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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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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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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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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