Management company director from hell?

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I’ve been a joint shareholder of a freehold company that owns a Victorian block with 4 flats for about 5 years, there are four flats with four shareholders, and I am one of three Directors running the management company.

The other two Directors are ‘Directors from Hell’

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COVID: Fraudulent tenant applications jump as renters dodge referencing

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Growing numbers of amateur scammers led to a 263% rise in the value of fraudulent tenant applications during the past three months, reports due diligence and guarantee firm Homeppl.

It says that if left unchecked, this severely impacts landlords and estate agents leading to potential long-term periods of rent or property damage.

Its fraud detection tests identified that 2% of all tenant applications were fraudulent in the first quarter, with the value of these applications three and a half times higher than Q4 last year.

One in 50 of all tenant applications handled by Homeppl was fraudulent and, in parts of London where properties fell into the high value bracket, this rose to one in 20 of all applications.

In these locations, it often uncovers professional fraud, when the tenant tries to take possession of a high value property and sublet it through short-let sites such as Airbnb to maximise income while defaulting on the rent to the landlord.

CEO and founder Alexander Siedes (pictured) says common techniques used by amateur fraudsters are fake IDs – including passports and driving licences – and doctored documentation including payslips, bank statements, letters of employment, proof of address and proof of study, as well as fake email and websites to mimic employers and references.

He says: “Amateur fraud occurs when tenants aren’t earning enough to afford the property and this type of activity seems to have risen as a result of the pandemic which could be due to tenants being on furlough or losing their jobs.”  

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – COVID: Fraudulent tenant applications jump as renters dodge referencing | LandlordZONE.

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LATEST: HMO landlord loses Tribunal appeal but wins £6.5k fine reduction

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A rogue landlord has had his appeal thrown out after a first-tier tribunal ruled he had failed to protect tenants’ deposits and welfare at his unlicensed HMO.

Lambeth Council brought the prosecution against Fernando Brown – known as Fred – of Holmewood Road, South Norwood, who was fined £18,500 for housing eight tenants in the six-bedroom property in Herne Hill.

The council’s environmental health team was alerted by a tenant after bailiffs turned up to demand council tax arrears from Brown’s son Andrew.

The tenants confirmed their landlord collected rent money in person and always in cash. Investigations revealed Brown often failed to provide rent receipts, had no written tenancy agreement with any of the occupants and did not protect their deposits.

Ignored

During the inspection, several defects including a lack of fire precautions were spotted and an improvement notice was served. A follow-up inspection found the eight tenants were still living at the property and the previous notice had been ignored.

The council issued a proposed fine of £24,999 as it said Brown had been motivated by financial gain by not paying £1,674 for a five-year HMO licence and failing to comply with the authority for almost a year.

During the tribunal, Brown claimed he had signed a tenancy agreement with three people in 2015 and thought they still lived at the property.

He claimed to have been misled and applied for possession of the property when he found out there were eight tenants. The tribunal upheld the original decision but reduced the financial penalty to £18,500.

Councillor Maria Kay (pictured), cabinet member for housing and homelessness, says: “Unscrupulous landlords who put profit ahead of their tenants’ safety and wellbeing will not be tolerated in our borough. I am pleased that the tribunal recognised the gravity of the breach Mr Brown committed and agreed his actions were serious enough to warrant a substantial penalty.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: HMO landlord loses Tribunal appeal but wins £6.5k fine reduction | LandlordZONE.

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FOCUS: Business rates now the biggest retail property cost over rents

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With falling rent values, business rates are now the biggest cost for many high street retailers, says Tom Entwisle.

With the long-term decline of the High Street, and now Covid, retail property values have seen a rapid decline. In some locations, rents have halved.

British Property federation (BPF) CEO Melanie Leech says that retail rents outside London had fallen by about 30% over the previous decade, even before the pandemic started. “Including inflation, it’s more like 50%.”

And commercial property agents are estimating that rents have fallen by up to another 50% since the start of the pandemic, depending on the type of retailer and location. This leaves business rates in some cases as much as 150% on top of the rent payable for tenants in some shopping centres.

The retail properties and office property sectors are expected to see major declines in rent values this year due to the Covid-19 pandemic.

More falls

According to Moody’s Analytics’ forecasts for commercial real estate average rents and vacancies, the average rents of retail properties are expected to fall again this year with wide-spread store closures and the rising threat to the sector posed by Internet sales and home delivery shopping.  

The office market is not far behind, experiencing downward pressure on the usage intensity of office space even before the pandemic, but now it is challenged by the shift to remote working. Moody’s forecasts effective rents in the sector will also fall as average vacancy rates are forecast hover around 20% over the coming two years.

Rates

Currently, business rates are based on the open market rental value of properties back in 2015.

The way these rates are calculated means that large businesses pay the tax at 51.2p on every £1 of rent payable at that time in 2015, and for small businesses the rate is 49.9p in the pound. But now that retail rents have dropped so much due to the general retail decline and the pandemic, instead of being around 50% above the rent bill, the tax can amount to over 100%.

So, business rates are becoming detached from reality; the real valuations that exist today which means, despite rate reductions and exemptions for some businesses, paying them is a strain for most retail businesses.

David Cox of Colliers Internationals says that business rates are “so far removed from the commercial reality… in historical terms, this is going to look like a window and chimney tax.”

Biggest expense

Property company British Land says that plummeting rents now mean that business rates will be the biggest property expense faced by many shopkeepers. Matt Reed, head of retail asset management at British Land, one of the UK’s biggest retail commercial landlords says:

“The current system is out of touch with economic reality as rates payable are based on valuations made years ago.”

“Across our portfolio business rates have become disconnected from rental values, meaning some occupiers are paying higher business rates than they are rent, making it harder for shop owners to keep their shops open and support jobs.”

The British Retail Consortium (BRC) property policy advisor, Dominic Curran says that rates now regularly exceed rent “especially in the north… I know of cases where rents were basically zero and yet units were still unlettable due to rates.”

Heavily criticised

Even before the pandemic the government was being heavily criticised by retailers and landlords for failing to reform business rates. But now the next business rates revaluation has been pushed back, not due until 2023. The final report on a consultation on long-promised fundamental reform of the tax is not due till the autumn.

The government has been accused of “Groundhog Day” inaction over business rates. It has recently published an interim report on its “fundamental review of business rates”, which sets out a summary of responses to last year’s call for evidence.

The review launched last July was set to be announced this spring, but on the 19 February, chancellor Rishi Sunak announced that he was delaying the Treasury’s report until autumn. The Chancellor argues that delaying the report will enable him to make decisions when the economic uncertainty due to the pandemic has reduced.

Sunak emphasised what that government has done for the industry during the pandemic by extending the business rates holiday for retail, hospitality and leisure businesses in England for a further three months until the end of June.

However, most of the industry responses to the various concerns about the businesses rates system were calling for more frequent revaluations and a reduction in the multiplier (UBR). Also mentioned was the possibility of a “zone-based” valuation system and an online sales tax.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – FOCUS: Business rates now the biggest retail property cost over rents | LandlordZONE.

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CPIH inflation rate has jumped to 1.6%

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The Office for National Statistics (ONS) released data for March 2021 shows the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 1.6% in the 12 months to April 2021 up from 1.0% to March.

This brings inflation levels towards the Bank of England’s medium-term target of 2% without causing immediate short term pressure on monetary policy and the Bank Base rate currently 0.1%

The largest contributors to this inflation rate increase came from housing and household services at 0.57%

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North of England prices booming amidst highest repossession levels

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With the current stamp duty holiday spurring a property market frenzy, house prices have boomed. The latest UK House Price Index shows that the North of England is leading the way, with both the North West (11.9%) and Yorkshire and Humber (10.9%) registering the highest rates of annual growth

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BREAKING: Demand for London rental property still weak as offices remain closed

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Latest research among landlords has highlighted the ongoing problems for the capital’s rental market as demand for rented property continues to wane while the rest of the UK revives.

Gleaned from a new survey by the NRLA conducted by research consultancy BVA-BDRC, landlords revealed that 56% had witnessed falling demand for their properties during the first three months of 2021 compared to the year before. Just 12% said they had seen increased demand.

This fell to 45% of landlords in outer London with 33% seeing a pick-up in demand.

The figures are confirmation that the capital has yet to re-awaken significantly from its Covid slumber – many offices remain either thinly staffed or empty and younger workers have yet to return to London to live.

The NRLA says rents are weakening, consequently. Some 46% of landlords within inner London have reduced rents to fill properties, dropping to 26% within its outer suburbs.

Stark contrast

This is in stark contrast to the rental market outside the capital.

Tenant demand was strongest in Wales, with 57 per cent of landlords renting property there having reported an increase over the same period, compared to just two per cent who registered a fall in demand.

This was followed by landlords renting property in the South West, where 53 per cent reported an increase in demand, compared to 13 per cent who registered a fall. 

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “The pandemic has seen a significant shift in where tenants want to rent, with the trend towards home working making inner cities, especially London, far less desirable.

“This poses significant challenges in determining where to invest to meet demand.

“Investors will no doubt be waiting for the market to settle, and the full roadmap out of lockdown to be realised, before making major decisions about where to invest.

“This will be particularly important as employers make decisions in the coming months about future working patterns.”

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Significant shift of tenants away from London

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Private sector tenants are leaving London in response to the COVID-19 pandemic. According to new research, landlords renting properties in London were the only ones in the country to report that tenant demand had fallen more than it increased.

A survey of National Residential Landlords Association members

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