Investor or Developer – How would HMRC treat me?

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I have the opportunity to invest in a small local development of 4/5 barn conversions, either as, purely an investor, or possibly as a director of the company (which will be set up solely for this particular development).

I have a small income from property

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Landlord Incorporation – Company Indemnity of Existing BTL mortgages

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The following quote, confirming that refinancing is NOT necessary at the point of incorporation, comes directly from the HMRC manual …

“The transferor is not required to transfer business liabilities to the company but often does so.

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NDR – Council is wrong?

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I have a tiny shop with ratings on VOA site showing as follows:-
April 2010 – Jan 2014 £2,600
Oct 2013 – 17 March 2014 £0
April 2017 – present £1,650

The assumption by the owner that on purchase in non-business rates applicable as well under the £12,00 rateable value.

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Test Case: Landlord’s consent with mutual and absolute covenants

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In this case – Duval v 11-13 Randolph Crescent Ltd – reached the Supreme court in May 2020 after a tenant in a block of flats had requested the landlord’s consent for alterations, but disputed by another tenant in the same block, objecting to the landlord giving consent.

Under the terms of all the other leases in the block, alterations similar to this one were prohibited. The wording of the leases was such that the landlord had covenanted to enforce the covenants in all the other tenants’ leases.

However, contrary to this, the landlord went ahead and granted consent for the tenant’s works. Upon hearing of this the other tenant claimed that this was a breach of the landlord’s covenant.

When challenged, the landlord having lost in the lower courts, pursued the matter by appeal to the Supreme Court which dismissed the landlord’s appeal. The Court decided that there was an implied covenant by the landlord not to do anything that would prevent it from enforcing the tenants’ covenants in the other leases. The covenant, the Court reasoned, would be useless if the landlord could modify it willynilly, or vary, or permit breaches as it pleased.

The tenant had planned to remove a substantial part of a load bearing wall in the basement of her flat. She realised that this action would be in breach of a clause in her lease, so she approached her landlord for a licence.

After studying the engineering and architectural reports provided by the tenant the landlord decided to grant that licence. However, this was objected to by the neighbouring tenant above who issued proceedings for a determenation that the landlord did not possess the power to grant the licence.

The neighbour’s argument was that because the landlord had promised (undertaken via the mutual enforceability clause*) to enforce the covenants in the leases, providing the tenant agreed to indemnify the landlord for the legal costs, the landlord must not therefore licence the breach of an absolute covenant**.

The tenant claimed that there was an implied term that the landlord would not “put it out of its power” to enforce the absolute covenant clause of the lease by licencing what would otherwise be a breach of it. The Supreme Court, as had the Court of Appeal before it, agreed.

The lease contained two relevant clauses:

“Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises” – the qualified covenant; and

“Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein….” – the absolute covenant.

The case has wide implications as mutual enforceability covenants are pretty standard clauses in modern leases. The Duval case shows that a landlord cannot grant a licence which allows something which would otherwise be a breach of covenant.

* What is a Mutual Enforceability covenant

It is usually the case that the landlord has the power to ensure that the lease terms are complied with by leaseholders. The leaseholder will then need to ask the landlord to enforce the terms of the lease against another leaseholder, usually where the lease states that a leaseholder can ask the landlord to take action, the leaseholder making the request has to cover the landlord’s legal costs.

In some cases, the lease may allow a leaseholder to take direct action against another leaseholder for breach of the lease, but only if the wording of the lease allows it.

** What is an absolute covenant

It is an absolute prohibition against doing something. A covenant not to assign the lease or carry out alterations are examples of absolute covenants. On the other hand, a qualified covenant is a covenant that requires the landlord’s consent, stating that the landlord’s consent will not be unreasonably withheld.

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Property Market Outlook For 2021

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So what’s in store for property investors in 2021?

In this video, I am joined by property entrepreneur Andrew Roberts as we take you through the threats, risks and opportunities for property investors in 2021.

Please click on the video below.

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Mould with a Covid Twist?

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I have tenants who have both been furloughed. One of the neighbours inquired if there was a leak in my flat as the internal glass door was streaming with condensation (this is an internal door leading to a small hall then another internal door)

I suspected that the tenants had not been heating enough and venting appropriately.

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Property turned out to be a Granny Flat?

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This is a long story I will cut very short. We had an offer accepted on a house we wanted to buy, we knew the people, not overly well, but enough to trust them.

We had a lot of issues from the start of Feb 2020

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Property investors Christmas message from the Palace

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Watch this special message exclusively for property investors this Christmas from Buckingham Palace.

2021 will be full of uncertainty, but this is the new norm.

I share how you can learn to prosper through the uncertainty and make 2021 your best year ever.

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The Property Investors Network, Simon Zutshi’s ‘pin’ group, is to be sold

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Founded by Simon Zutshi in 2003 the “PIN” group runs a series of property investors’ meetings and training events across 50 towns and cities throughout the country. It’s stated aims are to “connect new and experienced property investors”, and enable their sharing of knowledge and experience.

The PIN claims to be the UK’s largest property networking group, operating across the UK since 2003. It has agreed a US $15m buyout by the Singapore-based Genius Group.

Simon Zutshi is to remain CEO of the company following a successful acquisition process, and he has said:

“With property investors network having consolidated its market leading position in the UK over nearly two decades, I look forward to working with Roger Hamilton and the team at Genius Group to leverage this success within the global market to empower property entrepreneurs all over the world.”

The Singapore-based Genius Group claims to have “turned the tide on the coronavirus pandemic” and successfully pivoted their business model to go digital when their usual events could no longer take place.

The Genius Group says it includes a number of educational and entrepreneurial companies across the globe including Entrepreneur Resorts, a group of luxury resorts and lodges, beach clubs and city co-working hubs running entrepreneur events and accelerators, with locations in Singapore, Bali, South Africa and the Czech Republic.

Its programmes, that would normally have been conducted with entrepreneurs face to face, have been redesigned and delivered digitally, and globally for the first time the Genius Group claims. However, it says the majority of its usual locations are now open again and the international team is supporting new education programs at its various locations, while ensuring the safety of both staff and visitors.

Roger James Hamilton, Founder & CEO of Genius Group, says:

“The COVID-19 crisis has resulted in record job losses and bankruptcies. However, we are also seeing many small business owners and investors finding opportunity and growth in the crisis. We share pin’s mission of providing education and resources to business owners and investors at a time when people need it most.”

Following the acquisition, Genius Group and property investors network aims to expand its monthly pin meetings across many of the 20,345 cities in which the Genius Group says it has students.

The company says it will also provide financial literacy and property investing courses to students through Genius Group’s secondary school and university programmes, as well as the GeniusU edtech platform.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The Property Investors Network, Simon Zutshi’s ‘pin’ group, is to be sold | LandlordZONE.

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EXCLUSIVE: Leading lights tell LandlordZONE what 2021 will bring for landlords

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The UK’s 2.5 million private landlords will be forgiven for wondering what 2021 has in store for them.

Even the most optimistic will admit that the previous 12 months are a period of their landlording career they’d rather forget.

LandlordZONE asks some of the sector’s leading lights what they think the next year could offer them. Here are their answers.

The housing benefit expert

Bill Irvine, of Universal Credit Advice

“I don’t think 2021 will get any easier for landlords and letting agents when it comes to tenants relying on Universal Credit and housing benefit – the number of claims has doubled since March and DWP staff are still largely working from home which doesn’t help.

“I expect to be doing more chasing of the DWP to minimise landlords’ losses, particularly on behalf of those who have applied for the alternative payment scheme. Some landlords have lost thousands of pounds while they wait to hear back, and have applied many times without success.

“The ongoing pandemic means tenants continue to get into debt and many of those who hadn’t claimed before are now starting to experience difficulties and will decide to hold onto their money rather than pay rent.”

The commercial property agent

Adam Diamant, MD of Land Commercial

“There’s no demand for offices at the moment and I hope that will come back but as this country has long leases, even if a company wants to move tomorrow it might have to wait for years until the lease expires, meanwhile some premises are getting converted to residential.

“It’s surprising that retail still remains strong but we’ve done a lot of lettings in this sector. This has been helped by the change to use class E which has provided flexibility for properties to be used for a wider range of businesses.

“Looking forward, the current rules around forfeiture are a big problem as there are a lot of people still not paying rent, which needs to change.”

The property licensing tech chief

Joe Webb, chief marketing officer at Kamma Data

“The pandemic has put a huge strain on councils, while also putting standards of accommodation under the spotlight.

“These two factors create a perfect storm for legislation which will mean growth in both the number of licensing schemes and, crucially, enforcement. There are 44 live local authority consultations currently taking place; in a normal year we’d see 20-25 over a full 12 months, so, in essence, we’ve got two full years’ worth of schemes being planned for the start of next year.

“At its worst, licensing is a tax on high standards as those landlords who already look after their properties and tenants pay for inspections and licence costs, while those who don’t, ignore the regulation. Kamma wants to change this in 2021 with a tenant-focused directory making it easy to see who is complying and who isn’t, at the click of a button.”

Two regional landlord leaders

Giles Inman, EMPO business development director

“EMPO will be requesting that local councils come together to establish a universal approach over licensing schemes so we don’t continue to experience confusion around different fees, conditions and inspection expectations across council enforcement areas.

“We will continue to promote the message that it’s not acceptable for councils to threaten landlords with revoking licenses and large fines for not taking responsibility for dealing with tenant rubbish issues, bins on streets, drug dealing, vehicle damage and tenants riding Quad bikes around their rented properties.

“We will also attempt to encourage a conversation with social housing providers where we create an appreciation and understanding that these issues exist in both sectors and that both sectors should come together for an open discussion and to share best practice.”

Ruth Clarke, chairman of the Cornwall Residential Landlords Association:

“The business of being a private landlord can be stressful at the best of times but this year has been particularly trying.

“We’ll continue to produce monthly newsletters and I’ll be available at the end of the phone to listen to landlords’ problems and to try to help. “We’ll hold our bi-monthly meetings online as well as with Cornwall Council officers and MPs to discuss housing generally and the challenges of the PRS in Cornwall, and will respond to consultations and calls for evidence.

“We are urging members to take up any funding available; with the consultation to make EPC requirements more stringent over the coming years, there’s the usual problem for Cornwall with few local companies registered with TrustMark.

“We will encourage members to lobby their local MP to try to have more trade bodies included as acceptable and to encourage their preferred contractor to consider joining TrustMark.”

The property redress scheme boss

Sean Hooker, Head of Redress at the PRS

“At the turn of year a mere 12 months ago, experts stuck their necks on the line and made various predictions on what the change of decade was to bring.

“And then all the educated guesses when out the window with Covid19 and its aftermath.

I am therefore caution about sticking my neck on the line and forecasting anything more than a continuation of uncertainty and a Government in a reactive mode in terms of policy and direction.

That said, a few things will need to be dealt with as a matter of priority.

Read Sean’s blog on LandlordZone to find out more.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: Leading lights tell LandlordZONE what 2021 will bring for landlords | LandlordZONE.

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