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By Daren Cope

Representative, Amber Homes & Professional Properties

OTHER FEATURES

Thoughts On The Mass Exodus of Landlords

The buy-to-let market is going through a rough patch. With legislative change on the horizon, coupled with bleak ROI forecasts, many landlords are now questioning whether or not they should be playing the property game at all. 

Specifically, it's the smaller landlords (1-5 properties) who are looking to sell up - and it is those landlords to whom we speak today. We’re going to break down the main problems at hand, and hopefully help you decide your best course of action. 

We’ll start with the Rental Reform. It’s caused quite the stir since its announcement, with the most controversial proposal being the scrapping of Section 21, which will mean tenancies can only end if a tenant ends it or a landlord has a valid reason defined in law. There’s also the reduced limitations on pets, the doubling of notice periods for rent increases, and of course the abolition of all fixed term tenancies. 

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Quite understandably, this has been described as the ‘biggest shake-up in the private rented sector in 20 years’. Section 21, pet restrictions and fixed term tenancies have been staples of landlord rights for the longest time; the prospect of losing them hasn’t been particularly well-received, to put it lightly. 

Compounding these concerns further is the increasingly rough state of the economy. The cost of living crisis has called into question the affordability of rent for a striking number of households, while landlords have little choice but to increase rents to cover their own rising costs - and even with rent increases, rental yields for landlords are reportedly down. 

It’s all feeling a bit doom and gloom. For landlords, for tenants, for everyone. There’s no denying the difficulties the property market is facing, and it’s easy to see why more and more landlords are looking at selling up. The question is... should they? Should you? 

We’re not going to sit here and promise everything will be amazing if you stay in the BTL game... but we can at least confront each of the issues at hand, look at them objectively, and offer our own opinion as to how you might respond to them. 

First, the Rental Reform Bill. Although it has technically been in circulation since 2019, it’s still in its early stages (basically because of Covid). There’s a good chance the Bill won’t become law before 2024, and with much debate still to be had on it, there will almost certainly be revisions and amendments. 

As for the measures themselves, it’s not all bad news for landlords. Section 8, for instance, is getting juiced-up; you’ll find it easier to regain possession from anti-social tenants and tenants in arrears. You’ll also be able to use Section 8 if you wish to sell or move into your property. 

Moreover, there have been pledges to improve court proceedings for landlords. 

All in all, the best thing you can do is read and understand the Bill so you can best prepare for the changes. Sure, some of the measures are more difficult to come to terms with than others - but it’s really nothing you can’t handle. 

So, the cost of living crisis - admittedly, a bit harder to navigate. But here’s one way of looking at it: the BTL market isn’t going anywhere, and despite the troubles of the economy, the BTL market isn’t in turmoil in any real systematic way. The road may be bumpy for a bit, but the wheels keep turning. 

Besides, if you do decide to sell your property, chances are it’s going to be picked up by another landlord looking to expand their portfolio (this is what’s happening in real time). Granted, landlords with a bigger portfolio inherently have a bigger safety net - but if they’re going to turn a worthwhile profit on the property, why shouldn’t you? 

Heck, you could even take a leaf out of their book and look for opportunities to expand your portfolio, if you have the means. Because there will be opportunities, and someone will capitalise on them. 

Anyway, it goes without saying that you should do whatever you feel is best. Times are tough, but not impossible; our advice is not to panic and not to abandon ship, but to sit tight, and perhaps even to go in the complete opposite direction. While you might call it crazy to suggest portfolio expansion in the face of Rental Reforms and a purported property armageddon...  

... It might just be the most rational response of all. 

* Daren Cope represents Amber Homes & Professional Properties *

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    As much as I would have liked to carry on buying I think it unwise to be doing so at present, I'm not selling either, buy never say never, if pushed into a corner I will, at the present time with many landlords selling those of us left have the pick of the best tenants with increasing rents

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    I am steadily selling within the limits of CGT rules to reduce my liability. Sold 3 so far with no CGT due.
    Living overseas is very helpful though as CGT gains are calculated from the value in April 2015 if you are non resident.

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    Everything that’s wrong with PRS has been deliberately created by outsiders that’s a fact.
    The Budget yesterday is no better designed to help big Developers to keep creating high rise and fill their pockets.
    It doesn’t help first time buyers by reducing or removing SD, it irreverent when interest rates have risen by more than the SD relief, its just to keep roping them in to buy from Developers. They are walking blindfolded in serious trouble for the future. They are determined to get rid of small private landlords who subsidise Tenants Rents to a large degree. Try renting from large Companies and you’ll find they are invariably charging more, hundreds per month extra. I could be charging thousands more pa.
    You didn’t have to be earning £150k to be paying 45%, when you go over £100k they take away £1 for every £2 of your personal allowance until its all eaten up so in effect you have no personal allowance, work that out is it 62% ?.

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    Big companies will charge big bucks, and you can guarantee they'll increase the rent EVERY year

     
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    William, very strange and un-fair to place the the property value for over seas investors at 2015 if what you say is correct and I don’t doubt you. When I believe in ours case they go back to 1980 putting a value on them there to maximise the CGT payable so un fair, they used to encourage and support us to stay in long term before, now they can’t wait to get rid of us.

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    Prior to 2015 overseas residents were not liable to pay capital gains tax in the UK. It is purely due to the fact that you pay most of your taxes in your country of residence. Therefore I pay tax on my UK invetments and pensions in Cyprus, my country of residence. However this does not apply to rental income on which I pay tax in the UK. In 2015 G Osborn decide that CGT would also be payable to the UK by overseas residents from April 2015, but it would not be retrospective, hence the 2015 cut off. There are various tax treaties between many countries whereby If you pay tax on items in one country you do not pay tax on the same items in another country. Swings and roundabouts, not unfairness.

     
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    A good synopsis, but I am still selling, I simply have lost trust in government, this one is bad enough, Labour…. OMG. 😬😬

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    Same here.

     
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    Article a bit wishy washy for me.
    Section 24 and the EPC crack down are the issues that are affecting me.
    Interest rises would not be a problem, as still very low, but add in 40% tax from section 24, then that is an issue.
    I sold one property last financial year, paid £18,000 CGT. If it had been in any other commodity that would have been nearer £10,000.
    Private Landlords are soft targets and though it in itself is not pushing me out of the market, it is not helping either.

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    The author writes:

    "Sure, some of the measures are more difficult to come to terms with than others - but it’s really nothing you can’t handle"

    That is not the case as far as I am concerned. I definitely can't handle the abolition of fixed term tenancies; I am not prepared to operate in a system which requires me to hand the property over indefinitely. For me, that is out of the question.

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    Ellie - I'm curious as to what the advantage is in only using fixed term. Do you operate in a specific niche market or mainstream?
    I know you're very keen on fixed term tenancies but I've never understood why you want tenants to plan their lives to such a degree. Other aspects of life don't normally work in 6 or 12 month chunks.
    Obviously the student market and winter lets need fixed term tenancies but the rest of it works well on Statutory Periodic. The first 6 months fixed and then rolling with either one months notice from the tenant or 2 months notice from the landlord to end.

    If someone decides not to vacate at the end of their fixed term surely you still have to do the whole eviction thing just as you would on a SPT. Rent increases are pretty much the same on either. Voids are often shorter on SPTs as long as it's a decent property in a convenient location. As a professional landlord you're going to renew the tenancy anyway so why give yourself and your tenants the stress and hassle of having to work to a defined date every year?
    I can understand if you use a Letting Agent and that's just the way they've always done things to maximise their fees but as a landlord what is the advantage?

     
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    Jo my letting agent doesn't renew the contract every 6 months they just let it roll over into a periodic tenancy, I do use a good honest agent, unlike these rogue national ones

     
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    Hi Jo,

    As I said, I am not prepared to operate in a system which requires me to hand the property over indefinitely with only the tenant having the right to end the tenancy.

    I know, of course, that Section 8 gives the landlord a right to end the tenancy in certain circumstances but only in those specific circumstances and they are likely to become discretionary in the future. There were assured tenancies in the past like this, but they were not attractive to most landlords. You probably don't remember that time.

     
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    What extra powers does a Landlord have with a fixed term contract? At the end of the contract, if the tenants does not leave what can you do? Do you still have to go through a court process, or is there an easier way?

     
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    Hi John,

    The main issue is that a landlord can currently end either a fixed term contract (at the end of the fixed term) or a periodic tenancy with two months notice, but in the future if the White Paper comes into force, the landlord will not be able to end periodic tenancies (which is what all tenancies will be) unless certain criteria are specified.

    At the moment I find that all my tenants want a further fixed term contract at the end of the initial fixed term because they want the certainty of being able to stay in the flat for that additional period. If the tenancy rolled over into a periodic tenancy at the end of the fixed term I could end it with just two months notice as the law currently stands.

     
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    This article is ridiculous. It's full of folksy platitudes. Their is an interesting story about an Amber and Darren on a relationship internet site. Is this the same Darren ?

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    Not a very comprehensive or useful article really. Not even a mention of rising interest rates and the impact of Section 24. Anyone who doesn’t appreciate that this is the single biggest issue facing landlords, the true extent of its implications being yet to be really felt isn’t worth listening too. Sorry.

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    Jo, why not a fixed term Contract I never used anything else in 44 years.
    The alternative is what THE WHITE PAPER is trying to do. an indefinite Contract in perpetuity no thanks its our Property. We have to be able to decide not others with little or no input telling us what to do. Wait until I reflect on this, offer a half million/ million £’ property to the rental market for one months rent & 6 weeks Deposit and they are in control for as long as they like but owners have no say hmmm, enjoy the Collapse.

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    Spot on, Michael, and very well put!

     
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    Michael - I use a fixed 11 months tenancy for students and for everyone else start with a standard 6 month AST which then rolls onto a Statutory Periodic.
    It's never been a problem. I've never been asked for another fixed contract after the first 6 months. Several of my tenants have been with me over 5 years, some over 10 years. If I subjected them to the stress of having to commit for a whole 12 months every year several would have bailed years ago.
    I guess different parts of the country do things in different ways. Some areas will have a history of using a series of fixed term tenancies while in other areas rolling onto a SPT is the norm.

     
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    A lot of the conservative MPs are like Truss, previously very hard left

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    Hi Jo. I agree that was the case in the past. We always had fixed term Contracts until they introduced Periodic then that was fine, it continued as before with same term & conditions until one party or the other gave notice. I suppose we are talking in the past with removal of Section 21 imminent Periodic Tenancies will also be gone as
    well, in substitute we will need to go back to fixed Term Contracts or what we will have is no Contract that’s plain enough, not acceptable.

  • David Saunders

    I'm probably missing something here but there seems little or no mention of rent controls in the white paper as yet, giving the illusion that if a landlord wants to regain vacate possession, he/she can simply raise the rent to such a level that the tenants will choose to leave. Hence as sure as night follows day the outlawing of section 21 will be closely followed by rent controls and if/when Labour gains power likely hood of a tenants right to buy at 50% ish discount, making present day 28% CGT seem like a bargain.

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    I fully expect Labour will bring in rent controls, I doubt they will be able to force us to sell to tenants at a discount though

     
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    I wants to buy a car can I have a 50% discount please.

  • David Saunders

    Andrew, if rent controls are brought in, most landlords will be glad to sell to a sitting tenant at 50% discount of a property's true value just to be rid of the hassle.

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