Fined! Landlord with ten-year track record pleads ignorance over tenancy deposit law

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A landlord who kept his tenant’s deposit in a tin at his mother’s house has been fined £1,500 for failing to lodge it in an approved protection scheme.

Mark Bradley, from Gourock, Scotland (pictured), didn’t protect his tenant’s deposit for five and a half years – instead, she paid £600 to his mother in instalments for a ‘rental bond’ in April 2014.

The money remained in the tin until the end of the tenancy in September 2019, when the tenant asked for £150 back to pay for van removals, which his mother gave her in cash.

However, when she asked for the rest of her money, Bradley said he should keep it due to rent arrears – which the tenant had agreed to pay out of the deposit – and damage to the property.

Bradley told the Housing and Property Chamber first-tier tribunal for Scotland that he still had the remaining £450 in cash as his mother had paid it back to him.

Ten years

Although he had been a landlord for 10 years, he had never managed the property himself and wasn’t aware of a landlord’s duties.

He added that his mother had forgotten to protect the money as she was dealing with other family issues.

Eddie Hooker, CEO of mydeposits, says there’s no excuse for any deposit not to be protected with an approved scheme.

“The tenant’s deposit could have easily been misplaced or misappropriated and they have also been denied access to an impartial resolution service at the end of the tenancy,” he says. “These are exactly the reasons why the deposit schemes were set up.”

Mydeposits estimates that only 85% of deposits across the country are protected in authorised schemes; including Scotland, this equates to more than 500,000 deposits that fall outside protection.

Picture credit: Dave souza – Own work, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=818190

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Is government about to do a U-turn on rent arrears loans in England?

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The Government could be considering a U-turn over its refusal to offer tenant loans after several peers called for an England-wide scheme during a debate in the House of Lords.

Last month, Housing Minister Christopher Pincher rejected calls from MPs to give tenants more financial support, but yesterday his counterpart Lord Greenhalgh wouldn’t dismiss the idea.

When asked if he would be introducing a hardship loan scheme to help pay-off COVID-related rent arrears – which both Welsh and Scottish renters now have access to – he replied: “We need to get the balance right between the rights of renters and protecting and safeguarding the interests of landlords.”

In a debate on rent, evictions and Covid-19, Lord Mackenzie of Framwellgate told peers that the welfare of tenants should be safeguarded fairly without destroying the financial viability of innocent landlords, who had an interest in maintaining good tenants.

“With rent arrears above £400 million and to avoid a future homelessness crisis, have the Government considered developing an equitable solution for both tenants and landlords by providing a financial package to pay off rent arrears built up as a direct result of the coronavirus?” he asked.

Conservative Lord Flight agreed that there should be more protection for struggling landlords.

He added: “A lot of landlords are elderly people and their source of income may be the rental from one property. We have to look at both renters and those who are renting.”

Chris Norris, policy director for the National Residential Landlords Association, says it’s been calling for months for Covid-related hardship loans that are interest free, guaranteed by the Government and paid directly to landlords.

“It is a welcome development that ministers now appear to be considering this and we urge them to act fast to help landlords and tenants to sustain tenancies,” he tells LandlordZONE.

Watch the debate in full.

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Are you a ‘Rent to Rent’ Landlord?

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Do you ‘Rent to Rent’ or Are you considering ‘Ren to Rent?

‘Rent to rent’ can be lucrative and many landlords and property owners have done very well from it:

Property owners can earn an income from their property without having to do any management work

Landlords can run a landlord business without having to invest in a property themselves

Situations where it can work well include:

• Letting agents who manage a property as tenant rather than as managing agent
• Universities and Colleges who use the property as accommodation for their students

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BREAKING: Two thirds of letting agents report 10% or less rent arrears rate

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Nearly two thirds of letting agents have said that 10% of their tenants have rent arrears, a new industry poll has revealed.

Conducted by accreditation body Safeagent, it also reveals that 21% of agents have between 10% and 20% of their tenants in arrears while 7% said they had none.

And among those tenants who are in arrears, agents said a significant majority were either one or two months’ behind (39% and 33% respectively) while only 13% of firms said tenants had arrears of more than three months. And among those who had rent arrears, a significant proportion had simply refused to pay their rent.

Most agent’s landlords were willing to help their tenants and 86% had offered those getting into arrears a payment plan, a quarter had tried mediation, 20% had decided to sell their property and 37% had chosen eviction.

The most common reason for arrears was tenants losing their jobs (see full list below), says Safeagent, revealing that agents are most worried about the ending of the furlough scheme later this month, although a new scheme is due to be introduced for areas under lockdown.

Agents also said the ongoing eviction restrictions were becoming ‘a real issue’.

Isobel Thomson, Safeagent Chief Executive (pictured, left), says: “Clearly our sector is facing tough times, but where tenants are in difficulty, it is clear that agents are working to support tenants and landlords in finding solutions to repay arrears and keep people in their homes.”

Advice: How to stop tenants falling into arrears.

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Can private landlords refuse to let to Housing Benefit claimants?

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Those who believe that Government is not aware of the issues facing landlords in the PRS  may be surprised by the detailed analysis in the Briefing Paper published on 13th October by the House of Commons library.

The summary is quoted below but I recommend reading the whole report

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CLAWBACK begins! Landlords must now pay VAT on compensation payments, says HMRC

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Landlords and agents are now likely to have to pay VAT on compensation payments including dilapidations.

As the Government begins to claw back more money as the Covid-19 bill rises, its new advice makes clear that these payments are generally liable for VAT. 

Law firm Irwin Mitchell says the guidance has come in under the radar and is a departure from the normal position where a VAT change only applies going forward.

Tax partner Sarah Cardew (pictured, below) also tells LandlordZONE that the guidance is still under discussion as it’s been met with a lot of opposition.

She explains: “Controversially, HMRC advises that any vatable person who has failed to account to HMRC for VAT on such fees must now correct their error as soon as possible.”

But it’s unlikely to include the payment of rents due when a tenant in a residential, rather than commercial, property quits a property early as residential property can’t be included within the HMRC ‘option to tax’ rule.

The option to tax allows a business to charge VAT on the sale or rental of commercial property, or in other words, to make a taxable supply from what otherwise would be a VAT exempt supply.

Cardew says that while HMRC accepts that certain payments could still be considered true compensation and therefore outside the scope of VAT, such payments are often called compensation when they are really payment for a supply. 

In the past, true dilapidations payments were considered to be compensation which fell outside the scope of VAT.

Previous HMRC guidance was that break payments didn’t attract VAT either however, it seems that they do now.

If someone has paid a dilapidations payment inclusive of VAT, depending on the wording of the clause, they could try reclaiming 20% from the recipient says Cardew, who advises landlords to check transactions over at least the last four years. 

Other payments the guidance covers include those: by tenants following an exercise of break rights, provided that the landlord has opted the property to tax; by developers wanting to back out of an obligation to take a lease if a landlord has opted to tax; by landlords exercising contractual break rights (these should be exempt if a tenant has opted to tax); and interest for late payment of rent – subject to a landlord’s option to tax.

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Mortgage payment holiday forbearance framework

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In a speech by the Director of Consumer and Retail Policy for the FCA, Nisha Arora, it was outlined how lenders should support borrowers forced into taking mortgage payments holidays during the pandemic.

In the guidance below it sets out expectations for firms on how to support customers and work with them on their finances and repayment plans.

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