‘War on landlords’ continues as buy-to-let investors forced to make eco upgrades by 2028

Eco Upgrades
Eco Upgrades

The clock is ticking for Britain’s beleaguered buy-to-let landlords who now have just five years to cover the cost of energy-efficiency upgrades.

Property investors will be barred from renting out their homes unless they shell out to increase the Energy Performance Certificate rating of their homes by 2028, the Telegraph understands.

It is the latest in a long line of blows dealt to buy-to-let investors by ministers, and comes as landlords see their profit vanish and as they grapple with soaring interest rates on mortgages.

It was also announced this week that landlords face unlimited fines if their properties fall into disrepair as part of the Government’s efforts to boost renters’ rights.

The Department for Levelling Up, Housing and Communities said it was removing the upper limit on fines for landlords and building owners whose properties fall into disrepair.

While the reforms mainly target unscrupulous landlords, experts said it was yet another “unconservative” reform that hit buy-to-let property investors across the board.

Forced to make eco-upgrades

Landlords had been on-notice that they will need to upgrade their properties to meet a minimum EPC rating of C. This could include spending thousands on fitting a heat pump, insulation or solar panels.

EPCs rate homes on their energy efficiency, with properties graded between A and G. The Government’s initial consultation suggested requiring all newly rented homes to have a minimum rating of C by 2025, and then all rented properties by 2028. It is now expected to be confirmed that all landlords have until 2028 to make the upgrades.

It is also understood that landlords will be required to spend no more than £10,000 on energy improvements, even if this does not bring the home to the minimum rating required.

Fines for properties trashed by tenants

Currently, fines attached to so-called “Section 215” orders are capped at £1,000. But the housing department headed up by Michael Gove said it was now removing this cap in a bid to encourage landlords to fix disrepair which can attract anti-social behaviour.

Such fines have previously been levied against property owners for failing to tidy up homes and gardens which have become run down and overgrown, as well as on large vacant industrial sites and derelict buildings.

Elsewhere in the Government's action plan, it revealed plans to lower the bar for landlords wishing to evict tenants over anti-social behaviour.

Currently, landlords can only end a tenancy over anti-social behaviour if there is a conviction. The new proposals would remove the requirement for a conviction, meaning an eviction could be obtained by a landlord on evidence alone.

Currently if a landlord wants to evict an anti-social tenant in court, they have to convince the judge with evidence. Landlords who wish to evict a dangerous or unruly tenant through the courts can wait between up to eight months to see a judge in some cases.

Timothy Douglas, of lettings trade body Propertymark, said it was encouraging to see the Government pledge to speed up the eviction process for nuisance tenants. But he warned the court system would need to be overhauled for the reforms to be a success.

He said: “Given the lack of capacity in the existing court system, we reiterate our call for a dedicated housing court to ensure better access to justice for landlords and tenants.

“A key element is ensuring that tenant behaviour can be better evidenced in court and the cases of most concern are prioritised.”

Experts said conscientious landlords would not be affected by the latest rule change, saying it was “reasonable” for the Government to crack down on rundown rental properties which blighted the local neighbourhood.

Paul Shamplina, of eviction specialist Landlord Action, said it was “perfectly reasonable” for the Government to crack down on rundown rental properties which blighted the local neighbourhood, saying the vast majority of landlords were well intentioned. “Rogue landlords need more enforcement and decaying gardens and properties affect the rest of the community,” he added.

End of ‘no-fault’ evictions

The next blow for buy-to-let Britain is expected to come in the form of a ban on Section 21 evictions, which allows landlords to remove tenants without reason and are used as a way to routinely end tenancies without going through the courts.

Housing secretary Michael Gove published a white paper in June 2022 outlining an overhaul of the private rented sector in a bid to strengthen tenant rights.

In addition to the scrapping of no-fault evictions, there will also be a ban on fixed-term tenancies, moving all tenants onto a system of periodic tenancies instead.

Abolishing fixed-term tenancies will have a particular impact on investors in the student private rented sector, which relies on 12-month contracts linked the academic year.

The housing department has said it is “committed to delivering a fairer deal for renters”, saying its reforms will empower tenants to challenge above-market rent increases, adding responsible landlords had “nothing to fear” from the new policies.

Yet without Section 21 evictions, landlords will be forced to rely on Section 8 of the Housing Act 1988, which requires a court hearing, but the justice system is already plagued with delays.

Landlords have warned relying on Section 8 evictions would mean long wait times when attempting to evict anti-social tenants, who in some cases may not be paying any rent.

Landlords in England already must navigate more than 160 pieces of legislation, with more changes on the horizon.

No say over pets

The Government also plans to give tenants a legal right to keep pets in rented homes and stop landlords from placing a blanket ban on four-legged companions in their properties. Pets are a contentious issue as they can cause higher maintenance costs for landlords and the proposals have proved unpopular with investors.

Tougher tax rules and rising rates

However, industry experts also argue forthcoming measures, on top of harsher tax treatment such as the introduction of the 3pc stamp duty surcharge on second homes and the removal of mortgage debt tax relief, amounted to an “unconservative” raid on buy-to-let investors.

Dominik Lipnicki, of mortgage brokers Your Mortgage Decisions said a squeeze on landlords had been years in the making. “The Conservative government has been very un-conservative when it comes to landlords. Smaller landlords are leaving as a result, because it’s too expensive and too complicated,” he said.

It comes as buy-to-let investors are losing as much as £100 a month as higher interest rates bite, research by Capital Economics revealed last month.

Rate increases  by the Bank of England means the average interest-only mortgage bill in the first three months of 2023 will cost 220 per cent more than at the end of 2021, the research consultancy. Since rates started rising in December 2021, the monthly cost of an interest-only mortgage on an average home will have rocketed from £269 to £860.