Last month, the National Approved Letting Scheme (NALS) warned that a “lottery” of new fees for landlords could push a large number of them out of the buy to let sector.

The trade body stated that the hike in taxes and licensing costs could mean that many landlords will leave the private rented sector over the next few months.

End of buy to let – what has changed?

On December 28^th 2017, the Government published the reforms decided in their recent Houses in Multiple Occupation (HMO) consultations. Whilst the changes are still subject to parliamentary approval, the report has proposed:

• Mandatory licensing for all HMOs occupied by 5 or more people not part of the same households,
• That licensed HMO landlords must follow new guidelines regarding minimum sleeping room sizes and the maximum number of occupants per property,
• And for all HMO landlords to be required to provide suitable refuse storage facilities

Chief executive of NALS, Isobel Thomson, said that, although these changes will work to protect tenants and drive up standards in the private rented sector, the “maze of licensing schemes operating…is a huge financial and administrative burden on landlords with some councils seeing them as a new revenue stream”.

The extent and nature of the new rules for landlords varies between councils. For example, in the capital, as Thomson mentioned, there are already 29 licensing schemes currently operational, with more to follow.

A license to rent out a three-story HMO in London could vary from £125 to £2,500. In fact, licensing fees stand at over £1,000 for a property of this type in 23 of London’s 33 boroughs.

Whilst the average licensing fee will only increase 5% for 2017/18, compared with the 12.9% rise in 2016/17, the hike will add to the strain put on BTL landlords in recent years. When the changes come into effect later this summer, a further 160,000 buy to let homes across England alone will require a license.

Landlords will also now need to give all new tenants the latest copy of the ‘Guide for Renters’ when they move into a shared house. This will include their rights and responsibilities throughout the tenancy, as well as detailed information about each stage of the letting process.

Failing to issue this guide to new renters carries worrying consequences, as it means the landlord will be unable to evict them.

“With landlords under pressure from a host of tax and regulatory changes, this increased burden is likely to push them out of renting out homes at a time when they have a key role to play in providing much-needed housing,” says Thomson.

“If we want to improve the private rented sector for all, we need to see a more joined up approach, with a light touch, streamlined licensing scheme…This would help to minimise operating costs and keep fees to a more reasonable level.”

End of buy to let – is this really the end?

The online letting agent Upad remains optimistic in the private rented sector, claiming “serious” landlords will continue to flourish in buy to let.

Despite recent changes to tax and regulation for landlords making buy to let a difficult investment, the agency’s registration data for the last quarter found a 20% increase of new landlords registering.

During the same time period, Upad also reported registrations made by landlords with five or more properties rose by 56%, suggesting those with larger portfolios are those who will survive.

“Legislative changes introduced by the government in the last couple of years will, no doubt, place doubt in the minds of some accidental and less committed landlords,” says founder of Upad, James Davis.

“It would be foolish, however, to think that those who have made the strategic decision to invest in property would be so easily put off.”

For experienced accounting advise and insight into buy to let, speak to the Burton Beavan team today on 01606 333 900 or email hello@burtonbeavan.co.uk.