Kate Faulkner discusses topical BTL issues with Brooklands Commercial Finance

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The discussions revolved around a number of key issues impacting the BTL market and a common thread that kept appearing was the need for landlords to get good quality tax advice. This article covers the first of a series of 4 discussions around today’s BTL market.

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Landlord despair at courts’ slow processing of repossession cases

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Re-possessions:

The government has made its intentions clear: reform to the possession
rules is on the cards. It’s a situation which is likely to favour tenants over
landlords, and this at a time when the re-possession process through the courts
has never been slower.

Landlords and their representatives are in despair about the
prospect of even longer repossession times, when tenants are clearly in default,
and legally obliged to leave.

With no real prospect of reforms to the snail-pace court
system, the two main landlord associations, the NLA and RLA, have argued that specialised
Housing Courts (Housing Tribunals) are needed to speed up the process.

Currently, legal technicalities often result in blindingly
unfair rulings where tenants run rings around law abiding landlords. This
results in long delays, expense and severs trading losses. The situation will
be made even worse, argue landlords, if the planned changes to remove the “no-fault�
Section 21 election process goes ahead.

Record delays

Official data from the Ministry of Justice was published recently,
showing that private landlords attempting to regain possession of their
properties for lawful reasons now have to wait an average of 17.3 weeks before
they finally get their keys back. That’s nearly four and a half months, very
often without the rent being paid.

For those small-scale landlords who reply on the rent being
paid to meet their mortgage repayment obligations, it can put their ownership
of the property in jeopardy – the lender can foreclose if the non-payment goes
on for too long. Add to this the cost which may be incurred to deal with dilapidations
following a bad tenant, and the landlord is in real danger of losing everything.

The government’s recently released figures show that for the
first three months of this year it’s taken one week longer to get regain possession
than it did in the same period in 2018, so with the closure of many local county
courts, this situation gets worse, not better.

The government has stated that it is committed to holding
consultations with landlords to consider ways to improve the process, but
landlords’ confidence that this can be easily achieved in the short-term is severely
lacking. The fear is that many good landlords will be persuaded to abandon the
sector.

Possession statistics to March 2019

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84% of private renters satisfied or very satisfied

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The Office of National Statistics has released the English Housing Survey 2017 to 2018: private rented sector. Report on the characteristics and circumstances of private renters in England. Click here to download the full report.

The Finding of the report concluded:

The majority of private renters are satisfied with their accommodation and tenure

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Smart Meters – Beware and advice needed?

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I have just received a letter from Eon saying they have “issued a safety warning notice stating that the boiler is unsafe to use� in a house I rent out. They wanted to shut the boiler down, but the tenant (a very good one) refused to accept the notice or allow them to shut it down because the reason is ridiculous and both “engineers� who visited admitted they are not gas-safe registered

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Government release final ROPA Report

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Mark Hayward, Chief Executive, NAEA Propertymark and David Cox, Chief Executive, ARLA Propertymark comment on the final report from the Regulation of Property Agents (ROPA) working group:

“This is a significant moment for those in the property industry and a huge leap forward in stamping out bad practice.

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Tax Tribunal ruling favours landlords

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Stamp Duty Surcharge:

Derelict properties may be exempt the SDLT surcharge.

The Stamp Duty Land Tax (SDLT) paid by landlords on purchasing
a buy-to-let, and for those purchasing a second home, including when a 1^st
home has not been sold on transition, attracts a 3% surcharge.

First announced in the 2015 autumn statement, this surcharge
became effective from 1st April 2016 for exchanged contracts after 26 November
2015.

However, following a recent ruling by the First Tier Tax Tribunal
(PDF) the higher rate of SDLT may not be payable if it can be shown that
the purchased property is too dilapidated to live in.

In the case of PN Bewley Ltd against HMRC, the plaintiff
argued that where second properties are purchased which are deemed as
uninhabitable upon completion of the sale, they do not constitute as a “dwelling’
as defined under the Finance Act 2003.

The property and transaction in question involved a derelict
bungalow and plot of land in Weston-super-Mare. A purchasing couple, Paul and
Nikki Bewley, had set-up a limited company to acquire the property for £200,000
in January 2017. Their intention was to demolish the bungalow and re-build with
a new dwelling on the same site. The couple had acquired the property with planning
permission already granted for this change, to the previous owner.

Before, the purchased property had been vacant for several
years. The central heating system had been removed, and the wall, ceilings and
floors were full of holes following surveyors’ inspections and there was said
to be dangerous white asbestos cement present.

The Bewleys argued that they should only pay the standard
rate of SDLT since the property was clearly derelict and not suitable for
occupation, but HMRC disagreed. It argued that the bungalow was a dwelling
despite its dilapidation, and could be renovated to form a serviceable home. It
then amended the Bewleys’ tax return applying the higher rate of SDLT.

The Bewleys appealed to the First-tier Tax Tribunal and the
ruling went in their favour.

After carefully considering the case Judge Richard Thomas
said that the test set out in law is whether the building is “suitable� for use
as a dwelling at the point at which the SDLT became payable. After examining the
photographic evidence supplied, he decided that in this case it clearly was
not.

Accordingly, the judge ruled that the Bewleys had been
overcharged, and he reduced the self-assessment SDLT bill.

The case underlines the importance to landlords, developers,
agents and conveyancers to establish the condition of a purchased property, and
it opens up the possibility that developers and landlords may have paid an
inappropriate amount of SDLT and may be in a position to reclaim.

Stamp Duty Land Tax – Residential Rates

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Fantastic yields for 2 bedroom houses in Leeds

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Property Investor Partnership is delighted to have secured four, 2 bedroom houses in Leeds, for the discounted price of £152,995.

These properties have been discounted by 10% off current list prices and also include flooring, turf and white goods in our discounted price.

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How should we go about a change of letting agent?

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Recently we have had quite a few incidents with various agents performing disappointingly.

Such as delaying a few months in paying rents, changing tenants without prior notice to us landlords.

I’m wondering what rights we have as landlords to fire our agents ?

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Landlords send stark message to future PM

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Private Renting:

“Hands off the private rental sector�

The National Landlords’ Association (NLA) warns that whoever wins the Conservative party election – Boris Johnson or Jeremy Hunt – will face a major crisis in the private rented sector (PRS) if the Government is not prepared to rethink its plans to impose more stringent regulation on an already over-regulated PRS.

The dire warning from the NLA follows evidenced gathered by the association that around 86 percent of landlords consider it either “likely� or “very likely� that they will be selling-up and leaving the private rented sector, if the planned changes to the eviction tenancy laws are implemented.

Around half (46%) of private residential landlords invested in rental property to provide an income, or a supplement to their income, as they retire, as an alternative or addition to a standard pension pot. This was a very popular trend which followed various almighty pension scandals such as those of Equitable Life and the infamous Robert Maxwell debacle. Gordon Brown, Labour’s chancellor then exacerbated the pension fund confidence crisis with his famous “tax grab�, still little changed under the present Tory regime.

So, with the recent penalising changes to the landlord tax
laws, and a plethora of new regulations, and more still in the pipeline, the
NLA’s research finds that landlords are increasingly pessimistic about the
future. Little more one-third of those NLA members surveyed feel any degree of
optimism about their business prospects for the future.

With a declining income from renting out properties, many
elderly landlords may be forced into selling to fund their old age, triggering
a crisis in the supply of rental accommodation, at a time when demand has never
been higher. Such a shortage would only mean one thing – higher rents.

NLA chief executive, Richard Lambert, has said:

“Many landlords are telling us that the latest changes to
the regulations affecting the private rented sector are the last straw.

“These are not the greedy or unscrupulous people that many
would have you believe. They became landlords in order to fund their
retirement, but they are being backed into a corner because the government’s
plans to change the regulations—such as the proposal to abolish Section 21 of
the Housing Act—is making it harder and harder for them to generate sufficient
income.

“If they are left with no option but to sell their property
and exit the private rented sector in order to fund their retirement, then
given how many landlords are retired or approaching retirement, the chances are
that there will be a sudden and significant shrinkage in the size of the
private rented sector. If that happened, it is a racing certainty that the
current housing crisis would get worse.�

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Illegal HMO- Do we advise Council?

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Dear all, just need some guidance. In summary we gave our house to a rent guarantee company back in 2018. It has turned out to be a big mistake as we have received very poor service and most recently they have stopped paying us rent.

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