End of the Help-to-Buy Scheme: Know how to prepare

Do buyers understand the impact of a staged ending to the Help to Buy scheme?

 

The full economic consequence of ending the Help to Buy scheme isn’t yet known. But whilst much speculation exists within the industry around the pros & cons, there is clarity for the final stages. The way the scheme will be brought to a close has been clearly defined, including definitions for the eligibility to submit applications, the specific geographical financial value bands for borrowing, and ultimately, the explicit steps which will be taken to close the scheme.

Help to Buy is a government scheme for first time buyers. It is a loan that a buyer puts towards the cost of a new build. For those who are eligible, they can borrow 20% of the property’s value, or up to 40% for those in London. Throughout the term of the loan, the buyer isn’t required to pay off the loan, but the interest on the amount borrowed. When the property is sold, all the equity loan must be repaid.

 

Why was the Help to Buy equity loan scheme created?

The loan was launched in April 2013 to help bolster the housing market during a challenging climate. Its purpose was to assist those struggling to purchase their first property. It offered a way for first time buyers to get onto the property ladder sooner. The scheme stipulates specific eligibility criteria where those using it must:
 
  • Be 18 or over
  • Be a first time buyer
  • Be able to afford the fees and interest payments

The property being purchased must:

  • Be a new build
  • Be sold by a Help to Buy registered home builder
  • Be the only home the buyer owns and lives in

If a person has owned a home or residential land in the UK or abroad, they are ineligible. They’re also ineligible if they’ve had sharia mortgage finance.

Help to Buy scheme




How will the scheme closure deadlines impact imminent and accepted applications?

Help to Buy Scheme timeline

A buyer must submit their application for an equity loan by 31st October. Homebuilders must have registered the property onto the scheme for this to be possible. The buyer must also have a PIF (Property Information Form) submitted to a Help to Buy agent, prior to the deadline. Anyone purchasing at this late stage must check (for their own peace of mind) with their homebuilder to ensure a qualifying property completion deadline will be met and that the home will be built before the new year. A new home warranty is also required by the final day of 2022.

What if a property isn’t ready in time?

There’s a foreseeable risk of some housing projects over-running. This means some new homes not meeting the cut-off date for the closing of the Help to Buy loan. Regarding reservation fees and deposits there is security in the event of missing the deadline. But unfortunately, this may not be a full consolation to buyer’s with their eyes on a dream home.
 
  • If a homebuilder is unable to complete by the deadline, the homebuilder must return the full reservation fee.
  •  If a buyer has exchanged, the homebuilder must release them from the contract unconditionally and return the deposit.
  • Legal fees and financial advice costs, may still need to be paid.
Homebuilders are working to two Longstop Dates. These dates are the 31st December 2022, and the 31st March 2023.

“The First Longstop Date is 31 December 2022, and this is the practical completion deadline. Your homebuilder must have finished building your home so it’s ready to live in, and your home must have received a new-home warranty to be eligible for Help to Buy.”

“The Second Longstop Date is 31 March 2023, and this is the legal completion deadline. This is the last date you and your homebuilder can legally complete the purchase of your home“

*Source: Help to Buy: Equity Loan (2021-2023) applications closure – frequently asked questions, accessible version – GOV.UK (www.gov.uk) 

Is there a replacement for the Help to Buy equity loan scheme? 

 

Are Lifetime ISA’s an alternative to Help to Buy ISA’s?

 Lifetime Individual Savings Account’s aren’t a new scheme. The Lifetime ISA’s have been around from 2017 and were not created as a replacement for Help to Buy, but have been used in conjunction. A person can only use the government bonus from one of them for a property (even though they both offer 25%). Lifetime ISA’s also come with eligibility requirements. These include a person being 18 or over but under 40. There is a maximum value to save each year which is £4,000, until that person reaches the age of 50. The government pays out a bonus of 25% up to a maximum of £1000 per year (annual ISA limits also apply here). 

“If you have a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of them to buy your first home.

You can transfer money from a Help to Buy ISA to a Lifetime ISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA you’ll have to pay the 25% withdrawal charge.” – GOV.UK

Help to Buy vs L-ISA

 

 

Energy Performance Certificates – Proposed Changes

Energy Performance Certificates Image

IMPORTANT UPDATE:

In September 2023, the UK Government made significant updates to their over-all targets for Net Zero. Some of our articles relating to energy legislation provide timelines which are now inaccurate. We therefore have an updated summary for proposals and dates mentioned post 2023. For the latest updates, please see:

Government changes to EPC’s and gas boiler legislation – Finch (finch-app.com)

Are your landlords ready to get their Energy Performance Certificates’ Energy Efficiency Rating to a C by 2028?

 

The consequence for non-compliant landlords are financial penalties of up to £5,000 per property. This article is set out to address the up-coming changes within the private rental sector, and advise agents on best practice for their landlords. The penalties are:

  • Renting out a non-compliant property
  • Providing false or misleading information on the PRS Exemptions Register
  • Failure to comply with a compliance notice
 

What’s currently required by the landlord for their Energy Performance Certificates?

From October 2008, properties being let or sold in England and Wales require an Energy Performance Certificate (EPC).

“An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient)” – GOV.UK.

In 2018 a Minimum Energy Efficiency Standard (MEES) was introduced, requiring all properties to be let to meet an energy efficiency band of E. Any properties within the bands of F or G can not be let and need the landlord to take appropriate action to comply. The cost relating to the landlord’s appropriate action has a financial cap of £3,500 and includes actions such as loft and wall insulation, upgraded boiler, double or triple glazing, etc. Beyond this maximum cost, a landlord can apply for an ‘All improvements made’ exemption and will be awarded the EPC to let the property.

Energy Performance Certificates exemptions
- https://www.gov.uk/government/publications/private-rented-sector-minimum-energy-efficiency-standard-exemptions/guidance-on-prs-exemptions-and-exemptions-register-evidence-requirements#all-improvements-made-exemption

2018 saw the MEES applied to the issuing of new certificates. Certificates are valid for 10 years and from the 1st April 2020, this was extended to all existing tenancies. This now means that an EER of E or above is required for a landlord to let their property, or an ‘all improvements made’ exemption needs to be registered.

What is the long-term action plan for Energy Performance Certificates?

An EPC Action Plan was created in September 2020 by the Department for Business, Energy & Industrial Strategy along with the Ministry of Housing Communities & Local Government. The plans laid out by these departments have 2035 as the target for as many homes as possible to have an EER of B and C. Changes were suggested for the Standard Assessment Procedure (SAP) for EPC’s throughout 2022 with an expected roll-out of the consultation in 2028. Topics being consulted upon included:

  • Reducing EPC validation periods
  • Raising the maximum spend landlords are required to invest to £10,000. This initially had the proposed requirements applying to new tenancies from 2025 and to all tenancies by 1 April 2028. But following further consultation and lobbying from Propertymark and the NRLA claiming the date to be unworkable, the deadline of 2025 has now been extended to 2028 (as of 28/03/2023).

Minimum Energy Efficiency Standard Timeline

Energy Performance Certificates timeline

If properties aren’t upgraded, then what?

It is a Government requirement that properties meet an EER of E or better before being let. If the properties aren’t upgraded, and exemptions aren’t requested, then the local authority may issue the landlord with a financial penalty.

Here are the penalties presented on GOV.UK

The maximum penalties amounts apply per property and per breach of the Regulations. They are:

  • up to £2,000 and/or publication penalty for renting out a non-compliant property for less than 3 months
  • up to £4,000 and/or publication penalty for renting out a non-compliant property for 3 months or more
Documentation:
  • up to £1,000 and/or publication for providing false or misleading information on the PRS Exemptions Register
  • up to £2,000 and/or publication for failure to comply with a compliance notice

Maximum amount you can be fined per property is £5,000 in total. – GOV.UK 

Top 3 reasons for properties failing to achieve the required rating to let

There are a few reasons why an EPC rating might be lower than expected. These are some of the major culprits for poor energy ratings:

  • A large portion of walls being poorly insulated, allowing them to lose heat.
  • Similar to the walls, having no or little loft insulation.
  • Poor heating – specifically, having electric-only heating can significantly reduce performance.

Helping your landlords meet the standards

Determining the rating of your landlords EPC is easy through the Find an Energy Certificate portal, where a postcode search will provide the energy rating along with the valid until date. 

It is important to consider your landlords compliance with the up-coming changes around MEES,  proposed reduction for the EPC validation periods and the proposal for the minimum spend to increase from £3,500 to £10,000 before exemptions can be requested.

An example of where a landlord might need guidance

  • The Property is currently rated as an E and needs £3,500 spent to bring it to a C for 2025.
  • Following the £3,500 spent, the property is still only rated as a D, but the ‘all improvements made’ exemption has been granted allowing a certificate to be provided,  the EPC is valid for 10 years, but the exemptions are only valid for 5.
  • In order to begin a new tenancy, the landlord will need to comply with the MEES by holding an EPC for the property with an EER of C or better. As exemptions only last 5 years, the original EER would expire and an amount up to a cap of £10,000 could need to spent to upgrade to a C, before any further exemption can be re-made. 
  • If the property is let after 2028 and the spending cap is raised to £10,000, The landlord may find themselves having to pay an additional £10,000 on top of a recent £3,500 spend for a valid EPC. 

Guide landlords through the changes to Energy Performance Certificates

Using a digital process to manage this for your landlords is the obvious solution, but it will need to go beyond a CRM filing system. For many agencies they will be faced with a large number of landlords, some of these landlords will have multiple properties and all of their EPC’s will have 10 year expiration dates at differing times.

An action plan as an agent could be a written proposal or suggestions list to the landlord to help them continue to let their property over the coming years to educated on the EPC changes and where possible, propose your suggestions on how to navigate these changes most effectively. Summarise the requirements as stated above, specifically highlighting the issues to those landlords who are (or will be) in the wrong band, making sure that they are clear on the regulation changes. 

The best way to achieve this; remind them which band their property is currently in, explain the penalties for non-compliance and importantly, to highlight the potential benefits of moving up the energy rating grades as it relates to sale value in the future. Finally, you may want to point your landlords toward the Governments “Green Deal: energy savings for your home” as well as checking that a Green Deal company they’re using is genuine. 

Ultimately this is all about bringing landlords up to speed and helping them to prepare their properties for the change without falling into any avoidable pitfalls.

With EPC changes still in consultation, sign up and keep updated on all the latest changes 

UK Right to Rent from October 2022

Using innovative technologies to check a tenants’ Right to Rent

According to law, all UK tenants must go through verification by way of Right to Rent Checks. The Right to Rent check was introduced across England in 2016 and includes collecting and verifying documents to confirm that the tenant is allowed to rent within the UK. If a landlord or agent lets to a person who does not have the right to rent in the UK, or if they have not carried out the correct Right to Rent Checks, they can be sent to prison for up to 5 years or receive an unlimited fine. Penalties range from £1000 for a first time offence and £3000 for subsequent offences.

Up until the COVID-19 changes, Right to Rent Checks were required to happen face-to-face, again prescribed by the government. One of the main reasons for this was that both the identity of the prospective tenant and the documents they provided needed to be verified in person.

COVID-19 came with significant and rapid restrictions across all sectors and the property sector certainly took a hit. As a result, the government permitted virtual Right to Rent Checks, but this will be ending soon. The country will be reverting back to a face-to-face process, however for the first time ever, landlords and agents will be able to choose from approved virtual Right to Rent Check vendors to approve a Right to Rent.

The information-gathering needed for British tenants

Once a let is agreed, a Right to Rent Check must take place. The landlord or agent must obtain the documentation to prove their right to rent and should take all reasonable steps to check the validity of the documents presented. The tenant must visit the landlord or agent’s office with original versions of all the document so that in the presence of the prospective tenant or tenants, the relevant checks can be made. The landlord or agent must then conduct laborious checks on each document and create clear copies of the documents in a format which cannot be altered and retain the copy securely: electronically or in a hard copy.

Landlords and agents are required to check the following during the Right to Rent Check, as per UK law:

  • They must check that all the documents provided are genuine, original, unchanged, and belong to the tenant in a face-to-face meeting.
  • They need to check that the dates on the tenant’s Right to Rent in the UK have not expired.
  • Landlords and agents must ensure photographs are the same across all documents.
  • If the documents presented have different names on them, the landlord or agent must receive supporting documents showing why they’re different.

How COVID-19 changed the process of letting to British tenants

When the COVID-19 pandemic hit the UK, harsh restrictions were put in place by the government, including total lockdowns. As restrictions eased and companies could function again, the government made provisions to allow the Right to Rent checks to happen virtually.

The government allowed landlords and agents to conduct a provisional Right to Rent Check via video call, where the tenant was required to hold up their original documents to the camera for verification. It was also permitted that Identification Document Validation Technology (IDVT) could be used to carry out the checks.

What changes post-pandemic?

When restrictions eased completely, and the UK economy settled into the ‘new norm’, the government released new guidance that, virtual Right to Rent Checks were no longer allowed from the 6th April 2022. They stated that the face-to-face process was to be restored.

However, after some consideration, the guidance has changed once more. Virtual Right to Rent Checks are still permitted until and including 30 September 2022. Thereafter, Right to Rent Checks must either happen in person or through government-approved technology vendors.

From 1 October 2022, Landlords and agents can conduct Right to Rent Checks and onboard new tenants remotely through compliant digital trust frameworks. For the first time ever, landlords and agents will be able to conduct the Right to Rent Check entirely remotely.

What changes if I check Right to Rent using a digital trust framework?

The two routes offered for a landlord or agent to check a tenants Right to Rent are; physically in person or by using a compliant digital trust framework. The outcome of both of these routes is the same, neither holds more weight legislatively and ultimately it comes down to the perceived ease for the landlord or agent to make a decision. The digital route cuts out the process of human scanning of documents to verify the key data points, reducing the risk of oversight and error which could lead to civil penalties. It also reduces the time-thirsty process of onboarding tenants, removing those inconveniencies preventing agreements being made in real-time, such as the arranging of a date to bring the ID, as well as travel to get to the landlord or agent.

Who is responsible for these checks?

This is an interesting and important question of liabilities. The landlord is primarily responsible and therefore liable for the Right to Rent Check being carried out correctly. It is their property and they are contracting with the tenant. If an agent has agreed to let the property on the landlords behalf, then the landlord is still liable unless the agent has been appointed contractually to ensure that the Right to Rent Checks are completed and that the checks are compliant. The written agreement must make clear that:
 

This final point is particularly important as the liability, for example cannot be transferred to 3rd parties, such as tenant reference agencies or similar. Neither can the landlord automatically assume that the agent is responsible.

At Finch, we are dedicated to ensuring that these types of considerations are clearly defined and handled within our digital processes provided to our agent customers. Residential agents should ensure that their terms of business documents clearly define who is responsible for correctly carrying out the Right to Rent Checks and where the liability sits. This will help to avoid any uncomfortable disputes further down the line.