Get your question answered by Iain Duncan Smith

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UK Landlords put your questions to Iain Duncan Smith directly.

Dear fellow Property 118 Members,

My name is Tracey Hanbury and I am one of the Directors of the National Landlord Investment Show and also the Editor of Landlord Investor Magazine.

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Pass the Keys and make Airbnb rental hassle-free 

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Pass the Keys – UK’s leading Airbnb management service is based in Greater London and operating in London, Bath, Brighton, Bristol, Cambridge, Edinburgh, Manchester, Oxford and just expanded to York and Glasgow.

Pass The Keys overs a hassle-free Host-Service around the globe using the concept of the sharing economy.

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Letting Agents’ Fees Ban

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Letting Fees:

Further news is still awaited from government on the proposed letting fees ban following the House of Commons debate about the much trailed ban last month.

Kevin Hollinrake, MP for Thirsk and Malton, who sits on the Communities and Local Government Committee, and is co-founder of Hunters Estate Agency – so has some direct experience in this field – called for the debate in the House of Commons.

The intention to introduce a fees ban was originally announced in the 2016 Autumn Statement by the Chancellor, and is expected to come into force within the next 12 months, but given the pressure on the legislative programme in the Commons, there is no firm date and the scheduled passage of a bill could easily slip.

The time it is taking has already prompted criticism from proponents, but Alok Sharma MP, Minister of State for Housing and Planning said that with 4,700 responses from the consultation exercise to analyse, the Government needs more time to work through this before drafting a bill.

Despite much evidence indicating the move would result in costs incurred by agents having to be passed on to landlords, and in turn recovered by increasing rents for tenants, the Minister has said, “all fees on tenants need to be banned”.

He did however confirm that ‘holding deposits’ would be exempt from the ban and asserted that the introduction of the ban would lead to a more affordable, transparent and competitive lettings market.

The proposed bill is said to include putting a cap on security deposits at one month’s rent and holding deposits at one week’s rent.

The cap on holding deposits at one week’s rent would not appear to cause landlords and agents a problem, but several industry practitioners have raised concerns about a cap of one month’s rent for a security deposit because:

1. Many landlords currently take six weeks rent to deter tenants from cancelling the last month’s rent and asking for their deposit to be used in lieu, a common occurrence that landlords face, and
2. Tenants with pets are usually charged a higher amount to safeguard landlords from damage and the extra wear and tear that pets often bring, so it is said the move could discourage landlords from taking on tenants with pets.

Mr Hollinrake has said he is in favour of a fees ban, but he warned about the already identified ‘unintended consequences’ of the legislation due to the possibility of rent increases, job cuts in agencies and for independent inventory clerks, and other costs being transferred from agents to landlords.

Hollinrake also called for effective enforcement by a proposed extending of the agency redress schemes, and there could be schemes, it has now been suggested, that would also cover landlords.

Another important point made was the problem of a severe lack of resources and time for local authorities, these being the agencies tasked with enforcement, to adequately deal with the extra work.

The Minister, Alok Sharma, had suggested that the Government is looking at setting up a lead enforcement authority (similar to that for Estate Agents) and that local Trading Standards were “best placed’ to enforce the new policy. However, given that most local authorities claim that they are ‘strapped for cash’, and some are even said to be at financial breaking point and on the verge of technical insolvency, it is hard to see how local government can adequately staff all this extra work.

In the fees debate the Minister acknowledged the potential for rent increases but considered that any potential rent increases would be significantly less than the fees tenants are currently charged. On the other issue of any future deposit caps, Sharma indicated that any such proposal ‘must strike the right balance’ between affordability for tenants and the need for landlords’ protection.

David Cox, chief executive of ARLA Propertymark, has expressed the view that any fees ban will cause “unprecedented damage to the rental sector”, stating that, “independent analysis commissioned by ARLA Propertymark, following the UK government’s announcement of its own ban, revealed that if a full ban was introduced, rents will increase…”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Letting Agents’ Fees Ban | LandlordZONE.

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Are my wife and I a property rental BUSINESS?

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Dear Mark

The crux of the issue regarding putting BTL properties into a company seems to be whether HMRC will agree that my wife and I are in “business”.  This means whether what I do at present can be correctly described as “business”.

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Was the Base Rate increase an overreaction?

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Was the Bank of England’s decision to increase the Base Rate from 0.25% to 0.5% and overreaction to artificially high inflation figures or can we anticipate potential future adjustments upwards?

One of they key factors expressed several times by Mark Carney and his team for the increase in Base Rate is the erosion of slack within the economy with  unemployment falling to a 42 year low and global growth at a much higher overall level than the UK’s.

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Mortgage lenders for 10+ property portfolio other than TMW

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Hi is anyone aware of any mortgage lenders available for a 10+ portfolio with values from £50k other than TMW (I have given up looking for 40k lenders unless anyone know of one).

My wife and I have built up a portfolio of 15 properties over the last two years

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Illegal eviction results in criminal record

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Protection from Eviction Act:

Council makes an example of landlord to deter others.

A landlord from Clackton-on-Sea, who has been convicted of illegally evicting a family, has been given a community service order as an alternative to a jail sentence.

The Clacton Gazette has reported that Lisa Bottone, of Cotswold Road, Clacton, admitted breaching the Protection from Eviction Act 1977 when she appeared at Chelmsford Crown Court last Thursday.

Bottone was sentenced to a 12-month community service order, with a rehabilitation activity requirement of 20 days and was also ordered to pay £75 costs to her tenant victim Regina Dewar.

Tendring District Council, the prosecuting authority, said that tenant Miss Dewar had signed a 12-month tenancy agreement on 13^th September 2016 to live at the property in Cotswold Road, Clackton-on-Sea, and the council had agreed to pay the rent and the rental deposit.

After only one week landlord Ms Bottone visited her tenant Miss Dewar to inform her that she could no longer move in. When Miss Dewar contacted the council she was advised by council officers that landlord Ms Bottone would have to go through the proper court eviction procedures before she could bar her from the tenancy.

However, when tenant Miss Dewar arrived at the property to move in on September 22 she was barred entry. Two council officers attended and tried to persuade Ms Bottone, but she refused to change her mind. Consequently, the council officers proceeded to enforce the landlord’s breach of the Protection from Eviction Act 1977.

Council housing boss Paul Honeywood said he hoped the case would be a deterrent to other landlords.

“We came to a conclusion that in this instance the landlord did not have a reasonable cause to stop Miss Dewar’s occupation of the property,” he said.

“It was felt to be in the public interest to enforce the legislation to avoid homelessness and prevent other incidents occurring.

“Where there is sufficient evidence we will not hesitate to take action over illegal evictions – and that should be a warning to all.

“I welcome this prosecution and hope that it sends a clear message.”

The lesson for landlords here is: once a contract has been agreed by the parties, there is a commitment on both sides, and they can be held to account, the landlord to provide the service and the tenant to stay and pay rent. Barring a tenant entry to a legitimate tenancy is a criminal offence under the Protection from Eviction Act 1977.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Illegal eviction results in criminal record | LandlordZONE.

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Rate increase could be the first of several more…

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Initial Reaction to the Rate Rise:

An interest rate rise is bad news for some, good for a few, but could be quite devastating for some people and businesses already in trouble, particularly if this rise is the start of a trend.

With incomes already squeezed for many people, even having to pay as little as £25 on an average mortgage each month could push them over the edge. It has been estimated that one in 10 mortgage payers could end up with a household budget problem.

Buy-to-let landlords, already under pressure from tax increases, could also find the going gets tough if rates go on an upward swing over coming months, and as the economic as the tide changes, though the rate of increase is likely to be gradual.

The rate rise might also send thousands of businesses to the wall as the number of firms reaching significant levels of distress over the past years reaches almost half a million, that’s according to business recovery specialists Begbies Traynor. This is often the result of businesses taking too many risks and being lulled into a false sense of security in the ultra-low interest rate environment which has existed over the last few years.

The Nationwide building society is to implement an “across-the-board” increase in mortgage costs as it announces that the 0.25% interest rate rise to 5% will be passed on in full to all of its 600,000-plus variable-rate home loan customers.

That would immediately add £22 a month to the monthly mortgage costs for example, on a £175,000 mortgage and £51 a month for anyone on a £400,000 mortgage, that’s assuming they have a 25-year term.

There are said to be as many as 5 million people on variable-rate mortgages in the UK.

Peter Gettins, product manager at mortgage broker London & Country, has said:

“The prospect of variable rates increasing from here is now looking more and more likely.”

Andrew Ellinas, Director, Sandfords

“Inflation has been creeping up and The Bank of England’s Monetary Policy Committee has increased interest rates to 0.5% to compensate, despite the annual growth rate being at its weakest for four years.

“A 0.25% rise is not going to have a significant impact on the economy as a whole, but it will further depress a falling property market, particularly in prime central London. Currently, the market is flat.

“As an example, there are two blocks of apartments near our Regent’s Park office that are historically very sought-after and if a property came available we would be swamped with buyers and a sale would be made very quickly.  In one of those blocks, in the same month in 2016 there were three apartments on the market and they all sold. This year, there are ten apartments currently available but there are no buyers for them.  In the other block, a very similar situation, there was one property on the market in 2016 and in 2017 there are ten that are not selling.

“There are two main reasons for this. The first is that they are overpriced. Vendors still believe that values are what they were two years ago. I called the top of the market just over a couple of years ago and it has been drifting down ever since, with a bit more yet to go.  With so many tax changes (increased stamp duty, an extra tax for buy-to-let investors and foreign investors’ tax) and Brexit looming, there is too much uncertainty and buyers, particularly overseas investors, have been put off making big financial commitments.

“The government is being urged to abolish stamp duty ahead of the budget. Undoubtedly, this would be the best thing to happen to the property market. London is the driving force for every market and scrapping this tax would provide buyers with an incentive to start moving again.”

Angus Stewart, Chief Executive, of Property Master

Angus Stewart of Property Master, which matches up landlords against a database of over 2,000 mortgage products, said of today’s base rate rise:

“For many buy-to-let landlords this will be the first rate rise they have seen. If they are on a fixed rate now they will have some protection but they need to think of the higher costs they are likely to face once that deal comes to an end.  Today’s rise is unlikely to be the last as the Bank seeks to normalise rates following the market crash and then last year’s Brexit vote.”

“This creates a whole new environment for buy-to-let landlords and comes swiftly on the back of tightening lending criteria and the tapering of mortgage tax relief.”

“We expect that the buy-to-let market will become increasingly professionalised as smaller players facing increased cost and regulation will seek to exit the sector.  For those that remain we can expect many to begin re-mortgaging before rates move any higher and it is interesting to see that there has been a mixed response from lenders certainly in the run up to today’s decision with a number continuing to offer low fixed rate deals.”

Christian Spence, Head of Research and Policy at Greater Manchester Chamber of Commerce, commenting on today’s decision by the Bank of England’s Monetary Policy Committee to raise the Bank Rate from 0.25% to 0.5%, has said:

“Today’s rise, the first in ten years, was not unexpected. The Committee hinted strongly in its previous meeting that a rise was likely this time. Whilst the increase is, as expected, small, and its effects on the economy overall will be small, it sends a strong reminder to consumers and businesses that interest rates can indeed increase.

“Whilst spreads on commercial and personal loans remain low, there will be little direct negative impact from this move, but it may cause some to reconsider the likely forward path of rates over the coming years. With the UK economy slowing over the past year to growth of 1.5%, a rise may feel unusual, particularly when in our judgement inflation will rise little further from its current level.

“This move is not without its risks, particularly with the current levels of uncertainty in the UK economy for both domestic reasons and with the ongoing Brexit negotiations. We reiterate our call to government to move rapidly to provide certainty to UK businesses across the country of their proposed policies for the coming years, and they must use the November budget to support business growth and confidence for the future.”

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BofE Base Rate increased 0.25%

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The Bank of England has increased the Base Rate for the first time since July 2007 from 0.25% to 0.5%.

Despite modest economic figures and a cut in projected growth rates the current 3% inflation rate was apparently too much to ignore against the 2% medium term target.

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As expected BoE raises Bank Rate to 0.5%

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Breaking – Bank Rate Rises by 0.25%

The expected rise, the first time in 10 years, was announce this morning by the Bank of England BoE) following its Monetary Policy Committee (MPC) meet.

Following plenty of hints and much speculation in the press recently about the rise, which is now announced, a move from the current 0.25pc to 0.5pc.

The UK economy is not particularly strong but there are some signs of growth, albeit marginal, with a 0.4pc GDP third quarter rise, an improvement over the previous two quarters of 0.3% each.

The main reason for this rise, is to stave off rising inflation, but with the stock market at record valuations, and consumer credit still worryingly high, there are fears that the Bank now has little in the way of “ammunition” to fight off another severe downturn.

Slashing interest rates has been the natural response to a downturn, but with these rates at or near zero there is not a lot the Bank can do there. This small rise therefore could at least give the Bank a little leeway in this regard, should the worst happen.

More Quantitative Easing is still a possibility, but more debt and asset price inflation (houses in particular) and more damage to savers and pension funds, despite its mini-boost effect, is far from a desirable move.

Philip Hammond, the Chancellor, is now on record as saying he wants to eliminate the deficit slowly by the middle of the 2020s, though some experts have said that he has room to spend up to an extra £10bn in the budget and still meet his deficit reduction, targets. However, other demands from pressure groups such as public sector workers may yet mean that balancing the budget and reducing overall national debt could be pushed back even further.

Meanwhile, UK house prices grew by 0.2pc between September and October, according to the Nationwide, and annually prices year-t-date to October increased by 2.5pc, up from 2.3pc in September. This takes the average property price in Britain to £211,085, exceeding expectations, but still a flat market compared to last year’s comparable figure for October of 4.6pc.

With the average house price to earnings ratio at around 7 times, any rise in interest rates will no doubt hit demand for property if the MPC raise rates today. Relatively low mortgage rates even after a small rise, and full employment, will help, but inflation coupled with falling real wages put pressure on household incomes, and this will likely put off potential first-time buyers.

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