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The Budget and its implications for Britain’s landlords

Posted on 2015-03-31

Earlier this month Chancellor George Osborne gave his last Budget before the general election on May 7.

It passed without much attention on the housing and property industry – apart from the launch of the Help to Buy ISA – until the small print was announced.

The small print can be found in the Budget Red Book and this time around it’s page 51 which has caught the attention of the Private Rented Sector (PRS).

Put simply, the government proposes to make it easier for tenants to sub-let their rental property.
For a number of reasons, most landlords ban sub-letting in their rental agreements so this proposal has come as a shock to many in the rental sector. Many letting agents, industry bodies and organisations have already voiced their concerns.

The government says it’s come up with the idea to help promote a ‘sharing economy’ and it’s expected – should the legislation go through – that tenants who want to sub-let will start to advertise rooms on popular sites such as AirBnB.

The principal concern within the industry is that tenants will be making a profit on their room while increasing the chances of damage and wear and tear – negatively affecting their landlords’ bank balances in the process.

Other concerns raised are whether those sub-letting would have to carry out the same checks as landlords and letting agents currently have to, whether they would have to prepare and provide an Energy Performance Certificate and whether tenants sub-letting would have to carry out Right to Rent checks.

The specific wording on page 51 of the Budget Book reads as follows:

"Building on the recommendations of the independent review of the sharing economy, the government will: make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”

In the immediate aftermath of the Budget, the Department of Communities & Local Government remained cagey on the subject, declining to comment when asked by numerous media agencies.
However, Housing Minister Brandon Lewis – who’s a private landlord himself – has told the Guardian that tenants should be able to ask their landlord’s permission to sub-let their home without expecting a blanket refusal in every case.

“Our proposals would mean a tenant could ask for this permission under the model tenancy agreement, with landlords having the right of refusal offering reasons for that decision and within a reasonable time frame,” he said.

As you can see, this issue’s in no way clear cut and it looks likely to rumble on for several weeks. It’s advisable to keep on top of the news to monitor any developments as the legislation goes through parliament.

Other measures announced in the Budget which will affect the PRS but did not secure as many column inches include the government’s proposal not to extend the Landlord’s Energy Savings Allowance and the creation of several housing zones across the UK, which will deliver new homes – some of which will be designated for rent.

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