Landlords face a squeeze as challenges mount in 2021

For many landlords, 2020 has been an annus horribilis of lost rents and painful limbo. For James Grey, 57, an accidental landlord in Hertfordshire, the situation is on a knife edge. Mr Grey, who asked to use a different name, was struggling to sell his home last year so signed up a tenant in August 2019 to cover his £ 2,300 monthly mortgage.

Mr Grey served notice to his tenant in February after he found a buyer. But then came coronavirus and the eviction ban. The tenant did not leave, and then stopped paying rent. Nine months on, the tenant is £18,500 in arrears. Mr Grey’s sale, which he needs to fund his onward purchase, is about to collapse. “I offered to forego the outstanding rent if she would leave, but she didn’t reply,” said Mr Grey. If he does not make progress by March he “could face financial ruin”, he said.

But there is a flipside, as other investors are spying opportunity. Chris Sykes, of Private Finance, a mortgage broker, said: “I have landlords waiting in the wings expecting there to be some house price falls in 2021.”

Some are ready with cash to take advantage as buyers rush to complete in time for the stamp duty holiday, which expires on March 31.

WHAT WILL CHANGE WITH EVICTIONS? The ban on bailiff evictions ends on Jan 11, and the six-month notice period for eviction is due to finish on March 31. But neither deadline is entirely certain. Chris Norris, of the National Residential Landlords Association, a trade body,

Rents outside the capital are rising after lockdown said the success of the vaccine rollout would be key in determining whether these dates were extended.

“March could be a turning point, but if there are further extensions of restrictions then a significant number of landlords will be disrupted to the point of no return,” said Mr Norris.

When the special measures are eventually lifted, landlords will face court backlogs. About 50,000 cases would have been processed during the period since March in a normal year, said Mr Norris.

While this logjam filters through the courts, only the most extreme cases are being prioritised, which means the backlog is increasing. Without extra funding and a transition to online hearings, it could take 18 months to work through it, said Mr Norris.

Bigger changes are on the horizon. The Conservatives have promised to abolish Section 21 “no-fault” eviction. Yet while the process to bring this in will likely begin in 2021, Mr Norris does not expect it to be finalised next year.

‘I have investors waiting in the wings, expecting there to be house price falls next year’

WHAT OTHER POLICIES WILL CHANGE? Brexit will be a logistical consideration as landlords need to assert tenants’ “right to rent”, which includes their

immigration status. Currently, EU citizens are considered in the same way as UK citizens. After Brexit, they may instead be considered internationals.

Chancellor Rishi Sunak’s spring Budget could introduce changes to capital gains tax, bringing rates on the sale of second homes and buy-to-let properties in line with income tax.

The Government also plans to introduce a requirement that all newly rented homes have a band C energy performance certificate rating by 2025 and that all existing tenancies meet this by 2028. To be compliant, landlords will need to fund expensive retrofitting works.

The changes would particularly hit landlords who own older properties in cheaper areas, where they do not have much equity, said Mr Norris. “If you’re letting a threebedroom house in Burnley, where homes cost £40,000, you certainly won’t be able to spend £30,000 on an air source heat pump,” said Mr Norris.

WHAT WILL HAPPEN TO RENTS? Rents in Britain were up 3pc year- onyear in November, but this number masks major falls in city centres, according to Hamptons International estate agents. The recovery of city rents will depend not just on demand but on what happens to supply. If tourism picks up again, many of the short-term lets that flooded the market after tourism collapsed will disappear again.

David Fell, of Hamptons, said unemployment levels would be key. The rate is forecast to hit 7.5pc next year and is likely to be concentrated in areas where employment is particularly dependent on industries affected by the pandemic.

WHAT ABOUT BUY-TOLET MORTGAGES? After March 31, all buyers will see their tax bills rise as the stamp duty holiday ends.

David Lee, of Total Landlord Mortgages, a broker, said lenders were likely to become much more cautious, looking closely at affordability and landlords’ income beyond their properties when making assessments. If rents start to fall, it is likely lenders could increase the required size of deposits, he said.