LATEST: Formal pre-action protocol on the back burner ‘for the time being’

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The government has confirmed to LandlordZONE that its much-discussed pre-action protocol for the evictions process has been shelved for the time being.

This follows last Friday’s announcement that it is instead introducing more basic pre-action rules for landlords that nevertheless must be met before a possession hearing can be continued or granted.

These come into force on 23^rd August, the same day the eviction ban ends, and will apply to both existing action and new ones requiring landlords to:

• Provide a ‘reactivation notice’ informing the court and tenant in writing without which the case will remain dormant.
• Consider that if the action is about the non-payment of rent, the claim must set out what knowledge if any the landlord has as to the effect of the Coronavirus pandemic on the tenant and their dependants
• Produce the full arrears history in advance rather than at the hearing – this is encouraged rather than required.

The rules also suspend the standard period between issue of a claim form and hearing which would usually be not more than eight weeks.

Protocols ‘lite’

These pre-action rules are in effect a ‘lite’ version of a protocol, although the Ministry of Housing, Communities and Local Government (MHCLG) says that: “We remain interested in exploring the introduction of a pre-action protocol for private tenants in the future.

“New court rules – in place until end March 2021 – will require landlords to set out information about a tenant’s circumstances, including the effect of the COVID-19 pandemic on a tenant’s vulnerability, when bringing a possession claim,” an MHCLG spokesperson says.

“Where this information is not provided, judges will have the ability to adjourn proceedings until such information is provided.

“This encourages landlords to have the right conversations with tenants before seeking repossession – helping to achieve the aims of a pre-action protocol. Through guidance, we are also encouraging landlords to agree to rent repayment plans or rent flexibilities where possible.”

Struggle

Paul Shamplina of Landlord Action says: “Using pre-action rules like this makes sense, but I really worry that landlords who have been waiting months from before Covid to evict tenants who haven’t been paying their rent, are going to struggle to re-engage and find out how Covid has affected their tenants.

“It is not practical and the chances of the tenant playing ball all pretty slim. So landlords are going to struggle to fulfil the pre-action rules and get their hearing.”

Read more about the eviction process rule changes.

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BREAKING: Wear a mask when in your letting agent’s branch, government urges landlords

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Landlords who visit their letting agent’s branch for a catch-up should wear a mask when inside the office, the government has urged.

From today onwards it is mandatory for everyone to wear masks in shops, enclosed shopping centres, supermarkets, train and bus stations as well as banks and building societies or risk a £100 fixed penalty fine if they refuse to do so after being asked.

The new regulations are not specific about estate agencies – somewhat strangely as many high streets contain dozens of them – but the guidance issued last night by the Ministry of Housing, Communities and Local government to the industry nevertheless strongly encourages landlords and tenants visiting branches to wear them.

“The face covering regulations do not explicitly refer to estate and letting agents but we would strongly encourage all members of the public who are visiting an agent’s office or viewing a property to wear a suitable face covering in order to prevent the spread of infection,” it says.

“We would also recommend that any agent who is interacting directly with the public also wears a face covering unless other protective measures are in place such as a screen.”

Health secretary Matt Hancock, who has set the new regulations to last for a year, says: “Everyone must play their part in fighting this virus by following this new guidance.

“I also want to thank the British public for all the sacrifices they are making to help keep this country safe.”

Read more about keeping safe during Covid.

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Worries mount among leaseholders over plans to give them responsibility for apartment block safety

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A poll of 1,000 leaseholders within apartment blocks across the UK has found that 70% are worried by the government’s decision to press more responsibilities on them following the Grenfell Tower disaster.

The extra duties for building management and safety follow the draft Building Safety Bill published earlier this week which will hand those who manage apartment blocks increased financial and legal obligations including the creation of an ‘accountable person’. The Bill is the government’s response to Grenfell Tower and the need for regulatory reform.

But if the government’s expected moves to reform the leasehold system following this week’s Law Commission reports – which freeholders argue will remove them from the equation if ground rents are abolished – will transfer these new responsibilities to leaseholders and commonholders.

The research, commissioned by the UK’s leading freeholders, reveals that if this were to happen, many leaseholders believe it would be ‘a disaster’.

Health and safety

Some 67% of respondents are worried about the extra admin and neglect of building maintenance. A further 65% foresaw personal health and safety as an issue, given many leaseholders’ “lack of awareness around certain issues and understanding of up-to-date legislation”.

Additionally, 63% fear conflict with other residents when it comes to decision making.

Richard Silva, Executive Director of residential freeholder Long Harbour, says: “The Government is right to be introducing these new reforms to building safety, but this new evidence clearly shows that leaseholders do not want to be landed with these responsibilities themselves.

“As professional freeholders, we are perfectly positioned and equipped to take on these legal and financial responsibilities, but this will be impossible if the Government drives freeholders out of the market by removing our financial incentive, in the form of a reasonable ground rent.”

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Disappointment as six-month notice period introduced in Wales

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Landlords in Wales will need to give tenants six-months’ notice when repossessing homes under new rules announced by the Welsh Government today in response to the Covid-19 crisis. Landlords have reacted with anger and disappointment to the plans, which will leave some without rent for over the year and are being implemented with immediate effect. […]

The post Disappointment as six-month notice period introduced in Wales appeared first on RLA Campaigns and News Centre.

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Scrapping Section 21 to be delayed until Covid is over, minister confirms

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The government has indicated that that it will not be bringing the much debated Renters’ Reform Act forward as draft legislation until the Covid crisis is over, which LandlordZONE has been informed means at earliest next year.

Given the six to nine month lead times for legislation to make it through parliament, even with cross-party support, this means it will a year until Section 21 notice evictions are abolished.

The Renters’ Reform Act as proposed is the tool that the government intends to use to do away with Section 21 of the Housing Act 1988 ‘no fault’ evictions, which many landlords use to regain possession of a property when they wish to sell it or move in themselves.

Chris Pincher told parliament yesterday in reply to an urgent question from shadow housing secretary Thangam Debbonaire about giving tenants greater rights, that the draft legislation will see the light of day ‘in due course, when we have [a] stable terrain on which to do so’.

“That will improve tenants’ rights. We will also ensure that there is provision for a lifetime deposit scheme in that Bill,” he said.
The act has, by any measure, been severely disrupted by the Covid crisis,” he said.

The Renters’ Reform Act announced in the Queen’s Speech on 19^th December just after the general election following a consultation that ran from July to October 2019 which sought views on abolishing Section 21.

Originally announced in April last year, the proposed legislation was described by Ministers as an attempt to ‘modernise’ the rented sector, and has been heralded by government as a ‘fairer deal for both landlords and tenants’.

But so far the government has yet to even publish its analysis of the feedback, a sure sign that Ministers at MHCLG have neither the time nor inclination at the moment to tackle this thorny issue.

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Chancellor Rishi Sunak has ordered a review of capital gains tax (CGT)

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Ostensibly the review is to look into whether the current tax on gains from asset sales – Capital Gains Tax (CGT) – is “fit for purpose” and to see if the current rules “distort behaviour.”

Whether this results in changes or not, the fear is that as revenue, and lots of it, will need to be raised post the massive Covid borrowing, so this could be the precursor to a “tax grab” on the wealthy?

Landlords and home owners would be an obvious and an easy target given the transparency of property asset translations. Tweaking the current regime of allowances, exemptions and reliefs is a simple paper exercise for the government.

Home owners are currently and always have been exempt from capital gains tax on their principle residence. Second homes, holiday lets and buy-to-lets are all subject to CGT when they are sold. But recent rule changes mean that the CGT is now payable 30 days after a sale rather than as previously, payment was delayed until after the tax reporting period end on the 31^st of January.

It’s always a stated aim of governments to simplify tax rules and collections, even though it never seems to happen; so it would make perfect sense that the Chancellor asks the Office of Tax Simplification, an independent arm of the Treasury, to identify opportunities to simplify CGT.

Capital gains on assets ranging from shares to second homes and buy-to-lets are traditionally taxed at lower levels than income tax, and therefore the very wealthy usually try to arrange their affairs so that they pay CGT in preference to income tax.

Having a lower rate for CGT would seem fair given that to make a gain with shares, property or from building a business entails taking a risk, whether it’s a business risk or as a pure investment. Income from employment and cash savings attracts a higher tax rate as there’s no risk – though good luck to anyone who can find an income from savings at present.

On the 11^th of March the Chancellor announced an increase in the capital gains tax (CGT) allowance, but a significantly reduced entrepreneurs’ relief in his spring Budget. The CGT allowance was increased to £12,300, but the time to pay CGT on property sales was cut to 30 days from the date of sale, as from 6 April 2020.

The most significant change was the lifetime limit on entrepreneurs’ relief in CGT, which costs the Treasury over £2bn. It was reduced from £10m to £1m. However, corporation tax remained unchanged at 19%, though it seems the planned 1% annual reduction has been dropped.

CGT is payable on the gains above the CGT allowance, so a couple selling a buy-to-let owned jointly would pay CGT only on any gain above their combined allowance of £24,600.

The actual gain is calculated by: Selling Price minus the Buying Price and buying / selling Transaction Costs, and including any Capital Costs expended on the property during the course of ownership.

The actual amount of tax paid will be determined by an individual or couple’s other income.

Rates for Capital Gains Tax

From 6 April 2017 onwards the following Capital Gains Tax rates apply:

• 10% and 20% tax rates for individuals (not including residential property and carried interest)
• 18% and 28% tax rates for individuals for residential property and carried interest – carried interest is a share of any profits that the general partners of private equity and hedge funds receive as compensation regardless of whether they contribute any initial funds.
• 20% for trustees or for personal representatives of someone who has died (not including residential property)
• 28% for trustees or for personal representatives of someone who has died for disposals of residential property
• 10% for gains qualifying for Entrepreneurs’ Relief
• 28% for Capital Gains Tax on property where the Annual Tax on Enveloped Dwellings is paid, AEA is not applicable
• 20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property)

Capital Gains Tax – A Brief History

Capital Gains Tax was introduced for the first time by the Labour government in 1965. The then Chancellor set CGT at 30pc to prevent individuals avoiding paying income tax by switching their income into capital. The CGT allowance was £9,500.

Under the Labour government of 1970s inflation reached 27pc, so in 1982 the Conservative Chancellor Geoffrey Howe, introduced indexation relief, an allowance for the effects of inflation on asset prices.

In 1988 income tax for high-rate taxpayers was reduced from 60pc to 40pc. Basic rate taxpayers had their rates reduced from 30pc to 25pc. CGT at this time became a dual rate tax following the income tax rates, above a new allowance of £5,000

By 1997 the CGT allowance had reached £6,500 and in 1998 Gordon Brown replaced indexation with taper relief. The meant that the length of time an asset was held was taken into account, with a lower the rate of tax for longer ownership.

By 2002 the allowance had reached £7,700 and 2008 saw Alistair Darling’s first budget scrap the dual rate of CGT and introducing a new lower, single rate of 18pc, but with no taper relief. By 2009 the allowance £10,100.

2011 saw rates at 18% and 28% for individuals for lower and higher rate tax payers, and 10% for gains qualifying for Entrepreneurs’ Relief.

2016 saw 10% and 20% tax rates for individuals, 18% and 28% tax rates for individuals for residential property and carried interest, still 10% for gains qualifying for Entrepreneurs’ Relief, and 20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property).

Properties owned before 1982 and Capital Gains Tax

If you dispose of a property by sale or transfer acquired before 1 April 1982 and disposed of after 5 April 1988 any gain is ‘rebased’ to 31 March 1982. What that means is that CGT is charged only on any gain attributable to the period since that date. You will need to get a professional valuation for the property to determine its market value then – as at 31 March 1982.

Capital Gains Tax rates and allowances

Capital Gains Tax – background History – House of Common Library

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Ipswich duo fined £6,726 over shocking HMO failures

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A landlord and building manager who removed fire alarms from their HMO where too many tenants were living have each been fined more than £3,300.

Ahmet Ali, 36, of Valley Road, Ipswich, admitted nine offences including failing to ensure all fire alarms were maintained at the property in All Saints Road (pictured) in the town, and failing to keep all common areas in a good state of repair.

The former building manager, Dorel Nastase, was also charged with seven offences but failed to appear at Suffolk Magistrates Court.

The pair also faced charges for failing to inform Ipswich Council that Nastase was acting in a managerial role at the property.

The court heard that Ali had turned the house into an HMO in 2018 and licenced it the following year but, after struggling to make it pay, employed Nastase to help him find Romanian tenants.

But Ali then struggled to keep up with the maintenance on the property.

Following concerns that too many people were living there, once inside officials found tenancy agreements that suggested seven people lived in the six-bedroom property – one too many – and that several fire alarms had been removed along with general maintenance issues.

The building has since been refurbished and is now managed by the YMCA.

Ali was fined £3,388, including costs and surcharge while Nastase was found guilty in his absence and fined £3,338.

Read more about Ipswich landlords.

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I wasn’t worried until I tried to sell?

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I purchased a buy-to-let property at Auction in 1996 which I believed to be freehold and was registered as such when my ownership was recorded with UK Gov Land Registry. The legal work involved was carried out by a solicitor with whom I had a long-standing association at the time.

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EXCLUSIVE: Government gives ground to landlords over eviction proposals

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Landlords can heave a significant sign of relief today after the government resisted pressure from tenant groups to make the grounds for eviction under Section 21 and Section 8, Ground 8 discretionary rather than mandatory.

This may have opened the floodgates for thousands of possession claims to be rejected by the Courts once hearings restart on August 24th. The proposals adopted are similar to those recommended by the NRLA.

Such a change would have also led to significant extra costs and time delays for landlords and made evictions much harder for landlords.

Today, housing minister Chris Pincher made a statement on the latest changes to the possession hearing regulations laid before parliament on Friday, which – as we have reported – require new rules to be followed

Normalise proceedings

“We are moving through a transition phase and it is right that we normalise proceedings and procedures,” Pincher said.

“To that effect I have had conversations with the Master of the Rolls and with Sir Rob Knowles, who have been quite clear that they want to ensure that the courts act properly to hear landlords’ and tenants’ concerns.

“I want to be very clear that should a landlord not provide the requisite information to the courts about the effect of Covid on a tenant when a landlord is bringing forward an application then the courts will have powers to adjourn the case which will hit the landlord in the pocket.. and focus their minds.”

But the respite may only be temporary – the government has also today re-stated that it is committed to bringing forward both reforms designed to increase the security that tenants need and measures to strengthen the rights of landlords to regain their property when they need to do so. Legislation will be brought forward in due course.

Ben Beadle, Chief Executive of the NRLA says: “We welcome the balance that the Government has struck between protecting both tenants and landlords by focusing on hearing priority possession cases in the courts from 24th August.

“For tenants and neighbours whose lives are blighted by anti-social tenants, for victims of domestic violence in rented housing and for landlords who may not have had any rental income for months due to severe rent arrears built up before the pandemic, the news that landlords will be able to apply to regain possession of these properties again will be a relief.

“That said, the changes to the Court process will inevitably add delay to an already slow process. Trying to reach a resolution away from the Courts, where possible, is essential and guidance to help tenants and landlords agree rent repayment plans is available.

“Eviction is not, and should not be seen as the inevitable outcome of getting behind with rent payments.”

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Landlords – Don’t complain!

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Landlords: don’t complain when you pay more tax than everyone else; you are, in fact, receiving a gift from Government.

There has been some controversy since the announcement of a Stamp Duty Land Tax (SDLT) ‘holiday’ a fortnight ago.

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