A crooked property manager who pocketed thousands of pounds in rental income which he failed to pass on to landlords has been jailed for 10 months.
Scott Walker, 36, from Redcar, near Middlesbrough, stole money from landlords who responded to an advert he published on Facebook for S Walker Property Management.
Walker withheld rent from several clients, including one couple who were supposed to receive £550-a-month for their buy-to-let property in Redcar. In total, they lost out on £6,100 after he stole all the rent paid by the tenants, according to Gazette Live.
The wife, who was at Teesside Crown Court to Walker sentenced, said in a statement: “This man has sat in my house telling me that the tenants were a month in arrears.
“It impacted on my marriage leading to tension and arguments with my husband.”
After the Crown court heard that Walker had also stolen rents from other properties, prosecutor Jenny Haigh said: “The Crown would say that this was an abuse of trust over a substantial period of time, aggravated by his previous record.”
Andrew McGloin, defending, said that Walker, 36, had some mental health issues and had become dependent on alcohol, following the death of his mother last year.
McGloin commented: “He tells me that he recognises the impact on his victim.
“He has attended bereavement counselling and he has been working with the probation service and he has been making progress.”
McGloin had offered to repay the money he stole at £100 a month from his benefits, but the judge said that the landlords would stand a better chance of recovering the stolen money if they applied to the County Court for an order of repayment in full.
A buy-to-let landlord has been ordered to pay almost £6,500 for renting out four houses in Nottingham without a license.
Dilip Gohil was penalised after failing to acquire HMO licenses for the properties, despite the fact that each house featured up to seven bedrooms.
Several health and safety issues were also uncovered at the properties, including one house which had no fire doors throughout the property, while the kitchen door did not have a handle and could not be closed.
At court, Gohil admitted seven breaches of the Housing Act, and received fines worth £4,750. He was also ordered to pay council costs of £1,519 and a government tax of £170, and was given three months to pay.
Under the terms of the conviction, Gohil may be denied licences for the four homes, ‘which would affect his income’, although the landlord was given credit for the guilty plea, as the punishment would ‘have been a lot more than that’, according to Joan Charlett, presiding magistrate.
Toby Neal, portfolio holder for community and customer services at the council, said: “We take licensing issues really seriously, since landlords who ignore them are putting the safety, well-being and lives of their tenants at risk. We will always prosecute where breaches are found as they were in this case.”
Although Budget 2017 announced that the Government intends to review the rent-a-room scheme, it currently remains a tax-efficient way of letting out a spare room. Broadly, HMRC’s rent-a-room scheme is an optional exemption scheme, which allows individuals to receive up to £7,500 of tax-free gross income (income before expenses) from renting out spare rooms in their only or main home. The exemption is halved where the income is shared with a partner or someone else. Broadly, as long as income is below the annual threshold, it does not need to be reported to HMRC. If income exceeds the threshold, it needs to be reported to HMRC via the self-assessment system.
In order to qualify under the rent-a-room scheme, the accommodation must be furnished and a lodger can occupy a single room or an entire floor of the house. However, the scheme doesn’t apply if the house is converted into separate flats that are rented out. The scheme cannot be used if the accommodation is in a UK home which is let whilst the landlord lives abroad.
The rent-a-room tax break does not apply where part of a home is let as an office or other business premises. The relief only covers the circumstance where payments are made for the use of living accommodation.
Sometimes additional services are provided, for example, cleaning and laundry. The payments for such services must be added to the rent to work out the total receipts. If income exceeds £7,500 a year in total, a liability to tax will arise, even if the rent itself is less than that.
Accounting for tax
Where the annual threshold is exceeded, there are two options available:
– the first £7,500 is counted as the tax-free allowance and income tax is paid on the remaining income; or
– the landlord opts to treat the renting of the room as a normal rental business, working out a profit and loss account using the normal income and expenditure rules.
In most cases, the first option will be more advantageous. The principal point to bear in mind is that those using the rent-a-room scheme cannot claim any expenses relating to the letting (e.g. insurance, repairs, heating).
To work out whether it is preferable to join the scheme, the following methods of calculation should be compared:
– Method A: paying tax on the profit from letting worked out in the normal way for a rental business (i.e. rents received less expenses).
– Method B: paying tax on the gross amount of receipts (including receipts for any related services they provide) less the £7,500 exemption limit.
Method A applies automatically unless the taxpayer tells their tax office within the time limit that they want method B.
Once a taxpayer has elected for method B, it continues to apply in the future until they tell HMRC they want method A. The taxpayer may want to switch methods where the taxable profit is less under method A, or where expenses are more than the rents (so there is a loss).
During 2016/17, Flo lets out a room in her home. She receives a total income of £11,000 (£10,800 rent plus £200 towards bills). She incurs expenses of £3,000. If she uses method A to calculate her tax liability she will pay tax on £8,000 (£11,000 less £3,000). If she uses method B, she will pay tax on £3,500 (£11,000 less £7,500). Flo is better off using method B.
Even though the tax rules for the rent-a-room scheme are different to the general property income tax rules, a resident landlord will still have certain responsibilities towards tenants, particularly in relation to safety. For further information, see the GOV.UK website at https://www.gov.uk/rent-room-in-your-home.
The above article was created by Novitt Harris Accountants in St Albans – for more information please visit http://www.novittharris.com/ or call 01582841040.
Having long provided mega double-digit returns for investors, investment in buy-to-let has outperformed all major asset classes in recent years. But the government’s decision to introduce a number of measures, such as tax rises, to curb the growth of private landlords means that those investing in the sector face a period of adjustment, new research shows.
A report from Shawbrook Bank, undertaken by the Centre for Economics and Business Research (CEBR), acknowledges the fact that tax changes mean buy-to-let will no longer deliver the returns it did, but it predicts that professional landlords will continue to enjoy good investment opportunities despite an anticipated decline in yields from an average of 5% in 2016 to around 3.5% by 2027.
Landlords stand to benefit from a rise in demand from tenants, with the bank anticipating that the share of privately rented dwellings will increase from 21% in 2016 to 28% in 2027, but the most profitable element of investing in buy-to-let property will almost certainly come from capital growth, with Shawbrook Bank projecting that the average price of a UK home will rise to £336,845 by 2027 – an increase of 59.7% compared with 2016.
A major cloud on the horizon, however, is the dominance of the London and South East market where the combined share of the buy-to-let investment market is almost 40%.
With demand from the international migrant community helping to support the rental market in the city, the report questions whether continued rises in prices and rents are sustainable, especially with Brexit on the horizon.
Commenting on the CEBR findings, Stephen Johnson, deputy CEO and managing director for commercial mortgages at Shawbrook Bank, said: “As the spotlight continues to shine on buy-to-let, the landlord community will need to adjust to lower levels of available debt and will, therefore, require more equity, or have to grow at a slower pace than was previously possible.
“This will mean a period of adjustment for landlords who will have to consider how the changed environment affects them individually. As with all market shifts, there will be winners and losers, but it is most likely that professional landlords with equity and scale from larger portfolios will be better positioned to weather the changes. Buy-to-let has produced excellent total returns for property investors in the past, and notwithstanding some of the new challenges, the fundamentals still remain compelling for those who adapt to the new environment.”
There has been a significant increase in the number of people investing in the buy-to-let sector for the first time over the past year, despite various tax changes, tougher mortgage lending conditions, as well as political and economic uncertainty, according to a new report.
Buy-to-let specialist, Sequre Property Investment, has revealed that new investors entering the market accounted for 61% of their property sales in the 12 months to March 2017, up 15% year-on-year.
Just over a quarter – 26% – of those surveyed said that they chose to invest in the buy-to-let market to generate a secondary income, 23% did so for retirement, 18% wanted to start a property portfolio, while 14% opted to invest for inheritance purposes.
Despite the introduction of the 3% stamp duty surcharge on additional properties, which came into force in April 2016, and the reduction in mortgage interest relief which is being phased in from now until 2020, Sequre Property Investment has reported a 14.8% increase in overall sales over the past 12 months.
Graham Davidson, managing director at Sequre Property Investment, said: “It’s clear that many investors and landlords remain undeterred from investing in property and are buying wisely to mitigate the changes.
“Investors had over a year to prepare for the stamp duty changes and were also given plenty of time to adjust to the revised stance on tax relief, however, the level of enquiries we’re receiving are at an all-time-high. Low mortgage rates and rising house prices have both resulted in favourable market conditions for landlords. Savvy investors understand that purchasing buy-to-let property which produces strong yield returns from the rental income is crucial, as is choosing the right property type and location. A shortage of housing supply in many large cities has continued to keep rental demand high, and these factors are all key attributes of a successful buy to let investment which many novice investors have been keen to take advantage of.”
Graham added: “Buy-to-let property in central locations with high yields and great scope for capital growth results in investors continuing to make a sizable profit even with additional tax payable.”
Buy-to-let landlords will experience an average 13% rise in their taxable profit from 2017/18 to 2018/19, leaving many with little alternative but to pass on the additional financial burden to tenants, according to many in the industry. It is believed that 20% of landlords will increase rents to help mitigate the cost of their new tax bill, meaning tenants could face a permanent increase in rent as a direct result of the changes.
The changes, which were phased in at the start of the new financial tax year – 6 April – mean landlords must now pay tax on turnover, rather than the difference between rental income and mortgage interest.
By 2020, 100% of buy-to-let finance costs will be restricted to the basic tax rate of just 20%.
It is widely believed that many basic rate taxpaying landlords may find themselves moving up a tax bracket as a result of the phasing out of mortgage interest relief.
But we are reminded that there are other options for landlords to consider besides rent increases, including setting up a company to buy property, or transferring an existing property to a limited company or a lower-rate taxpayer if it is jointly owned.
Despite the changes being gradually introduced over the next four years, research shows already how out of pocket landlords are set to be by 2018/19 alone, as they see a big rise in their tax bills and a substantial hit to their profits. Those who are in the higher rate tax bracket of 40% will be the worst affected but others could find themselves being tipped into the higher tax bracket despite their income not having increased, which will leave many renting at a loss and subsidising their property every month.
The government is putting the overall housing market at risk by “squeezing” the buy-to-let sector with higher stamp duty, new mortgage interest tax and extensive affordability tests for new buy-to-let mortgages, according to a leading expert.
Stuart Law, owner and founder of Assetz Capital, is warning the next government about the risk that is being taken with the buy-to-let market and the consequences it could have on the UK housing market.
“Currently we find ourselves in a very precarious position when it comes to the housing market,” said Law, who insisted that recent tax, mortgage and legislative changes in the buy-to-let industry have already led to a sharp decline in buy-to-let property transactions and this will lead to “many fewer rental properties coming to the market, pushing up rents”.
Law accepted that one of the main government’s intentions is to free up buy-to-let properties for first-time buyers, but he said that this “isn’t the way to go about it best”.
He added: “The new changes will bring to market a lot of cheaper housing for first time buyers for sure but we’ll see capital growth slow or even go negative as supply begins to exceed demand for a few years caused by landlords selling their properties.
“Low or negative house price growth will slow housebuilder activity and suppress GDP growth and renters will suffer the most perhaps as fewer rental properties available will drive rental costs up.
“The housing markets most likely to be affected by the tighter restrictions on the BTL market will most likely be London and the South East as the new taxes have the highest impact there and we are already starting to see a shift out of London for BTL landlord activity and already seeing downward pressure on prices there.”
Looking at the wider picture, the fact that consumer and market confidence is known to be based substantially on the housing market means that any price drops could be at exactly the wrong time, according to Law.
He continued: “As Brexit kicks in, it could lead to catastrophic consequences across the board if it turns out to be a hard Brexit with bad economic consequences and now housing market feel good factor to help counter it.
“The government and Bank of England has put these new measures in place far too early and far too aggressively and would be wise to moderate these plans and let the BTL market continue to grow at a more modest pace whilst putting in place real housing market supply solutions that truly deliver new stock, not the woolly housing papers we have seen to date.
“The problem is that the tough decisions on expanding cities, towns and villages around the country are guaranteed vote losers for any party due to NIMBYism and we, unfortunately, expect politicians to be more bothered about their own short term success than the real long-term success and stability of the country.”
A landlord has been handed a £16,000 fine because his tenant would not stop playing loud music.
Jason Duffield must pay the hefty penalty even though it was his tenant who disturbed neighbours by playing his dance tracks for up to 36 hours at a time.
The tenant has now moved out the property in Tamworth, Staffordshire, and Duffield, 47, has been left wondering how he is going to raise the capital needed to pay the fine.
He told the press: “I honestly can’t put into words how I feel about it. It’s made me sick with worry and I have no idea how I will pay the fine.”
Despite never having lived at the rented property, Duffield, who lives in Birmingham, was handed a restraining order by police last year because of the noise coming from the house, and was then sent an abatement notice by North Warwickshire Borough Council, which later seized stereo equipment and televisions belonging to the landlord because he rented the property out furnished.
Duffield, who has now sold the property, was as convicted of five breaches of the Noise Abatement Notice at Nuneaton Magistrates’ Court, and was ordered to pay a £10,000 fine, £6,000 in costs to the council, and £170 in surcharges. But he says that he will fight the conviction “all the way”.
He commented: “I will fight it all the way but it’s just so much extra stress. To get blamed for something I have not done is completely crazy. Even in court, the solicitors and the people next door said they had not seen me at the house. However, Steve Maxey, assistant chief executive and solicitor to the council, insisted that the fine reflects “the severity of the offence”.
He said:”Jason Duffield repeatedly ignored the warnings from the police and from the council, which not only constituted a flagrant breach of the law but also caused undue distress and upset to his neighbours in Dordon.”
Over the past 20 years, investing in buy-to-let has been a relatively sensible way to make money, which is why so many people would rather supplement their income or grow their wealth through property than shares or cash.
But after two decade, tax changes mean buy-to-let will no longer deliver the returns it did, and yet many people are still looking to invest in the sector, as the fundamentals still look solid, supported by growing demand from people looking to rent – the average age of a first-time buyer in the UK is now 35, as opposed to 24 a decade ago.
“Becoming a landlord can be a rewarding experience and, if done correctly, provide a steady and sustainable return as an income investment, especially compared to lower savings rates and stock market swings,” said Stephen Reade, letting operations manager at Harrison Murray Lettings, which is part of The Nottingham.
“Investors are snapping up property in the hope that it will not only return a reliable yield but also a benefit from capital growth given enough time. Mortgage rates at record lows are helping buy-to-let investors make deals stack up.”
But Reade urges existing landlords and those planning to invest in the private rented sector to “beware low rates” and ensure that that figures stack up.
“One day they [rates] must rise and you need to know your investment can stand that stress test, a criteria sought by many lenders recently,” he added.
Reade continued: “Recent history provides an important lesson in how returns can be hit. Many buy-to-let investors who bought in the boom years before 2007 struggled as mortgage rates rose. A sizeable number were thrown a lifeline when the base rate was slashed to 0.5 per cent. Rates stuck there until this summer and then were cut again after Brexit, but they will rise again.
“Even considering the recent tax changes and potential for buy-to-let mortgage costs to rise, there are many positives. We are becoming a nation who sees renting as a flexible lifestyle choice and is far more sociably acceptable. With greater demand from tenants, rents that should rise with inflation and the long horizon for interest rate rises, mean many investors are still tempted by buy-to-let.”
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Source: Property News Feed
Private landlords in the capital are starting to feel the pinch from weaker tenant demand, with some landlords being forced to reduce rents in order to attract new renters.
With significantly more properties to choose from, tenants are firmly in control when it comes to the private rented market across much of London, as reflected by a drop in rents in many parts of the city in recent months, as illustrated by the latest HomeLet data.
The capital’s new build housing market has been particularly badly affected by the slowdown in the rental market, according to London Central Portfolio’s (LCP).
Following LCP’s recent report on the new build housing crisis in London, where sales have fallen as much as 41%, the company now suggests that many new build homes are being left unoccupied because more renters are targeting period homes.
While many areas have seen less demand from new renters, LCP says that places with large numbers of planned new homes, such as between Battersea and Nine Elms, south of the river, where more than 20,000 properties are being delivered, are ‘really beginning to suffer’.
Typically purchased by foreign buyers as rental investments, data analysed by LCP demonstrates a significant annual increase in available rental properties in this area amounting to 28.1%. This has been accompanied by a 6% reduction on asking rents over the last three months.
Alongside an increased supply of properties with reduced asking prices, the number of properties actually let has dropped 14.8% over the same period and there has been a fall in achieved rents of 2.8%, at a time when corporate housing budgets are being tightened.
Naomi Heaton, CEO of LCP, commented: “In much the same way as we see in the sales market, there is increasing fragmentation in the lettings market, according to property type [new build or traditional stock] and by price point.
“Alongside the oversupply of rental stock in new build heartlands, the uncertain economic outlook has resulted in tighter tenant budgets. It is therefore not surprising that recent reports indicate a 14.8% fall in the number of properties rented south of the river over the last three months and a 6% discount on asking rents.”
Unsurprisingly, the research found that the rental market has been far more robust in areas with limited new build potential.
In prime central London, where stock levels have increased by just 5%, rents have not been negatively impacted and have seen an increase of 1.5% over the last three months. The number of properties being let has also seen a 2.5% rise over the corresponding period.
Heaton continued: “In contrast to the dynamics south of the river, the mainstream rental market in prime central London has continued to perform positively as demand for well-presented rental property remains high and stock remains scarce.
“LCP’s portfolio targets one and two bedroom properties in prime central London. During the credit crunch, occupancy rates remained at 96% despite a contraction in the financial sector of one third. With housing budgets being squeezed again, we are once again seeing tenants prioritising location over size and shirking higher priced new developments for quality period stock.
“In contrast to the average 1.2% fall in London rents being reported, newly renovated one-bedroom properties in prime central London, for example, have demonstrated a 6.7% rental increase this year.”
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Source: Property News Feed
Britain’s biggest and arguably most contentious buy-to-let landlord, who recently banned ‘coloured people’ from renting any of his properties has suggested a specialist insurance company should be set up to deal with cases where tenants leave homes smelling of curry.
Having already barred battered wives and plumbers from occupying his homes, Wilson, who runs a property empire in Kent alongside his wife Judith, caused further controversy last month by insisting that he would not allow Indian and Pakistani tenants to rent his properties because ‘they make them smell of curry’.
The landlord, who is currently facing legal action from the Equality and Human Rights Commission (EHRC) over his controversial letting policy, denies accusations of racism, insisting his decision is purely economical after spending thousands of pounds removing the smell of curry from one of his properties.
He is now calling for an insurance policy to be in place to cover him in such situations in the future.
Wilson told Kentnews.co.uk: “If someone punches a wall and leaves a dent, you can take a photograph to prove it.
“How do you prove there is a smell? It’s impossible to prove because they might have got so used to the smell that they don’t notice it.
“The thing is, a curry smell is not malicious damage – we are insured for someone smashing the house up but not for that.
“If they are cooking curry they are not doing it maliciously but they are ‘injuring’ the house.
“If the EHRC set up their own insurance company to underwrite claims there would be no problem.
“If that had been in place I would not have made those comments.
“These are all economic judgements. It costs as much for a new carpet as you are achieving in rent for six months.”
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Source: Property News Feed
The Residential Landlords Association (RLA) is calling for the introduction of a specialist new court to deal solely with housing issues to help speed up what it considers to be an existing ‘slow, complex, and underfunded’ court system.
The aim of the new court would be to enable private landlords and tenants to access justice swiftly, which means, for instance, that it does not take a landlord seeking possession against a tenant who does not pay their rent an average of 43 weeks between issue and finally obtaining possession.
The call for a new court is one of six key issues outlined in the RLA’s own manifesto ahead of the general election, which also encourages the new government to adopt positive pro-landlord tax policies that will encourage more people to invest in the private rented sector.
The RLA says it wants the new housing specialist court to be modelled on the existing Residential Property Tribunal, enabling disputes to not just to be settled quickly where possible, but also without the need for expensive lawyers and long arguments.
A statement on the RLA websites states: “We know this model works. Scotland has been using a similar specialist tribunal successfully for some time for housing disrepair matters and has now expanded it to cover possession matters as well. Ireland also has a successful specialist housing disrepair Tribunal.
“We have invested a great deal into the existing Residential Property Tribunal structure but continually limit its operations to matters involving HMO licensing.
“The RLA is calling for that Tribunal to be able to do much more and to use its substantial expertise to benefit the PRS across a wider range of issues.”
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Source: Property News Feed
It is a currently a challenging time for buy-to-let landlords, following a raft of changes introduced by the government which are threatening to cripple the private rented sector.
The phasing out of mortgage tax relief from April 2017, coupled with the introduction last year of the 3% stamp duty surcharge on additional properties, will inevitably see many landlords paying significantly more money in tax moving forward, leaving them with little alternative but to alter how they conduct their commercial and business affairs.
To help avoid the hit, many investors are now looking to treat their mortgage interest as a business expense by setting up company structures to manage their rental properties, as reflected by a sharp increase in mortgage lending to buy-to-let landlords borrowing via limited companies, and this trend looks set to continue thanks to a sharp rise in the number of mortgage products aimed at limited companies.
The proportion of buy-to-let deals available to limited companies has doubled over the past 12 months, new research by Moneyfacts shows.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “It feels like the BTL market has been hit from all angles recently, and this has left landlords feeling vulnerable and wondering whether it is still worth continuing in the BTL sector. This has resulted in a shift in focus to limited companies, away from individual ownership, which is influencing not just landlords but also providers offering BTL mortgages.
“As the reality of April’s tax changes starts to bite, the proportion of deals available to limited companies has grown dramatically, having increased by 7% in just six months. With the extra pressure in the BTL market and the added interest in limited companies, it is no surprise that lenders have leapt into action and started offering more deals to limited companies.
“Despite the boost in product numbers, borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the BTL market. For example, the average two-year fixed rate BTL mortgage for those applying as a limited company stands at 4.22% today, whereas the average two-year fixed rate for the rest of the market is significantly less at 2.97%.
“With all the extra legwork a limited company option entails, any borrowers considering it should consult a financial adviser to ensure it is the right route for them.”
5 years ago
A year ago
6 months ago
Number of Limited Company Products
Overall Percentage of the BTL Market
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Source: Property News Feed
When a tenant paid his initial one month’s rent in addition to a tenancy deposit in exchange for the keys to his new rental property last year, he did not expect a few weeks after moving into the flat to be contacted by the landlord wanting to know where his money was.
When it materialised that the letting agent had had not passed on his deposit or initial rent payment to the landlord, the tenant issued a worthwhile compliant to The Property Ombudsman (TPO) which was upheld by the Ombudsman, who ordered the letting agency to pay the money owed to the landlord totalling more than £4,000, together with £250 compensation to the tenant.
But to make matters worse, the London-based company failed to pay the award, despite the fact that TPO members are required to comply with any award and direction given by the Property Ombudsman and accepted by the complainants.
Failure to pay the fine subsequently resulted in the agency’s expulsion from the residential agency ombudsman, which means that the company in question cannot legally trade as a letting agency, because as many of you will undoubtedly know, it is mandatory that all letting agents and property management agents register with one of three government-approved redress schemes, none of which will allow previously expelled agents to join.
Although in most cases disputes are resolved without a formal referral, these government approved schemes, run by The Property Ombudsman (TPO), Ombudsman Services Property and the Property Redress Scheme (PRS), provide fair and reasonable resolutions to disagreements between members of the public, including buy-to-let landlords, and property agents, ensuring that tenants and landlords have a straightforward option to hold their agents to account when required.
To help strengthen its offering, TPO has appointed Baroness Warwick, the current chair of the National Housing Federation, as the scheme’s new council chair, after Lord Best officially stepped down from the role after his eight-year term came to an end.
Baroness Diana Warwick (pictured below) said: “I am delighted to succeed Lord Best in this important role and hope that the qualities and skills I bring will help to reinforce the commitment to high standards that he has fostered.
“I share the Property Ombudsman Scheme’s values of independence and public service and strongly support its purpose in providing free, fair and impartial service to buyers, sellers, tenants and landlords of property in the UK.”
Reflecting on the appointment, the Property Ombudsman, Katrine Sporle, said: “I look forward to working closely with Diana who has spent many years helping the government make and shape laws, and debate public policy matters."
"She will be a great asset to TPO which aims to raise standards in the industry and protect consumers from unfair practices.”
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Source: Property News Feed
The government is facing a legal challenge over its controversial Right to Rent scheme, which effectively forces buy-to-let landlords to act as border control offices.
Since the scheme was introduced across England in February 2016, while Theresa May was Home Secretary, private landlords across the country have been required to check that a tenant or lodger can legally rent their property, by ensuring that they have documents to prove they can live in the UK before the start of the tenancy.
The immigration checks have left many foreign nationals, and indeed Britons without a passport, struggling to rent due, according to a recent survey.
A report by the Joint Council for the Welfare of Immigrants (JCWI) issued earlier this year, revealed that foreigners and British citizens without passports, particularly those from ethnic minorities, are being discriminated against in the private rental housing market as a result of the Right to Rent scheme designed to crack down on irregular immigration.
Just over half – 51% – of landlords surveyed said that the scheme would make them less likely to consider letting to foreign nationals, while 42% of landlords stated that they were less likely to rent to someone without a British passport as a result of the scheme. This rose to 48% when explicitly asked to consider the impact of the criminal sanction.
Somewhat worryingly, an enquiry from a British Black Minority Ethnic tenant without a passport was ignored or turned down by 58% of landlords in a mystery shopping exercise, following the introduction of the Right to Rent scheme, introduced in the Immigration Act 2014 as part of the government’s reforms to build a “fairer and more effective” immigration system.
Under existing rules, landlords who fail to check a potential tenant’s “Right to Rent” face penalties of up to £3,000 per tenant, and a maximum five years imprisonment.
But the JCWI yesterday wrote to the Home Office to call for a halt to the rollout of the scheme and for a full evaluation of its effects. It insists that it will take legal action if the government fails to comply.
Saira Grant, chief executive of JCWI, commented: “In the face of clear evidence of discrimination under Right to Rent, the government must show it is not acting illegally before it presses ahead with a rollout to the rest of the UK. This is a scheme that not only discriminates against BME Britons, foreign nationals and British nationals without passports it imposes costs on landlords, agents and tenants too. In the absence of any clear plan to monitor its effects the Government must carry out a thorough review until then, any extension to other parts of the UK would be premature, dangerous, and potentially illegal.”
RentalStep, designed to do for the private rental market what Airbnb has done for the holiday home business, provides tenants with a secure, online passport where all their verified rental history can be stored and shared with landlords.
The primary idea behind the new website is to offer landlords access to a pool of verified tenants who pay their rent on time and keep their properties tidy.
Buy-to-let landlords can also create tenancy agreements and store all documents for free, securely, online.
RentalStep also allows both tenants and landlords to leave reviews of each other and their properties so everyone can make more informed decisions about future moves.
“Our revolutionary new platform that connects great tenants and great landlords has launched across the UK and is set to revolutionise the way we rent,” said Mike Georgeson, founder of RentalStep. “Our partnership with Experian means we can offer free credit scoring and ID verification for both tenants and landlords.”
He added: “Our unique, secure Tenant Passport allows tenants to show a landlord just how good a tenant they are, whilst giving landlords access to a pool of verified tenants.”
Following a recent report which claimed that one third of private tenants would not tell their landlord if they did significant damage to their rental property, landlords are being urged to ensure that they have the procedures in place to make sure tenants can be reasonably charged for damage they cause to a rental property.
A YouGov survey commissioned by TheHouseShop.com last month revealed that 33% of private tenants would not inform their landlord if they caused major damage to their rental property, with 15% admitting that they would attempt to repair the damage themselves – with the landlord none the wiser.
But one way that you can be sure whether tenants have caused any damage to your property is to have an accurate schedule of condition in place.
Some experts, such as Patricia Barber, chair of the Association of Independent Inventory Clerks (AIIC), believe that an inventory has become almost as important as the tenancy agreement itself.
As well as being used as evidence in a dispute, a detailed and precise inventory completed at the start of the tenancy, and again when the tenancy ends, also underlines exactly what is expected of the tenant, while it can also help landlords avoid a disagreement in the first place.
She said: “While it’s clear that the majority of private tenants do report issues to their landlords, the third that are failing to do so still represents a high proportion and could have financial implication for landlords. Aside from carry out an independently compiled inventory, Barber is also reminding landlords to make sure that stringent processes are in place, including tenant referencing, as well as taking and protecting tenant deposits.”
Barber continued: “These three processes can combine to make sure that landlords give themselves the best possible chance to claim money back in the event that a tenant damages their property. Tenant referencing increases the prospects of securing ‘good’ tenants in the first place, while an inventory provides you with the evidence you need to make a deduction from the tenant’s deposit.”
Barber also suggests that landlords proactively warn and remind tenants to report damage issues as quickly as possible.
She added:”As we can see from TheHouseShop’s study, not all tenants are diligent in their reporting of damages and repairs. Issues that are left unattended for long periods could deteriorate and cost more in the long-run. So, reminding tenants of their responsibility to report problems could certainly save landlords money over the course of a tenancy.”
A landlord has been fined for not licensing 12 buy-to-let properties in the North Ormesby area of Middlesbrough.
John Bradley, 39, was the first landlord to be brought to court for not signing up to the scheme since Middlesbrough Council introduced compulsory £580 licences for those who rent out property in the local area in a bid to crackdown on rogue landlords.
But while Bradley admitted to the offences relating to the 12 unlicensed houses, the prosecution, brought by the council, apparently caused difficulties for district judge Kristina Harrison, as they were no guidelines to sentence those who break the rules.
The landlord, who claims that annually he clears only a few hundred pounds profit in rental income on each property, was eventually fined £500 for each property – £6,000 in total – and ordered him to pay £1,000 in costs.
He has also been ordered by the district judge to purchase a licence for each property within two months or he could face even bigger fines. In addition, he also owes late payment fees of £100 per property taking the total amount he owes the council to more than £8,000.
Cath Cunningham, for the council, told Teesside Magistrates’ Court: “Selective licencing was consulted upon and agreed by the council, and puts the onus on the landlord to be aware and deal with the problems in North Ormesby , including anti-social behaviour.
“The idea is to uplift the area.”
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Source: Property News Feed
The owner of a rental property in west London, which was described by a judge as a “deathtrap”, has been told to pay more than £60,000 after it was deemed that the house was “an accident waiting to happen” following the discovery of several fire safety failings.
Westminster Magistrates’ Court heard last week how the property on 118 Woodsford Square in Holland Park, W14, let by David Leslie Symonds to six tenants, lacked a proper fire detection system and other fire safety precautions.
Health and safety officers at Kensington and Chelsea Council discovered a number of safety breaches at the four-storey 1950s-built mid-terrace property, which has been converted into bedsits, after firefighters were called to deal with an incident there.
Safety breaches included no automatic fire detection system within the property, a lack of fire safety equipment, fixtures and fittings including smoke seals and fire separation between bedsit rooms.
There was also an absence of fire doors to some rooms and damaged fire doors to others, inadequate fire escapable key locks, the use of loose electrical cables with multiple electrical adaptors in use, no existing gas safe certificate for the boiler or heating system, while the escape route – a staircase leading to the property’s garden – was obstructed.
In addition, it transpired that Symonds had failed to apply for a house in multiple occupation (HMO) licence, which was required as the property had six unrelated tenants.
Now deterred by the idea of being a landlord, Symonds is planning to sell the property in Holland Park.
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Source: Property News Feed
A significant number of landlords are being prevented from renting to tenants receiving housing benefit by discriminating buy-to-let lenders, fresh research shows.
Analysis of the market by mortgage distributor 3mc, on behalf of the Residential Landlords Association (RLA), found that around two-thirds of the largest buy-to-let lenders, representing about 90% of the market, prohibit landlords from renting property to tenants receiving benefits.
Having assessed 58 lenders’ policies for buy-to-let mortgages on a two-bedroom flat where the tenants would be claimants, 3mc found that 38 do not permit mortgaged homes to be rented out to those in receipt of housing benefit.
Doug Hall, director of 3mc, said: “Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession.”
The RLA wants to see the next government carry out a review of the practice.
The RLA’s chairman, Alan Ward, commented: “Discrimination against tenants receiving benefits is not driven by landlords but by the banking system.
“If the private rented sector is to house more people then barriers to landlords making fair decisions over who they rent to must be removed.”
Ward wants to see a system where a tenant’s Universal Credit and benefit payments can be made directly to their landlord, as long as the tenant does not fall into arrears.
“We need a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full,” he added.
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Source: Property News Feed
Former British prime minister Tony Blair made headlines over the Bank Holiday weekend for announcing a return to domestic politics to fight Brexit, but it also materialised that he is embarking on plans to expand the multi-million pound property portfolio that he owns with his wife, Cherie, by acquiring more buy-to-let properties in the north west of England.
Tony and Cherie Blair, which already own 38 buy-to-let homes worth an estimated £33m, have formed a company, Harcourt Ventures Ltd, to help manage their property empire, which was incorporated at Companies House in March.
The Blair family, which have reportedly banked at least £1.7m in profits from buying and selling nine properties, also have an extensive portfolio of private homes, including a £9m five-storey Georgian townhouse which they purchased in 2004 and a £10m Grade I-listed Buckinghamshire manor house,
As a QC, Cherie Blair last year threw her weight behind a campaign to prevent cuts to mortgage interest relief.
Her law firm Omnia Strategy claimed that the changes, which were finally introduced last month, breached landlords’ human rights.
The legal challenge was backed by landlords Steve Bolton and Chris Cooper.
But the landlords represented by Cherie Blair eventually failed in their legal battle against planned government tax relief changes for buy-to-let homes.
Speaking after the case in October last year, Mrs Blair said: “The Court’s decision that our clients’ legal challenge should not proceed is very disappointing. Steve and Chris, and many others, have dedicated a lot of time and energy into putting forward the best case possible. We know the case has been supported and followed with interest by a large number of individual landlords. Many of these landlords now face challenging times ahead.
“From the outset, the legal process was just one aspect of our clients’ fight against this unfair measure. Together with their impressive and growing coalition, they will continue to engage with the government, and the legal team wishes them every success.”
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Source: Property News Feed
Across the whole of England and Wales the average rent in the PRS stood at £800 in March, up £2 compared with the previous month, but down sharply from the £811 recorded at the end of last year, new figures show.
According to the latest Your Move England & Wales Buy to Let Index, rents increased in six of the 10 regions analysed in March compared with the previous month, led by gains in the East of England. Prices here have increased by 1.6% in the last month and are now 7.4% higher than in March last year.
“In previous months we have seen rents in the South East rise as people looked to move beyond the capital, but it is the East of England which appears to be seeing the benefit as rents here have risen 7.4% in the last year,” said Valerie Bannister, letting director at Your Move.
In contrast, rents in London continued to fall, with the capital seeing rents decline on both a monthly and yearly basis.
The average rental property in the capital let for £1,203pcm during March 2017, down 6% month-on-month. But the city unsurprisingly remains home to the country’s most expensive properties.
“Rents in London have declined in the last 12 months, falling from £1,297 a year ago to £1,203 in March 2017,” Bannister added.
London was not the only area to see rents decline in both the last month and last year. In the North East, prices now average £525pcm after falling 3.7% since last month and 3.1% versus March 2016. It remains the cheapest place to rent a property in this survey.
The typical yield across England and Wales was 4.5% in March, Your Move found. This is down on the 5% recorded a year earlier.
Places with higher house prices continue to have the smallest yields, and so it is perhaps unsurprising to find that the average yield in London was just 3.2% last month, the same as the previous month, and lower than any other part of the country.
At the other end of the scale, properties located in the North East enjoyed the biggest yields. In this region the average return was 5.2% last month, while in the North West it was 5% – although both were down on the same point in 2016. These were the only two areas to see yields above the 5% mark in March.
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Source: Property News Feed
From the 1st April 2018, it will be unlawful to rent a property which breaches the requirement for a minimum energy performance rating of E on an Energy Performance Certificate (EPC), unless there is an applicable exemption.
But when it comes to improving the energy efficiency of their properties, a concerning 49% of landlords recently surveyed by E.ON said that they do not feel adequately informed about how to do so.
Not only does this mean they may struggle to get their property compliant with the minimum EPC rating regulations, but they also might miss out on other benefits for making a property more energy efficient.
Thankfully, Mike Feely from E.ON has provided a number of tips for landlords looking to improve their properties’ EPC ratings:
+ Don’t underestimate the importance of insulation in making a property more energy efficient. If the property was built before or around 1920, it most likely has solid walls. Solid wall insulation can be installed from either the inside or the outside. If the property was built after 1920 it’s likely to have cavity walls. These have a double external wall with a small gap between which can be filled with insulation.
+ Make a play of your energy savings standards – don’t just think of improving energy efficiency as something for meeting regulations, it’s a commercial decision too. Given most tenants are responsible for paying energy bills, some may be willing to pay more for properties that are energy efficient, so make sure you’re making the most of this as a selling point.
+ Without properly insulated windows, the property could be losing up to 10% of its heat. Double glazed windows make a big difference when it comes to lowering energy bills as well as reducing condensation and noise. Instead of double glazing you could install secondary glazing which involves fitting a pane of plastic or glass inside the existing window recess to create an insulating layer of air. Though not as effective as double glazing, secondary glazing still saves a significant amount of energy and allows you to maintain good kerb appeal by keeping original features such as sash windows.
+ EPC ratings look only at permanent improvements to the fabric of the building so think about long-term upgrades that will help to reduce heat and energy use. Simple things – sausage dog draught excluders and the like – will help keep heat in, but for the EPC you need to find permanent ways to fill the gaps to stop heat escaping through windows, doors, letterboxes and even keyholes.
+ For those looking to bring their properties completely up to date, consider renewable technologies such as solar panels with an at-home battery to store electricity for use even when the sun goes down. Be aware these will contribute to your rating only if they’re helping to heat the house, rather than providing electricity for other uses.
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Source: Property News Feed
There has been a sharp fall in the number of landlords looking to expand their buy-to-let portfolios, according to the latest quarterly index from BM Solutions.
Just 13% of landlords are currently planning to add to their portfolio, which is the smallest proportion since the survey began 11 years ago, the buy-to-let brand of Lloyds Banking Group said.
While recent tax changes is undoubtedly the primary reason why fewer landlords are actively investing further in the private rented sector, the fact that tenant demand continued to slow in Q1 2017, with 17% of landlords reporting a decline, is also having an impact, especially in central and outer London, where the proportion of landlords reporting falling tenant demand now outnumbers those experiencing growth.
But in spite of these negative findings, confidence among landlords has now stabilised, with the proportion of landlords feeling optimistic about the UK’s financial markets having more than doubled over the past 12 months, with confidence regarding capital gains, the UK private rental sector and rental yields remaining stable.
In terms of how landlords feel about their own letting business, the levels have bounced back to the same recorded in Q1 last year.
Landlords in the South East are most optimistic about the prospects of their own letting business, with almost half – 47% – feeling ‘good’ or ‘very good’ about its prospects, while those in Scotland and Wales are the least optimistic, with just 26% feeling positive.
Less than half – 48% – of landlords are seeing rents increase in their area compared to 53% in Q4 last year, while 42% have increased rents across their own portfolio in the last year, down by 3% from Q4, with 32% intending to do so in the next six months, down 5% from Q4.
The findings are based on data from 754 online interviews with National Landlords Association members and associates conducted between 17 March and 30 March 2017.
Phil Rickards, head of BM Solutions, commented: “Despite signs of landlord confidence stabilising this quarter, fewer landlords are feeling optimistic about the prospects for their own businesses.
“This has driven down the number of those looking to expand their portfolio further to a new all-time low despite the average portfolio creeping up slightly.
“The impact of the tax changes has a natural link to landlord confidence, as the market landscape continues to be reshaped by changes in regulation.”
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Source: Property News Feed
Since the twin onslaughts of George Osborne’s Section 24 tax raid and the wholly unfounded negative hype surrounding Brexit, the talk has all been about woe is me, and that being a landlord marks you out as being belonging to an endangered species.
At the same time, there’s been a panicked rush to offset the removal/capping of mortgage interest relief by chucking everything into a limited company; another predominantly negative reaction.
So, if you believe all of that, then it’s clearly impossible for you to make money as a landlord – it’s what’s known as a self-fulfilling prophecy.
Thankfully, the naysayers have got it wrong – as if anything, now is one of the best times ever to make money as a landlord.
Firstly, property is one of the few truly asset-backed investments out there whose value is closely linked to supply and demand, as opposed to equities whose value is mostly sentiment-based.
For instance, according to the Office for National Statistics (ONS), the UK population grew to 65.1 million in 2015, an increase of over half a million since 2014.
Moreover, it continues to grow and is projected to continue to increase to nearly a quarter of the population by 2045; and my gut feeling is that demand for private rented accommodation will at least remain at current levels, if for no other reason than people living longer means that there are less properties on the market for our kids to buy. There are also the long-term demand hotspots along HS2 and London’s Crossrail, amongst others.
Same goes for Brexit, the world won’t stop wanting to come here, and if anything the reverse is likely to happen as UK Plc is a pretty good to place to live, work, and make money. That’s why so many people (my ancestors amongst them) risked everything to get here.
Secondly, owning and running investment property is absolutely no different to owing and running any other business asset. Note the operative word being ‘Business’, the definition of which is being a person’s regular occupation, profession, trade or commercial activity. In other words, property is simply a raw material to which you add value (which is in this case providing decent rental accommodation of whatever flavour) and, if you get the sums and market intelligence right, make a profit in the process.
In which regard, the numbers are everything. Getting the balance right between yield and capital growth is not easy – London yields are awful, but the potential for capital growth is really good; albeit don’t over borrow as capital values are outside of your control, such as what happens to them during a loss of market confidence or perceived political risk such as Brexit.
As they say at the roulette tables “Faites vos jeux”, or in good old Anglo-Saxon “Place your bets”. In contrast, however, rental yields in the North East can be as high as 15%, but the chances are that you’ll never make much on the underlying asset value.
Probably the biggest part of running any business is to have clearly defined, manageable, measurable, and realistic goals. In other words, how much, of what, by when, by whom and, most essentially, why? So if you want to succeed, you really do need to work out what it is you want and be able to put a number and timeframe to it.
Thirdly, don’t let the tax tail wag the planning dog. Remember, having to pay tax is one of the most reliable indicators of being in good financial health – you only pay tax if you’ve actually earned something.
Likewise, if you all you worry about is paying less tax, then you’re looking at what once was (a bit like the way most accountants are really only interested in last year); whereas you should be behaving like an entrepreneur, i.e. knowing where you are now, where you want to be (next year), and working out how to get there as quickly as possible by reducing risk, having maximum choice, and minimising cost(tax is just another business cost),in an effort to maximise return.
One thing is for certain though, using a standalone limited company just to offset the predations of S24 will cost you far more than you bargained for, be pretty restrictive when it comes to raising money, and tie you knots into the bargain that are almost impossible to undo.
Bear in mind, that whilst mortgage interest is 100% deductible in a company, and its profits only taxed at 19% (corporation tax is falling to 17% over the next three years and perhaps even further as Brexit washes through), every penny you take out after that will be subject to more tax, and yet again when you die.
Likewise, the reason why the Exchequer just loves limited companies, is that they are totally visible and a doddle to tax; something that’s always popular with voters come election time. After all, the next oldest insult after tax collector is landlord!
In summary then. Yes, is it still possible to make money as a landlord, but only if you look at property as a business and behave like one, of which the largest part (and generally the hardest) is to accept that you don’t know what you don’t know, and be prepared to pay for that which a professional adviser does. In other words, don’t be afraid to seek and pay for advice – it’s the only way that you’ll achieve anything like your potential, let alone your goals!
Keep calm and carry on, as they say.
Tony Gimple is one of the owners of Less Tax For Landlords, which will be exhibiting at the Property Investor & Homebuyer Show this weekend – stand number 268.
You can register to attend the show free of charge by clicking here.
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Source: Property News Feed
The mayor of London Sadiq Khan has vowed to crackdown on criminal landlords by ensuring that they are ‘named and shamed’ on a new online database.
The move is designed to protect the two million or so people living in the private rented sector in the capital, the mayor said in a statement yesterday.
The new online database will list landlords and letting agents who have been prosecuted for housing offences, enabling renters to check up on their future, or existing, landlord.
The new platform, which is set to launch in the autumn, will initially obtain information from six councils, including Newham, Brent, Camden, Southwark, Kingston and Sutton, with other London boroughs set to sign up to the initiative once it has been launched.
The mayor made the announcement as he joined a criminal landlord enforcement raid in Newham, carried out under the council’s borough-wide licensing scheme for private rented properties.
In 2013, Newham Council was the first local authority in London to be granted borough-wide licensing and has successfully prosecuted 1,100 rogue landlords – more than any other local authority in the city.
Sir Robin Wales, mayor of Newham, said: “Newham has pioneered the fight against rogue landlords and were the first authority to introduce borough-wide licensing to protect vulnerable tenants.
“I am proud that Newham is responsible for 70% of all criminal landlord prosecutions across London and we are determined to continue to tackle the scandal of substandard and dangerous accommodation, illegal evictions and extortionate rent rises.”
In addition to Khan’s efforts to improve conditions in the private rented sector, he also yesterday announced the launch of a property portal on City Hall’s website, which will advertise affordable homes on the rental and sales market in the capital.
The mayor of London said: “I refuse to stand by as thousands of Londoners suffer sky-high rents and horrendous living conditions in a city they call home.
“I have seen first-hand the abysmal conditions that some of London’s private renters are forced to endure as a result of rogue landlords. I want to be clear that the vast majority of landlords treat renters well – but a minority are exploiting their tenants and it’s simply unacceptable. This must stop now.
“To help renters, I will be working in partnership with London Boroughs to launch my new ‘name and shame’ database of criminal landlords and letting agents to help Londoners before they rent a property, and to deter dishonest landlords and agents from operating.
“I fully support the excellent work councils like Newham are doing to target the worst offenders in their borough. I will continue to support them and other boroughs who use licensing schemes effectively to drive up standards in the private rented sector.”
The mayor’s announcement of the ‘name and shame’ criminal landlord database has been welcomed by various trade bodies and property professionals, including the National Landlords Association (NLA).
Richard Lambert, chief executive officer, NLA, said: “The mayor’s ‘name and shame’ online database brings information on criminal landlords and agents together to make it much easier for renters to find and avoid landlords anyone who has been prosecuted for housing related crimes.
“Importantly, it is also the first time renters have had a central online tool that should take some of the stress out of reporting potentially criminal housing conditions to their local authority.”
David Cox, ARLA Propertymark’s chief executive, concurred: “We have campaigned for the government’s database of banned letting agents to be publicly available as, with no public access to the database, how will landlords or tenants know if they are using a banned agent?
“This online database overcomes that problem and means tenants and landlords in London can rent with the confidence of knowing their agent has not committed any offences.”
However, the mayor’s landlord database will do little to root out the crooks, according to the Residential Landlords Association (RLA).
RLA policy director, David Smith, commented: “Criminal landlords have no place in the private rented market, but another database is not the answer.
“Such lists do nothing to help find criminal landlords in the first place. After all, they are hardly likely to come forward to register to go on it.
“Rather than duplicating what the government is already doing, the money to be spent on this scheme would be better used protecting tenants and good landlords by actively finding the crooks who intentionally break the law.”
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Source: Property News Feed
You may have heard about the welfare reform changes that started in 2013. Many existing benefits are being abolished and replaced by a new benefits system.
Universal Credit system, a single means-tested benefit, will apply to all tenants who receive some or part of their rent through benefits.
But it is expected that over the coming years, landlords will face some confusion as the system is rolled out. With all benefit payments being rolled into one, tenants are expected to manage their monthly budget across household bills and living expenses with little support or guidance.
With a juvenile system in place, the Department for Work and Pensions will be under increased amounts of pressure to deliver fast solutions to time sensitive issues within an entirely new framework of compliance.
Universal Credit administration is much more complex than its predecessor for both tenants and landlords and problems are already being reported in areas where it has come into effect, according to Caridon Landlord Solutions, a dedicated service provider specialising in Universal Credit and housing benefit advice for private landlords, letting agencies and housing associations, by helping them mitigate any potential rental losses and adapt to the new changes under the welfare reform.
“Our team have extensive experience in helping tenants and landlords who have UC related issues,” said Sherelle Collman, commercial business director at Caridon Landlord Solutions. “We can resolve even the most complex situations that arise from this new system.”
She added: “In addition we offer a range of competitively priced services throughout the tenancy process, providing invaluable support and access to expert guidance on a range of issues from non-payment of rent and historical debt collection to tenant disputes and the latest landlord legislation.
“We would advise landlords to educate themselves and make themselves familiar with the changes to the Welfare Reform and if they encounter a situation that they are not familiar with then to speak with experts within the industry as Universal Credit is here to stay.”
Caridon Landlord Solutions will be exhibiting at the Property Investor & Homebuyer Show under Caridon Group, along with Caridon Developments, Caridon Property and Caridon Living, this week.
A representative from Caridon Landlord Solutions will also be taking part in a panel discussion, Managing Welfare Reform.
The Property Investor & Homebuyer Show, the UK’s most comprehensive property exhibition, takes place at London ExCeL on 28 and 29 April and is free to attend. However, all visitors are required to register before entering the hall. To avoid the queues on visit day, you can register online now by clicking here.
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Source: Property News Feed
There has been a significant increase in the number of landlords exiting the buy-to-let sector due to higher stamp duty costs and the phasing out of mortgage tax relief, a new study shows.
Estate agents reported an average of four landlords selling properties per branch last month, up from three in February, according to the research from the Association of Residential Letting Agents (ARLA Propertymark).
The last time the volume increased above three per branch was in November last year, when a ban on letting agent fees was announced by the Chancellor Philip Hammond during his Autumn Statement.
With landlords quitting the market, there will seemingly be fewer rental properties available to let, and yet the number of registered tenants per branch increased, albeit marginally, from 34 in February to 36 last month.
However, the research, based on an online survey of 331 member branches between 3 and 10 April 2017, carried out by Opinium Research, found that the number of agents witnessing rent reductions increased from 2.2% to 3.6%, with a quarter seeing landlords increase rents – down 7% year-on-year.
Somewhat worryingly, two-thirds (66%) of ARLA Propertymark members fear further landlord taxes will be introduced this year, which will only “further dampen supply”, according to David Cox, ARLA Propertymark’s chief executive.
“The introduction of mortgage interest relief means the market is becoming less and less attractive to investors and it appears some landlords are, as we predicted, choosing to exit the market rather than pay the higher taxes,” he said.
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Source: Property News Feed
The consultation period for the proposed ban on letting agents’ fees in England should either be extended or suspended until after the general election, according to the Association of Residential Letting Agents (ARLA Propertymark).
The trade body’s chief executive, David Cox, sent a letter to Communities Secretary Sajid Javid yesterday also requesting that workshops on the matter be reintroduced, as part of the consultation process.
Here is David Cox’s letter in full:
Dear Secretary of State,
As the UK’s largest professional body for the lettings industry with over 9,000 members, ARLA Propertymark requests that you extend the time limit for the consultation to ban letting agent fees in light of the recently announced General Election.
We were pleased that a key part of this consultation process, as set out by DCLG, was to engage the sector and host a number of workshops throughout the country to discuss the implementation of the fee ban and proposals in the consultation. This was most welcome as it would have allowed agents to gain clarity from officials on some of the points raised in the document and share their views on the proposals. However, as it is likely the fee ban will become a manifesto pledge in the coming weeks and therefore a political issue, this work cannot properly take place during purdah; when civil servants will need to take extra care to remain impartial and objective. General Election guidance also makes clear that statements which refer to future intentions of the Government should not be handled by a Department.
Therefore, ARLA Propertymark asks that the Government either extends the consultation for a further period beyond the election, or suspend it until a new Government is in place.
Either way, we request that the consultation does not close until the now cancelled workshops have taken place; as the Department originally committed to do as part of the consultation process.
I look forward to hearing from you in due course.
ARLA Propertymark Chief Executive
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Source: Property News Feed
The government’s plan to ban letting agents in England from charging fees to tenants will not deter the vast majority of landlords from using an agent to rent out their property, fresh research shows.
Tenants can currently be charged fees for a range of administration, including reference, credit and immigration checks, as well as the drawing up of tenancy agreements, with fees varying widely. But 79% of landlords in England and Wales surveyed by the UK Association of Letting Agents (UKALA) believe that if tenant fees are banned, these costs will simply be passed on to landlords.
However, only 9% of the respondents questioned said that they would ditch the agent if their fees rise.
Perhaps the reason why so few landlords would stop using agents is because many – 40% – are planning to pass increased costs on to tenants through higher rents.
Some 22% of landlords said they would look to shop around for a better deal, 13% would attempt to negotiate or refuse to pay, 9% would pay the additional fees while 9% would leave their agent and 7% are currently unsure about what they would do.
The findings contrast with recent research from UKALA which showed that almost half of landlords – 47% – would forego the services of their letting agent if their profits fall following the changes to landlord taxation from next month.
Both sets of research were undertaken by UKALA in conjunction with the National Landlords Association (NLA), in order to better understand the impact that recent government policy decisions will have on the professional letting sector.
“UKALA agents strive to provide a premium service which represents excellent value for money, but the ban on tenant fees could leave hundreds of professional businesses with no other option than to increase fees for their landlord clients,” said Richard Price, executive director of UKALA.
But he did accept that the tax and tenant fee changes coming into play leaves “a tricky path ahead to navigate for agents”.
“They’ll need to balance out the need to cover their costs in the wake of a ban on tenant fees without alienating their primary customers and source of income,” he added.
Rental market slows in February as supply crunch continues
The UK’s rental market showed signs of weakness last month, as the number of homes to let fell as uncertainty and a lack of supply restricted choice for potential renters.
The latest Property Activity Index from Agency Express shows that there were lower levels of activity in the private rented market in February.
Across the UK, the number of new listing ‘to let’ sat at -13.8%, marking the largest month-on-month decline for February since the index’s first records in 2012.
The data appears consistent with the Council of Mortgage Lenders director general Paul Smee’s view that buy-to-let property purchase activity “continues to be weak”.
But properties ‘let’ during the period did rise, sitting at 3.4%. However, looking back over the Index’s historical data, records show figures in previous years were more robust, sitting at 4.5% in 2016 and 5.5% in 2015.
Looking at performance across the UK, only two of the 12 regions recorded by the Property Activity Index reported increases in new listings ‘to let’, while five regions reported increases in properties ‘let’.
Properties ‘To Let’
• East Midlands 10%
• West Midlands 3%
Properties ‘Let By’
• South East 40.2%
• West Midlands 7.6%
• Scotland 6.3%
The West Midlands was the only region in this month’s index to record increases in both new listings at 7.6% and properties ‘let’ at 3%.
The largest decline in this month’s Index was recorded in East Anglia. Figures for new listing ‘for sale’ dropped to sit at -25.5%.
Stephen Watson, managing director of Agency Express, said: “The Property Activity Index historically shows us a drop in figures throughout February. However, this month we have seen a greater fall than in years previous, an impact of the buy-to-let changes which will undoubtedly affect the market ongoing.”
Council targets landlords that allow homes to fall into disrepair
Buy-to-let investors are being warned not to leave their properties to fall into disrepair after a landlord was found guilty of allowing a vacant property in Liverpool to become overrun by rats.
Liverpool City Council is currently targeting home owners in the city who are leaving homes to fall into disrepair to prevent more vacant properties in the city becoming infested with rats.
Landlord Giles McHugh, of Farnham, Surrey, was found guilty at Liverpool Magistrates’ Court of failing to remove overgrown vegetation and rubbish from outside the property he owns in Norris Green, which caused it to become what was described as “a home for vermin”.
Despite receiving several letters warning him about the problem, McHugh failed to address the issue at the property, leaving the council with no alternative but to undertake the work.
McHugh chose not to attend court, and was fined £500 in his absence and ordered to pay costs of £150.
The city council, which will also now pursue the landlord for the costs incurred in carrying out the works, is now warning landlords to ensure that they manage their properties efficiently.
Councillor Frank Hont, cabinet Member for housing, said: “The impact of derelict houses on the local community is immeasurable and infestations of rats and mice cause untold distress.
“When refurbished this property would make a lovely family home.
“It is part of the Mayoral Pledge to deal with long term vacant houses and engage with owners to bring the properties back into use.
“In this case our efforts were frustrated and we had no option but to take legal action – this should be a warning to those who let their vacant property go to wrack and ruin, engage with us to put the property right or face the consequences.”
Ipswich Building Society has launched a new two-year fix rate buy-to-let product at 3.39% and a two-year discount at 3.44% for new purchases and remortgages at up to 75% loan-to-value.
The mortgages are available to those borrowing up to £500,000, subject to an application fee of £199 and a completion fee of £1,300, in addition to a standard valuation fee.
However, that valuation fee will be waived for buy-to-let landlords remortgaging a property worth up to £1m, while they will also receive assistance with their legal fees.
Richard Norrington, chief executive, Ipswich Building Society, commented: “We continue to provide choice in the marketplace for mortgage misfits and those who may not fit a ‘one size fits all’ assessment.
“By employing a manual approach to underwriting, with consideration of each application based on individual circumstances, this new initiative will help creditworthy buy-to-let borrowers who may be finding it hard to remortgage away from their existing lender.”
Can you afford to ignore the Affordable Warmth Scheme?
The UK government’s Affordable Warmth Scheme (AWS) has been in place since 2013, as part of the Energy Companies Obligation (ECO).
The aim of the scheme, which was originally supposed to last until this month, was to tackle fuel poverty in the UK by replacing old boilers and storage heaters with new, environmentally friendly versions that would heat homes more efficiently, saving bill payers money.
Towards the end of 2015, it was announced that ECO would be replaced by the Domestic Energy Efficiency Supplier Obligation (DEESO) in Spring 2017. The new scheme would have a significantly reduced budget available. However, a Parliament Select Committee consultation in March 2016 criticised several aspects of the plans, calling for more ambitious targets and more funding.
In January this year, the government published the final plans for the transition from ECO to DEESO, and, in a surprising move, it was announced that ECO would be extended to September 2018:
“The government’s final position is to extend the current ECO obligation by 18 months with a greater focus on tackling fuel poverty and supporting households on lower incomes. The extension will see an increase in the size of the Affordable Warmth (AW) obligation that focuses on lower income and fuel poor households.
“The policy will also […] increase eligibility under Affordable Warmth: Eligible pool of 4.7m households (compared to 3m at present and 4m in the consultation).”
As a landlord, you could benefit from the extended AWS if someone privately renting your property is on certain state benefits, and you have an old boiler or old storage heaters. Now that eligibility for the scheme has been widened, it might be worth checking to see if your tenants qualify.
If your tenants and property meet the scheme’s requirements, you will be given a grant that covers the cost of replacing your boiler or storage heaters, effectively giving your property a free upgrade. In light of the upcoming crackdown on energy performance certificates, as Landlord Today has already covered extensively, free upgrades to your property’s energy efficiency shouldn’t be ignored.
Alongside the legal requirements that will soon come into play, upgrading your rental property will help make it more attractive to future tenants. Environmentally friendly boilers and storage heaters will make a real difference to your tenants’ monthly bills – that’s the whole point of the AWS. New technology and a higher EPC rating can help improve the value of your property.
The value of the grant will change depending on your situation. According to the scheme’s official website, storage heater grants are ‘calculated from the results of the EPC and it may or may not cover the total cost of replacing the faulty storage heaters in your rental property.’
As for boilers, the website states that ‘the free replacement of central heating boilers is subject to a survey by a Technical Surveyor and an EPC but these are carried out free of charge.’
At present, being eligible for a grant does not guarantee that the grant will cover the full cost of new heaters or boilers. While this may change or become more flexible between now and September 2018, it is important to bear in mind for now. Still, there is no cost for checking your eligibility, and you don’t have to pay anything if you decide not to go ahead with the replacement.
With the end to ECO and the AWS now fixed in late 2018, it is worth being certain of your eligibility. With the changes to how a property’s EPC rating affects its capacity to be rented on the horizon as well, any upgrade that you can make to your property’s energy efficiency could have an important positive effect on your bottom line long-term. At the very least, it is worth being aware of the AWS and its implications.
Paul Campbell is the founder of Greenvision Energy. For more details on the AWS and how to proceed, read Greenvision’s information page.
Buy-to-let property purchase activity ‘continues to be weak’
The number of buy-to-let loans secured by buy-to-let landlords increased in January to the second highest monthly level since the introduction of the 3% stamp duty surcharge on second homes in April 2016, behind November 2016, new figures show.
But rather than new loans to invest in new much needed private rented housing, this activity was actually driven by buy-to-let remortgage lending which accounted for more than two thirds of total lending.
The volume of loans for buy-to-let house purchase advanced in January was at an eight month low in part due to the traditional seasonal dip in activity in the winter months.
By contrast, buy-to-let remortgage lending was at its highest monthly level, alongside November last year, since the stamp duty reform was introduced.
With mortgage tax relief set to be phased out from next month and now that the Bank of England’s Financial Policy Committee has been granted greater powers over the buy-to-let market, making it harder for many buy-to-let landlords to get a mortgage due to new tougher mortgage affordability tests, activity levels in the sector could yet slow further.
Paul Smee, director general of the CML, commented: “Buy-to-let house purchase activity continues to be weak, despite strong buy-to-let remortgage levels. This will likely remain so going forward as lenders tighten affordability criteria ahead of the PRA mandated stress tests, and the introduction of tax changes in April.”
Enquiries from investors seeking to invest in the buy-to-let market rose sharply in the final three months of 2016, new figures show,
According to the Intermediary Mortgage Lender’s Association’s (IMLA) latest Mortgage Market Tracker, buy-to-let enquiries rocketed 47% as investors looked to beat the Prudential Regulation Authority’s (PRA) tougher buy-to-let lending rules that were introduced at the start of this year.
Lenders expect overall demand for buy-to-let mortgage lending to continue into the first three months of 2017, albeit at a lower level, as a result of tighter lending conditions and the forthcoming changes to landlords’ mortgage tax relief, which are due in April.
Peter Williams, executive director of IMLA, said: “It is unsurprising that there was an increase in the numbers of borrowers seeking expert advice in the final quarter of 2016, given that the changes to buy-to-let underwriting standards and mortgage tax relief were looming large on the horizon.
“As the layers of regulation in the market become increasingly complicated, and the number of products increase, the intermediary market continues to play a very important role in the provision of mortgage finance to a variety of borrower types.”
Up to 1.4 million landlords unaware of buy-to-let tax changes
Many people feel anxious and uncomfortable when getting themselves into debt and understandably this is why many of us strive to pay off our mortgages as quickly as possible. But financially, this is not always the best decision when long-term debt is used as a tool to create wealth.
For many landlords, effective use of gearing has been the key to getting the most from their buy-to-let properties, as the interest element of their mortgages – and remember many buy-to-let investors have interest-only deals – has always qualified for tax relief, and so paying it off has not been quite so attractive, not when the rental profit and home equity could potentially be used to acquire more investment properties.
But of course, that is all about change.
The existing rules that permit landlords to offset all of their mortgage interest against tax will, from this April, be phased out over the next three years until 2020/21.
Once mortgage interest relief has been withdrawn altogether, the consequences of Section 24 will mean that landlords will only be able to claim back a basic tax rate deduction of 20% off their tax bill, which will eat into their rental returns.
But somewhat surprisingly, tenant referencing firm, Tenant Referencing UK, claims that up to 1.4 million landlords – 70% of approximately 2 million landlords in this country – may still be unaware of the tax changes coming into play from next month.
The research is based on a poll of 1,000 of its members, in which 70% of respondents said they were unaware of any tax changes being introduced in the sector.
The National Landlord’s Association (NLA) fear that around 440,000 basic-rate tax payers – 22% of approximately 2 million landlords in this country – will move up a tax bracket once planned changes to landlord taxation comes in to force.
Richard Lambert, chief executive, NLA, commented: “When the government announced these changes, it claimed they would only hit a small proportion of higher-rate taxpayers. We now know that is complete tosh.”
The NLA has suggested that the government should consider implementing the new rules only on new buy-to-let loans approved after April, but their calls for change have been ignored.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home,” Lambert added.
Average rents in Great Britain have fallen for the first time in more than six years, driven by a sharp drop in the cost of new tenancies in London and the South East of England.
Nationally rents fell 0.6% over the last year to £921pcm last month, down £5 compared with February 2016, Countrywide’s latest Lettings Index shows.
Renters in London and the South East have been handed a measure of relief, with annual rents dropping by 4.7% and 2.6%, respectively.
The fall was triggered by a flood of new rental homes coming on to the market, while demand from private renters fell by 3% in London and 5% in the South East compared with the same period last year.
But greater tenant demand in other regions of the country meant that rents continued to increase across all other parts of Great Britain, albeit at a slower rate than in January, led by gains in the East and West Midlands, and when excluding London, Countrywide’s figures reveal that rents rose by an average of 0.8% year-on-year.
“Rents are growing in most of the country but falls in London and the South East are dragging down the national growth rate,” said Johnny Morris, research director at Countrywide. “Recent falls in London and the South East are small in the context growth in recent years. Rents are a third higher in London and the South East than in 2007.”
He added: “Early signs point towards 2017 being a rare year where rents rise faster in the north of the country than in the south. While rents are likely to track any increase in earnings, affordability in London and the South East remains stretched. That is likely to limit rental growth.”
Buy-to-let landlord sentenced for tax fraud and fined £200,000
A London based landlord has been given a suspended two-year prison sentence for tax fraud, following a Revenue and Customs investigation that discovered £281,000 in unpaid taxes.
Property developer and landlord Michael Charles Waddingham, 44, was sentenced on Friday at Kingston Crown Court after pleading guilty to evading the large sum in taxes and has been ordered to pay a fine of £200,000 within the next six months, in addition to the £281,000 tax he has already repaid.
An HMRC investigation found he had not submitted tax returns between 2008 and 2012; failing to declare rental income, that he had been a director of seven land and property development companies and had income above £100,000 per year due to the directorships.
Waddingham, who lives in Teddington, will also have to undertake 200-hours community work over the next 12 months, honour a six-month curfew between the hours of 8pm and 5am with electronic tag and pay a victim’s support charge of £425.
Landlords urged to ‘think twice’ about ‘unjust’ tenancy deposit deductions
Buy-to-let landlords are well within their rights to make appropriate deductions from a tenancy deposit when a tenant breaches the terms of the tenancy agreement, such as causing damage or not paying rent, but they must avoid charging for things that they cannot prove.
When renting out a property, most landlords opt to take a deposit from the tenant prior to the tenancy starting, but disputes can often occur when the condition the property is not the same at the end of the tenancy, as it was at the beginning.
However, while fair wear and tear has long been a grey area for landlords, mainly because it tends to vary from case to case, that does not mean that landlords have the right to charge for deposit deductions without being compliant with the rules, according to the Association of Independent Inventory Clerks (AIIC).
That is why since the introduction of mandatory deposit protection schemes, an accurate schedule of condition has become almost as important as the tenancy agreement itself.
As well as being used as evidence in a dispute, a detailed and precise inventory completed at the start of the tenancy, and again when the tenancy ends, also underlines exactly what is expected of the tenant, while it can also help landlords avoid a disagreement in the first place.
“Tenants are becoming increasingly savvy and persistent – they won’t put up with deposit deductions that they feel are unjust,” said Patricia Barber, chair of the AIIC.
“Although it is only a minority, those agents and landlords who do charge for things they can’t prove should think twice about this practice. Alongside being immoral, it could cause financial and reputational damage to a business,” she added.
To help enjoy a risk-free tenancy, it is generally good practice for a landlord to have an inventory, which records the condition of the property with written notes, photographic evidence, as well as details of the contents, including fixtures and fittings.
Barber continued: “Photo inventories allow all parties to make a fair comparison of the property’s contents and condition at the beginning and end of the tenancy.”
Almost 17% of homes could become unrentable by 2018
Nearly 17% of properties currently available on the private rented sector could become unrentable by 2018 if government plans for new legislation go ahead, according to fresh data released by Urban.co.uk.
The 2015 Energy Efficiency Regulations, passed in March 2015, set out minimum energy efficiency standards for England and Wales. These regulations will make it unlawful for landlords to grant a new lease for properties that have an energy performance certificate (EPC) rating below E, from 1 April 2018, unless the property is registered as an exemption.
Urban.co.uk’s Landlord Knowledge Survey Report, which questioned around 4,000 UK landlords on a number of issues relating to the UK rental market, suggests that many existing private landlords are unaware that a significant chunk of the homes now available in the rental property market currently fall below the minimum energy efficiency requirements proposed.
“One reason to explain the lack of industry knowledge could be due to the recent influx in new regulations, which have flooded the rental market,” said Adam Male, co-founder of Urban.co.uk. “With landlords facing more changes than ever over the past couple of years, it is no surprise that many find it tricky to keep up – unfortunately that’s no defence should it all go disastrously wrong.”
In reality, careful planning and preparation are required to mitigate the potential impact of the new regulation, meaning that it is important that buy-to-let landlords with below E rated properties take action now if they wish to avoid legal headaches in the not too distant future.
Reflecting on the 2015 Energy Efficiency Regulations at the end of last year, Danny Luke, managing director at Quick Move Now, commented: “It is commendable that the government is keen to improve the quality of rental property, but for the proposed new legislation to be workable, a great deal of thought will need to go into how landlords can be supported to make the necessary changes. This is especially true in light of the government’s decision to stop funding Green Deal improvements.”
Luke pointed out that recent changes to tax relief, stamp duty and letting fees guidelines mean many landlords are already concerned about the viability of their businesses, which largely explains why some are now thinking about selling their rental properties.
“If significant energy efficiency improvement work is likely to be required, landlords will need support if we want to ensure a vibrant and efficient private rental market in the coming years,” he added.
Landlord narrowly escapes prison over gas safety failings
A buy-to-let landlord has narrowly escaped jail after failing to ensure gas appliances in one of her properties were checked for safety.
Preston Magistrates Court heard that following a concern received from Preston City Council about the gas appliances in a property on Alvern Avenue in Fulwood, Preston, the Health and Safety Executive (HSE) made contact with the landlord, Pritpall Kaur Singh, to establish whether she was complying with her legal duties as a landlord to ensure annual gas safety checks were carried out.
Singh, 44, failed to co-operate with HSE and failed to produce a Landlord Gas Safe Record to demonstrate that these checks had been undertaken correctly.
An Improvement Notice (IN) was issued to the landlord by the HSE for non-provision of a gas safety record for the gas appliances in her property, but Singh did not comply with that notice.
Singh was given a 26 week prison sentence suspended for 12 months and was ordered to pay £1,000.00 costs, after pleading guilty to breaching section 33(1)(g) of the Health and Safety at Work etc Act, 1974 and to one breach of the Gas Safety (Installation and Use) Regulations 1998 (36 (3)).
After the hearing, HSE inspector, Anthony Banks, said: “If you rent property out, you must comply with requirements of the Gas Safety (Installation and Use) Regulations, including the need to have a gas safety certificate. Gas appliances should be regularly checked, as faulty appliances can kill.”
For information on your gas safety responsibilities as a landlords, click here.
Specialist mortgage lender for intermediaries Vida Homeloans has strengthened its buy-to-let proposition following the introduction of new underwriting standards by the Prudential Regulatory Authority earlier this year.
Vida Homeloans’ rental cover is 125% for basic rate UK tax payers and limited companies (top up using surplus income from 115%) and 140% for higher rate UK tax payers (top up using surplus income from 120%).
Other affordability criteria include HMOs from 130% rental cover, rental calculation based on higher of product rate or 5.5% notional rate, 5% rate applies to £ for £ remortgages, and a five year fixed rate cover is based on product rate.
The announcement follows last week’s housing white paper which set out legislation to improve conditions in the private rented sector for both landlords and tenants.
Vida Homeloans already offers three year assured shorthold tenancies (ASTs) and will continue to review its product range to ensure it meets the needs of underserved customers across the UK.
The 36 month AST is available on student and corporate lets, with no limit imposed on the duration of corporate lets providing they are let directly to a registered provider of social housing or Public Limited Companies.
Louisa Sedgwick, director of sales – Mortgages, Vida Homeloans commented: “Vida Homeloans prides itself on being a modern mortgage lender – committed to helping borrowers from a range of backgrounds with their specialist needs. Our buy-to-let proposition is designed to give flexibility to landlords and demonstrates our appetite to advance mortgages to landlords who want to offer longer tenancies.”
“We have had great feedback from intermediaries and distribution partners about our willingness to consider 20% top ups from surplus income, which could mean that a higher rate taxpayer can obtain a buy to let mortgage based on 120% of rental income. Coupled with a notional rate of 5% on £ for £ remortgages, you can see how we are using ICRs which are tailored to the individual client’s financial status.”
Landlord opposed to licensing scheme plans to hold a referendum
After forcing Burnley Council to hold a referendum on a directly-elected mayor, a disgruntled buy-to-let landlord has now vowed to do the same in Blackburn with Darwen after it extended its selective licensing of landlords.
Last year, landlord Geoffrey Berg, from Prestwich in Bury, created a petition calling for a referendum to decide whether Burnley Borough Council should be led by an elected mayor after becoming irritated with Burnley Council’s extension of its Selective Landlord Licensing scheme to several more areas of the Lancashire town.
He ultimately wanted to trigger a referendum in Burnley offering the public a vote on whether Burnley Council leader councillor Mark Townsend should be replaced by a directly elected mayor.
Last week, Blackburn with Darwen’s executive board approved the new licensing scheme and extended it to cover not just Sudell ward but also parts of Marsh House, Earcroft and Sunnyhurst.
Berg, who owns homes to rent in both Darwen and Burnley, as part of a portfolio of buy-to-let homes across the North West of England, fears that the licensing scheme will have an adverse impact on the local private rented market by discouraging investment in the sector, leading to more vacant homes in the area.
He has now confirmed that he will press ahead with a petition calling for a mayoral referendum in Blackburn with Darwen after the vote on the issue in Burnley on May 4.
Berg said: “I will proceed with the petition necessary to call a referendum on an elected mayor in Blackburn with Darwen in due course after the vote in Burnley.
“It is legal and appropriate to pursue this process to try and stop thousands of homes being devalued by such schemes.”
The 61-year-old landlord has already gained support from many local residents and Tory councillor, Imtiaz Ali, who fears that the new scheme could increase rents for tenants.
“The buy-to-let market will disappear or be seriously crippled,” he said in a meeting last week.
BTL mortgage costs and rates ‘moving away from long period of historic lows’
Buy-to-let mortgage costs remain at record lows, but there are growing signs that borrowing costs and rates in the sector could be entering a period of stabilisation, or even increase over the past three months.
Fresh product data analysis from Mortgage Brain shows that the BTL sector may have reached a plateau following strong year-on-year reductions in the cost of BTL mortgages spanning the past three years.
The cost of an 80% LTV two-year fixed, for example, is now 18% lower than it was at the start of 2014 and 11% lower than it was a year ago.
Similarly, the lowest rate three-year Fixed BTL with an 80% LTV – at 3.39% – is now 16% lower than it was three years ago and 10% lower than last year.
BTL investors favouring longer-term deals can also benefit from the savings with Mortgage Brain’s latest figures revealing that the cost of a 60% loan-to-value (LTV) five year fixed BTL mortgage is now 15% lower than it was in 2014, while its 70% and 80% LTV counterparts are 14% and 11% lower respectively.
Despite the long period of reducing mortgage rates, however, Mortgage Brain’s short term analysis shows signs of potential stabilisation with mixed movement in the cost of all main BTL products over the past three months.
A three-year fixed BTL mortgage with an 80% LTV, for example, now costs 4% less than it did three months ago, while the cost of a two-year Fixed (60% and 80% LTV), a three-year fixed at 70% LTV and a five year fixed with a 60% LTV are all down by just 1% compared to November 2016.
By comparison, a marginal 1% increase in cost has been recorded for a two-year Tracker BTL mortgage with a 70% LTV, whereas a two year Fixed at 70% LTV, a two-year Tracker at 60% LTV and a five year fixed BTL mortgage at 70% and 80% LTV have all remained inactive with mortgage costs remaining static with those offered at the beginning of November 2016.
Mark Lofthouse, CEO of Mortgage Brain, said: “Like our recent residential mortgage product analysis the Buy To Let sector looks like it could be levelling out and moving away from the long period of historic lows in terms of costs and rates.
“Buy to let investors can still take advantage of some good savings and low rates when compared to this time last year, however, the mixed and marginal movement in costs over the past three months could be seen as a further sign of stability or even the start of a period of rises.”
Mortgage lenders are shaving percentage points of their buy-to-let mortgage rates in an effort to entice buy-to-let landlords acquiring new properties through their doors.
Fresh figures show that the price of two- and three-year fixed rate buy-to-let mortgage products have dropped to an all-time low.
Mortgages for Business’ January Buy-to-let Mortgage Product Index reveals that the average two-year fixed rate is 2.92% and the average three-year mortgage rate is 3.76%, which is great news for landlords who favour shorter term products, but those wishing to lock into record low rates for the longer term must act quickly, according to the broker.
David Whittaker, chief executive at Mortgages for Business, said: “Longer term swaps, in particular, have risen in recent months, so it’s no surprise that pricing for five-year fixed rates has started to creep up.
“However, when looking at the bigger picture, these rates are still, on average, less than 1 per cent more than their shorter-term counterparts.
“As such, we continue to recommend them to customers as they not only provide a longer period of security against rate rises in an uncertain market, they can also save landlords the time and money it costs in remortgaging more often.”
Rents in the residential property sector are continuing to rise across many parts of the UK with no fewer than 20 areas seeing growth of more than 3% in the last 12 months, according to fresh figures.
Luton is the area with the fastest growing rents with a rise of 6.5%, followed by Northamptonshire up 5.1%, Peterborough up 4.8% and Edinburgh up 4.6%, the Landbay rental index shows.
Other areas to see high rental price increase include Medway up 4.5%, Bedfordshire up 4.6%, Thurrock up 4.4%, Bristol up 3.62%, Swindon up 3.31%, Nottingham up 3.25%, Leicester up 3.1%, and Greater Manchester up 3.06%.
Overall rents in the UK remained virtually unchanged at an average of £1,189pcm in January compared with the previous month, but were just over 1% higher when compared with the corresponding month last year. But in London while the average rent is £1,883pcm, this is down 0.42% year-on-year.
Of the 20 locations identified in Landbay’s index report as posting annual rental growth of more than 3% year-on-year, the analysis found that tenants in nine of the 20 areas are currently spending over 60% of their take home pay on rent.
Tenants in Luton, for example, currently spend an average of 68% of their disposable income on rent, with tenants in Brighton and Hove, Bristol and Thurrock spending an average of 69%, 64% and 63% respectively.
John Goodall, CEO and founder of Landbay said: “There are currently 4.3 million tenants in the private rented sector but affordability is becoming an issue across many parts of the UK. Whether tenants are renting as a stepping stone on the way to home ownership or, increasingly, renting for life, people rely on a well-served buy-to-let market to ensure rental growth doesn’t become unbearable.”
Goodall believes that the government’s focus on supplying more rental properties, as illustrated by last week’s housing white paper, suggests that the private rented sector may “finally be given the investment it needs to keep rents in check”.
He added: “Further institutional investment in large scale developments, specifically designed to rent rather than buy, should go some way to professionalise the sector, improving living standards and helping control further rental growth.
“While PRS schemes are already on the way in many of the areas facing the fastest pace of rental growth, the government’s white paper missed an opportunity to highlight where in the country this type of investment is needed the most. For those in the top 20, experiencing rental growth above 3% a year, the clock is ticking.”
Around half of landlords refuse to let to those without a UK passport
Foreign nationals and Britons without a passport are struggling to rent due to immigration checks introduced last year, according to a new survey.
A report by the Joint Council for the Welfare of Immigrants (JCWI) reveals that foreigners and British citizens without passports, particularly those from ethnic minorities, are being discriminated against in the private rental housing market as a result of the Right to Rent scheme designed to crack down on irregular immigration.
Just over half – 51% – of landlords surveyed said that the scheme would make them less likely to consider letting to foreign nationals, while 42% of landlords stated that they were less likely to rent to someone without a British passport as a result of the scheme. This rose to 48% when explicitly asked to consider the impact of the criminal sanction.
Somewhat worryingly, an enquiry from a British Black Minority Ethnic tenant without a passport was ignored or turned down by 58% of landlords in a mystery shopping exercise, following the introduction of the Right to Rent scheme, introduced in the Immigration Act 2014 as part of the government’s reforms to build a ‘fairer and more effective’ immigration system.
From 1 February 2016, all private landlords in England have been required to check that new tenants have the right to be in the UK before renting out their property.
Under existing rules, landlords who fail to check a potential tenant’s ‘Right to Rent’ face penalties of up to £3,000 per tenant.
The law means that private landlords, including those who sub-let or take in lodgers must now check the right of prospective tenants to be in the country to avoid being hit with a penalty.
Saira Grant, chief executive of JCWI, said: "We have been warning for some time that the Right to Rent scheme is failing on all fronts. It treats many groups who need housing unfairly, it is clearly discriminatory, it is putting landlords in an impossible position, and there is no evidence that it is doing anything to tackle irregular immigration.
“Creating a so called ‘hostile environment’ that targets vulnerable men, women and children is bad enough, implementing a scheme that traps and discriminates against British citizens is absurd. Expanding the scheme to devolved nations without taking into account the discrimination it causes would be misguided and unjustifiable. It is time to stop the scheme before it does any more damage.”
JCWI’s research suggests that landlords who have no wish to discriminate are being forced to do so by the scheme – with people who have a full right to rent a home in the UK being disadvantaged, along with others who should be able to access housing.
Alan Ward, chairman of the Residential Landlords Association (RLA), commented: “We share JCWI concerns over document discrimination and these findings reflect issues that the Residential Landlords Association raised right from the start. The government’s own figures show the Right to Rent scheme is not working so maybe it is time to scrap it and think again. With the threat of a jail sentence hanging over landlords if they get it wrong it is hardly surprising that they are being cautious.
“There are more than 400 acceptable documents proving right to rent from within the EU alone and landlords are making risk-based decisions and only accepting documents that they recognise and have confidence in. The RLA supports landlords by offering immigration and right to rent courses which guide them through the complex process – including a section on the Equality Act and how to avoid discrimination.”
Growing wealth in the BTL sector ‘fuelling cash purchases’
The proportion of buy-to-let landlords acquiring property in cash increased to 61% in January, the highest level since records began a decade ago, according to Countrywide.
Buy-to-let investors who have opted to acquire property since the introduction of the 3% stamp duty surcharge last April have relied more heavily than ever on cash to fund their investments, the estate agency group claims.
Countrywide says that over the last decade, the proportion of landlords purchasing property with 100% cash has steadily increased from 41% of landlords in 2007 to 61% today.
Landlords purchasing properties in the North of England are most likely to use cash to fund their purchase, reflecting the fact that the least expensive homes are most likely to be bought with cash, according to Countrywide.
The company report that 70% of buy-to-let acquisitions in the region are in cash, a larger proportion than anywhere else.
Over the last year almost two thirds of homes costing less than £125,000 were paid for in cash.
In stark contrast, Landlords in London, where properties are typically most expensive in this country, are more likely to use mortgage finance to invest in property.
Johnny Morris, research director at Countrywide, said: “On average landlords sell a home once every 17 years meaning as prices have increased, a significant amount of wealth has built up in the sector. This is now fuelling cash purchases. With the forthcoming tapering of tax relief on mortgage interest payment, landlords have less of an incentive to borrow, suggesting more cash activity in 2017.
“Rents are rising at twice the pace of last January and there are signs that rental growth is starting to pick up in much of the country. Ten months after the introduction of the stamp duty surcharge the number of homes on the rental market is showing signs of coming down. If this fall continues over the next few months, it is likely to support rental price growth.”
Rents to rise faster than house prices in next five years, says RICS
Rental prices look set to increase faster than house prices over the next five years, according to the Royal Institution of Chartered Surveyors (RICS).
When it comes to house prices, chartered surveyors said that they anticipate an increase of just less than 20% over the next five years, while rents are expected to rise at a faster rate of 25% during the same period. This is owed mainly to an anticipated reduction in housing supply in the private rented sector (PRS), as more buy-to-let landlords either exit the market or reduce the number of properties they have in their portfolios, as a consequence of tax changes.
The introduction of the 3% stamp duty surcharge on buy-to-let homes last year and the phasing out of mortgage tax relief from this April will inevitably push some landlords out of the market, and this is likely to result in more tenants chasing fewer rental properties, according to surveyors.
Jeremy Blackburn, head of policy at RICS, said supply in the market needed a “turbo boost”, while Simon Rubinsohn, chief economist at RICS, added that the “the scale of the challenge the Government faces as it announces its new approach to housing is clearly demonstrated in the results from our latest survey”.
Given the inadequate supply of housing in the UK, combined with the pressures facing the buy-to-let sector, it is not that surprising that rents are expected to rise by 25% over the next five years, according to Charles Haresnape, group managing director of mortgages at Aldermore.
He said: “This [RICS latest report] further supports our view that additional assistance is required for smaller developers which could go some way to alleviate the slow progress in addressing this [housing] deficit. In light of the housing white paper released this week, the latest RICS survey highlights the scale of the challenge the government faces.”
Private tenants are ‘enduring cold conditions’ out of fear of eviction
A high number of tenants in the private rented sector feel as though they are being left with little alternative but to live in cold homes out of fear of high heating bills and losing their tenancy, research shows.
The study, carried out by Sheffield Hallam University and funded by the Eaga Charitable Trust, an independent grant-giving trust committed to fighting fuel poverty, was developed to provide a better understanding of the existing state of energy inefficiency in private rented sector housing.
The research, which focused on private rental sector tenants across Hackney in London and Rotherham in South Yorkshire, found that many tenants face considerable barriers to seeking help with cold homes that are unaffordable to heat.
The researchers at Sheffield Hallam said that respondents in both locations experienced dangerously cold homes and rationed their heating in winter due to energy inefficient properties and fears over high heating bills.
It added that the relationship between tenant and landlord was one characterised by fear on the part of tenants that any complaint may be countered by retaliatory action such as rent increases or eviction if they spoke out.
Most tenants apparently felt reluctant to make contact with their landlord and instead found ways to work around problems.
Keeping warm by routinely wearing coats inside the home, keeping blankets in living areas and spending extra time in bed or outside of the home were common practice, as was heating the home for very short periods in order to save money, rather than lobbying landlords for improvements.
Issues such as excess cold, condensation, and extensive damp and mould were widely highlighted, with respondents also highlighting increased suffering associated with chronic health conditions known to be exacerbated by cold homes and the emotional strain of insecure tenancies and living properties they wouldn’t have chosen to live in. But many tenants also said that they had not lobbied their landlords for improvements.
Under the Energy Act (2011), tenants are able to request consent from their landlords to carry out energy efficiency improvements to properties. The landlord cannot unreasonably refuse consent. It is, however, the responsibility of the tenants to arrange funding. Although the majority of respondents were supportive of the Act in principle, the majority felt too afraid to approach their landlord about this.
Dr Aimee Ambrose, senior research fellow from Sheffield Hallam University’s Centre for Regional Economic and Social Research (CRESR), who led the project, said: “There is a key voice missing from the debate about energy performance in the private rented sector: that of the tenant. Tenants are under-researched and underrepresented, lacking a collective voice due to the absence of organised groups representing them.
“The picture emerging from the accounts of respondents is one characterised by limited housing choice that leads to the acceptance of poor quality properties that would otherwise be unacceptable, to fear of challenging the landlord in case of retaliatory action, to enduring cold conditions and high bills, and to suffering the consequences for health and wellbeing.
“This research represents a decisive step towards a stronger voice for tenants in the debate about energy efficiency in the private rented sector."
Dr Naomi Brown, manager of Eaga Charitable Trust, commented: “This is highly significant research which is hard-hitting in its depiction of the challenges that tenants in the private rented sector face.
“The Eaga Charitable Trust is very pleased to have funded the research and hopes that it will influence positive changes to enable private tenants to live in warmer, healthier homes.”
Rental market in England and Wales ended 2016 strongly, latest index shows
Despite a turbulent year average rents ended 2016 higher than they started it, the latest Your Move England & Wales Buy to Let Index has revealed.
The average property was let for £811 a month in December. By comparison, the average rent in January 2016 stood at £790.
Rents increased across most regions last year, with the East of England seeing rents rise faster than any other region.
As demand for properties in London has slowed, many people have looked outside of the capital for options, with the East of England seeing strong rent rises across the year (6.1%), followed closely by the South East where the typical rent has grown 4.4% since December 2015 to reach an average of £877 per month.
Just two areas saw average rents fall on a yearly basis in 2016. In the South West, homes now let for £660 per month, 1.4% lower than 12 months ago, while the North East saw a smaller fall with prices down 0.2% on the year.
The North East remains the cheapest place to rent in England and Wales, with the average property on the market for £543, while in spite of a marginal decline between November and December 2016, London remains home to the highest rents in England and Wales.
The typical property in the capital let for £1,291 in December, some £4 less than November’s total of £1,295, Your Move found.
Valerie Bannister, letting director at Your Move, commented: “The rental market in England and Wales has ended the year strongly, with all key indicators looking positive.
“Rents ended the year higher than they started in most areas, yet tenant arrears have remained broadly at the same level.”
London was the only region to see a fall in rents month-on-month as the rest of the country was either flat or saw rises.
Rents in the East of England grew 0.7% compared to November – the best performing area. This was followed by the South West (0.6%) and the East Midlands (0.5%).
Unsurprisingly, London was the region which offered the lowest rental yields, with homes in the capital returning 3.3% on their investment during December.
In contrast, landlords in the North East continue to enjoy the strongest yields. Across this region the typical property returned 5.3% in December, the same as in both October and November
Across England and Wales the typical return was 4.7% in December, which is below the average yield of 5.1% recorded in December 2015, as well as the 5% recorded at the half way point in June 2016.
Bannister added: “Rents ended the year higher than they started in most areas, yet tenant arrears have remained broadly at the same level.”
A private landlord has been jailed for almost four years after being found guilty of stealing money from more than 100 prospective tenants.
Tahir Khaliq operated a fraudulent scheme in which prospective tenants were encouraged to pay a holding fee of typically £200 or £400 as a non-refundable deposit so a property would be taken off the market and their application would progress.
But Khaliq, aged 49, ordered staff at his company, Lancashire Lettings in Bury, to accept but never return holding deposits from a number of renters looking to secure accommodation and arranged for bogus home insurance claims to be submitted with fake quotes and invoices with the assistance of employee Paul Dickinson.
Prosecutor Andrew Thomas told Bolton Crown Court this week that among the fake insurance claims were those made for houses in Shackleton Grove in Johnson Fold as well as Ainsworth Avenue in Atherton and Hoyle Street in Radcliffe.
Genuine looking inflated quotes were submitted from two invented firms and then if needed leases were falsified to try to prove the properties were occupied at the time.
Thomas said: “The two most blatant parts of this fraud were the lies told about two things: about who was living in the property and the fabrication of estimates and invoices for repair work.
“Internal emails showed Paul Dickinson was the author of the bogus documents and Mr Khaliq was involved.
“In reality the works were done by their own handymen at a fraction of the cost.”
In sentencing Khaliq, Judge Graeme Smith, said: “[Khaliq] became accustomed to putting his own selfish interests before others. You were involved in several fraudulent activities that all took place over an overlapping period.
“You had a leading role actively involved in each fraud; other employees were involved however [this offending] took place over a long period of time and you had high culpability in relation to the deposit fraud aspects; some of whom were vulnerable.”
Khaliq was handed a 45 months sentence this week, while Dickinson, aged 42, was given a two year jail term, suspended for two years, and 240 hours of community service.
The rogue landlord was also ordered to pay back £100,000 and pay court costs of £25,000 and was disqualified from being a company director for 10 years.
The government’s private rented sector policy is ‘hypocritical’
New housing policies affecting the private rented sector, including longer tenancies, boosting the supply of much needed hosing and plans to clamp down on rogue landlords, have been broadly welcomed.
However, landlords fear that they still face tough challenges ahead relating to tax changes which could push up rents at a time when the new housing white paper, unveiled by communities secretary Sajid Javid (pictured) yesterday, aims to deliver more affordable homes to rent.
Steve Bolton, founder of Platinum Property Partners and co-leading the Axe the Tenant Tax coalition – a crowd-funded coalition of individuals and organisations who represent more than 150,000 landlords – agrees with the government that “a fair and affordable rental market is crucial”.
He believes that it is encouraging to see more support for longer tenancies, as they benefit both renters, who have greater security and peace of mind, and buy-to-let landlords, who can manage their portfolio more successfully knowing they are less likely to face void periods.
“We absolutely need to get more homes built, and faster. Improving property supply – both in the homeowner and rental market – is key if we are to slow rising house prices and rents,” he said.
Yet, while the government commits to increasing the availability of homes in the white paper, Bolton fears that buy-to-let tax changes due to come into effect in April threaten to “seriously derail investment in the rental sector”.
He commented: “The proposed tax changes will hit private landlords’ profitability and inevitably cause some to leave the market altogether, restricting the number of rental homes available.
“How can the government say they are committed to improving homeownership and reducing rents while simultaneously introducing a ‘tenant tax’ that will only result in higher rental costs, and therefore making it harder for people to save for a deposit?
“All the good thinking in the white paper is completely derailed by this hypocritical approach.”
According to the white paper, almost two thirds – 65% – of private tenants are happy with their tenure, compared to 48% in 2004-05.
“It’s clear that landlords are providing an essential service – yet they are being squarely punished for it,” he added. “If the government truly wants to improve homeownership levels, and make renting more affordable for all, they need to abolish this ludicrous tax change sooner rather than later.”
Activity in the letting market continued to grow in September, new figures from Agency Express show.
Across the UK, the number of new listing ‘to let’ rose by 1.3% year-on-year, while the volume of properties ‘let’ increased by 4.4% during the same period.
However, looking at data recorded over a three month rolling period, the number of properties let actually fell by -1% which is on par with figures recorded from the same period in 2015.
On a regional basis, seven of the 12 regions recorded by the Property Activity Index reported growth in both new listings to let and properties let.
Properties to let:
+ North East: 19.6%
+ Yorkshire & Humberside: 12.6%
+ East Midlands: 12.3%
+ Central England: 7.6%
Properties let by:
+ West Midlands: 17.7%
+ Wales: 13.8%
+ Central England: 11.4%
+ South East: 10.1%
Central England was the top performing region in September, recording increases in both new listings to let at 7.6% and properties let at 11.4%. Over a three month rolling period figures for new listings were down at -2.1%, and again on par with those recorded in 2015.
The West Midlands reported a record month for properties let, up 17.7%, marking the region’s greatest rise for September since the index’s first records began more than four years ago.
The largest declines in September were recorded in East Anglia, where new listings sat at -11.2% and properties let at -1.4%.
Following suit, Scotland also recorded notable declines. Falling for a second consecutive month new listings sat at -4.2% and properties let at 3.3%, notably down on 2015’s ‘let’ figures of 3.6%.
Stephen Watson, managing director at Agency Express, said: “We have witnessed some growth across the UK lettings market. One or two regional pockets reported record bests, while others performed consistently. However, year-on-year figures are still recovering from the buy-to-let fallout.”
Ireland’s decision to scrap buy-to-let tax is a warning to Britain
As the UK prepares to change the way landlords are taxed by scrapping the existing rules that permit them to offset all of their mortgage interest from property investments against tax, Ireland has announced that it is reversing its policy that prevented landlords from claiming full mortgage interest tax relief on rental income to help stop rents soaring out of control.
In his Budget statement made last week, Ireland’s minister for finance, Michael Noonan, said landlords would be able to claim 80% tax relief from next year, up from an existing level of 75%.
Tax relief will then increase by a further 5% a year until it reaches 100% again.
Noonan highlighted the fact that the policy, which is similar to the tax changes due to be introduced in the UK from April next year, was introduced in Ireland in 2009 to “rescue the public finances” but with investment in Ireland’s private rented sector falling now is an “appropriate time” to revisit it.
The existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.
By 2020, landlords will not be able to deduct any of their mortgage interest from their rental income before calculating their tax bill.
The changes to tax relief will make it harder to make a profit from letting property, which in turn could deter investment in the sector.
Campaigners against the mortgage interest relief changes argue that Ireland’s change of policy demonstrates that the levy does not work.
Rents in Ireland have increased significantly since 2013, with recent figures from the Irish Residential Tenancies Board revealing that rents in Ireland have risen by almost 10% since last year.
Here in the UK, many landlords will have no alternative but to recoup their losses through higher rents, with tenants paying the price of the government’s tax-grab.
Research conducted by Property118 earlier this year revealed how up to 4.6 million tenants could be affected by the now former chancellor George Osborne’s tax attacks on buy-to-let landlords.
Mark Alexander, founder of Property118, told the press this week: “Ireland has got a really big problem with reduced investment in property at the same time as rents have increased dramatically.”
At the moment, the suggested regulations are only targeted at houses in multiple occupation (HMOs) in the buy-to-let market, but Dominic Martin, head of operations and strategy at Westrock, the investor and developer behind regional rental brand PLATFORM_, said it was important for the government to recognise the different offerings between buy-to-let and build-to-rent.
PLATFORM_ focuses on key regional commuter towns and employment hubs and aims to deliver professionally managed, high quality buy-to-let flats in central locations.
Dominic Martin, head of operations and strategy at Westrock, said: “It’s important when considering space requirements the government recognises the difference between traditional buy-to-let market and the new amenity and service led build to rent sector. This one size all approach just doesn’t work and doesn’t reflect this new and better offer to renters.
“Our initial schemes have been office-to-residential conversions, and while the unit sizes are smaller than a conventional new build, this means we have been able to deliver more much needed homes for private rent. As a counter however, this is compensated by the provision of quality amenity space and a greater investment in smart technology like underfloor heating, as well as onsite staff offering a new customer focused service.”
But there are question marks over the government’s plan to introduce minimum space requirements for rooms in the private rented sector even when it comes to HMOs, with property consultancies like Daniel Watney LLP insisting that it “will ultimately harm renters”.
Julian Goddard, head of residential at Daniel Watney LLP, cautioned that the suggested regulations would adversely impact on renters willing to compromise on space in order to save money, and also did not reflect recent technological changes.
He said: “While well intentioned, these minimum space requirements for the rental market will do little to help people looking for cheaper options to live, especially in ultra-competitive locations like London.
“They also fail to recognise the huge shifts in technology that mean we are increasingly asset lite.
“From streaming music on Spotify to watching films on Netflix, people – especially the younger generations who see more likely to rent – are owning less and less physical copies and relying more and more on digital services, reducing the need for storage space. Housing policy should be made for the future, not the past.”
Tighter licensing requirements for HMOs won’t improve standards for tenants
The government’s plan to tighten licensing requirements for landlords of shared accommodation in an effort to clamp down on rogue landlords is doomed for failure, according to the Association of Residential Letting Agents (ARLA).
In a consultation published yesterday, the Department for Communities and Local Government (DCLG) proposed to apply licensing rules to all shared homes in England with five or more people from two or more households and to flats attached to business premises.
The new rules, which are set to be introduced next year, will ensure that “everyone has somewhere safe and secure to live”, according to housing and planning minister Gavin Barwell.
He added: “These measures will give councils the powers they need to tackle poor-quality rental homes in their area.
“By driving out rogue landlords that flout the rules out of business, we are raising standards and giving tenants the protection they need.”
Landlords who fail to obtain a licence can be criminally prosecuted and face a potentially hefty fine.
However, David Cox, managing director of ARLA, insisted yesterday that “landlord licensing doesn’t work”.
He commented: “Councils already have a wide variety of powers to prosecute for poor property conditions and bad management practices; with penalties ranging from fines to seizure of property and even imprisonment. But Councils don’t have the resources to undertake effective enforcement action. Imposing more burdens on councils will not mean improved standards and better conditions for tenants; it will merely mean more laws that are not being enforced.”
The housing minister has also announced that minimum room sizes will apply to shared homes, and Cox fears that this will have “unintended consequences”.
He continued: “Some people are happy to take small rooms to keep their costs down. If these rooms are no longer available, where are people supposed to live?
“What’s more, if a small room in a property can no longer be let out, the costs of that room will be spread across the other tenants living in the property; pushing up their rents. A habitable room is essential but a one-size-fits-all policy doesn’t always work.”
Associations slam decision to continue 3% stamp duty surcharge
Landlords and lettings agents have expressed disappointment at the Welsh government’s decision to press ahead with proposals for a 3% stamp duty surcharge on additional homes, including buy-to-let properties.
Following a consultation period, finance secretary Mark Drakeford has confirmed that the extra stamp duty charge will continue in Wales after it devolves the tax in April 2018.
Wales is following Scotland by replacing stamp duty with the Land and Buildings Transaction Tax – a decision that has incensed the Association of Residential Letting Agents (ARLA) and the Residential Landlords Association (RLA).
In a joint statement, ARLA’s David Cox and the NAEA’s Mark Hayward, commented: “We are disappointed that the Welsh government has decided to take this decision and followed the rest of the UK in implementing this punitive regime for buy-to-let landlords.
“We have been highly supportive of the new devolved tax regime in Wales precisely because it was a way that it could set its own tax agenda that works best for the housing sector in the region. In continuing with the surcharge, the Welsh government is not making the most of its new powers in order to increase the supply of homes that Wales so desperately needs.”
Cox and Hayward are agreed that the measures will lead to increased rent prices through a fall in supply and increasing demand.
“Tenants will also see additional costs passed onto them, as landlords look for ways to increase the profitability of their properties in the face of spiralling expenses. Ultimately, this will lead to sub-standard accommodation as money, previously used for the up keep of homes, will be swallowed up in tax payments.”
Around 440,000 landlords will be pushed into higher tax bracket from April 2017
Some 440,000 basic-rate tax payers will be forced into a higher tax bracket from April next year once planned changes to landlord taxation comes in to force, according to the National Landlord Association (NLA).
The existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.
By April 2021, once they have been withdrawn altogether, the disastrous consequences of Section 24 will mean that it is likely that higher-rate tax payers will only receive 50% of the relief that they currently get, which will eat into their rental returns as they will be required to pay significantly more income tax.
The NLA claims that while 440,000 basic-rate tax payers – 22% of approximately 2 million landlords in this country – will move up a tax bracket, all landlords could be at risk of seeing their tax liability increase regardless of their existing rate of tax, with landlords in central London (31%), the East of England (30%), and the West Midlands (28%) particularly hit.
The amount by which landlords will be affected will depend on their personal circumstances, including whether or not they generate income from any other sources.
NLA research shows that landlords’ tax liability will increase depending on their existing annual mortgage interest payments, which are broken down by portfolio size below:
Single property – £3,600
2-3 properties – £8,600
4-5 properties- £16,300
5-10 properties – £18,200
11-19 properties – £24,900
20+ properties – £38,000
Richard Lambert, chief executive officer at the NLA, said: “When the government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh.
“The government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home.”
The supply of homes listed on the market to let has fallen sharply now that pretty much all of the buy-to-let properties acquired prior to the introduction of the 3% stamp duty surcharge in April have now been filled.
Research by property crowdfunding platform Property Partner shows that four out of ten of major towns and cities in the UK saw a fall in the volume of homes available to rent in September compared to the previous month.
Eight out of ten locations, which saw a drop in new rental listings in August, registered a further decrease in new buy-to-let homes for the second consecutive month, owed in part to a fall in the number of buy-to-let homes being purchased by investors following the recent tax changes in the sector.
In most areas, there was a decline in new rental homes advertised, led by Grimsby which saw rental listings fall by 26%. The next three locations were in the South East – Oxford (-24.4%), Canterbury (-23.9%) and Brighton (-18.7%) but no region was unaffected by the shortage in supply of new buy-to-let properties.
Most major English cities saw new rental property listings fall, but London bucked the trend and posted a 1.43% rise in September.
Dan Gandesha, CEO of Property Partner, commented: “You’d expect a seasonal drop off in the number of new buy-to-let properties coming onto the market during August but September has also proved worryingly slow. We’ll have to wait until next month to determine whether this is just a short-term problem or something to be increasingly concerned about.
“The new stamp duty hike in April for buy-to-let and second homes saw a rush by landlords to beat the deadline with a subsequent rise in stock levels. But now that the dust has settled, we’re seeing some significant declines in new listings, particularly surprising after the summer.”
Earlier this month, the Royal Institution of Chartered Surveyors (RICS) warned that the UK is facing a severe shortage of homes to rent, largely because of tax changes for landlords.
Gandesha continued: “Like RICs, we believe Britain should be building more homes across all tenure types. Over the past decade, more and more people have moved away from home ownership and become long-term renters.
“It’s time for the new government to make build-to-rent a key priority, encouraging the private sector to build properties for residential letting with incentives for institutional and professional landlords.”
The following table shows the 29 UK towns and cities that saw the decreases in new rental property listings for both August and September:
RLA slams Shelter’s ‘extravagant claims’ about housing standards
The Residential Landlords Association (RLA) has once again defended the private rented sector (PRS) after Shelter’s latest analysis of housing trends in Britain claimed that four in 10 British homes are not up to standard, with the problem most acute in the PRS.
The RLA slammed Shelter’s ongoing assault on the PRS as ‘plain wrong’, as it suggests that the sector is not fit for purpose as private sector tenants are more likely to face insecurity as a result of short term tenancies.
The RLA pointed out that the PRS provides a crucial service to a growing and varied demographic of tenants, as illustrated by recent research which revealed that 82% of tenants in the private sector are satisfied with their accommodation, higher than in the social rented sector.
Shelter’s analysis of housing trends in England suggests that tenants face instability as a result of short term tenancies. However, the RLA pointed out that the most recent English Housing Survey shows that tenants are on average living in their homes for four years, and a version of the survey published last year showed that just 8% of tenancies are ended by the landlord.
The RLA’s vice chairman, Chris Town, commented: “Shelter is once again making extravagant claims about the standard of all housing in Britain, let alone private rented property.
“Though we share Shelter’s ambition for every rented home to be of a decent standard the answer is not more regulation.
“With over 400 regulations covering the sector, what is needed is not new powers but better enforcement of existing powers to root out the crooks, rather than tying the majority of good landlords up in excessive red tape.
“The most effective way of ensuring housing is affordable is to increase supply. We hope Shelter will support landlords in calling on the Government to change recent tax policies and on councils to scrap ineffective, but costly, licensing schemes all of which discourage investment.”
Up to 70% of eviction notices could be illegal, says law firm
A large share of buy-to-let landlords trying to evict tenants are being delayed in doing so by defective Section 21 and Section 8 notices, a law firm has claimed.
Danielle Hughes from North West solicitors Kirwans has seen a sharp rise in the number of private landlords facing delays, in some cases of more than two months, and consequent rental losses, as invalid notices – part of the Housing Act 1988 legislation – are identified and new ones issued.
Hughes said of the cases she has seen over the past three months, 70% have been held-up by problematic notices, creating a huge amount of stress for landlords.
She commented: “The legal changes that have taken place in this area over the past 12 months have been fast-paced and complicated, and many landlords are finding that the notices they have prepared themselves using online forms, or even those that have been prepared for them by well-meaning letting agents are out-of-date as a result.
“When trying to evict someone, landlords have to follow a strict process which sees them serve notice on the tenant, then issue a claim for possession in the county court, then request a warrant for possession and make an eviction appointment.
“Many landlords don’t seek legal advice until they try and move on to stage two of the eviction process, when the claim for possession is issued.”
The eviction process is a lengthy one, with the minimum court fees involved to go through all three stages recently increasing from £390 to £476, but Hughes said that most errors and risks often occur at the first stage of the claim for possession when many landlords or letting agents attempt to go it alone without a solicitor.
“Time and time again we are seeing defective notices,” she added. “The impact of this on the landlord can be devastating, both in terms of emotions, costs and delays, particularly in situations where the tenant is no longer paying rent.”
NALS seeks fees transparency to ensure a fair deal for tenants
A new Fair Fees Forum has been launched by the National Approved Letting Scheme (NALS) in order to help prevent excessive fees being charged by agents.
The Fair Fees Forum, which brings industry, trading standards and consumer groups together to discuss the creation of a fair fees charter, will explore whether a cap on upfront tenant fees is practical and enforceable.
The organisation, which represents both letting and management agents, feels that a cap on fees is the most appropriate way of preventing excessive fees, as opposed to a widespread ban as proposed by some quarters of the housing industry.
The new forum will work together to consider fees and ensure agents are still paid for the work they do setting up a tenancy, while looking at a way to curb the fee excesses that have crept into some parts of the market.
Some 84% of letting agents in this country back the idea of a cap on fees, NALS research claims.
Isobel Thomson, chief executive of NALS, commented: “Ultimately this is about creating an equitable solution for all. The truth is, a good private rented sector cannot be free, and nor should it be. Agents should be paid for the work they do, but equally tenants should know they are paying a reasonable fee that has been explained to them clearly: nothing hidden, nothing excessive.
“The private rented sector faces the widely held misconception that all letting agent fees are sky high, and should therefore be banned. In fact, the bulk of letting agents are charging tenants a fair fee for their service. Where they aren’t, we believe excessive fess should be curbed.
“NALS’ Fair Fees Forum brings all sides together to explore the feasibility and practicalities of a cap as well as considering the way in which agents’ present fees to tenants to ensure clarity and understanding. This is not a talking shop – it’s time to act on excessive tenant fees.”
Tory peer condemns government’s attack on buy-to-let
Lord Flight, a former Conservative Shadow Chief Secretary to the Treasury, has once again slammed his own party’s buy-to-let tax changes, warning they could exacerbate the UK housing crisis.
He fears that the former Chancellor George Osborne’s tax grab on landlords could see thousand of buy-to-let landlords exit the market, reducing the supply of much needed homes in the private rented sector.
Lord Flight first criticised the government’s assault on private landlords at the start of the year, when he warned that the buy-to-let tax changes could destabilise the UK’s housing market by triggering “a sharp fall in prices, if not a crash”, while also threatening to “put thousands of tenants’ security at risk”.
In an article published on the Residential Landlords Association’ (RLA) website, Lord Flight said that the tax chances, including the recently introduced stamp duty surcharge on buy-to-let homes, will inevitably drive up rental values.
From a landlord’s perspective, it has been a tough year, with a raft of changes designed to bring the booming housing market under control and create what the former chancellor George Osborne described as a “level playing field” between investors and homeowners, especially first-time buyers.
But in his article, Lord Flight points to evidence from the London School of Economics that undermines the previous government’s assertions that landlords are buying homes that first-time buyers could have purchased. He also highlights assertions by the Institute for Fiscal Studies that landlords are taxed more heavily than homeowners.
Lord Flight calls on landlords to lobby their local MPs to tell them about the damaging impact the tax changes will have on the supply of affordable homes to rent and encourage them to seek changes in the new Chancellor’s Autumn Statement next month.
Commenting on the article, RLA Chairman, Alan Ward, said: “Lord Flight’s analysis is correct. When we need almost two million more homes to rent by 2025, recent tax changes will choke off investment, increase rents and make it more difficult for tenants to save for a home of their own.
“The new Chancellor has an important opportunity next month to correct the previous Government’s changes to the way the rented sector is taxed. We call on him to seize this opportunity with both hands.”
Landlord ordered to pay over £10,000 for regulatory breaches
A private landlord has been ordered to pay more than £10,000 in fines and costs for breaching regulations for private accommodation.
Piang Fui Pun, 47, of Cromer Road in Norwich admitted 13 breaches of regulations for HMOs, including not providing safety certification for electrical and gas installations at the property on Prince of Wales Road.
David Lowens, prosecuting on behalf of the city council, told Norwich Magistrates Court that council officers initially visited the property in February of this year and after pointing out various defects returned three months later to find that many of the matters had still not been put right.
Pun, who spoke through an interpreter, said that his sister normally looked after the management of the property but had been distracted by personal family affairs and as a consequence standards had dropped. He said that everything in the property had now been put right.
Chairman of the bench, Geoff Dyett fined Pun £5,500 and ordered him to pay £4,600 in investigation costs of the case.
Dyett told Pun: “If there had been an accident or worse there could even have been a fire, you could have well been facing more serious allegations.”
After the case councillor Bert Bremner, the city council’s cabinet member for private sector housing, said: “Keeping our residents’ safe and ensuring all housing is of a good standard are top priorities for the council.”
“This particular case required a high level of partnership working and is another excellent example of the work being done to tackle landlords who operate outside the law,” he added.
Private landlords urged to brush up on legislation
Private landlords and letting agents are failing to get to grips with several legislative changes in the private rented sector, it has been claimed.
The Association of Independent Inventory Clerks (AIIC) says that its members are frequently receiving queries about new industry regulations, particularly those regarding carbon monoxide and smoke alarms and window blinds.
Since October 2015, it has been mandatory for a smoke alarm to be installed on every floor of a rental property where someone is living, partially living or is deemed as a habitable area, including bathrooms.
Landlords or their agents must also fit Carbon Monoxide alarms in rooms with a solid fuel-burning appliance, including wood burners and open fires.
Based on the most common queries regarding these regulations, the AIIC says that many landlords and agents’ are unsure of the required location and type of alarm as well as when they need to be tested.
What’s more, the association says its members have also reported receiving queries from landlords relating to safety requirements for blinds and curtains.
In 2014, the British Standards Institution introduced a new set of safety requirements, aiming to address child safety risks posed by blinds and curtains.
The requirements mean that any blind which is installed with cords and chains has to have breakaway connectors and cord and chain safety retainers.
The cords and chains must also be maintained at a minimum 1.5 metres from floor level.
If an accident involving a non-compliant blind or curtain track takes place in a rental property, the landlord could face prosecution from Trading Standards.
“A worryingly large number of letting agents and landlords are still completely unaware of some important new regulations according to our members, who are being asked to explain health and safety rules,” said Patricia Barber, chair of the AIIC.
“There is no excuse for anyone in our industry to ignore regulations, this could be dangerous and very costly in the long run.”
Barber says that landlords and letting agents must strive to ensure that they are clear on all their legal obligations and has urged other trade bodies to publicise as much helpful information as possible, especially as there is likely to be more new legislation in the future.
“As the UK’s longest established membership organisation for independent inventory clerks we take standards of working practices very seriously,” she added.
Buy-to-let lending will fall by as much as 20% over the next two years to reach around £33bn by the end of 2018, a leading mortgage expert has predicted.
Speaking at the Mortgage Business Expo in the Barbican Centre in London late last week, David Whittaker, managing director at Mortgages for Business, estimated that the market would slow considerably because of the various changes occurring in the buy-to-let market, including the Prudential Regulatory Authority’s affordability stress tests.
Whittaker advised intermediaries to aim to conclude deals by Christmas, before more stringent mortgage lending rules potentially deter many buy-to-let landlords from adding to their property portfolios.
Whittaker projects that the market will reach £39bn in 2017 and £33bn in 2018, suggesting that the Intermediary Mortgage Lenders Association’s (IMLA) forecast that buy-to-let lending will reach £48bn next year is over optimistic, to say the least.
Whittaker said: “Our view is it [buy-to-let lending] is going to peak this year and it’s going to start coming down.
“And in 2018 we think the market will contract by 15-20% as landlords take fright, worry about the advice they are getting, and lenders do not transition comfortably from just doing vanilla buy-to-lets to limited company buy-to-let, because that’s where most landlords want to be and we are still trying to absorb what the regulator has imposed on us from the 1st October next year.”
Almost a third of tenants think it’s acceptable to take landlord’s possessions
Almost a third of tenants in the private rented sector think it’s ‘fair game’ to keep items belonging to the landlord when they move out of their private rented accommodation, new research reveals.
A new survey by Direct Line for Business shows that 30% of tenants who have rented a property in the last five years think it is acceptable to take items that do not belong to them when they leave the property, with some of the strangest items removed including a bee hive.
Some of the more popular things tenants have removed from their rental properties have included fridges, freezers, light fittings, televisions and sinks!
Various reasons for taking items from rented properties were given and included believing that the landlord would not notice that the item was missing, taking items by accident and forgetting that the item was not theirs. However, the most common excuse – given by more than a fifth of respondents who admitted that they had stolen items – was simply that they wanted to take the items.
The cost to the landlord of replacing these items adds up, with tenants estimating that the overall value of items they had taken from a property stands at over £500.
Nick Breton, head of Direct Line for Business, said: “The range of items that tenants feel that they can take with them when vacating a property is quite amazing. It isn’t even just small items that go missing; our research found that renters are helping themselves to beds, sofas and cupboards once their tenancy agreement comes to an end. These are expensive to replace and could have a knock-on effect for future tenants of that property. Plus a tenant could find that they lose their deposit.”
Interestingly, the research also revealed that 21% of respondents who have stolen goods said they did not complete an inventory when they moved into the property. However, 23% confessed that all of the items they removed were listed on the inventory but this did not deter them from taking the items.
The research also identified some very unusual items that were taken from rental properties including coconuts, a bee hive and a rolling pin.
Breton continued: “The research highlights the importance of having a thorough inventory. Building a relationship with tenants could minimise issues further down the line. If the property is furnished then make sure you have the right insurance in place so you’re covered should things go missing – like the kitchen sink!”
More than half of all tenants in the private rented sector tend to stay in their rented accommodation for five years or more, updated data from landlord insurance specialist Cover4LetProperty shows.
The eighth in the series of surveys, which is carried out bi-annually – from March 2013 to September 2016 – asked how many rented properties the respondent has lived in during the past five years, with 59% of renters having stayed for five or more years in the same property – no change from a year ago.
In October 2013, 15% of males had lived in four or more properties in the last five years compared to 8% of females.
As of October 2016, just 8% of males and 5% of females have lived in more than three properties, suggesting that tenants are staying longer in their rented homes.
Some 79% of respondents said they tend to rent long term, which represents an increase of 15% over the past 12 months.
Some 15% of exiting renters plan to acquire their own home within the next six months, down 18% in the last six months, while 29% hope to buy in a few years’ time.
While buying property in London has proved to be a lucrative move for many buy-to-let landlords for capital gains in recent years, it is increasingly holding less appeal for those looking for generous rental returns. But where in the UK currently offers attractive rental yields?
LendInvest’s latest buy-to-let Index looked at the areas which have seen the largest rise in rental yield over the last 12 months, and found that Blackburn is now the number one buy-to-let hotspot following a 37.8% rise in the average yield being achieved in the Lancashire town.
The research by LendInvest, which looked at where landlords are seeing the biggest returns on buy-to-let investments by analysing historical purchase prices from the Land Registry and current average rental prices on property website Zoopla, allowed the online lending and investment platform to identify the most profitable areas in the UK to be a landlord, with other buy-to-let ‘hotspots’ including Carlisle, Gloucester, Lincoln and Oxford.
Christian Faes, Co-Founder and CEO of LendInvest, said: “Savvy property investors won’t only look out for which areas will offer the best returns right now, but are considering the best growth for the months and years to come. That means spotting areas which will become more popular in the future. That may be due to improved transport links, for example those towns which are due to be on the new HS2 line, or those which are due to benefit from new infrastructure projects, which will bring additional employment into the region.”
LendInvest’s new Buy-to-Let Index also highlights the buy-to-let coldspots – those postcode areas which have seen average rental yields fall the most over the 12-month period between August 2015 and July 2016.
Tenancy deposit disputes are at their highest level since records began in 2007, new figures from the Tenancy Deposit Scheme (TDS) reveal.
The data shows that at the end of March 2016 there were close to 173,000 tenancy deposit disputes adjudicated in the nine years since the legislation was first introduced in England and Wales.
Indeed in 2015-16 alone the three deposit schemes operating in England and Wales resolved 28,100 disputes, the highest ever annual amount. This represents a total of 0.82% of all deposits protected at March 2016, a figure which has stayed at about that level for the last six years.
The study found that cleaning now accounts for the lion’s share of tenancy deposit disputes, reflecting the fact that landlords are increasingly faced with dirty properties at the check-out stage of a tenancy.
Cleaning was mentioned in 57% of dispute claims handled by the TDS, followed by damage to fixtures and fittings features at 51%, redecoration at 32% and rent arrears in 19% of claims. Gardening disputes were mentioned in some 16% of tenancy deposit claims.
In terms of who received what, the figures show that the average disputed deposit handled by TDS in 2015-16 was £863.40, with 45.5% being returned to tenants and 54.5% to the landlords and, or agents.
Deposits taken on assured shorthold tenancies in England and Wales by landlords or letting agents must be protected within 30 days in any one of three government-backed insurance based or custodial deposit protection schemes operated by MyDeposits, Deposit Protection Service (DPS) and the Tenancy Deposit Scheme (TDS).
The insurance product enables landlords or agents to retain the deposit during the tenancy but in return pay a protection fee to the scheme.
The custodial scheme allows landlords or agents to hand over the deposit for protection during the tenancy, with no fees attached. The scheme is funded entirely from the interest earned from the deposit pool.
There are separate tenancy deposit protection schemes in Scotland and Northern Ireland.
The three appointed scheme administrators in Scotland are Letting Protection Service Scotland, Safedeposits Scotland and MyDeposits Scotland.
In Northern Ireland, the schemes are Deposit Scheme Northern Ireland, MyDeposits Northern Ireland and Letting Protection Service NI.
Mortgage lending may have rebounded in August with gross lending last month reaching a nine-year high of £22.5bn, but the buy-to-let sector continues to remain subdued, the latest figures show.
According to the data released by the Council of Mortgage Lenders (CML), adjusting for seasonal factors, lending has been stable over the last few months but, under the surface, the mix of lending is moving towards remortgage activity, particularly in the buy-to-let sector.
Buy-to-let activity has slowed following the introduction of the stamp duty surcharge in April and the fact that lenders are offering more stringent affordability criteria in anticipation of tax relief changes from April 2017.
CML senior economist Mohammad Jamei said: “House purchase activity for buy-to-let continues to remain subdued, even as we move away from the stamp duty change, and is firmly down compared to a year ago.
“This looks set to continue going forward, given that lenders have been tightening affordability criteria in anticipation of the forthcoming interest tax relief changes in April 2017.”
Increasing numbers of lenders are cutting buy-to-let mortgage rates in an effort to help boost fresh business from more buy-to-let landlords, but with many lenders now demanding rental coverage of 145% for buy-to-let mortgages, mainly due to the decision to restrict the amount of tax relief a landlord will be able to claim on mortgage interest to the basic rate, this strategy could have limited success.
Mike Richards, director of London-based Mortgage Concepts Associates, said: “Lenders reducing rates is not going to help at all because the government has crucified buy-to-let.
“While an interest rate is one of the concerns, it is not the only concern.
“People have a finite amount of money for deposits and most people will have to pay 3% extra stamp duty while lenders are increasing their stress rates.”
Coventry Building Society has announced rate cuts across its buy-to-let products, enabling brokers to offer buy-to-let landlords home loans at ‘highly competitive rates’.
New deals include five-year fixed rates ranging from 2.99% to 3.99%.
The new five-year fixed rate starting at 2.99%, has been reduced from 3.29%, at 75% loan-to-value (LTV) with a £1,999 arrangement fee.
There is also is a new 3.39% five-year fixed rate deal, down from 3.69%, at 75% LTV with a £999 arrangement fee, along with a 3.69% five-year fixed rate mortgage – reduced from 3.99% – at 75% LTV with no arrangement fee.
Kevin Purvey, director of intermediaries at Coventry, which last week increased the age in which it will lend to buy-to-let investors to a maximum of 85 years, up from 75 years of age, said: “With continuing uncertainty in the market, our rate reductions mean that brokers can offer their clients the stability of a fixed monthly repayment at a highly competitive rate.
“In addition, all of our products are still booking fee free and include a valuation of up to £700 for buy-to-let mortgages.”
Brexit fears were ‘wide of the mark’ and ‘misguided’, say experts
Fears raised over the UK housing market in the wake of the Brexit vote were ‘wide of the mark’ as illustrated by a sharp rise in mortgage lending in August, according to a senior economist.
New figures from the Council of Mortgage Lenders (CML) estimate that £22.5bn worth of home loans were handed out last month, up 7% from July and 15% higher than August last year, making it the strongest August for mortgage lending since 2007 when gross lending reached £33.6bn.
“Widely voiced fears in recent months about the housing market have proved to be wide of the mark,” said Mohammad Jamei, a senior economist at the CML.
“Prospects for house purchase activity post-referendum look slightly subdued, when compared to late 2015 and early 2016,” he added. “However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate.”
Jamei said that the recovery in sentiment is likely to be down to several factors, including the Bank of England’s monetary stimulus and its introduction of the Term Funding Scheme last month.
He continued: “A subsequent uptick in approvals is anticipated, albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers.
“The Bank also continues to indicate another rate cut on the cards, if medium term prospects remain unchanged.”
The CML added that the biggest concern was the general lack of homes on the market for sale, with CML figures showing that the average number of properties per surveyor is close to an all-time low.
Meanwhile, the number of house purchase approvals fell to an 18-month low of 61,000 in July.
“There are still constraints on the market, namely the lack of stock, which has the potential to reduce the number of transactions and therefore reduce mortgage activity, constraining the level of growth that we were seeing earlier on in the year,” said Paul Smith, CEO of haart estate agents.
However, the encouraging mortgage data from CML revealing that activity jumped back up in August after hitting a blip in July ultimately shows that projected fears about the collapse of the housing market in the wake of a Brexit vote “were misguided”, according to Smith.
Many commentators believe mortgage approvals are now likely to fall over the coming months as the combination of weaker consumer confidence and economic uncertainty causes people to reconsider moving or buying a first home.
Henry Woodcock, principal mortgage consultant at IRESS, commented: “If there are no unforeseen bumps in the economy, the optimist in me – encouraged by these figures – would expect mortgage approvals and advances to increase further over the coming months – but at lower levels of growth than in 2015 – as lenders seek to hit end of year targets.”
Thousands of private landlords suffer abuse from tenants
Thousands of private tenants claim to have suffered abuse at the hands of landlords according to Shelter, which include threats, assaults and harassment which could have, and indeed should have ended up with legal action being taken against them, but while there are many serious issues that are simply unacceptable, it is not just a one way street, research by the National Landlords Association (NLA) shows.
Shelter often hears from renters who have to put up with problematic property owners, with some suffering at the hands of rogue landlords, but the latest report by the NLA actually suggests that as many as 600,000 buy-to-let landlords have themselves been abused by tenants in the past.
“Three in ten landlords in the UK, which is approximately 600,000, say they have been either verbally or physically abused by a tenant before,” said Richard Lambert, chief executive officer at the NLA.
The NLA is by no means trying to excuse the poor behaviour of a small minority of rogue landlords, with Lambert insisting that no one should have to put up with a “criminal landlord”. But he also points to a lack of enforcement and prosecution from councils which make it “way too easy for the unscrupulous to get away with this kind of behaviour”.
Lambert also highlights figures from the NLA’s latest research which shows that 82% of tenants report to being happy with their existing landlord. “Furthermore, Shelter’s figures show the vast majority of landlords to be law abiding,” he added.
Ultimately, what is important, according to Lambert, is that anyone who feels they are being harassed, abused or subject to what they consider to be illegal behaviour “seek immediate advice” and “reports the matter to the police and relevant authorities”.
Controversial landlord launches appeal after losing damp house row
Controversial landlord Fergus Wilson has launched an appeal against a county court decision to award former tenants compensation following a row over a damp house.
Wilson claims that the court judge made a legal error when he threw out a case against Attila Lant and his partner Eva Nemeth, who he believed caused damage to a property in Wood Lane the Park Farm estate in Ashford, which is actually owned by his wife Judith Wilson, and ordered her to pay up instead.
Deputy district judge Adams was told the couple reported a leaking hot water cylinder in May last year which caused extreme damp conditions, including sodden carpets and a partial collapse of the kitchen ceiling. But after inspection of the property, Fergus Wilson, who earlier this month sold almost half of his entire portfolio of around 900 residential properties, alleged the tenants were legally responsible for the damage.
But after they failed to carry out the repairs, he terminated their tenancy agreement and attempted to sue the pair for £4,000.
After hearing from both parties and a number of witnesses, deputy district judge Adams concluded that the leak was the landlord’s responsibility to repair, especially as the tenancy agreement prohibited the tenants from attempting any repair without the landlord’s consent.
The judge heard how the Wilsons maintained a “hostile and at times offensive attitude” towards the tenants, and stated, as part of his judgement: “Mr Wilson can let his defensive instincts get the better of him and say unpleasant things.”
Lant and Nemeth were awarded £2,500 damages.
Buy-to-let investors are continuing to enjoy a fall in mortgage rates, particularly those looking for longer-term fixed rates, following last month’s base rate cut from 0.5% to 0.25%.
New research by Moneyfacts.co.uk shows that the average fixed rate at 75% loan-to-value (LTV) has fallen by 0.49% over the past six months taking this rate to below 4% for the first time ever.
With savings rates at record lows, many savers that once used their interest to supplement their income are looking elsewhere, and as bricks and mortar is often deemed a ‘safe bet’ an increasing number of people are looking at buy-to-let as an investment option, according to Charlotte Nelson (right), finance expert at Moneyfacts.co.uk.
She said: “The reduction in the Bank of England Base Rate to 0.25% has already affected BTL rates, with the average five-year fixed rate at 70% LTV falling by 0.15% in just one month. In fact all LTVs for five-year fixed rates have reached the lowest in the market this month.”
But while the costs of obtaining a buy-to-let mortgage are being driven down, Nelson pointed out that there are other costs to factor in, such as the stamp duty surcharge that was introduced in April this year and the tax relief changes that are coming into play next year.
The finance specialist continued: “As five-year fixed rates get ever lower, and with more calls for longer-term tenancy agreements, we could perhaps see a shift in the focus of the buy-to-let landlord whereby the investments become a more long-term prospect.
“Low rates may make a buy-to-let investment an attractive option, but borrowers should remember that a buy-to-let investment is not without its risks, so it is important for any potential landlords to seek financial advice to see if buy-to-let is the right option for them.”
Top tips to ensure your tenants stick to the rules
While we all know that it is important for all landlords to have a watertight legal contract in place to fall back on should anything happen to their property, how can we actually make sure that tenants do not breach the rules of their tenancy?
With new research showing that one in seven renters have broken one or more rules outlined in their tenancy agreement, leaving them potentially facing anything from the loss of their deposit to eviction, Direct Line for Business has outlined its top tips for landlords to ensure that tenants stick to the rules of their contract:
+ Be clear from the outset: Ensure that your adverts clearly state any rules that you feel strongly about – for example looking for non-smoking or pet-free tenants only.
+ Have it agreed in writing: It is imperative to have a written tenancy agreement for your tenants. Not only will they be legally required to pay rent, but it will also clearly outline what is and what isn’t allowed in the property. It’s a good idea to go through all of the clauses and penalties with the tenants before they sign the agreement to ensure that they are clear on the rules of the tenancy.
+ Maintain dialogue with your tenants: You are within your rights to make scheduled visits to your property to ensure it is being maintained to a level that was agreed in the contract. This will also ensure that tenants look after your property, and dissuade them from breaking the rules too much.
+ Don’t go overboard: Try not to make too many rules. Keep it simple. Establish a trusting, positive relationship with the tenant as they’ll be even more likely to stick to the rules.
+ Accept that you may need to be flexible: If you have good tenants in your property for a length of time who make a request to get a pet, you may want to consider a compromise. Keeping the value of your property is one thing, but this may be offset by the time and cost of finding new tenants if it becomes a deal breaker.
One in seven renters have broken one or more rules outlined in their tenancy agreement, while 11% of renters surveyed claimed that they were unsure as to whether they had actually broken any of the rules in their contract or not, new research from Direct Line Landlord Insurance reveals.
Failure to pay rent on time, smoking and keeping a pet are among some of the most frequently-cited rules broken, with some of the most common sanctions for breaking tenancy rules including the loss of some or all of the tenant’s tenancy deposit (52%), followed by having to pay for any damages (22%) and in some extreme cases tenants were even evicted (4%).
More than one in five (21%) tenants said that that their landlord never found out about their misdemeanours.
Nick Breton, head of Direct Line for Business said: “The relationship a tenant has with their landlord can be crucial in the smooth running of a rented property. It is therefore of utmost importance for tenants to keep in touch with their landlords should anything arise that may be in breach of their rental agreement.
“Many landlords may be accommodating of requests to have a pet or to make changes to the property, but it is always safest to ask before doing anything to ensure that you are not breaking your contract in the process. Tenants who break the rules of their contract can face anything from the loss of their deposit to eviction, so for peace of mind, landlords should ensure they have a watertight legal contract in place to fall back on should anything happen to their property.”
The 10 most common rules broken by tenants
Percentage of tenants
Failing to pay rent on time (or at all)
Smoking in the property
Keeping a pet in the property
Damaging or making alterations to the premises
Changing the locks
Caused disturbances or a nuisance to neighbouring properties
A landlord operating in the London borough of Brent has been has been ordered to pay close to £7,500 for cramming six families into a single semi-detached house.
Landlord Mohammed Mehdi Ali converted the four-bedroom bedroom family home in Wembley, north-west London, into six bedsit-style rooms and a shared kitchen and bathroom, with no consent and without applying for an HMO license.
A raid by council enforcement officers found 16 people living in the property, including at least six children. Each of the rooms were rented out to a different family or group, which each only had their bedroom as living space because the lounge was being used as a bedroom. The tenants were sharing just one bathroom and two toilets between them.
Aside from overcrowding in the property, Ali, who received £2,300pcm in rent, also failed to install basic fire safety measures, such as adequate smoke alarms or fire doors.
Ali opted not to attend the hearing at Willesden Magistrates Court and so was convicted in his absence of offences under the Housing Act 2004 and fined £6,000 and ordered to pay costs of £1,318 and a victim surcharge of £170 – a total of £7,488.
The rogue landlord used a letting agents, Easy Let Homes, to collect rent on his behalf. The company pleaded guilty to offences under the Housing Act 2004 and was fined £450 and ordered to pay a victim surcharge of £45. The magistrates said that they had taken the company’s full cooperation into consideration.
Cllr Harbi Farah, Brent Council’s Lead Member for Housing, said: “Given the serious overcrowding and poor fire safety in this house, we could easily be reflecting on a much more serious crime here.
“The contempt Mr Ali has shown for this legal process by not even bothering to turn up for sentencing speaks volumes. The vast majority of landlords and lettings agents in Brent are honest and law abiding, but we take a zero tolerance approach to the minority who think they can treat their tenants like this. Failure to licence your property could result in an unlimited fine and a criminal record.”
A new range of five year, fixed rate buy-to-let mortgage products for individual and limited company landlords has been launched by Paragon Mortgages.
The new buy-to-let mortgage rates at up to 75% loan-to-value start from 3.75% and the products include funding for self-contained homes as well as more complex HMO properties.
“With the outlook for interest rates now much lower for longer, we have been able to deliver these longer term fixed rates aimed at professional landlords including those borrowing through limited companies and those purchasing HMOs,” said John Heron, managing director of Paragon Mortgages.
These new longer term fixed rate products feature a revised interest coverage calculation based on an interest rate assumption of 4% with the interest coverage ratio (ICR) set at a minimum of 125% for single self-contained units and 130% for more complex HMO properties.
Heron added: “These are the first products we have launched which feature an ICR that reflects lower interest rate expectations and the reduced risk that customers on longer term fixed rates benefit from.”
London rents exceed £1,750 for first time, data suggests
The cost of renting property is now more expensive than ever with the average price of a flat or a house in London now exceeding £1,750 a month, fresh figures show.
According to data collected by the Tenancy Deposit Scheme (TDS) rents have shot up across the country with tenants on average paying by far the most to live in the capital.
The figures, based on all new deposit registrations across England and Wales in August 2016 with TDS Insured, show that new average monthly rents in August hit £1,765 in the capital.
After London, the next highest cost region was the South East with the monthly rent coming in at £1,124.
The cheapest region to rent is Wales with average rents for newly let properties in August 2016 coming in at some £664.80. The next cheapest region to rent was the North East where rents averaged out at £652.88.
Steve Harriott, chief executive of the TDS said: “This data comes from landlords and agents registering new deposits on our database in August 2016 and advising us of the monthly rent that they charge. The figures show starkly the differential in regional rents across England and Wales.”
A growing number of private renters are now older than 40, a fundamental shift over the past decade that reflects the surge in house prices and an aging population, new research shows.
A report released this morning by Your Move, one of the UK’s largest letting agents, overturns the assumption that the sharp rise in the number of people renting is being solely fuelled by younger renters, with Generation Rent no longer the preserve of the young as more 40-plus year olds either choose or have little alternative but to rent.
According to the study, which was conducted by Your Move’s sister company LSL Corporate Client Department Ltd, to provide insights into the 4.5 million privately rented households in the UK – a number which is expected to grow to 6 million over the next few years – 40% of renters are aged over 46.
The research found that 18% of renters were over the age of 55, with another 22% of tenants belonging to the 46-55 age group, while just 39% of those in private rental accommodation were under 35.
Valerie Bannister, head of letting at Your Move, commented: “These results show very clearly that renting is becoming extremely important across the UK. The rise of the Silver Renter may seem surprising, but increasingly thousands of people have turned to the Private Rental Sector as the most convenient option available to them, following a change in personal circumstance. Now more than ever, it is important that this sector offers good quality, well managed properties that allow tenants to feel at home in them.”
Of those surveyed, 25% of 18 – 25 year olds claimed they were satisfied with renting, with 80% wanting to own their own home in the future. These numbers reversed for those aged 55 and above, with 46% stating they were happy with renting and only 19% saying they would like to own their own home in the future.
Across all age groups, 81% of tenants said that renting suited their lifestyle – whether that lifestyle choice was on a permanent basis, or just for a few years.
Bannister continued: “Many of the younger tenants in our survey have aspirations to own their own home in the future. However, the endemic lack of affordable housing to buy across the UK, coupled with a low savings-rate environment, is making it increasingly difficult for want-to-be homeowners to buy their first home.
“The Private Rental Sector needs to answer this issue by becoming a first choice tenure, and not just the second best option. If the flexibility of renting can be combined with the stability and reassurance of longer residencies, and fewer restrictions around making the space ‘feel like home’, for many, renting would be considered a better long-term, as well as short-term, option.”
Tenants face potential rent rises as the supply of rental homes falls
Tenants are potentially facing steeper living costs following a significant drop in the supply of rental properties, new figures suggest.
Some 87.6% of major towns and cities in the UK saw falls in the number of new buy-to-let properties being advertised in August compared to the previous month, according to Property Partner.
It said that there was a 15% fall in the volume of a new rental homes being listed across more than 90 towns and cities in the UK.
In most areas, there was a decline in new rental homes advertised, led by Hartlepool in the North East which saw rental listings fall by 36.5%.
A further 11 towns and cities experienced a shortage of new buy-to-lets being listed including Canterbury (-30.4%), Wakefield (-28.5%), Loughborough (-28.3%), Colchester (-26.5%) and Cardiff (-25.9%).
London saw new rental property listings down 16.4% between July and August. While, in Manchester and Birmingham, new rental dropped 18.4% and 16% respectively.
Dan Gandesha, CEO of Property Partner, said: “There’s usually a seasonal drop off in new rental properties coming onto the market over the summer. But July saw the highest numbers of buy-to-lets being advertised since the stamp duty hike in April whereas last month experienced some dramatic falls in most parts of the UK.
“Traditional landlords have had it hard of late. Alongside the stamp duty surcharge, the banks have imposed tougher lending criteria, and cuts to mortgage interest tax relief will begin to take effect next year. Profits have been hit and this could force many landlords to sell up. If September fails to pick up and there’s a shortage of available rental properties, rents could be pushed up. Hopefully for tenants, this won’t be the case.”
Buy-to-let moving towards ‘an era of professionalism’
Recent changes hitting buy-to-landlords, including the introduction of a 3% stamp duty surcharge and cuts to mortgage interest tax relief next year, will mean a move towards more professional landlords, it has been suggested.
Adrian Moloney of One Savings Bank believes that the recent and forthcoming changes will inevitably have implications for individual landlords, which will lead to “an era of professionalism”.
Speaking at the Financial Services Expo (FSE) London exhibition last week, Moloney said: “We are seeing a move towards a more professional sector and we’re going to see less of the ‘dinner party’ landlord. This is very much an era of professionalism and I don’t think that’s necessarily a bad thing for the private rental sector.”
Moloney does not believe that some of the changes coming into play are necessarily a good thing for the buy-to-let sector, especially the scrapping of mortgage interest tax relief from next April.
“My hope is that the chancellor will change the tax rules for buy-to-let landlords in the Autumn Statement, but that’s probably not going to happen,” he added.
Coventry Building Society increases maximum age of BTL borrowing to 85
Coventry Building Society has increased the age in which it will lend to buy-to-let investors to a maximum of 85 years, up from age 75. The minimum age at application will be 75, and it is available on all buy-to-let products.
The decision to increase the maximum age reflects the changing needs of borrowers, according to Coventry Building Society’s director of intermediaries Kevin Purvey.
He said: “With more people working later in life, buy-to-let investors may want to keep their investment property to supplement their income, or to help save for the future. We have therefore reviewed our lending policies to adapt to these changes, while of course remaining committed to lending responsibly.”
Are you aware of your gas safety responsibilities?
Landlords are being reminded this week that they are responsible for the safety of their tenants, as part of Gas Safety Week, which starts today.
The annual event, which takes place 19-25 September, aims to raise awareness of gas safety and reminds us to have our gas appliances safety checked annually by a qualified Gas Safe registered engineer.
More than 6,500 organisations across the UK will be working together alongside the Gas Safe Register to raise awareness of the dangers of poorly maintained gas appliances, and responsibility for safety of tenants is something that all landlords should be aware of, in accordance with the Gas Safety (Installation and Use) Regulations 1998, which outline the duties of landlords to ensure gas appliances, fittings and chimneys/flues provided for tenants are safe.
If you let a property equipped with gas appliances, the Gas Safety Register highlight three main responsibilities:
Maintenance: Pipework, appliances and chimney/flues need to be maintained safely. Gas appliances should be serviced in accordance with the frequency given in the manufacturer’s instructions. If these are not available, you should ask a Gas Safe registered engineer to service them annually.
Gas safety checks: An annual gas safety check should be carried out on each gas appliance/flue. This will ensure gas appliances and fittings are safe to use. There is a legal requirement on you to have all gas appliances safety checked by a registered engineer annually and you also need to maintain gas pipework and flues in a safe condition. This is UK law.
Record: A record of the annual gas safety check should be provided to your existing tenants within 28 days of completion, or to new tenants upon the start of their tenancy. If the rental period is less than 28 days at a time you may display a copy of the record in a prominent position within the dwelling. You’ll need to keep copies of the record for at least two years.
Buy-to-let landlords could face tighter borrowing rules
Buy-to-let landlords could soon find it harder to secure finance to acquire property following the news that buy-to-let mortgage lenders may face more stringent regulations when calculating mortgages for those investing in the private rented sector (PRS).
Given that buy-to-let lenders are not supervised by the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) is growing increasingly concerned that lending standards in the sector may not be up to scratch and may ‘compromise’ the integrity of Britain’s financial system.
The City watchdog is now drawing up plans to tighten its scrutiny of buy-to-let mortgage lending and has already written to companies for which it has sole regulatory responsibility to inform them that it is considering intervening in the growing PRS.
According to a letter sent to affected firms by Philip Salter, the FCA’s director of retail lending, which was obtained by Sky News, the city watchdog’s review of the buy-to-let lending sector would include “considering to what extent poor BTL underwriting by firms solo-regulated by the FCA might compromise the advancement of our objectives – in particular our objective to protect and enhance the integrity of the UK financial system, as well as the potential for poor BTL lending to affect the fair treatment of customers with regulated products”.
Earlier this year, the PRA, the banking regulator, published a consultation paper outlining plans for new affordability tests for borrowers, including a minimum ‘stressed’ interest rate of at least 5.5%.
The Bank of England estimates that banks are likely to extend their lending in the UK buy-to-let mortgage market, which is currently worth around £200bn annually, by about 20% a year over the next two years.
The 25-year-old son of billionaire landowner the Duke of Westminster will inherit the family estate and a £9bn fortune after his father died suddenly on Tuesday.
Hugh Grosvenor (left) becomes the third wealthiest landowner in Britain and 68th wealthiest person in the world, according to American business magazine Forbes.
Grosvenor, the only son of the late Duke of Westminster (right) and his wife, Natalia, has become the 7th Duke of Westminster and the owner of a significant share of the most exclusive parts of London. He also happens to Prince George’s godfather.
The Grosvenor property firm, which was first formed in the 17th century to run a huge portfolio of properties across London’s West End, is almost certainly the largest property management company in the UK by value.
Where in London can you achieve the best rental returns?
Rental yields in London are now among the lowest in the country, but take a closer look at the market and you will find that there are still some attractive returns available.
Fresh research by London estate agent Portico has looked at rental returns in each London borough on a street level to find the highest potential yields in the capital, and discovered that London’s highest yield of 8.3% was found in the borough of Havering, in the Romford postcode area around Whybridge Junior School.
The average monthly rental price for a two bedroom flat in the area is just £1,156 – £600 less than London’s average monthly rental price of £1,756.
The outer London boroughs offered the highest yields, with areas within Barking and Dagenham, Bexley, Redbridge and Bromley all achieving yields of 6% or over.
The suburban area of Chadwell Heath in Barking and Dagenham – where Crossrail services will launch in 2019 – offers landlords an impressive 7.6% yield. Here, landlords can expect an average monthly rent price of £1,278.
In inner London, Greenwich is the borough that offers buy-to-let landlords the highest returns and the most affordable monthly rent.
A landlord can expect a 6% yield around north Greenwich station, on roads Pelton Road, Bellot Street, Blackwall Lane, Armitage Road and Millennium Way, and the average monthly rental price in the area is £1,477.
Yields range from around 2 – 4% in prime central London, with the highest being found around the towering World’s End Estate in Kensington and Chelsea at an average of 3.8%, or the northern end of Finchley Road in the borough of Westminster at 4.8%.
Robert Nichols, Managing Director, Portico, said: “The rental market has remained strong post Brexit, but landlords still need to be smart about where they are investing as a very small difference in yield can determine whether they make a profit or a loss.
“If you’re thinking of buying-to-let, transport links are key. London’s commuting tenants want to be within close proximity of a Tube, so look for properties near new developments such as Crossrail and Crossrail 2.
“Havering, Barking and Dagenham and Bexley – which will soon have stations on the eastern edge of the Elizabeth line – are clearly key investment hotspots where landlords are achieving extremely impressive yields.”
July ave. monthly rent
Highest potential yield*
Barking and Dagenham
Kingston upon Thames
Richmond upon Thames
Hammersmith and Fulham
Kensington and Chelsea
Data source: Portico
*The highest potential yield represents the streets with the highest yield within each borough, based on yields calculated by Portico.
A significant number of EU citizens living in the private rented sector (PRS) say they are worried that the result of the referendum will make it harder for them to rent property in the UK.
According to fresh research conducted by the National Landlords Association (NLA), 31% of EU citizens living in the PRS are concerned that they will find it difficult to secure rental accommodation in this country in the future, with a quarter worried that landlords would be less willing to let to non-UK nationals following the UK’s decision to leave the EU.
The poll of almost 1,000 renters found that 18% of private renters – the equivalent of around 2m people – are EU citizens who currently have the right to freedom of movement within the EU.
But there are now concerns about whether or not EU citizens will be able to remain in the UK if the right to freedom of movement is removed or restricted during the process.
Richard Lambert, chief executive officer at the NLA, said: “These findings show that a significant proportion of tenants from the EU are genuinely concerned they’ll have to uproot themselves from their work, studies, or friends and family on the strength of the referendum result.
“There is still a great deal of uncertainty surrounding the referendum, but we want to reassure European citizens living in the UK it’s simply not the case that landlords will stop letting to them just because the country has decided to leave the EU.
“However, if the right to freedom of movement within the EU is curtailed during the exit negotiations, then landlords may have no other option than to end tenancies rather than facing fines and even jail time if they let property to someone without the legal right to remain in the UK.”
With the manically busy September and October periods in the letting market rapidly approaching, which marks the start of the academic year and therefore a sharp rise in students looking for accommodation before the start of term, graduates starting new jobs and families relocating closer to schools, Foxtons, one of London’s largest sales and letting agents, has compiled some top tips for landlords to ensure a smooth and easy letting process during these busy months.
1) Make use of marketing opportunities.
From high-quality professional images and a profile on leading property websites to a presence on estate agent’s apps and in national newspapers – there are plenty of opportunities to help promote your property. A well-established estate agent will offer all these services free of charge to make sure that the exposure of your property is maximised.
2) Keep up to date with current landlord obligations.
With landlords’ legal responsibilities in the UK changing frequently, make sure to read up on the latest regulations by visiting local and national government websites regularly and signing up to receive updates from them.
3) First impressions count.
Decisions on a property are made within the first few seconds of entering, and can sometimes be made even outside the front door. With plenty of available properties to choose from, ensure that yours is looking its best. Get cracking now on any maintenance or decorating jobs on your to do list.
4) Meet expectations.
Tenants today expect a professionally managed property alongside high-quality fixtures and furniture. When it comes to move in day, they also expect an independent inspection of the property and a professional clean organised by the landlord – have the arrangements in place to save yourself any unnecessary last-minute hassle.
5) Speed is of the essence.
If you don’t respond to the tenant’s offer promptly, or can’t be reached in order to finalise the contracts, then the tenant might move on to their second choice of property. Make sure your agent knows if you are going to be away, and check your messages regularly or at a set time each day so that you don’t miss out on the perfect tenant.
Pace of rental growth slows across UK, says HomeLet
Rents on new tenancies continued to increase across most parts of the UK over the three months to July, albeit at a slower pace, according to new figures.
Fresh data from the HomeLet Rental Index shows that the cost of a new tenancy in the private rentals market in the UK, excluding Greater London, rose by 2.3% to £779pcm in the three months to July 2016. However, the figures represent a fall from the 3.5% annual rise recorded over the three months to June.
According to the Index, rental prices rose in almost every area of the country, with 10 out of the 12 regions surveyed seeing an increase over the three months to the end of July.
Rental price growth in the UK was led by East Anglia and the East Midlands, where rents on an annual basis rose by 9.7% and 5.4% respectively.
London remains by far the most expensive place in the UK to rent property, with the average rent on a new tenancy now stood at £1,599, up 4% year-on-year.
The North East, South West and North West of England all saw annual rents fall, down -5%, -2.1% and -0.5% respectively.
The data suggests that the rental market remains robust despite impending tax changes and uncertainties around the UK’s vote to leave the European Union in June.
Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, said: “Ultimately, rents will be determined by supply and demand in the private rental sector; what we know here is that population growth will continue to increase demand, and that the housing stock isn’t growing quickly enough to meet that demand. However, with rents ultimately limited to a tenant’s ability to pay, rents are likely to continue to climb, albeit at the slowing pace noted most recently.
“We won’t know exactly how Brexit is impacting the private rental sector and it will be several months yet until we see some clearly established trends in the marketplace. Expect to see some interesting insights from the HomeLet index in the months ahead. It seems likely that with lenders concerned about the prospect of falling house prices, loans to value in the mortgage market are going to become less generous, which may see more people turn to the rental sector rather than buying a property.
“However, it’s possible we may also see renewed interest in the London rental market as foreign investors seek to pick up investment property to make the most of the big exchange rate advantage following the fall in the pound. We may also see foreign investment increase outside the capital, in other cities across the UK. This coupled with recent figures showing that the number of people becoming homeowners is falling across the country, the demand for rental accommodation is likely to remain strong.”
Rental figures from the July 2016 HomeLet Rental Index
Average rent 3 months to July 2016
Average rent 3 months to June 2016
Average rent 3 months to July 2015
Yorks & Humber
UK ex Greater London
Based on new tenancies in May, June & July 2016
Based on new tenancies in April, May & June 2016
Comparison of average rent in 3 months to end July 2016 & 3 months to end June 2016
Based on new tenancies in May, June & July 2015
Comparison of average rent in 3 months to end July 2016 & 3 months to end July 2015
Government should scrap stamp duty to create a ‘“buoyant and vibrant’ market
The Society of Licensed Conveyancers (SLC) has called for the government to abolish stamp duty to create a more “buoyant and vibrant” market.
The number of landlords acquiring property has dropped significantly since the 3% stamp duty surcharge was introduced at the start of April. Also, with the basic rate of tax relief landlords can claim on properties also set to fall to 20% from April 2017, there is widespread concern that many more people will be deterred from investing in the buy-to-let sector, which would reduce the volume of much needed homes available in the rental market.
But the SLC believe that scrapping the stamp duty land tax would not only create a more buoyant and vibrant property market, but it would lead to a “marked hike in investment and building of new homes, not to mention create a “much more straight forward and quicker home buying and selling process”.
Simon Law, chairman of SLC, said: “Stamp duty land tax is perhaps the most inaccurately named tax in existence. There is no stamp involved, it is not a duty, and it is on assessed property values rather than land. In fact the only word that is in any way accurate is tax. In reality, SDLT is a direct property transaction tax.
“It is ironic that the government is engaged in a review to improve the home buying process when it has introduced legislation that actually makes the process more complicated and tortuous. It is an insult on top of this that HMRC looks to conveyancing lawyers to act as tax collectors.”
Last month, the TaxPayers’ Alliance also urged the government slash stamp duty rates by 50% immediately with a view to abolishing the levy altogether.
The pressure group and think tank fears that tenants will end up bearing the cost of the latest tax rises for landlords as it will result in a reduction of homes on the rental market that in turn will push prices higher.
Many landlords will soon be left with no alternative but to pass extra costs onto landlords as they will lose the ability to offset all their mortgage interest against tax on rental income, but the TaxPayers’ Alliance believes that the government still has an opportunity to undertake ‘real reform’ to tackle the housing shortage in the UK and stop rents from increasing, by modifying or abolishing stamp duty and mortgage interest tax relief changes.
“For decades politicians have failed to tackle the root causes of the housing crisis: a chronic lack of supply,” said Jonathan Isaby, chief executive of the TaxPayers’ Alliance.
“Stamp duty is still punitively high and gimmicky tweaks to the tax system will ultimately end up penalising tenants and increasing rents,” he added. “The new Chancellor should now seize the opportunity to drastically simplify and reduce property taxes, while removing planning restrictions which prevent huge swathes of land from being built on for no good reason at all.”
Corbyn’s proposed ‘rent controls’ would be a ‘disaster for tenants’
Labour leader Jeremy Corbyn’s plans to introduce rent controls and secure tenancies in the private rented sector (PRS) if elected prime minister at the next general election would spell ‘disaster for tenants’, as it would deter many people from investing in the sector, reducing the supply of homes to let, it has been claimed.
Corbyn’s plan for rent controls, were named among 10 pledges announced by the Labour leadership contender last week, but the Residential Landlords Association (RLA) believes that introducing controlled rents would inevitably reduce the supply of rental homes, worsening the UK housing crisis.
Alan Ward, RLA chairman, said: “Jeremy Corbyn’s call for rent controls would be a disaster for tenants. He is ignoring all history and experience which shows that where such controls are applied they choke off the supply of homes to rent, making it more difficult for tenants to access decent and affordable housing. This has previously been acknowledged by Labour’s former Minister responsible for housing in Wales.
“Rather than playing the populist tune, Mr Corbyn would do well to consider the facts. Figures in the English Housing Survey show that private sector tenants are spending an average of four years in their current property, up from 3.7 five years ago. Such tenants are also more satisfied with their accommodation than those in the social rented sector according to the same survey.”
The RLA, which has long opposed the introduction of rent controls, believes that rather than penalising landlords for providing much needed rental homes the government needs to address the issue of supply by doing more to encourage greater levels of housebuilding in order to stabilise rents in the long term.
How to protect your home while your tenants are on holiday
Given that we have now entered the holiday season, there is a good chance that your tenants may be heading abroad for a much needed break, leaving your property empty and therefore vulnerable.
To help ensure that your property remains protected, you may care to consider some of these tips provided by the owner of Belvoir Birmingham Central, Major Mahil, designed to keep your property safe this summer.
Police your policy
If your tenant is going to be away for an extended period of time your insurance company may need to be informed.
Most insurance companies will want to know if the property is going to be empty and, if the appropriate steps aren’t taken, the policy may be invalidated and any claims made affected.
Always read your insurance documents carefully and don’t forget the small print!”
Most burglaries take place when no one is home so make sure the property appears to be occupied,” he continues.
There are couple of tips and tricks for this, including setting timers on internal lights and maybe a radio, plus cancelling deliveries such as newspapers and perhaps having post temporarily redirected so it’s not stacking up behind the door. This is particularly pertinent if the door is made from glass.
Good neighbours can be a valuable asset in creating the illusion that someone is home and helping you win the war on holiday crime.
They can put out the dustbin on the appropriate day, push post through the door if it’s stuck in the letter box and perhaps even mow the lawn. If they have a key to the property they could open and close the curtains on a daily basis too.
Many burglaries aren’t pre-planned so make sure there’s nothing to tempt an opportunist and attract them to the property.
Always ask your tenant to store away valuable items, such as jewellery and games consoles etc, so that they are not on display. Perhaps provide blinds which can be angled to reduce visibility too.
If the property has a burglar alarm make sure your tenant knows how to use it properly and ask them to set it before they leave.
Make sure you know the security code too so the property can still be entered in an emergency.
Light up your life
Well illuminated areas have less appeal to a would-be intruder than poorly-lit spaces with dark corners in which to hide.
Make sure the outside of the property is suitably lit by providing security lights with timers or motion sensors. Ensure the nearest streetlights are working too.”
Lock up and leave
It goes without saying that locking up before leaving should be a priority… but it’s surprising how many people forget to do this!
Remind your tenant that they need to lock all lockable doors, close windows and shut internal doors too, which will help slow down the spread of fire if one was to occur while the property was unoccupied.
As a landlord, make sure all locks are secure and fit for purpose, plus if the property has window locks make sure the keys have been provided and the tenant is aware that they are expected to use them.”
Access all areas
Before your tenant vacates for vacation it’s wise to ask for their permission to enter the property for regular checks during their absence.
This can be useful in order to make sure everything is ok and to troubleshoot maintenance issues, such as potential leaks. Even a small drip can do a lot of damage if left undetected for a long period of time!
It’s very important that your tenant is selective in who they tell about their forth-coming trip.
This is particularly important when it comes to social media. Posting pictures and updates about a holiday online is simply advertising that no one is home.
If your property is set to be empty for a long period of time, ask your local letting agent for their tips and advice.
They are experts in all things rental-related and will be aware of what can go wrong when an address is empty and how to plan and prepare to make sure your property is properly protected.
Various housing bodies have welcomed the end of Right to Buy in Scotland, more than 35 years after it was first introduced.
MSPs voted to scrap the measure, introduced by Margaret Thatcher in 1980, two years ago following concerns that it had contributed to a severe shortage of affordable homes to rent and buy north of the border.
Right to Buy schemes, which continue to operate across the rest of the UK, allow sitting tenants to buy public-sector housing, often with a discount on the market value. But there is nothing to then prevent them selling these units on at a later stage, many of which have been sold to buy-to-let landlords over the years.
Many landlords specialise in acquiring and renting out ex-local authority housing as they typically offer above average rental returns.
Scottish Federation of Housing Associations (SFHA) said the scrapping on the policy in Scotland “hasn’t come a moment too soon”.
SFHA chief executive Mary Taylor said: “Right to Buy has had its day and has no place in modern Scotland.
“SFHA and its members long campaigned for an end to RTB, and warmly welcomes the end of a policy which has led to a considerable reduction in the availability of truly affordable social rented homes and contributed to the growing intergenerational inequality in terms of access to affordable quality housing.
“Going forward, we have a chance in Scotland to adopt a housing policy that is focused on the supply of well-designed, energy efficient social rented homes that are truly affordable to people on low incomes.”
The Association of Local Authority Chief Housing Officers (ALACHO) also welcomed the end of the policy.
“Ending the right to buy will allow social landlords to plan longer term, manage assets and income more effectively and most importantly to invest to increase the number of social rented homes for the first time since 1981,” said Tony Cain, the ALACHO’s policy manager.
“That means more long term jobs and apprenticeships to maintain our homes and more households taken out of housing need and living in warm, dry and genuinely affordable housing,” he added.
The Scottish government pressed ahead with plans to scrap the policy in order to protect the housing stock that was available for social renting.
Housing Minister Kevin Stewart said: “It is absolutely vital that people can access social housing when they need it most.
“By ending the right to buy we are protecting up to 15,500 social homes from sale over the next 10 years and safeguarding this stock for future generations.”
Bogus letting agent jailed for ripping off landlords and tenants
A fraudster who posed as a letting agent with the sole intention of stealing from landlords and tenants has been jailed for almost two and a half years, seven years after being imprisoned for a similar letting scam.
Adam Coote, 36, from Shoreditch, London, was sentenced to 28 months in prison at Southwark Crown Court on Friday for conning landlords and tenants out of tens of thousands of pounds by using fake agencies with names such as Belgravia Property Group, Mayfair Residential and Park Lane Residential to offer properties in London, Bristol, Birmingham and Walsall that he had no intention of letting.
Coote, along with his accomplices, Andrew Rickard, 51, and Sahila Kauser, 34, who were handed suspended sentences of 18 months each, persuaded prospective tenants to hand over up to six months’ worth of rent before informing them that they had failed credit checks, and then making off with their money. The group stole more than £26,500 in total.
Coote started the operation four years ago after being released from a four-year prison sentence for carrying out the same con in Liverpool and in Manchester.
Police discovered the fraudulent activity after acting on a tip-off.
Prosecutor Warwick Tatford said: “In its simplest form the fraud involved establishing false letting agencies which would be used to approach landlords who were selling properties on the internet.
“The defendants were able to secure access to the properties and keys and a number of prospective tenants would then be shown around the properties.
“Prospective tenants were provided with access keys of the properties and when they intended to move into the property they would find there was already a tenant in place who had also signed a tenancy with the company.”
This case highlights the fact that those seeking to let out or rent property should perhaps be wary of using the internet, according to Judge Jeffrey Pegden QC.
“It was plainly a persistent fraud and it was plainly significantly planned,” he said.
Up to 330,000 buy-to-let landlords will be required to pay a “green tax” of up to £5,000 to make their properties more energy efficient, according to a report in the Telegraph.
The newspaper has learnt that many landlords will have to pay upfront for measures such as insulation, cavity wall filling and new boilers from 2018.
It had previously been suggested that landlords would be able to apply for loans from the Green Deal scheme to make the necessary improvements, which would then be repaid by tenants who benefit from lower bills. However, the new Department for Business, Energy and Industrial Strategy is now proposing that homeowners provide the money.
Landlords who let out homes from the Victorian and Edwardian eras are likely to be most affected by the green tax as these types of properties are typically less energy efficient compared to homes built over the past decade or so.
"Unless they make funding available, landlords will be forced to pass these costs on to tenants in the form of higher rents. It could also make being a buy-to-let landlord prohibitive. They could struggle to find such a large amount of money upfront," said Richard Jones, policy adviser at the Residential Landlords Association.
"Landlords have been harshly treated. This is an extra stealth tax on top of all the other measures that threaten the finances of the sector," he added.
From April 2018, buy-to-let landlords must raise the energy efficiency of their rental homes to at least Band E. That means that around 330,000 residential properties currently in bands F and G will require major works.
Buy-to-let landlords undeterred by stamp duty surcharge
The first figures following the introduction of the stamp duty surcharge for buy-to-let landlords and second homebuyers have been released by Revenue & Customs (HMRC) and they show that the volume of residential property transactions remained broadly unchanged in the second quarter of the year compared with the previous three months, and was up 10% year-on-year.
The provisional non-seasonally adjusted residential property transaction count for Q2 of the year was 208,000 liable and 63,400 non-liable sales, up by 1% on Q1 2016 and 10% higher than Q2 2015.
The estimated stamp duty yield for Q2 2016 was £1.977m from residential transactions and £724m from non-residential transactions, up 13% quarter-on-quarter, and 28% higher than Q2 2015.
The marginal increase in the volume of properties sold was led by sales at the lower-end of the market where momentum is at its highest.
“It may be too early to call but it seems the government’s changes aren’t off-putting buyers from snapping up those additional properties,” said Andrew Bridges, managing director of Stirling Ackroyd.
“It seems buy-to-let investors are still primarily competing with first-time buyers for lower value properties,” he added.
But with sales at the top-end of the market looking rather subdued, Bridges has suggested that the government may have to look again at the stamp duty surcharge and assess whether it is helping or hindering the market.
Andrew Lloyd, managing director of Search Acumen, agrees that the government may have “shot itself in the foot” by introducing the surcharge.
“Instead of freeing up the lower-end of the market for first-time buyers as promised by George Osborne, competition for these more affordable properties has intensified and therefore further squeezed out many first-time buyers from getting onto the housing ladder,” he said.
Ultimately, the figures show that despite a tumultuous three months in British politics, and the government’s decision to penalise those investing in additional properties, the residential and buy-to-let markets have stayed strong, according to Lloyd.
He added: “The second quarter of 2016 saw a 10% jump in residential transactions from the previous year and was the highest recorded figure for this quarter since 2007. Although it may feel as though we are in a time of constant change and uncertainty, we can look ahead with some optimism despite the looming realities of Brexit. The market is fundamentally strong.”
Lack of supply will push up cost of renting, says ARLA
Almost half of letting agents have witnessed uncertainty from landlords looking to let properties, which ‘could cause waves in the rental market over the coming months’, warns the Association of Residential Letting Agents (ARLA).
The trade body reports that the private rented market has so far been unaffected by the UK’s decision to leave the EU, but it is urging the government to offer landlords reassurances that housing in the private rented sector (PRS) remains a priority or risk seeing many buy-to-let investors exit the market.
David Cox, managing director, ARLA, said: “The rental market has responded to Brexit in a calm fashion, with no immediate fallout amid extreme political and economic uncertainty. What we need is some certainty from the new government that housing remains a priority with the rental market playing a central role. For example, we want to avoid a situation where institutional investors start pulling away from the market because ultimately this will impact tenants by squeezing supply further and pushing up rents.
“Although we’ve seen some hesitation from landlords this is relatively mild and it’s important they do not act in haste. Any inevitable longer term changes will then be taken on board with greater ease.”
The PRS is in desperate need of more housing stock to help cater for growing demand from renters, which increased by 12% in June to 37 prospective tenants on average registered per ARLA member branch, up from 33 in May. The supply of rental properties rose by just 3% in June, from 171 in May to 176 properties on agents’ books.
The rental market remained stable last month, with little to no movement in terms of rental costs, but ARLA warn that will soon change unless more homes are made available.
Cox added: “If one thing is clear following Brexit, it’s that supply and demand remains a real issue in the rental market. If supply continues to dwindle against growing demand, no matter what the eventual implications of Brexit are, renting will become more difficult and expensive for tenants.”
Government needs to restore confidence in rental investment market
New Prime Minister Theresa May will undoubtedly have a number of things to do on her to-do list, but among the biggest immediate challenges is the need to restore confidence among buy-to-let landlords post EU referendum, according to letting agents Belvoir.
Pre-referendum uncertainty, combined with the former Chancellor George Osborne’s mortgage tax relief cuts, increased stamp duty for buy-to-let investors, stringent buy-to-let mortgage requirements and a lack of commitment to new affordable housing have collectively had an adverse impact on the rental investment market across many parts of the country, as reflected by the recent fall in buy-to-let property transactions.
Now that the referendum result has been decided, Belvoir report that there is a “back to business” mentality among many landlords, reflecting the fact that property remains a “very attractive” long-term investment opportunity, particularly for those with cash to invest.
However, in some areas continued uncertainty over the future of EU nationals in the UK is having a negative impact, according to Belvoir managing director, Dorian Gonsalves.
For example, over in Boston in the East Midlands, which was reported as being the most pro-Brexit town in the UK with 75% of the population voting to leave, thousands of EU workers remain anxious about their immigration status.
“We hope that the government will act quickly to resolve this uncertainty and reassure EU citizens about their future in the UK. This will also help to reassure those overseas landlords who are also expressing concern” said Gonsalves.
Emma Falco, co-owner of Belvoir Peterborough, just 30 miles from Boston, admits that Brexit has certainly been a “hot topic” for landlords and tenants, but whilst there is a lot of conversation surrounding it, it doesn’t seem to have deterred serious investors.
Falco said: “I think many still have the 2008 crash in their minds and are hopeful that they may be able to pick up a property bargain in the coming months if the market drops, as predicted. Now that property prices have risen back to their 2007 values many investors wish they’d had the confidence to buy when prices plummeted in 2008. In my opinion, investors should still consider property as one of the best places to put their money. For example in Peterborough, an average rental property would generate a landlord a 9% return on the capital they employ. Investors will not get anywhere close to this by leaving their money in the bank. Regardless of what happens to property prices in the short term, the demand from tenants is ever growing.”
How can you protect yourself from costly property damage?
Landlords in the UK are out of pocket to the tune of over £5bn every year because of damage to property and unpaid rent. Tenants’ rent arrears account for around £900m in costs annually, while damage to landlords’ property sees them fork out an incredible £4.5bn.
Research shows that broken appliances are one of the biggest problems when it comes to property damage. Damage to carpets and decorating is also prevalent, while “cigarette burns remain an issue” despite many rental properties not allowing smoking inside. Over a third of the landlords surveyed also stated “lack of cleanliness” as a common concern.
According to the latest TDS stats, property damage is the second most common cause of disputes (52%). Historically, many tenant disputes have gone in favour of tenants, as there was simply not enough evidence to support the landlord’s or agent’s damage claim. Many landlords and agents feel tenants are not held to account when damage is caused and that there is little they can do to protect their property. Furthermore, landlords and agents have a poor record in winning tenant dispute cases.
So, how can landlords and agents protect themselves from costly damage?
Picking the right tenant can save landlords and agents from a long, costly eviction process further down the line. Be thorough in conducting background checks and reference gathering, including bank statements for the past three months, previous landlord and agent references to check the tenant paid rent on time and credit checks, incorporating fraud indicators and employer references. Check identity and proof of current address “ideally tax or insurance documents” and talk at length to a prospective tenant.
Secondly, landlords and agents should make regular interval inspections (at least every four months) to record the condition of the property and arrange repairs for any damage or wear and tear as soon as possible. Normally, visits should be arranged for a convenient time for the tenants and landlords and agents should give at least 24 hours’ notice. However, entry can be made without notice for emergency repairs (e.g. in the case of flooding).
Landlords and agents should ensure that the lease agreement also gives them a reasonable right of access to inspect the state of the property and to provide any agreed services (e.g. cleaning or gardening).
Finally, landlords and agents need to protect themselves at the start, during and at the end of a tenancy agreement, ensuring that there is a professional inventory, check-in and check-out. The best way for landlords and agents to protect their property and avoid a dispute is by ensuring that the condition of the property is fully recorded at the start of the tenancy, with a comprehensive inventory, along with a thorough check-in and check-out report.
What do landlords and agents need to look out for at check out? The most important focus of a check-out is to make sure the property has been left in the same condition that it was in when the tenant moved in, allowing for reasonable wear and tear. To enable landlords and agents to do this job properly, it is vitally important that they have an inventory; the inventory must be fully detailed and supported by photographs where necessary. A check-out is very much reliant on an efficient check-in process. Without an inventory, a landlord or agent is unlikely to be able to deduct any money from a deposit, as there will be no proof as to what condition the property was in at the beginning of the tenancy.
The most common mistake in inventories is the lack of detail. Often there are not enough appropriate photographs with accompanying description to show the condition of the property and its contents. For example, many landlords and agents fail to record the condition of sinks and bathroom fittings, as well skirting, doors, floor coverings and kitchen units. If an inventory is not a professional and thorough report on the property, it is not worth the paper it is written on.
Inventory reports should note detail on every aspect of damage and its location at the start of a tenancy. Good photographs provide vital evidence and should be of a high quality when printed on A4 or A3 size paper, making any damage clearly visible.
Unless landlords and agents have a water-tight inventory, they are at risk of disputes and expensive repair bills. Our research shows that landlords and agents who have switched from analogue to digital inventories have seen their tenant deposit disputes drop by more than 300% and their success rate at adjudications improve by an average of 75%.
Normal wear and tear is a fact of life with rental properties, just as it would be at home; but if landlords and agents wish to avoid the hassle of disputes over responsibility for damages, they need to prepare a thorough inventory of the condition of the property that details the condition of every item within.
At Let Me Properties we take the above very seriously. We always thoroughly reference every tenant, we ensure that a thorough professional inventory (including check-in and check-out) is always carried out, and we inspect our fully managed properties every four months to ensure that our tenants are taking good care of them. For more information visit http://letmeproperties.co.uk/full-management-service/
Demand for smart controls is heating up, but not among landlords
Landlords are being urged to make improvements to their rental properties by installing effective heating controls systems to offer tenants greater control of energy consumption and make their rental homes more desirable.
Recent research by the Energy Saving Trust found there was a high demand in the private rented sector for green measures upgrades, with tenants in private rented housing wanting to ‘go green’ .
Standard heating controls have been proven to save over 50% on heating bills, and the additional control that new smart thermostats provide mean there is the potential to save even more.
Mark Waddy, a director at MTW Research, said that a study last month by his organisation found unprecedented growth in the smart heating sector across a range of products this year, owed largely to the fact that more manufacturers are expanding their range and making the most of the smart heating market opportunities.
But while the study carried out by MTW Research revealed that sales of heating devices have increased sharply in recent years, led by smart heating controls, the signs are that the take up by owner-occupiers is far higher than buy-to-let landlords.
Recent research by the Department of Energy & Climate Change (DECC) found the private rented sector has the highest proportion of least energy efficient homes – 5.8% of G rated properties – compared with 3.4% in owner-occupied homes.
With the Energy Act (2011) providing that, from April 2018 at the latest, it will be unlawful to rent out residential or business premises which do not reach a minimum energy efficiency standard – the lowest acceptable energy rating is likely to be E – Drayton, one of the UKs leading heating control brands and part of Schneider, is urging more landlords to fit smart heating controls to the rental properties.
Simon May, Product Manager at Drayton, points out that landlords of F and G rated buildings will be unable to let them out after April 2018 unless they take active steps to improve the energy efficiency of those buildings.
“Internet connected controls – or smart thermostats as they’re known – allow tenants to manage the temperature of a property, using a mobile app, no matter where they are,” he said.
Interest rates in Britain remain frozen at an all-time low of 0.5%, after the Bank of England decided against the first cut in more than seven years today.
The Bank was expected to implement a rate reduction to help invigorate growth in an economy that was already slowing ahead of the UK’s decision to leave the European Union. But its nine-member monetary policy committee decided this morning that a cut to 0.25% was not necessary at this stage, despite the latest figures showing that the UK economy cooled at the end of the second quarter.
There is now every chance that rates will be cut in August. But for now mortgage borrowing costs will remain more or less the same, especially those with tracker mortgage deals which will automatically fall in line with the drop in interest rates.
Landlords with fixed rate mortgages would not have benefitted from the cut until their deal expires.
However, even if there is a cut in interest rates next month, it will not necessarily be passed on in full by mortgage providers, as David Whittaker, managing director of Mortgages for Business, pointed out last week.
He said: “They [lenders] may even be keen to sustain current rates, or increase pricing in order to regain recent months’ lost margins.”
Nevertheless, there remains a very strong core of stable low loan to value lending to property investors, including landlords, which is unlikely to contribute to instability, according to Whittaker.
“The current regulatory regime adds to this strength,” he added.
The MPC’s decision to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer has been welcomed by Private Finance.
Simon Checkley, managing director of Private Finance, said: “We fully support today’s decision by the MPC to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer.
“We anticipate a further review in August once the new economic forecasts are published where we would expect the committee to cut rates by as much as 50bp, achieving a zero percent interest rate, which would be in line with Mark Carney’s most recent comments about the need for the implementation of monetary easing over the summer.”
“The move will make little difference for frustrated savers who are already receiving record low returns for their cash,” said Stuart Law, CEO at Assetz Property.
Law expects to see continued growth in buy-to-let property, largely because investors can get around three times the income that they could get from a bank account and still have good long term security of capital.
He continued: “Buy-to-let landlords investing in Northern property in particular will continue to thrive as the market appears to be remaining stable post-Brexit. Prices continue to be modest versus the South, while gross yields are reaching up to 8.5% on average, compared to just 3.5% in the capital.
“Amid these current times of uncertainty and unanticipated outcomes, we expect investors to concentrate on investing for yields as the small dividends from the stock market do not really compensate for fluctuating share price risks.”
Landlords who rushed to acquire properties earlier this year are now actively renting them out, providing tenants with a flood of homes to choose from, according to Rightmove.
The property portal report that there was an 8% rise in the volume of rental properties being listed in the second quarter of the year compared with the same period in 2015.
London saw the biggest increase in supply in Q2, up by 22% on the corresponding period last year, resulting in a fall in average asking rents by 1.1% to just under £2,000 per month.
But overall, despite the increase in supply, rents rose by 2.8% between the start of April and end June outside London in England and Wales, though this is only 0.1% higher than the rise in Q2 2015.
The East of England’s year-on-year increase of 5% is the highest of all regions, while the South East saw rents increase the most over the quarter, up by 5.1%.
Rightmove’s head of Letting Sam Mitchell commented: “The big spike in March transactions resulting from a large number of investors beating the more punitive stamp duty tax deadline has created a rental supply boost which is good news for prospective tenants actively looking for a new place to live. Now that the stamp duty changes have come in this boost may be short-lived, as landlords consider whether or not to make further purchases.”
Rightmove’s research among landlords shows that just under a third are concerned that the stamp duty changes, plus the forthcoming tax relief changes, will potentially wipe out their profits.
Mitchell continued: “Once the tax relief changes start to be phased in from next year new buy-to-let activity could slow further. However, rental demand is still outstripping supply in many areas of the country so we may see a shift by investors to look in areas that offer better yields for long-term property investments.”
Buy-to-let landlords seeking to add to their property portfolios may wish to look to some of the areas with highest demand from prospective tenants.
The top five places include three in Greater Manchester – Ashton-Under-Lyne, Stalybridge and Oldham – where average asking rents for two-bedroom properties are around £520 per month and you can buy a two-bed home for around £100,000.
The figures from Rightmove also show that rental enquiries as measured by email and phone were up 2% in Q2 2016 compared to last year, and up 1% in the two weeks after the referendum compared to same two weeks in 2015, as the letting market shows no immediate signs of Brexit impact.
Mitchell added: “Whilst it’s too early to speculate or predict any long term impact of Brexit for the rental market, these latest figures show that it’s business as usual for tenants looking for a place to rent. Naturally we saw a dip in demand the three days after the referendum result, but that soon returned to usual levels of searching. If confidence in buying houses does falter it could lead to more people looking to rent, perhaps in the short-term, and that would mean that rents could rise further.”
Landlord lending falls as first-time buyer mortgages jump
Buy-to-let house purchase lending was under half what it was in the in the months leading up to the stamp duty changes, while buy-to-let remortgage is by value 10% lower than levels seen in January and February before the surge in activity in March, the latest figures show.
The latest monthly lending data from the Council of Mortgage Lenders reveals that gross buy-to-let lending continues to be lower than usual, with the amount landlords borrowed in May falling by 4% year-on-year to a total of £2.6bn.
The decline was expected following the surge in activity to beat the stamp duty changes on second properties ahead of the April 1 deadline.
“Buy-to-let lending continues to be lower than usual, which was expected after the surge in activities ahead of the stamp duty changes in April, but it’s telling that this had much more of an impact on the market than Brexit,” said CML director general Paul Smee.
But in a sign that confidence is slowly returning to the buy-to-let market following a slump in activity after the stamp duty surcharge was introduced in April, the amount landlords borrowed in May did actually rise by 4% compared with the previous month.
In total, 16,600 loans were issued to buy-to-let landlords, up 3% compared to April but down 8% compared to May 2015.
In contrast, first-time buyer lending shot up by 23% year-on-year to £4.3bn in May, although the figure is down 15% compared with April.
Remortgage lending rose by 30% year-on-year to £5.2bn in May, but also fell 15% on April.
“The data shows the market was actually more confident than expected in the month leading up to the referendum – significantly first-time buyer borrowing outweighed home movers for two months running, for the first time in 20 years,” said Smee.
He added: “Uncertainty is ongoing, but with a new PM taking office earlier than planned and the Bank of England due to cut the cost of mortgages, the market is quickly getting back to normal. What is clear is that lenders are still open for business, and our own data shows that plucky buyers are readying to swoop in and grab a bargain.”
The historic referendum vote in favour of leaving EU raises questions over what impact this will have on the UK private rental market and in particular on landlords. Will reduced immigration lead to a lower demand for housing? Will rents rise or fall? Will buy-to-let landlords quit the market?
To help answer some of these questions, plus others that you may have, Andrews Property Group will be using its weekly ‘#PropertyHour’ discussion on Twitter to answer any questions and concerns people have following the UK’s decision to leave the EU.
Starting next Wednesday, 20th July, the property group will focus on a different aspect of how the outcome of the EU referendum may impact the property market, kicking off with a Q&A with David Westgate, managing director at Andrews Letting & Management, on how Brexit will impact the letting market for landlords.
Speaking of the decision to dedicate its ‘#PropertyHour’ discussion to the impact of Brexit, Ronda Green, marketing director at Andrews Property Group, said: “The UK’s decision to leave the EU has created a number of questions. These encompass the impact it’ll have on house prices; how interest rates and mortgages will be affected; and whether the lettings market will see its pool of potential tenants fall.
“In order to best serve our existing and future customers, we felt it wise to showcase our industry experts across sales, lettings and mortgages so that the questions that have emerged in the last few weeks can be answered and the uncertainty felt by many can start to be erased.
“No-one can say with absolute certainty what the future holds but our experts are continually monitoring the market and can advise the public of what is actually happening, without any of the scaremongering that emerged during the run up to the vote. We’re very much looking forward to seeing what the burning questions that the public have at this time are.”
David Westgate’s post-Brexit #PropertyHour on how Brexit will impact the letting market next week, will be followed on Wednesday 27th July with Paul Bumford, financial services director, answering questions on mortgages in the post-Brexit world, while on Wednesday 3rd August, Chris Chapman, managing director of Andrews’ estate agency, will be taking questions on the residential sales market.
Don’t forget to pay tax on your rental income due this month
If you are registered under the self-assessment tax regime, it is crucial that you do not forget to make your second payment on account by July 31st or it could cost you money.
Payments on account are only for people who complete tax returns each year, but not everyone who completes a tax return will necessarily have a payment to make. HMRC should send out statements with a payslip to show the amount due. However, sometimes people have elected for the statement to go to their agent, or the individual may not have advised HMRC of a change of address. Note: Interest will be charged for late payment at HMRC’s rate, which is currently 3% per annum.
The payments on account are estimates based on the previous year’s tax liability, including any profit you made from renting out a property. For the payment due by the end of this month, it will have been based on the individual’s tax liability for the year ended 5 April 2015 and is a prepayment for the tax year which ended 5 April 2016.
Paul Haywood-Schiefer, assistant manager at London based accountants Blick Rothenberg, said: “This will apply mainly to those receiving rental income and the self-employed, but those with large amounts of investment income may also have a payment to make.”
He added: “If the person knows their income was lower in the tax year to 5 April 2016, now would be a good time to go over the figures for that year as it may be that the payment on account could be reduced.”
If you are unsure whether there is anything to pay, Haywood-Schiefer advises that you contact your accountant or, if you do not have one, either access your online self-assessment account or call HMRC for the payment details.
Sharp rise in BTL borrowing via limited companies in H1 2016
There was a significant increase in lending to buy-to-let landlords borrowing via limited companies in the first half of this year, fresh figures reveal.
According to the latest data from Mortgages for Business, the number of buy-to-let mortgage applications completed by limited companies in H1 2016 rose to 30% of all buy-to-let completions, up from 21% in the second half of last year, and 18% in the same period in 2015.
Almost a third – 30% – of all buy-to-let loans were handed to those acquiring property through a limited company, up from a quarter (25%) in H2 2015 and 20% in the first half of 2015.
The data also reveals that the volume of lenders offering products to limited company borrowers also rose in the first half of the year to 14 from 12 in the second half of 2015, reflecting a marginal rise in the number of existing buy-to-let lenders introducing limited company products rather than new lenders entering the buy-to-let sector.
David Whittaker, managing director of Mortgages for Business, said: “Both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business.
“However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number or 25% by value in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy to let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter.”
Whittaker pointed out that remortgaging activity has remained more or less unchanged as many landlords who already own property adopt a wait and see policy, “probably waiting to see how the economy pans out post-referendum”.
He added: “With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy-to-let property via corporate vehicles.
“Clearly, the trend for limited company buy-to-let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime.”
Rents on new tenancies rose across most parts of the UK over the three months to June, albeit at a slower pace, new figures show.
The latest data from the HomeLet Rental Index reveals that the cost of a new tenancy in the private rentals market in the UK, excluding Greater London, rose by 3.5% to an average of £773 per month in the three months to June 2016 compared with the corresponding period 12 months earlier. But the figures represent a fall from the 4.4% annual rise witnessed over the three months to May.
According to the Index, rental prices rose in almost every area of the country, with 10 out of the 12 regions surveyed seeing an increase over the three months to the end of June.
Rental price growth in the UK was led by East Anglia and the East Midlands, where rents rose by 8.2% year-on-year, followed by gains of 7.4% in Scotland.
London’s rental market, where the average rent on a new tenancy is now £1,575, up 3.9% year-on-year, also saw rental price growth slow – down from 6.2% the previous month.
The North East and North West of England were the only regions to see annual rents fall, down 3.6% and 0.2%, respectively.
The June data from the HomeLet Rental Index will provide some encouragement for both landlords and tenants, in light of the increase of rental stock following the rush to acquire buy-to-let properties before higher rates of stamp duty came into force at the start of April.
Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company, commented: “The June HomeLet Rental Index shows that the rental market remains resilient in the face of the various economic and political headwinds the sector has faced recently. Landlords are continuing to secure rental growth whilst there are some early signs of affordability criteria beginning to bear on the rates of rental price growth.
“The impact of the EU referendum vote will now play out over the months ahead: if, as expected, the result acts as a restraint on the supply of new housing, the gap between demand and supply in the private rental sector will remain marked; all the more so if more people decide to rent while waiting to see what happens to house prices.
“Landlords will be considering their position carefully, particularly in the light of further taxation changes to come next year, which could reduce net yields; with long-term drivers such as net population growth still in place, it is likely that rents will continue to rise, though affordability will continue to be crucial. The recent slowdown in rental growth rates may suggest an affordability ceiling is being approached.”
Rental figures from the June 2016 HomeLet Rental Index
Average rent 3 months to June 2016
Average rent 3 months to May 2016
Average rent 3 months to June 2015
Yorks & Humber
UK ex Greater London
Based on new tenancies in April, May & June 2016
Based on new tenancies in March, April & May 2016
Comparison of average rent in 3 months to end June 2016 & 3 months to end May 2016
Based on new tenancies in April, May & June 2015
Comparison of average rent in 3 months to end June 2016 & 3 months to end June 2015
Buy-to-let “still attractive” according to veteran investor
Marco Robinson successfully predicted that the UK would leave the EU two years ago, he also said that corporate tax would drop just like in Ireland and now he is predicting that buy-to-let property in the UK will remain a ‘brilliant investment asset’ post Brexit.
Despite having acquired more than 100 properties in the past 12 months, Robinson insists that he remains undeterred by the plethora of negative reports about the UK’s decision to exit the EU, partly because he is now receiving a net Income of more than £70,000pa from his buy-to-let property portfolio. In fact, he now views Brexit as a wonderful opportunity to negotiate good value for money property deals.
“Brexit, in my view, is a very, very good thing not just for the UK Economy,” he said. “The next three months is the best opportunity to buy Property in the UK there has been in the last 50 years!”
What’s more, the first 50 seats booked will receive a free holiday accommodation for two people from Robinson’s fully licensed Abta and Atol travel agency for up to seven days for two people with a choice of over 1,800 destinations in Europe.
The Marco LIVE ‘Buy-to-Let Property Buying System’ seminar, which will be held on Sunday 17th July, at the Marriott Hotel in Kensington, will cover a whole host of topics, including what a post Brexit UK housing market will look like, as well as various home buying and selling strategies, ways in which to maximise profits and save on tax, among a host of investment techniques.
To attend the free buy-to-let workshop, click here.
Landlords may wish to reconsider plans to sell-off property as savings rates plummet
For many people buy-to-let has been an attractive income investment at a time of low saving rates and stock market volatility. But with the removal of landlords’ mortgage interest tax relief set to come into play from next year, various reports suggest that many landlords plan to sell up in the coming months. But before they do, it is essential that they find other ways of growing their money, especially given the fact that the average easy access savings account now pays just 0.56% interest.
Earlier this year, research from the National Landlords Association found that as many as 500,000 properties could be sold by landlords by early next year following George Osborne’s tax attack on the buy-to-let sector.
In his July Budget he announced the removal of landlords’ mortgage interest tax relief which, when fully implemented in 2020-21, will mean some landlords pay tax on zero income or even on losses.
And in November he announced that landlords would pay a 3% stamp duty surcharge, which was introduced in April.
While many landlords will undoubtedly pass on the costs to tenants by increasing rents, others plan to leave the sector. But the latest six-month review of the savings market suggests that they may care to reconsider their strategy.
As far as the savings market was concerned, the first half of 2016 was a total wipe-out, with the latest research from Moneyfacts.co.uk revealing that, since the start of the year, savers have witnessed a vast number of rate cuts, which have caused rates to plummet to new lows. For example, the average five-year fixed rate has fallen by a staggering 0.63% since January this year.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Savers have been fighting an uphill battle to get a decent return in the first half of this year; over 900 individual cuts to savings rates have occurred since January, which is shocking considering that there have only been 111 rate increases over the same period. As a result, it’s not surprising that many have begun to wonder if the cuts will ever end.
“The positive competition kick-started last year by the challenger banks sadly proved to be short-lived. The harsh reality kicked in during the early months of 2016 and rates subsequently fell to record lows. For example, the average two-year fixed rate has dropped from 1.79% in January to 1.39% today.”
Providers at the top of the Best Buys are pounced on by savers who are desperate to secure a decent interest rate, and as a result, these deals rarely remain on the market for long. Therefore, providers who want to be at the top of the market only need to offer a reasonable return to move into prime position.
The fall in SWAP rates has also had a negative impact on the fixed savings market, according to Nelson.
She continued: “A drop in these [SWAP] rates means that it’s now cheaper for providers to fund their mortgage book, which has led to a drop in longer-term investment rates. Quite simply, providers don’t need savers’ funds, so they don’t need to compete in terms of interest rates.
“Mark Carney’s announcement that the Bank of England Base Rate could fall past its record low of 0.50% in the near-future means that savers need to brace themselves for even tougher times ahead. If a good deal is to be secured, savers will have to shop around and work hard, and keep a close eye on the market.”
Landlords have little alternative but to pass extra costs onto tenants
Private landlords are being forced to increase rents just to have a chance of meeting their mortgage obligations and other costs, new research reveals.
With many landlords seeing their profits wiped out as a consequence of the chancellor George Osborne’s tax clampdown on buy-to-let, rent hikes are ‘inevitable’ as landlords aim to at least break even, according to leading experts.
A fresh survey conducted by the Residential Landlords Association (RLA) shows that 84% landlords are likely to consider increasing rents following the chancellor’s decision to withdraw the level of tax relief that they can claim.
With many landlords likely to face the prospect of having their profits unjustly ‘wiped out’, the majority of landlords will have no option but to recoup their losses through higher rents, with tenants ultimately paying the price of the government’s ‘unfair tax-grab’, according to the association.
Landlords will see their tax relief cut from next April until it is removed altogether and replaced with a 20% credit against mortgage interest.
Alan Ward, chairman of the RLA, said: “Landlords do not want to increase rents unnecessarily but many will have to if they are stay in business as a result of these wholly unreasonable tax increases.
“It is unfortunately tenants who will end up paying the price either through higher rent bills or finding it more difficult to find somewhere suitable to live.
“We welcome the concern of many MPs and hope that they will be able to persuade the Government to change its mind.”
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Small-scale landlords with mortgages on their buy-to-let properties are being urged to fight back against unjust mortgage tax relief changes by joining a campaign against the cuts.
The existing rules that permit landlords to offset all of their mortgage interest against tax will, from next year, be phased out, and by April 2020, once they have been withdrawn altogether, it is likely that higher-rate tax payers will only receive 50% of the relief they that currently get.
The curb on the amount of tax that landlords can claim back on their property investments, which were announced by Chancellor George Osborne in the July Budget, could mean buying and renting out property is no longer viable for many.
Attempts to reclassify mortgage interest as anything other than a normal business expense could have a disastrous impact on the buy-to-let sector, with higher expenses passed on to tenants.
According to Treasury forecasts, the tax relief changes will net it close to £1bn a year by 2021.
Campaigners are trying to raise a £300,000 war chest in a bid to launch a judicial review against the restrictions.
Anyone pledging more than £100 will be entitled to claim at least one complimentary ticket to a campaign rally being held in London on Thursday 9th June.
Cherie Blair MBE QC has thrown her weight behind the campaign. Her law firm Omnia Strategy sent a legal letter to the HMRC in February stating the changes breach landlords’ human rights. She believes the campaign has a reasonable chance of success.
The legal challenge is also being backed by landlords Steve Bolton and Chris Cooper.
Cooper is a part-time landlord who is using buy-to-let as part of his pension, while Bolton owns around 20 residential and commercial properties. He is also the founder and owner of Platinum Property Partners, a buy-to-let specialist with a portfolio worth a total of £200m.
In a statement to landlords the pair said: “With your continued financial backing and support, we plan to take the Government all the way to court and fight the strongest case that we can.
“Please spread the word far and wide amongst your community, especially fellow landlords, tenants, letting agents and others who will be adversely affected by this ludicrous legislation.”
Landlords in the capital could see the rental value of their London-based buy-to-let properties soar over the next few years, as more property investors pass on higher tax bills to their tenants.
As the new buy-to-let stamp duty surcharge takes hold, and landlords seek fresh ways of offsetting the additional expenditure they are incurring on new buy-to-let acquisitions and take the sting off the proposed reduction in tax relief that will come into effect from next year, the Royal Institution of Chartered Surveyors forecast that rents in the capital will rise by an average of £5,328 by 2021.
If accurate, this would equate to an average monthly rent of £1,965, up from today’s current average of £1,543, according to data provided by HomeLet.
Stewart Pope, CEO at Perrys Chartered Accountants, based in London, is not surprised that rents in the capital are forecast to rise sharply.
He points out that those investing in property for the rental market who would have originally been paying £7,500 in stamp duty on a property valued at £350,000, will now have to pay £18,000 – “a significant difference at over double the previous charge”.
He continued: “This has been further compounded by the proposed reduction in tax relief that buy-to-let property owners can claim on their mortgage interest from their rental income, which will be phased in from 2017 and will be in full force by 2020.
“The natural result is that landlords will need to look for ways to recover these sums in the long term, particularly if they need mortgages to secure new properties.”
This technology can help save energy – and why landlords should consider it
Simon May, heating controls expert and product manager at Drayton, discusses the benefits of smart thermostats and how they can help landlords make their properties more attractive to potential tenants.
As a landlord, you may be reluctant to make improvements to your rental properties unless the enhancements offer value and a quick return on investment. Although some improvements carry a hefty price tag, there are certain areas that can be upgraded for a reasonably low cost – and they could help attract new tenants.
One such area is the energy efficiency of a property. Installing an effective heating controls system can be a quick and easy way to offer greater control of energy consumption and make a property more desirable.
Research by the Energy Saving Trust found there was a high demand in the private rented sector for green measures upgrades, with tenants in private rented housing wanting to ‘go green’ .
In a typical UK household, heating and hot water accounts for around 82% of the total energy use , and the cost of energy has increased by nearly 170% in the last decade – so for tenants, keeping energy usage to a minimum has never been more important.
Standard heating controls have been proven to save over 50 per cent on heating bills, and the additional control that new smart thermostats provide mean there’s the potential to save even more.
So what exactly makes these devices ‘smart’ and why should you add them to the properties that you let?
Internet connected controls – or smart thermostats as they are known – allow tenants to manage the temperature of a property, using a mobile app, no matter where they are.
This means that they can turn the heating on or off and adjust the temperature without needing to be near their home.
For example, if they have rushed off to work and accidentally left the heating on, they can remotely switch it off with the touch of a button. This gives greater freedom and control over the amount of energy being used, and flexibility when it comes to the temperature of their home.
It is also really easy to adjust heating schedules on the go, so tenants can reduce energy consumption by tailoring heating periods to fit in with their changing lifestyle.
If their routine is disrupted while they are away from home, tenants can make tweaks in order to prevent energy wastage.
So if they get invited for last minute drinks after work, they can change the schedule so the heating doesn’t come on until later on in the evening.
For the tenant, this makes a property more attractive, as they not only have the ability to reduce energy consumption and household bills, but they can improve their comfort levels too.
What’s more, smart controls can form part of a larger home automation system, so if you’re planning to add other ‘connected’ elements to the property – such as smart locks or smart lighting – then it makes sense to ensure the heating is connected too.
Home automation can make a property more desirable to technology savvy tenants, meaning landlords can tap into a niche market and differentiate their property from the rest.
Drayton, like other heating controls specialists, offers a collection of internet connected heating control packs – known as miGenie Wishes. The miGenie systemcan be controlled using an intuitive app downloaded onto an iOS or Android smartphone or tablet, or an Apple Watch.
There are three different pack options for different heating requirements, and controls feature an industry standard backplate for quick and familiar installation by a heating engineer or electrician – there’s no wiring needed in most cases, so no mess!
The system works no matter which energy supplier your tenant uses, and if the Wi-Fi connection is down the heating can still be adjusted via the controller. The controls are really simple to operate too, featuring familiar buttons and icons and step-by-step instructions for set up.
So consider a smart thermostat for the properties you let – you will make your property more attractive to energy conscious tenants and give them greater control over their energy usage and comfort levels.
New buy-to-let mortgage products for LLP customers
Kent Reliance has started lending to customers seeking to borrow money through a Limited Liability Partnership (LLP), with a view to buying or remortgaging a property.
The decision to start lending to non-trading LLPs follows the announcement in last year’s Budget of a phased change to tax relief on mortgage interest for landlords from 2017 onwards.
The move comes after a change to Kent Reliance’s criteria was made earlier this year when it started allowing buy-to-let clients to transfer assets from their individual name to a limited company SPV or an LLP.
A growing number of landlords are expected to set up companies to manage their buy-to-let portfolios amid fears that their profits will be hit by tax relief changes.
Landlords are anticipating a dent in their profits after Chancellor George Osborne issued new rules from April 2017 restricting tax relief on mortgage interest to the basic rate, currently 20%.
The latest edition of the Kent Reliance Buy to Let Britain report suggests that limited company lending across the UK could exceed 56,000 in 2016, up from 30,000 in 2014, showing the significant rise in demand for this type of product following last year’s Budget announcement.
However, it is worth noting that setting up companies to manage buy-to-let portfolios could be costly for those landlords with just one or two properties.
“Following the Chancellor’s recent changes we introduced products designed specifically for property investors who were moving their investments into a limited company. We are pleased that we can now extend the same proposition to support LLPs,” said Adrian Moloney, sales director for OneSavings Bank.
Rents on new tenancies rose across most parts of the UK over the three months to the end of April, led by gains in the East Midlands and Scotland, fresh figures show.
The latest data from the HomeLet Rental Index reveals that the cost of a new tenancy in the private rentals market in the UK, excluding Greater London, rose by 5.1% in the three months to April 2016 compared with the corresponding period 12 months earlier.
The rental data, the first to be released since higher stamp duty charges on buy-to-let rental property purchases were introduced on 1 April, show that rents on new tenancies continue to rise at a much faster rate than UK inflation.
According to the Index, rental price growth was led by Scotland, where rents rose by 11.4% year-on-year, followed by gains of 7.9% in the East Midlands and 7.7% in London.
The increase takes the average rent for new tenancies in the UK, excluding Greater London, to £764 per month. In Greater London it is £1,543 but the rate of growth remains below the double digit rises witnessed in 2015.
The Index reveals that rents on new tenancies increased in 11 out of 12 regions in the UK on an annual basis over the three months to April 2016. The only region not to record growth was the North West of England, where rents dropped by 1% over the three month period.
“The April HomeLet Rental Index has been much anticipated given the potential impact of the stamp duty changes on the private rental market; for now, however, rental price growth in most areas of the country is unchanged from the trends observed over almost three years,” said Martin Totty, chief executive of Barbon Insurance Group, HomeLet’s parent company.
“It may be that over the next several months, the trends observed in the rental market begin to reflect the signs of some slowdown in the rate of house price growth that we are now beginning to see and that will be something to watch closely,” he added.
With alluring rental returns achievable and low-cost interest-only mortgages, otherwise deemed too risky for regular homebuyers, still available to landlords, buy-to-let continues to have plenty of momentum behind it that appeals to prospective investors, but there is growing concern that the sector is getting out of control.
Sir Jon Cunliffe, Bank of England (BoE) deputy governor, has expressed his concern at the rapid pace the buy-to-let mortgage market is growing.
He is worried that mortgage lenders are overexposing themselves to buy-to-let and lending money too freely.
Buy-to-let lending has increased by an average of 6% since 2008, but he acknowledged that it had shot up to 11.5% last year.
The deputy governor also highlighted the fact that but-to-let lending to landlords now accounts for more than 15% of all mortgages, up from around 8.5% in 2007.
With mortgage lending in the sector growing, he told the press this week that it is necessary to look carefully at whether lenders’ underwriting standards are falling and at what is happening “to the distribution of borrowers’ indebtedness”.
Cunliffe said: “At around the start of 2016, lenders were planning to grow their gross buy-to-let lending by, on average, almost 20% per annum over the next two years, with some challenger banks and smaller building societies planning to grow their buy-to-let books at a much faster rate.
“When some form of credit is growing fast one needs to look very carefully at whether lenders’ underwriting standards are slipping.”
In March, the Bank of England announced plans to introduce more stringent checks on buy-to-let lenders amid concerns that the property investment market is moving into bubble territory.
The Bank’s Prudential Regulation Authority said it was putting in place a “guardrail” to prevent banks from making risky loans, warning that 20% of lenders were not carrying out the necessary checks.
The main concern is that a bubble in the buy-to-let market could cause a wider housing market slowdown, which would be bad news for millions of people who have invested in property.
More than 1.7 million properties have buy-to-let mortgages, which represented 17% of loans used to acquire homes last year.
Mortgage lenders now have to take into account all the costs a landlord might have to pay when renting out a property as well as the borrower’s wider financial situation, including their personal tax liabilities and living costs.
Rents set to rise further as demand grows and supply falls
Rents will continue to rise over the next few months, owed in part to a reduction in housing supply in the private rented sector (PRS), as more buy-to-let landlords exit the market as a consequence of recent tax changes, according to a leading letting agent.
Adrian Gill (below), director of lettings agents Your Move and Reeds Rains, believes that tenants will be the losers from the extra stamp duty on buy-to-let landlords, as the additional levy looks set to exacerbate an already chronic shortage of properties in many areas reducing choice and driving up rents.
“Ultimately this will only punish tenants, driving out buy to let landlords will reduce supply leading to lower choice and higher rents for those that can least afford them,” he said.
Gill believes that early spring is just the “calm before the storm”, as demand for homes in the PRS is driven by the flow of jobs and the flux of a generally more mobile workforce looking for a place to live.
“This reflects the strengths of private renting, the opportunity for young independent adults to strike out on their own, or for families to move across the country and earn the best possible livelihood. In the towns and cities with the biggest renting populations it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy, and will depend on the freedom to invest as a landlord.”
A survey conducted by the Association of Residential Letting Agents (ARLA) last week found that two thirds (65%) of landlords will refrain from acquiring more properties for buy-to-let following the recent surcharge on stamp duty and the cap on tax relief for buy-to-let mortgages, which in turn will reduce the supply of rental properties.
Three in five (61%) of ARLA agents now believe that rents will rise further as a result of the changes.
David Cox (pictured) at ARLA said: “Whilst landlords adjust to the increase in costs we can expect to see one of three outcomes prevailing in the buy to let market: landlords absorbing the cost and taking the hit; landlords withdrawing from the market causing supply to fall; or landlords regaining those costs through hiking rents. Next month we can start to assess the damage.”
Rental prices in the private rented sector (PRS) rose by an average of 2.6% over the year to March 2016, unchanged when compared with the previous month, the latest data from the Office of National Statistics (ONS) reveal.
The ONS’ private housing rental index shows that rental prices increased by 2.8% in England, 0.6% in Scotland and 0.2% in Wales.
Rental price growth was recorded across the whole of England in the 12 months to March 2016, led by gains in London where rents are up 3.7%, reflecting the fact that annual price growth has been stronger in London than the rest of England for the past five and a half years.
Growth in the capital was followed by the East of England at 3% and the South East at 2.9%, both unchanged over the corresponding period.
But there is a classic north-south divide. In the North East, the average tenant is only paying 0.8% more in rent compared with a year ago – the lowest annual rental price rise recorded in England. Rental prices in the North West and Yorkshire and the Humber also rose at below the English average at 1.1% and 1.2% respectively over the same period.
The data from the ONS supports the latest HomeLet index which also shows that rents are continuing to rise in many parts of the UK.
The data from HomeLet reveal that overall the average rent in the UK, excluding Greater London, is now £755 per month.
“We’ve continued to see increases in rents on new tenancies in almost every part of the UK during the first quarter, as the private rental market has responded to the pressures of an imbalance between demand and supply,” said Martin Totty, Barbon Insurance Group’s chief executive officer.
With experts at accountancy firm PricewaterhouseCoopers forecasting that by 2025, 7.2 million households will be living in rental accommodation, compared with 5.4 million today and just 2.3 million in 2001, there does not appear to be an end in sight for rising rents, which is why John Bibby, a policy officer at housing charity Shelter, is now calling for a rental system that is made “fit for purpose”.
“England has regulations in place, but they are incredibly weak and ineffective,” he said. “It’s easy for landlords to impose excessive rent increases, with tenants able to choose between paying up or moving out.”
“Private renting is no longer just a stepping stone for young adults – it’s where a quarter of families in England have to live,” he added.
Where do leading London mayoral candidates stand on housing?
With just one day to go until the London mayoral election takes place, housing remains the main issue that will help determine who gets to run the capital for the next four years.
Housing is without doubt the number one concern for Londoners ahead of tomorrow’s London mayoral election, according to research by ComRes.
Mindful of the fact that housing is now the biggest issue for Londoners, the leading London mayoral candidates have put it at the core of their proposals, with front-runners Sadiq Khan, the Labour candidate, and Zac Goldsmith, for the Conservatives, both calling the election a “referendum on housing”.
“The emphasis on housing from all the candidates is not unexpected, with the lack of affordability one of the greatest threats to the sustainability of London,” said Stephanie McMahon, head of research at Strutt & Parker.
Given that house prices spiralled under both Ken Livingstone and Boris Johnson, the next mayor of London will be under a great deal of pressure to do more to make London affordable.
Residential property prices in 28 of 33 London boroughs are now at least 10 times average salaries, with prices in many of London’s most expensive boroughs now out of reach for all but the super-rich.
So who should you vote for?
London mayoral candidates’ policies at-a-glance:
Sadiq Khan (Labour)
Labour Mayoral hopeful Sadiq Khan has vowed to deliver 80,000 new homes in the capital each year, 50% of which will be affordable, by freeing up more brownfield land for housebuilding. He also wants to form a ‘new homes’ division in City Hall, set up a not-for-profit letting agency, aim to restrict rent rises, and invest more in the London Affordable Homes Programme.
Zac Goldsmith (Conservative)
The Conservative candidate has also pledged to focus on releasing publicly-owned brownfield land for the construction of more residential properties, with a view to delivering 50,000 new homes a year in London by 2020, financed in part by a new pan-London investment fund for overseas investors. He also wants to bring thousands of vacant homes back into use, get tough on rogue landlords, and introduce longer term tenancies.
Caroline Pidgeon (Liberal Democrats)
Caroline Pidgeon wants to boost new housing supply in the capital, including significantly more council homes at affordable rent levels. She also wants all private landlords in the capital to be registered, introduce a ‘right to buy’ for tenants if the landlord decides to sell, abolish letting agency fees for tenants and promote three- to five-year tenancies.
Sian Berry (Green Party)
Sian Berry is demanding that the mayor of London be given greater rent controls, as part of efforts to help private renters in the capital. She also believes that there should be a voluntary landlord registration in place, as well as a new Renters’ Union, financed by City Hall, designed to provide tenants with greater support and advice.
Peter Whittle (UKIP)
Aside from lobby for “sensible migration” levels to help restrict demand for housing, Peter Whittle has pledged to boost housebuilding levels. He believes that a comprehensive registry of all London’s brownfield sites is crucial to boosting the supply of land for the construction of new homes. Whittle has also proposed taxing buy-to-let landlords at a higher rate if they leave their homes empty and offering long-term residents in London priority when it comes to social housing.
UK mortgage lenders are now expected to restrict lending to buy-to-let borrowers following the Mortgage Works’ decision to limit the amount landlord investors can borrow.
The Mortgage Works, the buy-to-let division of Nationwide, announced late last week that it will, from 11 May, require landlords to receive significantly more rental income relative to the costs of their mortgage than is currently the case.
The Mortgage Works has tightened its rental cover requirement – the amount a landlord is required take in rent compared to the cost of the mortgage repayments – from 125% to 145%.
The change means that Nationwide will no longer lend to landlords with a 20% deposit, and will only lend to those with a minimum of 25%, provided the new rental cover criteria are met.
The changes are in response to the Bank of England's announcement in March that mortgage lenders would face more stringent regulations when calculating mortgages for buy-to-let landlords.
Many experts now forecast that property investors will require a minimum 40% deposit when acquiring property as a consequence of these tougher rules.
David Whittaker, managing director at broker Mortgages for Business, said that he was not surprised to see that lenders are starting to increase their income cover ratios for individual borrowers.
He commented: “As one of the biggest mainstream buy-to-let providers, The Mortgage Works is taking the lead and demonstrating to the market and the regulators that it truly understands the forthcoming tax relief changes. It will be interesting to see how other providers react.
“I anticipate a few will be making similar preparation, some will wait until the outcomes of CP11/16 [Recovery and Resolution Plans] are known and others will bury their heads in the sand. ICRs [interest coverage ratio] on products for limited companies will remain generally the same as they are now because these borrowing vehicles will not be subject to the new tax relief restrictions. Indeed, it will be the lenders with products in this category who will be the likely winners out of this in the long term.”
Some experts believe that in low-yield areas like London, landlords with less than 40% deposits will struggle to borrow in future.
Andrew Montlake, of broker Coreco, said: “In London where yields are down to 2% or 3% you’re only going to be able to get a 60% mortgage from now on. Landlords are going to have to put more cash in.
“It's likely that these costs will be passed onto tenants, so the cost of renting will go up, too.”
Paragon Mortgages has updated its lending criteria for limited company landlords in the wake of recent Government announcements on tax relief changes.
The specialist buy-to-let mortgage provider has removed the exclusivity borrowing restriction for limited company landlords, meaning they can make best use of holding their properties in a corporate structure.
This follows Paragon’s research, published yesterday, showing that more than two out of five landlords are moving their buy-to-let portfolios into corporate structures ahead of forthcoming tax changes.
John Heron, director of mortgages at Paragon, said: “We know from our latest research there are an increasing number of landlords looking into whether to incorporate, some 41% were at least considering whether to do this in Q4 last year.”
“Therefore, we have updated our criteria to allow limited company landlords to have borrowings elsewhere too.”
“This demonstrates our continued commitment to working with our landlord customers to understand their bespoke requirements and also adapt as the market changes.”
A survey of nearly 1,400 private rented sector landlords undertaken by BDRC Continental on behalf of Paragon Mortgages has revealed that increasing numbers are considering moving their property investments into limited company vehicles.
The move comes as landlords plan for the increased rate of stamp duty on buy-to-let purchases and cuts to landlord tax relief.
Of the landlords surveyed, 41% indicated they are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief available to landlords last year.
A further 5% have already established limited companies. For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it.
In terms of portfolio growth, 43% of landlords surveyed agreed that the stamp-duty increase will affect their buy-to-let purchasing plans over the next couple of years. This figure rises to 63% for larger landlords with 20 or more properties.
Despite uncertainty about what impact the changes to tax relief and stamp duty might have however, tenant demand amongst landlords is still perceived as being high.
Demand for rented property in Q4 2015 was strongest in the South West where 40% of landlords reported demand to be rising. Landlords in the North East experienced the weakest demand, with just under a quarter (24%) of landlords reporting increased demand.
Reflecting this demand, average yields have also remained stable and averaged 5.6% across the country – unchanged on the previous quarter. The North West saw the highest yields, at 6.2%, while outer London had the lowest, at 5.1%.
John Heron, director of mortgages at Paragon, said: “Recent government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however – tenant demand and yields – remain strong so there are competing dynamics at play.
“It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy-to-let purchases.”
The day has finally come, and from now on most buy-to-let landlords will have to pay a further 3% Stamp Duty (SDLT).
Following announcements made in the 2016 Budget on 16 March, HMRC have published further guidance on the changes that are being made to stamp duty land tax (SDLT), announced in Autumn Statement on 25 November 2015, which apply from 1 April 2016 to purchases of additional residential properties, such as second homes and buy-to-let properties.
Broadly, higher rates will apply, which will be 3% above the standard rates of SDLT but will not apply to purchases of property under £40,000 or purchases of caravans, mobile homes and houseboats. The guidance can be found here.
In addition HMRC have also published further guidance on the changes that are being made to stamp duty land tax (SDLT), and how they affect non-residential property transactions from 17 March 2016.
The changes mean that:
– on or after 17 March 2016, the SDLT rate for non-residential freehold and leasehold transactions will only be payable on the portion of the consideration which falls within each band (rather than tax being due at one rate on the entire value);
– SDLT on the rental element of non-residential leasehold transactions is already taxable on the portion of the consideration that falls within each band. From 17 March 2016 a new 2% rate applies for transactions with a net present value (NPV) above £5 million;
– from 17 March 2016, the ‘£1,000 rule’ no longer applies.
From 1 April 2016, new regulations allow private tenants to request their landlord’s consent to carry out certain energy efficiency improvements, such as installing insulation and improved heating controls.
The new rules, introduced under the Energy Efficiency (Private Rented Sector)(England and Wales) Regulations 2015, are part of a series of measures aimed at improving energy efficiency in the private rental sector. It is important all NALS members are aware of these changes.
A tenant can request energy efficiency improvements by writing to the landlord, explaining the proposed measures and how they will be funded – whether directly by the tenant or through an energy efficiency scheme. The landlord is not required to pay.
The landlord cannot unreasonably refuse consent and must provide a response in writing within one month. The regulations provide scope to issue counter-proposals and also specify situations where permission can be refused, such as if the proposed improvements would reduce the market value of the property by more than 5%.
The tenant can appeal to the First-tier Tribunal if they are not satisfied with the landlord’s response.
In a series of further planned reforms, a new minimum energy efficiency standard for private rented homes will be set at an Energy Performance Certificate (EPC) rating of ‘E’:
From 1 April 2018 landlords will be unable to issue a new tenancy for a rented property with an EPC rating of ‘F’ or ‘G’, subject to certain exemptions.
From 1 April 2020 the restriction on renting out properties with an EPC rating of ‘F’ or ‘G’ will apply to all existing tenancies in a domestic private rented property, subject to certain exemptions.
From 1 April 2023 the restriction on renting out properties with an EPC rating of ‘F’ or ‘G’ will apply to all existing tenancies in a non-domestic private rented property, subject to certain exemptions.
NALS licensed firms are being encouraged to help landlords identify their ‘F’ and ‘G’ rated properties so they can explore options for upgrading energy efficiency before the new tenancy restrictions come into force.
(The above is provided thanks to the National Approved Letting Scheme)
If you are a landlord and would like to know more about these changes, please feel free to contact us on 01727 846361.
Research by Aldermore shows that over half the UK’s buy-to-let landlords (52%) expect today’s changes to stamp duty and buy-to-let mortgage tax relief to have no real impact on them.
The research, carried out amongst 1,000 landlords by YouGov on behalf of Aldermore, explores how the recent changes to buy-to-let, which came into force on 1 April, have affected landlords, including whether they would raise rents, sell their properties and what they thought the future was for the private rented sector.
Seven in 10 respondents expect the number of tenants in the private rented sector to increase over the next five years, but a third (33%) of landlords feel the overall value of the buy-to-let market will decrease over the next 12 months.
The majority of landlords (63%) in Britain own only one property that they rent out, with 95% of respondents owning five or fewer properties.
Charles Haresnape, group managing director for mortgages at Aldermore, said: “These figures show that the majority of landlords believe there is nothing to fear for the future of the buy-to-let market in the UK. It is clear that the vast majority of landlords fall into the ‘accidental landlord’ category, and as such would be unaffected by upcoming changes as they are not actively looking to build a rental portfolio.”
“With 70% expecting the number of people in the private rented sector to rise over the next five years, it is vital that regulation does not stifle this hugely important segment of the UK housing market, particularly at a time of significant supply constraints.”
“The majority of our buy-to-let customers are committed long-term landlords. While they will obviously not welcome an increase in stamp duty, over the course of a 20 year investment the sums remain relatively small and are unlikely to significantly affect the buy-to-let market.”
Proposals by the Bank of England to curb buy-to-let lending are “premature” according to the Residential Landlords Association (RLA).
As Landlord Today reported yesterday, the Bank claims increased buy-to-let lending is now a risk to the economy as a whole and wants to impose new controls, including strict affordability tests taking into account borrowers’ costs and personal income.
It also wants to see lenders take into account potential future interest rate increases and a special underwriting process introduced for ‘portfolio landlords’ with more than four properties. The new measures have gone out for consultation.
The RLA, whilst agreeing that no landlord should take on debt that they cannot afford, is warning that the proposals are premature given the considerable tax changes being made to the sector which are likely to cool the market.
In February the Treasury Select Committee warned that measures taken to curb buy-to-let could come at a cost to the wider economy given the importance of the sector to supporting and encouraging a flexible labour market.
RLA policy director David Smith said: “The Bank needs to be careful that it does not over-react to the current surge in buy-to-let applications which are aiming to beat the tax increases coming in April. These include a three percentage points extra levy on stamp duty and abolition of mortgage interest relief. It is likely that the impact of these will significantly reduce the demand for borrowing.
“We would urge the Bank to tread carefully and avoid any premature moves that could stifle the supply of the one million rental properties the country desperately needs.”
Others in the industry were less concerned about the Bank’s proposals. Estate agent Ludlow Thompson said the measures were unlikely to seriously impact the growth in buy-to-let mortgage lending.
The agent claimed the new 5.5% base rate stress test would only affect 25% of current buy-to-let landlords.
Stephen Ludlow, chairman at ludlowthompson, said: “Even with the new regulations, buy-to-let investors will continue to enjoy access to plenty of competitively-priced mortgage products.”
Peer-to-peer lender LendInvest has examined the financial impact on landlords – and their tenants – of the additional 3% Stamp Duty Land Tax (SDLT) which will be payable investors from 1 April 2016.
It found that landlords in London and the Southeast will need longest to repay higher SDLT rates with investors in inner London and Harrow needing the equivalent of 20 months’ rent or more to repay higher SDLT. The tax hike also means landlords in 13% of country will pay SDLT for first time.
LendInvest found that average house prices in 14 out of 105 postcode areas are less than £125,000, meaning future buy-to-let purchases will be subject to up to £3,750 SDLT for the first time.
Darlington, Halifax and Doncaster are among the worst affected by first-time SDLT payments with 86% of first-time stamp duty payers in the Northeast or Northwest.
Landlords in areas including Sunderland, Blackburn, Durham, Hull and Wigan could have to pay up to £3,750 on new purchases on which they paid £0 previously.
Christian Faes, co-founder and CEO of LendInvest, said: ”The stamp duty hike spells bad news for landlords – and their tenants. Put simply: when taxes rise, someone has to pay. Our latest BTL Index shows that the likely payer is ultimately going to be the tenant, with higher rents. The Stamp Duty Land Tax hike will cause rental yields to fall for landlords, putting pressure on them to raise the rents they charge.
“It’s not just in Inner London, where landlords’ taxes will soar, that we can expect to see landlords and tenants squeezed financially. The index shows that all across England and Wales, we will many landlords factoring several thousands of pounds of stamp duty tax into their budgets for the first time. Towns like Sunderland, Blackburn, Wigan and Oldham could be particularly badly impacted: here, rental yields are comparatively good but average house prices are below £125,000 meaning SDLT will be imposed for the first time.
“The Treasury’s decision to inflict this tax hike is part of their longer term plan to professionalise the buy-to-let market and make Britain a country of homeowners. While the mission has its merits, there are no quick fixes to the nationwide housing crisis. Until there are more houses on the streets that people can buy at reasonable prices, landlords have their place and their tenants must be protected.”
BTL investors “stormed the housing market” says NAEA
Estate agents have reported an increase in the number of buy-to-let investors trying to push sales through before April stamp duty deadline.
The National Association of Estate Agents’ (NAEA) February Housing Market found that in February more than eight in 10 (85%) estate agents reported an increase in the number of buy-to-let investors flooding the market to beat the stamp duty changes on second homes.
The Chancellor’s announcement around stamp duty for additional homes, made in last year’s Autumn Statement, meant in January and February this year, 72% and 85% of agents respectively, saw an increase in interest from those hoping to purchase second homes.
With added pressure from BTL investors on the market, demand for housing was the highest level for 12 years in February. There were an average 463 house hunters registered per member branch – the highest since August 2004 when 582 were registered per branch. This is following an increase in January when estate agents reported 453 per branch, the highest since July 2015.
The number of properties available per branch increased marginally from 33 in January to 35 in February, as the number of sales agreed per branch in February increased too. There were an average nine sales completed in February, back to the level seen in October 2015 and a rise from eight sales agreed per branch in January.
A quarter (24%) of total sales made in February were to first-time buyers (FTBs), a decrease of five percentage points from January, as mounting pressure from investors increased competition.
Mark Hayward, NAEA managing director, said: “It is evident from February’s report findings that we’ve seen a real sense of urgency from landlords trying to complete on sales ahead of the stamp duty reforms– which now come into force next week. However, the mounting pressure and increased demand for housing has meant that first time buyers have had to compete with landlords for property and as a result they have lost out.
“We would like to say that come April things will look better for first time buyers. Schemes like the Help to Buy ISA, Help-to-Buy scheme and the new Lifetime ISA all sound great on paper, and there’s no doubt that some young people will definitely benefit from them. The crux of the problem though is that there is still a huge issue with supply and until we build more homes, and crucially the right sort of homes, we cannot fool ourselves into thinking we are doing enough to help people buy their own home.”
Bank of England announces buy-to-let mortgage crackdown
The Bank of England has revealed its tougher borrowing standards to prevent buy-to-let lending overheating the wider housing market.
The Bank’s financial policy committee (FPC) views buy-to-let lending as one of the biggest domestic risks to the financial system, although the possible exit from the European Union was cited as the biggest short-term risk.
The Bank’s Prudential Regulation Authority (PRA) reported that mortgage firms expected to grow buy-to-let lending books substantially over the next few years – despite recent tax measures such as the 3% stamp duty surcharge and phased reduction in mortgage interest tax relief.
The authority says action is required “to ensure underwriting standards did not slip” and BTL lending go out of control. The PRA claims that without further constraints, lenders expect a gross increase of 20% in buy-to-let borrowing over the next two to three years.
It set out four measures designed to tighten buy-to-let lending standards:
Lenders should consider the borrower’s costs associated with letting the property, including tax costs.
A borrower’s personal income should be verified if the lender wants to include it to support the mortgage.
Lenders should include future interest rate increases in affordability assessments. This includes a worst case scenario of interest rates rising to 5.5% for a full five years.
There should be a special underwriting process for “portfolio landlords” with four or more properties.
The authority says these measures should ultimately reduce buy-to-let approvals by between 10 and 20% by 2019.
Some three quarters of buy-to-let lenders already meet its new standards, the authority says, but five of the 20 biggest lenders currently use a ‘stressed interest rate’ of 5.47% or lower – so below the new level set by the authority.
The changes are expected to be fully implemented this summer.
The authority says it has looked at the major 31 lenders in the industry, which represent 90% of buy-to-let lending in the UK.
Jeremy Leaf, a former RICS chairman and north London estate agent, says: “This is a classic case of slamming the stable door after the horse has bolted. The changes the Chancellor has made to mortgage interest tax relief and higher stamp duty for landlords will have enough of an impact on buy-to-let without the need for further interference from the Bank of England. Landlords will already be put off investing further unless the numbers add up and this is a case of kicking them when they are down.
“The Bank of England should have waited to see what impact the changes that have already been made have on the market before making further tweaks. The combined impact of all these measures will be to cut supply and increase the upward pressure on rents. A number of landlords will already have been tempted to sell before this latest round of proposed changes to the sector.”
Legislation will be included in Finance Bill 2016 to reduce the rate of capital gains tax from 18% to 10% where the person is a basic rate taxpayer and from 28% to 20% where the person is a higher rate taxpayer or a trustee or personal representative, except in relation to chargeable gains accruing on the disposal of residential property (that do not qualify for private residence relief), and carried interest.
Provisions will also make clear that a residential property interest includes an interest in land that has at any time in the person’s ownership consisted of or included a dwelling and an interest in land subsisting under a contract for an off-plan purchase. Rules will set out how gains should be calculated in the case of mixed use properties.
This change will have effect for relevant gains accruing on or after 6 April 2016.
Disposals of UK residential property by non-residents
The capital gains tax (CGT) provisions for disposals of UK residential property by non-residents (NRCGT) are being amended. Broadly, the computations required in relation to a disposal will be corrected and HMRC will be given news powers to prescribe circumstances in which an NRCGT return is not required. In addition, CGT is to be added to the list of taxes that the government may collect on a provisional basis between Budget day (or a day after the Budget), and the coming into operation of the subsequent Finance Act.
Amendments to the computations to put beyond doubt that a double charge does not arise will apply retrospectively to disposals made on or after 6 April 2015 and, in relation to an omission in how to compute the balancing gain, to disposals made on or after 25 November 2015.
The extension of HMRC powers provisions, and the inclusion of CGT on the government’s provisional basis collection list, will apply from Royal Assent to Finance Act 2016.
Changes to rules to extend availability of Entrepreneurs’ Relief on associated disposals
Entrepreneurs’ Relief will be allowed on an ‘associated disposal’ of a privately-held asset when the accompanying disposal of business assets is to a family member. Relief can also be claimed in some cases where the disposal of business assets does not meet the present 5% minimum size condition.
Finance Act 2015 introduced new rules to combat abuse of ER. Whilst preventing the abuse, those rules also resulted in relief not being due on ‘associated disposals’ when a business was sold to members of the claimant’s family under normal succession arrangements. It was announced at Autumn Statement 2015 that changes to mitigate the impact of the Finance Act 2015 rules on associated disposals in these circumstances were being considered. Legislation will be included in Finance Bill 2016 and the changes will be backdated to 18 March 2015, the date on which the Finance Act 2015 measures became effective.
This will be welcomed by owners of businesses who are retiring or reducing their participation in their business and passing it to other family members.
Entrepreneurs’ relief: extension to long-term investors
The Chancellor announced that Entrepreneurs’ relief (ER) will be extended to external investors in unlisted trading companies.
The extension to ER, introducing investors’ relief, will apply to gains accruing on the disposal of certain qualifying shares by individuals (other than employees and officers of the company). In order to qualify for relief, a share must: – be newly issued, having been acquired by the person making the disposal on subscription for new consideration;
– be in an unlisted trading company, or unlisted holding company of trading group;
– have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016;
– have been held continually for a period of three years before disposal.
The rate of capital gains tax charged on the qualifying gain will be 10%, with the total amount of gains eligible for investors’ relief subject to a lifetime cap of £10 million per individual. Rules will ensure that this limit applies to beneficiaries of trusts.
As the relief is designed to attract new capital into companies, avoidance rules set out in the Finance Bill 2016 legislation will ensure that shares must be subscribed for by individuals for genuine commercial purposes and not for tax avoidance purposes.
This change extends ER to external investors and is intended to provide a financial incentive for individuals to invest in unlisted trading companies over the long term.
Lifetime limit on employee shareholder status exemption
The Chancellor announced that for Employee Shareholder shares issued as consideration for entering into Employee Shareholder Agreements from midnight at the end of 16 March 2016 there will be a lifetime limit of £100,000 capital gains tax (CGT) exempt gains. Any past or future gains, realised or unrealised, on Employee Shareholder shares that were issued in respect of Employee Shareholder agreements made before midnight at the end of 16 March 2016 will not count towards the limit.
When Employee Shareholder shares issued as consideration for entering into Employee Shareholder Agreements from midnight at the end of 16 March 2016 are disposed of, gains made in excess of the lifetime limit will be chargeable to CGT.
For transfers of Employee Shareholder shares between spouses or civil partners, the transfer will be treated as being for consideration which gives rise to a gain equal to the transferor’s unused lifetime limit, subject to the over-riding condition that the consideration does not exceed the market value of the shares transferred. This amount will fix the acquisition cost in the hands of the spouse.
Stamp duty hike will push up rents, say letting agents
The new stamp duty reforms for buy-to-let properties, coming into effect on 1sApril will increase rent costs for tenants and trigger a decline in the supply of available properties, according to the Association of Residential Letting Agents (ARLA).
ARLA’s February Private Rental Sector report found that more than half (52%) of letting agents reported an uplift in interest from buyers looking to invest in rental properties before the stamp duty reforms come into effect – an increase from 47% in January. However, after the deadline, two thirds (63%) predict that supply will fall as landlords are pushed out of the market.
Almost six in 10 (57%) ARLA members agree rents will be pushed up once the stamp duty reforms have come in to effect, as increased costs for landlords are passed through to tenants. This is especially high in London, where three quarters of letting agents (73%) expect to see this happening.
ARLA managing director David Cox said: “The stamp duty changes are now imminent, and as well as hitting small landlord’s, they will also impact institutional investors. Although members are reporting a rush from landlords trying to snap up their buy-to-let investments now, it’s likely that we’ll see the buy-to-let market drop like a stone come April and probably not pick up again until next year. This will most certainly cause rents to increase, with supply dropping, as competition for the limited availability of properties intensifies.”
Demand rose by almost a fifth (19%) in February, with an average 37 prospective tenants registered per member branch. This is the highest level seen since February last year, when an average 40 tenants were registered per branch. Alongside growing demand, the supply of rental properties on letting agents’ books increased to 176 in February, a rise from 172 in January.
“The demand for housing continues to intensify as supply remains an issue across most of the country. We are concerned that the government rhetoric of wanting to help people onto the housing ladder does not tally with their action of continuing to target the rental market with additional costs,” said Cox, “Some landlords will simply withdraw from the market whereas others who can take the hit of the extra stamp duty will simply raise rents to cover the extra costs. The dream of home ownership will remain out of reach for many as we move closer towards becoming a nation of forever renters.”
Newham Council has prosecuted what it called a “group of criminals” running a dodgy letting business with an estimated income of £1.25 million.
The group of criminals described as a “gang of chancers” have been hit with fines and costs totalling around £79,000 after renting out properties using fake names and businesses.
The gang apparently used a “rent-to-rent” strategy to take over properties and sublet them to tenants.
Luis Felipe Tilleria Limongi, 34, of Regents Park; Ney Fernando Limongi, 40, of Poplar; Christian Hidalgo Limongi, 28, of Poplar; Lenner Velastegui Guaman of Plaistow; Leandra Velez of Poplar; and Alex Ibarra of Poplar, were all prosecuted by Newham Council for housing offences under the relevant HMO regulations and the Housing Act 2004.
A number of companies were also prosecuted as part of the case including Q Lion Management Limited and London Rooms Rental Limited. Flatshare London Limited and Valenberg Properties Limited also faced prosecution, however they were dissolved shortly before the trial.
The group came to the attention of the council’s private rented sector licensing team shortly after the scheme was introduced in January 2013, when Luis Limongi’s name appeared on a tenancy agreement in a house which was not licenced as a rental property. At the time, the home owner was prosecuted for failing to licence his property.
But as the licensing team carried out more operations over the years they uncovered several tenants with agreements naming Limongi, one of his accomplices or up to 25 businesses, which they would quickly dissolve, as the landlord or licence holder.
Tenants within the same property would often have tenancy agreements with different companies run by the group named as landlords and complained to the council that these companies were impossible to contact. They also reported that rent was paid in cash and collected by different people.
When officers visited these properties they saw that the houses had been converted into bedsits without permission from the council, and the master room in the house would often include a flimsy partition to create an extra room. There was also minimal fire safety in the properties.
Under scrutiny the tenancy agreements actually stripped tenants of their statutory rights, and their deposits were not placed in deposit protection schemes.
The officers also found that the properties were not licenced with the private rented sector licensing scheme.
One tenant took pictures of the group which helped the council identify the “landlords” operating in other properties.
On 4 March 2016, the group were required to attend Thames Magistrates’ Court to answer 115 charges, relating to five properties in the borough. Two of these properties were owned by Luis Limongi and three others had been rented by the group and then sublet without the permission of the owner.
The 115 charges included failure to licence the properties, several breaches of safety conditions under the relevant HMO regulations and failure to co-operate with the council’s requests for documentation, such as safety certificates and details of deposit protection schemes.
Luis Limongi pleaded guilty to a total of 38 charges. He was ordered to pay £18,450 of fines and £10,415 of costs.
Ney Limongi pleaded guilty to a total of 46 charges. He was ordered to pay £14,040 of fines and £14,690 of costs.
Christian Limongi was found guilty in his absence and ordered to pay £4,050 fines for 12 charges, and costs of £3,456.
Lenner Guaman was found guilty of one charge in his absence and ordered to pay a £300 fine and £250 costs.
Leandro Velez was found guilty of 12 charges in his absence and ordered to pay £4,050 and costs of £1,832.
Alex Ibarra was found guilty of seven charges in his absence and fined £2,550 and ordered to pay costs of £4,275.
London Rooms Rental Limited was also charged with one offence and fined £300 and ordered to pay costs of £250.
In total the group were ordered to pay fines of £43,740 and the council’s costs for their investigations of £35,168.
Councillor Andrew Baikie, mayoral advisor for housing, said: “This gang of chancers tried everything they could to avoid taking responsibility for their tenants. They were all about making as much as possible from these properties and used false names and businesses which they would dissolve. Their tenants were left with worthless tenancy agreements and they had no chance of getting their deposits back when they moved on.
“They thought they could avoid our licensing scheme but they underestimated our determination to protect residents from opportunists who put not only the safety of their tenants, but their finances at risk too.”
Tower Hamlets Council’s trading standards team also helped the council with their investigations. Newham Council has now passed on details of 92 properties run by the group across London to the local authorities. It is estimated that the group are receiving an income of more than £1.25million from their network of properties.
George Osborne has slashed the capital gains tax (CGT) rate – but not for landlords, prompting an angry response from the industry.
Osborne announced in the Budget that the CGT 18% rate will reduce to 10% and the 28% rate will reduce to 20% for chargeable gains. However the new rates do not apply to chargeable gains accruing on the disposal of residential property (that do not qualify for private residence relief), and carried interest.
David Cox, managing director of the Association of Residential Letting Agents (ARLA), said that this is now the third Budget which directly attacks landlords.
“The sector has been punitively taxed, with stamp duty on buy-to-let properties, mortgage interest relief and now capital gains tax changes. It’s an outright assault on the sector.
“Every other sector has been offered a tax break – yet there is nothing here to help the private rented sector, including landlords – and most importantly tenants – who will see rent costs rise to subsidise the taxes that landlords pay on property. The government talks about wanting to help the younger generation get onto the property ladder, but with the changes announced today the supply of available property is bound to decrease, and as a result rents will rise.
Richard Lambert, chief executive officer of the National landlords Association (NLA), said: “The Chancellor said that this government would tax the things it wants to reduce not the things it wants to encourage. On that basis, it’s clear he does not regard ordinary people putting their own money into providing homes as worthwhile.
“The steady upward ratchet of taxation on landlords over the past year shows that George Osborne is determined to bear down on the private rented sector, but he still depends on the tax revenues he expects to pull in from them.
“The NLA called for a short term easing of CGT to allow landlords to restructure their portfolios or to exit the market altogether but it appears that however much he wants us out, he can’t afford to allow us to leave.”
More than half of landlords halting portfolio investment plans
With just three weeks to go until the 3% stamp duty hike on buy-to-lets and second homes kicks in, research suggests landlords are putting off adding to their portfolios or selling up.
Property crowdfunding platform Property Partner found that nearly six in 10 (59%) landlords surveyed say they are shelving plans to make further investments in traditional buy-to-lets, or are even planning to sell some of their existing properties.
Surprisingly, given the extensive media coverage, many landlords still seem unaware of the full implications of the combined government measures about to be implemented. Tougher mortgage lending rules kick in on 21 March, quickly followed by April’s stamp duty hike, with mortgage interest tax relief being phased out from 2017.
Yet 27% of landlords surveyed by Property Partner, had little or no awareness of the radical changes to their financial fortunes in the pipeline.
Dan Gandesha, CEO of Property Partner, said: “On the evidence of our research, landlords are deeply divided over how to respond to the government’s clampdown on buy-to-let.
“A significant minority are desperately buying up available stock to beat the April stamp duty deadline, causing a surge in prices. Do these people really understand how the government’s tax changes will impact their profits?
“Luckily the majority of landlords are taking a much more cautious view, with many choosing Property Partner as a better way to access residential property investment, without the hassle, expense, or tax implications.”
Capital allowances are not available for expenditure on furniture and furnishings for use in dwelling houses. However, until 5 April 2016 (1 April 2016 for corporation tax) a deduction for wear and tear may be claimed (known as a ‘wear and tear allowance election’), equal to 10% of the ‘net rents’ from furnished lettings (ie after deducting payments that would normally be borne by the tenant, such as water rates). In addition, a deduction may be claimed for replacing fixtures that are an integral part of a building (eg central heating systems), but excluding additional expenditure on ‘improved’ versions of those items. However, replacing single glazed windows with double glazed units is treated as allowable repairs and not disallowable improvements.
Many flats are let unfurnished due to the difficulties of complying with fire safety legislation.
In relation to expenditure incurred on or after 1 April 2016 (for corporation tax) and 6 April 2016 (for income tax), the former wear and tear allowance for fully furnished properties will be replaced with a relief enabling all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property.
The new relief given will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced.
The amount of the deduction is:
– the cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent); plus
– the incidental costs of disposing of the old item or acquiring the replacement; less
– any amounts received on disposal of the old item.
This deduction will not be available for furnished holiday lettings as capital allowances continue to be available for them.
Note also that the renewals allowance for tools (under ITTOIA 2005, s 68) will no longer be available for property businesses from the same date.
As you may have seen, buy to let landlords have been targeted by George Osborne in the Autumn Statement 2015. Many may have realised that landlords will be worse off due to the incoming tax changes, however many may not yet have realised that this now means that higher loan to value (LTV) products have now been removed from the market also.
Many banks have started raising rental stress test levels, making loan sizes smaller, and getting rid of more popular 85% LTV and 80% LTV products.
Even those with more sensible 75% LTV products will now be hit where the property value far exceeds the rent.
So if you already own your property, does this affect you? – Yes, because further advances are one of the cheapest and quickest ways of releasing equity from your property. A further advance is essentially a way of releasing equity from the property without changing your existing mortgage. There are no early repayment charges to pay, and money is released quickly (often within weeks).
For example, a property valued at £400,000 currently mortgaged with TMW (The Mortgage Works), with a rental income of £1500 pcm, would usually get a maximum mortgage of £288,000. This rental income of £1500 pcm would now only get a maximum mortgage of £262,000 which is a staggering reduction of £26,000 or a 9% difference.
So if you have a property valued at £400,000. Your maximum loan to value (LTV) from TMW (one of the biggest buy to let lenders on the market) has now gone from 72% LTV down to 65% LTV.
Interbay has also raised its rental stress test from 110% to 125% DSCR (Debt service cover ratio). Interbay is a commercial & subprime lender, who lends on quirky buy to lets and large HMO’s (houses of multiple occupancy). This means that many landlords looking to raise additional funds after refurbishments will now also need to put in more additional capital than they thought necessary at the beginning.
This is important as buy to lets are classed as investments, which are all calculated on ROI (return on investment). The ability to withdraw your money up to 75% LTV as the property increases in value is one of the best ways of continually ensuring your investment is paying its way, by giving you more money for future purchases. According to an article in the Telegraph, those who have continually refinanced at 75% LTV, and reinvested, have been able to treble their ROI compared to those who owned their properties outright, since 1996.
So what can you do if you are looking to release money from your portfolio? Luckily, there are still banks out there that have not raised their rental stress tests yet.
Experienced brokerages, such as Clark Finance, can help advise you on how to get the most out of your existing properties. We will also give you a free portfolio review service, to help assess your needs.
Richard Clark is an appointed representative (AR) of Connect Mortgages.
FCA Number: 711260
Connect IFA Ltd FCA Number: 441505
Information Commissioner’s Office (ICO) for data protection: ZA125965
Clark Finance, 1B Hatfield Road, St Albans, Hertfordshire, AL1 3RR
The above article is a guest publication from Clark Finance and is presented here in good faith with no warranty, guarantee, or liability offered or accepted
Time is running out to escape the stamp duty surcharge on buy-to-let properties and second homes and the cost of failure is high.
Tax specialists have warned that many could be caught out because the deadline is 1 April, rather than the start of the new tax year on 6 April.
Missing the deadline by a day would increase the stamp duty on an average property in England and Wales, which costs £188,270, by a hefty £5,648. In London it could add more than £15,000 to the cost of the average property purchase.
Chris Springett, director at accountancy firm Smith & Williamson, said anyone looking to buy a second home, residential buy-to-let or investment property must be sure they can complete by midnight on 31 March 2016.
This applies unless contracts were exchanged on or before 25 November 2015.
Springett said: “Missing the date by a few days could cost thousands of pounds and I fear many people could inadvertently miss out.”
The stamp duty charge on a property costing £188,270 is currently £1,265, but this will rise fivefold to £6,913 from 1 April, some £5,648 extra.
Stamp duty on the average London property costing £514,097 will more than double from £15,704 to £31,127.
Springett added: “The changes are due to apply from April Fool’s Day, so anyone seeking to buy a second home, buy-to-let or residential investment property should keep this in mind.”
Landlords advised to wait until April to replace furniture
Landlords should wait to replace furniture in let properties until 6 April 2016 when the 10% wear and tear allowance is replaced and such costs become deductible under a new tax relief, according to accountants Blick Rothenberg LLP.
Robert Pullen, personal tax manager at Blick Rothenberg, said: “From 6 April 2016, the favourable 10% wear and tear allowance for fully furnished residential properties will no longer be available.
“Instead, only the actual costs incurred in replacing furniture, furnishings, appliances and kitchenware provided for the tenants’ use will be deductible. Initial costs are not allowed, only the replacement of such items. The Government expects this measure will bring in around £165 million/year from 2017 onwards.
“This is a significant step away from the wear and tear allowance, bringing the position more in line with the general deductibility of repair costs or replacing toilets, boilers, etc. Landlords of fully furnished properties will feel this change adds additional complexity to an increasingly complicated area of deductible costs, following closely on the heels of the restriction to finance cost expenditure.”
Pullen said the change is good news for landlords of part or unfurnished properties, who will be eligible to claim this new relief. Currently such landlords do not generally receive any relief for such costs following the changes brought in from 6 April 2014.
HMRC have promised to provide ‘comprehensive guidance’ on the thorny areas of whether a replacement is an ‘improvement’ or not. Where the asset is replaced to its nearest modern equivalent, the ‘improvement’ as a result of technological upgrades should be ignored so that the cost is still allowed in full.
Qualifying furnished holiday lets and commercial properties are outside of these rules and relief on the initial cost of such items, as well as replacements, remain allowable.
Property experts says tax changes will lead to higher rents
One of the country‘s leading rental sector analysts is warning that tax changes for landlords’ mortgage interest relief, and the imminent second home stamp duty surcharge, may backfire in terms of rent levels and income raised for the government.
Chancellor George Osborne is introducing both measures under the guise of improving opportunities for first time buyers to purchase properties which otherwise may be bought by buy-to-let investors. Some also believe the measures aim to encourage institutional Build To Rent investors in a bid to improve the quality of the UK’s private rental sector.
But Kate Faulkner, a leading commentator on the lettings market and the creator of Propertychecklists, says that while the policies may get a small number on the property ladder instead of renting and may help establish the ‘large landlord’ sector, there are considerable downsides.
“Those who need to rent – students, overseas, people in debt, those waiting for social housing – are likely to see a hike in rents. And if buy-to-let reduces, the tax expected to be raised from the increases may not then be able to fund the first time buyer initiatives,” she says.
“So why on earth is George Osborne ignoring the money that investors could put into building instead of buying existing homes? Many landlords with £100,000-plus could help to create new homes. So where are the ‘mini Build To Rent’ sector initiatives for smaller landlords who are established and want to continue to expand their portfolio?” she asks.
Warning against falling for stamp duty surcharge 'avoidance' scam
The Residential Landlords Association (RLA) is warning private investors not to be lured by firms offering schemes which allegedly promise to help them avoid the controversial 3% stamp duty surcharge on additional homes from 1 April.
RLA policy director David Smith, who has met with the Treasury to discuss the new measure, says it’s crystal clear that loopholes have been spotted by the government – and filled in.
“Landlords should be very careful about making plans for their property purchases until after the budget. Any property purchases must be completed before 1 April if the buyers want to avoid paying the new levels of Stamp Duty Land Tax. The Treasury has made it abundantly clear that anyone offering schemes to get around the changes is talking nonsense,” says Smith.
Smith says the Treasury made clear that the new rules will be highly restrictive and confirmed that no additional guidance will be made available until after the Budget in mid-March, which will announce the changes to implementation following the official consultation process on the ‘additional homes’ proposal.
It was also revealed that the ’15 property rule’ – which would see investors buying 15 or more properties exempt from the 3% surcharge – would only apply to those buying all 15 on one contract and in a single transaction.
Landlords urged to carry out mid-tenancy inspections
Now is the ideal time of year for landlords to carry out a mid-tenancy inspection of their rental property, according to the Association of Independent Inventory Clerks (AIIC).
This is because many homes will currently be suffering from mould, which is generally caused by condensation problems.
The AIIC is therefore urging landlords to carry out a mid-term inspection in the next few weeks in order to stop any problems from escalating.
“Mould can be caused by a lack of ventilation or incorrect drying of wet washing – even if just one tenant is living in the property,” says Patricia Barber, Chair of the AIIC. “It can also be caused by on-going leaks both inside and outside the property, blocked gutters and missing roof tiles.”
Barber adds that these problems are exacerbated if the property houses more than one occupant.
The AIIC advises landlords that if there is any sign of mould build-up they should make sure that it's not down to external factors, a lack of ventilation facilities or any other problem they could solve themselves.
If, on the other hand, it is being caused by bad living conditions then landlords should advise their tenants of the required action to take in writing.
This should include reference to ventilating the property, wiping down walls and windows in bathrooms, using extractor fans and not placing wet washing on radiators or heaters and the importance of wiping down any mould spores as soon as they appear.
“If mould is not dealt with on a regular basis the resulting damage could cause both tenant and landlord a lot of money at the end of a tenancy,” says Barber.
More than half (55%) of buy-to-let mortgage applicants are unaware of the impending changes to mortgage law, according to a survey.
Accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes, says Direct Line for Business which conducted the survey.
The survey conducted amongst mortgage brokers across the UK, revealed that nearly two-thirds (62%) of applicants were unaware of either the changes to mortgage tax relief or the EU’s Mortgage Credit Directive (MCD), that means changes which could impact their ability to secure a mortgage.
This lack of awareness rises to 71% amongst ‘accidental landlords’, namely those who rent out property due to unforeseen circumstances such as being unable to sell, or inheriting a home.
Mortgage advisers estimate that accidental landlords account for approximately one in six (17%) new mortgage applications, with overall buy-to-let mortgage applications growing by 29% in the past year according to the panel.
The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy-to-let mortgage applications, compared to 59% who expect it to have a negative impact.
The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as “consumer” lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests.
Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic-rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy-to-let property will pay a 3% surcharge on their stamp duty bill.
Nick Breton, head of Direct Line for Business said: “The new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.
“With house prices in the UK rising by 7% in the year leading to October 20152, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city.”
The controversial Right to Rent scheme has affected fresh criticism on the day it goes live.
From today, 1 February, landlords are required to check a tenant’s immigration status before granting a tenancy and risk fines of up to £3,000 if they let to someone without the right to live in the UK.
However, the Residential Landlords Association (RLA) claims more than 90% of landlords have received no information from the Government on their new legal duty to check the immigration status of their tenants.
According to a survey of more than 1,500 landlords, carried out by the RLA, the lack of information from the Government is leading to confusion about how landlords are expected to carry out the checks.
The survey found that that 72% of landlords do not understand their obligations under the policy, designed to make the country a more hostile environment for illegal immigrants.
The result will be that many landlords are unlikely to rent to those who cannot easily prove their right of residency. The survey also found that 44% of landlords will only rent to those with documents that are familiar to them: this will cause serious problems for the estimated 17% of UK nationals without a passport. This is likely to be a higher proportion of young people and the less well off.
The RLA is calling on the Government to undertake a more thorough evaluation of the impact of this policy in the West Midlands where it has been piloted, before rushing into rolling it out across the country.
The evaluation of the pilot scheme noted that there was only “limited evidence” that it was deterring illegal immigrants from seeking to access rental housing.
Commenting, Dr David Smith, Policy Director for the RLA said: “The Government argues that it’s ‘right to rent’ plans form part of a package to make the UK a more hostile environment for illegal immigrants. The evidence shows that it is creating a more hostile environment for good landlords and legitimate tenants.
“Landlords are damned if they do and damned if they don’t. Fearful of a fine they face two difficult ways forward. They can play it safe, and take a restrictive view with prospective tenants, potentially causing difficulties for the 12 million UK citizens without a passport. Alternatively, they may target certain individuals to conduct the checks, opening themselves up to accusations of racism.
“The Government’s own evaluation of its pilot scheme noted that there was only limited evidence that the policy is achieving its objectives. Given the considerable problems it will create for tenant-landlord relations it’s time for the Government to think again.”
Meanwhile figures obtained from the Home Office by law firm Simpson Millar show that just nine civil penalties were issued to landlords under the Right to Rent pilot between 1 December 2014 and 19 November 2015.
Six fines were issued to landlords of properties in Birmingham, two in Sandwell and one in Dudley. The pilot covered the city of Birmingham, Walsall, Sandwell, Dudley and Wolverhampton.
“Given that the pilot covered an area with more than 2 million people it is hard to see how the scheme has had any significant financial impact at all. Rather, it has the potential to create a culture of fear and discrimination,” says Sumita Gupta, head of immigration at Simpson Millar in Manchester.
“There will be rogue landlords who won’t care about undertaking the required document checks; they could view this new scheme as an opportunity to exploit a very vulnerable group of people who might otherwise find it difficult to secure accommodation and end up homeless.”
Illegal eviction prosecutions show councils are cracking down on rogue landlords
Rogue landlords are being weeded out by councils for some of the worst cases of illegal eviction, according to the Local Government Association.
It highlighted one case where a family of nine were forced into a garage. A mother and young son booted out of their home with their belongings were also among tenants wrongfully kicked out of their homes by reckless landlords taking the law into their own hands.
The Local Government Association said councils are cracking down on illegal evictions, with four councils securing successful prosecutions in one month alone – but is calling for the legal process to be speeded up to bring more cases to court.
Two of the landlords narrowly avoided jail after forcing tenants out of their home without following the correct procedure.
Recent council prosecutions include:
In Birmingham, a landlord was prosecuted for illegally evicting a couple and their seven children from their home, changing the locks and shoving the family into the garage. The offence cost him more than £2,000.
Also in Birmingham, a landlord was forced to pay more than £5,000 after illegally evicting a mother and her 11-year-old son, putting her belongings in the garden and changing the locks. When she regained access using a locksmith he had the locks drilled out, leaving her too scared to stay at the property.
In North East Lincolnshire, a landlord received a suspended prison sentence after a tenant returned to the flat to find the locks changed and some possessions removed. The landlord said he thought the tenant had left the property.
In Middlesbrough, a landlord was given a 12-month community order after forcing her way into a home and evicting a family with young children, bundling their possessions into black bags.
In Manchester, a landlord was fined £3,500 after removing a family illegally and making them homeless.
The Government recently announced £5 million of extra funding to help councils tackle rogue landlords and the Housing and Planning Bill includes provision for maximum fines of up to £30,000.
The LGA is calling for the legal process to be speeded up to bring more illegal eviction cases to court. The LGA, which represents more than 370 councils across England and Wales, said the recent prosecutions show local authorities won't allow unscrupulous landlords to bully tenants out of their homes.
Cllr Peter Box, LGA housing spokesman, said: "Councils won't hesitate to take irresponsible landlords to court and show the consequences they may face if they don't apply the law correctly.
"Making people homeless by bullying them out of their properties, changing locks and removing personal belongings is not only a criminal offence, but also traumatic for the victims.
"When relationships break down between tenants and landlords there are strict legal processes that have to be followed and council officers are here to help both sides move forward.
"No landlord can act outside the law and councils will do everything in their powers to ensure tenants can live in rented properties safe in the knowledge that local authorities are there to protect them from illegal eviction.
"Failure to follow the right eviction process could leave reckless landlords with a criminal record and an unwanted new home themselves – a prison cell.”
The National Landlords Association (NLA) has criticised local councils for telling private tenants to ignore eviction notices served by their landlords and to wait for bailiffs to turn up before moving out.
The NLA says half (49%) of tenants who’ve been served with a section 21 notice by their private landlord say they have been told to ignore it by their local council or an advice agency such as Shelter or the Citizen’s Advice Bureau (CAB).
The figures shine a light on the scale of the issue, which was recently highlighted by the Telegraph, and has been exacerbated by the increasing use of private landlords by local authorities to discharge their housing duties.
The NLA says that the advice is increasingly being offered because councils are refusing to accept tenants’ housing applications before an order for possession has been granted by a court, despite guidance from central Government that confirms all housing applications should be accepted from the time notice is served on the tenant.
NLA chairman Carolyn Uphill said: “We’ve always known that tenants receive this kind of advice and it’s a huge problem because it damages the confidence of landlords who work in the community to home those who aren’t able to access social housing.
“There is no justification for prolonging the stress and uncertainty brought by a possession case. Advice like this creates unnecessary strain on tenants, landlords, and the courts service, which must first hear the case and order possession before councils are prepared to carry out their statutory duties.
“Nobody should ever be told to wait until the bailiffs turn up; it makes an already unpleasant situation much worse for everyone and creates a vicious cycle of misery and spiralling costs for all involved.”
Mortgage intermediaries are split on the prospects for further growth in the buy-to-let market this year.
Brokers are positive about the health of the market but are increasingly concerned about the outlook for 2016, according to new research by NatWest Intermediary Solutions.
In a survey of 441 intermediaries, two thirds said they had seen an increase in demand for buy-to-let mortgages from customers over the past six months, while just 7% reported a decline.
They are far more gloomy about the outlook, with more than four out of 10 expecting to see a fall in buy-to-let business.
Although 32% were still bullish and expected to see growth this year and around one in four expect the market to remain stable.
More than a third said the best prospect for growth this year came from remortgaging.
Graham Felstead, head of NatWest Intermediary Solutions, said the buy-to-let market should remain attractive to brokers.
“However, it does appear that some of the uncertainty surrounding the interpretation of the new Mortgage Credit Directive, the new tax regime for landlords and the Government’s focus on boosting home ownership has muted the optimism for further growth amongst a sizeable number of brokers.
“We may well witness a ‘wait and see’ approach by many until the new factors bed in.”
Felstead said brokers are looking to lenders for clear, consistent and uncomplicated criteria, affordability calculations and underwriting, good BDM support and the availability of interest only.
Money site claims landlords sitting on £514m of unprotected deposits
Financial website money.co.uk has claimed that 284,000 landlords have failed to protect tenants’ deposits, amounting to £514m in unprotected funds. It has also called for a national register of landlords.
Money.co.uk commissioned the Centre for Economics and Business Research (Cebr) to carry out research into deposit protection.
It concluded that with approximately one in five (4.6 million) households in the UK now privately rented and the average protected deposit at £1,040, the total value of deposits paid by tenants and placed in protection schemes by landlords has now reached a whopping £3.2 billion.
But despite the risk of fines for landlords who fail to protect their tenants’ deposits, money.co.uk claims 15% are still failing to do so. The site claims these landlords are together earning up to £8.5 million a year in interest on unprotected money, while leaving themselves and their tenants with no third party protection when their agreement comes to an end.
It is mandatory for all landlords to protect deposits for assured shorthold tenancies via a government backed tenancy deposit scheme within 30 days of receipt. Landlords must also give tenants prescribed information about where their deposit is protected, who they are renting from and how they raise a dispute.
The schemes give landlords and tenants access to a free dispute resolution service if things go wrong when the tenant moves out, eliminating the need for court action in many cases.
Hannah Maundrell, editor-in-chief at money.co.uk, said: “Renting is a money minefield and with troubled times ahead for the buy-to-let market, the problems caused by ‘dodgy landlords’ are only likely to get worse. While many landlords are doing the right thing and protecting deposits in one of the official government backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable.
“Renters must take control and ask landlords which protection scheme their money will be stashed in before signing on the dotted line. Existing tenants must ask for proof their money is protected if their landlord hasn’t given them the correct written documentation.
“It’s not right that tenants are left responsible for taking their landlord to court if their deposit hasn’t been protected. The government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start. This works for Scotland and Northern Ireland and it seems crazy this hasn’t been brought in across the UK. Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to; and the foundation for policing landlords that are currently going unchecked.”
Bank of England governor Mark Carney has once again expressed concern at the rapid boom in the buy-to-let market.
Answering questions from MPs about potential risks to the economy, Carney said: “We think developments in the buy-to-let market have warranted heightened scrutiny and have done so for some time.
"As a general rule, any time you see a very sharp and sustained increase in activity in one area… it at least bears heightened scrutiny.”
Bank of England figures show lending to landlords has surged from 8.8% of new loans eight years ago to 14.5% last year. The bank warned in its December financial stability report that its financial policy committee “stands ready to take action if necessary”.
Carney told the Treasury Select Committee the Bank will examine the effect of tax changes brought in by George Osborne to calm the market.
A mortgage broking firm has analysed the market and concluded that buy-to-let remains an attractive investment in the immediate future.
However, Private Finance has also warned that accessing finance will now be the biggest challenge for amateur landlords in the new market landscape.
The market analysis took several key factors into account including the reduction in higher rate tax relief, the stamp duty increase and the outlook for house prices and yields.
The broker has also considered the impact of the European Mortgage Credit Derivative (MCD) and concluded that whilst these factors may have a negative impact, they are unlikely to dampen the market altogether.
Private Finance has applied its model to a typical buy-to-let situation in a typical commuter town. Its findings demonstrate that a potential 62% return on capital could be achievable, if the investment is held for a term of at least five years utilising a fixed rate mortgage at 3.6% for the duration which is currently available in today’s market.
Whilst a number of commentators have suggested that annual capital appreciation of as much as 5% is achievable in areas such as this, Simon Checkley, managing director of Private Finance has said that a buy-to-let still remains viable at a lower rate of appreciation.
“Of course, these figures assume the full extent of the tax relief reduction and stamp duty hike so the short term returns could look more attractive if you are able to take immediate action and complete a purchase before 1 April 2016 when the increased stamp duty will apply,” he said, “We are not underestimating the impact of the loss of higher rate tax relief or the increase in stamp duty on the market. What we are saying is that they are not necessarily 'deal breakers'. Of course, there have been many protestations in recent weeks from concerned landlords as a result of the planned tax changes. What is less commonly recognised is that there are still opportunities in this market if an investor makes a sound purchase subject to other underlying economic factors. Understandably, many landlords are claiming they will lose considerable sums of money as a result of these changes. However this does beg the question of the true viability of their original investment.”
Checkley went on to say that it can be difficult to make things work in London because house prices are such that yields remain relatively low. He explained that this affects the amount of mortgage investors can obtain and therefore the attractiveness of buy-to-let as a whole. However, a number of commuter towns by contrast are offering both the potential for capital growth as well as decent yields.
Landlords say “reasonable chance” of judicial review of BTL tax change
The two landlords behind a campaign to seek a judicial review of George Osborne’s controversial mortgage interest tax relief change say they have been told there is a “reasonable chance of success.”
Landlords Steve Bolton and Chris Cooper have sought the advice of a legal team including Cherie Blair QC on the chance of securing a review of section 24 of the Finance (No. 2) Act 2015 – which includes the proposed restriction of mortgage interest tax relief at a basic rate, even for higher rate-paying landlords.
“The next step is for our lawyers, Omnia Strategy LLP, to send a letter outlining our case to the government with a view to commencing judicial review proceedings” says the landlords on their Facebook campaign page.
Bolton, whose Platinum Property Partners business has £200m of residential property in its portfolio, is working with fellow landlord Cooper to mount a legal challenge on behalf of around 250 investors in the PPP network.
The pair say on their Facebook page: “The Finance Act 2015 includes Clause 24, which overturns a fundamental financial business principle, where INCOME less COSTS equals PROFIT. The current government sees fit to change this tried, tested and proven commercial formula. In simple terms, the government believe that it makes complete sense to tax property owners on that part of the rent that has been paid to the lender as mortgage interest, as if that money was still in the property owners’ bank account!"
Almost one in five landlords may quit sector because of tax changes
It comes as no surprise but a survey shows an overwhelming proportion of landlords believe the government’s buy to let tax changes will damage the sector.
The research by property management group Orchard Shipman, questioning 500 landlords earlier this month, shows 90 per cent admitting that the tax hikes will result in higher rents.
A quarter of landlords will be selling some of their properties, and 18 per cent say they are likely to pull out of the market altogether.
The research also reveals that over 90 per cent of landlords believe they should be free to deduct legitimate costs, just like any other business – one of the main grievances about the government’s proposal to limit mortgage interest tax relief for higher-taxed landlords.
More than half of landlords surveyed said they would be raising rents in 2016 to cover the increased financing costs.
But Orchard Shipman says government ambitions to make buy to let look less appealing may yet be thwarted.
Many landlords and property investors are committed and passionate and will do whatever it takes to protect their interests. Our research shows that the majority of landlords are looking at ways to recover the potential drop in revenue says Shane Spiers, the firm’s chief executive.
Find out more about investing in property today by speaking with expert letting agents in St Albans Let Me Properties
A report from an online estate agent has found that half of UK landlords are not prepared for the Right to Rent legislation, set to come into force on 1 February 2016.
A survey of 5,000 landlords by urban.co.uk found 20% of landlords believed that they had until April 2017 to prepare for the changes, while 3% believed they had until 2018 to get ready.
The new legislation, already implemented in the West Midlands, will soon require all landlords and agents in England to check a tenant’s immigration status or right to rent in the UK. A failure to prepare could leave landlords at serious financial risk, with potential fines of £3,000 if they do not comply.
The latest findings are revealed in Urban.co.uk’s Landlord Knowledge Survey Report. The report, which questioned private landlords on a number issues relating to the letting market, was undertaken to understand where there were gaps in the knowledge of UK landlords, as a raft of new legislation is coming into play in 2016, adding to the growing list of responsibilities for landlords.
Other key findings include:
Only 10% of landlords provide the correct information to tenants at the start of a lease.
The majority (90%) of landlords were unable to identify the characteristics of a House in Multiple Occupancy (HMO)
16% of landlords were putting themselves at serious financial risk by failing to provide a valid contact address on tenancy agreements; an action which could see contracts being deemed as null and void.
One reason to explain the lack of industry knowledge could be due to the rise in accidental landlords who rent property due to circumstance such as having inherited property. Rightmove’s consumer rental forecast in 2013 for instance found that 30% of UK landlords are now accidental landlords and this naturally means that many are inexperienced in the market place.
Adam Male, co-founder of urban.co.uk, said: There has been an influx of new legislation relating to the rental market made in recent years and we know that UK landlords are struggling to keep on top of these changes. Despite knowing many of the basics, many find it difficult to navigate the minefield of changing renting rights and wrongs and this is particularly so for accidental landlords.
A Camden councillor has been prosecuted by the council he works for after failing to carry out improvement works to a rented property he owns.
Jonny Bucknell used to be Camden Conservatives’ spokesman for housing, and has been a councillor for Belsize Ward in Labour-run Camden since 2010.
Appearing at Highbury Magistrates’ Court, the 58-year-old admitted to failing to carry out necessary improvements on a home he rents out in Primrose Hill, London. He asked for more time to prepare a statement of mitigating circumstances before sentencing – potentially later this week.
He was first ordered to make improvements to the flat on 22 August 2014, but failed to comply with the improvement notice within the required period of time.
Cllr Bucknell later moved the tenant into temporary accommodation at another property he owns in the same street.
But magistrates heard there was a period of time in which the tenant was still living in the home requiring improvement.
Cllr Bucknell represented himself in court and said he initially intended to plead not guilty, but changed his mind at the last minute. He claimed there were “significant mitigating circumstances” to his failure to act on the improvement notice.
RLA accuses government of “discriminating against UK investment” in housing
Government policies are discriminating against UK based investment in the housing market by making it easier for foreign investors to purchase properties.
This allegation has been made by the Residential Landlords Association (RLA) in its submission to the Treasury ahead of the budget in March.
In the Autumn Statement it was announced that a 3 percentage point levy would be added to Stamp Duty for the purchase of buy-to-let property, except where 15 or more properties are being purchased at once. As the vast majority of investment in UK rental housing has been made by small landlords owning just a handful of properties to rent, this measure discriminates against them in favour of larger investors, many of whom are likely to be from overseas.
The RLA is calling for all new build properties contributing to a net increase in the housing stock to be exempt from the stamp duty levy. A survey of more than 1,100 landlords by the RLA found that 30% would be more likely to buy new properties if this were the case.
With the Office for Budget Responsibility uncertain about the likely impact of the Stamp Duty changes, the RLA is calling for the Government to give more time to consider the implications of the policy given the potential ramifications on housing supply and rent levels. Ministers have indicated that the policy will be implemented from 1 April despite the consultation having not yet been concluded.
RLA chairman Alan Ward said: “It is astonishing that a Conservative chancellor is leaving the way open for foreign investors and cutting opportunities for individual UK landlords. This additional assault on private landlords coming on top of changes to the taxation of rental income will only lead to reduced supply and higher rents
“The chancellor’s planned changes to Stamp Duty came as a bolt out of the blue. Regardless of the Government’s plans for home ownership, demand for rented housing is only set to increase.
“The Government needs to understand that not everyone will be able to afford to buy a house or indeed want to, even if more houses are built. Its whole policy towards the private rented sector needs to change. If it does not, it will only make the housing crisis worse.”
The RLA is also taking advice over whether the Government’s changes to mortgage interest relief, announced in the 2015 Summer Budget, are a breach of the Human Rights Act and European Union Law on free movement of capital.
Landlords shouldn’t pay company BTL surcharge, says lender
Foundation Home Loans (FHL), the specialist buy-to-let lender, has hit out at lenders “overcharging” for limited company BTL mortgages.
FHL announced in December that its own limited company BTL mortgage would be priced at the same rate as its core range.
FHL commercial director Simon Bayley said that at a time when landlords are under pressure because of tax and stamp duty changes, it cannot be right to expect clients to stump up extra just because of the lack of choice.
"Certain lenders are charging up to 100bps extra for this product over their core range, when the risk is no different – effectively asking landlords to pay any tax saving from using a limited liability company structure to the lender instead,” he said, “Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model. As soon as they realise that there are lenders, like FHL, who are not in the market to take short term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear. It certainly will not win any friends among advisers and their landlord clients in the long term."
Accountants warn Airbnb hosts to watch out for the taxman
The Association of Chartered Certified Accountants (ACCA) has warned that HMRC is set to target those making money from renting out property through Airbnb.
Chas Roy-Chowdhury, ACCA head of taxation, said: “Money made by renting out a property through Airbnb will be classed as income and must be declared to the taxman. If you are using the website to rent out a property you own then I would strongly advise you to make the necessary declaration to HMRC.
“If you make a voluntary declaration to HMRC, rather than wait for them to come knocking, it is far less likely you will receive a fine. HMRC are under tremendous pressure from the government to increase the tax revenues collected and if they believe that you are deliberately withholding information about a source of income they will look to penalise you.
“If this is a second source of income is it likely you will owe tax on all income from the rental. If you are unsure you should seek the services of a Chartered Certified Accountant, who will be able to advise you how to declare this income and what needs to be declared.”
Conservative MPs have defeated a Labour amendment to the government’s housing and planning bill to require landlords to ensure their properties “are fit for human habitation”.
The amendment to the bill was defeated by 312 votes to 219 on Tuesday, a majority of 93.
Shadow housing minister Teresa Pearce proposed the amendment. She said: “The majority of landlords let property which is and remains in a decent standard. Many landlords go out of their way to ensure that even the slightest safety hazard is sorted quickly and efficiently.
“So it is even more distressing when we see reports of homes which are frankly unfit for human habitation being let, often at obscene prices.”
Pearce said that the condition of some rented accommodation – such as mouldy walls – would not be tolerated in other sectors.
“Where else in modern day life could someone get away with this? It’s a consumer issue. If I purchased a mobile phone or a computer that didn’t work, didn’t do what it said it would or was unsafe I would take it back and get a refund,” she said.
Pearce said that in market where demand outstrips supply, renters lacked the consumer power to bargain for better conditions.
The result of the vote prompted outrage from tenants’ campaign groups on Twitter.
Hackney Renters (@hackney_renters) Tweeted: “Jaw dropping: Even though 16% of rented homes unsafe Tories believe landlord propaganda about basic standards 'pushing up rent'” and said the vote was “Further evidence for just how much the current government is in cahoots with the private landlords”
Tenants advised to wait for bailiffs before leaving rented property
The Telegraph has raised the issue of how local authorities are increasingly encouraging evicted tenants to stay put in a property until the bailiffs arrive.
Professional landlords won’t be surprised at councils’ advice but amateur landlords could be surprised by the approach which encourages non-paying tenants to ignore their landlords’ requests to leave a rented property.
The Telegraph article highlights the case of one family who rented out their home while living abroad. They gave the tenants notice to leave when they returned but the council advised the renters to stay in the property until the last possible moment, leaving the owners homeless.
The problem is most common in London and Birmingham and other areas of high rental demand.
David Lawrenson, of LettingFocus.com, described the councils’ approach as “stupid” and said it doesn’t encourage landlords to take on people who are financially vulnerable.
Alan Ward of the Residential Landlords Association said councils were unable to help people until they had nowhere else to go and pointed out that tenants cannot be rehoused until the bailiffs are at the door.
Rush to buy as landlords aim to beat stamp duty hike
A north London estate agents has reported an increase in investors looking to buy before April in order to avoid having to pay higher stamp duty rates.
Jeremy Leaf, former RICS chairman and north London estate agent, claims there isn’t any time to lose and advises investment buyers to ensure they have a good solicitor and that they have taken mortgage advice.
Chancellor George Osborne announced in the Autumn Statement that landlords and investors will pay a 3% surcharge on stamp duty rates from April.
“On the ground, we have already noticed investors keen to buy before the middle of February so that they can complete by April and avoid the extra stamp duty take. Because of the tight timeframe, there is more risk in buying a property in a chain because of the chance of fall-through of the sale, leaving even less time to complete a transaction. Landlords may opt for new-build instead where there is no such risk and they have certainty of sale.
“Inevitably, we have seen examples of vendors taking advantage of landlords’ desperation to complete before the April deadline, with some being greedy on the price,” he said.
“Landlords, or indeed those buying a second home, who are keen to do a deal before April should also ensure they have a good solicitor on board and have spoken to an independent mortgage broker about finance. With the NAEA warning in December of a typical 50-day wait for a mortgage offer, borrowers can’t afford to hang around by going direct to a lender. A mortgage broker will help them identify the lenders who can move quickly and get an offer out in time.”
The Residential Landlords Association (RLA) has accused the Government of declaring war on individual landlords and described 2015 as an “annus horribilis” for the residential landlord.
In a New Year message RLA policy director David Smith said the association met with dozens of MPs last year, responded to numerous Government consultations and lobbied on issues from Right to Rent to Flood Re exclusion.
Just over a third (36%) of members’ subscription goes into the RLA’s annual fighting fund of more than £600,000 that runs the association’s campaigns team. The balance of the funding runs the RLA helpline, develops training, creates documents, produces the magazine and helps run and update the website.
“As it says on the RLA website, we provide national support for landlords: not working on a single topic like mortgage interest relief, but all those issues – national and local – likely to affect the way we run our renting businesses,” said Smith, “By attacking the private rented sector chancellor George Osborne is attacking the very people who are providing homes for those who cannot afford to buy and those for whom councils cannot find a home. He is attacking those of us who help social landlords when they can’t cope with demand and even those who have opened their doors to cope with the scores of people rendered homeless by the recent floods.”
Smith said Osborne had effectively declared war on individual landlords and that it would appear the PRS has become little more than a cash cow for the Treasury.
On top of the upcoming changes to income tax and stamp duty, February brings the launch of Right to Rent checks for landlords to control illegal immigration.
“In Wales it’s all change too. If you thought that a Labour government was a safe haven for landlords then Wales proves otherwise,” said Smith, “A new landlord registration and licensing scheme will prove to be a bureaucratic bowl of spaghetti that will cost good landlords and their tenants and encourage landlords to leave the sector whilst the foundations have been laid that will make the sectors fundamentally different between England and Wales.”
Smith said the RLA spent 2015 fighting to protect landlords from proposed legislation to abolish section 21 notices, agency fees and rent controls.
“On all of these issues and many more your RLA is leading the way. Don’t expect a government U-turn on any of these issues – politics doesn’t work like that,” said Smith, “Discussion, argument, negotiation, amendment are the processes which in the end produce reasonable agreement.”
Smith warned the changes George Osborne proposes will have knock-on effects throughout society, with social housing and build-to-rents projects first to be hit – with the prospect of falling supply and rising rents looming for tenants.
“We need to be clear. There is and will continue to be a PRS. There are challenges ahead and there is no doubt that as landlords you need to look long and hard at what is best for your business,” he concluded.
A group of landlords and property investors have mounted a legal challenge to the Government’s proposals to increase tax on buy-to-let investments and reached their initial £50,000 crowdfunding target in just a matter of days.
Private landlords Chris Cooper and Steve Bolton set up the crowdfunding page on Crowd Justice on Boxing Day and so far more than 600 landlords have contributed. If the group’s application for a judicial review is successful, a new fundraising phase will be launched.
The group is hoping a judicial review will overturn the controversial “Clause 24” of the 2015 Finance Bill, in which the Government introduced plans to limit the amount of tax relief landlords can claim to the 20% basic rate, regardless of the tax band they fall into. A judicial review is a legal process in which a court reviews legislation or administrative decisions.
Calling it the “Alice in Wonderland Tax Grab”, the group said: “The Finance Act 2015 includes Clause 24, which overturns a fundamental financial business principle, where income less costs equals profit. The current Government sees fit to change this tried, tested and proven commercial formula.
“In simple terms, the Government believe that it makes complete sense to tax property owners on that part of the rent that has been paid to the lender as mortgage interest, as if that money was still in the property owners’ bank account.”
The Government has repeatedly referred to the term “level the playing field” when comparing owner occupiers and property investors but the crowdfunding group point out that owner occupiers already have a number of tax advantages compared to investors. These include:
Owner-occupiers pay zero Capital Gains Tax when they sell their property, whereas owners of rental accommodation pay between 18% and 28% capital gains tax.
Owner-occupiers have no regulations or costs associated with fire, gas and electrical safety and certification, licensing and energy performance certificates, whereas owners of rental accommodation have financial and/or legal obligations relating to more than 200 different regulations and laws. Failure to comply can result in imprisonment and substantial financial penalties.
Many owner-occupiers can buy property with a deposit of just 5% to 10% and access lower interest rates, compared to 20% to 25% deposits and higher interest rates for buy-to-let borrowers.
Owner occupiers can benefit from the Rent a Room scheme, which enables them to earn £4,250 a year (£7,500 from April) tax-free from renting out a room, compared to paying tax on rental profits of between 20% and 45%.
KPMG predicts higher rents in 2016 as tax changes hit
Accountants KPMG has warned that the upward trend in buy-to-let may reverse in 2016 due to the tax changes being introduced this year and beyond.
The firm has warned that the stamp duty hike for landlords could result in developers struggling to sell new build property while reduced supply of rented property could mean higher rents for tenants.
According to figures from the Council of Mortgage Lenders, the number of buy-to-let loans increased nearly 28% from October 2014 to October 2015, with the value of loans increasing by almost 36% in the same period. But KMPG warns that these trends could reverse this year.
Dermot Callinan, head of private clients at KPMG in the UK, pointed out that the past four years have seen 14 tax changes targeted at residential property and in particular buy-to-let landlords, making the economics of such an investment less and less attractive.
“So far, experience had shown that the majority of individuals have opted to pay the higher taxes than invest differently, and in the short-term, we may well see a rush to invest in rental properties before the additional 3% in stamp duty land tax on buy-to-let and second home properties (above £40,000) comes in from 1 April 2016,” he said, “However, following its implementation and on top of a number of other measures phased in from 2017 onwards such as landlords facing a restriction in their ability to offset mortgage interest, it will be interesting to see whether buy-to-let investors opt to keep property portfolios or sell up ahead of the further changes coming in to force.”
Callinan warned that if large numbers of landlords take the decision to sell leading to a significant amount of second hand stock being put up for sale, this will have an impact on the housing market and could also cause problems for some developers reliant on investors to maintain the current rate of sale.
“Added to this, if fewer buy-to-let properties are available thereby creating a squeeze on the market, there is also the risk that these changes could result in high rental rates as landlords seek to compensate for increased costs,” he said.
“While a number of the tax changes have been highlighted as major revenue raisers for the Government, the thinking behind them is also to deter some from investing property in order to leave more opportunities for owner-occupiers to get onto the housing ladder.
“Whether these changes achieve the Government’s policy aims remains to be seen, but these measures may well dampen demand for the kind of properties that are marketed as buy-to-let investments in the medium to long-term.”
The Association of Residential Letting Agents (ARLA) has warned that rents will rise in the New Year due to a number of rule changes affecting landlords.
David Cox, ARLA managing director, says the various pieces of legislation coming into play in 2016 will result in increased compliance costs for landlords, and as a result push up rents for tenants.
“We urge the Government to re-think its proposals around reducing mortgage interest relief, scrapping the wear and tear allowance and hiking up stamp duty by 3% on buy-to-let properties. Whilst these remain, the Government’s goal of increasing the percentage of people in home ownership is getting further out of reach,” he said.
“The issue of supply and demand in the rental market will be increasingly pushed to its limit with rising demand outstripping supply.”
However, ARLA said it is good news that regulation in the industry will be tightening up in 2016.
The letting agent trade body said it hopes that the provisions of the Housing and Planning Bill – when brought into force – will give enforcing bodies and the courts more teeth in tackling rogue and criminal landlords and agents. This will develop in 2016 to enforce harsher penalties for landlords and unregulated agents that aren’t complying with basic laws.
“The Right to Rent checks introduced in the Immigration Act 2014 will be rolled out nationally from 1 February 2016 following a successful pilot scheme in the West Midlands,” said Cox, “However, we worry that the goodwill established towards the scheme may be tested by the increase in volume, disenfranchising landlords from the process.”
“Tenants will damage properties to avoid eviction” claims online lettings agent
Tenants could be trying to avoid eviction by damaging property and abusing the new legal system designed to ban revenge evictions, an online lettings agent claims.
The new legislation came into force on 1 October meaning landlords who have failed to remedy legitimate repairs requests cannot use the traditional Section 21 procedure to regain possession of their property.
But research by PropertyLetByUs – an online agency – claims 10% of tenants have admitted that they have caused over £500 worth of damage to properties.
“While in principle the legislation is a good move, ensuring that landlords don’t evict tenants because of a genuine disrepair issue, it is open to dishonest tenants bending the law to avoid eviction,” claimed the agency’s managing director, Jane Morris.
“Landlords need to ensure that they make regular checks on their properties and handle tenants’ complaints about damage, quickly and efficiently. If landlords are suspicious that the damage is intentional to avoid eviction, they should seek legal advice.”
Buy-to-let market to slump in 2016 and 2017, mortgage lenders predict
The Council of Mortgage Lenders is warning of a possible slump for the buy-to-let market in the next two years.
“Buy to let faces a challenging period as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals. Buy to let house purchase activity in 2015 may peak and fall away below 2014 levels by 2017,” said the CML’s latest market commentary.
The CML says there are three substantial causes of buy-to-let uncertainty – incoming tax changes on mortgage interest relief from 2017, the recently announced 3% stamp duty surcharge on buying buy-to-let property from next April, and the possibility of the Bank of England constraining mortgages for landlords from next year.
“Inevitably, these will adversely impact the rate of growth in the sector and even cause lending volumes to ease back,” warned the CML.
It says buy-to-let will account for 9% of all UK property transactions this year – still much lower than in the 2006 to 2008 period. BTL will account for around 16% of all mortgaged transactions.
“Future prospects are closely tied to potential macro-prudential regulation and incoming tax changes. We currently expect buy to let house purchase activity in 2016 to fall below its 2015 level, and for activity in 2017 to fall below the level seen in 2014,” the council said.
With regard to the stamp duty surcharge, the CML says that a consequence will be higher activity levels in the first quarter of 2016, to avoid the hike before it comes into effect.
“The scale in terms of transactions is likely to be in the low thousands, though the overall impact will be close to zero over 2016 as there will probably be a corresponding fall in transactions in subsequent quarters,” the CML warned.
The Bank of England Governor Mark Carney is the latest influential figure to hint that there may soon be additional restrictions on landlords’ abilities to obtain buy-to-let mortgages.
In an interview with the Financial Times, Carney said he was concerned about high levels of lending for buy-to-let mortgages, highlighting a possible risk that large numbers of investors would try to sell at the same time if house prices slumped.
"So we do have to be careful around that sector. And I think collectively there are a number of things happening and we are watching it, we are watching it closely and we will take action," Carney told the FT.
Richard Lambert, CEO at the National Landlords Association (NLA), said the government is pushing many landlords to the conclusion that they have almost no other option than to sell up.
“There are still big questions as to what the Governor has in mind to 'tackle' buy-to-let, especially given the role George Osborne has played in significantly cooling the market in recent months,” he said, “Mr Carney has an important and very difficult job to do, but repeatedly and publicly labelling a sector which plays such an important role in supporting economic recovery as dangerous is hardly helpful. If the Governor is truly worried about landlords dumping their properties, then his best bet would be a quiet word in the ear of our anti-PRS Chancellor.”
ARLA and NAEA: House prices will be up 50% and rents 25% by 2025
Rents are set to sky-rocket, and buying a house is getting further out of reach for many, according to the Association of Residential Letting Agents (ARLA) and National Association of Estate Agents (NAEA) Housing 2025 report.
Compiled with Centre for Economics and Business Research (Cebr), the report predicts the state of the property market in 10 years’ time, and suggests what can be done to repair it.
With the average house price currently around £280,000, the Housing 2025 report predicts house prices will increase by half their current value by 2025 – reaching an average price of £419,000. It’s even worse news for those aiming to buy in the capital, as house prices are expected to nearly double in the next decade in London, rising from £515,000 to £931,000.
For those planning to enter the rental market in the next few years, the news is bleak. Rents are predicted to increase by 27% from a current UK average of £134 per week to £171 in 2025. Again, those living in London will be worse off as they’ll need to pay 34% extra in rent per week by 2025, an increase from the current average of £234, up to £314.
Lower homeownership rates amongst the working age population and the ageing of the baby-boom generation will continue to drive a decline in the proportion of UK households that own their own home. Currently around 62% of the working population owns their own home; the ARLA and NAEA Housing 2025 report predicts this will fall to 55% in the next 10 years.
A declining homeownership rate will boost demand for rental properties, and drive house prices up. The Housing 2025 report also predicts the proportion of private renters in the UK will increase from 20% of households in 2015, to nearly 29% by 2025.
ARLA managing director David Cox said: “Buying and renting a home is a giant step, and is out of reach for many. Rent costs are already growing at a rate that people are struggling to keep up with, and they’re due to become even less sustainable over the next decade – particularly when the new landlord tax sets in, which will put off many would-be landlords from entering the market. If we’re to see the property market lifted out of its current state, we need to help the rental market from top down as well as bottom up, ensuring landlords are not penalised for their choice of income, and they can in turn give tenants the best possible price and service they deserve.”
NAEA managing director Mark Hayward said: “House prices are only going to go one way, and unfortunately that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear. Ongoing house price inflation, combined with low wage inflation, tighter lending restrictions and a shortage of affordable housing, means owning a home will continue to be distant dream for many. Increased rental costs will also make it more difficult for current renters to save for a house deposit; as much of their income will be eaten up in rent.”
Luton Borough Council has launched a new initiative which aims to tackle rogue landlords who are letting properties that are being poorly managed or are unsafe.
The initiative has been developed in partnership with the Bedfordshire Fire & Rescue Service, the Luton Law Centre and the Luton Citizens Advice Bureau.
The message is that this issue will not be tolerated and offending landlords will be caught.
The project is particularly focused on:
Houses in multiple occupation (HMOs)
‘Beds in sheds’ – sub-standard premises being used as living accommodation without the relevant permissions
Empty homes – the council wants to bring these properties back into use to provide people with accommodation.
In recent months, 18 landlords have been prosecuted by the council or served with prohibition orders many resulting in large fines and criminal records. Beds in sheds and HMOs have been emptied and a number of investigations are ongoing.
Cllr Tom Shaw, portfolio holder for housing at Luton Borough Council, said: “The Rogue Landlord Project is an integral part of ensuring that private housing in Luton is of a good standard. It is an important part of our enforcement policy and will help ensure that properties in Luton are safe and maintained to a good standard. If a HMO is poorly managed, tenant’s safety could be at risk.
"We are committed to ensuring that rogue landlords are identified and are made to improve the property or face prosecution. I would encourage tenants or neighbours who suspect a landlord is not adhering to the rules to get in touch with us.”
Government poised to launch "farcical" buy to let mortgage consultation
The government is poised to launch a consultation document which is expected to advocate further restrictions on buy-to-let mortgage lending.
The formal consultation is expected to be launched within the next 72 hours although one prominent buy-to-let expert, Ray Boulger of independent mortgage broker John Charcol, has already been quoted as branding the exercise “a farce” because so much advance information has already been in the public domain.
Landlord Today has already reported that some lenders have voluntarily introduced stricter lending criteria, which is expected to become the norm following the consultation.
“The Bank of England currently has no control over lending in the BTL sector, but the Chancellor will soon hand powers over to the Bank's Financial Policy Committee. The consultation is a farce,” Boulger has told the Daily Mail.
Chancellor George Osborne first announced in October that a consultation would take place; a final decision on which powers will be given to the Bank of England will be made next year.
Buy-to-let taxes will lead to landlord rush to incorporate
A report from a mortgage lender has claimed that new taxes on buy-to-let will trigger a lending surge as landlords rush to form companies.
The Buy To Let Britain Report 2016 by Kent Reliance says that radical changes to the tax treatment of landlords will mean more landlords buying property through companies in the future.
The changes announced in the Budget, lowering the tax relief for mortgage interest payments for landlords from April 2017, has already caused an increase in the number of landlords seeking to incorporate.
Kent Reliance saw applications from limited companies surge immediately after the July Budget. This has accelerated as landlords absorbed the impact of the tax changes; in September, applications tripled year-on-year (+213%).
One quarter of all buy-to-let mortgage finance demand is now through limited companies, up from 13% a year ago.
Highlights of the report include:
Buy to let lending to limited companies doubles to 5,000 per month following Budget announcement.
Number of loans to limited companies to climb to 56,800 in 2016, up by 90% compared to 2014.
Stamp duty surcharge announced in Autumn Statement likely to see purchase activity surge before April.
Tenants likely to feel impact of tax changes as landlords pass on increased costs of running business.
Additional £6,600 stamp duty cost for average purchase could trigger £55 per month rent rises.
The importance of the private rented sector has grown. The sector is now worth £1.2 trillion, with 5 million households renting in England alone.
Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands, said that the changes to the tax treatment in the past six months will bring unintended consequences.
“First, the rush to put properties inside a limited company will be sustained, especially if larger scale investors are indeed exempted from the new stamp duty surcharge. Secondly, the buy-to-let market will see activity hit overdrive between now and April as landlords seek to beat the stamp duty deadline.
“Smaller scale investors are now more likely to think twice before investing and I see that as a good thing. However, in the longer term, it is tenants who will pay the price of the chancellor’s tax raid on buy to let, as landlords will recoup increased costs through rent increases. Ultimately, the move will do little to help tenants save for a deposit on a home of their own. Making rented homes more expensive was surely not the Chancellor’s intention.”
The mortgage director of one of the world’s largest independent financial advisory organisations has said that George Osborne’s clampdown on buy-to-let investors will be “ineffective for its purported aims.”
Mike Coady, who heads deVere Group’s deVere Mortgages brand, spoke out after the Chancellor announced a 3% additional stamp duty rate on buy-to-let properties and second homes in last week’s Autumn Statement.
“It is commendable that the government wants as many people to own their own home as possible – and, of course, this is something all of us in the mortgages industry would promote,” said Coady.
“However, for three main reasons the Chancellor’s new 3% stamp duty surcharge will be ineffective in its purported aims of raising cash to help first-time buyers and paying for more affordable housing.
“First, the revenue raised by this initiative – £1bn by 2021 – is a nominal figure when given the scale and seriousness of the UK’s affordable housing crisis.
“To many it seems this is something of a political stunt. The government is wanting to be seen to be acting on this emotive and topical issue and is doing so by appealing to the politics of envy with buy-to-let landlords and second homeowner the targets.”
Coady also warned of a ‘rush-to-buy’ phenomenon between now and April by those wanting to purchase a buy-to-let property racing to avoid paying the extra levy. This will, of course, push up prices in the short-term.
“Furthermore, in the medium to longer term, I don’t believe it will put off overseas or UK purchasers from investing in property,” he said. “Despite the 3% stamp duty surcharge, which is not ideal of course, most investors will still regard investing in property in the UK, especially in areas like London, the South East and Manchester, as an attractive and safe investment opportunity.”
Coady also pointed out that as property investment is typically a long-term one, 3% over the entire investment period is something most property investors will absorb.
He warned that those who are renting could find their rents are even higher after this policy comes into effect in April, as landlords pass on their higher costs to tenants. This, in turn, would make it even harder for first-time buyers to get on the property ladder.
“The stamp duty will be ineffective in helping first time buyers, indeed it could hinder them further. If the government is serious about helping generation rent it needs to rethink. The solution to the housing crisis is not the rate of stamp duty,” concluded Coady, “Planning restrictions and building more homes would be a better way to deal with the ongoing housing crisis in Britain.”
The Residential Landlords Association (RLA) has warned that the stamp duty hike announced in the Autumn statement will only worsen the current shortage of accommodation and drive up the cost of rents.
The Chancellor stated that ‘solving the housing crisis was a top priority’. But the RLA said the focus again seems to be help for first-time buyers and home ownership with the announcement that those buying second homes and investing in buy-to-let will pay an extra 3% stamp duty than others buying a primary home to live in.
This is another hit for landlords who are still anxious about how changes to mortgage interest relief (MIR) announced in the Summer Budget will affect them.
Given that the private rented sector has accounted for the large majority of new dwellings created in England between 1996 and 2013, this extra burden threatens to reduce the number of new homes available at a time when demand continues to rise.
RLA chairman Alan Ward said: “The biggest losers from the Autumn statement are tenants who will now find it even harder to get the accommodation they want at a price they can afford. The extra stamp duty on buy to lets will exacerbate an already serious shortage of properties in many areas reducing choice and driving up rents.
“The government should be encouraging landlords to invest, not doing everything they can to discourage them.”
Landlords and property experts have continued to express their anger at changes to the stamp duty regime announced in the Autumn Statement. Some warned that rents will increase as a result of the changes.
Chancellor George Osborne announced on Wednesday that buy-to-let and second home properties will be subject to an additional 3% stamp duty from next April.
Jeremy Leaf, former RICS chairman and north London estate agent, described the move as “demonstrating practical naivety”.
“Many buy-to-let investors underpin some of the bigger developments in particular. There is a danger that it will kill the market and result in some developments not happening at all,” he said, “Landlords will either sell or not add to their portfolios at a time when we need more affordable accommodation. Such a move inevitably puts extra upward pressure on rents.”
Jamie Lester, head of Haus Properties, agreed that the stamp duty hike could have a negative effect on the rental market.
“This may ultimately lead to a shortage of good quality properties or an increase in rent, which could make it much more difficult for tenants,” he explained.
The 3% surcharge charge on all stamp duty bands above a £40,000 starting level will more than treble the bill for landlords buying a £275,000 rental property – hiking it from £3,750 to £12,000.
Some industry pundits have warned that the move could distort the housing market, with a rush of buy-to-let and second home purchases before the start of April – pushing up prices.
Doug Crawford, CEO of My Home Move, said: “The stamp duty changes will turbo-charge the housing market over the next four months as buy-to-let landlords and holiday home buyers race to beat the deadline before the changes bite in April. This will inevitably push up property prices in the short term, especially in locations popular with buy-to-let investors, such as London.”
Budget small print revealed another attack on landlords: From April 2019 any Capital Gains Tax due on the sale of a residential property will need to be paid within one month of completion.
Ray Boulger, senior technical manager at mortgage broker John Charcol, described the CGT change as a “small, but additional, attack targeted at BTL landlords”.
Boulger warned the “triple whammy” of income tax changes announces in the last budget, SDLT increases announced in the Autumn statement and expected lending restrictions from the Prudential Regulation Authority next year, will result in less landlord purchases and more landlord sales of existing buy-to-let properties. He said that unless enough tenants can afford to buy a home this will push up rents.
In the correct condition and market conditions, we would expect the above properties all rent very well, when rented to professional tenants. If any of these properties interest you, then please let us know and we will gladly give you more detailed information on what rental income you could expect to achieve from the one that you are interested in. Furthermore, if you are really interested in the property, we would gladly accompany you on a viewing of the property, to give you an independent opinion on the investment and rental aspects of the property.
* The above properties are all listed for sale with other estate agents in St Albans, and we provide these suggestions in good faith. In depth due diligence is required whenever making a property purchase.
In his 2015 Spending Review (the first to be delivered since 2010) and Autumn Statement speech, Chancellor George Osborne said that the government is delivering on its commitment to put both economic and national security first. He referred to this as being a ‘big Spending Review by a government that does big things’.
The main headlining announcement concerned tax credits. As confirmed in the Summer Budget, the Chancellor said that the £12 billion of welfare savings the government has committed to will be delivered in full in a way that helps families during the transition to the new National Living Wage. However, in a huge U-turn, the Chancellor went on to say that after listening to recent representations made concerning controversial cuts to tax credits, improvements in public finances mean that the proposed changes will not be phased in as planned but ‘avoided altogether’. Note though that the tax credits system is being gradually phased out in conjunction with the current phasing in of the universal credit. The announcement does, however, mean that the tax credit taper rate and thresholds will remain unchanged from 2016. The income fall disregard will be retained at its current level of £2,500. The Chancellor also said that there will be no further changes to the universal credit taper, or to the work allowances beyond those that passed through Parliament last week.
In the Summer Budget, the government announced that revenue of some £5 billion would come from measures on tax avoidance, evasion and imbalances. Building on this, the Chancellor announced new penalties for the General Anti-Abuse Rule (GAAR), action on disguised remuneration schemes and stamp duty avoidance, and he said there would measures to stop abuse of the intangible fixed assets regime and capital allowances. Energy generation is to be excluded from the venture capital schemes, to ensure that they remain well-targeted at higher risk companies.
In accordance with recent announcements concerning HMRC’s 10-year modernisation plans, the Chancellor confirmed that HMRC will make savings of 18% in the departmental budget through efficiencies which include the restructure of 170 separate offices into thirteen regional centres, and the development of digital tax accounts to be managed online. Some of the savings are to be reinvested, with an extra £800 million, in the fight against tax evasion – an investment with an anticipated return of almost ten times in additional tax collected.
With regards to local and national finances, the Chancellor said that local councils will be given wider powers to control their own spending; Northern Ireland needs to deliver sustainable budgets so that the government can take forward its plans for a cut in the rate of corporation tax to 12.5%; and the devolution of income tax to Wales will take place without the need for a referendum.
This newsletter provides a summary of the key tax points from the Spending Review and Autumn Statement, based on the documents released on 25 November 2015. It is possible that changes will be made between now and the publication of the draft legislation. We will keep you informed of any significant developments.
SDLT on acquisition of additional properties
From 1 April 2016, higher rates of stamp duty land tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes. The higher rates will be 3 percentage points above the current SDLT rates.
The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.
The government will consult on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.
A consultation is to be undertaken on possible changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. It is expected that any changes would take effect from 2017-18.
ATED and 15% higher rate SDLT
From 1 April 2106 the reliefs available from Annual Tax on Enveloped Dwellings (ATED) and from the 15% higher rate of SDLT will be extended to equity release schemes (home reversion plans), property development activities and properties occupied by employees.
SDLT and Authorised property funds
A seeding relief will be introduced for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) and changes made to the SDLT treatment of CoACSs investing in property so that SDLT does not arise on the transactions in units.
There will be a defined seeding period of 18 months, a 3 year clawback mechanism, and a portfolio test of 100 residential properties and £100 million value or 10 non-residential properties and £100 million value.
These changes will take effect from the date of Royal Assent to Finance Bill 2016.
Deep in the Money Options
Shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be charged at the 1.5% higher rate of stamp duty based on either their market value or the option strike price, whichever is higher.
HMRC will prevent avoidance using ‘Deep in the Money Options’, which are options with a strike price significantly below (for call options) or above (for put options) market value. Share transfers made other than to a clearance service or depositary receipt system as a result of exercising an option will be unaffected.
This change will apply to options entered into on or after 25 November 2015 and exercised on or after Budget 2016.
Buy-to-let landlords are increasingly searching for lower-priced properties in a bid to secure higher yields, new research suggests.
Seven in 10 landlords are now searching for a mortgage on properties valued below £250,000, up sharply from just five out of 10 one year earlier.
And one in three are looking for mortgages on properties costing less than £150,000, according to the latest Mortgage Search Tracker from Mortgage Advice Bureau.
More landlords are opting for higher loan-to-value (LTV) mortgages as interest rates continue to fall.
The trend towards looking for cheaper investment properties comes as average UK house prices continue to rise, up by 5.2% in the past year.
London, the South East, South West and East of England all have average prices of more than £250,000.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “As rental demand remains strong nationwide, opting for a cheaper property can result in more attractive yields.
“It appears many landlords are looking to invest in areas outside the South of England, where property prices won’t hold them back from making a profit.”
Murphy said buy-to-let investors are benefiting from competitive pricing. "Although higher LTVs generally mean more costly monthly repayments, falling rates mean landlords may find they can now afford higher-LTV products.”
Landlord tax changes will lead to rent increases, says survey
More than two thirds of landlords say that changes to buy-to-let mortgage tax relief will lead to increased rents, according to a survey conducted by The Deposit Protection Service (The DPS).
In July, Chancellor George Osborne, announced that the government would reduce the amount of tax relief available for interest on buy-to-let mortgages.
Of the 4,480 landlords who responded to a recent survey issued by The DPS, 69% said that they believed that the changes would lead to increased rents, with more than a third saying they are considering leaving the rental market or selling their property as a result of buy-to-let mortgage relief changes (35%).
Julian Foster, TDS managing director, said: Many landlords are currently facing a double-whammy of tax changes that could lead to increased rents for tenants forcing them to sell or leave the rental market.
Many landlords are small businessmen and women or & accidental landlords, and taxation increases can affect their livelihoods and financial well-being.
With many commentators predicting an interest rate rise next year, landlords are facing a series of financial challenges over the next few years.
Any future interest rate rise is likely to have financial consequences for landlords with mortgages, and 33% of respondents to The DPS survey said that they intend to pass on the costs of any interest rate rises to tenants.
Almost two thirds of respondents also said that they would be worse off over changes to wear and tear tax relief (62%).
From April 2016, an automatic 10% tax break for wear and tear at a property will be replaced with tax deductions covering the actual cost of replacing or repairing its contents.
Anger from landlords at Osborne’s move to impose extra 3% buy to let stamp duty
There has been an angry reaction from landlord organisations and others to the news that buy to let and second home properties will be subject to an additional 3.0 per cent stamp duty from next April.
The announcement, in the Chancellor’s Autumn Statement, is expected to generate around £1 billion, much of which will be spent on new homes as part of an extensive programme announced by George Osborne.
The chief executive of the National Landlords Association, Richard Lambert, says: “The Chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent. If it’s the Chancellor’s intention to completely eradicate buy to let in the UK then it’ a mystery to us why he doesn’t just come out and say so”.
As a result of Osborne’s July Budget, buy to let landlords are already due to get a lower rate of tax relief on mortgage payments, and a less generous interpretation of the annual wear and tear allowance.
“The buy to let investor should not be blamed for house price rises, rather, this is down to the chronic shortage of housebuilding in this country which is compounded by population growth. We would therefore advise caution against penalising this group of investors when actually other policy areas hold the key to unlock the solution” says Stuart Law, chief executive of Assetz for Investors, a pro-buy to let organisation.
Tenants asking their landlords to do anything more than the most urgent repairs face an uphill struggle this winter, according to research by the chartered accountancy firm, HW Fisher & Company.
In a study of residential landlords, the firm found almost a third (31%) intend to spend less than £250 on maintaining furniture and fixtures in the current tax year. The figure compares poorly with previous tax years, with 86% of landlords saying they usually spend more than £250 per year – and 14% saying they normally spend over £1000 a year.
More than twice as many landlords plan to spend the bare minimum – under £250 – on maintenance this year compared to normal years, in which a mere 14% spend this little.
Their reluctance to spend on maintenance now has been triggered by a planned change in landlords’ tax allowances that gives them a perverse incentive to delay spending until next April.
The current wear and tear allowance, which the research shows is claimed by 86% of landlords letting furnished property, is paid whether or not they have repaired or replaced the property’s furniture and fittings.
But from next April the current rules – which give landlords a flat rate tax deduction of 10% of their rental income – will be scrapped in favour of a new system, under which they will only be able to deduct costs they actually incur.
Tim Walford-Fitzgerald, Tax Principal at HW Fisher & Company, explains: “The new system is intended to be fairer and more transparent, only giving landlords tax relief for the money they really pay out.
“But the impending change has thrown up an anomaly – landlords can spend nothing on maintenance this year and still claim 10% tax relief on their rental income. And they could save more tax on what they do spend if they delay doing so until after April.
“So it’s not surprising that many are holding off on all but the most essential maintenance until the next tax year. This is smart tax planning – but it will come as little comfort to tenants struggling with battered furniture and tatty carpets in their homes.”
The research also found that nearly two thirds of landlords (64%) disapproved of the plan to end the current wear and tear allowance, with almost as many (58%) viewing the present flat rate system as fairer than its proposed replacement.
Demand for buy-to-let is set to soar with each new generation while home ownership will continue to plunge.
Fewer than half of those born in 1990 will own their own home by age 40, according to new data from Savills.
Its latest Residential Property Focus 2015 reveals that 53% of those born in 1960 could look forward to owning their own home by the age of 30, rising to 71% by the age of 40 and 79% by the age of 50.
Of those born in 1980, just 35% owned their home by age 30, and this is projected to fall to 26% for those born in 1990.
By age 40, most will be in rented accommodation, with just 47% predicted to own their own home.
Jonathan Stephens, managing director of Surrenden Invest, a specialist buy-to-let consultancy, said the figures spell good news for investors.
"Quite simply, falling rates of homeownership mean rising rates of renters, so the growing situation in the UK creates a substantial opportunity for those looking to make their money work for them by investing in residential real estate.
“Of course, alongside this it is important to remember that the area in which you invest is important too – a few miles difference, particularly in major cities like London, Manchester and Liverpool, can have a big impact on yields."
This is particularly true of London properties, he said. House prices are projected to rise by 21.5% in central London and by 18.2% in outer London over the next five years, according to Savills.
Half of subletting cases without landlord’s consent
Almost half of tenants who sublet their property do so without their landlord’s consent, according to new findings from the National Landlords Association (NLA).
The findings come as the government recently announced proposals to introduce minimum room sizes in order to crack down on problems with private rented accommodation such as unauthorised subletting, which often results in overcrowded and cramped properties.
Of the 11% of tenants who say they have sublet all or part of their property before, just 5% did so with their landlord’s permission.
A quarter (26%) of tenants say they have approached their landlord about subletting but have had the request declined, and 63% say they have never asked their landlord about subletting their property.
Overall, the findings show that around a third (32%) of tenants have approached their landlord about subletting their property, with a fifth (22%) of requests being permitted by the landlord.
Carolyn Uphill, chairman of the NLA, said: “These findings indicate that subletting is not common in private rented homes, but worryingly that where it does happen, much of it takes place behind landlords’ backs, without their knowledge or permission.
“This isn’t something apparently harmless, like putting your flat on AirBnB while you are on holiday. We are talking about individuals looking to deceive their landlord and maximise their personal gains at the expense of proper property management standards and the risk of others. It not only increases the cost of renting for the unwitting sub-tenants, it affects their rights and can reduce security of tenure.
“Subletting can also breach a landlord’s mortgage terms, the conditions attached to licenses granted for letting out shared homes, and invalidate existing insurance products – so they must be aware of the problems it presents.
“The NLA advises all landlords to insert a clause into new tenancy agreements that makes clear sub-letting is only allowed with the landlord’s permission, which should not be unreasonably withheld. This would reduce their exposure to a whole host of unnecessary risks, including hefty fines and even a prison sentence.”
“Up to £530 million available for landlords” who let tenants decorate
One in four (43%) of tenants would be happy to pay more rent if their landlord allowed them to put a more personal stamp on their property, according to a survey of 1,000 tenants by insurance provider Endsleigh.
The survey found tenants would be happy to fork out an additional £149.52 a year, on average, if they were allowed to decorate their rental property.
With two million private landlords, letting out five million homes in the UK that means there’s potentially an extra £530 million in revenue out there for landlords who explicitly say they are happy for tenants to decorate.
Only 29% of tenants surveyed have the freedom to decorate their property as they wish; but with a quarter (25%) living in a rental property for more than three years, and one in five saying they would be ‘likely’ or ‘very likely’ to avoid inviting relatives round their home if they were embarrassed about the décor, it’s understandable that tenants want to decorate their homes.
The top five things tenants want to do to their rental property, but aren’t permitted to do are:
Paint the walls with colours (19%)
Hang pictures or mirrors with screws (17%)
Hang wallpaper (10%)
Blue-tack pictures to the wall (9%)
Hang a TV on the wall (9%)
Just 28% of tenants ask their landlord for permission to decorate but of those that do, 76% of those tenants’ landlords agree to the request, despite it being against the tenancy agreement.
David Hadden, manager for landlords and lettings at Endsleigh said: “With it being so difficult to get on to the property ladder, people are now renting for longer, so naturally they are going to want to decorate the property they are living in long-term.
“Landlords who allow tenants to personalise their property could be favoured over those who don’t and may be able to command a higher rental price. If tenants feel at home in their property they may also have longer tenancies.”
Moneyfacts: Buy-to-let mortgage market is “booming”
The popularity of buy-to-let as an investment option continues to soar thanks to high rents and increasing demand, according to data analyst Moneyfacts.
Lenders are subsequently taking advantage of surging demand and are doing all they can to attract new buy-to-let borrowers.
Data from Moneyfacts shows that lenders are pulling out all the stops to entice new customers; average rates have fallen dramatically while the number of deals that have no arrangement fee have more than doubled in just one year.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “The BTL market is clearly booming; with rents at a high and BTL mortgage rates dropping to historic lows, there is great potential for prospective landlords.
“The finding that the average two-year fixed rate has fallen by 0.37% in just one year is particularly good news for older borrowers who are looking to access their pension pots to invest in bricks and mortar.
“However, the Bank of England has recently gained new powers to regulate the buy-to-let market, which may mean that the end is nigh for these low-cost deals. Potential landlords looking for a fixed rate should therefore act fast to ensure they are not disappointed.
“Future legislative changes to the BTL market could also mean potential profits will fall, so investors need to keep an eye on any announcements to ensure BTL will still be profitable for them.
“The increase in deals with no fee is a sign that BTL lenders are trying to diversify and offer borrowers more choice than ever before. However, borrowers still need to weigh up the true cost of a mortgage to ensure the best deal is secured. Anyone thinking about entering this sector would be wise to seek the advice of an independent financial adviser to see if BTL really is the best place for their investment.”
Reduced tax relief is top worry for landlords thinking of selling up
The Government’s reduction of landlord buy-to-let tax relief to the 20% basic rate is a major factor for half (50%) of all landlords currently looking to sell, according to a sentiment survey of more than 1,200 landlords conducted by Your Move and Reeds Rains.
The tax changes, announced as part of the summer Budget, are proving a major concern for buy-to-let investors. Currently, 9% of landlords think it’s a good time to sell up, with the tax reforms influencing their decision more than any other factor. Many fear letting out a property will become far less profitable when the reforms start to come into force in April 2017, and they are now considering leaving the sector as a result.
This loss of enthusiasm is even dampening the optimism of the 31% of landlords who think that now is a good time to buy rental properties. Overall two-fifths of UK landlords (44%) believe investing in buy-to-let property is more complicated than it was six months ago.
This is due to more rigorous regulation, also introduced as part of the Budget, which includes requirements for landlords to check their tenants’ immigration status before they let their properties. Almost a fifth of landlords (19%) are daunted by this task, and now feel unequipped to let out their houses without the support of letting agents to manage their investment.
Nearly a quarter of landlords (24%) believe the legislation on letting out properties has become more confusing, with more than one in ten (11%) feeling that they don’t fully understand the current regulations. These changes are denting landlord confidence, and general disenchantment with the letting industry was an important factor for 23% of landlords who think now is a good time to sell.
Adrian Gill, director of Your Move and Reeds Rains, said: “Landlords could be forgiven for feeling a little deflated at the moment and its worrying to see this may motivate many to reconsider their investment. The Government’s tax changes appear to be making investing in buy-to-let less attractive because of the seemingly smaller profits margins on offer in the future. If a tenth of landlords do decide to leave the industry, this would seriously shrink the number of properties available for tenants. At a time when tenant demand is only rising, shorter supply will only translate into increased rents. This may mean landlords are underestimating the likely pace of future rent rises.
“The government need to cut the red-tape involved in providing homes for renters if they hope to maintain a healthy supply of rental properties. With the Bank of England keeping a wary eye on the buy-to-let market, further regulatory interference may only make landlords’ and tenants’ lives harder. We need landlords to stay in the market and invest further in the sector, in order to match future demand.”
Landlord landed with £200,000 bill for ignoring planning rules
A North London landlord has been ordered to pay more than £200,000 by Harrow Crown Court for illegally converting two Brent properties into flats without planning permission and ignoring enforcement notices sent to him by Brent Council.
Vijay Kara from Hendon rented out properties on Strode Road, Willesden, and in an industrial estate off the North Circular Road that was of poor quality and not up to council standards.
Criminal proceedings were issued for Kara's failure to comply with the notices which required him to restore the properties to their original condition.
Kara pleaded guilty and on 29 October 2015 was served a confiscation order of £187,600 for both properties, fined £10,000 and also ordered to pay costs of £10,000 by Harrow Crown Court.
A confiscation order is designed to take the profit out of crime by making the convicted defendant pay a sum of money, which represents the benefits of the crime, to the Crown.
Councillor Margaret McLennan, lead member for housing and development at Brent Council said: "It's staggering that Mr Kara thought that he could get away with letting out illegal sub-standard accommodation, despite a conviction for the same offence in 2009.
"Thanks to our hard working enforcement team, he has been caught out again and landed with a hefty bill.
"It is so important for planning rules to be upheld, not just to protect what our streets look like, but to protect tenants from poor standard accommodation."
MyDeposits given go ahead to operate custodial deposit scheme
Mydeposits has been given government approval to operate a custodial based tenancy deposit protection scheme in England and Wales from April 2016.
Protecting tenants’ deposits has been a legal requirement in England and Wales since 2007, with landlords and letting agents having the choice of an insurance based scheme that involves a fee, or a free-to-use custodial scheme to protect deposits and comply with the law.
The announcement is significant because it now means landlords and letting agents who prefer the custodial based option will have a choice in which scheme they use.
Eddie Hooker, CEO of mydeposits, said: “Mydeposits has been through a detailed procurement process with the government and we are delighted to have been given the green light.”
“We’ve been hopeful of winning the contract for some time and have already begun an exciting and ambitious reboot of Mydeposits. We’re taking a fresh look at deposit protection and are investing in our systems and processes to create a faster, smarter scheme designed to remove delays and problems associated with deposit protection.
“We’ve held numerous focus groups with landlords, letting agents and tenants, along with our sponsor, the National Landlords Association, to form a detailed blueprint of how we can improve. We are delighted that landlords and letting agents will soon have a genuine choice of which custodial scheme they use and look forward to welcoming anyone who wants to change from their current provider.
“Our scheme continues to go from strength to strength having also been chosen by the Jersey States as the sole supplier of a custodial tenancy deposit protection scheme on the island which launched earlier this month.”
Two estate agent firms have been expelled from membership of The Property Ombudsman (TPO) for a minimum of two years.
AS Moon & Partners, a sales and letting agent based in Northumberland, and CityWest.co.uk Limited, a sales and letting agent based in Hounslow, have both been kicked out of the redress scheme.
Both had failed to comply with parts of the TPO Codes of Practice, failed to co-operate fully with the Ombudsman’s investigations following complaints and failed to pay awards made.
The decision to expel CityWest from TPO membership arose following a complaint from a potential buyer who paid the agent £2,500 for what he maintained was a deposit, but the agent said was a fee for speaking to mortgage lenders and arranging suitable solicitors. Ultimately the Ombudsman did not accept that the fee had been a deposit.
When the purchase fell through the fee was not refunded. The Ombudsman criticised CityWest’s failure to explain when the fee would be retained or returned. He also considered that the taking of the fee was an unfair business practice, as the buyer was not made aware that this was not standard industry practice.
The buyer’s first language was not English and he was purchasing for the first time. Despite the agent claiming that they “charged him accordingly” for their time, the complainant was billed before any work had been carried out. The Ombudsman also upheld in part a complaint about poor communication. The award he made was a refund of most (but not all) the fee and compensation for aggravation to the complainant, which had been made worse by the agent’s failure to provide documentation to the Ombudsman when it was requested.
The decision to expel AS Moon from voluntary TPO membership arose following a complaint from a landlord of two properties. On the first, the complainant said the agent returned a deposit to his tenant in full despite there being damage to the property and without checking whether the landlord wished to claim against it.
On the second property, the landlord complained about not receiving rent and failure to carry out a check-out inventory, despite the agent providing a managed service to the landlord. The landlord also complained that AS Moon failed to respond to his complaint. The Ombudsman upheld all the complaints to varying degrees and made the award.
Gerry Fitzjohn, vice chairman of the TPO board, said: “The role of the Property Ombudsman is to impartially review complaints made by members of the public against agents based on the evidence that is submitted. The Ombudsman aims to promote a resolution in full and final settlement of a complaint, and will determine appropriate redress where satisfied that the actions of an agent have disadvantaged a complainant.
“In these cases, both agents have failed to co-operate fully and both have failed to pay awards made: In the case of AS Moon & Partners the sum of £750 and in the case of CityWest the sum of £2,800. I would like to remind agents of their obligation to co-operate with any investigations by TPO, The Ombudsman requires any evidence they can provide and that is their chance to put across their side of the story. While the vast majority of agents do co-operate, the small number who do not do so, put themselves at greater risk of having a complaint upheld, when The Ombudsman has only the consumer’s evidence to consider.
“Agents must comply with any award and/or direction made by The Ombudsman against them and pay the complainant the amount of any such award within the required period for payment. Cases of non-compliance are taken very seriously and are dealt with by the disciplinary and standards committee (DSC) of the TPO council.”
A tenant eviction specialist has warned that the Government’s proposal to introduce minimum room sizes will not prevent subletting scams which are often the cause of “rabbit hutch rooms”.
Landlord Action founder Paul Shamplina said the proposed new rules will require greater enforcement resources to be effective.
The Government’s consultation paper explores the options for extending the scope of mandatory licensing of HMOs to smaller and medium-sized properties.
Widening the net of properties to which the rules apply and setting a minimum room size of 6.5 square metre (70sqft), aims to make it easier for local authorities to raise standards in properties used as shared homes.
Shamplina welcomed the proposals pointed out that only a small proportion of landlords abuse the system in this way.
“Nevertheless, they are guilty of exploiting the vulnerable whilst profiting from the housing crisis, particularly in the capital. Therefore, anything which helps to eliminate this problem and impose proper sanctions in the case of violation, is a positive step forward.”
However, Shamplina said there are two key hindrances with the proposed new measures; enforcement and sub-letting.
“One of the biggest problems with implementing any new legislation is enforcement. Local councils do not have enough resources as it is, with environmental health officers already responsible for monitoring overcrowding, subletting, poor conditions, and most recently retaliation eviction. There is no room in our sector for rogue landlords, but to tackle the problem properly, legislation needs to be backed up by more boots on the ground,” he said.
Shamplina also said that the leading culprits of setting up uninhabitable rooms are not just rogue landlords, but tenants posing as landlords and subletting properties to unaware sub-tenants.
“Landlord Action has never seen so many subletting cases as it has over the last two years, with an 18% increase. This has been fuelled by sky high rents preventing some tenants from being able to afford even single-unit accommodation, forcing many to resort to bedsits or shared accommodation.”
In a recent North London subletting case handled by Landlord Action, partition walls were erected to create more bedrooms. Most rooms were barely large enough to fit a single mattress in, and the rogue tenant was subletting each “room” for £750 per month.
“Cases like this are not only damaging to the property and financially devastating for landlords, but are also extremely unsafe, creating untold health and safety issues, particularly relating to fire safety and sanitation issues,” said Shamplina, “They should also act as a reminder to landlords of the importance of carrying out thorough tenant referencing checks, as well as regular property inspections.”
Housing minister Brandon Lewis has announced new measures that will clamp down on “criminal” landlords who “trap and cram vulnerable tenants in unsafe, overcrowded homes”.
The proposals intend extending HMO licensing to one/two storey properties, instead of just three storey properties at present, and setting a minimum size of rooms that can be let as a bedroom. The plans also include ensuring rules apply to poorly converted blocks of flats and flats above and below shops, which are often exempt.
Lewis said: “It is simply unacceptable that people are living in cramped, unsafe accommodation provided by landlords who are more interested in a quick profit than the safety or welfare of their tenants.
“The actions of these rogue landlords are helping fuel illegal working, benefit fraud, and illegal immigration by creating a shadow housing market that carries dangers to people’s health as well as communities.
“The government is determined to crack down on rogue landlords and these measures, alongside those in the Housing Bill, will further strengthen councils’ powers to tackle poor-quality privately rented homes in their area.”
The announcement for more robust licensing complements wider government efforts to crack down on rogue landlords set out in the Housing Bill.
Ian Fletcher, director of policy (real estate) at the British Property Federation, said: “We understand that the Government is trying to crack down on rogue landlords who are unlawfully filling HMOs with illegal immigrants living in poor conditions, but there is huge scope for unintended consequences if the Government does not get this redefinition right. The current system allows local councils to target other forms of HMOs through discretionary schemes and the definition of a mandatory HMO was carefully crafted in 2004 to be proportional.
“Widening scope as set out will not only capture many new-build student halls, but the extension to some flat-conversions will have implications for owners of some leasehold property, their property managers, and value of their homes.”
Winter voids risk damage to properties, warn inventory clerks
The risk of damage to rental properties heightens in winter – especially if homes are empty, according to the Association of Independent Inventory Clerks.
The association is urging landlords or agents acting on their behalf to take extra care as the temperatures fall.
The association explains that with no one living in a property for an extended period of time, it will not be ventilated properly which could lead to damp, mould and related problems. Condensation is the predominant cause of damp and when windows are left unopened for an extended period it becomes more frequent and the chances of mould developing increases.
The AIIC added that the longer a property remains unoccupied and unchecked, the higher the chances are of drain blockages, pipe problems and clogged gutters, typically because of fallen leaves. Pipes should also be checked for cracks and leaks as these can escalate into more serious problems, especially if the water freezes.
The AIIC is therefore urging landlords – especially those with empty properties – to make regular and thorough checks this winter.
Paragon Mortgages recently reported that the average void period dropped to under 2.6 weeks per year but the AIIC warns that even this relatively short period is long enough for winter-related property problems to arise.
“A detailed inventory carried out by an independent inventory clerk also allows a landlord to identify what needs repairing between contracts. This can be vital in ensuring the long-term condition of the rental property as well as helping to get it up to scratch for new tenants,” said Patricia Barber, chair of the AIIC.
The Dargons’ Apprentice Challenge is a wonderful program that we have sponsored for many years where schools identify their interest in participating and encourage year 12 students to put themselves forward and form teams of 6. Each team is matched with a local business mentor (their dragon) and a local charity or community group. We have previously been a dragon and mentored our own team, but unfortunately we haven’t had enough time to participate to such an extent for the last few years, although our aim is to ultimately act as a mentor each year from 2016 onwards.
Teams are given £100 and challenged to “turn £100 into £1,000 or more”. Dragons provide support in the form of advice, and access to resources, to help their team achieve their business goal and funding target. All profits made by the teams go directly to their allocated charity/community organisation. The challenge runs annually from Sept – March.
During the 2014 challenge teams of students from schools and colleges across Hertfordshire worked hard to devise ways of earning money for 56 local charities. With support from local business Dragons, team fund raising projects included race nights, themed dinners in local restaurants, quizzes, sleep overs, concerts, cake sales and dance offs. One team purchased MP3 players from China and loaded them with music from local bands which they sold to commuters in the St Albans area. Together the teams earned over £83,000.
To date over 900 young people have participated and over £200,000 has been presented to 109 Hertfordshire based charities.
Dragons’ Apprentice Challenge is managed by the Centre for Voluntary Service (CVS) St Albans and District. To register your interest in participating in the 2015 challenge please contact the CVS here.
First-time buyers need to earn £50,000 to get on the property ladder
New research by Gocompare.com claims that first-time buyers need on average a minimum household income of £50,000 to purchase a house in the UK.
The figures look at 65 towns and cities across the UK and show the minimum first-time buyers need to earn to get a mortgage, based upon a 90% mortgage and affordable monthly housing costs.
Unsurprisingly, London tops the chart with household incomes of at least £140,000 a year needed to buy a flat and an eye-watering £275,000 for a detached house. The median average salary in the capital is just £30,338.
According to the research, Blackburn is almost 10 times cheaper than London and a household income of just £14,000 could get you on the property ladder. The median average salary in the Lancashire town is £18,444, making it one of the few places in the UK that are affordable.
In 51 out of the 65 cities included in this research, the average salary is below the minimum required to buy a property.
After Blackburn, the cheapest places to buy property are Hull, Blackpool, Grimsby and Stoke-on-Trent where a salary of just £15,000 could be enough to purchase a flat.
Outside of London, Brighton, Edinburgh, Bristol and Oxford are the most costly. Minimum salaries to get on the property ladder in these cities are £60,000, £60,000, £58,000 and £54,000 respectively.
Ben Wilson, home insurance expert at Gocompare.com, said: “Although owning a home may be achievable in places like Blackburn and Sunderland, in other parts of the country the rapid rise in property value and a growing urban population is pricing many of the British public out of home ownership. London’s high prices are well documented, but it’s in other parts of the south of England that the gap between average salary and average house price is at its most alarming, with places like Brighton requiring a minimum household income of £180,000 to afford a detached house.”
MPs challenge immigration minister over RLA concerns
MPs scrutinising the Government’s latest immigration proposals have used Residential Landlords Association (RLA) background briefings to challenge the immigration minister over Right to Rent.
At last week’s meeting of the Immigration Bill committee, opposition MPs continually referenced the RLA’s document, outlining landlords’ misgivings over right to rent checks. They outlined their concerns about discrimination, the criminalisation of landlords and the retrospective nature of the changes to immigration minister James Brokenshire MP.
RLA policy director David Smith wrote to all committee members calling on them to support an amendment that would give some protection from prosecution for renting to a person without a Right to Rent.
The bill, as currently drafted, would mean that as soon as a landlord receives a notice from the secretary of state that a tenant does not have a Right to Rent they would automatically be committing a criminal offence. This is despite the bill requiring landlords to give such tenants 28 days’ notice to leave the property under the proposed eviction procedure.
The RLA also highlighted concerns over a Government amendment that could see all tenancies covered by Right to Rent checks, rather than only new tenancies agreed after 1 February.
“As previously noted in correspondence to members of the committee the RLA has serious concerns about the potential chaos and confusion of all tenants potentially having their immigration status checked at the same time,” said Smith, “We therefore believe that a phased approach whereby tenants are checked as and when tenancies are up for renewal or created in the first place would be a much better approach.”
Petition against buy to let tax changes passes 35,000 signatures
The online petition opposing the proposed tax changes for buy to let landlords has now reached 35,000 signatures – but is still some way off the target which may trigger a parliamentary debate on the issue.
The tax proposal, outlined by Chancellor George Osborne back in the July Budget, means mortgage interest tax relief for buy to let owners will be restricted to the basic rate of income tax, currently 20%, even if they themselves pay the higher 40 or 45% tax rates.
Osborne says the relief, which will address "unfairnesses in property taxation", will be phased out from 2017.
There had been a strong reaction from the industry against the measure; in addition to the petition there has been the establishment of a ‘SayNoToGeorge’ website outlining how the measure will hit not just landlords but also letting and estate agents, pensioners, tenants and suppliers.
However, the online petition needs 100,000 signatures by the end of January if it is to force the consideration of whether to hold a parliamentary debate.
The success of the petition received a blow in recent weeks when the National Landlords Association’s chief executive described it as "a waste of time" – although he was not actively discourage landlords from signing.
Writing on the online Huffington Post website, Richard Lambert said even surpassing the 100,000 signature mark may sound impressive but meant any subsequent debate by MPs would be “when 'parliamentary time allows' meaning that it could be months down the line, by which point the chance to affect change may well have passed."
New regulations surrounding smoke and carbon monoxide alarms
From the 1st October 2015, new regulations require both smoke alarms and carbon monoxide alarms to be installed in rented residential accommodation. Changes are also made to the licence requirements, in relation to houses in multiple occupation (HMOs), such as shared houses and bedsits, which require a licence, and also in relation to properties that are subject to selective licensing. The Regulations apply both to houses and flats. Failure to comply can lead to a civil penalty of up to £5,000 being imposed.
Below, we have quoted the RLA Website, explaining these changes in more detail. We test carbon monoxide and smoke alarms at the check-in appointment when new tenants move into a property. Our tenants are made aware that it is their responsibility to test these alarms on a monthly basis, report any faults to us, and replace the batteries as and when required. This ensure that our fully managed and rent collect landlords are fully compliant with the new regulations.
It has always been our good practise to insist that carbon monoxide alarms are added to any room that houses a gas appliance, or a solid fuel-burning combustion appliance. Although there has been a lot of misunderstanding and ambiguity around the new regulations, we believe that it is still not law to supply a carbon monoxide alarm for gas appliances (only solid fuel-burning). However, where we fully manage a property, we insist that this is provided to ensure the safety of our tenants. Many gas engineers will not pass a Landlords’ Gas Safety Certificate if there is not a carbon monoxide alarm present in the room where the gas appliance is located.
It has always been our good practice to insist that there is a working smoke detector on every level of the property, and this is now becoming the law, as detailed below.
Details of the new regulations quoted from the RLA Website:
Requirement for Smoke Alarms
During any period beginning on or after 1st October 2015, while the premises are occupied under a tenancy (or licence), the landlord must ensure that a smoke alarm is equipped on each storey of the premises, on which there is a room used wholly or partly as living accommodation. A living room will include a lounge/dining room and kitchen, as well as a bathroom or toilet. It also includes a hall or landing. This means that a smoke alarm must be provided in working order on each storey. Since the regulation relates to each storey in the premises, this suggests that a separate alarm is not needed on a half landing, as these would not be regarded as individually being a storey. As regards individual flats located on one floor, there will have to be at least one alarm within the flat itself, or alternatively provided outside the flat on the same floor of the building, i.e. a communal alarm.
Likewise, for flats comprising more than one storey, there will need to be a smoke alarm on each floor.
It is the location of an alarm that sounds, which is crucial; not the positioning of detectors.
The Regulations do not stipulate what kind of alarm is required. Ideally it should be a hard wired alarm system. It can, however, be a single standalone alarm. Landlords are recommended by the RLA to fit ten year long-life, tamper-proof alarms, otherwise there is a problem of batteries being taken out and not being replaced.
Carbon monoxide alarms
Likewise, during any period beginning on or after 1st October 2015, where the premises are occupied under a tenancy or a licence, a carbon monoxide alarm must be provided by the landlord in any room that is used wholly or partly as living accommodation, which contains a solid fuel-burning combustion appliance. This applies to any kind of wood-burning stove, or an open coal fire. It will also extend to equipment such as a solid fuel Aga in the kitchen. This is already a requirement with new installations of solid fuel-burning combustion appliances, as under Building Regulations there is a requirement to install a carbon monoxide alarm. This is now extended to any existing appliances already in place before Building Regulations imposed this requirement, or where building regulations are not observed.
The new form of Section 21 Notice must be used for all tenancies of properties in England that start on or after 1 October 2015.
Until 1 October 2018 you can choose whether or not to use the new form of Section 21 Notice for tenancies that started before 1 October 2015.
If you choose to use the new form for tenancies that started before 1 October 2015 be aware that as most of the pre-conditions for validity (see below) will not apply to these tenancies use of this form may be confusing for tenants.
What are the pre-conditions?
For tenancies of properties in England that start on or after 1 October 2015 in order for the Section 21 notice to be valid the tenant must have been provided with:
a copy of the EPC
a copy of the gas safety certificate
a copy of the DCLG how to rent guide
In addition, the Section 21 Notice will be invalid if:
the landlord is carrying out a “retaliatory eviction” (see more here)
the landlord has failed to properly protect any deposit provided by the tenant
the property is requires a license but is unlicenced
What Does This Mean For Landlords & Agents?
The upshot for landlord and agents is that the Section 21 process is becoming far more evidence based and I believe will be increasingly adversarial. In short Section 21 is moving from a pure process to one that is impacted by the acts or omissions of a landlord or their appointed agent.
(The above is courtesy of FixFlow)
What Are We Doing:
We have updated our documents and procedures, in anticipation of these changes in regulations. As many landlords who have used our service already will know, at the beginning of every tenancy we oversee, we do already issue to tenants copies of all of these required documents. The only change for us is that we now include the EPC and ‘How to Rent’ guide, along with these important documents, at the start of each tenancy.
We make sure that landlords using our fully managed or rent collect services are compliant at all times.
Many of our landlords ask us about the complicated topic that is Capital Gains Tax. Unfortunately we cannot be experts in every field, so we stick to being experts in marking and managing properties, and leave Capital Gains Tax planning to the tax experts.
Below is a brief breakdown about Capital Gains Tax, and when it is likely to apply. At the bottom of this post is a link to a really useful article from Which.co.uk that goes into some depth about Capital Gains Tax, and gives some excellent examples, we highly recommend reading the article.
For a basic understanding of Capital Gains Tax, there is usually no Capital Gains Tax to pay on your main home unless:
You develop your home – for example by converting part into flats
You sell part of your garden and your total plot is over half a hectare (1.2 acres)
You use part of your home exclusively for business
You let all or part of your home (See the article below for detailed information about this!)
You live away (though gains relating to some absences are tax-free, including the last 18 months)
You bought or improved the home wholly or partly for the purpose of making a profit.
In the Summer Budget 2015, the government announced that the level of rent-a-room relief will be increased from the current level of £4,250 to £7,500 from April 2016. This means that from 6 April 2016, an individual will be able to receive up to £7,500 tax-free income from renting out a room or rooms in their only or main residential property. The relief also covers bed and breakfast receipts as long as the rooms are in the landlord’s main residence.
To qualify under the rent-a-room scheme, the accommodation has to be furnished and a lodger can occupy a single room or an entire floor of the house. However, the scheme doesn’t apply if the house is converted into separate flats that are rented out. Nor does the scheme apply to let unfurnished accommodation in the individual’s home.
The rent-a-room tax break does not apply where part of a home is let as an office or other business premises. The relief only covers the circumstance where payments are made for the use of living accommodation.
If additional services are provided (cleaning and laundry etc.), the payments must be added to the rent to work out the total receipts. If income exceeds £4,250 a year in total, a liability to tax will arise, even if the rent is less than that.
There are two options if the individual is receiving more than the annual limit a year:
– the first £4,250 is counted as the tax-free allowance and income tax is paid on the remaining income
– renting the room is treated as a normal rental business, working out a profit and loss account using the normal income and expenditure rules
In most cases, the first option will be more advantageous.
The principal point to bear in mind is that those using the rent-a-room scheme cannot claim any expenses relating to the letting (e.g. insurance, repairs, heating).
To work out whether it is preferable to join the scheme or declare all of the letting income and claiming expenses via self-assessment, the following methods of calculation need to be compared:
– Method A: paying tax on the profit they make from letting worked out in the normal way for a rental business (i.e. rents received less expenses).
– Method B: paying tax on the gross amount of their receipts (including receipts for any related services they provide) less the £4,250 exemption limit.
Method A applies automatically unless the taxpayer tells their tax office within the time limit that they want method B.
Once a taxpayer has elected for method B, it continues to apply in the future until they tell HMRC they want method A. The taxpayer may want to switch methods where the taxable profit is less under method A, or where expenses are more than the rents (so there is a loss).
The individual has up to one year after the end of the tax year when their income from lodgers went over £4,250 to decide the best option to take, so it is worth taking a bit of time to work out which route produces the lowest tax bill, we can help you with this.
Under Moulton Estates we will be able to offer property buyers and people selling properties in St Albans the same great service that we have been giving our tenants and landlords over the past 7+ years!
Moulton Estates will run as a traditional estate agents in St Albans from the same offices as Let Me Properties, incorporating all the services property owners might need under one roof in St Albans City Centre.
There will be a “hard launch” in the new year, once Moulton Estates is selling more than just a few properties per month. In the meantime we have launched, and Moulton Estates will be marketing properties for sale in St Albans very soon!
If you would like to sell a property in St Albans, please visit http://moultonestates.co.uk/ or call us on 01727846361 to find out more. All sellers who instruct Moulton Estates during the remainder of 2015 will receive a 50% discount off their standard selling fees*!
We have the pleasure to present a guest post written by Novitt Harris (accountants in St Albans) in their Summer Budget 2015 Newsletter.
Chancellor George Osborne has delivered the first Budget by a wholly Conservative government in almost 20 years. The March 2015 Budget provided some clues as to possible new measures and of course, the Conservative election manifesto contained a wide range of commitments to be introduced during the course of the current parliament.
The Chancellor said that this is a Budget for working families in a ‘one-nation society’. In ‘a big Budget for a country with big ambitions’, he focused on how the government will continue with its deficit-reduction plans, whilst giving the promised support to ‘hard-working families’. He said that whilst the deficit would be cut at the same pace as under the previous government, it would be a bold budget containing bold new measures.
As predicted, savings in welfare spending of around £12bn, and increases in revenue from tax avoidance and evasion to yield around £5bn made an early couple of headlines in the Chancellor’s speech.
The welfare savings are to be funded by:
– ensuring those aged 18 to 21 who receive Universal Credit apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement 6 months after the start of their claim;
– subjecting benefit payments to a regional cap (£23,000 per year in London and £20,000 in other areas – cut from £26,000 a year);
– limiting child tax credits to two children for new claimants;
– working-age benefits, including tax credits and Local Housing Allowance, will be frozen for 4 years from 2016-17 and
– reducing rents for social housing by 1% a year for 4 years. Tenants on higher incomes (over £40,000 in London and over £30,000 outside London) will be required to pay market rate, or near market rate, rents.
With regards to tax avoidance and evasion, HMRC is to be given significant extra investment – some £60m between now and 2020 – for increased work on tackling evasion and non-compliance. It will be interesting to see how and where this money will be spent.
The Conservative manifesto pledged to introduce a new law within the first one hundred days of a Conservative government to prevent any rises in income tax, VAT or national insurance in the next parliament and it seems that this promise is now to be delivered. Broadly, a five-year ‘tax lock’ will guarantee no increases in income tax rates; no increases in VAT, nor an extension of its scope; and no increase in national insurance, nor an increase in its ceiling above the higher rate threshold. However, the Chancellor could still move the goalposts – there will still be plenty of scope to raise more revenue without increasing tax rates by widening the definitions of what is taxed, or by withdrawing tax reliefs.
This newsletter provides a summary of the key tax points from the July Budget, based on the documents released on 8 July 2015. It is possible that changes will be made between now and the publication of the draft legislation, which is due to be published on 15 July 2015. We will keep you informed of any significant developments.
Tax rates and the personal allowance
Although the personal allowance for 2016-17 was set at £10,800 by the first Finance Act 2015, it has now been confirmed that it will rise from its current level of £10,600 to £11,000 for 2016-17. The government plans to increase the personal allowance to £12,500 by 2020.
The personal allowance will automatically increase in line with the equivalent of 30 hours a week at the national minimum wage for individuals over 21, once the personal allowance has reached £12,500. The Chancellor of the Exchequer will have a legal duty to consider the level of the national minimum wage in setting the personal allowance each year, until it reaches £12,500.
Increases to the personal allowance since 2010, when it was £6,475, mean that a typical taxpayer will be £905 a year better off in 2016-17.
The basic rate limit will be increased to £32,000 for 2016-17 and to £32,400 for 2017-18. As a result, the higher rate threshold will be £43,000 in 2016-17 and £43,600 in 2017-18.
National living wage
From April 2016, a new National Living Wage of £7.20 an hour for the over 25s will be introduced. This will rise to over £9 an hour by 2020.
The dividend tax credit (which reduces the amount of tax paid on income from shares) is to be replaced with a new £5,000 tax-free dividend allowance for all taxpayers from April 2016.
Tax rates on dividend income will also be increased. The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
Whilst the Chancellor stopped short of Labour’s proposals to completely abolish non-dom status, he said that ‘it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.’
From April 2017 anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed to be domiciled in the UK for tax purposes and will therefore be required to pay UK tax on their worldwide income. A technical consultation on the finer points of this change will be published later this year.
It is unclear how many individuals will be affected by the new rules. Those resident in the UK for more than seven years are currently required to either pay UK tax, or pay an annual charge that ranges from £30,000 to £90,000, depending on how long the individual has lived in the UK. The latest figures show that in 2012-13, some 5,080 paid the annual charge.
Inheritance tax on the family home
Currently, inheritance tax is charged at 40% on estates over the tax-free allowance of £325,000 per person. Married couples and civil partners can pass any unused allowance on to one another. From April 2017, each individual will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death. This will be phased in from 2017-18. Broadly, the family home allowance will be added to the existing £325,000 IHT threshold, meaning the total tax-free allowance for a surviving spouse or civil partner will be up to £1 million in 2020-21. The new allowance will be tapered away from those leaving more than £2 million with the intention that those leaving more than £2.35m will not benefit from the new allowance. The tapering policy does, however, have a major flaw -where a home worth £175,000 is included in an estate with a value of between £2m and £2.35m, an effective rate of 60% will be payable.
Currently, individual landlords can deduct their costs – including mortgage interest – from their profits before they pay tax, giving them an advantage over other home buyers. Wealthier landlords receive tax relief at 40% and 45%. This tax relief will be restricted to 20% for all individuals by April 2020.
Landlords will be able to obtain relief as follows:
– in 2017-18 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction.
– in 2018-19, 50% finance costs deduction and 50% given as a basic rate tax reduction.
– in 2019-20, 25% finance costs deduction and 75% given as a basic rate tax reduction.
– from 2020-21 all financing costs incurred by a landlord will be given as a basic rate tax reduction.
In addition, from April 2016, the ‘wear and tear allowance’, which allows landlords to reduce the tax they pay (regardless of whether they replace furnishings in their property) will also be replaced by a new system that only allows them to get tax relief when they replace furnishings.
The rent-a-room relief limit is to be increased from the current level of £4,250 to £7,500 from April 2016. This means that from 6 April 2016 a person will be able to receive up to £7,500 tax-free income from renting out a room or rooms in their only or main residential property. The relief also covers bed & breakfast receipts as long as the rooms are in the landlord’s main residence.
From September 2017, working families with three and four year olds will receive 30 hours of free childcare – an increase from the 15 hours they are currently offered.
In addition, from 2017, parents will benefit from up to £5,000 worth of free childcare a year in a policy designed to help parents work. The government will also fund 15 hours a week of free childcare for all disadvantaged two-year-olds, worth £2,500 a year per child.
Taxation of lump sum death benefits
A change is being made to the pensions tax rules to reduce the tax charge that applies to taxable lump sum death benefits paid from registered pension schemes or non-UK pension schemes. Broadly, the rate of tax payable will be reduced from 45% to the recipient’s marginal rate of income tax. This change will apply in relation to lump sums paid on or after 6 April 2016.
Tax-advantaged venture capital schemes amendments
Amendments are to be made to the existing Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) rules. Broadly, the changes are as follows:
– The first measure specifies the age of a company that is eligible for investment under EIS and VCT. Companies must raise their first investment under EIS, VCT or other risk finance investment within 7 years of making their first commercial sale or 10 years if the company is a knowledge-intensive company. However, no age limit will apply to companies raising an investment where the amount of the investment is at least 50% of the company’s annual turnover, averaged over the previous five years. The age limit will apply also to any business that has been owned previously by another company.
– In addition to the existing cap on annual investments of £5 million, there will be a new cap on the total amount of investments a company may raise under EIS, VCT or other risk finance investment, of £12 million or £20 million for knowledge-intensive companies (see below). Any risk finance investments used by a business previously owned by another company will count towards the total funding limit.
– If an individual subscribes for shares in a company and that individual already holds shares in the company, the new shares will not be eligible for EIS unless the individual has made a risk finance investment in the company before Royal Assent or the individual’s shares in the company (excluding founders’ shares) were a risk finance investment. A risk finance investment is an investment under EIS, SEIS or Social Investment Tax Relief.
– There will be a new requirement for the money to be used for the growth and development of the company (or subsidiary company).
– The rule prohibiting the use of money for the acquisition of shares will be extended to all investments made by VCTs on or after the operative date and will therefore apply to non-qualifying holdings.
– A new rule will prevent companies from using EIS and VCT investments to acquire a business.
– Higher limits are being introduced on total investment, age of company and number of employees to provide support for knowledge-intensive companies that are particularly likely to struggle to access finance. A knowledge-intensive company is a company:
– whose costs of research and development or innovation are at least 15% of the company’s operating costs in at least one of the previous three years, or at least 10% of the company’s operating costs in each of the previous three years and either
– which has created, is creating or is intending to create, intellectual property or
– which has employees with a relevant Masters or higher degree who are engaged in research and development or innovation and who comprise at least 20% of the company’s total workforce.
For knowledge-intensive companies, the limit on employees will be raised from less than 250 to less than 500 employees.
– The following measures will be introduced with the intention of smoothing the interaction between SEIS and EIS:
– companies will no longer need to use at least 70% of SEIS funds before raising funds under EIS or VCT respectively;
– the EIS relief of investors in companies that redeem the shares of SEIS investors will no longer be reduced, so long as the SEIS relief on the redeemed shares is repaid;
– the legislation will be amended to clarify that farming outside the UK is not an eligible activity for EIS, SEIS, VCT and Enterprise Management Incentives.
The measures will have effect from April 2014 for the change to the rule on redemption of shares of SEIS investors; 6 April 2015 for the provision removing the requirement for 70% of SEIS funds to be used before a company may raise funds under EIS or VCT; and Royal Assent for shares issued under EIS and for investments made by VCTs and for determining whether investments held by the VCT are to be regarded as qualifying holdings.
Possible pension reform
The Chancellor indicated that there are major changes afoot in the pension tax regime. Changes to the current regime may mean that in future, pension savings operate along similar lines to ISAs – where money is invested, the government makes top-ups to the investment, and the proceeds can eventually be taken out tax-free. There are no further details on this at present but a pension reform Green Paper is to be published for consultation, so we will be monitoring this area for further developments.
Investment managers Capital Gains Tax treatment of carried interest
Carried interest arises from an individual’s participation in an investment vehicle, typically a partnership, and they will normally be charged to capital gains tax on the full amounts they receive in respect of that interest. In relation to all carried interest arising on or after 8 July 2015, whenever the arrangements were entered into, deductions will only be allowed in respect of sums actually given by the individuals as consideration for acquiring the right to that carried interest. This change will not affect genuine investments in funds made by managers on an arm’s length basis (known as ‘co-invest’).
Annual investment allowance
The annual investment allowance (AIA), which has previously been increased temporarily to £100,000 until 1 January 2016, will be set permanently at £200,000 from that date.
Broadly, the AIA allows businesses to deduct the full value of certain items, including equipment and machinery, up to a total value of £200,000 from their profits before tax. This helps them with cash flow because it means the full tax relief is given in the year that items are purchased, rather than over several years. Any businesses considering making large investment on items qualifying for the AIA should now consider the timing of such spending.
Personal service companies
The government is concerned that the IR35 rules are not effective enough and non-compliance in this area is estimated to cost over £400 million a year. The government has therefore asked HMRC to liaise with business on how to improve the effectiveness of existing IR35 legislation. We can expect to see further developments in this area.
Extending averaging for farmers
As announced in the Spring Budget, the averaging period for farmers will be extended from two years to five years from April 2016. A consultation on the measure has now been published.
Reduction in corporation tax rate
The main rate of corporation tax has already been cut from 28% in 2010 to its current rate of 20%. The Chancellor has announced that the main rate will now be cut further from 20% to 19% in 2017, and then to 18% in 2020, benefiting over a million businesses.
Business goodwill amortisation
Corporation tax relief for the cost of purchased goodwill will be restricted for acquisitions and disposals on or after 8 July 2015. This measure will be enacted in Summer Finance Bill 2015.
Research and development tax credits
Universities and charities will no longer be able to claim the research & development expenditure tax credit with effect from 1 August 2015. This corrects an anomaly in the legislation and restores the original policy intention. This measure will be enacted in Summer Finance Bill 2015.
Businesses will have their employer national insurance bill cut by another £1,000 from April 2016, as the employment allowance rises from £2,000 to £3,000. This increase means that from April next year, businesses will be able to employ four people full time on the national living wage and pay no national insurance at all.
Also from April 2016, companies where the director is the sole employee will no longer be able to claim the employment allowance.
Abolition of Class 2 NICs and reform of Class 4
The government has confirmed that it will consult in autumn 2015 on abolishing Class 2 NICs and reforming Class 4 NICs for the self-employed.
VAT on services used and enjoyed in the UK
The VAT “use and enjoyment” provisions will apply so that from next year, all UK repairs made under UK insurance contracts are subject to UK VAT.
Also, the government will consider a wider review of off-shore based avoidance in VAT-exempt sectors, with a view to introducing additional “use and enjoyment” measures for services such as advertising in the following year.
VAT refunds for shared services
The Finance Bill 2016 will provide for refunds to eligible public bodies of VAT incurred on specified shared services.
Office for Tax Simplification
Legislation will be included in Finance Bill 2016 to put the Office for Tax Simplification (OTS) on a statutory basis and it will become a permanent office of HM Treasury.
The OTS are to review:
– the closer alignment of income tax and National Insurance contributions; and
– the taxation of small companies.
Taxation of employee benefits and expenses
A new statutory exemption for trivial benefits in kind costing less than £50 will be introduced with effect from April 2016. This was first announced at Autumn Statement 2014 as part of a package of measures intended to simplify the taxation and reporting of employee benefits and expenses. Although the other measures were included in Finance Act 2015, this measure has been held over for inclusion in Finance Bill 2016.
Finance Act 2013 introduced simpler rules that can be used by unincorporated businesses to claim relief for some business expenses. Legislation will be included in Finance Bill 2016 to amend those rules to ensure that partnerships can fully access the provisions in respect of the use of a home and where business premises are also a home.
Simplification of the treatment of termination payments
The government will consult on the tax and NICs treatment of termination payments with a view to making the rules simpler and fairer.
Reviewing the rules for tax relief on travel and subsistence expenses
A discussion paper will shortly be published outlining proposals for new rules for tax relief on travel and subsistence expenses.
HMRC debtor and creditor interest rate
Currently, different rates of interest apply to tax-related debt depending on whether or not it follows from court action. Legislation will be included in the Summer Finance Bill 2015 to ensure that rates of interest payable on tax-related debts to which HMRC is a party are all contained within tax legislation.
With effect for interest accruing on and after 8 July 2015, the government will set the rate of interest which applies on taxation-related debts payable under a court judgment or order by HMRC to a rate equal to the Bank of England base rate plus 2%; and it will apply the late payment interest rate of 3% to taxation-related debts owed to HMRC under a court judgment or order.
More information about Novitt Harris & Co Limited Accountants
They are based in Markyate, offering local business owners and individuals a wide range of services to small and medium sized businesses.
All clients receive fixed fees, work delivered on time and free unlimited phone support. Visit their website http://www.novittharris.com for more information.
We highly recommend signing up to their newsletters, that often have landlord specific information in them, that we believe you will find very helpful.
At Let Me Properties we are proud of the fact that we do not charge our landlords any hidden fees!
One of the greatest challenges we face when meeting a new landlord who is trying to choose a letting agent in St Albans is trying to get across the message that our management fees are “fully inclusive”.
Unfortunately there are many less scrupulous letting agents in St Albans who charge “hidden fees” or “stealth charges” as they are known to some. These are charges that at the time of choosing a letting agency, the landlord does not think to ask about. Every landlord knows about the monthly management charge, but many don’t think about the “running costs”. When you are letting out a property, the monthly management fee that you pay your letting agent is only one of the costs you will face as a landlord.
Therefore it is particularly important that you consider ALL the other factors before you make up you mind and decide on a letting agent.
Are they experienced in the St Albans property market?
Are they independent?
Are they transparent?
What is their monthly management fee?
Do they charge landlords for finding tenants at the start of their managed service or is it included free?
Do they charge any landlord set up, or administration charges?
Do they charge any landlord fees for dealing with the tenancy agreement, or renewing the tenancy?
Do they charge landlords extra when arranging maintenance?
Do they receive any kickbacks, fees, or commissions from the contractors they use for maintenance
Do they use small local businesses to keep costs low when arranging maintenance?
What are some example costs for:
A visit from the electrician
A visit from the plumber (and a gas safety certificate and boiler service cost)
A visit from the handyman
A visit form the professional cleaners
Do they have a good reputation?
Do they have a prominent high street location?
Are they easily contactable?
Do you feel you can trust them?
If you ask all of the above questions to the letting agents you are trying to choose between you will be must more likely to make a informed choice that you will most likely be happy with for many years. When a landlord asks us and any other letting agents they are considering employing the above questions, those landlords have always chosen to employ Let Me Properties.
We pride ourselves in being fully transparent, charging no hidden fees, accepting no commissions from contractors, and keeping the maintenance and repair bills as low as possible for our landlords. Our fully inclusive full management service only has ONE added fee (for dealing with the deposit protection at the start of each tenancy), besides our deposit protection fee, we have no other added fees for UK landlords (small added fee applies for Non-Resident Landlords who live outside the UK for more than 6 months of the year).
It is articles like the above article in the Metro that we hope will raise awareness of this practise and will show landlords that a cheaper management fee does not mean a more cost effective solution. At the end of the day, when selecting a letting agency to manage your property, it is important to find one that is transparent and trustworthy. They may cost you 1% or 2% extra on the management fee, but will most likely save you hundreds, if not thousands, of pounds each year by not charging stealth fees and by saving you money on repairs and maintenance.
Wouldn’t you rather work with a letting agency that is transparent and trustworthy anyway?
Article quoted above is: http://metro.co.uk/2015/06/07/foxtons-could-be-hit-with-42million-legal-bill-after-overcharging-a-landlord-for-light-fitting-5234408/ published by Oliver Wheaton for Metro.co.uk on Sunday 7 Jun 2015 5:19 pm
If you are involved with sales of UK residential property where the buyer or seller is tax-resident outside of the UK, you need to be aware of a new tax that came into effect on 6 April 2015: non-resident CGT (NR CGT).
The NR CGT charge is applied at different rates according to whether the seller is a non-resident closely-held company, fund, individual, personal representative or trustee. It applies to gains made in the period from 6 April 2015 to the disposal date of the property, so a small amount of tax likely to be payable on property sales made in 2015/16.
However, when such a sale is made a NR CGT return must be submitted to HMRC within 30 days of the conveyance of the property, and this must be done online. The return must be made whether there is any NR CGT to pay or not, where there is a loss on the disposal, and even where the taxpayer is due to report the disposal on their own personal or corporate self-assessment tax return.
Where the vendor is not registered for UK income tax, corporation tax or the annual tax on enveloped dwellings (ATED), the NRCGT charge must be paid within 30 days of the conveyance date. This payment can only be made once the NRCGT return has been submitted and HMRC have replied with a reference number to use when making the payment. There are penalties for failing to file the NR CGT return on time, and failing to pay the tax on time.
If the taxpayer is registered for UK tax they can opt to pay the NRCGT due at the same time as the tax due for their normal personal or corporate tax.
Conveyancing solicitors need to be aware of the very tight tax reporting and payment deadlines. Property developers need to warn non-resident customers that they will be liable to tax on any gain made when they sell the residential property and that gain includes any discount in the price achieved by buying “off-plan”.
Well folks, it’s official, Let Me Properties were the NUMBER ONE letting agents in St Albans at getting properties rented quickly*.
According to the Rightmove.co.uk statistics report, Let Me Properties was the fasted letting agent in St Albans at finding tenants, out of the top 18 letting agents in St Albans who list on Rightmove. It took Let Me Properties only 12 days on average to rent each property we marketed. The report also shows that our nearest competitor took 18 days, with many agents taking more than 23 days to secure tenants for their landlords.
The six days, on average per property, that we saved our landlords in lost rent equates to almost £250 in extra rent that our landlords could make (if their property is empty and rented by Let Me Properties 6 days earlier than our nearest competitors).
We are very proud to be recognised for our ability to rent properties in St Albans so quickly, and we continue to work hard to ensure that we stay so far ahead of the other letting agents in St Albans.
If you know of any landlords in St Albans who could benefit from our speedy tenant finding skills, please ask them to get in touch with us as soon as possible, and we will be happy to help!
Guest Article by Richard Clark Cert CII (MP)
Specialist Buy to Let Mortgage Broker Advocate Finance
As a specialist buy to let mortgage broker, I am often asked by my clients about the best ways that they can grow their buy to let property portfolio. I usually explain that the most important part of the process is choosing the right mortgage lender. Most people believe that the 3 most important factors in choosing a mortgage lender are:
Now although the above are important and worth due consideration, if you are an investor intent on growing your property portfolio and making the highest return on investment over the medium and long term, then I believe the most important factors to consider when choosing a mortgage lender are:
Ability to borrow more money against your existing mortgage (some banks will gladly let you release capital from your properties, other banks will specifically not allow you to take a further advance).
The number of properties that the lender will lend on or allow you to own (some banks will not lend to you if you own more than say 5 properties for instance).
The rental stress test. Some banks will lend you up to 125% of the rental income stressed at a 5% interest rate. This means that if you receive £12500 pa in gross rent, you may only borrow up to £200K from that bank. Other banks may lend 125% of the rental income stressed at 4.48%, this may not seem like it makes a large difference, however in actual terms it means on the same property, you would be able to borrow up to just over £223K, which may allow you to use that extra £23K towards investing in further buy to let properties. Therefore, as you can see, the rental stress test can make a huge difference in your ability to grow your buy to let portfolio. [To calculate the rental stress test: take the annual rent, divide it by 1.25, then divided that by the stress test percentage (do not use % – first work out % expressed as a decimal eg. use 0.05 not 5%) to equal the Maximum Loan Size]
Generally speaking property investors are looking for 3 things:
Highest return on investment
Lowest hassle and steady cash flow
If you lock away capital in your properties, then your return on investment will not be as high as if you were regularly re-investing your profits made through capital growth. According to a recent article in the Telegraph the results of a study they carried out found that buy to let landlords who purchased properties completely with cash made 3 times less of a return on investment than buy to let landlords who invested in properties using 25% of their own money as a deposit whilst borrowing the other 75% from the bank. In fact they found that for every £1 invested in buy-to-let properties since 1996, that £1 is now worth £14.90 where investors put down a deposit of 25% and borrowed the rest via buy-to-let mortgages, whilst cash buyers on the other hand, over the same period, only turned that £1 into £5.07.
Therefore the re-investment of your capital and using mortgage lending wisely becomes pivotal in achieving the highest returns on your investment and allows you to make the most capital growth by allowing you to own more properties whilst making capital gains using the banks money.
As for the last point that landlords are looking for steady cash flow and low stress investments, this comes down to choosing properties in the best areas such as St Albans, and choosing the best letting agents to deal with these properties for them, such as Let Me Properties.
If you ever wish to release your capital and re-invest it, you may need to re-mortgage the property. The costs of re-mortgaging can amount to thousands due to costs such as solicitors’ fees, arrangement fees, valuation fees and so on. Alternatively, by using a further advance from your existing lender, buy to let landlords can negate the costs of re-mortgaging altogether which can be much cheaper making your return on investment much greater. Many of the high street lenders do not permit further advances and also impose portfolio size restrictions which is why you need to carefully consider all of your options and always take expert advice.
I am always happy to discuss the best options and provide free advice to clients of Let Me Properties. If you would like to find out more about how we can help, then please contact me on 01582 742729 or email me at email@example.com.
Richard Clark Cert CII (MP)
Specialist Buy to Let Mortgage Broker
Directly authorised by the Financial Conduct Authority (592830)
Members of the National Association of Commercial Finance Brokers
Much of our business comes from referrals. If you know anyone who may require our help or advice, please pass our details to them.
So it’s official, Let Me Properties St Albans Premium Letting Agents new website is finally finished!
We have been working very hard over the past few months to develop this shiny new site and we are extremely happy with the outcome.
Marking and property presentation are the most important factors in finding tenants for our landlords’ properties. This is why we have specifically trained a member of our team in professional property photography, and we use (very expensive) specialist camera equipment to make sure that we produce high quality professional property photographs. We have also always made it a top priority to create very detailed and informative property adverts and particulars. Now that we have our fantastic new website we can really take full advantage of these photos and property details to maximise the interest and enquiries received about their properties.
For the past 18 months we have had fantastic success on Google Search, being in the top two positions on the map listings and natural search listings for the most important search phrases such as “letting agents in St Albans”. This was not easy to obtain, and is even more difficult to maintain. One of the most important considerations in creating our new website was to protect this fantastic position on Google Search, because this is how our landlords find us, and how their future tenants find their properties to rent through us. We believe we have managed to protect our standing on Google and we will keep working extremely hard to maintain this, for the benefit of our landlords and the growth of our company.
Please have a look around our new website, and if you are feeling generous please share it with your friends and family who may be interested in letting or renting property in St Albans, Hatfield, and the surrounding areas. And if you would like to leave some lovely feedback on for our testimonials page, we will be very thankful. Please just complete the form on the testimonials page to do this.
Having a letting agency office in St Albans city centre leads to all sorts of people coming in and calling in each day. Over the past 7 year we have had hundreds, if not thousands, of requests for donations from varies charities. We always want to help everyone as much as possible, however we find that spreading ourselves too thinly means that we aren’t able to make a real difference for anyone in particular.
We are dedicated supporters of the Dragons’ Apprentice Challenge, an excellent local community initiative from the Centre for Voluntary Service (CVS) which provides a platform linking students from schools and colleges with local businesses and local charities/community groups. We take part in the challenge each year, and we are the regular sponsors of the Best Managed Team Award.
For awhile we have been looking for a way to concentrate our charitable giving, and find a way that we can help others to raise money for a brilliant cause. We believe we have found it! We are now official sponsors of Guide Dogs, a fantastic charity that provides blind and partially sighted people with independence and a national voice. Through our sponsorship we as a company give our charitable donations to Guide Dogs, and we make it possible for everyone to generate donations for Guide Dogs as well.
We pledge to donate £50 for every new landlord that is recommended to Let Me Properties (once we let and manage their property as per our terms and conditions).
In order to ensure that the donation reaches Guide Dogs, please make sure that you let us know that you are making the recommendation on behalf of Guide Dogs, or make sure to let the new landlord mentions this program to us to ensure we know to make the donation in their honour.
Many of you who are already friends with me on Facebook will already know that I am a big softy for animals, especially dogs, so it makes me incredibly happy to be able to support such a fantastic charity.
To submit a landlord recommendation to us in a way that you can be sure will result in a donation to Guide Dogs, please complete the below form.
[contact-form-7 id=”6824″ title=”Recommend a Landlord”]
Terms and Conditions apply to our fully managed service and to this pledge. We reserve the right to end or alter this pledge without notice. Please only submit the details of landlords who have given you permission to do so, after you have informed them about us and explained that we will be contacting them.
As many of our existing landlords may already know, I, Gregory Moulton, am the managing director of Let Me Properties and a 50% shareholder in the company, with the remaining 50% of shares being owned by a silent shareholder.
Well we are very pleased to announce that as of 02/04/2015, I am now the sole owner of Let Me Properties letting agents in St Albans.
We had a lovely party at home on Good Friday with some of our closest friends.
The next few years will involve a lot of hard work and we have a lot planned for the future. We appreciate all of your continued support, and we look forward to continuing to provide a top of the range service for everyone, whilst constantly improving!
The following is an extract from the Novitt Harris & Co Limited Accountants Autumn Statement 2014 Newsletter and is posted here purely for interests sake without liability, warranty, or guarantee. For any clarification, or help with any accounting matters, we highly recommend Notvitt Harris & Co.
The Chancellor of the Exchequer pulled out a few surprises in his Autumn Statement. The most eye-catching is the reform of stamp duty land tax (SDLT), which is payable by purchasers of land and property. The changes should reduce the SDLT payable on 98% of transactions which complete from 4 December 2014 onwards.
Small businesses should be pleased with the £1,500 business rate discount for small high street shops, cafes, pubs and restaurants. All employers will benefit from the zero rate of employers’ national insurance for workers aged under 21, which is to be extended to apprentices aged under 25 from April 2016.
People employing carers in their own homes will qualify for the employment allowance with up to £2,000 per year. Where an ISA is passed on to the surviving spouse or civil partner on death, the tax shelter for the savings will be preserved.
Further detail on all these points is given below. This newsletter is based on the documents released on 3 December 2014. It is possible that a different position will be shown by the draft legislation which will be published on 10 December 2014. We will keep you informed of any significant developments.
Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is paid by purchasers of land and buildings. The tax is regarded as unfair, as it is imposed in a slab system on the whole value of the property according to the highest rate applicable for the property value.From 4 December 2014 the new rates and bands of SDLT apply (see below) and the tax is imposed in a progressive fashion such that each slice of the property value bears tax at the rate according to that band, like income tax. These changes only apply for residential properties, not for commercial properties.
Until 3 December 2014 a house which sold for £260,000 would attract SDLT at 3% on the entire value, so the purchaser would pay £7,800 (£260,000 x 3%), although SDLT for properties costing up to £250,000 was just 1%.
Where the contract for the same house at the same price completes on or after 4 December 2014 the SDLT will be calculated as:
£250,000 – £125,000 x 2%
£260,000 – £250,000 x 5%
This saves the purchaser £4,800.
Buyers who have already exchanged contracts to purchase, but have not completed the transaction before 4 December 2014 will pay SDLT at the new rates and bands which are:
Rate of SDLT on each band
£0 – £125,000
£125,001 to £250,000
£250,001 to £925,000
£925,001 to £1,500,000
The changes for SDLT will mean that purchasers of residential properties costing less than £937,500 will pay less tax, but purchasers of properties over that threshold will pay more tax, and for purchasers of properties costing over £2.1 million will pay considerably more.
Land and Building Transaction Tax
From 1 April 2015 purchasers of land or buildings in Scotland will pay Land and Building Transaction Tax (LBTT) in place of SDLT. This new Scottish tax will be imposed in a progressive fashion, like the new SDLT. However, the new progressive LBTT will apply to both residential and commercial properties at the following rates and bands:
Up to £135,000
£135,001 to £250,000
£250,001 to £1m
Up to £150,000
£150,001 to £350,000
Annual Tax on Enveloped Dwellings
The annual tax on enveloped dwellings (ATED) is paid by the owners of residential properties (dwellings), where the property is held by a non-natural person such as a company, partnership with one or more corporate members, unit trust or similar structure. A number of reliefs and exemptions are available which must be claimed on a property by property basis for dwellings that are commercially let, held as stock for development companies, used as employee accommodation or as farmhouses, or are open to the public.
This tax was introduced in April 2013 and has raised five times more than expected, so the Chancellor is putting up the annual charges to apply in 2015/16 as follows:
If you let out residential property you need to know whether you can receive a tax deduction for the cost of replacing or repairing furniture and fittings provided inside that property. The cost of equipment used to maintain the outside of a property, or used in the communal areas of a building containing multiple dwellings, is always deductible.
When you fit something for the first time to a property, such as a fitted kitchen, that cost will form part of the capital cost of the building and will only be deductible when you sell the property. If you repair a fitting or replace the fitting with something of the same quality, the cost counts as a repair which can be deducted from the rental income.
If the fitting is replaced with items of a higher quality, the whole cost must be treated as a capital improvement, which is only deductible from the proceeds of selling the property. This does not apply if the replacement is superior just because the modern equivalent of an outdated material or design is used. For example when you replace an old central heating boiler with a new condensing boiler, which does the same job but with greater energy efficiency, that will be a tax deductible repair not an improvement.
Let Property – Furniture and Fittings
When your property is fully furnished you can claim a wear and tear allowance (10% of the net rents), each year to cover the cost of replacing furniture and furnishings such as carpets and curtains. You can only claim capital allowances for furniture used inside a property which is let out commercially as furnished holiday accommodation for at least 140 days a year (other conditions also apply).
Before 6 April 2013, the taxman allowed landlords of unfurnished and partly furnished properties to claim for the cost of items provided in those properties under the “renewals basis”. Now the taxman has changed his guidance, saying that claims for “renewals” can only apply to small items such as toasters, lamps, or rugs.
This denies a tax deduction for the cost of larger loose items such as fridges, cookers, carpets and curtains. The cost of replacing items which are fixed to the building, such as a fitted oven or hob in a fitted kitchen, are counted as “repairs”, and are deductible as described above.