Landlords and letting agents – brace yourself for yet more legislation and tax changes in the buy-to-let market in 2020. Here’s an overview of some of those changes that will affect the sector – and your bank account.

Extension of Homes (Fitness for Human Habitation) Act

The Homes (Fitness for Human Habitation) Act, designed as the name suggests to ensure that all rented accommodation is fit for human habitation, came into force on 20 March 2019.

The act originally only applied to tenancies signed on or after 20 March 2019, but as of 20 March 2020 it will apply to all tenancies.

Introduced in a bid to combat rogue landlords and strengthen tenants’ powers against the minority of landlords who do not fulfil their legal obligation, the Act means if a landlord fails to keep their property free of hazards, tenants may have the right to take court action for breach of contract.

Minimum Energy Efficiency Standard (MEES) Regulations

The Minimum Energy Efficiency Standard (MEES), introduced in England and Wales on 1 April 2018, was designed to get landlords to improve the energy efficiency of their properties by giving properties an Energy Performance Certificate Rating, with F and G being the least efficient.

Restrictions on existing tenancies were put on properties with F or G grades but as of 1 April 2020 it will be illegal to let out properties with an Energy Performance Certificate Rating of below an E if your property is covered by the MEES rating regulations (and not all are).

Landlords must take steps to improve the MEES to at least an E or face penalties – unless they apply for an exception.

There is a cost cap of £3,500 (including VAT) on energy efficiency improvements and there is funding available to landlords who need to spend more than this amount to bring their property up to standard.

The government’s website says landlords “should make all the improvements which can be made up to that amount, then register an ‘all improvements made’ exemption.” The website (https://www.gov.uk/guidance/domestic-private-rented-property-minimum-energy-efficiency-standard-landlord-guidance) gives guideline costs on likely improvements.

Capital Gains Tax

Changes to Capital Gains Tax (CGT), which is paid on any profits made through the sale of a property that isn’t your main residence, are set to take effect from April 2020.

These changes will take several forms:

Tighter deadline

Previously CGT was paid through your self-assessment tax in the following tax year, but from April sellers will have just 30 days to pay it or face penalties.

PRR

Private residence relief (PRR), which means homeowners selling their primary residence don’t have to pay CGT on any profit, also applies to landlords who previously lived in the property they now let out.

At present, a landlord is exempt from paying tax on the final 18 months they owned the property, even if it was not rented out, but that is being shortened to nine months.

Letting relief changes

Letting relief, where a property was a person’s main residence but has also been let – was once available for up to £40k of any gains. But from 6 April 2020 the relief only applies if the the owner was living in the property at the same time as letting it.

Compulsory CMP for agents

It has been compulsory for letting agents to sign up to one of six Client Money Protection (CMP) memberships since April 1 2019. But agents were given a 12 month grace period in which to sign up to the scheme following technical issues.

From April 2020 there will be no excuses to sign up to the scheme, which offers greater protection to landlords and tenants should a letting agent misappropriate or fraudulently uses rent or deposit money. Letting agents face fines of up to £30,000 for failing to sign up and penalties of up to £5,000 for not displaying a certificate of membership or providing one when asked.

End of transition period for Tenant Fees Act

The Tenants Fee Act, that came into force in 2019, banned letting agents and landlords from charging fees for all tenancies signed on or after June 1.

For all other agreements signed before this date, there was a 12-month period transition which will end on 31 May 2020, meaning all prohibited payments will be unlawful regardless of when the tenancy started.

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