Deborah Kearns
Higher mortgage rates and stricter rules on buy-to-let homes are cutting into landlords’ profits, prompting more of them to throw in the towel and sell up.
Since 2016, around 400,000 rental homes have been sold in the UK, according to analysis of UK Finance data by CBRE, a global commercial real estate and investment firm. Of that figure, 126,500 rentals, or 32%, have been sold since the start of 2022 when the Bank of England began hiking the base rate of interest, the firm reports.
If landlords continue to sell off at this rate, the UK will have lost around 10% of its private rental homes by the end of 2023, CBRE estimates.
For tenants caught in the middle of this exodus, a tight rental market is becoming even more difficult – and unaffordable – to navigate.
Why landlords are selling up
Rental property investors get into the market to turn a profit and grow a rental income stream.
But changing government rules, such as extra stamp duty for second homes and the end of mortgage interest relief in recent years, have driven up landlords’ payable taxes on buy-to-let homes and the rental income from those properties.
The Bank of England has hiked the base rate, which drives mortgage rates, from 0.1% in December 2021 to 5.25% in August 2023 to help curb inflation. Higher rates mean higher monthly buy-to-let mortgage payments which can make buy-to-let investments less feasible.
Landlords are also facing higher expenses to make their homes more energy efficient to comply with recent legislation changes. Since 1 April 2020, landlords cannot legally let properties with an Energy Performance Certificate (EPC) rating below E without a valid exemption.
It is all taking a big bite out of landlords’ net profits, which for those with a buy-to-let mortgage slumped to 3.9% in the second quarter of 2023, down from 25.7% in 2018, according to research by property firm Savills.
It’s not surprising that landlords are rethinking whether buy-to-let is worth the expense and obstacles.
“It’s causing a bit of a stir,” Emma Snoddy, senior head of lettings at estate firm Hamptons in Marlborough, said of the uptick in rental sales. “This is reducing rental supply, decreasing inventory and pushing up the rent in places where it’s becoming unaffordable for tenants.”
What to do if your landlord decides to sell up
As a renter, getting an eviction notice if your landlord intends to sell up can be scary and stressful. However, you have certain protections and rights as a tenant.
“Landlords and letting agents must follow the correct procedures to evict you; they can’t just tell you to leave or change the locks,” said Andy Parnell, a housing advisor with Shelter, a homeless advocacy organisation.
Here are his tips on what to do if your landlord gives you notice.
- Check if the eviction notice is valid. If you have an assured shorthold tenancy, as most private renters in the UK do, your landlord must provide you with a Section 21 “no-fault eviction” notice. Your landlord doesn’t need cause to evict you under Section 21, but they must properly fill out a 6A form.
“If your landlord has made a mistake on the form, issued it too early or too late or not carried out their responsibilities like protecting your deposit, they will need to start the process all over again,” Parnell said. - Confirm that your landlord is providing you with enough notice. If you have a fixed-term lease that has ended or a rolling tenancy, landlords are required to provide you with two months’ written notice to quit and your move-out date must be at least six months after your original lease started. Also, your landlord cannot give you notice within the first four months of your original tenancy, or it is not valid.
With an active fixed-term lease, the original tenancy term must be seen through. That means even if your landlord sells and the property changes ownership, the new owner cannot ask you to leave until your lease term ends. - Get your deposit back. Landlords are required to set up a deposit protection scheme to protect your rental deposit until your tenancy ends. If your landlord fails to do this and doesn’t give back your deposit, the eviction notice is invalid.
- Ensure you were not charged banned fees. Landlords and letting agents can only charge five weeks’ rent as a deposit. Most administration letting fees are banned, and if your landlord overcharged you, they must pay you back before filing a Section 21 notice.
- Make sure you received the required documentation. Private landlords must provide valid copies of the government’s how-to-rent guide, an EPC certificate and a gas safety certificate when you sign a tenancy agreement. If you didn’t receive any of these documents, your eviction notice is not enforceable.
- Guard against retaliation for repair requests. Landlords are required to provide a safe, habitable rental. A Section 21 notice is invalid if dated within six months of you filing a complaint to your council about poor living conditions and the landlord receives an improvement or emergency works order.
Additionally, your landlord cannot evict you as retaliation if you send a written complaint to them about your living conditions and the council then sends them an improvement or emergency works notice.
When you get an eviction notice, the date listed is not when you are legally required to leave the property. Your tenancy continues until you agree to leave voluntarily, or you’re evicted by the courts.
If you and your family do not have anywhere else to go, do not leave until you receive a court order to do so, Parnell said.
For renters who are worried about becoming homeless, Parnell added: “Contact your local council straight away, as they may be able to negotiate with your landlord to stop or delay the eviction, or they might be able to help you find a new home.”
The turmoil may mean landlords losing a valuable income stream, but some private tenants in the UK are now facing huge – and growing – challenges to find and keep an affordable, decent and suitable home.
Image source: Getty Images
About the Author
Dive even deeper
UK House Prices April 2024
House prices are changing all the time. So whether you’re moving home or buying for the first time, it’s a smart move to keep on top of the latest UK house price data, trends and housing market forecasts.
Tim Leonard
How to Remortgage to Consolidate Debt
Remortgaging to consolidate debt involves borrowing more on your mortgage to pay off other debts. This can make it easier to manage debt and could help lower your combined monthly debt repayments. However, more debt is secured against your home and you could end up paying more interest overall.
How to Remortgage to Pay for Home Improvements
Remortgaging to pay for home improvements or an extension may be an option if you have sufficient equity in your property and can prove to your lender a larger mortgage is affordable. Your income, outgoings and job status are some of the factors typically looked at when deciding whether you can afford a mortgage.