Not so rich after all! Official data shows 70% of private landlords pay basic rate tax

admin    Uncategorized     agents

New government figures show that more than two-thirds of landlords pay the lower rate of income tax – a picture far removed from a sector full of rich investors painted by some housing campaigners.

Treasury minister Lord Agnew of Oulton revealed the numbers declaring income via self-assessment for letting property in 2019/20 showed that 1,519,000 landlords paid the basic rate of tax, 560,000 paid the higher rate of 40% and 106,000 paid the additional higher rate of 45%.

He was responding to a Parliamentary question from Lord Carrington.

Lord Agnew (pictured) added that the figures didn’t include certain categories of BTL property owners including Scottish taxpayers, those with income below the £1,000 property allowance, those with property income between £1,000 and £2,500 who would declare this via PAYE, and some who did not fall into any of the tax bands as their income would be within their personal allowance.

Lord Agnew added: “During the pandemic, the government has put in place a substantial financial package, backed up by billions of pounds, which is supporting renters to sustain tenancies and to afford their housing costs.

“The government is supporting landlords by providing tenants with extensive financial assistance to continue paying rent.”

He said the forthcoming Better Deal for Renters was designed to help the rental market work better for both tenants and landlords.

Last year, Rentround’s survey of 20,000 landlords showed 20% of landlords were looking to leave the sector, while 33% were unsure about their future.

They blamed uncertainty around property prices post Covid-19, concern about future tax hikes and fear of further rent defaults when the furlough scheme ends.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Not so rich after all! Official data shows 70% of private landlords pay basic rate tax | LandlordZONE.

View Full Article: Not so rich after all! Official data shows 70% of private landlords pay basic rate tax

What are “Deemed Contracts” and how do they affect Landlords?

admin    Uncategorized     agents

Especially at a time like this, in the middle of a pandemic, when good commercial tenants are hard to find, landlords dread the time when a lease comes to an end, or their tenant goes into administration.

When a commercial landlord loses a tenant, not only do they lose regular rent payments, they also lose all the other payments that their tenants have to find: insurance for the building, business rates, utilities charges and if its a full-insuring and repairing lease, the maintenance costs for the building’s upkeep.

After a 3-month vacancy, in most cases the landlord becomes responsible for paying full business rates, a substantial item which in many cases roughly equates to the rent amount.

Also, because of the increased risk with an empty building, not only does the landlord now take on the cost of providing building insurance, this often approximately doubles in price. Depending on the location the landlord may be forced into taking extra security measures, hiring specialists with alarms, cameras and guard patrols. In some cases it’s even prudent to install live-in guardians.

The Deemed Contract

Something that’s often overlooked is utilities charges and this is where “deemed contracts” come in.

Tenants will often shop around for the best deals they can get from various utilities suppliers, which means that if landlords have several commercial units vacant at any one time they could be dealing with numerous utilities companies.

This may not sound too onerous but that’s deceiving, it can become an administrative nightmare task that takes up a considerable amount of management time.

Who is liable to pay?

Whether the landlords takes back the property because the lease comes to an end, and the tenant does not want to renew, the tenant goes into administration or the landlord decides to forfeit the lease, it is likely that there will be utilities contracts in place.

The law says that even though there is no direct contract between the landlord and the utility supplier, because the tenant signed, a contract is “deemed” to be in place between the supplier and the landlord.

So therefore, gas, electricity, telephone and internet serves and water will possibly all be supplied by way of a deemed contract. Of course, when the property is empty not all these services will be in use, but the supplier will be entitled to invoice for regular (usually quarterly) standing charges.

Also, the landlord may want to retain some of the supplies: electricity for lighting, alarms etc, gas for heating, especially in winter when pipes could otherwise freeze, and water for sprinklers etc.

The Legal Context

The electricity companies rely on the Electricity Act 1989 to give them legal authority, which states that “where electricity is supplied otherwise than in pursuance of a contract, the supplier shall be deemed to have contacted with the occupier (ie., the owner if the premises are unoccupied) for the supply of electricity.” There are similar provisions in place for gas services embodied in the Gas Act 1986.

A quirk of this legislation is that it makes the occupier not necessarily the tenant responsible for the contract. So if the tenant has vacated the premises, even though the lease is still current and in place, the occupier (in this case the owner) becomes liable.

Of course there would be nothing to stop the owner in turn pursuing the tenant for the costs, but as was pointed out above, the whole thing becomes an administrative nightmare for the landlord, especially if the landlord has several units vacant and is dealing with several different suppliers – taking readings, dealing with standing charges invoices etc.

Usually, the financial cost is not great from the individual suppliers, but multiply those costs over several suppliers and property units, not counting the time taken to administer all of this, and the costs mount up.

Complications always arise because the supplying utility companies base their initial charges on previous consumption patterns, so meter readings will need to be agreed and verified and adjustments made to the billing invoices before a void property usage pattern can be established.

Take evasive action early on

When you know that a unit is becoming vacant, or soon after it has done so, you should find out which companies have been supplying the services to the previous tenant.

Makes sure you take accurate meter readings, preferably with photo evidence, so that the charges can be accurately apportioned between landlord and tenant from the day the tenant vacates.

Next step is to contact each supplier in turn and try to negotiate the best deal you can. Leave it to the company and they will probably apply the most expensive tariff, so it’s up to you to ensure that does not happen.

With acknowledgements to Tim Speed of Shakespeare Martineau, Birmingham

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – What are “Deemed Contracts” and how do they affect Landlords? | LandlordZONE.

View Full Article: What are “Deemed Contracts” and how do they affect Landlords?

LATEST: Oxford first ever council to stop landlords and agents using ‘No DSS’ adverts

admin    Uncategorized     agents

Oxford has pledged to stamp out DSS discrimination against tenants on housing benefit and Universal Credit – the first council to take such a stand.

A cross-party motion has called on the cabinet to explicitly ban discrimination against welfare recipients by changing the wording of its landlord accreditation scheme to say: ‘You must not discriminate on the basis of age, gender, race, language, sexuality or any other factor that might place an individual at a disadvantage.

This includes indirect discrimination such as ‘no DSS’ or related practices, namely refusing to let prospective tenants on housing benefit or universal credit view affordable properties and requiring guarantors in cases where a prospective tenant’s income is sufficient.’

It wants to ensure that the city’s welfare reform team proactively looks out for, and acts upon, reported cases of discrimination and suggests that a new, formal tenants’ forum should be consulted on housing decisions.

The council’s housing and homelessness panel will monitor action taken to address discrimination against those on benefits while duty housing officers would refer cases to the welfare reform team and independent advice centres.

Green Party councillor Chris Jarvis (pictured) tells LandlordZONE that for too long, some landlords and letting agents have been acting with impunity. 

“DSS discrimination is often covert, however, community union Acorn has documented clear examples of letting agents in the city actively engaging in discriminatory practices against welfare recipients including ensuring that potential tenants are screened before landlords let properties and not letting properties to tenants on universal credit or housing benefit.”

Last July, York County Court ruled that landlords and letting agents risk prosecution if they won’t allow housing benefit claimants to rent their properties. However, last October, an investigation by the BBC Data Unit found Wokingham landlords were refusing to rent to benefits claimants; none of the landlords who listed 45 properties on the website OpenRent accepted ‘DSS income’.

Safieh Kabir, chair of Acorn’s Oxford branch, tells LandordZONE: “We’re proud that our members’ collective campaigning efforts have pushed the issue of covert DSS discrimination out from the shadows.

“Oxford has a deserved reputation as a divided city, and property owners discriminating against renters on benefits is yet another factor squeezing working class people out.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Oxford first ever council to stop landlords and agents using ‘No DSS’ adverts | LandlordZONE.

View Full Article: LATEST: Oxford first ever council to stop landlords and agents using ‘No DSS’ adverts