Being a buy-to-let landlord has got a lot harder this year following the introduction of several pieces of new legislation.
Journalist Emma Lunn, a former landlord herself, argues that there's never been a worse time to rent out property.
My own experiences
I’d kept my one-bedroom flat to rent out when I moved up the property ladder to a two-bedroom flat.
I was a landlord for five-and-a-half years and ended up about £3,500 down – contrary to popular belief, landlords aren’t always raking it in. Mortgage costs, maintenance and service charges all eradicated my profits.
Like most flats, my place was leasehold. This meant I paid a seemingly ever-increasing wad of cash to managing agents for repairs and maintenance to the communal areas of the block.
Personally I think the leasehold sector is the true 'Wild West' of the property market, not the rental sector.
And then, of course, there were the tenants. My first tenant paid the rent on time just once in 10 months before disappearing, leaving the flat in a state.
The deposit didn't cover the cost of fixing all of the damage.
The last couple I rented to bombarded me with a constant list of largely imaginary complaints. Eventually they left of their own accord, dumping their rubbish in the front garden and threatening me with court if the entire deposit wasn’t returned, despite not bothering to clean the flat and leaving debt collectors at the door.
So I sold up, my stress levels reduced by about 90% and I was no longer an evil, hated landlord.
How things have changed for landlords
Plenty has changed in the private rented sector since my exit in 2012.
The most dramatic change came in the Summer Budget in July this year, when the chancellor announced that tax relief on buy-to-let interest payments will be restricted to the 20% basic rate tax.
Currently landlords paying higher (40%) or additional (45%) rate tax could claim tax relief at their highest rate. But the new rules, which will be phased in over the next four years, limit it to 20%.
Osborne also scrapped the automatic 10% wear-and-tear allowance landlords could previously claim.
Both changes will reduce landlords’ profits.
The Deregulation Bill
Tenants have long complained that landlords hold all the power. One reportedly common issue is tenants complaining about the state of a property but, instead of making the necessary repairs, the landlord evicts them.
Years of campaigning has resulted in the Deregulation Bill, which bans 'revenge evictions'. The bill became law on October 1.
The new law makes an eviction invalid if the tenant has made a complaint about housing conditions which the landlord failed to adequately respond to.
This might seem fair enough, but many landlords have raised the issue of tenants gaming the system to remain in a property, for example making spurious complaints or blocking entry so the landlord cannot fix anything.
Many tenants already abuse the rules, which mean it can take landlords six months or more to legally evict a non-paying tenant from a property.
The Deregulation Bill also requires all rented properties to have a working smoke alarm and, in some cases, carbon monoxide detectors. Failure to meet these requirements can result in a fine of up to £5,000.
Right to rent
From February 1 2016 all landlords will need to check their tenants have the right to rent a property in the UK. Those who let property to illegal immigrants can be fined up to £3,000.
The rule has led to criticism that landlords will be forced to act as UK border control and will need to become experts on spotting false documents.
Some industry insiders have warned that landlords will simply refuse to let to anyone with a foreign-sounding name. And to be honest, who can blame them?
What’s next for landlords?
Prior to the General Election, landlords lived under the threat of Labour gaining power and shaking up the rental market.
The party wanted three-year tenancies as standard, as opposed to the current standard six- or 12-month tenancies. Labour also wanted to cap rent rises.
Obviously Labour didn’t win the election, but Labour MPs are still pushing the party’s ideas about the rental market.
They have the backing of groups such as Generation Rent, which are calling for rent controls, claiming that such measures work in other countries.
Generation Rent also wants the compulsory licencing of landlords, as opposed to the “selective licensing” regime we currently have where local authorities can choose whether or not to licence landlords.
Personally, I’m with the group on this issue – but not if it acts simply as a money-making opportunity for local authorities, which unfortunately I suspect would be the case.
I'm glad I got out?
With all that in mind, would I be a landlord again?