The new healthy homes standards became law on 1st July 2019. These standards require residential rental properties to meet specified standards across areas including heating, ventilation, insulation and drainage. The deadline for landlords to provide a compliance statement for meeting the healthy homes standards has now been extended from 1st July 2020 to 1st December 2020. This is in recognition of the impact of COVID-19 and the limited access that landlords and tradespeople had to rental properties during the crisis. Note that the deadlines for complying with the standards have not altered, only the deadline for a compliance statement produced through a qualified inspection.
In meeting the healthy homes standards, some landlords are likely to incur a number of costs, for example with the installation of fixed heating devices, insulation, extractor fans, security stays for windows and guttering, as well as draught stopping measures. So can landlords claim these costs associated with complying with the healthy homes standards?
Unfortunately, the majority of costs incurred will be classed as capital expenses as they are improvements to the residential rental property, therefore increasing its capital value. Residential buildings are generally depreciated at zero percent so no depreciation can be claimed. The depreciation exceptions are electric panel heaters, some models of heat pumps, through-window extractor fans, window stays, door openers and stops, external door draught excluders and some fireplace blocking devices – which can all be depreciated at specific rates.
The costs that can be claimed as deductions are those classed as repairs or maintenance, including replacing like-for-like items. For example, replacing broken guttering is a claimable expense, but installing guttering where there previously was none is not claimable. The costs must be claimed in the income year in which they are incurred.
Any costs associated with record keeping and providing information in tenancy agreements can also be claimed as deductions.