Universal Credit: update for landlords

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The Department for Work and Pensions has published a newsletter for landlords who have tenants in receipt of Universal Credit. The newsletter includes the latest information on the managed migration pilot scheme in Harrogate as well as the latest statistics on Local Housing Allowance and Universal Credit. It also includes a new video for private […]

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YOU told us: Rising costs for landlords are forcing up rents

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Two sets of research reveal how many landlords are planning to increase their rents this year as costs rise.

A
LandlordZONE Twitter poll has found that 62% of landlords intend to increase their
rent in the next 12 months, while a
survey of Belvoir letting agents shows nearly three-quarters of its offices expected rental
increases throughout 2020.

Belvoir, which has 170
branches across the UK, found
72% of offices were predicting rent rises, with almost a quarter expecting
rents to be static and just 6% anticipating a drop in rents.

“The tenant
fee ban, combined with punitive tax changes and ever-changing costly regulatory
demands have resulted in landlords incurring considerable additional charges,”
says Belvoir CEO Dorian Gonsalves.

Belvoir found
that many fed-up landlords planned to quit the private rented sector. David
Devlin, owner of Belvoir Devizes, says the Tenant Fees Act puts all new and
renewing tenancy costs on landlords, who are understandably recouping those
costs through higher rents.

“Coupled with
punitive changes in taxes and ever-increasing regulatory demands, landlords are
being driven out of the sector, which is reducing supply,” says Devlin. “Add to
this steady and increasing demand and it will obviously have the inevitable
effect of rents rising.”

While tenants
are winning more rights, it is coming at a cost, adds Gonsalves: “Although the
government is trying to help tenants, reducing supply when demand is increasing
is resulting in rents rising in those areas where tenants’ wages are increasing
more than inflation.”

Tim Hassell,
founder of central London lettings agency Draker Lettings, says: “I think a rise in rents is well over-due in
central London. What people don’t realise is that rents here have been steadily
falling for landlords over the past decade as low interest rates have prompted
huge new investment in buy-to-let which has in turn created a glut of stock in
the market.

“But it’s only been in recent months that we’ve seen landlords
begin to exit the market as rents have slipped and costs increased, prompting a
15% drop in stock. This is beginning to push prices up.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – YOU told us: Rising costs for landlords are forcing up rents | LandlordZONE.

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Renewing a Business Lease

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Commercial Property:

A commercial lease is based on contract law and a contractual agreement between landlord and tenant. The rules laid down are those as agreed in the lease agreement and are largely unencumbered by statutory rules, unlike the case with a residential tenancy, which is just the opposite – largely governed by statutory rules.

However, when a business (commercial) lease (England & Wales) comes to an end, that’s when statutory rules start to apply. Under the statutory rules laid down by the Landlord and Tenant Act 1954 Part II, a business tenant has security of tenure – i.e., most tenants have an automatic right to renew their lease at a revised (market) rent on similar terms to the original lease.

This article applies primarily to England and Wales. Other regions and jurisdictions are often similar but there may be important differences. This is not a definitive interpretation of the law, every case is different and only a court can decide. If in doubt seek expert advice.

There are a few obscure exceptions but the main exception to this is where the tenancy is “contracted out” of the Act – where a tenant agreed with the landlord BEFORE the lease is signed that they would not be bound by the statutory rules. All other commercial tenancies default to the Landlord & Tenant Act protection rules.

If the proposed new lease is to be “outside the act” there are strict procedures which must followed before the lease is signed. The process necessitates the tenant receiving a specified form of noticed in advance that there is no automatic right of renewal and confirming its agreement.

The landlord has the right to refuse renewal, but only on very limited grounds, namely: if the tenant is in serious breach of its lease obligations (e.g. rent arrears, continually late paying rent etc), the landlord wishes to use the premises for their own business use, or to redevelop the property  – see schedule 3 of the Act.

Where the tenant is refused renewal by the courts on these grounds, and the where landlord successfully claims the premises back, the tenant usually has a right to compensation using a formula laid down in the Act.

The process of lease renewal is started off either by the landlord serving a notice with strict time constraints under section 25 of the Act (either proposing a new tenancy with proposed new terms, or opposing renewal) or the tenant serving a request for a new tenancy under section 26 of the Act.

There are prescribed forms for this in the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004. It is of course important to ensure these notices are valid in every respect and served correctly meeting the time deadlines: valid dates, names and addresses, entitlements etc.

The Civil Procedure Rules (CPR), which came into force on 1 April 2013, are designed to avoid costly legal disputes between landlords and tenants where a tenancy renewal is opposed or there are disagreements on renewal terms.

Lawyers will in the first instance try to get agreement and settlement or use independent arbitration (usually specified in the lease agreement) before resorting to the courts, but in any event opposed and defended lease renewal disputes can involve legal processes, can be time consuming, cause long delays and can therefore be expensive.

Landlords of commercial premises should be aware that once let, a commercial property may not easily be recovered. Tenants may remain in possession theoretically indefinitely,  and so it is very important to sign tenants up to a good strong lease agreement – a cheap off-the-shelf lease is unlikely to be sufficient in most cases.

However, reversion is not impossible, as the following case shows:

In the case of Youssefi v Mussellwhite 2014, the judge said that a tenant’s “persistent and wilful refusal” to comply with the terms of the lease would be good enough reason for the landlord to oppose a request for renewal under the Act.

The tenant had a lease of a house, shop and premises covered by the Landlord and Tenant Act 1954.

The tenant served a request for a new lease but the landlord opposed it under section 30(1)(c) of the Act on the ground that the tenant (1) was in breach of her repairing obligations, (2) was persistently late in paying rent, (3) repeatedly refused to allow the landlord access to inspect the premises, and (4) had failed to use the premises as per the lease user clause, that is as a shop.

After considering all these points both individually and collectively the court had to consider if it was fair that this tenant, given her past behaviour, was to be “foisted” on the landlord for a new term, or the property should revert back to the landlord.

Although the court found some of the points to be not serious enough of the others were considered serious, mainly the breaches of the access covenant and the user clause.

Finally, the judge considered that it would be unfair and prejudicial to expect the landlord to continue with the present tenant due to her past behaviour. The lease had contained a positive obligation to use the premises for a stipulated purpose.

Covenants to keep the property in repair and to use the property for a specific person are there to preserve the value of the reversion of the landlord’s and adjoining property, so the tenant’s actions (or inaction in this case) were deemed prejudicial to the landlord’s interests and the breach had been substantial.

This case is good news for landlords with difficult commercial (business) tenants; landlords can use evidence of a tenant’s bad behaviour in support of their case coupled with other substantial breaches of the lease as legitimate grounds to oppose a request for a new tenancy.

Landlords should always be diligent in recording all information relevant to a tenancy including all correspondence and communications between the parties, in case this should be required for legal proceedings.

The case may serve as a warning to commercial tenants and a useful bargaining counter for landlords to use when insisting on appropriate behaviour during the lease term.

If you have any questions about any of the issues here, post your questions to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Renewing a Business Lease | LandlordZONE.

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Landlords- make sure your tenants know about EU settlement scheme

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It has been nearly a month since the United Kingdom stopped being a member of the European Union, triggering the transition period. As you may already be aware, if EU citizens wish to stay in the UK beyond 31st December 2020 (when the transition period ends) they and their close family members will need to […]

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Three quarters of Belvoir franchises predict rent increases in 2020

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In the wake of Britain’s exit from Europe, a Belvoir survey
reveals that almost three quarters of franchisees anticipate rental increases
throughout 2020.

“Belvoir commissioned media property expert Kate Faulkner to
survey a representative cross-section of Belvoir franchisees in England,
Scotland, Wales and Northern Ireland,” says Belvoir CEO Dorian Gonsalves. “The
results show an overwhelming 72% of offices predicting rent rises in 2020, with
almost a quarter expecting rents to be static and just 6% anticipating that
rents will decrease in their area.

“The reasons stated are the tenant fee ban, combined with
punitive tax changes and ever-changing costly regulatory demands that have
resulted in landlords incurring considerable additional charges. As Belvoir has
noted in the past, rent increases vary from region to region, with some areas encountering
resistance as rents are typically capped by wage growth and where supply
exceeds demand.

“Belvoir offices in Westminster, Wembley, Wood Green and Queens Park, predict that now the uncertainty over Brexit has passed, rents are likely to increase by around 1-2%. Six Belvoir offices surveyed in the South East, with the exception of Maidenhead, all predicted rental increases. “In the South West, David Devlin, owner of Belvoir Devizes said: “The Tenant Fees Act (TFA) put all new and renewing tenancy costs on landlords, who are understandably recouping those costs in terms of higher rents. Coupled with punitive changes in taxes and ever increasing regulatory demands, landlords are being driven out of the sector, which is reducing supply. Add to this steady and increasing demand and this will obviously have the inevitable effect of rents rising.”

In Yorkshire, the market is buoyant due to a successful
local economy, with franchisees forecasting static to rising rents. Chris
Duffy, owner of Belvoir Doncaster said: “The local economy in Doncaster is
thriving. A strong demand plus a shortage of stock is leading to rent
increases. The distribution sector is thriving; Amazon, Next, Ikea, Lidl, along
with companies such as Siemens. Companies are finding it hard to fill
vacancies, leading to wage growth. There is a shortage of good quality
properties of all types with the exception of single room accommodation.  These two factors are resulting in landlords
being able to charge higher rents for good quality properties.  Most properties are letting on the first day
of viewings.”

Glenn Broadwell of Belvoir Leeds North West said:
“Legislation, coupled with landlords now feeling the full effect of losing
mortgage tax relief, will see landlords asking more for valuations to exit the
market. We have already had more valuations this year, and a landlord has put
their property on the market asking us to serve notice on two tenants in a
shared property.”

A similar picture is revealed in the North East, the North
West, Wales and Scotland. Rob Price, owner of Belvoir Cardiff is expecting
rents to increase and said: “Void periods are short, demand is high and many
investors are leaving the market. We expect this to continue through 2020,
leading to increased rents.”

Nick Horan of Belvoir Dundee reported a general reduction in
the number of rental properties due to legislation and taxation, while tenant
demand remained the same.

Commenting on the results of the survey, Dorian Gonsalves
said: “Although the government is trying to help tenants, reducing supply when
demand is increasing is resulting in rents rising in those areas where tenants’
wages are increasing more than inflation. This means that although tenants may
be getting more rights, it is coming at a cost,”

“Moving forward, what is important is for the
government to implement a fair system that works for both landlords and
tenants. Failure to do so is likely to result in a shortage of new rental
properties, making it more difficult for tenants to find an affordable home.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Three quarters of Belvoir franchises predict rent increases in 2020 | LandlordZONE.

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BREAKING: Number of landlords caught up in HMRC tax avoidance campaign jumps by 28%

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RLA blames the increase on honest mistakes caused by the increasingly complex tax rules facing landlords, but HMRC is also ramping up its efforts to get collect revenue.

The number of landlords who have admitted to under-declaring their
rental income increased by 28% last year when compared to the year before, a
Freedom of Information (FOI) request submitted to HMRC has revealed.

During 2019 some 11,129 landlords were found to have under-paid or not
declared rental income at all, up from 8,704 in
2018. HMRC has subsequently reclaimed £44.7 million from landlords, an
increase of 36% from £32.8 million during 2018.

The FOI request, which was submitted by the Telegraph newspaper, also
found that HMRC had fined accounting professionals dealing with landlords’ tax
affairs a total of £7.6m, another rise of 36% compared with the 2018 fines.

These latest figures are part of HMRC’s Let Property campaign which has
been running since 2013 and targets tax-evading landlords.

But the Residential Landlords’ Association is keen to point out that
many of the people involved have not been deliberately avoiding tax, but rather
making honest mistakes when submitting their income tax returns.

Its spokesman David Smith told The Telegraph that the level of mistakes was not surprising “given a number of recent changes and an increasingly complex tax system affecting rented housing.”

HMRC’s Let Property campaign enables landlords who think they have not declared, or under-declared income from rental property in the UK or overseas to ‘get up to date with their tax affairs’ as HMRC euphemistically puts it, without having to pay a huge fine. The campaign was introduced as a short-term measure but has since been made permanent.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Number of landlords caught up in HMRC tax avoidance campaign jumps by 28% | LandlordZONE.

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72% of Belvoir franchises predict rent increases in 2020

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In the wake of Britain’s exit from Europe, a Belvoir survey reveals that almost three quarters of franchisees anticipate rental increases throughout 2020.

“Belvoir commissioned media property expert Kate Faulkner to survey a representative cross-section of Belvoir franchisees in England

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Britain braced for more severe weather – have you protected your rental property from storms?

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With
much of Britain still grappling with the aftermath of Storm Dennis, Melissa
Choules, Senior Claims Handler at Hamilton Fraser Total Landlord Insurance
highlights the importance of protecting your property and your tenants from
severe weather:

“Many were affected by
the disruption caused by Storm
Dennis over the weekend, and as expected, we have been receiving a large number of claims
from customers whose properties were seriously damaged by the storm. The high
volume of weather-related claims this week highlights just how severe the
weather conditions were over the weekend.”

“Storm-related
claims can result in particularly high pay outs. For example, in 2019, we paid
out £13,111 for a single storm damage claim.”

“High winds
damaged some roof tiles and as a result there was water ingress into the
property causing damage to the kitchen, hallway and two bedroom ceilings and
floors. Therefore loss of rent was included as well as the property was deemed
non-tenantable whilst the works were taking place.”

“If the
customer did not have an insurance policy in place, they would have suffered a
severe financial loss. This shows how important it is to be well prepared and
not overlook the danger of extreme weather conditions.”

What can landlords do to prepare for
storms?

Storm damage
during the winter season is one of the most common types of insurance claim,
particularly damage involving roof tiles cracking, trees falling into
properties, flooding, and fences collapsing. At Hamilton Fraser Total Landlord
Insurance, 64 per cent of all storm claims made between January 2014 and
January 2019 were related to roof damage. And the average claim value for this
type of damage was £2310.

It’s within
landlords’ best interests to know how to protect
their properties and their tenants from severe weather and storms.

Top tips for landlords:

1. Keep
   an eye on the weather forecast

Regularly check the weather forecast and keep an eye out for extreme weather. If severe conditions are predicted, be sure to contact your tenant and plan a visit so that you can inspect the property in advance and make sure that it is secure. This will help to reduce the risk of damage to your property as well as the possibility of your tenants or anyone else in the area being hurt – for example, by strong winds causing a loose roof tile to fall to the ground.

2. Carry out preparations in advance

Making last
minute emergency preparations for your rental property can be very difficult,
especially if you live far away. This is why it’s important to make
preparations well in advance of an emergency. This will also require you to
arrange a suitable time with your tenant.

Here are some
key steps you can take to prepare your rental property for stormy conditions:

• Secure all fences
• Secure outdoor furniture
• Check for vulnerable trees
• Check the roof
• Check windows and doors

3. Maintain regular communication with your tenants

It will be much easier to secure your property if you have an amicable and communicative relationship with your tenants. Establish a clear and consistent channel for communication so that if they have any concerns to report about the property they can contact you easily. This will allow you to identify any vulnerable areas in your property before they are compromised by severe weather conditions and storms.

4. Carry out regular inspections

In addition to
keeping in regular contact with your tenants, you should also visit the
property to inspect it. Inspections can be carried out once every six months or
so, and the tenant will need to be notified in writing that you will be
carrying out regular visits. The notice period for carrying out a visit should
be outlined in the tenancy agreement.

Although you
may want to check the overall condition of the property, it’s important to pay
close attention to aspects of the property that could be affected by a storm,
such as the exterior, roof and garden area.

Prevention is better
than cure when it comes to protecting your property against storms. Be vigilant
and prepare your rental property for severe weather conditions. This is
particularly true during the winter season, when storms are more
likely to hit the UK.

For more
information, download Hamilton Fraser Total Landlord Insurance’s guide, Protecting
your rental property against storms.  

Having a
comprehensive landlord insurance
policy in place can help to provide an added layer of security and peace of
mind.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Britain braced for more severe weather – have you protected your rental property from storms? | LandlordZONE.

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Review of Council Tax rule for HMOs – Petition

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Kevin Humphrey has started a Change.org petition for Councils and government to review Council Tax rules for Houses of Multiple occupancy (HMO). Click here to sign the petition.

“Some local councils are starting to charge by the room for houses of multiple occupancy (HMO)

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