The best tax structure for landlord newbies

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The best tax structure for landlord newbies very much depends on taxable income. For example, a couple who are earning say £30,000 each who plan to purchase two or three properties, where the combined rental profits and mortgage interest wouldn’t push them into the higher rate tax bands

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RLA calls for crack down on tenants as well as landlords

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Deposit Cap:

Amid all the talk about cracking down on (rogue) landlords, the responsible landlord’s voice is often drowned-out – what about those rogue tenants who the media seem to think have ceased to exist?

The RLA claims that a move to cap deposits at 6 weeks’ rent could end up helping rent cheats.

As any experienced landlord knows, it’s a common practice that, at the end of a tenancy, some tenants will cheekily stop their last month’s rent payment. Fearing the landlord may retain their deposit, these tenants think they’ll get their move in first and stymie the landlord in this regard, leaving the landlord with no protection for any damage that may be revealed when the tenants leave.

What makes matter worse is that often the landlord does not even hold the deposit money as it’s placed in a custodial deposit protection scheme and won’t be released until the tenant agrees to it. So not only does the landlord “sing” for the last month’s rent, he’s lost his deposit damage protection – the whole idea of a damage deposit in the first place.

This is the reason most landlords ask for at least 6 weeks’ rent deposit, and sometimes 2 months (in case there are additional risks like pets), so that the amount does not exactly equal a month’s rent. This does at least give some protection.

Furthermore, The Sun newspaper claims to have seen a leaked copy of the Housing, Communities and Local Government Select Committee‘s report into the government’s Draft Tenant Fees Bill, which recommends that the maximum security deposits be reduced from the planned six weeks to just five weeks.

Taking more than two month’s rent does have some legal consequences as it can be interpreted as giving the tenant authority to assign (most ASTs bar this) should the tenancy be or become a contractual periodic tenancy.

The cap, set to be introduced in the Draft Tenant Fees Bill, could be seen as a “charter for rent cheats”, says they RLA, which it claims is supported by their research showing how 40% of private landlords have reported their tenants not paying their final month’s rent, in the past three years.

This Bill is designed to make renting fairer and more affordable for tenants. Other measures being proposed include having a lead enforcement authority in the Private Rented Sector, and allowing tenants to see all fees and costs upfront before they rent a given property.

But by reducing security deposits, the RLA says, landlords will suffer financial losses if faced with tenants fail to make regular rent payments, and those who leave properties in disrepair.

David Smith, policy director for the RLA, says:

“It is not unreasonable that landlords should have the security to know that funds are available to cover the unacceptable practice of those tenants who do not pay their rent at the end of the tenancy and, in some case, leave the property in an unacceptable state.

“In a quest for quick popularity, the government’s plans risk becoming a missed opportunity for fundamental reforms to improve tenants’ ability to access rented housing.”

The RLA would like the cap for security deposits to be set at eight weeks as opposed to the suggested six. It also thinks that the current deposit system should be overhauled so that deposit funds can be transferred from one private rental property to another landlord, if the tenants move house, rather than tenants having to raise a new deposit and await the repayment of their last one.

Draft Tenant Fees Bill

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Tax Efficient Extraction of Profit From Companies For 2018/19

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The new tax year means that many directors of family companies will be considering the most tax efficient method of paying themselves.

For many years accountants and tax advisors have suggested that director/shareholders should extract profit by paying themselves a low salary with the remainder of their income being extracted in the form of dividends.

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Universal Credit Full Service

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By the end of this year, every area in Great Britain will be delivering Universal Credit Full Service – with the new style benefit expected to replace all existing means-tested benefits by October 2022.

So, if you either take

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Ex tenant trying to sue me for personal injuries!

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In all the years I have done property I have never come across this. My ex tenant is now trying to sue me for personal injuries.

She reported a leak to the letting agent. I sent the plumber straight out as soon as she reported it and he found that the tap had a slight leak on it and did say that it had been leaking for a while.

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HMOs disappearing in some locations

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HMO Reverse Conversions:

HMOs have often been a preferred option for many landlords wanting to maximise their returns, as packing more tenants into one property always gives a high yield. The problem has always been getting planning permission to convert larger properties, and sometimes commercial properties, into HMOs. There have also been fears that in some locations HMOs have been overdone and the market is becoming saturated with them.

Most addresses where reverse conversations are taking place are for a return to single family dwellings, a move which is obviously beneficial and more profitable for the owners, when the demand for houses is there. Generally, no planning permission is required for a change of use back to a single dwelling. In such cases, landlords would not be required to submit any application,” a council the spokesperson said.

Based upon this planning policy, in 2017 Waltham Forest Council did not grant any planning applications for HMOs that resulted in the loss of housing.

This is not the case though, particularly in some other parts of London. As a recent report from Inside Housing says, “Houses in multiple occupation are often far from ideal lodgings – but a trend to convert them to more profitable houses is leaving residents with few options.”

HMO living is often a compromise for tenants; they provide a less expensive option for those people who can’t afford a place of their own. The compromise paying lower rent for living in shared accommodation, and in London where rents are at their highest, and when people are not eligible for welfare assistance, this is often the only option for them.

These properties are predominantly owned by private landlords and a good proportion of them house social tenants, something that takes a large burden off the local authority. This type of housing is “far from perfect”, says Inside Housing, but it is obvious that local authorities will really struggle to find enough places for people to live.

Linda Wade, Liberal Democrat councillor for Earl’s Court, is on a mission to stop houses in multiple occupation (HMOs) in her ward being converted for other uses. She tells Inside Housing:

“Within my ward there are about eight of these types of applications in the pipeline. I’m faced with potentially 80 to 90 people at risk of being made homeless because of planning applications to convert HMOs into self-contained units. HMOs are not perfect but they do in some cases represent an affordable option for low-paid workers.”

There is a policy to try and protect HMOs in the borough, and private landlords need a licence to operate an HMO, but in practice these rentals are still being lost to the borough through conversations away from HMOs.

A Freedom of Information Act request to all the London boroughs, plus Newcastle, Birmingham and Bristol, by the publication found out just how common it now is for HMOs to be converted:

[Source: Responses to Inside Housing Freedom of Information Act requests]

Karen Buck, Labour MP for Westminster North, told said that some councils have planning policies to protect HMOs, but there was one case in 2016, when a former hostel in Bayswater, run by the housing association Viridian, closed, when “Sixteen occupants were left homeless. Westminster housing did try to assist with keeping the hostel open as it recognised there is a shortage of this type of accommodation. “Cities thrive when they offer a range of housing options suitable to the variety of needs of their populations,” said Ms Buck.

The Freedom of Information Act request showed that recent planning applications granted for works on HMOs in Westminster for 2017 did not result in any losses to housing. These works were simply to increase or reconfigure the units, the figures showed.

However, in some locations the loss of HMOs is putting existing tenants under a great deal of stress, with the constant threat of a move to lower cost areas, further away from their employment.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – HMOs disappearing in some locations | LandlordZONE.

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Is it too late to challenge my lease?

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We purchased an off-plan property for BTL in 2008 (yes, I know!!!), and the lease we signed before Completion had the Ground Rent as £150 pa. Our solicitor (a supposed leasehold expert recommended by the broker) proceeded to completion, and we thought no more about it until the 5 year anniversary

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New flexibility for landlord annual gas safety checks

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Following campaigning work by the Scottish Association of Landlords (SAL) and their England/Wales partners the RLA, the SAL are pleased to announce a good result.

From 6 April 2018 a change in gas safety regulations will introduce a degree of flexibility to the timing of landlords’ annual gas safety checks. 

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Want To Live The High Life? – Check Out This Members Club

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One of my reasons for moving to Malta was to work more closely with my biggest consultancy clients. They specialise in making it easier for you to turn your aspirations into an affordable reality.

You don’t have to own a garage full of supercars to be able to drive the one you want when you want it.

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New law on abandonment of residential property 06/04/18

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Below is a summary of a larger detailed explanation of this complex piece of legislation, due to come into force tomorrow!

I thought it would be of interest to Property118 readers.

“The Housing and Planning Act

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