Fire risk assessments and FRAEW?

admin    Uncategorized     agents

Hello everyone, I am keen for readers’ views relating to the fire risk assessments and Fire Risk Appraisal of External Walls (FRAEW).

I’m just wondering how other professional landlords are faring with this – the Act is unclear about how we are to progress or what we can to do help the situation –

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Repeat rogue landlord to pay £33,000 over HMO failures but escapes larger fine

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A rogue landlord who threatened tenants with eviction after they complained about problems in their HMOs has had her fine slashed by £67,000 to £33,000.

Lystra Dorval, of Oaks Lane, Ilford, was issued with 10 penalty notices relating to poor management of two sub-standard HMOs in Hayes Road (pictured), Clacton, and fined £90,000 following an investigation by Tendring District Council.

However, a First Tier Property Tribunal ruled that because the issues had rapidly deteriorated over a short period of time there was less culpability.

Dorval argued that some work had been done and that damage had been caused by the tenants. It follows a previous appeal in 2020 when another tribunal reduced her fine to £70,500.

Threatened

The council’s housing team first began work with Dorval in April 2019, when tenants reported they had been threatened with eviction after highlighting problems, which included a faulty fire alarm, blocked fire escapes, insecure entrance doors, broken staircases, toilets not working, water leaks and dangerous electrics.

Several complaints were also made by neighbours about anti-social behaviour and the property’s condition.

When work had still not been done, the council issued an Emergency Prohibition Order to shut down the buildings. It also removed Dorval’s HMO licences.

The next day, a gas leak and flooding were found after pipework was stolen, and during clear-up work further damage was revealed including floors at risk of collapse, drains blocked with rubble and rotting waste.

Paul Honeywood (pictured), cabinet member for housing, says the level of fine shows landlords they must maintain their properties. “We are not afraid to take action against rogue landlords who think it is acceptable for our residents to live in sub-standard housing. This case highlights the issues which can happen, rarely to this level, and we will not hesitate to take strong action to clamp down on landlords who flout the rules.”

Read more: Essential guide to HMO property management.

View Full Article: Repeat rogue landlord to pay £33,000 over HMO failures but escapes larger fine

Property Market August Update With Ranjan Bhattacharya & John Howard

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In this property market update, John Howard and I are covering the recession, interest rates, and the outlook for Buy to let investors and developers. We debate our predictions for what this means for property investors as property prices and rents continue to sore &

View Full Article: Property Market August Update With Ranjan Bhattacharya & John Howard

Should Landlords Capitalise On Sky-Rocketing Rental Demand?

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Whether or not landlords should capitalise on sky-rocketing rental demand is a political hot potato. There are polarised opinions even among the Private Rented Sector’s leading centre’s of influence.  For example …

Eddie Hooker, CEO of Hamilton Frazer (the owners of MyDeposits

View Full Article: Should Landlords Capitalise On Sky-Rocketing Rental Demand?

Property Redress Scheme donates cash to local food bank charity

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A charity running a food bank and relief centre in Hertfordshire has received a cheque for £2,500 from the Property Redress Scheme.

Two of the company’s seniors, Tim Frome and Sean Hooker, visited Gratitude’s offices in Borehamwood, not far from Hamilton Fraser’s HQ, to see the work its three trustees and 60 volunteers do to support a variety of vulnerable individuals including those in financial hardship.

The charity takes food that’s good to eat but can’t be sold in shops because of packaging errors or overproduction. It then redistributes this food to the community through various free meals projects, a community pantry and its network of local charities.

Two of the trustees, John and Sheila Carlisle, were on hand to receive the money.

Frome, who is Managing Director of the Property Redress Scheme (PRS), says: “We decided to use half of our annual donation to help a local charity this year.

“We are delighted to support the great work that Gratitude does in the Borehamwood community providing food, supplies and other support and guidance to those in need.

“Having met John and Sheila I was very impressed with how passionate they are about expanding the services locally and into other areas of the UK.”

Humbled

Hooker, who is Head of Redress at the PRS, says: “We are proud and humbled to help Gratitude with their work.

“Whilst they are a local charity, their vision and ethos, goes beyond being a foodbank and relief centre.“They want to build a community and a sense of cooperation and inclusion. Their ambition is to help those who use their service, for whatever reason and for however long they need it, to develop and find solutions to help work through their challenges.

“In the short term they want to expand their service to provide hot meals for those who need them and we are pleased our donation will help make this happen.”

There are over 2,500 food banks in the UK and latest data from the Trussell Trust indicates the number of emergency food parcels being distributed has jumped from a few thousand every year in 2008 to 2.6 million last year.

Approximately 2.5% of UK households rely on this kind of support at the moment.

To donate to Gratitude, visit the charity’s website.

Main pic: (LtoR): John Carlisle, Sheila Carlisle, Sean Hooker, Tim Frome.

View Full Article: Property Redress Scheme donates cash to local food bank charity

Current student bed shortage will rocket to 450,000 by 2025 – claim

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Rising numbers of students heading to university, coupled with a slowing supply of new student housing, means that by 2025, the UK will face a shortfall of around 450,000 student beds, research reveals.

According to the latest data from StuRents there is currently a shortage of 207,000 which will not only push rent prices up –

View Full Article: Current student bed shortage will rocket to 450,000 by 2025 – claim

What are the special rules for VAT on commercial property?

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VAT on Commercial Property is a complex topic and anyone wishing to understand these complexities in relation to their own situation should seek specialist advice. This article should give a broad brush general overview but you really should seek advice because errors can be irredeemable and penalties can be a significant.

Owners of Commercial Property can Opt in to VAT – the so call Option to Tax. There are pros and cons to this step. A developer or renovator of a property many gain by the fact that VAT can be reclaimed on supplies and materials, as can a landlord for ongoing costs, but it means that once opted in, VAT must be charged on rent and on the sale price of the property.

In some situations this can make the building uncompetitive on the rental market. For example if your tenant is a sole trader who is not VAT registered they cannot reclaim the VAT they pay on their rent, as also cannot an insurance company or a bank.

VAT can also cause cash-flow issues for buyers when purchasing a commercial property, with the 20 per cent VAT charge on top of the price. However there are now some innovative solutions to this problem – see below.

The Option to Tax

If the Option to Tax has been made, it results in rent and sale proceeds being subject to VAT at the standard rate, that is 20 per cent at the time of writing. If a prospective purchaser is not VAT registered it simply adds 20 per cent to the price for that buyer, whereas a VAT registered purchaser could reclaim the tax.

The Option to Tax once executed lasts for 20 years, so great care should be taken when considering such a decision.

The sale or letting of a Commercial Property or on land, unless it has been Opted in to VAT, or is a new-build, is by default VAT exempt. So a purchaser or a tenant would not have to pay VAT. The flip-side for the owner is that they cannot recover VAT on all costs associated with work on the property, the sale or the letting, which in some cases can be substantial and may outweigh the other disadvantages.

Transfer as a going concern

Special exemption rules apply. Transfer of Going Concern (TOGC) – where a property is sold as part of the transfer of a business as a going concern. Providing the new owner continues the existing business, the transfer is generally outside the scope of VAT.

One example may be a commercial property sold with an existing tenancy in place. The sale can be a TOGC providing other conditions are met. Great care is needed when buying a commercial property because it’s not always apparent whether it has been opted in for VAT – sales particulars and the asking price don’t always include or specify VAT.

To avoid VAT on a commercial property purchase it either means verifying that the property is VAT exempt (i.e. not opted into VAT) or you can obtain TOGC status. This is where professional advice is vitally important is this situation.

TOGS comes with some complicated conditions that must be met: for example, a company that owns the property and the trading business in a company, or is in separate companies, must pass to the buyer with the sale, and the buyer must carry the same type of business in the same companies as the seller did.

The sale of a new Commercial Property which is less that 3 years old cannot be a tax exempt building on the sale, and is subject to the standard rate of VAT. However, there are some special exemptions again, for example if the building is to be used by a charity or not-for-profit business.

If you sell a commercial building or you charge rent on an VAT opted in property, then you as owner / landlord are responsible for applying VAT as appropriate. If you make an error in this regard you could find yourself liable to HMRC for a very substantial amount of money. It is therefore essential that both sides of these commercial transactions seek specialist VAT tax advice.

Opting to tax is not a step to be taken lightly and all the pros and cons need to be taken into account. As well as the initial registration, VAT comes with the onerous task of completing regular VAT returns, accounting for all the relevant transactions and you will undergo VAT inspections from time to time.

The VAT charge may put off commercial property investors?

In an environment with threats of a recession and slowing business operations, according to Carter Jonas, this may cause businesses to reduce their spending and in turn it will reduce profits for property investors.

With higher costs and therefore restricted margins, confusion around the VAT status of a property could easily prevent investors from capitalising in a less optimistic market. However, according to Freddie Digby, CCO of Adsum, alternative-finance (alt-fi) can remove worries about that potential extra 20%, he says.

Commercial property has always been a wise, if turbulent, asset to invest in, says Digby, with consistent historical market growth – fuelled in large part by the rise of e-commerce and dwindling supply.

In May, falling Amazon profit forecasts caused a tumble in commercial property stocks due to reduced demand for warehouses, and now rising interest rates may start to punish investors who jumped in at the top of the market.

For office space, says Digby, Greater London is still the epicentre – but changes hint at limited cash flow. The city’s edges in the south east are seeing the most extensive growth at 2.1% to May 2022, compared to the centre’s increase of 0.7%, which could highlight that businesses looking for a new office market may not have the cash to expand into that central, expensive London postcode. This, in turn, could impact investors’ margins.

With so much market turbulence, VAT becomes an obstacle to market confidence. The extra 20% paid on completion of new builds can be a significant additional cost and if the property is over three years old, the confusion around its VAT status is still a concern, thinks Digby. Without payment, sales can’t complete, and with additional costs raised by a fifth, deals may fall through.

The challenge is finding out the exact VAT status of the building as this depends on a multitude of factors, including its deal history and the status of any commercial renters currently renting the property.

Technically, says Digby, HMRC can help in two ways: Firstly, by opening an investigation into its VAT status – but investors often do not have time for this in such a rapidly moving market. Alternatively, HMRC can refund the 20% after completion; however, many will not be able to continue operating with such a dent in cash-flow.

However, according to Digby, tech-savvy property investors should not worry about this potential extra cost. Instead, they can leverage it as an asset to secure immediate capital, should they have to pay VAT. A vibrant, new generation of the so called ‘alternative-finance’ (alt-fi) fintechs can put up HMRC’s refund upfront – ensuring on-demand, consistent and calculable cash-flow, without waiting for HMRC to refund.

Digby comments:

“Investing in commercial property has traditionally been a promising asset class if one of the more complicated. The VAT status of a building, or a shop or office within a building, is seldom clear cut. To make matters worse, there is a significant knowledge gap on the issue.

“Sometimes, businesses or investors in a VAT refund position are happy to wait for HMRC to send them that money back. However, as wages, inflation, and other costs eat into margins and with a recession looming on the horizon, weary investors have even more reason to need consistent, resilient cash-flow and reduce costs.”

“Put both factors together – and it is clear why property VAT is such a tricky issue. When a deal is on the line, and an investor finds out they must find an extra 20% to complete, alarm bells rightly go off.”

“It just shouldn’t be complicated. HMRC guarantees your refund, but the issue isn’t just having to find an extra 20% and surviving without it for months. Investors will often face compliance questions, taking time to register, submit claims, chasing, recovery, and lawyer or consultant fees, which take time and money.

“By leveraging the inevitable VAT refund as an asset, investors and businesses can use it as collateral to secure on-demand finance. This gives calculable, hassle-free capital when investors are facing a slowing market and shrinking margins.”

Established in March 2020 in Hammersmith, London, Adsum is a fintech tax credit specialist providing an advance funding solutions for UK business tax receivables

View Full Article: What are the special rules for VAT on commercial property?

Periodic tenancies will make housing crisis worse, expert tells national radio show

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A homelessness expert has warned that switching to periodic tenancies under proposed renter reforms could lead to a worsening housing crisis.

Benjamin Howarth (main picture), founder of emergency accommodation provider the Howarth Housing Group, believes similar harm has already been done in Scotland after short assured tenancies were discontinued in favour of private residential tenancies in 2017.

Speaking on Shelagh Fogarty’s LBC show, he said the cost of renting in Glasgow had gone up by 38% between 2010-2019 – largely due to a change in the law. “There wasn’t enough effort put into strengthening the private rented sector, so it introduced more risk to landlords, less people were then becoming landlords, the number of tenancies dropped, and it increased rental prices,” he said. “The same thing will happen in England when the Section 21 ban takes effect.”

Howarth warned that the PRS needs to be protected, otherwise landlords will quit the sector which, along with councils building insufficient housing, would exacerbate the housing crisis.

“More restrictions and licensing that costs a lot of money is supposed to be a good thing but it’s often badly implemented,” he added. “You can’t blame individual landlords – they’re not able to have the return on their investment.”

Forced eviction

One landlord who called into the programme – Adam in Hartford – told of how existing pressures were forcing him to evict his tenant. He said: “Due to rising interest rates and the tax breaks which have been continuously eroded over the years, I’m going to have to make my tenant homeless which breaks my heart, she’s a single mother. I’m forced into a corner – I can no longer afford to rent it out.”

Howarth said one solution would be to make the PRS more desirable for tenants and increase the number of properties. “If you have your pick of property you can negotiate, instead of the current situation where you’re fighting with other people to live there.”

View Full Article: Periodic tenancies will make housing crisis worse, expert tells national radio show

LATEST: Periodic tenancies will make housing crisis worse, expert tells national radio show

admin    Uncategorized     agents

A homelessness expert has warned that switching to periodic tenancies under proposed renter reforms could lead to a worsening housing crisis.

Benjamin Howarth (main picture), founder of emergency accommodation provider the Howarth Housing Group, believes similar harm has already been done in Scotland after short assured tenancies were discontinued in favour of private residential tenancies in 2017.

Speaking on Shelagh Fogarty’s LBC show, he said the cost of renting in Glasgow had gone up by 38% between 2010-2019 – largely due to a change in the law. “There wasn’t enough effort put into strengthening the private rented sector, so it introduced more risk to landlords, less people were then becoming landlords, the number of tenancies dropped, and it increased rental prices,” he said. “The same thing will happen in England when the Section 21 ban takes effect.”

Howarth warned that the PRS needs to be protected, otherwise landlords will quit the sector which, along with councils building insufficient housing, would exacerbate the housing crisis.

“More restrictions and licensing that costs a lot of money is supposed to be a good thing but it’s often badly implemented,” he added. “You can’t blame individual landlords – they’re not able to have the return on their investment.”

Forced eviction

One landlord who called into the programme – Adam in Hartford – told of how existing pressures were forcing him to evict his tenant. He said: “Due to rising interest rates and the tax breaks which have been continuously eroded over the years, I’m going to have to make my tenant homeless which breaks my heart, she’s a single mother. I’m forced into a corner – I can no longer afford to rent it out.”

Howarth said one solution would be to make the PRS more desirable for tenants and increase the number of properties. “If you have your pick of property you can negotiate, instead of the current situation where you’re fighting with other people to live there.”

View Full Article: LATEST: Periodic tenancies will make housing crisis worse, expert tells national radio show

Environmental issues won’t go away because of a cost-of-living crisis

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ESG – Environmental, Social and Governance – has become something of a mantra in the financial world where investment funds have been diverting the attention of their investors to those investments which best demonstrate constituent companies’ ESG credentials.

From private to public corporations, government, education and health institutions, all are under increasing pressure to demonstrate their commitment to gradually improving their ESG credentials in their property portfolios.

Whether you are a property owner, occupier, investor or developer these issues cannot be ignored, they are becoming increasingly important, not only are they driven by the need to demonstrate social responsibility, they are important elements in achieving your environmental, energy efficiency, human resources and commercial goals.

Investors and other stakeholders, as well regulators and the general public expect organisations to be thinking about and moving towards higher ESG compliance. In an era where evidence of climate change increasingly underlines the importance of adhering to stringent social and environmental standards, landlords face being left behind if they don’t start planning now.

Energy Efficiency

With city buildings soaring higher, urban centres getting bigger all the time, and summers getting hotter, the rate at which global energy is being used will continue to increase exponentially – you only need to look at the predictions for the increase in air condoning use, especially across Asia but also in Europe.

Most existing commercial and residential buildings in established urban areas were constructed well before anyone considered the importance of energy efficiency, with construction methods, glazing and levels of insulation proving totally inadequate, not withstanding the recent dramatic hikes in energy costs.

UK buildings are responsible for over 40 per cent of energy consumption in the UK. Nearly 70 per cent of that energy consumed in commercial buildings is used to provide heating, lighting, air conditioning and hot water. The potential economic and environmental savings are enormous.

Property owners and operators should now be planning and working to improve energy efficiency by applying a range of solutions that can help meet socially desirable targets, and will be highly beneficial long-term.

Formulating a plan

Owners and operators along with building occupiers need to work towards a long-term strategy with clearly defined and understood goals, targets set for achievement goals along the way. A survey whether carried out in-house or by external consultants should identify those measure that will be lease expensive and provide quick-fix solutions, followed by a hierarchy of priorities which become increasingly expensive.

Planning the works will necessitate working around occupiers’ needs, tackling improvements by moving ongoing works around, or waiting until buildings become vacant.

A focus on energy efficiency is a good starting point. Reducing energy consumption using a more efficient heating and ventilation system, better insulation and glazing, and using methods to self-generate energy to supplement the buildings total energy usage will provide a big hit.

Government drive to net zero

Commercial owners and occupiers will face an energy efficiency drive in the near future, with Government proposing two upcoming “compliance windows”, the first of which being from 2025 to 2027. From 1 April 2025, all non-domestic rented buildings in the scope of the Minimum Energy Efficiency Standards (MEES) regulations will be required to have a valid EPC, and if one has expired, a new one will have to be obtained.

The owners of commercial buildings including many institutional buildings such those used for educational purposes, student accommodation, hospitals and other institutional will be have to achieve a minimum Energy Performance Certificate (EPC) rating of at least C, if not B, by 1 April 2030, as well as being required to comply with more stringent inspections of heating and air conditioning systems.

Further tough measures are expected in the future regarding carbon reduction, where there will be introduced industry-wide standards and requirements for measuring and reporting carbon emissions.

Electric vehicle charging facilities

Especially in the case of institutional operators such as hospitals, education establishments and large employers, there will be increasingly a need to provided large scale electric vehicle (EV) changing points. There are projected to be millions of electric vehicles on the roads by 2030 when manufacturers will no longer be offering internal combustion engined car for sale.

The Department for Transport has announced funding of £500m to be made available to kick-start the roll-out of a national electric car charging network. The aim is to increasing the number of electric vehicle (EV) public charging points in the UK by tenfold over the next eight years, to make the network more accessible for drivers.

The money will be allocated via the Local Electric Vehicle Infrastructure (LEVI), providing local authorities with finance for the improvement of local facilities, along with a £950m Rapid Charging Fund to increase to 6,000 the number of EV rapid charging points on the UK motorway network by 2035.

While cost saving is a usually a priority aim when upgrading commercial buildings, other employer priorities will include improving air quality through better ventilation systems, and especially following the upheavals of Covid, measures to better cope with the post-Covid changing working model and a more comfortable working environment.

View Full Article: Environmental issues won’t go away because of a cost-of-living crisis