MEES (Minimum Energy Efficiency Standard) regulations deadline just days away

With the coming of the MEES (Minimum Energy Efficiency Standard) regulations in April, letting agents, and indeed landlords themselves, will need to make sure that a property is reaching a minimum energy efficiency standard of “E” before it is marketed to let.

Checking out a rental property’s EPC rating is a relatively simply process that any agent or landlord can do instantly online. Providing the property has had an Energy Performance Assessment done within the last 10 years, (EPCs last for 10 years and usually cost between £70 and £100) the information is available from the MHCLG website

New regulations coming into force this April 1 mean that residential landlords and their agents are obliged to ensure that their rental properties meet the required rating before a new or a replacement tenancy is granted, or otherwise they will face heavy penalties.

The penalty for renting out a property on a new or renewal tenancy for any period of fewer than three months will be in breach of the MEES Regulations and will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.

Also, in two years’ time, even with existing tenancies – 1 April, 2020 – it will become illegal for residential landlords to continue letting out a property if they have not addressed the issue of energy efficiency and ensured the property meets the minimum “E” EPC rating.

Another pressing reason for doing this is for mortgage renewals. Under the new mortgage regulations, underwriting standards for buy-to-let mortgage contracts, issued under the Bank of England’s Prudential Regulation Authority, new buy-to-let mortgages and renewals require proof that the property meets the minimum standard.

Mortgage lenders granting new finance deals will typically require properties to be revalued. If single rental properties or properties in a landlord’s portfolio do not meet the minimum MEES standards after April, value could be affected would possibly result in mortgage applications being turned down.

Find the EPC rating for a property instantly online using the property address here

At YOUR AGENT we have ensured that all our managed properties meet the required minimum standard. Great news not only for our landlord clients and tenants but for the environment.

MINIMUM ENERGY EFFICIENCY STANDARDS

As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector must have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. 

For most landlords this will mean that they will no longer be able to rent out a property with a rating of F or G after April 1st 2018. As such landlords with properties in this EPC bracket should begin preparing now for April 1st. 

Where at any time on or after 1st April 2018 a landlord lets a privately rented property which is F or G rated on a current legally required EPC then energy efficiency improvements must be carried out to bring the property up to at least an E rating before the property is rented out, unless the landlord qualifies for an exemption and the exemption is registered on the Public Exemptions Register.

At YOUR AGENT we've worked closely with our landlord clients to ensure every single property we manage meets the required standard. 

Parliament to debate rental payment credit rating plan

Private tenants who are prompt with their rental payments may soon see their credit score boosted, which in turn could make it easier for them to get a foot on the housing ladder.

This comes after the news Parliament is to debate the idea of taking rental payments into account when people make an application for a mortgage.

The debate will take place following a petition on the issue raised by Plymouth construction worker Jamie Pogson attracted 147,307 signatures. This was substantially more than the 100,000 required to force a debate in Parliament.

Typically, credit rating agencies do not routinely include rental payments when calculating credit scores. This means a tenant could find it difficult to access a mortgage, even if they have a long history of prompt and full rental payments.

However, a recent survey of nearly 3,000 buy-to-let landlords carried out by the RLA discovered that 61% of landlords would support rental payments being added to credit histories, just in the same way as mortgage payments.

Including rent payments in this way will make it easier for landlords to ascertain a more accurate assessment of a prospective tenants’ credit and rental payment history.

With many tenants wanting to buy a house of their own, it is absurd rent payment is not routinely included when undertaking credit checks for mortgage applications.

Moving to such a scheme would help not just tenants, but also landlords by giving them a clearer sense of whether a prospective tenant has historically paid their rent in full and on time.

Number of buy to let mortgage products surges to 1,725

The number of new buy to let mortgages available to investors has hit 1,725 - its highest point since 1,942 products were recorded in December 2007, almost a decade ago.

Since January 1 this year - when the market saw a dramatic drop in the number of products available to landlords - the number of deals on offer has gone from strength to strength, culminating in a rise of seven per cent in the past four weeks.

Despite reduced BTL activity in the first quarter, competition among lenders remains high as providers fight to retain their standing in a diminished market. Rates have also fallen with the average two-year BTL fixed rate down from 2.91 per cent in August to 2.86 per cent in September - another record low.

Providers are now starting to get ready for further changes at the end of September, which will see lenders apply stricter standards to those investor-borrowers with four or more properties. 

It is still uncertain how providers will choose to react to the new changes, but product numbers could climb as providers start to target their products to the two different types of borrower. However, despite this increased choice, rates might not improve.

The extra pressure on the buy to let market could be a turning point, with the competition that is currently alive and well amongst providers perhaps starting to ebb as they shift their focus to ensuring the new regulation is followed.

Rents rising 2.4% across the UK

Rents in the UK rose by an average of 2.4 per cent during August - the highest rate of annual growth seen this year. 

The average rent agreed on a new tenancy signed last month was £939 according to the HomeLet, compared to £916 in the same month of 2016.

August’s increase in average rents was partly driven by a return to inflation in the London market, where rents agreed on new tenancies last month were also 2.4 per cent higher than in August 2016. Last month’s increase took the average rent in the capital to £1,609 – the first-time rents in London have been above £1,600.

Excluding London, rental price inflation has also picked up, with 10 out of the 11 remaining regions beyond the capital seeing rents increasing last month. The average rent on a new tenancy outside London was £776, up 2.3 per cent compared to the same period in 2016.

Rents rose fastest in the South West of England (up 3.9 per cent compared to August 2016) and Northern Ireland (3.7 per cent), with only the South East recording a decline - it was down 0.2 per cent.

Rents to rise faster than house prices in next five years, says RICS

Rental prices look set to increase faster than house prices over the next five years, according to the Royal Institution of Chartered Surveyors (RICS).

When it comes to house prices, chartered surveyors said that they anticipate an increase of just less than 20% over the next five years, while rents are expected to rise at a faster rate of 25% during the same period. 

This is owed mainly to an anticipated reduction in housing supply in the private rented sector (PRS), as more buy-to-let landlords either exit the market or reduce the number of properties they have in their portfolios, as a consequence of tax changes.

The introduction of the 3% stamp duty surcharge on buy-to-let homes last year and the phasing out of mortgage tax relief from this April will inevitably push some landlords out of the market, and this is likely to result in more tenants chasing fewer rental properties, according to surveyors.

Jeremy Blackburn, head of policy at RICS, said supply in the market needed a “turbo boost”, while Simon Rubinsohn, chief economist at RICS, added that the “the scale of the challenge the Government faces as it announces its new approach to housing is clearly demonstrated in the results from our latest survey”.

Given the inadequate supply of housing in the UK, combined with the pressures facing the buy-to-let sector, it is not that surprising that rents are expected to rise by 25% over the next five years, according to Charles Haresnape, group managing director of mortgages at Aldermore.

He said: “This [RICS latest report] further supports our view that additional assistance is required for smaller developers which could go some way to alleviate the slow progress in addressing this [housing] deficit. In light of the housing white paper released this week, the latest RICS survey highlights the scale of the challenge the government faces.”

Endsleigh claim letting agents save landlords £2k pa

Insurers Endsleigh surveyed* landlords who say that using a letting agent saves them £1910 a year more than if they marketed their own properties.

As one of the country’s leading specialist insurance providers for letting agents, landlords and young professionals, Endsleigh surveyed 500 UK landlords to uncover what it says are “widespread misconceptions” among landlords about the true value for money offered by lettings agents.

Staggeringly, says the company, more than half of the landlords surveyed (53%) currently choose to rent out at least one of their properties privately without the help of an agent, with more than two in five of those indicating that cost is a reason for this.

The claimed savings are related to services which help to let properties quicker, guarding against costly void periods. Three in four (76%) of respondents reported that their agent also helps them with legal and financial matters.

The survey also suggests that relationships between letting agents and landlords are not just about the financial benefits. Half of landlords (50%) were most attracted to their current agent because of their local knowledge, and more than two in five (44%) claim that excellent service is a deciding factor.

Another factor identified was “quality of life”. Two in five (41%) feel that the main benefit of working with an agent is that it provides peace of mind, and a quarter of landlords (25%) communicate with their lettings agent on a weekly basis.David Hadden, Head of Property, Endsleigh said:

“Landlords who use letting agents find them very useful – especially before a letting – and state they help to reduce stress, free up time and, critically,  save them money.

“The perceived cost of using a letting agent is among the biggest deterrents for many landlords, but those that do use an agent are on average reporting significant savings.

Landlords considering letting their properties directly to tenants in light of changing legislation must seek advice to avoid potentially compromising their income, their quality of life and the provision of support and service that agents can offer.”

*This research was conducted by OnePoll on behalf of Endsleigh, and was of 500 UK landlords that rent out at least one property through an agency from 20 October 2016 to 14 November 2016.