Right to rent guide updated

UK Government releases updated Right to Rent guide for landlords. AirBnB hits back at proposed regulations for Scotland. Mortgage payment holidays extended for six months.;
Right to Rent

The Home Office has published an updated Right to Rent guide, effective from November 2020. The updated version is designed to minimise the effects of Covid-19 on hindering landlords to confirm the eligibility of prospective tenants.

The updated 43-page guide confirms which identification and documentation are accepted, including passports, birth certificates, and other travel or immigration documents.

Prior to Covid, landlords and/or a representative agent in England were legally required to meet all potential adult tenants, before a contract could be signed. Video calls are now permitted in their place. Documentation is now also allowed to be requested digitally, rather than providing a physical copy.

These new rules are intended only as a temporary measure while social distancing remains an ongoing effort to slow the spread of Covid-19, and became active from November 2nd.

A free online service will launch on November 25th, allowing non-UK nationals to enter their details, including uploading relevant documents and identification. The service then provides a unique “share code” which can subsequently be sent to prospective landlords/agents to confirm the identity and status of the applicant.

Nationals from Australia, Canada, Japan, New Zealand, Singapore, South Korea, and the United States are permitted to use a passport and evidence of travel to demonstrate their right to rent for visits shorter than six months.

Ongoing Right to Rent requirements

Landlords and their agents have been liable for ensuring that tenants hold a legal ‘right to rent’ prior to allowing prospective tenants to move into a property. This requirement, introduced by the Immigration Act of 2014 and non-compliance punishable with a fine, was re-enforced by the introduction of further penalties in December 2016.

Landlords/agents must confirm the ‘right to rent’ of all occupants over the age of 18, regardless of whether or not they will be named on the tenancy agreement. Non-compliance will result in an initial fine of £1,000 for the first ineligible tenant and an additional £3,000 for each tenant following.

The Home Office is also empowered to require landlords end the tenancy of non-compliant tenants.

Citizens of the European Union, Switzerland, Norway, Iceland, and Liechtenstein will continue to be covered by just a passport or national identity cards until July 2021.

Landlords can request the forms for a right to rent check via the Home office website.

AirBnB hits back at proposed regulations for Scotland

In January 2020, the Scottish government revealed their plans to regulate short-term rentals, announcing the need for a licensing scheme.

The decision was made after the Scottish government conducted independent research, into the impact of short-term lets on people and communities to understand the benefits of, and issues around short-term holiday lets.

Although they found that short term lets were having a positive impact, it also highlighted the negative impacts, such as the reduction in homes available for residential use and reduced affordability of housing for local people.

The licensing scheme

The primary purpose for introducing a mandatory licensing scheme in Scotland is to ensure that properties meet health and safety standards, and facilitate local authorities in knowing what is happening in the area.

The licencing scheme will give councils the discretion to apply further conditions to address any concerns that local residents may have, and allow councils to set up ‘control area’s’ to manage high concentrations of short-term lets.

In addition, the new regulation will give councils the power to restrict or prevent short-term lets in places or types of buildings where it is not appropriate.

Scottish Housing Minister, Kevin Stewart explained the decision, stating that:

“Our proposals to regulate short-term lets will ensure these properties adhere to a common set of safety standards to protect guests and neighbours.’

‘This is part of our work to ensure a responsible and sustainable approach to tourism, which better balances the benefits of tourism with wider community needs and concerns.”

The regulations, if approved by Holyrood Parliament, would come into operation by April 2021.

Airbnb criticises new regulations

Airbnb, the largest provider of short-term lets in Scotland, has criticised the proposed regulations, claiming that it could put approximately 17,000 Scottish jobs at risk and take almost £1million a day out of the Scottish economy.

Airbnb draws on research conducted by BiGGAR, a consultancy, which studied the potential impact of these regulations.

The research highlights the economic impact of Airbnb, stating that the platform boosts the Scottish economy by £677million a year, and supports more than 33,400 Scottish jobs, money that currently stays with local families and communities in Scotland.

The research also warns that if such regulations were to be put in place, unemployment would increase by .6%.

Alternative measures

Responding to the research conducted by BiGGAR, Patrick Robinson, Airbnb public policy director, said:

“These proposals will put jobs at risk, price Scottish families out of hosting and shift tourism pounds away from those that rely on the income to help make ends meet.

“It can’t be right that hosts need to rip up their floors and hire consultants before they can welcome a guest into their home for the night.”

“We want to find a balanced approach and work with the government to regulate short-term lets while protecting livelihoods, ensuring we prioritise the needs of local families who need the additional income most and who are the beating heart of Scottish hospitality.”

Alternatively, Airbnb has suggested for Scotland to implement a national registration system to ‘give local authorities visibility of short-term let activity in their area’, rather than introducing control areas immediately.

They note that any rules imposed by the government should be ‘proportionate to the level of activity provided with lighter rules for occasional hosts and more thorough conditions for commercial operators.’

Mortgage payment holidays extended

The Financial Conduct Authority (FCA) has confirmed that mortgage payment holidays, will be extended for a further six months.

The scheme was due to end on 31 October, however, after the announcement of a four-week lockdown for England that same day, the FCA proposed to extend the availability of the payment deferrals.

The UK government initially announced a three-month payment holiday in March, at the beginning of the first national lockdown. This was then extended for a further three months as the economy continued to be impacted by the Covid-19 pandemic.

Approximately 2.5 million people have already taken a mortgage holiday since the start of the UK lockdown.

The scheme

The scheme is open to both homeowners and landlords or investors with property loans.

Borrowers who did not take a mortgage holiday under the existing scheme will be able to request a break from repayments of up to six months if they are in financial difficulty.

Those who have already taken advantage of the payment holiday will be able to request to extend it or take another one up to a six-month limit.

The deadline for deferral applications will also be extended until January 31, 2021.

Important information

Borrowers will still accrue interest on their mortgage during a payment holiday, and will not be making payments, therefore this will increase the overall balance of the loan in the long term.

With this in mind, the FCA have advised homeowners to only apply for a mortgage holiday if they are in genuine financial difficulty as a result of the Covid-19 pandemic. This also applies to landlords, where tenants have been financially effected and are struggling or unable to make rental payments.

The FCA also suggests that borrowers who have already taken a full six-month payment holiday this year and require further help should speak to their mortgage lender to agree an alternative form of ‘tailored support’.

Consumer groups have welcomed the extension. Gareth Shaw, head of money at Which? commented:

“With a tough winter ahead for many consumers, we called for financial support measures to be extended, and it’s good to see the regulator taking action.”

"Extreme pre-Covid rent arrears” evictions are allowed in England’s second lockdown

In England’s second lockdown, the eviction of tenants will continue to be prohibited, except in exceptional circumstances.

The Secretary of State for Justice Robert Buckland confirmed this information in a letter to the High Court Enforcement Officers Association.

These extreme cases, where eviction is currently deemed acceptable have been outlined. They are as follows:

  • Tenants engaging in illegal trespassing or occupation
  • Fraud or deception
  • Incidents of domestic violence
  • Anti-social behaviour
  • Where a residence is unoccupied due to a tenant passing.

Government officials have further highlighted that evictions involving “extreme pre-Covid rent arrears” can also now be pursued.

These eviction measures are expected to continue until early January; however, this may change if lockdown restrictions persist.

More information on these ‘extreme’ pre-Covid rent arrears cases is expected to be released in due course.

Impact for Landlords, Renters and Government

Allowing the eviction of consistently incompliant tenants will ease the financial burden some landlords are currently experiencing.

Certain landlords will therefore be able to acquire new tenants and begin yielding income from their properties once more.

As a result of this, landlords will be able to continue supplementing their incomes or provide for their family’s futures again.

Furthermore, it may help to ensure that government initiatives intended to protect tenants are not being exploited.

Despite these benefits, many landlords may continue to suffer, as their tenant’s pre-Covid rent arrears and other eviction cases may not be considered extreme.

This may pose financial problems for some, particularly those landlords who only have a small number of properties to rent.

However, temporary relief may be provided to these individuals in light of the extension to the government’s furlough scheme, which is now anticipated to last until March 2021.

Under this extension, tenants may be able to afford their rental costs and other living expenses, resulting in landlords receiving income from their properties.
Ben Beadle, chief executive of the National Residential Landlords Association highlights that:

“The extension will be a lifeline to many renters reliant on it.”

Although the extension to the furlough scheme is positive, there are still concerns regarding rent arrears, which are not considered to be extreme.
Ben Beadle discusses this by stating that:

“This still does not address the considerable rent arrears that tenants and landlords continue to face due to the pandemic through no fault of their own.

“Ministers need urgently to develop a bespoke financial package for renters to pay off such arrears. This should include a mix of interest free government guaranteed hardship loans and increased benefit support for those who rely on it”.

Overall, the introduction of extreme pre-Covid rent arrears evictions and extension of the governments furlough scheme through England’s second lockdown, could provide landlords with some form of relief.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.