Bridging Rates at All Time Low

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The cost of bridging loans have been reducing over the last 5 years. Rates now start from 0.49% pm and therefore they are no longer seen as a lender of last resort.

Also their use has changed from just the traditional chain breaking bridging loan. Bridging loans are mainly used to provide quick, short-term capital to fund property transactions.

A recent survey shows that the use of bridging loans are changing.

• 27% were used for refurbishments. This is where the client wants to purchase an uninhabitable property. Lenders will not usually lend on a property that doesn’t have a kitchen, bathroom, central heating etc. Investors use a short term loan and refurbish/renovate the property before selling it or putting it onto a buy-to-let mortgage at the enhanced value

• 25% were for mortgage delays and chain breaking. A bridging loan enables a seller of one property to purchase another property before the sale of their existing property. Also where a purchaser is in danger of losing the house of their dreams because of a delay with their mortgage provider.

• 15% were for other purposes. These include where a property needs a lease extension. Where a property has a short lease, it is unlikely that a client would be able to obtain a mortgage. A bridging loan could be used to extend the lease, before arranging a term mortgage. Others include where an investor needs to secure a property quickly to obtain an advantageous price, or developer needs to purchase a property or land prior to getting planning permission.

• 13% were re-bridges. These occur when there is currently a bridging loan in place that is about to expire or move on to punitive rates of interest.

• 11% were for business purposes. There are a variety of business uses for bridging finance. These range from having to pay an urgent tax bill to expanding the business.

• 9% were for auction finance. Here completion needs to take place within 28 days and traditional financing is not normally available within this time frame.

The above demonstrates the wide and varied use of bridging. Just as wide and varied are the number of bridging lenders out in the market and the criteria that they work to as well as the costs. Some of the factors that determine this are:

• Regulated or non-regulated transaction. Is it a personal or business transaction?

• Closed bridge (guaranteed exit route) or open bridge (less firm exit)

• Loan to Value

• Type, condition and location of the property

• Rolled up interest. This is where the interest doesn’t have to be paid each month and is added to the loan

• Client’s credit history

• Duration of the loan

With all of the variables and associated costs it is always prudent to seek the advice of a FCA regulated broker, before embarking on any type of bridging loan.

If you need assistance with any type of property or commercial finance please do not hesitate to ask for my help using the form below.

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Free Webinar on commercial property

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A CPD accredited briefing for property lawyers, commercial agents and local authorities on regaining possession of commercial property.

Wednesday 27^th September 12:30-1:30

The Sheriffs Office is a leader in the field of regaining possession of commercial property, including the removal of squatters and trespassers. We provide nationwide coverage and have worked on many high-profile cases. We have specialist teams of Enforcement Agents who are highly skilled and trained in specialist methods of entry.

All you will need to do on the day to take part is to log on to the online webinar via the link (this will be email to you). Don’t worry if you can’t make the date, if you sign up you will receive a recording of the webinar and presentation slides the next day so that you may watch it at you leisure.

 Click here to sign up: https://attendee.gotowebinar.com/register/8633207356712617475

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Mayor of Newham claims half the landlords there evade tax

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Last month a couple of unsubstantiated statistics were published in the papers.  They both came from the Labour mayor of Newham, Sir Robin Wales, who has an axe to grind.  He is fighting the government over the continuance of the mandatory universal licensing scheme that was introduced in 2013 and will end in December.  He wants to extend it – at the cost to landlords of £400 a property, instead of the current £150.

Sir Robin joined the Labour Party when he was 15.  He was knighted in the 2000 Birthday Honours for services to local government.

In a letter to Philip Hammond, Sir Robin wrote: “It is our understanding that, to date, up to 13,000 Newham landlords are of interest to HMRC, where there are discrepancies between declared income and our records, with potentially significant financial implication for the exchequer.”

Newham Recorder Click Here

This begs the question – what is his figure based on?  The only organisation that could know how many landlords may have failed to declare rental profits is HMRC.  And HMRC rejected the figure.  “HMRC said it did not recognise the figure of 13,000 landlords put to it by the council.” according to the Newham Recorder, and the Independent.

Independent Click Here

So where did his “understanding” of up to 13,000 come from?  The local paper gives the exact number of landlords: 26,254.  Was it based on anything more than “I bet half of those landlords are not paying tax you know”?

Note that he wrote “up to 13,000”.  So that if even one landlord was not declaring all of his or her rental profit, then Sir Robin’s claim would be correct.

If he had an accurate figure he would have used it.  The fact that he did not casts doubt on the “up to 13,000”.

The story was also published by the Guardian.  In the latter, Patrick Collinson even claimed that the miscreants had been identified.  His article started with “Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.”

The Guardian Click Here

He did not acknowledge that HMRC did not recognise the figure.  He merely wrote that “HMRC would not confirm the figure”.  This could be taken to mean that the figure was right but that HMRC refused to admit it, rather than the figure being wrong and rejected by HMRC.

He continued “The council estimated that unpaid tax by landlords is costing the public purse nearly £200m in London – and far more nationally.”

How did he get from 13,000 landlords in Newham to nearly £200 million across London?  Again, the local paper comes to our aid.  It said “The letter also highlighted data carried out by Institute for Public Policy Research (IPPR) in 2014 which estimates that the amount of undeclared tax in London totals more than £183 million.”

The source of the £183 million is described in an article from March 2014 by InsideHousing, with the title “Rogue landlords in London avoiding £183m in tax”

It said “Following a pioneering mandatory register of private landlords, Newham Council has built up a database of 20,000 landlords in the borough.

Using these figures it estimates landlords are avoiding £183.1 million in tax across the capital. The data, verified by the Institute for Public Policy Research, suggests £508 million in rent is paid to landlords cash-in-hand in London.”

Inside Housing Click Here

You have to admire the accuracy of the made-up figure for undeclared rent to the last £8 million, and the accuracy of the tax on this rent to one decimal place.  It makes the figures seem genuine, rather than invented.  Unfortunately there is no indication of where the £508 million for rent paid in cash was plucked from.

But the tax at 36% of rents seems high.  If the assumed tax rate had been 40%, that would only have allowed £50 million of costs (10%), including mortgage interest.  If the tax rate was 45%, the allowable costs would have been only about £100 million (20%).

But the IPPR was presumably happy with it, showing comradely solidarity with the mayor.  It is a Labour Party think tank.

“Setting up IPPR was a conscious attempt by Labour leaders and Labour sympathisers to promote their party’s modernisation beyond what was discussed by party-internal policy-making bodies e.g. during the Policy Review process.”

Sourcewatch Click Here

The Institute for Public Policy Research has been criticised by the Charity Commission, which said it “had “exposed itself to the perception that it supported the development of Labour Party policy”.

Telegraph Click Herel

What does it matter if the figures of 13,000 and £200 million are wrong if it means that Newham can extend mandatory licensing – at more than double the price?

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Stamp Duty for Armed Forces serving overseas

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I currently own a rental property in the NE that I’m looking to sell. I am a serving member of the UK armed forces and posted overseas.

The new property that I’m looking to buy would, in all likelihood, be rented (initially) until I’m posted back to the UK.

What stamp duty would the HMRC expect me to pay ?

Although I intend to live in the property (at some point when my military career allows) I will be selling one buy-to-let and buying another.

Can I convince them that I should pay standard rate ?

Many thanks

Jack

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The complex law surrounding property condition and disrepair

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This is the 12th post in my 2017 Legal Update series.

One of the chief complaints made by tenants against landlords is the poor condition of their rented property and the difficulties they face in getting anything done about it.

And one of the chief problems for both landlords and tenants is the multiplicity of laws relating to this area – which makes this whole topic difficult and confusing. Although basically the laws fall into two types:

• Those based on the civil law, and
• Those based on the criminal law

The difference between the two is that

• For civil law breaches a tenant can sue for an injunction to get the work done and claim compensation.
• Criminal law breaches are not normally enforced by tenants (although this is possible for some claims for example claims under the Environmental Protection Act 1990). In practice, these laws are mostly enforced by local authorities (NOT as a rule the Police) ultimately by bringing a prosecution in the Magistrates Courts. Although as we saw in this post there are a number of other things they can do now too.

The Civil Law and Disrepair

This is basically the statutory repairing obligations set out in section 11 of the Landlord & Tenant Act 1985 plus whatever you promise to do in your tenancy agreement.

S11 basically says that landlords are responsible for keeping in repair

• The structure and exterior of the property (including drains, gutters and external pipes) and
• The installations for the supply of gas, electricity, water and sanitation and
• The installations for space and water heating

Note that the rules are basically about things going wrong or being ‘broken’. A tenant has no right to request a court to order that something be improved. Even if that would be the better solution.

So, landlords can only be ordered to repair leaky roofs, not replace them. And to repair broken windows rather than replace them with double glazing.

The procedure for bringing these claims, for a tenant, is not easy and they have to first comply with the Pre-Action Protocol for Disrepair claims. However, it is something which many solicitor’s firms are offering ‘no win no fee’ agreements to tenants for, although this is mainly for tenants of social housing, not those in the private sector (yet).

Criminal law and the HHSRS

The starting point here is generally when the Council sends out an Environmental Health Officer (EHO) to do a Housing Health and Safety Rating System Inspection of properties (HHSRS) – usually when tenants contact them to complain.

As part of this exercise the property is assessed against 29 hazards – for example excess cold, damp and mould, fire, and excess heat. If this inspection throws up a ‘category one’ hazard then the Local Authority have a duty to do something about it.

What they will generally do is contact the landlord and ask them to sort the issues out, then serve an improvement notice if this is not done.

The next stage, if the work was still not done, used to be prosecution in the Magistrates Court. However, as we saw in my earlier post in this series, Local Authorities now have additional powers to serve Civil Penalty notices and also to apply for Rent Repayment Orders – if landlords fail to comply with Improvement Notices. When Banning Orders come in, this will be another option.

So, you need to make sure you are compliant.

This is a legal update series, I am a housing lawyer and don’t have the practical knowledge to be able to tell you, for example, how to configure your boiler or comply with Building regs. However, the HHSRS is a health and safety standard. Therefore, so long as you comply with all health and safety requirements, use properly qualified contractors, and try actively to ensure that your properties are safe, you should be OK.

To be able to prove this if challenged by the authorities you need to keep records – for example:

• Receipts for work done and any certifications
• Receipts for furniture, fixtures and fittings. New furniture sold by a reputable company for example must comply with the furniture regs or it cannot be sold.
• Records of any work such as PAT certificates that may be obtained in respect of your appliances
• Photographs showing your property in good condition – for example as part of your inventory.

Most landlords are proud of their properties and take care to keep them in good condition. If this is you, you should have little to fear.

Further information:

We did not have any talks at our 2017 Conference on these topics. However, recordings of Peter Marcus’ talk on Disrepair and Giles Peaker’s talk on the HHSRS from our 2016 Conference in Manchester, are both available as ‘bonus’ items in our 2017 Conference Course.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16 September.

Peter also did a day’s workshop for us on Landlords Repairing Obligations last November which was filmed and this is now an online course and available as part of our Summer Training courses. It carries 4 hours CPD.

In this talk Peter looks mainly at landlords contractual repairing obligations (in s11 onwards in the Landlord & Tenant Act 1985) and the court processes you need to follow both to bring and defend a disrepair claim. However, he also considers landlords obligations under their tenancy agreements, the Defective Premises Act 1972, private and statutory nuisance claims and the Gas Regulations.

You can find out more about this online course here plus you will find a short video here.

There is also a certain amount of information on my Landlord Law site plus members can always ask me questions in the members forum.

You can find out more about Landlord Law here

The next post will be on HMOs.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

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Lawyer warns of Section 21 confusion

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Eviction:

Section 21, the possession procedure in England, which has been a lifeline for landlords with bad tenants since the introduction of the Housing Act 1988, has undergone changes recently which have the potential to stymie an eviction attempt, if the rules are not followed to the letter.

No landlord wants to evict a good rent paying tenant who is looking after the property, but sometimes a limit is reached: rent arrears start to build, damage is occurring which shouldn’t be, or the tenant is causing neighbour problems.

In this situation a landlord owes it to himself and others to commence the eviction process, which, even in the best case scenario, can take around 3 to 6 months.

Danielle Hughes from Kirwans has written that landlords are issuing incorrect Section 21 notices, resulting in thousands of pounds being wasted on aborted possession claims and extensive delays in recovering a property.

In any case, a high proportion of Section 21 claims are thrown out by judges because of technical errors such as incorrectly served or defective notices, no proof of service, deposit protection errors, no property licence where it’s required, the list goes on.

But under the new rules, a new notice (the Form 6A Notice) applies (tenancies commencing post 1st October 2015) and additional tenancy requirements mean that the chances of error are far greater.

Landlords and agents will now struggle to get a successful eviction if they don’t have a rigorous system in place when they set-up new tenancies, making sure that all the documentary requirements have been met.

The old Section 21 notices – Notice Fixed-Term s21(1)(b) and Periodic s21(4)(a) – should still be used for AST tenancy agreements commencing before 1^st October 2015.

The older notices do not require the tenancy to meet the new requirements, so unless you are sure you can fully meet the new requirements, don’t use the new notices (Form 6A) for older tenancies.

Pre – 1 October 2015 Tenancies – Section 21 Requirements

With old tenancies this is what you need:

• A valid Section 21 Notice
• Proof of Service
• A valid Tenancy Agreement
• Deposit protection details and proof of service of (s213) notice
• Details of any licence requirements – for HMOs or in Selective Licensing areas

Post – 1 October 2015 Tenancies – Section 21 Requirements

• A valid Section 21 Notice
• Proof of Service
• A valid Tenancy Agreement
• Deposit protection details and proof of service of (s213) notice
• Details of any licence requirements – for HMOs or in Selective Licensing areas
• Energy Performance Certificate (EPC) served on tenant
• Gas Safety Certificate served on tenant
• The current version (at time of tenancy commencement) of the government’s “How to Rent Guide”

From 1^st October 2018, the new Form 6A will apply to all tenancies, new and old, so beware.

When applying to the court for accelerated possession (Court form N5b) or the standard route (Court Form N5 – where a hearing and a money claim are involved) landlords and agents should supply 3 copies of all the above documents to the court.

A further complication which could potentially stymie a claim involving new (Post 1^st October 2015) tenancies, is the new retaliatory eviction legislation. This applies where a tenant has made a report of the need for repairs and maintenance in a property. If the landlord does not respond quickly (within 14 days), and/or the local authority issues an appropriate repair notice, then a valid Section 21 notice cannot be served for 6 months after.

Also, whereas the old section 21 notices were of unlimited duration, the new notices cannot be served within the first 4 months on an AST tenancy, and they now have a limited life of 6 months – you must start a claim within the six months, or start again.

As the current court fee (July 2017) is set at £355, it is not in anyone’s interest to keep paying fees and delay the claim for 2 months while a new notice is served.

The whole process is manageable by landlords and agents so long as they can pay strict attention to the rules and process all documentation correctly – do this and all your possession claims will be successful. You can of course request that the judge to issue an order in damages against the tenant, but whether he or she can pay is another matter?

See also: New Section 21 Rules: www.landlordzone.co.uk/content/new-section-21-rules

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