How a Property Accountant can Help Landlords in 2024

Being a landlord demands significant involvement, especially in hands-on management. Responsibilities encompass addressing tenant concerns, overseeing property maintenance, ensuring compliance with regulations, and more. Dealing with problematic tenants, pursuing overdue rent payments, and shouldering buy-to-let mortgage costs are among the diverse challenges landlords may face.

For property owners, managing a sizable portfolio often involves enlisting the services of a letting agency, albeit at a cost. However, if you're operating solo, especially if being a landlord isn't your primary occupation, running the business can be quite demanding. Juggling legislative compliance, business management, accounting, and tax responsibilities adds to the complexity.

The gradual increase in interest rates has tightened the financial pressure on both property owners and owner-occupiers, resulting in higher mortgage costs and subsequently driving up rents. This dynamic has made expanding property portfolios or refinancing existing properties significantly more challenging.

Given these circumstances, there's a compelling case for hiring property accountants to optimize financial efficiency and free up time for focusing on core business activities. In our blog post, we delve into the imminent challenges posed by the Renters Reform Bill and explore how engaging a property accountant can enhance your property business.

The Renters Reform Bill

In May 2023, Parliament introduced the Renters Reform Bill, which is poised to make a substantial impact on landlords, renters, and the buy-to-let market once enacted into law.

The Government's objective with this bill is to instigate "once-in-a-generation" reforms in the private rental sector, with a focus on enhancing conditions for renters to establish "safer, fairer, and higher quality homes," thereby ensuring "a better deal for renters."

While the bill is still undergoing parliamentary debate, a notable recent amendment concerns Section 21.

Section 21 No Fault Eviction Abolition Delayed

In a recent reversal, which comes as welcome news for landlords and property owners, the Government has decided to indefinitely abandon plans to abolish Section 21 'no-fault' evictions. This decision stems from concerns that significant reforms to the court system are necessary, as the Government fears it may not be equipped to handle the expected surge in contested possession claims.

Through Section 21, landlords have the ability to evict tenants by giving them a two-month notice period once their fixed-term contract expires. Notably, landlords are not required to provide a reason for the eviction under Section 21, hence its designation as a 'no-fault' eviction.

While this change reduces security for renters, it grants landlords greater control over tenant selection and their overall property portfolio. Moreover, landlords are likely to lean towards longer-term leases, which offer a more dependable and consistent income stream.

Introduction of a Private Landlord Ombudsman

Upon the enactment of the Renters Reform Act into law, landlords will be obligated to enroll in a Government-approved Ombudsman scheme, which aims to provide renters with greater recourse in the event of accommodation-related issues.

Should a renter lodge a complaint against their landlord, they will have the option to seek an independent investigation by the Ombudsman. Subsequently, the Ombudsman will wield authority to address the renter's grievances, potentially mandating the landlord to undertake corrective measures and compensate the renter for damages, with the ceiling set at £25,000. Additionally, the Ombudsman may direct landlords to refund rent payments. This shift places the responsibility on landlords to ensure that their property portfolio aligns with all requisite standards.

The Decent Homes Standard

It's probable that once the Renters Reform Bill is enacted, it will extend the Decent Homes Standard to cover the private rented sector. Currently applicable solely to social housing, this standard sets forth a baseline that housing providers must meet, aiming to enhance the quality of social housing and ensure all renters have access to healthy, safe, and secure accommodation.

In the private housing sector, property owners and landlords already bear responsibilities such as conducting electrical safety checks every five years and installing smoke and carbon monoxide detectors in all properties. Additionally, properties must attain an Energy Performance Certificate rating of E or higher.

Should the Decent Homes Standard be enforced in the private rental sector, it would compel landlords to undertake further improvements to ensure that their properties either meet or surpass the minimum housing standards. For landlords with properties of lower quality, this mandate could entail significant cost implications to bring their properties up to the required standard.

Increased Notice Period to Raise Rents

Another provision within the Renters Reform Bill that shifts the balance of power in favor of renters is the proposal to extend the notice period landlords must provide before raising rents. Under this change, landlords will be required to give a two-month notice period for any rent increase, as opposed to the current one-month notice period.

While the increase in rent must align with market rates, there is no specific cap on the amount by which rents can be raised. However, tenants will have the option to challenge the increase through a tribunal if they deem it to be disproportionately high. Additionally, landlords will be limited to implementing one rent increase per year.