Clamp down on letting second homes planned

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Owners of second homes in many coastal and holiday locations could face a ban on renting using lettings websites like Airbnb. Tourist hotspots such as coastal towns in Cornwall and Devon are particularly affected.

Communities being eroded

In many of these towns, locals claim that their communities are being eroded because of a scarcity of affordable homes to buy, or to rent long-term.

According to East Devon Watch, Cornwall has 12,776 second homes and more than 11,000 holiday lets, while 21,817 people are on its housing register. Last year, the council installed emergency one-bed shelters for vulnerable people in Truro and Penzance. It has also placed people into bed and breakfast accommodation and static caravans.

The situation is only going to get worse as buy-to-let landlords, faced with increasing regulations, taxation, and the latest proposals contained in the Government’s White Paper – ‘A Fairer Private Rented Sector” – see the financial benefits of short-term lets over long-term lettings.

Buy-to-let exodus

A report published by ARLA Propertymark claims that 230,000 UK landlords – faced with Micael Gove’s White Paper – are likely to switch to short-term lets.

Gove’s long-awaited Government White Paper proposes significant changes to the private rented sector: confirming the abolition of Section 21; the ending of fixed-term tenancies; and the inability of landlords to refuse to let to families, housing benefit tenants and pets.

ARLA Propertymark says that around 10 percent of buy-to-let landlords are being tempted to join the ranks of the 46,000 investors who have already made the move form log-term to short-term letting. Those landlords with five or more buy-to-lets, says the estate agent’s body, were considerably more likely to take the plunge.

With short-term listing numbers on Airbnb rising rapidly over recent years, plans are now being drawn up by Michael Gove, the levelling-up secretary, which would give regional mayors extra powers to restrict people renting out second home properties.

Second-home ownership has always been a politically contentious issue. A more recent problem has been the rapid rise of the online rental platforms such as Airbnb allowing owners to more easily market their properties to short-term tenants.

The ever increasing Government regulation of the buy-to-let sector, the recent growth of domestic holidays during Covid, and now the even more dramatic proposals under the White Paper, ‘A Fairer Private Rented Sector’, is driving the exodus of buy-to-let long-term.

A further incentive for landlords to switch is the higher rental returns that are possible with holiday lets. It is incentivising landlords to evict their long-term tenants because they can make more money from short-term holiday lets. It is feared that with the end of section 21 in sight, landlords will use the time they have left to evict even more tenants before it is too late.

Growing political pressure

The move to control short-term lets is a result of growing political pressure on the issue. Conservative MPs representing seats in the South and South West fear the issue could cost them their seats at the next general election if something is not done about the problem.

A proposed amendment to the government’s “Levelling-Up and Regeneration Bill” currently in the committee stage, currently going through parliament, would require anyone wanting to rent out their property on a short-term basis to apply for planning permission for a change of use.

Under the proposed scheme now under consideration by ministers, and revealed in James Forsyth’s column in The Times newspaper, powers would be given to regional mayors to impose a ban on owners letting their properties on a short-term basis. The counties of Cornwall, Devon and Norfolk have all expressed an interest in using these extra powers as part of their “devolution deals”.

It would mean that the rest of the country would get similar powers to those already existing in London where short-term letting is restricted, and has been for many years, capped at a total of 90 nights per year.

The problem that councils have is that there is no data, no registration system where they can identify those properties let-out in this way, to enable them to effectively enforce the 90-day rule.

The Scottish parliament has introduced a licensing scheme for Airbnb-style letting enabling councils to identify registered owners who operate short-term lets for more than 28 days a year. If they do they have to apply for planning consent for change of use.

Bob Seely, the Conservative MP for the Isle of Wight, who has campaigned on the issue, told The Times newspaper, that any initiative was welcome:

“We have got to find a way of protecting communities and we are in the market for sensible ideas that can help,” he said. “Places like Devon, Cornwall, the Isle of Wight and the Lake District have lived too long with the problem of hollowed-out communities devoid of life apart from a few months of the year. What we need is creative ideas to solve some of these problems.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Clamp down on letting second homes planned | LandlordZONE.

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BREAKING: Clamp down on letting second homes planned

admin    Uncategorized     agents

Owners of second homes in many coastal and holiday locations could face a ban on renting using lettings websites like Airbnb. Tourist hotspots such as coastal towns in Cornwall and Devon are particularly affected.

Communities being eroded

In many of these towns, locals claim that their communities are being eroded because of a scarcity of affordable homes to buy, or to rent long-term.

According to East Devon Watch, Cornwall has 12,776 second homes and more than 11,000 holiday lets, while 21,817 people are on its housing register. Last year, the council installed emergency one-bed shelters for vulnerable people in Truro and Penzance. It has also placed people into bed and breakfast accommodation and static caravans.

The situation is only going to get worse as buy-to-let landlords, faced with increasing regulations, taxation, and the latest proposals contained in the Government’s White Paper – ‘A Fairer Private Rented Sector” – see the financial benefits of short-term lets over long-term lettings.

Buy-to-let exodus

A report published by ARLA Propertymark claims that 230,000 UK landlords – faced with Micael Gove’s White Paper – are likely to switch to short-term lets.

Gove’s long-awaited Government White Paper proposes significant changes to the private rented sector: confirming the abolition of Section 21; the ending of fixed-term tenancies; and the inability of landlords to refuse to let to families, housing benefit tenants and pets.

ARLA Propertymark says that around 10 percent of buy-to-let landlords are being tempted to join the ranks of the 46,000 investors who have already made the move form log-term to short-term letting. Those landlords with five or more buy-to-lets, says the estate agent’s body, were considerably more likely to take the plunge.

With short-term listing numbers on Airbnb rising rapidly over recent years, plans are now being drawn up by Michael Gove, the levelling-up secretary, which would give regional mayors extra powers to restrict people renting out second home properties.

Second-home ownership has always been a politically contentious issue. A more recent problem has been the rapid rise of the online rental platforms such as Airbnb allowing owners to more easily market their properties to short-term tenants.

The ever increasing Government regulation of the buy-to-let sector, the recent growth of domestic holidays during Covid, and now the even more dramatic proposals under the White Paper, ‘A Fairer Private Rented Sector’, is driving the exodus of buy-to-let long-term.

A further incentive for landlords to switch is the higher rental returns that are possible with holiday lets. It is incentivising landlords to evict their long-term tenants because they can make more money from short-term holiday lets. It is feared that with the end of section 21 in sight, landlords will use the time they have left to evict even more tenants before it is too late.

Growing political pressure

The move to control short-term lets is a result of growing political pressure on the issue. Conservative MPs representing seats in the South and South West fear the issue could cost them their seats at the next general election if something is not done about the problem.

A proposed amendment to the government’s “Levelling-Up and Regeneration Bill” currently in the committee stage, currently going through parliament, would require anyone wanting to rent out their property on a short-term basis to apply for planning permission for a change of use.

Under the proposed scheme now under consideration by ministers, and revealed in James Forsyth’s column in The Times newspaper, powers would be given to regional mayors to impose a ban on owners letting their properties on a short-term basis. The counties of Cornwall, Devon and Norfolk have all expressed an interest in using these extra powers as part of their “devolution deals”.

It would mean that the rest of the country would get similar powers to those already existing in London where short-term letting is restricted, and has been for many years, capped at a total of 90 nights per year.

The problem that councils have is that there is no data, no registration system where they can identify those properties let-out in this way, to enable them to effectively enforce the 90-day rule.

The Scottish parliament has introduced a licensing scheme for Airbnb-style letting enabling councils to identify registered owners who operate short-term lets for more than 28 days a year. If they do they have to apply for planning consent for change of use.

Bob Seely, the Conservative MP for the Isle of Wight, who has campaigned on the issue, told The Times newspaper, that any initiative was welcome:

“We have got to find a way of protecting communities and we are in the market for sensible ideas that can help,” he said. “Places like Devon, Cornwall, the Isle of Wight and the Lake District have lived too long with the problem of hollowed-out communities devoid of life apart from a few months of the year. What we need is creative ideas to solve some of these problems.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Clamp down on letting second homes planned | LandlordZONE.

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AGENT: What Gove’s ‘landlord bashing’ really means on the ground

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The media has been full of Michael Gove’s plans to reform the private rental sector but also warnings that any more ‘landlord hammering’ will shrink this vital housing market and ultimately hurt tenants.

We talked to a long-standing and experienced lettings agency owner, Lewis Green, to gauge what all this kerfuffle means for his landlords.

Lewis runs St John’s Wood-based North London estate agency Greenstone, which he founded 27 years ago and manages 150 properties in the area and beyond including core postcodes such as Regents Park, Primrose Hill and Maida Vale.

Is the government’s plan to give renters more rights a good one?

“I think tenants already have plenty of rights, so it seems the government doesn’t really understand what’s happening on the ground – ultimately if there’s a breach in the agreement between tenant and landlord so you don’t really want to meddle with that.

“Also, most landlords want tenants to stay as long as possible, pay the rent and look after the property, not turf them out without reason.

“But the proposals will impact the type of landlord who wants to work or travel overseas for a few years, for example, but who would be nervous about going into the marketplace after these changes come in because the tenant will have greater rights to stay in the property.

“And even before the reform proposals were announced, we’d already seen landlords sell their properties because they weren’t enjoying being a landlord any longer – tax benefits have gone, rents dropped dramatically during and after Covid and some tenants weren’t paying their rent – and so on. 

“I think we’ll see more landlords selling up and even less stock going forward, which ultimately is going to make it more difficult for people who want or have to rent.”

Are landlords still buying properties in your patch?

“No not really – areas like this are only attractive to those looking for long-term capital growth because the monthly rent only just covers the mortgage and running costs – no one earns a living in this kind of area.”

If rising inflation a worry?

“It’s eating away at confidence but not for the reasons you might expect – I recently showed a mixed-use residential/restaurant unit that offered a 5% gross return on income but clients told me that, with inflation at 9%, it didn’t make sense at the moment, particularly if interest rates begin to rise.”

Is the current situation like the 1990s or 2008?

“Yes, I’ve seen several downturns. It is different this time compared to the 1990s recession because so far mortgage interest rates have remained low despite spiralling inflation, while the global financial crisis just made it more difficult to get a mortgage, but interest rates didn’t rise. 

“So far it’s been easier because the Government’s financial support package during the pandemic made people feel they were richer and more secure – and anyway they had nowhere to spend their spare cash.”

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What is the best way to sell buy-to-let property?

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With inflation at a 40-year high, interest rates are at a 13-year high with more increases predicted, and higher tax bills it’s getting tougher for landlords with mortgages to make an annual profit on their rental income. For many landlords

View Full Article: What is the best way to sell buy-to-let property?

ADVICE: Are you ready for the Leasehold Reform Act going live on 30th June?

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In its latest plans, the Government is hoping to make the leasehold system fairer for leaseholders through a brand new Reform Act.

There are several things for landlords to consider when the

Leasehold Reform (Ground Rent) Act 2022 comes into force including where it doesn’t apply.

What is the Act?

In a nutshell, the Leasehold Reform (Ground Rent) Act 2022 comes into force on 30th June 2022 and abolishes ground rent for qualifying residential long leases, except for retirement properties for which it will not come into force before 1st April 2023. 

In the Act, the landlord is prohibited from recovering ground rent which is more than a peppercorn for a regulated lease, which is a lease granted for a term of more than 21 years. Basically, the lease must not contain a clause allowing rent to be recovered.

Why has it been brought in?

For the past few years, areas of the residential leasehold system have impacted those involved, particularly flat owners. Some Leaseholders face high and escalating ground rents which make it harder for them to sell or remortgage. 

There is also evidence that some charges requested under leases are extremely high or are subject to highly excessive administration fees. 

The Act has been brought in to make owning a leasehold residential property fairer, more transparent and more affordable. The government has also set out commitments to set future ground rents to zero and the Leasehold Reform Act will help to achieve this.

When does the Act not apply? 

The Act does not apply to existing leases, hence, this cannot be applied retrospectively.

However, if there is a surrender and re-grant of a lease either extending the term of the lease or adding additional property to the demise as defined in the lease, the Act may apply.

The Act also does not apply to business leases, statutory lease extensions, community housing leases and home finance leases either.

So what?

The whole point of the Act is to make leasehold properties more affordable and to provide a fair balance between Freeholders and Leaseholders as part of the Government’s statement of reducing ground rents to zero.

Conveyancers acting for buyers dealing with the grant of new leases must review the rent clause provisions carefully to ensure that they comply with the Act.

Conveyancers acting for sellers or developers granting new leases must ensure the ground rent is a peppercorn and cannot charge any admin fees for the same.

The consequences for failing to comply with the Act are that landlords can be fined from £500 – £30,000 where ground rent is charged as a breach of the Act and not returned to the tenant.

Author bio: Perdip Kaur Bhachu is a Senior Associate Solicitor in the Residential Property team at Blacks Solicitors.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – ADVICE: Are you ready for the Leasehold Reform Act going live on 30th June? | LandlordZONE.

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