WARNING: Keep up with local licensing rules or face fines, judge tells landlords

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Landlords must keep up with local licensing changes or face huge fines, a judge has warned in the latest big Rent Repayment Order case.

Despite being a member of the National Residential Landlords Association (NRLA), landlord David Peploe and wife Alison have been hit with a £9,262 RRO by a First Tier Property Tribunal after they failed to licence their five-bed student HMO in Tresillian Gardens, Exeter (pictured).

It had been shared between four former tenants – students at Exeter University renting from September 2019 to July 2020. The couple were also ordered to pay £300 costs.

The tribunal heard that the Peploes instructed a student letting agent, Cordens, when they first rented out the property in 2010 when it did not need an HMO licence.

But a licensing scheme was introduced in the interim and they did not apply for a licence until August 2020 after being contacted by Exeter City Council in March 2020.

The judge said: “The respondents were not able to provide any effective steps taken to regularly keep up to date with the requirements placed on landlords.

Sensible steps

“If modest and sensible steps had been taken, most obviously reading and acting upon information of relevance received from the NRLA, the overwhelming likelihood is that the respondent would have been aware of the change in the law and the need to act upon it.”

The tribunal said because they rented out various properties it meant the landlords were professional and that their ignorance of the law was ‘not an excuse’.

But it only awarded half the amount originally applied for, and added: “The tribunal found them to be essentially conscientious landlords, who did not have a licence or a defence to a lack of a licence but who tried their very best to provide good accommodation and achieved that, being careful to fulfil – and arguably exceed – the obligations that they were aware of.”

Read more about HMOs.

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National property licensing system for Wales proposed to limit short lets

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Plaid Cymru have called for a licensing system in Wales to create a balance between homes for sale and rent within communities.

The party’s short film, shown on Channel 4’s Political Slot, continues its campaign against second homes, with MP Liz Saville Roberts (pictured, above) claiming that the situation has reached breaking point.

“Vital Welsh-speaking communities are turning into a part-time playground for rich holidaymakers,” she told viewers.

In the party political broadcast, she urged the Welsh Government to make all second homes pay council tax, rather than some being eligible for business rates, and to introduce a requirement for buyers to seek planning permission to turn homes into holiday lets and for a new licensing system to regulate the balance of property types in an area. 

Compulsory registration

In July, the Welsh Government announced a compulsory registration scheme for holiday homes would be introduced as part of a three-pronged approach, which would see it look at the affordability and availability of housing, regulations including planning rules and how national and local taxation can be used.

But Plaid Cymru wants it to go further. The increasing number of second homes in Wales is growing and driving local people out of the property market, putting unacceptable pressures on local services in peak season, and creating desolate, half-empty towns and villages in winter, says the party.

It has pledged to change the planning laws to allow councils to impose a cap on the number of second homes and to refuse permission for changing a dwelling from being a primary to a secondary residence.

It also wants to allow councils to charge council tax premiums of up to 200% on second homes and to bring forward regulations to treble the Land Transaction Tax charge on the purchase of second properties.

Watch the Plaid Cymru film.

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Landlord slapped with than £17,000 penalty for fire-risk unlicenced HMO

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A landlord in Reading is the latest to be slapped with a huge penalty for operating an unlicensed HMO which also posed a fire risk.

The prosecution was initiated by Reading Council which takes an ‘Olympic’ approach to licensing management; awarding good landlords gold, silver and bronze medals but coming down hard on those who don’t join in the ‘games’.

Mohammad Basharat, 57, of London Road in the town, admitted operating the property in Blenheim Road (pictured) without a licence and failing to maintain smoke detectors, following an investigation by the council’s private sector housing team between May and July 2019.

Reading Magistrates Court fined him £14,065 for the offences as well as £3,000 costs and a victim surcharge of £170.

Lead member for housing, Ellie Emberson, says it’s yet another example of how its housing team is helping to protect the rights and safety of private renters.

Prosecution

She adds: “The successful prosecution should be seen as a strong warning to landlords all over the borough that they must comply with the rules or face the consequences.”

The team enforces the borough’s HMO licensing scheme, which covers 1,300 licensed HMOs, while its Reading Rent with Confidence Scheme aims to improve housing standards in the borough by accrediting landlords’ achievements based on criteria which also work to produce good property management services.

Emberson (pictured) adds: “Our Reading Rent with Confidence scheme is helping by awarding gold, silver and bronze standards based on the quality of accommodation and good management practices.

“By providing good landlords with a market advantage and potential tenants with confidence, along with prosecuting substandard landlords, we are showing our commitment to high-quality housing for all of Reading’s renters.”

Basharat got off lightly, it can be argued. In January Mohammed Zahir was was given a £66,000 fine for a similar offence.

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7 Things Landlords Need To Know About Making Tax Digital

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Making Tax Digital (MTD) is an ambitious scheme by the HMRC to move all tax administration to a digital system. The HMRC believes this transition will reduce bookkeeping errors making compliance easier for businesses and self-employed.

The new Making Tax Digital scheme necessarily means a dramatic change to how you will need to track and report your income and expenses for your buy-to-let properties.

In this article, we explore seven major parts of the MTD transition that landlords need to be aware of.

Find out more in our Landlord Studio’s latest MTD Guidebook.

1. Key MTD Dates

MTD came into effect for VAT registered businesses earning over £85k in April of 2019.
From the 6th of April 2023, it will apply to all self-employed, partnerships, and landlords whose combined gross income for the year exceeds £10,000.

2. Keeping Digital Records

To ensure you can submit all your updates in a timely fashion, you will need to have systems in place to keep up-to-date digital records. The easiest solution is to adopt a cloud accounting software like Landlord Studio that allows you to track your income and expenses on the go, connect your bank account for easy reconciliation, and digitise receipts at the point of sale.

3. Multiple Tax “Updates” Per Year

The number of returns (termed ‘updates’) to be submitted under the new MTD system will increase. Regulations state that individual landlords must submit separate quarterly ‘updates’ for each property business category (i.e. separate ‘updates’ for lettings, furnished holiday lets, and overseas lets) plus an end-of-year final statement. The minimum number of submissions will be five per tax year but could be as many as 20 if you have income from multiple business categories.

4. New Dates To Submit Your Taxes.

Taxpayers will need to submit updates every quarter (rather than just a single end-of-year statement) between 10 days before the quarter-end to precisely one month from the end of each quarter. You will also be required to confirm your previous submissions with a finalisation statement to be submitted by January 31st after the tax year-end.

5. Digital Documents And Receipts

While you won’t need to submit receipts and documents unless requested by the HMRC, this backup information must still be kept. You will want to make sure you are keeping them for your records and posterity.

It’s a good idea to find software that, as well as enabling digital record-keeping, will allow you to easily digitise receipts. For example, an income and expense tracking tool like Landlord Studio allows you to use your phone camera to snap a picture of a receipt at the point of sale and attach it to your recorded expenses for future reference.

6. Use approved software for quarterly submission

To be compliant you will need to have an approved software in your arsenal of tools so that you can digitally submit your quarterly returns as required by the new MTD rules.

Compliance is covered in more depth in our free MTD Guidebook.

7. Late Payments and Penalties

In conjunction with the launch of MTD, the HMRC will be updating its penalty scheme for late payments and submissions. There will be some leeway, especially during the first year as people become used to the system.

The new points system will designate one point for every missed submission deadline with a penalty of £200 once the threshold for the points is reached.

Once the points have reached the threshold, which for landlords will be 4 over 12 months, the taxpayer must bring everything up to date and then remain compliant for the following 12 months to reset the points back to zero.

If a taxpayer misses a payment, after 15 days grace period a 2% penalty will be applied. Should the taxpayer fail to pay after 31 days the penalty will be increased to 4%.

Final Words

April 2023 may seem a long way in the future, however, it is never too early to start preparing. Landlords need to be aware of the changes taking place and put together processes to ensure that the transition goes as smoothly as possible.

Landlord Studio is a cloud-based property management and accounting system that allows you to manage your tenancies, track income and expenses, digitise receipts and more through either the mobile app or desktop portal.

To learn more about MTD and the upcoming changes, download our free MTD Guidebook here.

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Consultation on commercial rent arrears – the evidence is in

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Government policy throughout the COVID-19 pandemic has been to help viable businesses – and the millions of jobs that they provide – to survive.

Early on the government introduced measures to protect tenant businesses from the threat of eviction or insolvency when they found themselves unable to pay their rent due to restrictions on trading.

These measures coupled with a code of practice published with the help of industry bodies have encouraged many landlords and tenants to come together to agree to share the impact of the pandemic in fair and sustainable ways.

Many landlords agreed to waive or defer some or all of the accumulated rent debt to enable their tenant businesses to survive, preserve jobs, and make their contribution to the recovery. However, there have remained many landlords and tenants that have been unable to reach agreement on this, and the level of accumulated rent debt still threatens the existence of many tenant businesses and in turn the millions of jobs they support.

What’s the true picture?

To get a true picture of the situation on the ground the government launched a consultation process, a call for evidence inviting landlords, tenants, and other interested parties to describe their experience in seeking to negotiate settlements of rent debt during the pandemic.

The thinking is that this evidence and the views of stakeholders will be used when deciding on the various options for withdrawing or replacing the existing tenant protection measures as the country moves towards a recovery from the pandemic.

The consultation elicited around 500 responses. Based on the evidence received the government announced on the 16^th of June that legislation is to be introduced during the current parliamentary session to work towards an orderly resolution of rent arrears accrued by commercial tenants over the period of the pandemic to-date.

The new legislation is to ringfence rent debt accrued from March 2020 for tenants who have been impacted by COVID-19 business closures until restrictions are removed for their sector. It will also introduce a system of binding arbitration between landlords and tenants.

Arbitration is seen as a last resort, after encouraging negotiations to take place between the parties to work towards and amicable solution. Ahead of the legislation the government is to publish the principles on which the legislation is to be based in the form of a revised code of practice, giving landlords and tenants time to negotiate on that basis.

Eviction ban

Section 82 of the Coronavirus Act 2020 currently prevents landlords of commercial properties from being able to evict tenants for the non-payment of rent and this will continue in force until the 25th March 2022, unless new legislation is passed in the meantime to change this.

The government expects those tenants who have not been affected by closures and who have the means to pay, should pay. Additionally, government expects commercial tenants to begin paying rent as per their lease from the point of restrictions being lifted for their sector.

As soon as the new legislation is passed, the moratorium on evictions will only apply to ringfenced arrears. This includes rent debt accrued from March 2020 by commercial tenants affected by COVID-19 business closures until restrictions for their sector are removed.

This means that landlords will be able to evict tenants for the non-payment of rent prior to March 2020 and after the end of restrictions for their sector, and who have not been affected by business closures during this period.

What were the options?

The two most favoured options for withdrawing protection measures based on the consultation responses were to allow the tenant protection measures to lapse on the 30th June 2021 (89.5% of responding landlords were in favour of this option) and to introduce a scheme of binding arbitration to resolve rent debt (66.3% of responding tenants were in favour of this measure).

Overall, 57.3% of respondents were against letting measures expire on the 30^th of June, whilst a significant group (33.7%) were in favour of it. 49.2% of respondents were in favour of binding adjudication, whilst only 27.4% were against it.

A dichotomy of views

Acknowledging that there was a clear dichotomy of views expressed by landlords and tenants the government had to consider its options in the light of its original policy objective; to preserve viable tenant businesses and the millions of jobs that they support.

This has led to the decision to bring forward legislation to ringfence rent debt accumulated during enforced closures and to set out a process of binding arbitration to be undertaken between landlords and tenants that are still unable to reach agreement on rent debt.

UK Hospitality estimates that around 332,000 jobs could be lost in the hospitality sectors if measures expired on the 30^th of June – about a sixth of the remaining workforce of 2 million.

The government’s decision also acknowledges the fact that a number of large commercial landlords, together with sector representative bodies from both landlords and tenants, have recently published proposals for binding arbitration and the ringfencing of rent arrears independently of the call for evidence.

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LEGAL LATEST: Landlord’s leasehold cancelled after ignoring anti-social tenant complaints

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A London landlord has had his leasehold cancelled after ignoring neighbours’ pleas to deal with an aggressive, anti-social tenant for more than a decade.

Neighbours Mr and Mrs Kandala claimed Andrew Cripps, who owns the leasehold on a property in St Ann’s Way, South Croydon, was in breach of lease covenant for allowing his tenant to cause damage, annoyance or inconvenience to the neighbourhood for 11 years.

Prolonged abuse had taken its toll and led to serious mental and physical health issues for Mrs Kandala.

Failure to respond

A First Tier Property Tribunal heard that despite writing to the landlord many times, he had failed to respond constructively to their letters or take any action. In an email from October 2019, Cripps replied to a letter complaining about the sub-tenant’s conduct, saying: “I apologise for any inconvenience/damage caused and please be advised I am taking this matter extremely seriously.

“We will of course give him notice if he continues to behave in this way.”

In 2010, the tenant was issued with a harassment warning by the police after setting fire to the Kandala’s back garden, but Cripps again did not reply to letters and the cost of repairs was met by the residents association.

“The tenant also let his dog foul in neighbours’ front gardens, parked across their garage and made regular threats of violence, screaming and shouting directly at the couple.

They said: “The residents association recently informed us that a notice requiring possession was served on the subtenant by Andrew Cripps. The subtenant immediately took to making repeated offensive sexual gestures to Mrs Kandala.”

The tribunal was satisfied that this was clear evidence of completely anti-social behaviour, amounting to breach of covenant. It also ruled that as Cripps was not named as a joint party on the building insurance policy, this was also a breach of covenant.

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Tenants’ rent tribunal win may cost billionaire landlord dearly – claim

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Billionaire landlord John Christodolou could face a deluge of rent claims after a judge ordered him to pay back £18,000 to former tenants in his Stoke Newington block.

The three members of Somerford Grove Renters (SGR) campaign group received a Rent Repayment Order for eight months’ worth of rent.

It has promised to file nearly 50 more cases from tenants, representing half a million pounds in possible claims, after a First Tier Property Tribunal heard how the 56-year-old tax exile had failed to license an HMO in Simpson House, Somerford Grove.

The tenants told the tribunal that their landlord had neglected to install fire safety measures. They also reported a lack of heating and hot water, poor building maintenance and lack of pest control measures

But a director of his investment company said that maintenance works had been carried out promptly when complaints were received.

Rent reduction

Last summer, SGR wrote to the lettings agent that represents Christodoulou, Tower Quay, asking for a rent reduction for struggling residents in next-door Olympic House (pictured, above), which he largely owns.

After initially saying renters’ requests for relief would be dealt with individually, they were turned down and instead told to use money saved on lunch, holiday, entertainment, clothes and travel to pay rent, it is claimed.

The judge ruled: “The tribunal does not accept that…a company with a large property portfolio could not have become or made itself aware of the additional licensing scheme that had come into effect on 1st October 2018.”

One of the winning tenants, Marc Sutton, told the Hackney Citizen that the victory would be the first of many. He said: “Our billionaire landlord responded to a request for a rent reduction by those of us who have lost income due to the pandemic by issuing eviction notices.

“After a year of campaigning and fighting, we are thrilled to have achieved such a major win, the first of many more to come.” 

Read the tribunal ruling in full.

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Five-fold increase in London rent repayment orders this summer

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London councils are relying more heavily on low-cost ways to penalise landlords and letting agents, resulting in a whopping 532% increase in Rent Repayment Orders during the last three months.

Fines totalling £139,146 were handed out in July, more than doubling June’s figure of £42,500 and up on May’s figure of £22,000, reports geospatial technology firm Kamma.

Its analysis of the Mayor of London’s Rogue Landlord and Letting Agent Checker (RLAC) shows £6.5 million in fines have been handed out since it was set up in 2018.

Both landlords and agents are at risk, with landlords fined more often and agents fined more heavily; the largest single fines ever recorded are £100,000 for a landlord and £167,000 for a letting agent.

Despite housing officers’ work being impacted by lockdown rules and regulations, this data reveals a dramatic return to enforcement practices, says Kamma CEO Orla Shields (pictured, below), who adds that councils are also deploying tenants to support enforcement in a low-cost way by using a checker search tool.

“While the pandemic seems to have reduced enforcement levels, it did not slow the level of regulation which is higher now than at any time before,” she says.

Tower Hamlets Council has issued almost 70 RROs, reclaiming £200,000 in rent, and with other local authorities following suit it’s more important than ever that agents get up to speed, advises Kamma.

“As the NRLA has recently pointed out, it’s right that councils enforce their own regulations, which otherwise would be a tax on good landlords, with rogue individuals continuing as before,” adds Shields.

“The danger is that good landlords and letting agents offering high quality homes to market could still get caught out by a change in regulation. With tenants acting as enforcers, agents and landlords have to stay one step ahead.”

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Rent arrears at lowest level for ten years, landlords reveal

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The average number of tenants in rent arrears is at its lowest point for ten years, according to Paragon Bank, while the amount of outstanding rent is the lowest since 2017.

New research shows that in the second quarter of this year, landlords had an average of 1.3 tenants with outstanding rent payments, the lowest number since the first quarter of 2011 when research agency BVA BDRC started its survey.

This has continued to fall consistently after climbing to 2.1 in Q2 2020, as the Covid-19 pandemic hit incomes.

The average amount of outstanding rent has reached a four-year low, adds Paragon, after falling from £2,376 in Q1 2021 to £1,781 in Q2, and the lowest figure since the end of 2017 when it was £1,584.

Rent reductions

The survey of more than 750 landlords found that just over a third (36%) have had a tenant request a change to their rent, most commonly rental holidays (18%) or a reduction in rent of up to 20% (14%).

Agreements were reached in almost all cases as 36% of landlords said they had granted requests to some form of change. These requests have also been falling off since the start of the pandemic, with the proportion of those asking to change rental agreements dropping by seven percentage points year-on-year.

Moray Hulme (pictured), Paragon Bank’s director of mortgage sales, says the vast majority of landlords are supporting tenants.

He adds: “These requests have been falling alongside the incidences and volume of rent arrears, and considering that the fewest number of people are now on furlough since the scheme launched in March 2020, it is a good indicator that the economy is bouncing back well.”

Read more about rent arrears.

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Bold action needed to save the PRS

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Covid-19 restrictions are easing, so now is the time to take decisive action to support landlords and tenants. NRLA chief executive Ben Beadle shares his thoughts on the country’s rent debt crisis and what the Government can do to tackle it.

After months of emergency restrictions as a result of the Covid-19 pandemic, measures are now being lifted.

It has been a tough 18 months for the sector – and while we are pleased change is coming, following extensive talks between the NRLA, ministers and civil servants, more is needed.

Latest figures show that a debt crisis is on the horizon.

New research carried out on behalf of the NRLA shows more than 800,000 of those living in the private rented sector in England and Wales have built arrears since lockdown measures started last year.

This is despite 82% of those owing no rent debt prior to lockdown.

We need the Government to step up to help these tenants and the landlords who house them.

Campaigning

We have been campaigning for a comprehensive package of financial support for the sector for some time now and we continue to lobby the Government to commit resources to this to help maintain tenancies and ease the pressure on the already overburdened legal system.

Those landlords who have no option but to repossess will also need support.

Recent figures show average waiting times from claim to possession were more than a year (57 weeks) in the first quarter of 2021 and action must be taken now to reduce that backlog.

Possession claims fell considerably during the pandemic, with the courts closed and landlords doing all they could to keep tenancies going.

If we want the courts to be able to tackle the backlog, then we need to keep those tenants who are in arrears as a result of the pandemic in their homes. We need to tackle the issue of arrears head on.

The NRLA’s proposal, for ringfenced Government support, includes interest free loans to allow tenants to pay off Covid-related arrears and stem the number of cases going to court, as well as grants for those claiming benefits.

Court figures

Latest figures show almost 23,000 possession claims have been made since the courts closed in March 2020. However, the same time frame only 8,600 possession orders have been issued.

This leaves a substantial proportion of claims – more than 60% – still unheard.

There are also enforcement issues.

Bailiff enforcements were permitted as of June 1 in England. At this point there were around 11,000 warrants, 70% of which are estimated to have pre-dated the pandemic – and the figures are only going to go one way as news claims are submitted.

However, there are changes that can be made by Government to streamline the process and help tackle this backlog.

These include:

• Getting rid of the additional ‘review’ hearings. These were introduced during the pandemic as a means of prioritising cases, but are now contributing to the delays
• Making greater use of digital remote hearings over the phone or online for simple cases
• Increasing the use of High Court Enforcement Officers to tackle the backlog of enforcement

There are also a number of technical administrative changes which could also make a difference when it comes to wait times.

The NRLA has produced an in-depth report on the challenges, and potential solutions, which can be read here.

Resolution outside the courtroom

Landlords too can play their part and we would encourage them, where possible, to look outside the courtroom for solutions should they have issues with their tenancy.

Mediation and conciliation – while not guaranteed to work in every case – can be highly successful. If your tenant has fallen into arrears working with them or via a mediation service to find a suitable payment plan can help you avoid court or, at worst, show you have made every effort to avoid it.

NRLA members can access a free mediation service provided by TDS  to this end.

We are on the road to recovery and, although we are not there yet, we at the NRLA will rise to the challenge and continue to campaign at the very highest level for positive change to sustain the sector.

For more information about the NRLA campaign lobbying for Government support for the sector click here.

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