How to succeed as a buy-to-let landlord. Part 1: Do you know the rules and regulations?

Updated: Jun 25, 2019

Despite the ever-changing political climate and market affecting buy-to-let investment, this sector has remained a steady and lucrative business model for investors. There are a number of things that you, as a buy-to-let investor, can do however, to ensure that you are making the most of your opportunities amongst Brexit and new laws surrounding tenancy fees.

"It's a confusing time to be a landlord, with new regulations on fees and licensing joining the raft of tax relief changes introduced over the past few years" - Which?

Check out Part 2: What can you do to ensure your investment is right?

Know the rules and regulations in play

There have been a number of changes in legislation surrounding landlords and buy-to-let investment in the past couple of years, including the Tenant Fees Act 2019, Section 24 tax changes, Section 21 eviction changes, new Minimum Space Requirements, and the Right to Rent initiative.

The Tenant Fees Act 2019 is the most recent of these and prevents landlords and agents from charging tenants fees for anything other than a specific set of items. The act came into effect to help tenants who were being charged excessive fees by their landlords, and also prevents agents from charging tenants letting fees (currently in England and Scotland). While these regulations have been positively received amongst tenants, those working in the industry have been sceptical. Many landlords have already voiced that they are worried agents will simply pass on their fees to the landlord, in turn causing landlords to charge higher rents to cover the costs.

Landlords are also dealing with new regulation surrounding tax, especially for buy-to-let landlords that are receiving a tax relief on how much they can claim from their mortgage payments. Section 24 tax changes have affected landlords claiming to April 2019 for the current tax year, as "landlords will only be able to to claim 25% of their mortgage tax relief when filling their taxes (down from 50% for the 2018-19 tax year)" (which?). Buy-to-let investors who stay ahead of the game, however, are seeing the positive impact this will have on improving the standard of the private rental sector overall.

New regulations also came into effect last October regarding Houses in Multiple Occupation (HMOs) in England. Previously, a rental property was only classed as a HMO if it was let to five or more people from at least two different households, had shared facilities between tenants, and was three or more storeys. The first change made in October was the HMOs now don't have to be three storeys high - any property, including single floor apartments, as long as they have more than five occupants from two or more different households is classed as a HMO.

Changes have also been made to the minimum space requirements of a rental accommodation. In October 2018, the minimum size 'sleeping accommodation' is required to be was increased, and landlords who do not meet these requirements could face a fine - although there is an 18-month grace period in which to fix any sizing issues. Minimum requirements now state that any sleeping quarters need to be; at least 4.64 sq.m. for any single person under the age of 10, at least 6.51 sq.m. for any single person over the age of 10, and at least 10.22 sq.m. for any two people over the age of 10.

In December 2018, Section 21 was debated by MPs to put in to place regulations to protect tenants facing eviction. This debate wasn't greeted well within the landlord and investor community, however some campaigners have said that it will have an overwhelming positive effect on the homelessness problem in the UK over the coming years, if it comes into effect. "Currently, landlords can give a Section 21 notice of possession to tenants to inform them they wish to take back possession of a property at the end of a fixed term or at the time of an agreed break clause" (Which?). While this ruling hasn't been approved yet, it's certainly one to watch in 2019.

Right to Rent is also a regulation which has seen much debate since its launch in 2016, though this side from the tenant side. Its aims are to protect landlords from renting to tenants who don't have a legal right to be in the UK - which can safeguard landlords from losing out if their tenants don't pay, breach their contract or leave the property in an unfit state. It is, however, important to note that landlords are legally responsible for making sure their potential tenants have a right to rent in the UK, and those who fail to do so could face threat of criminal sanction. Right to Rent is currently being challenged by the Joint Council for the Welfare of Immigrants, and have been given permission by the high court to proceed with a legal challenge against the regulation, so this is something else to watch this year.

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