The Property Nomads Podcast – Tax Planning with Mark Smith

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Robust Business + Tax Planning Structures with Mark Smith:

In this continuing mini-series of interviews with successful people in property, Rob talks to Mark Smith, a barrister based at Cotswold Barristers, Cheltenham.

Mark is a tax expert who

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RLA urge landlords to complete survey and help influence policy

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Now that the government has committed to a consultation following its announcement to ban section 21 notices the RLA is calling on landlords to help influence policy by completing a new survey: Click Here to access the survey.

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Bexley landlords fined for overcrowding

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Rogue landlords:

Husband and wife landlord team Mr Abul Azad and his wife,
Ashrafi have been successfully prosecuted by Bexley Council for illegally overcrowding
a bungalow they let.

After contravening a Notice of Over-Crowding and a Prohibition
Order served on them for the property they own and rent out in Pembroke Road,
Erith, their joint fines, penalties and costs totalled over £8,000

Bexley Magistrates were told that the property owned by Azad
and his wife, who also live in Pembroke Road, had had complaints to the Council
about noise and excessive generation of rubbish since 2014.

In 2016 a fire started at the bungalow had a tenant jumping
from a window to escape the flames, but escaped uninjured. However, at the time
it was reported to the Council as a possible house of multiple occupation (HMO)
by the London Fire Brigade.

Following this incident a Notice of Over-Crowding was issued
on the property after a Council inspection. At the time the bungalow was found
to be housing 17 beds, including using the roof space as bed space. Azad was given
a schedule setting out the maximum number of 8 people to be allowed in the
whole of the property and was told to inform the Council before re-letting
after repairs.

After a further spot inspection by the Council it was found
that 4 people were still living in the property despite the extensive fire
damage, making the staircase unsafe and the house unsafe for habitation. As a
result of this visit a Prohibition Order was served banning the property from being
used for sleeping and living.

Azad agreed that he would not re-let the property again
until all necessary remedial works had been carried out, but again despite all this,
a further unannounced visit found it occupied by 9 people, allegedly from one
family, but they had different names.

Yet another visit and inspection was made in April 2018 which
revealed 15 bed spaces, three of which were in the living room and included a
double mattress under the stair case. Most of the works specified in the Prohibition
Order had still not been completed at this time.

In court Azad pleaded guilty to all charges, of contravening
the Notice of Over-Crowding and the Prohibition Order. On 18 February 2019 Mr
Azad was fined £1,660 for contravening the Over-Crowding Notice and £3,300 for
contravening the Prohibition Order. He was ordered to pay £200 legal costs and
£890.44 investigative costs. He has since also been ordered to pay a Victim
Surcharge of £170.

On 4 March 2019, Mrs Azad, who did not attend court, was
fined £1,000 for contravening the Prohibition Order and ordered to pay £200
legal costs; £890.44 investigative costs and a Victim Surcharge of £100. There
was no separate penalty for the first charge of contravening the Notice.

After the case, Councillor Peter Craske, Cabinet Member for
Places said:

“I am delighted with this successful prosecution.
Bexley has no hesitation in prosecuting greedy landlords who have complete
disregard for the health and safety of their tenants. These two ignored advice
and guidance by our officers aimed at helping them rent their property legally
and safely – and then went on to flagrantly flout the Over-Crowding Notice and
Prohibition Order which were rightly issued.

“They are very lucky that they weren’t facing far more
serious charges, which they would have been had anyone been killed or injured
due to their total negligence.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Bexley landlords fined for overcrowding | LandlordZONE.

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Fees Ban for students starting September?

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One letting agency I know of is is charging students huge admin fees even though they don’t start their tenancies until September on the basis that they have to pay it now prior to the ban coming into force?

Therefore

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Rent-to-Rent can make a serious dent!

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Letting to an agent:

Rent to Rent means you rent your property to a “middle man�,
an agent who then re-rents (sub-lets) to an occupier, a tenant.

This has become a popular formula for some landlords. It removes the hassle of dealing with tenancies, achieves a ‘guaranteed� rent for (usually) around three years, and the owner gets the property back in pristine condition, or so the theory goes.

On the other hand, the agent will be renting the property off the owner for a bit less than the market rent, making a profit on the deal for their trouble when they rent to a single or multiple tenants.

The practice has been heavily promoted by the “investment guru brigade� as a way for individuals to get into property without the need for a large investment. But unfortunately some of these would-be property gurus are amateurs with little experience at best, if not rogues at the worst, so things can go horribly wrong.

That’s not the whole story of course; there are some genuine, professional and highly experienced agents offering this type of service, and some local authorities do so as well, but even so, owners need to be careful. There are some gaping chasms of risk that owners can fall into with this practice, so buyer beware.

First off, the
legalities:

This is a rather complex and in some respects an indeterminate area of the law. There are in effect two tenancies here, one between the owner and the agent, and another between the agent and the tenant. Most likely the latter will be a standard AST (Assured Shorthold Tenancy), but the former is not, because the tenant is not an occupier, one of the main requirements of an AST.

The former would most likely be a contractual tenancy between owner and agent, but there are instances, dependent on the circumstances of the tenant’s letting, and how the property’s being used, where the former arrangement could be a commercial tenancy under the Landlord and Tenant Act 1954.

A commercial tenancy, if not set-up properly, can give the agent renewal rights, which could cause no end of problems for the owner when the term comes to an end. Likewise, even a straightforward arrangement with a contractual tenancy and an AST can present problems if at the end of the term the tenant remains in place. Here, under section 18 of the Housing Act 1988, the owner will inherit the tenancy, with all the problems that may entail.

Secondly, a
trustworthy agent:

Can the agent be trusted to set-up a proper legal framework that fully protects the owner? And will they pay the guaranteed rent, even if there are void periods? Owners should be mindful that they should be dealing only with experienced agents who are members of one the recognised professional associations. Also, the agent should be using a knowledgeable solicitor to arrange the legalities.

If in doubt seek legal advice and get the agent checked out
properly.

Thirdly, the
regulatory risk:

There are now some swinging penalties for not following the rules and an innocent owner can get drawn into the fray. So if a rogue agent were a carry out internal alterations, increasing the number of lettable rooms to cram in more tenants, then things could get nasty. An illegal HMO (House in Multiple Occupation) is created which when not properly licensed carries fines of up to £30,000.

Evicting a rogue agent and the tenants he has rented to
could take a lot of time and hassle, let alone all the expense involved.

Legal cases:

Given the number of these types of lettings over recent
years, there are likely to be more examples of a case which came to court last
month:

A rogue letting agent from Hertfordshire was fined £72,000
after it was said he had been “breaking almost every regulation in the book�. Watford-based
Muhammad Siddique was found guilty of 15 offences dating back to 2017.

Siddique had been operating three illegal HMOs without the
knowledge of their owners, despite the owners thinking they were rented to
single families. Inspectors found he was seriously breaching health and safety
regulations and failed to provide gas and electrical safety certificates.

St Alban’s Magistrates’ Court heard that Siddique had been a
franchisee of estate agency chain, Open House, but his franchise agreement ran
out in 2016, terminated when the company became aware of his failure to meet compliance
procedures.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Rent-to-Rent can make a serious dent! | LandlordZONE.

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Landlords urged to respond to eviction ban

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No-Fault Eviction Ban:

The Government announced this week that the section 21 no-fault eviction process is under threat in England, and at the Welsh General Assembly this week Welsh Labour’s First Minister announced that the Welsh Government will be banning Section 21.

This follows similar action in Scotland in 2017 when they went even further: no more fixed terms – indefinite tenancies – rent officer controlled rent increases, longer notice periods of up to 84 days and the abolition of no-fault evictions, all form part of the new tenancy regime in Scotland.

The direction of travel is obvious and should Labour be elected, in England the regime would shift along the lines of the full-blown model introduced in Scotland.

No responsible landlord wants to see tenants evicted without good reason, and they agree that families need to be confident of their security of tenure when they follow the tenancy terms.

But the media hype around this issue is being blown out of all proportion according to landlord groups. Yes, there are examples of unreasonable evictions, but these are statistically very small in number and the argument that homelessness is being caused by section 21 seems tenuous at best.

Research conducted
by the RLA points to problems with Universal Credit, the freeze on Local
Housing Allowance and reduced housing benefits as more likely causes of any
spike in homelessness.

The Residential Landlord’s’ Association claims that only 11% of tenancies are ended by landlords, with over three quarters of these evictions due to high rent arrears. In fact the statistics show that there are more social tenants evicted every year than there are in the private sector.

The lack of provision for the most vulnerable tenants, many of whom would previously been housed in what is now a depleted social housing sector, it would seem, has left private tenants increasingly defaulting on rental payments.

So, it could be argued, it’s the Government’s own actions that brought about a rise in homelessness, and that if abolishing no-fault evictions results in a mass exodus of landlords, then it will probably result in an even greater crisis in English housing than already exists.

An opportunity to
Influence policy

The RLA argues that through the consultation exercise landlords are being given an opportunity to shape their legal rights in the future by taking part in an RLA survey.

The Government has committed to consulting on ending Section 21 repossessions, so the RLA stresses the importance of getting their views across: ensuring that private landlords can be confident in future that they can “swiftly and easily repossess a property for legitimate reasons�, such as for example, tenant rent arrears, anti-social behaviour and wanting to sell the property.

Therefore, ahead of the Government’s consultation, the RLA is giving the landlord community the opportunity to shape the future direction of the sector as it faces some of the biggest challenges it has seen for decades.

By taking part in the RLA survey private landlords now have the opportunity to explain their experiences and frustrations in the current system, and what they see as being vital to maintain their confidence “at a time when the demand for rented housing is outstripping supply.�

The survey will look at what measures might be needed to mitigate the difficulties likely to be caused by the Government’s plans and the problems landlords face when repossessing properties through the courts.

David Smith, Policy Director for the Residential Landlords
Association says:

“The system needs to be fair to both landlords and tenants.
The majority of landlords do a good job and it is vital that they have the
confidence to provide the homes to rent we desperately need.

“This survey provides an important opportunity for landlords
to shape the future of the sector and ensure that it works for them every bit
as much as it does for tenants.�

The RLA’s survey can be accessed here: https://tinyurl.com/y2hhxdhf.

Government announces end to unfair evictions

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlords urged to respond to eviction ban | LandlordZONE.

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Landlords Easter Offer – First come first served

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We are extremely excited to offer landlords with properties in Central London & surrounding areas our BEST DEALS yet!

These deals are available NOW for a limited time only. If you are interested, please get in touch via the contact form below and we will get an offer out to you within 48 hours.

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£15,500 PCM property fully managed by online letting agents

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Online Lettings:

Renting a luxury property might seem challenging, and agency costs reflect this. Naturally, when thinking of luxury, landlords imagine sharp looking real estate agents and a commission fee way higher than £1000. However, the sector’s future might look differently, as a new generation of letting agencies has set out to revolutionise the sector and are already providing the same services for less money and in less time. If it is true, can landlords expect to rent out a £15,500 PCM luxury property and pay £700 commission instead of £27,000?

In short, the answer is Yes.

Since luxury properties are considered to be more difficult to rent out and maintain, landlords are forced to pay 15% of their annual rent, the industry’s standard for a high end traditional letting agent. High-end letting agents argue that such price is based on the high marketing expenses required to find tenants and increased maintenance costs.

However, such calculations often seem unreasonable not only to the landlords, but to the new generation of letting agencies as well. Online letting agents—the ones that have optimised their services by taking a significant part of them onto digital platforms—do not consider luxury properties to be exceptional and choose to charge the owners a fixed price applicable to everyone.

A perfect example to this is a recent contract between a online letting agent Reneza and the owner of an apartment on Park Lane, Mayfair. Reneza has let out his property with monthly rental value reaching £15,500, and is fully managing it for as little as £59.

The commission fee paid by the landlord was £708, almost 4000% less than the traditional letting agent fee. [Additionally, the owner is now able to track all the activities in a digital dashboard and receive real-time notifications about the property. Though, chances are, an owner like that, does not really bother anyway.

Reneza
claims that they managed to convince the property owner to give them a shot and
prove him that letting a luxury property does not differ from a regular
property and requires a similar amount of resources. While both regular
property owners and luxury landlords expect the highest quality of service, in
its essence, the operations and price does not necessarily need to differ and
landlord should not be charged tenfold sums.

Whether it is luxury or regular, the process of renting out a property comes down to few things. Firstly, it is finding the right tenant. Reneza trusted Movebubble renting app to find the right people to rent the luxury apartment. The search did not take long, and the new tenants were ready to sign the contract in less than two weeks.

After the contract is signed, letting agent’s duty is to manage the property in a way that suits both the landlord and the tenant. To ensure successful property management, Reneza’s representatives work all over the UK and are on a network that allows them to respond to the queries and alerts from the properties closest to their location. It allows them to efficiently perform regular inspections and rent collection, if needed.

Still, for many landlords the lower property management costs bring doubts about the quality of the services. The market needs quite a lot of education in regard to sharing economy for property management because landlords find it hard to understand, how come property can be fully managed for a price that is up to 5 times lower than the standard.

While in fact it is very easy to explain: landlords actually do not need a full-time real estate agent around their properties and pay him commission for the whole time. Landlords could easily only pay the agent when there is an actual need for his help. For instance, in case of midnight emergencies with neighbours or extra inspections.

Online agencies successfully apply these principles and prove the landlords that the cost reduction is possible, and sometimes even necessary. Online letting agents manage to reduce the expenses by optimizing the manual workload, and building a network of agents, that they can tap into using sharing economy principles.

Therefore, the agency saves thousands on wages and landlords save thousands in fees—a very important aspect, having in mind the Tenant Fee Ban that will likely increase traditional letting agency fees significantly as the agencies will lose as much as 20% of their income.

For the new generation of letting agents, technology not only helps save money, but also assures that all parties are in the loop and provides the much desired efficiency that has always been the pain point of the sector. Nowadays, successful property managers need to be connected with the landlord and the tenant all the time.

For property managers technology is a tool to keep both landlords and tenants satisfied with the services, and for the real estate agents, digital solutions reduce the amount of manual tasks, allowing them to focus on the quality of their work.

Needless to say, technology benefits landlords far beyond the saving aspect. Reneza has clients with portfolios of 60+ properties scattered all across the UK. For such landlords, the fact that they only need to contact one agent is a huge relief.

Saving time and receiving transparent information about their properties is also a reason why luxury property owners choose to switch to online letting agencies, that prove they are able to manage the properties successfully for more and more landlords everyday.

Even
though online letting agencies are still a novelty in the market that once was
seen as a steady one, their competitive advantage lets the observers guess that
the future of letting will be digital. The landlords, who feel that they were
tricked into believing they pay reasonable amounts for the services they
receive, are swiftly moving onto digital platforms.

In fact, the shift is quick not only because landlords hurry to start saving money. Those who choose to trust an online agent with their properties, do not waste time for face-to-face meetings with traditional letting agents. Starting to let properties online only requires registering, providing some property details and choosing one of the available service packages.

According to Reneza, the registration and uploading a property onto the website takes less than 5 minutes, and there is support staff online to answer all the questions that emerge throughout the process.

As if it that does not sound good enough, by signing up to Reneza’s platform and letting them know, you found out about them through Landlordzone, landlords will receive two months of full property management for free! Make sure you do that and enjoy a worry-free letting from the moment they register on the website.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – £15,500 PCM property fully managed by online letting agents | LandlordZONE.

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New – National Trading Standards Estate and Letting Agency Team

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A new team has been set up to provide greater protection for renters in England from letting agents who charge illegal tenant fees. This follows legislation that will ban tenant fees in the private sector in England from 1 June 2019.

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One person households on the increase

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HMO Investment:

Keeping an eye on changing demographics is one way that
landlords and property investors can benefit from these changes.

One such change, which can be identified by close analysis
of the national statistics, is the rise in the number of people living alone.

A handy, practical and affordable solution for lone dwellers
is living in a shared rented house, and in rental terms that means an HMO – a house
in multiple occupation.

The traditional bed-sit image of a grotty room in a large old
Victorian run-down house is becoming a thing of the past. As standards improve
and city living for working and professional groups, as well as the retired,
means that landlords are providing rather more up-market abodes in this type of
accommodation – and the demand is there.

Consequently, buy to let investors are looking at the possibility
of a HMO investments to take advantage of this growing trend, and to make a
better return on investment in the process – multi-occupied properties can
produce income yields far above those of single lets.

Data recently release by the Office for National Statistics
shows that one person households have increased by 16 per cent to 7.7 million
over the 20-year period to 2017. This trend, The ONS is anticipating, will
continue and that this figure will reach 10.7 million by 2039.

ONS put the trend down largely to older age groups in single
living, those selling properties to release capital for living in retirement, plus
a bulge in the number of births in the 1960s, all added to with more couples
splitting in older age.

The old saying “two can live as cheaply as one� has a ring
of truth about it, so when one person lives alone, whether owning or renting,
in a traditional property, with the costs all falling on one income or pension,
they are high in proportion.

A single room in a larger property therefore makes a lot of
sense to the renter, with the added bonus that there are no scary maintenance
bills to pay.

So, buy to let landlords who can offer good quality shared
accommodation (HMOs) can benefit from this growing trend of downsizing and
saving on housing costs, both young and old are considering shared
accommodation as a viable option and an optimal solution for their needs.

Co-founder of ideal flatmate, Tom Gatzen, has said:

“The current cost of living is making it tough for many to
get by, but shouldering this financial burden alone makes it all the more
difficult.

“While we are currently seeing an upward trend in single
occupant living as a result of a growing population and social factors such as
an increase in divorce rates, we are also seeing a similar increase across
other living habits such as co-living.

“While living alone is more prevalent across older age groups,
we’re seeing a growing preference amongst younger generations to live in share
households. This is not only helping them to address the financial issues head
on but can also help with other disadvantages associated with living alone such
as a lower level of wellbeing.

“If properly considered and developed, this lifestyle trend
could go some way in addressing the predicted uplift in those living alone over
the next two decades and the negative impact that this could have on this
segment of the population.�

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – One person households on the increase | LandlordZONE.

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