UK Rental Market Update: Insights into the Current Landscape

Welcome to our Property Market blog, where we provide you with comprehensive insights into the current trends shaping the UK housing market. In this edition, we'll dive into key headlines of the current Rental Market - including supply and demand dynamics, challenges faced by investors, rental growth versus earnings, and regional snapshots. Let's explore the latest findings!

 

- Annual rental inflation for new lets in the UK remains high at an average of 11%, slightly down from 12.3% in mid-2022.

- Rental growth continues to outpace earnings growth, raising concerns about affordability for renters.

- The demand for rental properties remains significantly higher than the five-year average, while the supply of privately rented homes in Great Britain has seen a minimal 1% increase over five years.

 

Supply and Demand Imbalance:

- The stock of homes available for rent is 33% below the five-year average, highlighting the significant supply and demand imbalance.

- According to the recent ARLA Propertymark Report, the demand for rental properties recorded by member agents in April 2023 was 24% higher than the previous year, further exacerbating the supply shortage.

- Factors such as rapid growth in overseas students and high net immigration contribute to sustained demand for rental properties. This follows the Government shake-up of Visa rules in 2021 to help attract more skilled workers to the UK.

 

Challenges for Investors:

- The number of privately rented homes has only increased by 1% since 2016, as new investment is offset by properties leaving the rental sector.

- Tax changes, growing regulations, higher borrowing costs, and tighter lending criteria have prompted landlords to reassess their portfolios and investment strategies.

- Mortgage rates have increased, impacting the equity or deposit levels required for new buy-to-let purchases, along with stricter lending criteria and stress tests.

 

Rental Growth and Existing Tenancies:

- Existing tenancies have seen rental increases at an average of 4.4%, significantly lower than the market average for new tenancies.

- Landlords are encouraged to review their rents periodically, especially considering challenges such as tax changes and higher mortgage rates, as rent increases can positively impact investments.

 

Breakdown of the Private Rental Market:

- The core private rented sector, comprising long-term lets, accounts for 66% of the market, offering lower hassle and workload.

- Sub-sectors such as holiday and short lets or HMOs may provide higher yields but come with additional costs, workload, and regulations.

 

Regional Snapshot:

- In the West Midlands region, average rents have seen a year-on-year increase of just under 10%, with Birmingham ranking among the top five cities for rental growth.

- Manchester, Edinburgh, Glasgow, and Nottingham also demonstrate strong growth in rental prices.

 

Conclusion:

The UK rental market continues to experience robust demand, outpacing earnings growth and raising concerns about affordability. The supply shortage persists, presenting challenges for both tenants and landlords. Investors face changing dynamics, including higher mortgage rates and stricter lending criteria. Regular rent reviews are encouraged to ensure investments remain financially viable.

Thank you for reading our Rental Market Update blog. If you are a landlord or property investor and would like some advice or to share your views, please contact me anytime...

 

Ali Durrant MARLA

Director of Concentric Sales & Lettings 

ali@concentricproperty.co.uk

The Must-Known Legislation To Let A Property Compliantly

Landlords, are you aware of the two main pieces of legislation that you need to comply with to remain safe and compliant? 

In the ever-changing private rented sector, it can be difficult to keep up with the latest laws and regulations that govern this space. However, failing to meet the government’s requirements can result in serious consequences in the form of; notices, fines and prosecution.

That’s why we at Concentric Sales and Lettings are focused on helping you get the compliance information you need on all aspects of Landlord law. In this blog, we’re going to dive deeper into the two pieces of landlord legislation designed to ensure the safety of your tenants within your private rented properties. These two laws are The Landlord and Tenant Act 1985 and the more recent Homes for Fitness & Habitation Act 2020.

 

The Landlord and Tenant Act 1985

Section 11 of the Landlord and Tenant Act 1985 details a landlord’s obligation for repairs. Simply put, as a Landlord, you must ensure the safety of your rented properties.

Specifically, you must ensure that the air, space, water, and heating of the property are properly maintained and kept safe. The law also clearly states that you must carry out repairs on your properties as and when they are due. 

This brings up the question – when are repairs due? 

The legislation states that repairs should be carried out on a “reasonable timescale” based on when you are first notified of the repair requirement. “Reasonable” is somewhat subjective and difficult to define but generally depends on factors such as (a) whether or not the tenant is living in the property and (b) whether or not the severity of the repair warrants an urgent response.

Major repairs (as in water gushing through a ceiling) are required to be acted upon immediately. You, as a Landlord, should take all reasonable steps to carry out any maintenance work or repairs to the best of your ability. Some repairs may take time to be rectified, but as long as you have taken the steps that you can take, the law will consider it reasonable. 

 

Protect Yourself Against Claims

We recommend that you always act as quickly as possible when carrying out repairs for your tenants. This is not just for the comfort of your tenants within your rented property. It is also one of the best ways to protect yourself from potential claims that the tenant may choose to pursue against you. 

Under the law, tenants have the right to report any outstanding maintenance issues to the local authority. The council may then decide to carry out a full inspection which can often lead to a much longer list of repairs. 

It’s important to remember that you are not the only person given responsibilities under Section 11. Tenants are also obligated to “behave in a tenant-like manner”, meaning that they are required to take care of the normal maintenance activities that keep the property clean and functional. This includes things like changing lightbulbs, keeping the drains clear, cleaning the gutters, and other similar activities. Now that we’ve covered the first piece of legislation for landlords let’s cover the second, more recent law. 

 

Homes for Fitness & Habitation Act 2020

This law does not replace the one we’ve discussed but creates additional rights and responsibilities. Generally, it focuses on areas that are not necessarily covered under the Landlord and Tenant Act 1985. There are two key factors you should be aware of when it comes to this law. 

First, this act gives tenants the right, for the first time, to take a Landlord to court for not maintaining their repairing obligations. The government has removed the requirement to first go to the local authorities and has enabled the tenant to go directly to the courts. Landlords must be aware of this change.

Secondly, Landlords are now responsible for hazards and repairs within communal areas throughout the tenancy. You are obligated from the moment the tenancy begins through to the conclusion of the tenancy to ensure that the property is fit for human habitation at all times. The only way to achieve this is through regularly inspecting the property. You must not rely on tenants to report repairs because they do not always do so. 

 

Final Thoughts

Your main focus as a Landlord should be to ensure that your tenants are safe at all times. Failure to comply with these laws can result in; prosecution by the tenant in court, penalties issued by the local authority, fines, and improvement notices that can restrict your right to gain possession of your property. 

With over 170 different pieces of legislation regulating the private rented sector, you may be wondering how to be compliant as a Landlord. 

Fortunately, we have created several resources to help you stay safe, compliant, and up-to-date. That’s why we run a quarterly webinar hosted by Dawn Benett, where we spend 2 hours diving deep into various pieces of legislation that you need to know about. Click here to register for FREE today!

What you need to know about the immigration act 2016 (2022 changes)

Are you aware of the changes that were made to the Immigration Act 2016 that just came into force in April 2022? The laws surrounding the private rented sector are changing all the time. As a landlord, it can be difficult to keep up with the many hundreds of different laws. However, you understand that there can be serious consequences if you fail to do so. Lettings law is serious. Here at Concentric Sales and Lettings, our goal is to help you by keeping you up to date with all the changes. We’re here to give you the knowledge and practical tips you need to always remain compliant.

So, without further ado, let’s get into the Immigration Act and the 2022 changes.

 

What is the Immigration Act of 2016?

The Immigration Act is a piece of legislation that applies to landlords and letting agents and came into force in England on February 1, 2016. The goal of the law is to ensure that properties are not rented to tenants or occupiers who do not possess a right to rent in the UK. Specifically, the legislation states that a landlord and/or a letting agent must be able to prove any occupier’s right to reside within the property throughout the tenancy. This means that landlords must check that any tenant or occupier within the property has the right to rent in the UK before the tenancy starts. This law applies to every adult who is 18 or more years old and who is living within the property, whether they are named on the tenancy or not. 

How to verify the right to rent

The most important part of the Immigration Act is the requirement that you verify your tenant’s right to rent in the UK. You mustn't discriminate when checking the occupant’s right to rent. Ask each of your tenants, regardless of their backgrounds, to provide the same evidence – namely, that they have the right to reside on the property. The easiest way to prove the right to reside in the UK is by presenting a passport. If it is a UK passport, you have all the evidence you need to prove that the tenant has the right to rent for the duration of the tenancy. If your tenant is from the EU, the process is a little different. In this case, their right to rent can be verified through the government website online. To do this, all you need to do is ask for a share code from the tenant or occupier. Using this code, along with their full name and date of birth, you can conduct an online rent check. Here is where you can do that. Finally, if your occupier is from outside the EU, other documentation will be required to verify their right to rent. Often, tenants from outside the EU prove their right to rent by showing a passport with a supporting Visa that shows the data the tenant or the occupier entered the UK and the expiry date of their visa. For any tenant or occupier that has a limited time to remain, you are required by law to conduct a follow-up check after completing the original right-to-rent check. The follow-up will need to be carried out either upon the date that the visa expires or 12 months after you carried out the initial check, whichever comes last. What this means is that you could, in theory, legally move a tenant into a property today, when their visa expires tomorrow. This wouldn’t be a violation of the law, but it might not make sense for you as a landlord. Therefore, you need to consider all the facts about a tenant’s right to rent before starting the tenancy. Some tenants may not be able to fulfil the fixed term of their tenancy. 

Landlords must keep documentation and evidence that the right-to-rent checks were carried out at the start of the tenancy. Also, landlords should keep records of any follow-up checks that were conducted while the tenant or occupier was living on the property. Finally, the right-to-rent requirements apply to all occupiers as well, so we recommend conducting further checks to ensure that no unauthorised occupants are living on the property.

Two big changes in 2022

Originally, the Immigration Act required these right-to-rent checks to be held face-to-face. However, due to recent events, for the past two years, we have been able to conduct right-to-rent checks via video call. The first big change to the act is that this amendment has been extended to the 30th of September 2022. The second big change is the alterations that have been made regarding biometric residence permits. Biometric residence permits are documentation that we have now used for many years for any tenant or occupier that has a set amount of time to reside. Based on the 2022 changes, these documents are no longer sufficient to demonstrate a right to rent in the UK. Tenants or occupiers that rely on these permits will also need to provide a share code just like EU nationals so that you, as the landlord, can verify their right to rent online. 

Stay compliant, stay safe

Although landlords are not immigration officers, this law is an essential piece of property law that you must comply with. This regulation carries with it fines of up to £3,000 per occupier and, potentially, a prison sentence. However, by ensuring that you are checking both your tenants and occupiers for their right to rent in the UK, you can remain safe and compliant. The Immigration Act of 2016 is just one piece of legislation in our private rented sector that you as a landlord should be aware of. If you’d like to learn more, feel free to join our FREE quarterly webinar hosted by our very own Dawn Bennett, where you can get more detailed information about the laws and regulations that you need to know.

 

The Minimum Energy Efficiency Standards You Must Comply With As A Landlord

As landlords, there are so many different laws, regulations, and standards that you need to comply with to avoid penalties. Plus, new legislation is constantly being added, further increasing the complexity of this space. Here at Concentric Sales and Lettings, we’re here to help guide you through the maze of rules and get you the information you need to stay safe, compliant, and up-to-date. 

Speaking of compliance, does your property/tenancy have an EPC rating of “E” or above? As a landlord, are you confident that your properties are compliant with the minimum energy efficiency standards (MEES)? In this article, we dive into what these energy efficiency requirements mean for you. 

What Are MEES?

Minimum Energy Efficiency Standards (MEES) first came into force in 2018. The standards focus on the energy efficiency of your property. Energy efficiency refers to the ability to use less energy to get the same amount of work done. With a higher energy efficiency rating, your property means that less energy is wasted and also can reduce energy costs for your property. 

What Does This Mean For You As A Landlord? 

The main MEES requirement for landlords is that any property that you own and rent out needs to have an energy rating of “E” or above. If your property falls below an “E” rating and you are not in receipt of an exemption, you are illegally renting out your property and could be subject to fines and penalties. The government expects landlords to spend a maximum of £3,500 to ensure that their properties are compliant. 

What If My Property Cannot Be Made Compliant? 

In the case that you are renting out a property that is not and cannot be made compliant, then we would recommend you head over to the government website and see if your property falls into one of the categories that are exempted from the energy efficiency requirements. 

You must be prepared to meet these standards. There is talk within the industry that the MEES will be higher in 2025 than it is now. It is currently being proposed that landlords’ properties will have to be a “C” rating or above. This could have a huge effect on many landlords. Fortunately, various funding opportunities are available to you as landlords and tenants right now and maybe more in the future too. We recommend seeking out that funding so that you can offset the costs that may accrue as a result of bringing your property into compliance. 

The EPC Requirement

Part of the MEES is the EPC requirement. The term “EPC” is short for energy performance certificate. It is part of the government’s rating scheme to describe the energy efficiency of buildings and properties. The ratings range from “A” (very efficient) down to “G” (inefficient). The EPC rating is how you as a landlord prove that your property complies with MEES. Providing a tenant with a valid EPC before the start of the tenancy is required under the Deregulation Act of 2015. Failure to provide them with a valid EPC would restrict your ability to serve a valid notice on them for possession of the property should the need arise. So although this piece of legislation may not seem that important, you need to ensure that you comply. 

The Penalties For Failure To Comply With This Piece Of Legislation Are Hefty, With A Maximum Fine Of £5000 Per Property

The size of this fine depends on the time that you let the property non-compliantly. EPCs are valid for ten years and, on average, cost less than £100. This means that for less than £10 per year, you could avoid that penalty and ensure that your property complies with the MEES regulations. Fortunately, it is also easy to get an EPC as there are EPC assessors in your area that can be found online and can carry out the job for you to ensure that your property is compliant and safe. It’s important to remember that funding is available at the moment for both landlords and tenants, so please be sure that you are researching any local funding within your area to improve the energy efficiency of your property. This will also help you to prepare yourself for the even higher requirements that may be coming in 2025. 

Always Remain Compliant

We hope you’ve found this post informative and enlightening. If you want to learn more, check out our YouTube channel, where we help keep you up-to-date on the latest and most important legislation for the private rented sector. There are over 170 pieces of legislation that you as a landlord need to comply with. That’s why we offer a free, quarterly webinar hosted by our very own Dawn Bennett, where you can get more details on all these different kinds of legislation. We’d love to see you there! 

Electrical Certificates – why every landlord should have them

The risks

Imagine if you picked up the phone in the middle of the night to be told that there was a fire at your rented property. As horrific as that news would be, one of the first things that the fire department, the police, and the insurance company would check is whether or not the electrics and electrical appliances within the premises were safe, or whether they could have been the cause of the fire.

And if that were the case, who do you think liability would automatically be with?

If you fail to produce a valid electrical certificate, it could very well be you, the landlord. That would mean that not only do you risk prosecution, but it’s highly unlikely that your insurance would payout.

But, if you have a valid, up to date certificate from a qualified electrician, then you have proof that you have done everything you can to ensure that the electrics in that property are safe. In that case, liability would no longer lie with you as the landlord, but with the electrician, as the question would be whether he had completed the work properly, or with the tenant, who has a responsibility to take care of the property while he or she lives there.

Is it law to have an electrical certificate for my property?

It will be, as right now Government are in processing a law which will mean that all rented properties will have to have electrical checks every 5 years. However, until that time, most agencies are recommending that their landlords get ahead of the game and make sure that all new tenancies start with a valid and up to date electrical certificate, before the tenant moves in.

That’s because, under the Consumer Protection Act Section 37 and Section 19, you have a responsibility to guarantee that your property is safe and fit for tenants to live in. And having an electrical certificate is part of that responsibility.

What will the new law mean for landlords?

Landlords will be required to have electrics checked in their properties every 5 years. This is mandatory, and must be carried out by a qualified electrician. This will be phased in over 24 months; in the first year, all new private tenancies will be affected, and in the second year, all existing private tenancies will also have to adhere.

If a property has recently had an electrical installation condition report (EICR) and has a valid certificate, then the property will not be required to have an inspection until 5 years has lapsed since the date of issue.

What will the required checks include?

The new legislation will require 5 mandatory recommended electrical safety features, which are:

What’s the difference between an EICR and a PAT test?

When we talk about getting an electrical certificate for your property, we’re really talking about the EICR – this is a test carried out by a qualified electrician, and tests the infrastructure of the properties electrics. As detailed above, this includes the wiring, units, plug sockets and switches etc.

A PAT test is really there for the appliances within that property. That would be anything that you include as portable appliances in the property, which might be things like a fridge or freezer, electric oven, dishwasher etc. It’s not mandatory for you to have a PAT test, but some landlords like to get one if they do include these appliances, as again, it provides an extra layer of cover if anything should happen.

In conclusion

While it’s not law to provide an electrical certificate at the time of writing, it’s highly recommended that you obtain one. It’s a small price to pay for peace of mind that your property is safe, and that you won’t be held accountable if something should go wrong.

The Government will be changing the law on this soon, so get ahead and make sure that you’re properties are protected, if not on existing properties, but on all of your new tenancies going forward.

If you are looking to keep all your properties safe by staying compliant with current legislation, click HERE to download our FREE compliance checklist.