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Legislation, Buy To Let, Landlords, Property Investment
Tax Breaks for Landlords: Will Holyrood Follow Suit?
Tax Breaks for Landlords: Will Holyrood Follow Suit? It’s all change in the UK. We have a new Prime Minister, a new Chancellor, and a new (mini) budget. For landlords in England and Northern Ireland, the tax breaks described in Kwasi Kwarteng’s budget could represent tens of thousands of pounds in savings. But for their Scottish counterparts, it’s simply a case of waiting to see if Holyrood (the Scottish Government) follows suit. In this short blog post, we recap the mini-budget’s impact on landlords and share some thoughts on Holyrood’s potential response. How will the mini-budget affect landlords? In case you missed it, here are the main points from the mini-budget that’ll affect landlords: The basic income tax rate will be cut to 19p (from 20p) from April 2023. The 45% higher rate will be abolished and replaced with a single higher rate of 40%. Stamp duty land tax will be cut in England and Northern Ireland. The limit for buyers will be raised to £250k (from £125k) — or £425k for first-time buyers. The planned increase in corporation tax has been cancelled. It will remain at 19%. The planned rise in National Insurance contributions will be reversed from 6 November. According to an analysis by tax firm Blick Rothenberg in the Telegraph, the corporation tax rate remaining at 19% will save an incorporated landlord with £250,000 in rental profits £15,000 a year. Meanwhile, the change in Stamp Duty rates means landlords buying property worth up to £250k will have less to pay. Previously, buy-to-let investors had to pay a 3% surcharge on purchases up to £125k, and a further 5% on anything between £125,001 and £250k. Now it’ll be a straight 3% up to £250k, 8% between £250,001-£925,000, 13% between £925,001-£1.5m and 15% for anything £1.5m+. Example: Under the new rules, Stamp Duty for a property worth £249,000 in England will be £7,470, down from £9,950 under the old rules. However, much of this will not affect Scottish-based landlords The cut in additional rate income tax (from 45% to 40%) on earnings above £150,000 won’t apply in Scotland. The rate in Scotland will remain at 46% for the time being. Similarly, the cut in basic rate tax from 20p in the pound to 19p won’t be seen in Scotland. And the Stamp Duty cut will only apply in England and Northern Ireland. Scotland has its own system: Land and Buildings Transaction Tax (LBTT). The current LBTT rates mean buy-to-let investors need to pay a 3% surcharge on purchases up to £145k, 5% between £145,001-£250,000, 8% between £250,001-£325,000, 13% between £325,001-£750,000 and 15% for anything £750,001+. So, for a £249,000 property in Scotland, LBTT is currently £12,040 — a significant difference from south of the border. Will Holyrood mirror Westminster? That is the question. And right now, the answer seems to be “no.” The First Minister, Nicola Sturgeon, has heavily criticised the Chancellor’s decision to abolish the top rate of income tax and has hinted that she has no interest in “blindly following suit”. As it stands, the Scottish Government probably won’t make a final call on income tax rates until its draft budget is presented to Holyrood. We’ll be keeping a close eye on developments. If you’d like to get more posts like this in your inbox, sign up for our regular newsletter.
Legislation
Scottish Rent Freeze and Eviction Ban – the latest update
Our in-house Compliance Manager attended a webinar on 14th of September 2022 with Daryl McIntosh from ARLA in the hopes to obtain answers for our landlords on the latest bans implemented by the Scottish Government. Sadly, we did not obtain the answers to the questions which we had hoped for, however have gained further information and legislative insight for our landlords which is detailed below. This is where agents are crucially important, smaller landlords that manage their own properties should look at reputable agents whom will follow legislation and support the landlord and give correct advice to get through the financial crisis and ever changing regulations being forced upon them. We will continue to update our landlords as new information is received, however any immediate questions should be directed to our Compliance Manager at: gemma@cairnletting.com Many landlords may be aware that on the 6th of September 2022, the First Minister for Scotland announced an immediate ban on rent increases and evictions in the Scottish rental market. This is part of a larger legislative programme to make a ‘stronger and more resilient Scotland 2022 to 2023’. Eighteen bills are set to be introduced during the 2022 to 2023 parliamentary year and further information on this is provided below. However, we will firstly look at the immediate rent freeze and moratorium on evictions. This ban has been implemented by the Scottish Government to support tenants through the cost-of-living crisis and is the focus of the 2022-23 programme. The programme outlines emergency legislation which will be implemented until the 31st of March 2023 and puts in place freezes on rent increases and evictions, along with a new tenant’s rights campaign. A new website is also being created which will provide tenants with information on a range of grants and support available to help through the cost-of-living crisis. It is important to note here that all parliamentary business has been suspended because of the death of Queen Elizabeth II. This has provided Ministers with more time to work on emergency legislation before issuing this out to the public. Rent increase notices It has been made very clear to all that as of 06/09/22, an immediate ban is in place on issuing rent increase notices to tenants. This means that landlords cannot increase rents after 06/09/22 or before 31/03/23. This is a blanket ban across all sectors including Social Housing. What does this mean for rent increase notices issued before 06/09/22? Sadly, no one currently has the answer to this question until the legislation is issued to all sectors. Our advice to landlords would be to air on the side of caution. Some housing experts believe that Ministers may be currently trying to word the legislation in a way that it bans all increases including notices which do not take effect until after 06/09/22. If the legislation is worded in this way, it could result in landlords needing to refund tenants the increased amount collected so the best approach currently is to hold off enforcing any increase issued until the legislation is announced. What if the tenant has already agreed to the rent increase notice served before 06/09/22? Arguments have been made that this would fall under contractual law, and it would be illegal for the Scottish Government to ban this, however they may look to supersede contractual law and again, our best advice is for landlords to be cautious enforcing notices until the legislation is issued in full. Will the temporary regulations be extended after March 2023? Again, no one currently has the answer to this, but it is believed that the Scottish Government may continue renewing the legislation (as was done during COVID) until legislation is made permanent in Scotland. It is expected that many landlords will issue increase notices to tenants in January 2023 to take affect after March 2023, therefore the Government are most likely looking into this already to have measures in place to stop this from happening. Can the tenancy be ended, and a new agreement created at a higher rent? The current belief is no, however this has not been confirmed. Again, we would advise landlords against taking this approach as the Government could request for any increases to be returned to the tenant after the legislation is issued in full. When will the legislation be issued? Unfortunately, it could potentially take 3 months or more for this regulation to be passed by Parliament, but the First Minister is wanting this to be passed quickly. We are all in the dark until this regulation is passed and issued, therefore landlords are best to be cautious until further information is received. Evictions It has been confirmed that the First-tier Tribunal for Scotland, Housing and Property Chamber and Sheriff Officers have been given no guidance from the Scottish Government on how to interpret this ban. Sadly, the decision makers appear to be as much in the dark as we all are. One belief is that the COVID emergency legislation will be utilized for this ban. Can eviction notices still be served on tenants? In theory, yes. The eviction notice is merely a request from the landlord to get the property back from the tenant and it is believed that this would not be classified as an eviction. If the tenant agrees to vacate at the end of the notice (request from the landlord), then this should be seen as a mutual agreement to end the tenancy by both parties. However, we cannot guarantee this, and the regulation could potentially include reference to ban eviction notices being served. How that will work and be monitored in practice, we do not know. What happens if the tenant does not leave at the end of the notice to leave / quit? This is where the regulation will most likely take effect, it is suspected that there will be a ban on the Tribunal issuing eviction orders and a ban on Sheriff Officers enforcing these orders. We still recommend that applications are submitted to the Tribunal as we do suspect there will be backlog of applications that the Tribunal will need to work through after 31/03/23 (if the regulation is not extended). We saw this happening with the Tribunal during COVID legislation where there were massive delays on applications being heard due to the backlog received throughout the pandemic. Will all eviction grounds be banned? All eviction grounds have been permanently made as ‘discretionary’ following the Coronavirus (Recovery and Reform) (Scotland) Act 2022, where the Tribunal need to follow a ‘reasonableness test’ and ensure that pre action protocols for rent arrears have been followed. We suspect that similarly to the COVID legislation, some eviction grounds may still be heard such as tenant abandonment. However, we will be unable to confirm this until the regulation is issued. What will happen with applications made to the Tribunal before 06/09/22? Will these still be heard? Unfortunately, we are unable to answer this question as no guidance has been issued to the Tribunal or Sheriff Officers for pending cases / applications pre 06/09/22. We are aware that the Tribunal are currently still hearing cases, but this may cease shortly until the regulation is issued. What about an eviction order or rent order that has just been issued by the Tribunal, can this still be enforced? It is believed so, however would advise landlords to be directed by the Tribunal / Sheriff Officers on what they are currently authorised to do. We would suggest that landlords are cautious until regulations are issued in full. Legislative Programme 2022-2023 Housing Bills (2) – Rent Controls. As part of the Governments 2040 housing plan, it is intended that rent setting / rent pressure controls will be introduced to Scotland. It is believed that this will start from percentage based restrictions being implemented for rent increase notices. This will mean that landlords will only be able to increase rents in Scotland by a certain percentage determined by the Scottish Government or local authority. The end goal is rent setting which will dictate how much a landlord can increase a rent by. Housing Bill (2) – Energy Efficiency measures Currently there is no minimum standard set in the private rented sector as this was delayed due to the Coronavirus pandemic. However, it is expected that a consultation will be issued in 2022 setting a minimum banding in Scotland. We would strongly advise landlords to start planning / working towards banding now to avoid large upfront costs when this legislation deadline is issued. Cairn is currently in talks with energy efficiency specialists to see if there is funding available for landlords and we hope to issue information out to our landlords regarding this over the coming months. New Deal for Tenants By 2025 the Scottish Government intend to: Enhance rights for tenants, Implement new requirements for data collection on rents in the PRS, Implement cross-tenure housing standards, Introduce a new Private Rented Sector Regulation, and Legislation to reinforce a new successful system of national rent controls. Short term (holiday) lets legislation Many landlords may be inclined to move to holiday lets for their rented property due to the ever-changing legislation being placed in the PRS. However, the Scottish Government are also implementing regulations within this sector: Any new holiday let host/operator (owner), will need to apply to the local authority for a licence to operate as of 1stof October 2022. After this date, new operators/hosts must have a licence. Any existing operator/host will have to apply for a licence to operate by 1stof April 2023. As of 1stof July 2024 it will be illegal to operate without a licence in all circumstances. Ever considered renting out your property at a higher monthly rental figure with no stress as someone else is taking care of all the set up for you– sound too good to be true? With over 20 years of property management experience, particularly in the highly regulated HMO market, one of our services is also hosting cAIRn BNB which is a natural fit to our existing management services. We offer a strictly ‘hands on’ BNB experience, tailor-made specifically for you, whilst maximising your overall monthly rental income. We pay close attention to market trends and any upcoming local events to ensure all prices fall in line with accurate rental prices across the board. Cairn BNB presents a fantastic opportunity to earn higher income where the fast-paced environment is both exciting and highly profitable, as opposed to the traditional professional letting route. New hosts and operators (Did you know?) If you were not using your premises to provide short term lets before 1 October 2022, you cannot take bookings or receive guests until you have a licence. All hosts and operators need to have a licence by 1 July 2024. There are four types of licence for short term let accommodation Secondary letting– the letting of property where you do not normally live, for example a second home that is let to guests Home letting– using all or part of your own home for short-term lets, whilst you are absent. An example of this could be whilst you are on holiday Home sharing– using all or part of your own home for short-term lets, whilst you are there Home letting and home sharing– operating short-term lets from your own home while you are living there and for periods when you are absent With the ever changing legislation being implemented on private residential landlords, it is imperative that landlords employ reputable and qualified agents to manage their properties in Scotland to ensure legislation is being followed and they are receiving the most recent and correct advice on how to manage their tenancies. At Cairn, we have fully qualified and friendly staff waiting to assist landlords with management of their properties, please contact us to obtain further information on our management services.
Legislation, AirBNB, Edinburgh
cAIRnBNB
Ever considered renting out your property at a higher monthly rental figure with no stress as someone else is taking care of all the set up for you– sound too good to be true? With over 20 years of property management experience, particularly in the highly regulated HMO market, we are delighted to announce Cairn BNB which is a natural fit to our existing management services. We offer a strictly ‘hands on’ BNB experience, tailor-made specifically for you, whilst maximising your overall monthly rental income. We pay close attention to market trends and any upcoming local events to ensure all prices fall in line with accurate rental prices across the board. Cairn BNB presents a fantastic opportunity to earn higher income where the fast-paced environment is both exciting and highly profitable, as opposed to the traditional professional letting route. Read about the new legislation directive from the Scottish Government – click here. New hosts and operators ( Did you know ? ) If you were not using your premises to provide short term lets before 1 October 2022, you cannot take bookings or receive guests until you have a licence. All hosts and operators need to have a licence by 1 July 2024. There are four types of licence for short term let accommodation Secondary letting – the letting of property where you do not normally live, for example a second home that is let to guests Home letting – using all or part of your own home for short-term lets, whilst you are absent. An example of this could be whilst you are on holiday Home sharing – using all or part of your own home for short-term lets, whilst you are there Home letting and home sharing – operating short-term lets from your own home while you are living there and for periods when you are absent You can find the latest information about the regulation of short term lets at https://www.gov.scot/publications/short-term-lets/. At Cairn we have a dedicated AirBnb ( Short-term Let ) specialist, Mark Coll – today we asked Mark for his comments on the new legislation changes. “At this moment in time, the information on licensing for short term lets is very vague where more information will be released when rules come into force on October 1st. What we do know is that any properties currently operating before this date can still operate under the assumption that landlords apply for a licence before April 1st 2023 and have it granted by July 1st 2024. Any new short term letting landlords operating after October 1st are not allowed to let their properties out until a licence has been applied for and has been granted otherwise there could be a firm penalty – this is extremely important to know and to not get caught out. My advice would be to be prepare in advance of this date and start contacting your local authorities now for more information to get the best footing for when the legislation takes effect. After October 1st we will have a much clearer vision of the direction and future of short term lets where Cairn BnB will be the first to offer any advice and guidance on the next steps to getting things up and running for your property on the short term letting market. Please get in touch if you’d like to know more information on this or if you would like to get up and running prior to the October 1st deadline.”
Legislation
Legislation Update
LEGISLATION UPDATE BLOG ( Date: 31.3.22 ) The Scottish Government has announced that from the 31st March 2022, landlords will no longer need to serve 6 months notice to bring a tenancy to an end. The 6 month notice rule was introduced by the Scottish Government as part of a number of emergency laws that were introduced into the Scottish Private Rented Sector in 2020 as a response designed to help make the rental sector more stable during the upheaval that the COVID pandemic caused on the market. The Scottish Government had explored making the 6 month notice rule permanent as part of their agenda to create a New Deal for Tenants, but the evidence shows that this particular rule change has not been good for the sector. The Scottish Association of Landlords presented evidence to the Government showing that, due to the extended notice periods, some tenants were accruing rent arrears that they remain liable for and could never afford to repay resulting in a negative situation for all concerned. The rolling back of notice periods to the pre-pandemic rules (where landlords serve either 28 days or 84 days’ notice on tenants depending on the circumstances) is very good news for the sector as there is a definite shortage of new landlords and rental properties which is having an extremely negative impact on the number of available properties in the market. This in turn is heating the market and driving asking rents up as more and more prospective tenants compete for fewer properties. The government also announced this week that the temporary downgrading of compulsory grounds for repossession to discretionary, which was part of the same emergency laws introduced in 2020, will continue until September 2022 and will thereafter be reviewed again. This shouldn’t affect most cases for repossession as long as landlords can demonstrate a strong enough case for taking back their properties under one of the grounds for doing so. The Scottish Government is currently considering the simple measure of restricting rent levels on the market, but the evidence shows that a change like this would have a negative impact on the number of landlords and properties in the market, exacerbating many of the issues the government are trying to address. This highlights the importance for landlords to have qualified and knowledgeable agents managing their properties to ensure that they are receiving the most up to date and accurate advice relating to eviction actions and general management of the property. If you need any help with evictions, tribunal applications or management of your property, please do not hesitate to contact Cairn and one of our qualified and experienced property managers will be on hand to help with all of your queries. For Glasgow 0141 270 7878, Edinburgh 0131 346 4646 or Portobello 0131 622 6215
Legislation, Edinburgh, Landlords, Services, Tenants
Switching Letting Agents in Edinburgh: Advice for Landlords
Switching Letting Agents in Edinburgh: Advice for Landlords Are you a property landlord thinking of switching letting agents in Edinburgh? Read on for some top tips & advice from Cairn. Expensive maintenance charges. Substandard repairs. Poor communication. Late rent payments. And every time you call, it’s someone different on the other end of the line — and they don’t know you or your property. As a landlord, the last thing you need is a letting agent mismanaging your property. If the above sounds familiar, it could be time for a change. And despite some common misconceptions, switching letting agents is easier than you think. Moving Letting Agents in Edinburgh: Common Misconceptions Many landlords see changing letting agents as a hassle they can live without, so they stay loyal to an agency, even if they’re not meeting expectations. Others think they need to wait until the property is empty before switching, while some simply don’t see the point in moving. After all, a letting agent is a letting agent, right? Wrong. Let’s deal with these misconceptions, one by one: 1. “I have to wait until the end of the tenancy before changing agents.” This isn’t true. The Tenancy Agreement is between you (the landlord) and your tenant. The agency has been hired to manage your property — switching agents won’t impact the agreement. In fact, it’s often easier to change agents with a tenant in place, as it means the new agent can take over the management of the property without the additional need to advertise and place a new tenant. 2. “Every letting agent in the Capital is the same; there’s no point in switching.” Most letting agents provide similar services. However, the way in which these services are delivered can vary from one agent to the next. Think of it like having a favourite coffee shop, even though you can get a coffee almost anywhere. There’s more to it than simply getting what you asked for. Likewise, the very best letting agents in both Glasgow & Edinburgh are doing more than making sure rent is collected on time. They’re fully regulated, understand the legislation involved, prioritise quality customer service, and offer professional and reliable communication at all times. 3. “Moving to a new letting agent is more fuss than it’s worth.” Switching from an underperforming agent to one who values a strong working relationship and cares for your property and its tenants is absolutely worth the fuss — if it can even be considered “fuss” in the first place! In reality, there’s little you need to do in order to switch. Beyond giving your current agent written notice that you plan to leave, your new agent will handle everything on your behalf. Case in point… Switching Letting Agents in Edinburgh (It’s Easier Than You Think) At Cairn, we make switching simple. From liaising with your current agent to communicating with your tenant(s), we take care of every last detail, including: The acquisition of a detailed handover from your current agent. This will include information related to rent arrears, payment plans, planned maintenance, and outstanding tenant requests; The transfer and recording of the latest safety certificates; The transfer of all keys, up-to-date inventory, and the current lease agreement (if applicable); And the provision of a new point of contact and updated bank details for rent payments to your tenant(s). You are appointed a property manager so you are dealing with one point of contact. Our qualified and experienced property managers conduct audits on documents sent to us to ensure that all legal responsibilities are met and the landlords interests are protected. Cairn have branches in Portobello ( 0131 622 6215 ) & Edinburgh City ( 0131 346 4646 ). If you’re interested in changing letting agents in Edinburgh, visit our Getting Started page or contact our friendly team for more information.
Legislation, Landlords, Tenants
Legislation affecting BOTH Tenant and Landlord
Legislation affecting BOTH Tenant and Landlord It’s no surprise that the rental market has undergone yet MORE changes to legislation from 2017-2019 than ever before. If you don’t already know, The Private Residential Tenancy came into force on the 1st December 2017 and has brought about some big changes. The tenancy system establishes the […]
Legislation, Property Finance
Investors Face Higher Tax Rate for Second Homes and Buy-to-Let Properties in Scotland
Investors Face Higher Tax Rate for Second Homes and Buy-to-Let Properties in Scotland New LBTT Higher Tax Rate Applies From 1st April 2016 Investors in Scottish property are preparing to face tax rate increases for purchases of second homes and buy-to-lets. From April 1 this year, a higher rate of Land and Buildings Transaction […]
Legislation, Landlords
Immigration checks are coming – What do you need to know?
Immigration checks are coming – What do you need to know? Many landlords carry out checks as a matter of course but from February, in England, Right to Rent checks become a legal requirement. For most, background checks on new tenants are an expected part of the moving in process, but these are about to become law. […]
Legislation
New legislation: Landlords required to install smoke and carbon monoxide alarms
New legislation: Landlords required to install smoke and carbon monoxide alarms Housing Minister Brandon Lewis announced new measures in March to protect tenants. Regulations for landlords in England were to be brought into line with building regulations for new builds in the UK, and will require the installation of working smoke and carbon monoxide alarms […]
