The government’s introduction of a 12-month ban on re-letting properties following a failed sale has placed many landlords under significant financial strain. This new rule, part of the Renters’ Rights Act, has created uncertainty and hardship in the private rented sector, particularly in London’s challenging housing market.

Impact of the 12-month no re-let rule

Under the Renters’ Rights Act, landlords who evict tenants with the intention to sell their property but whose sale subsequently falls through must wait 12 months before they can re-let the property. This measure aims to prevent landlords from evicting tenants simply to increase rents, but it has led to unintended consequences for landlords caught in the middle of a stalled sale.

Last year, the government acknowledged it had not conducted an impact assessment on the effects of this re-letting ban. As a result, landlords have been left navigating a difficult landscape without clear guidance or support.

Financial limbo for landlords

The Telegraph reports that many landlords rushed to sell their properties before the new legislation came into force on 1 May. However, those unable to complete sales have found themselves in financial limbo, unable to generate rental income while waiting for a buyer.

Research by Hamptons reveals that only 45% of London flats listed for sale in January had received an offer by April, highlighting the sluggish market conditions. Chris Norris, policy director at the National Residential Landlords Association (NRLA), described the reforms as making buy-to-let sales financially risky. He explained: “Once you pull the trigger, there’s no way back. The clock starts ticking on that 12-month no re-let period in which you can’t earn any rental income.”

Norris also pointed to the broader market challenges, particularly in London, where properties often remain on the market for extended periods without achieving the desired sale price. This situation forces landlords to reconsider their options, sometimes returning properties to the rental market after months of unsuccessful sales attempts.

Landlords caught between a rock and a hard place

The Telegraph featured the experience of Rachael, a London landlord who listed her flat for sale but, after eight months without success, had to return it to the rental market. She described the predicament: “There is a host of new legislation that makes it untenable to be a landlord, but we can’t do anything about it as we can’t sell. But we can’t afford to keep it empty either.”

Rachael’s situation illustrates the difficult choices landlords face under the new rules. With properties remaining empty and no income generated, landlords are left bearing the financial burden while waiting for market conditions to improve.

Government stance and legislative background

Housing Minister Matthew Pennycook has confirmed that the government has not carried out an assessment of the 12-month re-let ban’s impact. He stated: “My Department has made no such assessment. Landlords making use of new mandatory possession ground 1A (sale of dwelling-house) will be expected to sell their property with vacant possession as intended.”

Pennycook emphasised that the ban is designed to prevent landlords from misusing the possession ground by evicting tenants with the intention to re-let at a higher rent. “To prevent abuse of this ground, landlords will not be able to market or re-let their property for twelve months after using the selling ground. This will remove the financial incentive to landlords from misusing the grounds and evicting a tenant with the intention to re-let at a higher rent,” he said.

Despite a last-minute attempt in the House of Lords to reduce the re-let ban from twelve to six months, the amendment was ultimately rejected, leaving the 12-month period in place.

What this means for landlords

The 12-month re-let ban introduces a significant financial risk for landlords who seek to sell their properties but face delays or failed sales. With no ability to generate rental income during this period, landlords must carefully consider the timing and viability of selling their buy-to-let investments.

In markets like London, where sales can take many months and offers may fall short of expectations, landlords may find themselves trapped between the inability to sell and the financial strain of keeping properties empty. This situation may discourage some landlords from attempting to sell, potentially reducing market activity and limiting housing supply.

Landlords must also be aware of the legal implications of the new possession ground and the restrictions on re-letting, ensuring compliance to avoid penalties while managing their financial exposure.

Source: Based on reporting from The Telegraph

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