The 2021 Budget included headline-grabbing announcements on an extension to stamp duty relief and a new mortgage guarantee scheme. This follows a number of recent measures announced by the Government intended to help landlords, tenants and homeowners during the Covid-19 pandemic. This briefing outlines some of those recent key changes.
There will then be a gradual phasing out of the relief, with a £250,000 nil rate band in place until the end of September (double the standard nil rate band), followed by a return to the standard nil rate stamp duty band of £125,000 from 1 October 2021.
In his summer statement in July 2020, the Chancellor described raising the stamp duty threshold as a move to catalyse the housing market. The extension is intended to prevent those who are in the middle of slow-moving property purchases from being caught out by an unexpected SDLT bill.
Mortgage guarantee policy
The Chancellor also announced a new mortgage guarantee policy whereby lenders offering mortgages to buyers who can only afford a 5% deposit will benefit from a government guarantee.
These high loan-to-value mortgages of up to 95% have all but disappeared during the pandemic and many people are struggling to get on the property ladder. The government hopes this scheme will stimulate lenders’ appetite to lend in the current economic climate where job uncertainly has made it more difficult for buyers to successfully apply for mortgages. The new scheme is not restricted to first-time buyers or new-build homes. The number of homeowners struggling to move up the property ladder has a knock-on effect for the number of homes available for potential first-time buyers.
A mortgage eligible for a guarantee under the scheme will need to meet specific criteria. Mortgages must be in relation to UK residential properties with a value of £600,000 or less. Second homes and buy-to-let arrangements will not be eligible. The mortgage must have a loan-to-value of between 91% and 95% and must be taken out by an individual or individuals (not a company). Mortgage products must also be repayment only and applicants must meet the usual requirements of the lender.
The scheme is intended to run from April 2021 until December 2022 and some lenders will begin offering these 95% government guaranteed mortgages from as early as next month. The Chancellor stated that he hopes this new policy will help turn “generation rent” into “generation buy”.
Business rates relief
While the Government is under pressure to revise the business rates system more generally with its final report on its business rates review expected in the autumn, it has in the Budget focused on extending the current business rates relief for certain hospitality and retail businesses. The existing business rates holiday will be extended by 3 months until 30 June, with a discount equivalent to two thirds of the rates available for the following 6 months (subject to a cap).
Residential eviction ban
The Public Health (Coronavirus) (Protection from Eviction) (England) (No 2) Regulations 2021 (Regulations) were announced at the beginning of the pandemic and put a ban on tenant eviction. The Regulations were due to expire on 11 January 2021 but the Ministry of Housing, Communities and Local Government announced an extension to the Regulations for another six weeks until 31 March.
Under the Regulations, tenants can still be given notice and may have to attend court. Further, there are exemptions to the ban for the most serious cases where landlords will be under too much strain (e.g. illegal occupation; antisocial behaviour; or very long-term rent arrears). But the principle is that tenants cannot be evicted in the protected period.
The measures will be kept under review in line with the latest public health advice.
The Debt Respite Scheme
The Debt Respite Scheme (Breathing Space) comes into force on 4 May 2021. The scheme gives someone in problem debt the right to legal protections from their creditors. Debts covered by the scheme include mortgages and rent arrears so the scheme will be relevant to landlords and tenants.
To take advantage of the scheme, the debtor must be an individual who is domiciled or ordinarily resident in England and Wales and not subject to another of the main individual insolvency regimes. Debtors can only access a breathing space by seeking debt advice from a debt advice provider. If they cannot, or are unlikely to be able to, repay their debts, they can apply for a standard breathing space. This lasts up to 60 days. The debt adviser might decide a breathing space is not appropriate for a debtor, and a breathing space might also not be appropriate for a someone who can enter a more suitable debt solution straight away. Debtors cannot apply for more than one breathing space within 12 months.
If creditors are told that a debt owed is in a breathing space, all action related to the debt must be stopped. During the breathing space, interest, fees and charges in relation to the debt are frozen and any enforcement action is paused. Where the debt relates to a joint and several tenancy and the debt relates to the tenancy (e.g. rent), the breathing space applies to all tenants, even if the breathing space is in a single name.
When informed that a tenant has the benefit of a breathing space, the landlord cannot take any of the following actions:
- Contacting the tenant about the debt;
- Serving a possession notice on rent arrears grounds;
- Commencing proceedings after a section 8 notice on rent arrears grounds if notice was served before the breathing space started;
- Commencing any other legal proceedings relating to the debt;
- Obtaining a warrant;
- Enforcing a judgment relating to the debt; and
- Adding interest, fees or other charges during the period.
The scheme only applies to individuals and not to corporate entities and will therefore have more limited application to commercial leases. If a landlord of commercial premises does have an individual tenant, the scheme will not include debts where the debtor is VAT registered or in partnership with any other person, or where the debt relates solely to the business carried on by the debtor. Debts guaranteed by individuals may fall under the scheme where the individual can be granted breathing space.
More information on the Debt Respite Scheme can be found here.
If you are looking for advice on these or any other property matters, you can get in touch with our property team via our website.