Jul
26

Shelter and their abandonment of social tenants

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If there is one thing that Grenfell Tower has taught us it is that it often takes a catastrophic event for people’s serious concerns to be listened to; before the Grenfell fire, the tenants’ were forced to dice with death on a daily basis while their reports of the danger they were in went unheeded by their incompetent local authority landlords and also by ‘the left’ in general.  Indeed, there is no evidence that the organisations and individuals on the left who would normally be seen as their ‘protectors’ and advocates did anything at all to help them.

This refusal to listen to social tenants can only be explained as stemming from a misguided idealisation of council and Housing Association housing; a politically-correct vision of it as the preferred tenure for the poor (the ultimate dream of getting a council flat); in contrast to the portrayal of the private rented sector (PRS) as some kind of hell hole. Indeed, a new report out by the Joseph Rowntree Foundation also follows the politically-correct (but factually incorrect) line of assuming the PRS is a uniquely problematic tenure, whilst the social sector is deemed to be Nirvana.

We now see how this this simplistic and false dichotomy has cost people’s lives; it diverted attention from recognising and dealing with incredibly dangerous housing and shone the spotlight instead on housing which, despite its faults, was not putting its tenants’ lives at risk.

The ‘homelessness charity Shelter’s’  role has been especially pernicious in this. As all landlords know, this organisation has single-mindedly led the charge to demonise private rented housing whilst promoting the idea of social housing and more recently, following the Tory agenda, of owner-occupation, as the only tenures with a legitimate role to play in solving the housing crisis.

This is now beginning to unravel. Last week we saw Shelter and John Healey, Shadow Secretary of State for Housing, vying to get in on the act and talk about shoddy conditions in social housing. They will try and portray themselves as though they have been the champions of social tenants over recent years; they have not.

Even for weeks after the fire Shelter was semi-mute about it (possibly because they were frantically trying to work out how to explain the fact that one of their Board members was the sole shareholder of the company which had supplied the cladding to Grenfell Tower); perhaps they also found the switch to criticising the social sector too far out of their comfort zone.

Maybe they don’t see how utterly scandalous their ideologically-driven agenda of recent years has been. Given that additional information in the latest English Housing Survey (EHS) has confirmed that social tenants are more dissatisfied with their housing than private tenants are (data collected before the fire) how do they think they might justify this extremely poor prioritisation of resources?

Other key questions to be answered include:

  • Did Shelter ignore tenants’ groups’ warnings that they were being put in life-threatening situations because of a conflict of interest with their Board member supplying the cladding?
  • Where is the evidence that they were ‘advocating’ for social tenants across the country in general? (what proportion of their resources was spent on this?)
  • And why did they see their main role as pursuing private landlords to the near-exclusion of all else?

A glance at Shelter’s Facebook page over the months preceding the Grenfell fire reveals that it was spending a significant amount of time and resources during this critical time highlighting things like ‘mould and condensation’ issues in the PRS (often caused by occupants’ lifestyles – a fact Shelter does not like to acknowledge) and focusing its energies on pushing for private landlords to grant minimum 5-year tenancies, when tenancies last an average of 4.3 years anyway, according to the EHS. It gives a terrible new meaning to the phrase ‘fiddling while Rome was burning.’

The damning fact of the matter is that not only has Shelter not protected social tenants with its annual £60 million budget; not only has it relentlessly harassed private landlords (and supported George Osborne’s insane fiscal attack on private landlords which is an attack on private tenants as much as on landlords – a punitive fiscal attack on landlords can only lead to higher rents), but it has also not provided one roof over anyone’s head during all the time it has been undermining those of us who do.

I think many members of the public, including those who donate to the ‘charity’ would be surprised to know that despite the assumption behind its name, it provides no shelter.

Incredibly, notwithstanding all of this, somehow Shelter’s reputation has remained intact. Indeed their former Chief Executive Campbell Robb (now heading up the Joseph Rowntree Foundation), who presided over this catastrophic mismanagement, has also escaped scot-free and into another lucrative position in the voluntary sector, leaving Shelter in what can only be described as a moment of existentialist crisis.

What does it now stand for? Who should it be helping? And how should it be doing this?

These are fundamental questions which its new Chief Executive, Polly Neate, who is about to take up her post, must urgently address. If she cannot drastically re-frame Shelter’s priorities so that it helps rather than hinders in solving the housing problems of this country, then I suggest Shelter shut up shop as it is not fit for purpose.

Dr Rosalind Beck

Dr Beck is a porfolio landlord based in South Wales, who has written a critique of the Government’s ‘fiscal attack’ on landlords: Click Here

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Jul
26

Record Month For Number of Landlords Incorporated

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July 2017 has seen Property118 Limited help more landlords using the Beneficial Interest Company Transfer “BICT” structure to obtain HMRC non-statutory clearance for relief under s162 TCGA 1992 than ever before .

Non-statutory clearance in respect of using the BICT structure provides ‘peace-of-mind’ to landlords who want to be certain of being able to roll capital gains in their property portfolios into shares in the company they are transferring beneficial interest of their assets into whilst avoiding the costs associated with refinancing.

Advantages of incorporation from a tax perspective are that companies are unaffected by legislation which progressively precludes finance costs incurred by individual landlords being claimed as a business expense. Furthermore, incorporation using this structure re-sets the value of properties for the purpose of calculating tax on capital gains to the current value which is also indexed in a company structure. This enables landlords to trade their properties without having to worry about personal CGT.

There are now many ‘copy-cat’ structures being offered by tax-planners but many of them do not obtain non-statutory clearance. We have mystery-shopped some of the copy-cat companies and it is very clear that they are offering extremely dangerous advice in that the structures they are promoting fall short of delivering all of the promises they make. For example, some are transferring beneficial interest using a Deed of Trust but are completely overlooking the importance of a Business Sale Agreement and a Clearing Agency Contract between the company and the mortgage borrower. Many lenders will not accept mortgage payments from companies, hence the payments are being made to the landlord who in turn pays the mortgage. This is fine in principle, but there could be major tax consequences if the paperwork is wrong. We suspect many of the landlords using these ‘copy-cat’ schemes will find that their mortgage payments will be deemed to be income paid to the initial borrower by the company and taxed accordingly by HMRC, which is very worrying indeed.

We think one of the reasons Property118 Limited has been so successful of late has been due to our fee charging structure in regards to assisting with non-statutory clearance applications. Our fee is just £1,500 + VAT but that is refunded in full if clearance is declined.

Incorporation using the BICT structure is only one of the tax planning strategies recommended by Property118 Limited. This is because there is no ‘one-size-its-all’ solution. For this reason, an initial consultation is required to establish the current position and future aspirations of clients prior to an analysis and a detailed written report being prepared and followed up with a telephone or Skype based Q&A session. Clients of Property118 Limited are encouraged to include their accounts in this process and this in turn often leads to those accountants referring more of their clients. The fee for these consultations is £400 and comes with a guarantee of total satisfaction or a full refund.

The legal work associated with the implementation of BICT incorporation is always referred by Property118 Limited to Cotswold Barristers where clients own properties in England & Wales. For clients in Scotland, an Edinburgh legal firm provides additional assistance in regards to preparing the paperwork and dealing with LBTT returns, which are invariably nil for business partnerships.

Mark Smith, Head of Chambers at Cotswold Barristers said; “we are delighted with the symbiotic relationship with Property118 Limited and the work flowing therefrom. We fully anticipate the number landlords using the BICT strategy for incorporation to continue to increase”

Mark Alexander, founder of Property118 said; “this news will be very welcomed by many landlords and is one in the eye for critics of the BICT strategy”

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Jul
26

Rent to Rent Operator Prosecuted and Fined

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A Rent-to-Rent operator called Arthur Zurvskij has been found guilty by Willesden Magistrates Court of illegally sub-letting a five bedroom house to seven tenants.

The owner of the property, who lived in the United States and had legally handed over control of his property to Ludlow Thompson, believed that the property was being rented out to a single family. Willesden Magistrates Court heard that Zurvskij had not sought written permission from the landlord to let the house to more than one household.

Instead of securing a House in Multiple Occupation licence from Brent council, Mr Zurvskij (a director of Skyline Property Management) which he had subsequently changed to to Enox UK Ltd, had rented the property and then illegally sublet it to seven individuals. He was ordered to pay £2,250 in fines while his company Enox UK Ltd, had a £8,000 fine.

The Council enforcement officer said: “Breaching the law on HMO is very serious. If found guilty, the landlord or person in charge of the property is left with a criminal record. The potential fines are now unlimited.”

The maintain council’s zero tolerance policy which includes prosecuting tenants who illegally sublet.

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Jul
26

Is rent in advance a deposit?

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Advance Rent: Piggot v Slaven and Johnson v. Old

There are two important cases here which clarify the position on landlords accepting rent payments in advance. One concerns the accepting of the final two month’s rent in advance, a common device used by some landlords who thought, misguidedly, it was a way of avoiding the deposit protection rules, and one that was advised by some experts at the time the deposit protection legislation came in to force in April 2007.

The second case involves the taking of a lump sum rent payment for, for example the whole of 6 or 12 months.

This article applies primarily to English law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.

It is common practice for some tenants to offer rent in advance, for example 6 months’ rent up front. This occurs particularly with students coming to the UK from abroad, where wealthy parents are paying the rent, but it is also a feature of cannabis growers paying in cash, so beware!

In a competitive landlord’s market, where good rental accommodation is scarce, tenants will sometimes offer landlords several months’ rent in advance to entice the landlord into letting to them rather than another prospective tenant.

On the other hand, when a tenant appears to be a bit of a risk, with a low credit score or other affordability issues, landlords will sometimes accept an upfront payment of the first six months’ rent in advance, paid by a parent, for example.

It is custom and practice that landlords to demand the first rent period’s rent up-front in any case, so for a typical 6 month tenancy, with rent paid monthly, the landlord would be looking for, at the outset, the first month’s rent of, for example, £1000 and a deposit equal to 6 weeks rent at £1384.62 (£1000 x 12 divided by 52 and times by 6 = £1384.62), so in total £1000 + £1385 = £2385.00

Under common law, providing the landlord gives a written tenancy agreement rent is payable in advance, otherwise a landlord cannot demand it, with no agreement the tenant can demand to pay in arrears.

In the Grimsby County Court case of Piggot v Slaven [2009] it was held that asking a tenant to pay money that would count as the final two months’ rent under the tenancy would effectively amount to a deposit.

However, this case was overruled in the Appeal Court ruling in Johnson v Old [2013] where a tenant paid 6 months’ rent upfront for a 6 month tenancy. When the landlord decided to apply for possession of the property, issuing a section 21 notice under the Housing Act 1988, the tenant argued in defence that the 6 months’ rent she had paid amounted to a deposit, and furthermore it had not been protected in one of the approved Deposit Protection Schemes.  The section 21 notice was therefore defective according to the tenant’s defence.

It was held that the 6 months’ rent that had been paid upfront could not possibly constitute a deposit because the purpose for which it had been paid was rent for the property. Had the tenant been asked to pay an additional month’s rent on top of the previous payments, then she could have argued otherwise, questioning why she had to pay more than the rent amount.

The decision in Johnson v Old, being an Appeal Court ruling, settles that it is reasonable for landlords to request rent in advance and this will not necessarily constitute a deposit if it can be shown the intention for the payment is purely to pay rent that the tenant would not expect to pay again.

The Judge said:

“…there are various ways of dealing with the perceived risk that a tenant who is the subject of an inadequate credit reference will not pay his rent month by month; and one of those ways is to require payment of the rent ‘up front’.

It seems to me plain that that is what the landlords, perhaps on the advice of their agents, decided was the appropriate way to deal with the perceived risk in the present case. The fact that they chose to deal with the risk in that way – rather than taking a guarantee or a rent deposit – is no reason for refusing to give effect to the terms of the tenancy agreement.”

So by paying rent in advance the tenant was meeting a core obligation of the tenancy in itself, not the payment of a security against it. It was very clear to both parties from the start that there was no intention for the rent money to be returned to the tenant, so it could in no way be seen as a returnable deposit.

According to the Housing Act 2004, the definition of a tenancy deposit is:

[A] “tenancy deposit”, in relation to a shorthold tenancy, means any money intended to be held (by the landlord or otherwise) as security for

(a) the performance of any obligations of the tenant, or

(b) the discharge of any liability of his, arising under or in connection with the tenancy.

However, landlords and agents need to be careful in the way their tenancy agreements are drafted in that rent payment periods have a bearing on giving notice. When a tenancy becomes periodic, a six months’ tenancy would require a 6 months’ notice to quite. The tenancy agreement should make it clear that rent is due, for example, monthly, even though a large payment is made in advance.

See also: New Section 21 Rules

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Jul
25

How many of these ‘business’ hallmarks can you tick off the list?

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If you are hoping to incorporate your rental property portfolio and to roll CGT crystallised into shares in the company you are incorporating into then you will need to qualify for relief under s162 TCGA 1992. The main qualifying criteria for this relief is that HMRC accept that you are running a business.

How many of these questions would you feel comfortable answering if an HMRC inspector was to ask:-

What is your business name?

Does your business have its own Unique Tax Reference number “UTR”?

Do you have a bank account in your business name?

Do you have business letterhead?

Do you have a business telephone number?

Does your business have a website?

Do you have a business email address?

Does your business have an office?

Do you have business cards?

Does your business have any employees?

Does your business have a balance sheet produced regularly?

Does your business produce management accounts?

You don’t have to have all of these things in place to qualify for incorporation relief but if you have none of them HMRC are more likely to consider that you are curating an investment portfolio than running a property rental business.

I’m not saying they are right but perceptions could prove to be important if you are hoping to incorporate your rental property portfolio and claim incorporation relief to roll CGT crystallised upon incorporation into shares in the company you are incorporating into.

If you are considering incorporation or you need some guidance on the optimal tax structure for your business please click on the button below.

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Jul
25

HMRC perceptions, how many of these business hallmarks can you tick off the list?

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If you are hoping to incorporate your business and to roll CGT crystallised into shares in the company you are incorporating into then you will need to qualify for relief under s162 TCGA 1992. The main qualifying criteria for this relief is that HMRC accept that you are running a business.

How many of these questions would you feel comfortable answering if an HMRC inspector was to ask:-

What is your business name?

Does your business have its own Unique Tax Reference number “UTR”?

Do your have a bank account in your business name?

Do you have business letterhead?

Do you have a business telephone number?

Does your business have a website?

Do you have a business email address?

Does your business have an office?

Do you have business cards?

Does your business have any employees?

Does your business have a balance sheet produced regularly?

Does your business have management accounts?

You don’t have to have all of these things to qualify for incorporation relief but if you have none of them HMRC are more likely to consider that you are curating an investment portfolio than running a property rental business.

I’m not saying they are right but perceptions are important if you are hoping to incorporate your rental property portfolio and claim incorporation relief to roll CGT crystallised upon incorporation into shares in the company you are incorporating into.

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Jul
25

Tenant blackmailing to allow viewings?

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We have had rented out our apartment for just over a year now, the tenants have been an absolute nightmare and we have spent a small fortune on redecorating, installing fans, plastering walls etc etc, so we have decided to serve the tenants notice.

We have instructed a new agency as we feel the old agent’s property management could of handled the tenants expectations a lot better. The new agent has since contacted the tenants regarding viewing times and has received the following:-

“Dear Sir or Madam,

I am writing to you regarding your request for viewings.

As it is currently longer than 28 days, you as letting agents have no right to request.
You, as a representative of the landlord cannot guarantee or promise a pre-contract/contract to any prospective tenants for a start date to commence circa 2nd September as you are in no position to assure your prospective tenants that the flat will be available on the aforementioned date ie. Eviction processes/court proceedings might or might not be months in the making. It would be unwise for yourselves to allow viewings for this premises before the legitimate lease end date (2nd September 2017). Neither the landlord nor yourselves representing the landlord may ‘derogate from their grant’.

I appreciate that you are aiming for a seamless transition between us (the tenants in situ) and the prospective tenants so as not to lose the landlord monies.
However, as we are legally entitled to stay ‘undisturbed’ in ‘quiet enjoyment’ of this property until the 2nd of September we put this proposal to you:-

‘That we hereby promise to ensure reasonable and mutually agreed availability for viewings to this premises so as to help facilitate your search for prospective tenants between now (22/07/2017) and the lease end date (02/09/2017) based on the conclusion of a 50% discounted final month’s rent (£585.00p).’

We feel this is a fair amount when you consider the inevitable void of monies that would exist if you were to only allow viewings after our departure date.

Kindly confirm your position by return, this response via email.”

Now we know legally they do not have to allow access although the tenancy agreement somewhat states otherwise, but what they have responded with is clearly blackmail.

Is there anything I can do regarding this or will we just have to let the tenancy expire and wait for them to leave to begin viewings.

Clearly this is not ideal but I would rather lose money then allow my tenant to bend us over backwards like this.

If anyone can provide any advice it would be deeply appreciated.

We have contacted our property management company and they suggest waiting for the tenancy to expire.

Ignazio

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Jul
25

Landlord liability for water leak in tenement building with DSS tenant?

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I have owned a first floor flat in an Aberdeen tenement building for 10 years with no problems but this year we had two leaks within a week both affecting the two properties below ours and the communal areas.

The first leak was caused by the washing machine and the second by a tap left on by the tenant.

The tenant at the time was the first ever DSS tenant in this flat and he had been upsetting neighbours for months by his drinking and several visits from emergency services.

My insurers advised that I could not be held liable for damages to the properties below and the owners would have to claim on their own insurance and that we would have to club together and pay the damages to the communal area.

As a gesture of goodwill we paid for the recarpeting of the communal area and all owners clubbed together for the repainting costs which were minimal per flat.

However, the owners of both flats on the ground floor are now claiming that as this was a DSS tenant I am liable for any damages caused. They tell me Aberdeen City Council and the Citizens Advice Bureau have confirmed this.

They are therefore asking me to pay the excesses on their insurance claims which total something in the region of £1500 and are threatening Small Claims Court Action if I don’t pay up.

This flat has never before been the source of any trouble and has been well managed by my excellent local agent. With both the leaks the agent acted immediately and liaised fully with the neighbours throughout and has also had the tenant evicted for his antisocial behavior.

I have asked my insurers for legal advice but would welcome any thoughts / advice from any of you lovely people please.

Many thanks.

Mandy

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Jul
25

Landlord Action calls for unregulated eviction companies to join a redress scheme

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Over the years, Landlord Action has been instructed to take on several cases following the malpractice of other eviction firms. With repossessions for landlords now taking on average 43 weeks*, Landlord Action says landlords simply cannot afford to restart the process due to compliance errors. It is calling for unregulated eviction companies to become part of a redress scheme to help clean up the industry and protect landlords and letting agents from further unnecessary expense.

As the private rented sector has grown, so too has the eviction industry, and with it, the number of unregulated eviction firms cutting corners and not using legally qualified personnel to facilitate the process correctly. One landlord, Ms Romeena Hadwal, who like many people turned to the internet for advice when her tenant fell into arrears, found herself battling the very company she had instructed to help her. She comments: “I found a company on the internet which was offering what appeared to be a very good deal – £99 to get started and a money-back guarantee. I spoke to them on the phone, they seemed perfectly legitimate, explained the process to me, took payment and filed notice, which my tenant received.  However, problems started when it transpired they had put the wrong address on the court forms, which delayed the entire process.  Under the impression it had been resolved, the case went to court, but four weeks after the hearing, I was told I was unable to apply for the N325 ‘Request for Warrant of Possession’ because the address was still incorrect.  I wish I had gone to a regulated law firm.”

 Communication between Ms Hadwal and her eviction company became increasingly hostile until the firm stopped responding altogether.  Six months on, she was still no closer to getting her property back and had paid a total of £855 to a company which had not helped to evict her tenant.

Commenting on unregulated eviction firms, David Smith, Partner and Head of Operations, Anthony Gold Solicitors says: “Unregulated providers of advice to landlords look like a good deal at first blush. However, they can provide advice which is misleading or plain wrong and the lack of insurance or a complaints process leaves landlords with nowhere to turn when things go wrong. A robust complaints mechanism is a key component of giving landlords confidence in the reliability of such services.”

With nowhere to take her complaint and mounting rent arrears, Romeena Hadwal was desperate to get her property back. Her only choice was to take the plunge and instruct another eviction firm. She contacted Landlord Action who took the case over, and Ms Hadwal now has an eviction date set for 1st August.

Paul Shamplina, Founder of Landlord Action says “When we set up as the UK’s original 3-step fixed-fee eviction company, the aim was to provide simplicity to a previously costly and complicated burden for landlords and letting agents. As other operators have entered the market place, we’ve found ourselves working with more and more landlords who have not only been let down by their tenant or letting agent, but subsequently their unregulated eviction firm.  To improve standards and provide a better service, we acquired status as an Alternative Business Structure (ABS) in landlord and tenant law, authorised and regulated by the Solicitors Regulation Authority.  This means if a landlord has a complaint, they can report it. But not all companies are regulated, so landlords have nowhere to turn if they have a complaint, and this needs to change.  Belonging to a redress scheme would be the first step to making improvements and ensuring consumer confidence.”

Sean Hooker, Head of Redress, Property Redress Scheme added:

“Eviction is a highly technical skill that should be conducted professionally and sensitively. It is also an area where practitioners should be very aware of the service they provide to their customers. This is where access to redress comes in, allowing landlords and their agents to have their service complaints determined by an independent and impartial third party and things to be put right. The introduction of such a provision, will raise standards in the eviction world, provide customers peace of mind and confidence in the sector and increase the reputation and standing of those specialists that provide a necessary and valuable service.”

Contact Landlord Action

Specialists in tenant eviction and debt collection. Regulated by The Law Society.




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Jul
25

Need advice on works done without consultation?

Author admin    Category Uncategorized     Tags

My Freehold landlord had several thousand pounds worth of work done on the building without any consultation with us. In fact we have NO idea any work was being done until we received a bill for thousands. We disputed the invoice and looked up advice online which said that the legal amount (under section 20 act) we needed to pay under legislation was £250 per leaseholder.

We own all 3 flats so we paid £750. Now we get a legal letter stating that irrespective of no consultation we are bound to pay the 60% of the bill.

However, if we feel we were prejudiced in any way we need to notify them and they will consider it, otherwise they want to take us to arbitration. They site “Daejan Investments Limited V Benson and Others. So, if we want to allege prejudice they want to know what prejudice we are claiming. Can someone advise?? really stuck here.

What baffles me is that they are basically saying they can spend whatever they want and never have to consult with us, inform us or tell us…surely this cannot be right?

Many thanks

Paul

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