Should we have been given notice?

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Our fixed term tenancy rolled into a periodic one after 6 months.

When we moved over to the periodic tenancy, should the landlord/letting agent have advised us of the change to the notice period?

As I understand it, we have to give 1 months notice from our rent payment date. We are buying a house with completion in 3 weeks and want to give the months notice now to end 1 month later (we will use the extra week or so to get carpets cleaned, etc) but the letting agent said the notice won’t start until 28th of this month to end 28th of next month.

Although it does state in the tenancy agreement about the notice period changing, should we have been alerted to it nonetheless?

The landlord won’t reduce the notice period either.

Many thanks

Diane

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RICS Surveyors concerned about Landlords leaving the PRS

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The Royal Institution of Chartered Surveyors (RICS) conducted a survey of its members which highlighted their concern over landlords leaving the PRS when demand for rental property is already outstripping supply.

Member Surveyors surveyed thought on average over the next five years rental price inflation would be 3% where as they thought house price inflation would only average 2%.

61% of Surveyors thought more landlords would exit the market than enter the market over the next year and only 12% predicted the reverse.

Over the next 3 years 52% predicted there would be a net loss of landlords to the PRS and only 17% thought there would be a greater number (some may still not fully understand the consequences of Section 24).

Paul Bagust, of RICS, expressed concern over this prediction of landlords exiting especially when current house price inflation would normally mean the reverse.

Paul said: “A functioning private rented sector is crucial to a healthy housing market and it’s predicted that over 20% of all households will be PRS by 2020. The sector is extremely diverse, including many one home landlords.

“RICS is part of a sector wide collaboration developing a revised industry led PRS Code of Practice, to raise standards for both consumers and landlords, bring clarity to those already in the market on various policy measures, and encourage landlords back into a professionalised market.”

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Leicester BTL Recap (And What It Means For 2018)

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Leicester overview – the landlord year in figures

According to Zoopla, last year the average price for a property in Leicester was £206,115, whilst that average rose to £215,257 for August 2017, a growth of 1.11% on the year before. According to Rightmove’s Rental Trends Tracker for the East Midlands, asking rent saw an annual change of 2.7% and a quarterly change of 2.0%, suggesting Leicester’s rental market picked up in the last six months, no doubt aided by strong demand from student accommodation. That more or less reflects the wider picture. The national average of asking rent (outside of London) is up 1.9% on last year and 2.8% up six months ago, which is roughly in line with the 2.7% average of the last five years. In all, asking rents hold up despite a 7% increase in available properties.

These averages largely reflect the change to Buy-To-Let legislation seen this year. We take a look at them below.

Stamp Duty Land Tax (SDLT) (1st April 2016)

More than a year has passed since the new SDLT was devised to limit the rise of house prices and halt the decrease in the numbers of homeowners nationally, by creating a surcharge on Buy-To-Let purchases by 3% (see graph). So far there have been 60,000 transactions of these additional properties, accounting for £1.8bn in stamp duty. £1bn alone was raised by the new 3% tax. However, these figures also include property owners buying before selling. HMRC have refunded 10,700 of this type of SDLT taxpayer to the tune of £126m.

What does the new 3% tax mean for Leicester’s landlords?

Ex Housing Minister, Gavin Barwell, and George Osborne have gone some way to taxing investment and tackling irresponsible lending. This new 3% tax could leave many of Leicester’s landlords looking to make up losses by shoring up investments or raising rents. A £200,000 property would now cost £6,000 more with the additional 3% tax.

In the wider picture of the economy, the levy has certainly raised extra cash for the coffers, but hindsight reveals it has had a negative effect on the housing market with slower sales and rising rents.

New Buy-To-Let Mortgage Lending Regulation (1st January 2017 and 30th September 2017)

The Bank of England’s Prudential Regulation Authority (PRA) sought to tighten up affordability criteria earlier this year as well as mortgage stress tests at 5.5%. The end of September, sees the implementation of regulatory burdens on portfolio landlords; that is, lenders will now have to take into account income and mortgage details on all properties before refinancing landlords with four or more properties. These restrictions underline the Bank of England and the Financial Policy Committee’s fear that Buy-To-Let investors are more likely to cut losses and sell up than homeowners in the event of a poorly performing market. The logic behind the stricter rules is to avoid a property dump, price drop and a 1988 style bust.

Scrapping BTL mortgage interest rate relief (6th April 2017)

The new tax year heralded another blow to Buy-To-Let landlords by scrapping tax relief on mortgage interest payments. The new restrictions will be phased in over the coming years and eventually replaced with a 20% tax credit in 2020. Overall, this could be bad news for Leicester’s Buy-To-Let landlords as they’ll likely face lower profits and look to consolidate investments.

Tax will now be due on turnover as opposed to profits after deducting mortgage costs. This means that if mortgage rates rise, and rents do not rise proportionally, landlords will be out of pocket. At particular risk of seeing their returns wiped out are higher-rate taxpayer landlords whose mortgage interest makes up 75% or more of their rental income.

What It All Means For The Future

By scrapping tax relief, higher rate taxpayers will suffer the most, particularly if they have high levels of mortgage debt and a large portfolio. Some basic-rate taxpayers could see themselves pushed into the higher tax bracket. The added cost and the thinning margins of profit may mean landlords will be forced to up rent, particularly as housing supply is stifled and demand remains high. That, coupled with Leicester’s high rental yield and relatively low prices, means the city is as good a place as any to batten the hatches and weather the coming storm.

The new stamp duty hike will also make Buy-To-Let investors think twice before purchasing. Having said that, commercial ‘mixed use’ investments valued under £150,000 are exempt from stamp duty. Similarly, limited companies, are exempt from the new mortgage interest tax rules. Leicester landlords looking to explore the option of setting themselves up as a limited company should be aware of the drawbacks and seek professional advice.  Limited companies elicit higher interest rates, different tax restrictions and any transfer of properties may be liable to a capital gains tax and stamp duty and there are plenty of articles on the Property 118 platform about this.

Despite rental prices levelling out in areas, others have continued to rise, Leicester’s own rental prices have fared well, no doubt due to the landlord’s friend – regeneration – sticking around town.

Smart property are a student and professional property management and investment company in Sheffield, Leicester, Nottingham, Manchester and Salford.

As well as their property management services, they offer a long-term rent guarantee programme that Property 118 founder Mark Alexander found ‘so impressive’ he decided to invest in the company himself.

Andy welcomes private landlords, developers and investors to talk to him and his team about property management, guaranteed rent, investment opportunities and block management contracts.

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Are you properly protected against claims by tenants and prosecutions by the authorities?

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This is the 16th and last post in my 2017 Legal Update series.  See the rest of them here.

During this legal update series, I have given you a brief overview of the main laws which apply to landlords renting in the private sector.

It’s a big topic and I have not been able to cover everything.

If you have read all the posts, you will see that there is a lot to know. And failure to comply with the rules can often be expensive.

If you get things wrong then

• You may have an issue with your tenants Or
• You may face action from the authorities.

Claims by tenants

These can be things like disrepair claims or claims for the penalty if you have failed to protect their deposit. Or they may be able to prevent you from evicting them through the courts.

Often tenants are reluctant to take action against landlords – for example if they are worried about losing their tenancy or because that they can’t afford legal fees. However, don’t count on this as there is a lot of advice ‘out there’ for tenants. I suspect, for example, that as the consumer protection laws (discussed in this post) become better known, they may start to be used more.

Don’t forget also that tenants can apply to the Tribunal for a Rent Repayment Order as discussed in this post. This will be VERY expensive for you if it happens.

Action brought by the Authorities

Up until now the main complaint made about Local Authorities is that they don’t do enough enforcement work and allow rogue landlords to ‘get away with it’. However, the main reason for this in the past is lack of funds to employ and train the staff.

I discussed new enforcement procedures available to Local Authorities at some length in this post and am not going to repeat what I said there here. Other than to say that as of April 2017 action by Local Authorities has become much more likely as they can now keep the enforcement fines and penalties and use this to fund their enforcement action.

The best protection

The best protection you can have as a landlord or agent against any sort of enforcement action is to ensure that you are fully up to date with the rules and that you comply with them – and can prove that you have complied. So, keep proper records of everything that you do.

I would advise therefore that you do as much training as possible – the cost of this will be considerably less than the fines and rent repayment orders you may incur if you don’t.

Doing the training

This legal update series has given you a lot of basic information which you can build on. Every post in the series has a section suggesting where you can find more information.

Much of this is to be found in the Easy Law Training online training courses.

Of course, you don’t have to get our training courses, there are other ways to keep up to date.   This Propty118 site, for example, is a wonderful resource.

However, our Conference Course 2017 is especially recommended as it has talks on practically every aspect of landlord and tenant law from specialist lawyers, and is up to date (at the time of writing). So, it is very good all-round training. Plus, you get the speakers detailed notes.

Here are some suggestions for how you could use the online training:

• Watch one of the videos every day, ideally with another landlord or your business partner.
• If you are a letting agency or other property firm – why not watch the videos together – either as a firm or as a department – and have a group discussion afterwards?
• Use the courses for induction training for new staff members
• Watch the videos when travelling e.g. by train – the website is mobile friendly so you can watch it on your mobile devices.

However, the training courses do not just have videos. You can also download mp3 audios of all the talks. So why not listen to them:

• In the car when you are driving to your properties
• While you are doing maintenance work
• In the gym or while walking the dog, or
• While standing in a queue at the supermarket

Most of our online courses also carry CPD which you can get via an online multiple-choice quiz – an excellent way to help you remember what you have learned.

You need to build training into your life as a landlord or letting agent and make sure that you are always learning something new. This is the best protection you can have against legal claims – plus it will make you a better landlord or agent.

Further information:

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 16th September.

Note that you can find details of all our training at any one time via the Easy Law Training website.

There is also a lot 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.  There is also a huge amount of (free) information on my Landlord Law Blog.

Note that we will be putting on a Landlord Law Conference in 2018.  It will be held on 18 May and you can find out more here.  Bookings will probably open in November.

Finally, I hope this legal update series has been useful for you.  You will find all the posts here.

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

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Rent increases being forced on landlords…

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The latest Private Rented Sector (PRS) report from the Association of Residential Letting Agents (ARLA Propertymark) shows that landlords are responding to the squeeze on their income by passing on at least some of their increasing costs, by way of rent increases.

Around one-third of member letting agents surveyed in July 2017 saw rents increase for tenants, which has increased from just 27% of their agents seeing rent rises in May.

In July ARLA report that the number of properties managed per member branch had increased marginally, to 192 – up from 190 in June, while demand from prospective new tenants had continued to increase.

Private landlords are being faced with a stark choice: either increase rents to offset the increased costs they are face with, due to recent tax rises, or think again about selling the rental property. This latter is happening in some cases and is adding further to the shortage of rental property and pushing up rents still further.

David Cox, ARLA Propertymark chief executive, reports:

“Landlords really are stuck between a rock and a hard place.

“All the tax increases they’ve incurred over the last 18 months have meant they either need to sell their properties and exit the market, or increase rent payments to plug the deficit.

“Neither of these outcomes benefit tenants; if they exit the market, supply is even more strained and matched with growing demand, rent prices will increase anyway.

“Government may claim they are helping tenants but the unintended consequences of their actions on the private rental sector are now really being felt by tenants in terms of lack of homes to choose from and the feeling of being constantly priced out of the market. This needs to change.”

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Renting to Charity – Church

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I have just been approached by church who want to rent my 4 bed house for 1-2 years for their Pastor.

Could I do normal AST with them? Is there any pitfall in that.. as the letting agent said we cant do any credit check etc as they are registered charity and they were not sure, and asked us to take call if we want to rent them or not.

Any advice will be appreciated.

Thanks

Gopal

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HMO Liverpool advice please

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Dear All

16 months ago I bought a 6 bedroom HMO in Liverpool for 145k (105k interest only mortgage with Paragon, 5 year fix); I live in Somerset so it’s managed for me. I’m 54 and planning to retire in a couple of years.

Unfortunately, the expected tenants didn’t materialize, (or at least not enough of them) so I looked at another management company. The 2nd company tell me its location is good, as are the room sizes, but it’s in need of “doing up” i.e. new floors, new bathrooms, (only 2 at present ), new furniture new kitchen and decorated throughout – around 20k. I recently visited the property and noticed a couple of properties nearby which were boarded up, that wasn’t the case when I bought it.

I seem to have 4 choices:

A) Sell and loose maybe 40k- perhaps more.
Its my only property in my company so could sell it and the company together. At least it is a clean break with a city I probably shouldn’t have invested in, (I lack local knowledge). I’d stop worrying about it and focus on the successful properties in my small portfolio.

B) Rent to rent.
This would cover my mortgage but nothing else, worried that the person I lease it to may not look after the property, do the necessary smoke alarm checks etc, at worst case end up leasing to someone who ignores legal requirements and perhaps I end up in court!

C) Spend 20k-30k doing as the 2nd management company suggested, rooms would let out at £300 per month (maybe).
Might work but perhaps I could be putting good money after bad and end up selling at a bigger lose in a couple of years.

D) Invest 110k
A project manager has recommended I spend 110k upgrading the 6 bedrooms so that they are all on suite. I think it would probably rent out at £430 a room, however I don’t want to over extend myself and the profit is a little tight –total monthly costs £1,600, total projected income £2,580. In these figures I’ve assumed each room rents out 100% of the time! After re-mortgaging the total amount of my money in the project is £100k.

Any advice would be brilliant – I’m now having the odd sleepless night worrying about this property!

David

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Government approach to housing is short sighted

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In my opinion Government should focus on only two things to solve the Housing crisis:-

1. That supply meets demand
2. Available housing is lived in

Instead, Government seems to be obsessing about ownership.

No, no, no, no, no!

The focus should be to incentiving the building of new housing and empty housing to be sold or rented to people in need of it.

Government seem to view housing providers as a cash cow to fund HM Treasury but that is stifling supply, which is a very short sighted approach.

So what could Government to to reverse current trends.

First, they could discourage investment strategies which leave housing empty and treat it as an investment as opposed to its primary purpose of providing shelter for human beings.

Second, Government could make more grants available to bring empty housing into use.

Third, is that Government should incentivise new development of all tenures. It doesn’t matter whether housing is built for owner occupation or the rental market because once supply matches demand the pressure on prices will stabalise.

To achieve the above the whole system of planning and taxation needs a complete re-think.

Anything you would like to add?

Please comment below.

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When is a landlord liable for injuries to a tenant?

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Personal injury:

There are some instances when a landlord could be held liable for injuries suffered by a tenant (or a guest) while on the property. We explain everything you need to know below…

Landlords have a general duty of care to make sure the properties they rent are kept in a safe condition for their tenants. Not all tenant injuries are the fault of the landlord though, so it is important to know the difference and your responsibilities to avoid any expensive and damaging personal injury claims.

Negligence and a landlord’s duty to tenants

For a landlord to be deemed liable for an injury to a tenant, it must be shown that they were negligent in some way. Negligence is a legal concept that holds individuals accountable for any harm they may cause to other parties. To prove that a landlord has been negligent, a tenant is required to prove that the landlord failed to uphold their duty of care towards the tenant – which then resulted in an injury.

Duty of care, or ‘standard of care’, in this respect refers to the responsibilities of the landlord in terms of maintaining a safe property. Landlords are expected to make sure their property is safe to a reasonable standard.

If a landlord fails to meet the reasonable standard of care then they could be found to be liable for any injuries caused to tenants as a result.

The big question here for landlords is, what is meant by ‘reasonable care’? To determine if a landlord has acted reasonably, the courts will ask two questions:

1 – What would the average, reasonable landlord do in similar circumstances?

2 – Has the landlord demonstrated at least that average level of reasonable care?

In some cases, a court may find that the standard of care expected of a landlord should be greater than the average or ‘reasonable’ level. For instance if young children are involved, as they are less able to assess risks and avoid danger. Similarly, if you are renting to people who do not speak English as a first language it could be argued that, as the landlord, it is your responsibility to ensure warning signs are provided in the tenants’ language.

Similarly, a landlord could be held responsible for failing to install smoke and carbon monoxide alarms in the property. New regulations regarding smoke alarms are now in force in the UK, requiring landlords to fit working smoke alarms on every storey of a rental property and Carbon Monoxide alarms in any room containing solid fuel appliances that is used as living accommodation. For more information read our guide: Are you properly alarmed?

Physical injuries to tenants

A landlord could be held liable for a physical injury to a tenant that was caused by the landlord’s failure to maintain the property to a reasonably safe level, or to make repairs in a timely fashion. For example, if a staircase has a faulty handrail and the tenant is injured as a result of falling down the stairs then the landlord could be found negligent.

However, this would only apply if the landlord was notified of the hazard and had a reasonable time to fix it.

The Defective Premises Act 1972 states the legal obligation for landlords to prevent their tenants from suffering injury from property defects. Some of the more common defects to be aware of include:

• Damaged floorboards
• Worn/loose carpets
• No handrails/damaged handrails on staircases
• Loose plaster – particularly on ceilings

Landlords are also responsible for any defects in communal areas of rental properties as well as those in outdoor areas e.g. potholes on a driveway.

What damages can tenants claim for?

If a landlord is found to have acted negligently and therefore liable for an injury suffered by a tenant, then the tenant can pursue a personal injury claim for compensation.

Depending on the nature of the injury and the individual circumstance, a compensation claim could include General Damages and Special Damages…

General damages

These relate directly to the pain, suffering and ‘loss of amenity’ caused as a direct result of the injury. This could include physical and/or emotional pain and suffering, loss of physical or mental ability, loss of quality of life and so on.

Special damages

These deal directly with the financial impact the injury has had on the tenant, for example: loss of earnings, loss of earning potential treatment costs, rehabilitation costs etc…

The information in this article was supplied by Liverpool personal injury solicitor CL Legal.

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How to stop evictions going wrong

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This is the 15th post in my 2017 Legal Update series.

Evicting tenants is not a nice thing to have to do. Sadly, however it is sometimes necessary.

If it is necessary then it is best all round if you just get on with it. In many cases eviction proceedings are brought solely to force Local Authorities to re-house tenants, in which case it is in the tenant’s interests to get things resolved as soon as possible too.

There is also the fact that, even if you get them right, court proceedings take a long time, much longer than most people realise. It’s rare for eviction proceedings to take less than three months at the very least – normally it is closer to six months or even more.

Most people find court proceedings stressful – another reason to get them over and done with ASAP. Sadly, however things often take much longer than they should due to landlords’ ignorance of the rules.

Here are some of the things they get wrong:

• Issuing proceedings based on section 21 when they have not protected the deposit.
• Getting their section 21 notice wrong for some other reason
• Issuing proceedings before their eviction notice period has expired
• Letting agents signing the court paperwork (only the litigants themselves or their solicitors can sign claim forms)
• Using a ‘discretionary’ ground for possession (I’ll explain this further down)

The main problem though is landlords issuing eviction proceedings in a ‘gung ho’ manner, without doing proper preparation and research, thinking that they know it all when they don’t.

If you make a mistake, or if you use a ‘discretionary ground’, then this allows the tenant to put in a defence. The Judge will then set the case down for a longer hearing which will be at least three months away (often longer), and you are in for a long, expensive case which could take many months to resolve.

Apart from the fact that if your tenants are not paying rent, the rent arrears are going to be horrendous – if your tenants are able to successfully defeat your claim (and the fact that the Judge has not rejected their defence out of hand means it is not entirely off the cards) – you will probably be ordered to pay their legal costs!

This often seems massively unfair to landlords who may actually have a valid claim, but who lose their case because they made some sort of technical error.

However, Judges take the view that making someone homeless is a very serious thing which could be life changing for tenants (which it often is). They are not prepared to do this (particularly if there are children living at the property) unless landlords have followed the proper procedure and got their paperwork right.

Often landlords assume that because their tenants have behaved so badly, the Judge will take their part even if they have not followed all the rules properly. But this is a very dangerous assumption. They won’t. Or rather they may be sympathetic but they won’t find in your favour.

So, you need to get things right.

Discretionary and mandatory grounds

When you bring a claim for possession you need to hang your case on a legal ‘ground’. There are two types of ground – mandatory and discretionary.

• Mandatory grounds are those where, if you get things right, the Judge is not allowed to refuse to make an order for possession.
• Discretionary grounds are where, even if you do make out your case, the Judge has a discretion whether or not to make an order for possession. Even if he does make it, he can stay or suspend it ‘on terms’ meaning it may be a very long time before you actually get possession – if indeed you ever do.

When landlords read the discretionary ‘grounds’ for possession they often get quite excited as their tenants may have breached many of them – for example if they have breached terms of the tenancy agreement.

However, using a discretionary ground is NOT a good idea – save in exceptional cases. And there are fewer exceptional cases than you might imagine. So, don’t go there. Wait until you can use one of the mandatory grounds. Or at least get proper legal advice before starting a claim.

Further information:

If you can’t afford to use solicitors, my Landlord Law service has a lot of help for landlords wishing to evict tenants.  You can find out more about Landlord Law here

Probably the most popular talks at our 2017 Conference were the two taken by barrister Peter Marcus on defended possession proceedings and court procedure.

You can see a short clip from the defended possession proceedings talk here. Both talks are available as part of the 2017 Conference Course.

As a practising housing barrister Peter has extensive experience in using the courts, which is reflected in his training. His talk on Court Procedure will be invaluable training for whatever type of court claim you are involved in – and most landlords are involved in some sort of court claim at some time or other in their landlord career.

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.

In my next and final post in this series I will be discussing training generally and giving you some tips.

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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