It is much cheaper for sole owner landlords in Scotland to Incorporate

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The Scottish equivalent to Stamp Duty “LBTT” is the same as in England and Wales. However, the 4% additional rate of LBTT in Scotland (1% higher than in England and Wales) does not apply when six or more connected transactions complete simultaneously.

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Benefits of incorporating a rental property business with no mortgages

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This case study is based on a Merchant Banker resident in Central London. For the benefit of his retirement and legacy planning he has been building a UK rental property business for several years, mainly within City.

Due to having no mortgages at all he was completely unaffected by the Section 24 restrictions on finance cost relief.

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More than just bricks and mortar

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With the world economy suffering a slowdown, research shows people still have great trust for investments backed by ‘bricks and mortar’ and property continues to be a popular asset class with investors.

Why is this? Unlike other asset classes

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New service charges rules in commercial property

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Commercial:

A new set of mandatory rules introduced from 1^st
April 2019 and though the document itself is titled a first edition, it
supersedes 3 previous editions published as codes of practice.

The RICS (Royal Institution of Chartered Surveyors) says this
“professional statement sets a marker for the standards of management required
in commercial property and provides mandatory obligations that RICS members and
regulated firms engaged in this area must comply with.�

The new code has been endorsed by property bodies representing
all sides of the commercial property industry and is, according to The RICS, “widely
acknowledged as a significant step forward for the property industry.�

The aims and objectives of the code are to:

• improve general standards and promote best
  practice, uniformity, fairness and transparency in the management and
  administration of services charges in commercial property
• ensure timely issue of budgets and year-end
  certificates
• reduce the causes of disputes and to provide
  guidance on resolution, and
• provide guidance to solicitors, their clients
  (whether owners or occupiers) and managers of service charges in the
  negotiation, drafting, interpretation and operation of leases, in accordance
  with best practice.

Published by Joanna Crofts of global property consultancy
Knight Frank explains:

“…Industry guidance on service charges was first published
in 1996 by the Royal Institution of Chartered Surveyors (RICS) and has become
known as the ‘Service Charge Code’. Until now, this has only been guidance.
But, that is about to change.�

The new code sets out the mandatory requirements for landlords
and property managers – if they don’t comply with them, they may face legal and
disciplinary action.

Advantages for
tenants?

Making the guidance mandatory will make service charges
clear and transparent for all tenants – rather than just to those whose
landlords followed the guidance as best practice.

For example, in the past, it wasn’t set in stone who should
be responsible for paying for things like marketing events held in an office
building or a shopping centre. Now there’s clear guidance that says the
landlord should contribute 50% towards the cost of such events, says Joanna
Crofts.

Another example is, where a landlord has agreed a capped or
fixed service charge as an incentive to secure a new tenant, the landlord must
pay for any shortfall, and not simply try to hide this and recover the
shortfall from the other occupiers. The service charge matrix showing the basis
for recovery of costs must be completely transparent and disclosed, she says.

Service charges on different commercial buildings will now
also be easier to compare. So, if you’re looking for a property to lease or
buy, this will help you make the right decision on which premises to choose, in
relation to service charges.

The biggest change is
for landlords

The change that will have the biggest impact, says Joanna
Crofts, will be the new mandatory – much tighter – timescales for budgeting and
settling service charge accounts. They now have to be reconciled annually.

“Until now, unless the lease states otherwise, there was
nothing stopping a landlord going back several years to recover costs owed.
This can have a significant negative impact on a tenant’s cash flow. Similarly,
if too much time elapses, a landlord risks losing their chance to recover money
owed because a former occupier may have since become insolvent,� says Joanna
Crofts.

If you are a landlord and are up-to-date with your service
charge accounting, this won’t be an issue but, if you have a backlog already,
you really need to get up to speed now.

What has become
mandatory?

1. All expenditure that the landlord wants to charge for
must be in accordance with the terms of the lease.

2. Landlords must recover no more than 100 per cent of the
costs of the provision of the services.

3. Annually, landlords must give tenants service charge
budgets, including appropriate explanatory commentary.

4. Annually, landlords must give tenants an approved set of
service charge accounts showing a true and accurate record of actual
expenditure.

5. Landlords must give tenants a service charge
apportionment matrix for their property each year.

6. Service charge monies must be held in one or more discrete
(or virtual) bank accounts.

7. Interest earned on service charge accounts must be paid into
the service charge account.

8. Practitioners must tell tenants that, if a dispute
exists, any service charge payment withheld by them should only be the actual
sum in dispute.

9. Practitioners must tell landlords that, following the
resolution of a dispute, any incorrect service charge should be adjusted
straight away.

Acknowledgements Chris McColgan, Business News Wales

You can read and download ‘Service charges in commercial property, 1st edition’ on the RICS website here

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Dispute on certification for fire doors going to court?

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We are a partnership of 4 landlords and have a contract dispute with our supplier of FD30 doors. We had 3 installations done in 2013 in leasehold flats (using our freeholders’ approved supplier) but the freeholder of the blocks has recently failed them after a routine fire risk assessment.

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Abject Failure of the ICO is beyond belief

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The landlords alliance along with several of our members formally complained to the Information Commissioner about the application process for a selective licence from Sefton council. In essence our concerns were and are as follows:

1) Sefton ask for unnecessary and excessive information by demanding details of landlords properties licensed elsewhere.

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Brokenshire announces pledge cracking down on toxic leasehold deals

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A new industry pledge to stop leaseholders being trapped in unfair and costly deals has been unveiled by the Communities Secretary, Rt Hon James Brokenshire MP, today (28 March).

More than forty leading property developers and freeholders, including big names such as Taylor Wimpey and Barratt Homes –

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North West economy is booming despite Brexit

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Property Investment:

CBRE in Manchester, the international property consultants,
has announced that 2018 was a record year for deals in the city, with the company
having advising its clients on over £1.5bn of commercial real estate investment
transactions.

More than 40 individual large-scale transactions were concluded
by the company’s Manchester team over a wide-range of sectors which included
retail, office, logistics, leisure and healthcare, and demonstrating the underlying
health of this North-west economy.

New Developments:

During the year, CBRE advised Bruntwood in securing L&G Capital as a joint venture partner to create Bruntwood Sci-Tech, the UK’s largest property platform dedicated to driving science and technology growth in the regions. The partnership has already led to a £360m investment of capital, property and intellectual assets into the new venture.

L&G has also committed to buying the entire West Tower development
on its completion due in May, which will provide 350 residential apartments,
along with 150 parking spaces and communal residents’ lounges.

Colin Thomasson, executive director and head of capital
markets at CBRE in Manchester, said:

“Our transactional activity reflects the continued
attractiveness of Manchester and the wider North West region.

“Notwithstanding the challenges presented by Brexit, our
local economy is thriving and demand from investors and occupiers remains
strong.

“As Manchester continues to grow it is becoming more
attractive to a range of different businesses in the tech, digital, fin tech,
health innovation, creative, film and media sectors, and this will ultimately
sustain investment over the long term.�

Other Developments

All this is reflected in some of the major lettings
confirmed over the last year including Booking.com at Enterprise City, and
Qiagen at CityLabs. It is expected that major lettings will continue in 2019.

 A number of other high
profile announcements include HPE at Circle Square, the Booking.inc. at St
John’s, plus WeWork at Dalton Place, HMRC at 3 New Bailey, and Amazon at
Hanover House.

In addition, three more schemes at Old Granada Studios,
Bonded Warehouse and ABC are being delivered at St. John’s by Allied London and
are part of larger mixed-use schemes that include studio space for the
creative, digital and media industry as part of the Enterprise City initiative.
The University of Manchester’s new Graphene Engineering and Innovation Centre
(GEIC) represents a further £200m investment in the city.

Considerable investment in education and research projects,
such as Corridor Manchester, the (1.1m sq ft), the Graphene Centre and the
Manchester Engineering Campus, supported by a community of over 100,000 students
currently attending universities in the region and the highest number of
purpose-built student accommodation underway since records began in 1999, at
1,749 units in 2018.

The hotel sector is also seeing record activity, with the
number of hotel rooms under construction in 2018 at 1,963 new bed spaces. In
total there are nine new hotels are under construction, four of which are in
the city centre, two are located within NOMA and the Northern Gateway and one
within the Southern Arc.

As the boundaries of the city centre expand, the strength of
the business visitor economy goes with it, positioning the city as a world-leading
conference destination. Coupled with improvements to the travel infrastructure
and public attractions, the outlook for Manchester’s tourism industry is also very
strong.

Manchester airport has direct and daily flights to many
international destinations including New York, Tel Aviv, Los Angeles, Beijing and
Mumbai, an indicator of the city’s growing international connectivity.

The pipeline for all developments remains strong in 2019
with new starts anticipated including the new QBIC hotel at John Dalton House.

New Businesses

Figures just released from the ONS show that, as of 2018,
there are 23,845 businesses in Manchester, a rise of 58% from 15,060 in 2014
with a rise in more than a thousand businesses in the past 12 months alone,
from 22,490 in 2017.

Retail is the most popular type of business across
Manchester, followed by 4,215 businesses in the professional, scientific and
technical industry, ahead of 1,805 companies in the property sector.

The rising numbers seen in the city of Manchester over the
last four years reflect the national trend, which also shows a decline in peripheral
towns such as Trafford, Wigan and Stockport where numbers have fallen, by 470,
195, and 130 businesses respectively.

Residential
Development:

The residential sector has continued to achieve record
levels of development in Manchester for a third year running. Forty eight
residential schemes were in progress last year, up from 41 in 2017, and they
are set to deliver 14,480 residential units in the city.

Anyone visiting Manchester lately cannot fail to be surprised
at the sheer number of cranes on the skyline, and according to accountant’s
Deloitte Real Estate division its annual Manchester Crane Survey it showed over
3,345 units were under construction, compared to the same time last year. The projected
delivery over the next three years will be greater than the total number of
residential units delivered between 2007 and 2018 says Deloitte.

Several build-to-rent schemes in Ancoats and New Islington,
including Manchester Life’s Smith’s Yard and Sawmill Court, Mulberry’s The
Astley are bringing record numbers of residential units to market. Five more
such schemes were completed in Salford, including Slate Yard Wharf and
Middlewood Locks, while more residential development starts in 2018 included
Select Property Group’s Embankment West, FEC’s Mount Yard, Renaker’s Elizabeth
Tower at Crown Street, and Capital & Centric’s Crusader Mill.

Simon Bedford, partner at Deloitte Real Estate, said:

“Last year Manchester established itself as one of Europe’s
fastest growing cities, and this year’s report shows no sign of activity
slowing down.

“The city is leading the way in catering for an increasing
population through the development of entire new neighbourhoods – whether that
is bringing forward new living, retail or office space.

“These new districts are redefining the parameters of the
city centre as development spills out into the suburbs, particularly in the
northern and eastern quadrants of the city.�

“The marked increase in office construction levels is
reflective of the continued draw to the city for major businesses. Investor
confidence is booming, as the rise in pre-let deals clearly demonstrates� said
Bedford.

“With creative, media and tech occupiers leading the major
office deals in 2018, there’s also a growing diversity in Manchester’s job
market – we can expect this to play a key role in boosting the city’s economic
growth and talent retention in the years to come.�

Greater Manchester Chamber of Commerce

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Sheltered accommodation transfer to brother?

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I bought a sheltered accommodation property for my mum to live in some years ago and is unencumbered. I now wish to transfer part of it to my brother each year to use up my capital gains and will do this by declaration of trust.

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RLA campaign to challenge gas safety notice ‘breach’

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Section 21:

The Residential Landlords Association (RLA) has launched a campaign
representing a landlord member after a recent court case decided that landlords
cannot regain possession of their property using section 21 if they failed to issue
a gas safety certificate to new tenants BEFORE they enter the tenancy.

The ruling in the Trecarrel House Limited v Rouncefield case,
which went to appeal, means that the landlord will only be in a position to
regain possession of their property should the tenant breach one of the 17
grounds for possession, under section 8 of schedule 2 of the 1988 Housing Act.

Using section 8 the onus is on the landlord to prove a
breach, and unless the case is clear cut, and the breach involves one of the
mandatory (as opposed to discretionary) grounds, then a decision can go either
way. The process is often slow, uncertain of outcome, and expensive.

The judge in the appeal case followed a previous similar
case when a gas safety certificate was only served two weeks after the tenant
moved in.

The RLA is now supporting the landlord, Trecarrell House
Limited, in another appeal, on the basis that so long as the gas safety
certificate is provided before the Section 21 notice is served, then it is
valid. It is arguing that this case could breach a landlord’s rights under
European Convention on Human Rights on the basis that it deprives them of their
possessions.

David Smith, Policy Director for the RLA, said:

“Protecting the rights of landlords to repossess properties
in legitimate circumstances is key to providing the confidence the sector needs
to offer longer tenancies.

“The landlord in this case was not seeking to shirk their
responsibilities and provided the certificates that were needed.

“We will fight to ensure that if nothing else, logic
prevails.�

Article 1 of the First
Protocol of the European Convention on Human Rights provides states: “Every
natural or legal person is entitled to the peaceful enjoyment of his
possessions. No one shall be deprived of his possessions except in the public
interest and subject to the conditions provided for by law and by the general
principles of international law. The preceding provisions shall not, however,
in any way impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the general
interest or to secure the payment of taxes or other contributions or
penalties.�

Basis of the court
rulings:

Section 21A of the Housing Act 1988 (amended by the
Deregulation Act 2015) says that for tenancies entered into after 1st October
2015, a valid Section 21 Notice cannot be served if the landlord is in breach
of a “prescribed requirement�. Along with serving a current Gas Safety
Certificate, an EPC, the government’s “How to Rent� guide, and prescribed
information about a deposit, one of the prescribed requirements is that the
landlord must have complied with any statutory health and safety obligations.

To do this fully the Assured Shorthold Tenancy Notices and
Prescribed Requirements (England) Regulations 2015 (the “AST Regulations�) list
the requirement to provide a tenant with a gas safety certificate in compliance
with the Gas Safety (Installation and Use) Regulations 1998 (the “Gas Safety
Regulations�), crucially, BEFORE the tenancy starts.

Despite some experts arguing that this ruling was not the
intention of the Deregulation Act 2015, the MHCLG’s so far refusal to act means
that in practice it gives tenants security of tenure such that they will be
almost impossible to remove in the future without a serious breach of contract,
serious rent arrears for example.

MHCLG say they have updated guidance available to landlords
on the Gov.uk website, “to ensure landlords are certain of
their legal responsibilities.â€� 

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – RLA campaign to challenge gas safety notice ‘breach’ | LandlordZONE.

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