‘Tidal storm’ could hit the buy-to-let market, warns property expert

By Hull Daily Mail | Posted: 1 Feb 2018

A LEADING East Yorkshire property lawyer has warned that a “tidal storm” is set to hit the buy-to-let market. 

One of the region’s leading experts says that the market will suffer as government tax changes, a weakening housing market and fears over universal credit take hold. 

Reports suggest that the number of landlords planning to reduce their property portfolios has hit a ten-year high, a trend which the National Landlords Association attributes to tax changes.

The changes include the withdrawal of mortgage interest relief for high and additional tax payers, a 3 per cent surcharge on purchases of additional property and the introduction of a ban on upfront letting fees for tenants.

Before April 2017, landlords could deduct their mortgage interest costs from their income when calculating their tax bill. And up until now, tenants have tended to foot the bill for tenancy agreements, referencing and credit checks. 

But, under the announced changes, these costs will be passed on to landlords, explains Jonathan West, a partner and specialist in property related litigation at Wilkin Chapman solicitors.

He said: “Many landlords have taken advantage of low interest rates over the past 12 years and have bought buy-to-let properties with the benefit of a mortgage.  

“The return on investment was worthwhile when interest payments could be offset for tax purposes. The changes mean some landlords could actually be losing money now.  

“There are options to restructure a property portfolio, for example, setting up a company if you are a landlord with a number of properties rented out.”

These changes come on top of landlords’ fears over the implications of the universal credit roll-out. 

Mr West said: “The well- documented concern for all landlords is that these changes could result in an increase in the number of possession claims for ‘rent arrears’.”

He explained how landlords may well look at other legal measures open to them to manage tenants who build up arrears.

These options include the serving of a ‘Section 8 Notice’, which allows for eviction of tenants who have accrued arrears over eight-weeks. 

“Many landlords are aware of their right to claim possession of a property using the Section 21 Notice – giving a tenant two months’ notice to leave,” Mr West said.

“However, when a tenant is in arrears it would be understandable for any landlord to consider how, giving them at least a further two months in the property, will only serve to increase the losses, and this is where the Section 8 Notice comes in. 

“Overall, there are certainly some challenges faced by this sector, which, combined with a relatively fragile housing market and continuing uncertainty over Brexit – could prove too many waves for a number of landlords to be able to ride it out. Seek out good professional advice, to look at options to safeguard businesses in the future. As a nation, it must be ensured that  quality provision is offered in the rental sector.”

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