Solicitor David Smith gives some guidance:
With the UK having voted to leave the European Union there will be changes and concerns throughout the UK and world economy.
In among these there are bound to be effects on landlords and tenants.
It is inevitable that there will be a period of economic uncertainty.
This will have knock-on effects for the economy more generally. The pound has initially dropped against other currencies which may make foreign investors consider the UK to be a less attractive investment target.
Additionally, the stock markets have dropped markedly with lenders and house builders feeling a lot of the brunt. This may make lenders even more conservative with their lending and coupled with possible new criteria from the Bank of England around buy-to-let lending this may mean that there is very little available.
If house builders are weakened and have less value on the stock markets they will have trouble borrowing money and obtaining finance which will mean that house building targets will not be met. This will possibly drive house prices up more along with rents as the property shortage becomes ever more acute.
Alternatively, if house prices fall dramatically this will be good for those looking to buy but will be very bad indeed for anyone who already has a mortgage (whether as a landlord or homeowner) as their loan to value ratio will change and they may even find themselves in negative equity.
In general, economic uncertainty is unlikely to be helpful in dealing with the primary problem in the PRS and the housing sector as a whole of a lack of housing supply.
Unfortunately, this is likely to remain a problem for some time as the two parties work through their leadership contests, a decision is made on whether a general election is to be called, and the UK goes through the process of giving the Article 50 notification and negotiating with the EU.
Immigration has been a big deal in the referendum campaign, regardless of individual views as to its importance or the accuracy of statements made.
While there may be a desire to de-emphasise it now, the genie is out of the bottle and it is not a topic which can be easily put to one side. Any government will face pressure to keep immigration under control to some degree.
The government has already passed two immigration acts in the last two years. If we are to leave the EU then there will presumably need to be a third Immigration Bill in order to fill the gaps in border controls left by leaving the EU and to set up the “points-based system” suggested by the leave campaigns or such other immigration control mechanism as is required.
This may also involve further regulation of landlords and will certainly cause further confusion as it is likely that different documents will need to be checked and the definitions of permanent and time-limited rights to rent will need to change.
Delays in Other Changes
Given the enormous amount of work required it is likely that a lot of other intended legislation will be put to one side.
This will mean that potential changes in the operation of tenancy deposit protection which were being discussed by the government in order to simplify the process will likely not occur. The consultation on changes to the definition of HMOs and an extension of HMO licensing is also in danger of being set aside.
The implementation of the Housing and Planning Act which requires a lot of secondary legislation and guidance and the implementation of the second Immigration Act may also be delayed. There may also be knock-on effects for legislation that was proposed in the Queen’s Speech.
There is a certain amount of EU legislation that impacts the PRS. This is still in force right now but as part of the process of departure, it will be necessary for these to either be repealed or replaced with a home-grown version. These include the:
- Heat network regulations – these affect HMOs particularly;
- Consumer Protection From Unfair Trading Regulations – these are important as they deal with property misdescriptions and other trading issues;
- Energy Performance of Building Regulations – these are the regulations which require tenants and property buyers to be provided with an EPC.
There are also a range of regulations which relate to the manner in which agents provide consumers with services and which require agents to give information – which are all derived from EU legislation.
It is not at all clear how this will be dealt with.
The easiest scenario would be for Parliament to pass an Act which simply says that all regulations made in support of EU directives continue as before regardless of the UK leaving the EU. They can then repeal or amend specific regulations individually.
Either way, nobody should count on an immediate bonfire of regulations now or after the UK formally leaves the EU. It is far more likely to be a gradual process.
While it will be frustrating, the only option for the PRS at this stage is to remain patient.
Until there is more clarity about how the government is going to look and what their plans are to form a new relationship with the rest of the EU it will be hard to be sure as to what legislation is likely to stay or go.
The best advice has to be to remain conservative and be prepared to adapt to the changing environment.
David Smith is a solicitor and partner at Anthony Gold solicitors and Policy Director at the Residential Landlords Association.