth checking the risk your property faces. The government has a helpful website that allows you to see both the flood risk for a property and whether a flood warning has been issued.

Although flooding can be unpredictable, what we can say with some assurance is that floods are getting worse. Even if the government’s website suggests a property is not at risk, there is still good reason to consider preventative measures to flooding. As Britain faces more rainfall in autumn and winter, produced by climate change, flooding has become a more constant fixture in the news.

The old stereotype about English people and the weather seems to be changing from inane chit-chat to a genuine issue.

Preventing flooding

There are a number of steps that can be taken to prevent flooding. The most important thing to consider is how water drains away from your property. In the first instance, this means understanding where the water has come from. Allowing water to run off your property is essential to avoiding damage to your interior. Water can effectively be diverted using drainage and, if flood warnings are in place, temporary flood defences such as sandbags and barriers. Natural measures can also be an effective ally in preventing floods. Landscaping gardens can improve drainage and water retention while also acting as barriers to direct flood water and protect the property from significant damage.

Flooded street with benchConcrete, on the other hand, does not allow water to drain away effectively, leading to a higher risk of interior damage. If you live in a flood prone area, grassing your gardens will help manage the flow of water outside your property. However, while it is essential to take out sufficient measures if you do live in a flood-prone area, sometimes flooding emergencies are uncontrollable. Recently, one of our properties was flooded on Queens Drive in Finsbury Park when a water pipe burst. The flooding caused thousands of pounds worth of damage. The moral of the story for investors is that flooding can happen anywhere, so it is worth your while investing in interior flooding measures.

If water does come into your property, there are certain preventative steps that should be taken to avoid serious damage. Installing a damp-proof membrane on top of a concrete floor will prevent water from standing in the property. Likewise, avoid carpeting the property; tiles or floorboards will allow water to run off the property quicker. In order to avoid electrical damage, homeowners should also raise socket heights.

All of these steps can help reduce the damage that is done to your property and reduce the time to recover from any damage. Given that there are many causes of flooding, it is worth considering these measures regardless of whether the property is in a flood risk zone.

Is it worth it?

Ultimately, property investors should work out whether investing in a flood-prone property is worth the risk, and the cost. Completely flood-proofing your property is likely to rack up into the thousands, as is the home insurance for properties in flood-prone areas and ultimately could prove to be futile.

Though there has been some effort to reduce the cost of premiums, they are still likely to be higher if you live in a flood zone.

But there is, of course, a payoff to all of this. Many of Britain’s most idyllic properties lie in flood zones. Whether that is a coastal village or secluded riverside property in the countryside, investors should not abandon the perfect property out-of-hand. Certain steps can and should be taken to prevent flooding, regardless of where the house is situated. For investors who are confident in their ability to minimise the risk, the right investment might certainly be worth the reward.

*Israel Moskovitz is the founder and CEO of the Avon Group. He has over 30 years’ experience as a developer and property manager.

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