How should landlords prepare for Brexit?
While Covid has occupied the news headlines through all of 2020, the other main topic of discussion
– Brexit – has fallen off the front pages. But now it’s back.
As the Government enters the final stages of the negotiations with the EU, there is increased talk
about a no-deal Brexit becoming a reality.
In the event of a no-deal scenario, how should landlords be preparing for 2021
At the time of writing (Dec 2020), there is no clear view of the outcome of the Brexit negotiations. At
best we have two binary options, either we leave with a deal or without one. The best scenario
would be leaving with a deal which keeps everything the same, but that’s looking increasingly
unlikely. As such, landlords should be planning for a no-deal or hard Brexit where we leave all the EU
regulations behind us. So, what are the key areas that will affect landlords and the property market
as a whole?
Right to Rent
The Right to Rent legislation puts the responsibility on landlords to verify that tenants have the legal
right to live and rent in the UK. Penalties are issued to landlords failing to comply.
As members of the EU, the process is simple as all EU citizens have the right to live in any EU
country. However, on 31 st December, that may change.
Currently, there is little clarity from the Government, and the advice is to maintain the current Right
to Rent checks which will stay in place until January 2021. EU citizens can still use their passports as
proof of ID for now.
However, the long-term implications are unclear as a tenant’s legal status could change after Brexit.
Landlords who cater to seasonal EU migrant workers may well feel the effects as the workers face
restriction in their freedoms of movement. Basically, landlords may not have the tenants they need
to fill their properties.
A no-deal outcome is likely to harm the property market overall. Uncertainty in the economy is
never a great driver of growth in the property sector. However, the schemes introduced by the
Government to combat the effects of Covid may offset some of the adverse impacts of Brexit.
As we discussed in our last blog the UK property market has seen a mini-boom during 2020.
The Stamp Duty holiday created a significant boost. However, with it ending in March, there may be
a slowdown in early 2021.
With interest rates still at all-time lows, mortgage rates are competitive, which is boosting buyer
confidence as properties previously out of reach are more affordable. However, lenders are
restricting mortgages for borrowers with small deposits. The situation is compounded further by a
lack of capacity to process mortgage applications due to reduced staffing through Covid.
The level of property sales throughout 2020 has demonstrated a high level of buyer resilience during
the pandemic. They’ve taken advantage of low mortgage rates and the opportunity to agree on good
value fixed-term mortgages to give some protection against a future interest rate rise.
Could Covid offset Brexit?
The lockdowns caused by Covid have changed many people’s priorities when it comes to their
homes. Families being forced to stay inside while they worked and studies from home have realised
the importance of their home space. Tenants of flats felt the lockdown more than most as they were
trapped inside with little access to external areas.
It’s no surprise that properties on the outskirts of major towns and cities are in high demand,
particularly if they have outside garden space.
Despite all the uncertainty regarding jobs and future livelihoods, the property market boomed
during 2020. It showed that people were more prepared to buy because it was the right time for
them rather than the best time for the property market. From that perspective, Brexit may not have
the significant effect that many experts predict.
Whether they keep that attitude in 2021 remains to be seen.
The broader implications of no-deal Brexit
Ultimately, if the UK leaves the EU without a deal, we will default to trading on WTO (World Trade
While that doesn’t have a direct impact on landlords, it will have wider effects in the UK economy.
Trading on WTO terms means that all the products we trade internationally will be subject to the
maximum trade tariff for each product. Essentially, we will have to charge more for the products we
export and pay more for the ones we import.
This will have significant implications for manufacturers. As demand for their products falls, they will
have to make job cuts.
As such, it would be sensible for landlords to make sure their rent guarantee insurance is up to date
and protects them as much as possible.
One thing is certain – it’s all very uncertain.