London courts need urgent reform warn landlords

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Courts across London are failing to cope with the volume of landlord repossession cases they are hearing. New figures published today show that the average length of time from a claim from a landlord in London to a court issuing an order for a property to be repossessed for legitimate reasons is 30 weeks. This […]

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Property expert David Lawrenson looks back on the 2010s…

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Private Rented Sector Consultant at Letting Focus and Tenants Renting Guide, David Lawrenson:

“Private landlords have had to face a significant ramping up of taxes in the last few years, especially starting from the time George Osborne was Chancellor of the Exchequer. Taxes on rental income, capital gains and stamp duty land tax have all risen significantly for private landlords.

This has led to some private landlords leaving the sector – and there are some signs that the private rented sector may now be shrinking slowly from its high point of around 20%.

Of course, the government claims that increasing taxes on landlords was all about helping first-time buyers. But I think part of the government’s real thinking behind the increasing of taxes on private landlords was to try to make the sector less attractive to them and more attractive to institutional investors in private renting such as UK and foreign pension firms, (some of whom will, of course, make large donations to political parties).

I think there is a strong case for incentivising new build property for letting – so-called “build to let” – just as long as the playing field is not skewed too far away from individual or small groups of private landlords towards anonymous UK and overseas pension funds or other big players.

But the fact remains that the government cannot really “make do” without the smaller private landlord. The government and the housing associations do not have the cash to build large numbers of social (council) housing any more. And the much-vaunted, (by government, at least), institutional investors seem unable to build as much new housing as the government would like. (My own view of this is that this is because they struggle to make sufficient returns because they are far less efficient than the far more nimble small scale private landlords).

Also, institutional investors can only make their investments work in certain areas and where there is sufficient scale – think “me-too-identikit” flats on huge new-build estates. This still leaves the greater part of the housing market open to the smaller scale private landlord. So, still huge opportunities!

The fact is that across the UK there remains a shortage of the kind of homes that people want to live in. Many people either do not want to buy or are unable to buy their own home. And so they rent instead.

The ongoing shortage of housing stock in the private rented sector, the continuing failure of the institutional investors to deliver on build to rent and strong ongoing demand from tenants has led to rents starting to increase above the general rate of inflation in the last few years. So the picture remains very rosy indeed, especially for people who follow my guidance and buy the right type of properties in the right areas.

Of course, there will always be threats to the private rented sector.

But I believe most of these are not real threats. A good example is rent controls.

Many people on the far left rather like the idea of rent controls. What’s not to like in paying low prices for something? It’s like getting more income or winning the lottery – everyone says “Yes”.

But everywhere in the world and at every time in history where rent controls have been tried, they have led to a severe shortage of supply of rented accommodation and a reduction in the quality of that accommodation. Rent controls also lead to a proliferation of rogue landlords like Mr. Peter Rachman, who was famous in the 1960s in London.

Rent controls tend to have a knock-on effect, distorting supply on the rest of the housing market. A famous Swedish socialist economist, Assar Lindbeck, famously said, “In many cases, rent controls appear to be the most efficient technique presently known to destroy a city – except for bombing”.

His fellow Swedes clearly did not listen and rent controls in Stockholm introduced in the last few years have been the usual disaster – leading to an almost halting of new build and to 20-year waiting lists for rented accommodation.

But the UK government does not have to look to Scandinavia, New York or anywhere else to see the negative impact of rent controls, they only need to see the impact of lower housing benefit rates in the UK, which is like doing rent controls on a smaller scale.

The government decoupled housing benefit rates from local market private rent levels some years ago. As rent arrears soared for housing benefit tenants, landlords increasingly refused to let to people dependent on housing benefit.

Faced with rising homelessness, the government then set up separate pots of money where landlords are now given upfront cash incentives for housing people who are homeless. My own London borough, Bexley, is right now offering up to £8,000 to landlords to house a family on a long lease. Very nice!

This story proves that even when rent controls are introduced, landlords can still prosper. Indeed they will prosper as long as there is demand for the type of accommodation they can offer.

It will be interesting how Brexit plays out in the coming years. The risk here is that any restriction on migration from the European Union would dampen demand from that source for private rented accommodation. But the fact is that for the last three years, over half of migration is now from non-EU countries – and the numbers are increasing from this source. The UK will always need foreign labour and this will not change – Brexit or no Brexit.

To succeed in this more regulated climate for landlords, landlords will need to be more professional and better informed than their competitors. The new edition of my book “Successful Property Letting” shows you how to you can be fully informed and professional – showing you how you can still make money in the private rented sector, ethically and to have great fun as you do it too.”

David Lawrenson @LettingFocus – Advice for landlords and investors in residential property, Letting Focus and Tenants Renting Guide

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Property expert David Lawrenson looks back on the 2010s… | LandlordZONE.

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Average claim to repossession order takes 30 weeks in London

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Courts across London are failing to cope with the volume of landlord repossession cases they are hearing. New figures show the average length of time from a claim from a landlord in London to a court issuing an order for a property to be repossessed for legitimate reasons is 30 weeks.

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Average rents, housing court and right to rent

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In today’s political update we look at the latest ONS figures, calls by a senior member of the Labour party for a dedicated housing court and confirmation that the government does not plan to issue those with EU settled status with physical documentation to help the access rental homes. Average rents up by 1.4%  The […]

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New electrical checks and safety standards for Landlords

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The Ministry of Housing Communities and local government has written draft legislation proposed to come into force 1st April 2020 titled ‘The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020’ Click here.

Landlords will need to ensure that the electrical safety standards are met  and ensure every electrical installation is inspected and tested at regular intervals of no more than 5 year by a qualified person

First inspection and testing must be carried out before the tenancy commences or by 1st April 2021 in relation to an existing specified tenancy.

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New proposals for leasehold reform…

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Leasehold reform:

The Law Commission
of England and Wales has published a new report outlining the options
to simplify the rules for leaseholds and reduce the cost to
leaseholders when they buy the freehold or extend the lease to their
homes.

This is important
for many landlords because they may be leaseholders or freeholders or
in some cases both, depending on where and how they invest.

The Government’s
latest estimates show there were 1.4m leasehold houses in England in
2015-16, compared with the previous estimate of 1.2m in 2014-15,
following a change in methodology to include socially rented
properties.

There are also
around 2.9m leasehold flats, up from 2.8m previously thought. In
total, nearly one-fifth of all properties in England are leaseholds.
This stems from an explosion of apartment building in big cities, but
it’s down to developers’ controversial move to selling new homes
as leasehold instead of allowing a freehold title.

Many thousands of
new homebuyers have been caught-up in the controversy of ground
rents’ costs spiralling out of control on leasehold properties,
which have in some cases left owners of homes in virtually unsaleable
properties.

Reforms

The reforms have the
potential to make the process of leasehold enfranchisement easier and
more affordable for the millions of leaseholders throughout England
and Wales.

The report suggests
a range of options to make it cheaper for leaseholders to buy their
freehold or extend their lease. As well as reducing the price, these
options are intended to clarify and simplify the law, making the
process of leasehold enfranchisement easier and less expensive to
operate.

The Government had
asked the Law Commission to review the law of leasehold
enfranchisement following recent publicity about leaseholders finding
themselves at the mercy of developers and freeholders when they
signed up for leases on new-build properties. The Government’s
stated aim was to promote transparency and fairness in the
residential leasehold sector and provide a better deal for
leaseholders.

On the question of
valuation, the Law Commission was tasked with providing options to
reduce the premium (price) payable when both existing and future
leaseholders want to enfranchise their homes, whilst ensuring
sufficient compensation is paid to landlords to reflect their
legitimate property interests.

The report
re-examines the method by which the value of a landlord’s interest
is calculated, and therefore to identify possible reforms that could
lower the lease premiums, without at the same time breaching the UK’s
human rights legislation that protects the landlord’s property
interests.

The report puts
forward three suggested key schemes for determining the premium, each
of which will make enfranchisement cheaper, saving leaseholders
money. Each scheme uses a different method to determine the price of
enfranchisement and allow further reforms to make the process simpler
and to reduce uncertainty, says the Law Commission.

The report explains
how a simple formulae (for example a simple multiple of ground rent)
could be used in a new system, but explains that their wider use is
not possible under the UK’s human rights laws.

The Commission
puts forward a range of other options for reform:

• Prescribing the
  rates used in calculating the price, to remove a key source of
  disputes, and make the process simpler, more certain and predictable
• Helping
  leaseholders with onerous ground rents, by capping the level of
  ground rent used to calculate the premium
• The creation of
  an online calculator for determining the premium to make it easier
  to find out the cost of enfranchisement, and reduce uncertainty
  around the process
• Enabling
  leaseholders who are collectively enfranchising a block of flats to
  avoid paying “development value” to the landlord unless and
  until they actually undertake further development.

Professor Nicholas
Hopkins, Property Law Commissioner has said:

“We were asked to
provide options for reform that save leaseholders money when buying
their freehold or extending their lease, while ensuring that
sufficient compensation is paid to landlords. This is what we’ve
done.

“We are ready to
help the Government in implementing whichever options for reform they
choose.”

Housing Secretary Rt
Hon Robert Jenrick MP said:

“I welcome these
proposals from the Law Commission which provide options to make it
simpler and faster for leaseholders to buy their freehold or extend
their lease.

“I will consider
the proposals outlined in this report carefully and set out our
preferred way forward in due course.

“We have already
committed to addressing the abuses of leasehold seen in recent years,
by reducing ground rents to a peppercorn level and limiting new
leasehold to apartments, save in the most exceptional circumstances.
The Competition and Markets Authority is examining the alleged
misselling of leasehold properties and I will also await their
findings with interest.”

Consultation and
Progress:

The Commission has
said they consulted widely in putting together the options for
reform.

“Leaseholders have
advocated sweeping reform to lower the cost of enfranchisement of
their homes. We have heard contrary arguments from landlords and
investors – including charities and pension providers – the value
of whose interests would fall if premiums are reduced.”

The Law Commission
says it doesn’t hold views on which scheme and which other options
for reform should be adopted, as this is ultimately a decision for
Government.

Further
recommendations are to be made in the coming months for reforms to
improve the current complex enfranchisement system.

“We will also be
publishing reports on reforms to make commonhold a viable alternative
to leasehold, and on improvements to the law that gives leaseholders
the right to manage their

properties,” says
the Commission.

Mark Steggles,
partner at law firm Thomson Snell & Passmore on the Law
Commission’s report says:

“The Law
Commission’s report sets out a path for making leasehold
enfranchisement simpler, more transparent and cheaper for
leaseholders. The report sets out three alternative options for a new
regime for calculating the premiums payable to extend a lease or
purchase a freehold, and a further seven sub-options in terms of
items to consider when calculating the premiums for each regime.

“The potential
abolition of marriage value (which is the increase in value that
occurs where a tenant acquires the freehold) is the proposed reform
most likely to concern landlords as it would decrease the value of
the premiums payable by the tenants.

“However, this
proposed reform, together with the proposed introduction of
prescribed rates for calculating premiums and a suggested route for
capping the impact of ground rent escalators that are causing such
controversy at the moment, are likely to be warmly received by
leaseholders.”

You can read the
full report, summary and other supporting documents on the link
below:

Leasehold enfranchisement

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Shelter research playing on fears

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Responding to new research published by Shelter today, the Residential Landlords Association (RLA) says that no one should feel ill or stressed as a result of their housing situation, whether that it is in the private or social rented sectors or in the home ownership market.

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FOI request to Scottish courts shows eviction takes 312 days!

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Is this what landlords in the rest of the UK have to look forward to post the ban on Section 21?

The Times  has reported on a Freedom of Information request made by Scottish law firm and lettings experts Aberdein Considine to the Scottish Courts and Tribunal Service.

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Court Case re HMO rooms being deemed to be Band A Council Tax Dwellings

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CAN YOU HELP?

A HMO landlord friend of mine is in court on Friday challenging the VOA ruling on a HMO rooms.

He has:-

• NO ENSUITE ROOMS
• NO KITCHENETTES
• 100% SHARED FACILITIES
• BASIC ROOM FURNITURE ONLY IN ROOMS

The VOA claim the re-banding increase tax by factor of six is because the rooms are individual dwellings

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DWP changes causing problems for landlords…

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Universal Credit:

Landlords are unable to identify payments for Universal Credit tenants due to changes in DWP system.

Caridon Landlord Solutions is calling on The Department for Work and Pensions (DWP) to urgently address the changes to its payment system, which have left landlords unable to identify which housing cost payments of Universal Credit should be allocated to which tenants.

According to the company, more than three weeks ago payments of the housing element of Universal Credit made directly to landlords included a unique reference.  This was the reference provided by the landlord when they completed the UC47 to request managed payment because their tenant was unable to manage their finances or had fallen into arrears.  

However, since mid-December, payments have been coming through with a random 28 number reference with no explanation or payment schedule to enable landlords to identify who they are for.

Sherrelle Collman, Managing Director of Caridon Landlord Solutions, which specialises in helping landlords with tenants in receipt of Universal Credit, says she has been inundated with phone calls from landlords asking how to interpret the new number reference.

“We were told last week that there had been an upgrade to DWP’s system which has caused the change, but we have been unable to get any further information on how we can allocate payments or what is being done to rectify the problem.  We called Universal Credit Full-Service line but they are unable to help without a National Insurance number, date of birth and/or address. 

“Then we called the Third-Party deduction line, and they are unable to help unless the tenant is in arrears and now has third party deductions set up. Some landlords have numerous payments for the same amount but for different tenants, making it impossible to identify who the payment is for,” says Sherrelle.

Caridon Landlord Solutions says if the matter is not resolved soon, many tenants could be accused of falling into rent arrears through no fault of their own because landlords will be unable to update the tenant’s rent account.

One landlord who contacted Caridon Landlord Solutions was already in the process of evicting his tenant for rent arrears but has to provide the court with an up to date rent statement.  He is unable to do so as he is cannot identify whether any further rent payments have been made and is concerned what impact this will have on his eviction proceedings. 

Caridon Landlord Solutions is pursuing the matter with DWP as a matter of urgency.

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