Is there still value from incorporating where no bank borrowings?

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Hi, Is there value from incorporating a buy to let portfolio where there are no bank borrowings?

We have a small portfolio of three let houses and an industrial yard with no borrowings and the total value is about £1m and the rentals are about £50k pa.

View Full Article: Is there still value from incorporating where no bank borrowings?

Ultimate guide: Fire safety in a rental property

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Fire doors and fire door safety are key elements in the Government’s drive to improve fire safety post-Grenfell. The crucial importance of fire doors will be given particular emphasis in Fire Door Safety Week, which is taking place this year from 19-25 September.

As a landlord, you have a moral as well as a legal responsibility to ensure the health and safety of your tenants. Under English common law and statute you owe your tenants a duty of care to provide safe habitable accommodation. 

The last thing you want is to have the injury or death of a tenant on your conscience, regardless of any financial consideration this would bring, and of course as landlord or agent (the responsible persons) you could face a stiff legal penalty if you’ve been negligent.

Since the Fire Safety Act achieved Royal Assent on the 29th of April 2021, the Government has identified control measures that are reasonably practicable for monitoring fire doors.

Buildings above 18 metres should have fire doors in common parts checked at three-monthly intervals, and entrance fire doors six-monthly. Buildings of 11-18 metres should be checked at six-monthly and yearly intervals respectively, and below 11 metres the responsible persons have a duty to put in place general fire precautions making sure that all fire doors – including flat entrance doors – are capable of providing adequate protection.

The fire statistics

A look at the UK’s latest available statistics published by the Home Office on fire accidents shows there were 33,180 house fires in the UK in 2020/21, with 311 fire-related deaths.

This figure has come down a lot – possibly as a result of greater awareness of safety issues and safety checks carried out – as the highest number of fires attended by fire and rescue services on record was 71,082, occurring in 1999/00. 

Cooking and cooking appliances are the leading cause of house fires followed by one-third caused by smoking materials and 8 per cent of house fires started deliberately.

In the same period, electrical wiring, batteries and heaters caused 12 per cent of fires and six per cent of deaths, while domestic appliance fires and other appliances such as dishwashers, extractor fans, fridge/freezers, tumble dryers and washing machines account for nine per cent of fires and five per cent of deaths.

Matches and candles also are a significant risk, causing around four per cent of fires and four per cent of deaths.

How do I comply?

Responsible landlords, as well as their agents, will want to do everything in their power to minimise the risk of accidents in their rental properties by carrying out the necessary safety checks and making sure the necessary safety equipment is provided and maintained.

Single property buy-to-lets have the lowest threshold of legal requirements for fire safety checks but they still have a considerable amount of statutory regulations to comply with in 2022.

As you go up the hierarchy of tenanted properties, commercial properties (non-domestic) have their own requirements and more stringent requirements apply to houses in multiple occupation (HMOs), both unlicensed and licensed, student halls, hostels, hotels, B&Bs, multi-story and high rise blocks of flats.

Especially since the Grenfell disaster, fire regulations have been made more stringent. The Building Safety Act received Royal Assent on 28 April 2022 and it’s a significant piece of legislation which will bring into law changes to building regulations for higher-risk buildings in England.

The Act also introduces changes to building control that will affect all buildings with the aim of strengthening the Regulatory Reform (Fire Safety) Order. It provides new accountability and duties for owners and managers responsible for a building’s safety. It also introduces competency standards and provisions to strengthen the construction products regulations.

Fire safety and negligence

Negligence is a common law tort. English case law has established a general duty not to cause injury or damage because of careless or negligent behaviour. It applies where the damage or injury is foreseeable and reasonable care has not been taken.

The last thing you as a landlord or agent want is to be shown to have been negligent in carrying out your duties in the event of an incident. You are guilty of negligence as a landlord if you either fail to do something that a reasonable person would have done or you do something that no reasonable person would have done – this concept of what is reasonable has been developed over the years by much case law and depends on the circumstances of each case.

If you breached your duty of care you can be liable to pay compensation if your action or omission has caused damage, injury or ultimately, death, and you could find yourself liable to a heavy fine or even a prison sentence, it’s that serious.

Insurance

No matter how careful you are as a landlord or agent these sorts of outcomes can be inadvertent, so it is vital that you carry the right type of landlords’ insurance policy. Data from LandlordZONE’s insurance partner, Total Landlord, reveals that in the last five years the average fire claim has totalled £22,003. Total Landlord’s infographic highlights fire related insurance claims including average claim value by region over the past five years and a breakdown of the most common causes.

A good landlord’s insurance policy covers you for most eventualities including fires and accidents, and it will cover for loss of rent in the event the property needs to be reinstated after a fire. What you must do however is fulfil all your legal duties as a landlord.

Fire safety legislation

As a landlord you have to comply with two key pieces of fire safety legislation: The Housing Act 2004 which applies to all residential properties and The Regulatory Reform (Fire Safety) Order 2005 which also applies to properties across the board.

The 2004 Act incorporates the Housing Health and Safety Rating System used by local authorities to identify hazards, and for HMOs the The Management of Houses in Multiple Occupation (England) Regulations 2006 applies in certain circumstances. The Fire Safety (England) Regulations 2022 also apply, all of which can become quite confusing for landlords.

Fortunately there are plenty of simplified guides available which help with the interpretation and application of these regulations: the Government’s guide to safety in Private Housing is a good starting point, as is A short guide to making your premises safe from fire, which applies mainly to non-domestic premises. In addition, Total Landlord have produced a very comprehensive guide on fire safety for landlords which you can read here.

For HMOs, this Guide to Fire Safety in Houses in Multiple Occupation produced by Hertfordshire Fire & Rescue Service is very good, as is this guide to Fire Safety in Shared or Rented Accommodation, and the Government’s fact sheet.

A guide to the The Fire Safety (England) Regulations 2022, which introduces new duties under the Fire Safety Order for building owners or managers (responsible persons) is available here.

There’s new guidance for landlords and tenants on smoke and carbon monoxide alarms regulations, which come into force on 1 October 2022 and you can also read Total Landlord’s updated guide, Are you compliant with smoke alarm and carbon monoxide detector regulations?

Meeting your obligations

These publications embody national guidance on fire safety and other safety issues for a variety of different kinds of houses, flats, hotels, hotels, high rise and non-domestic premises, and if followed landlords can be confident they have met their full legal obligations.

In preparation for this article I had a conversation with Darren Baird DMS, MIFireE, MIFSM, Group Director Total Fire Group Ltd, a specialist firm of fire consultants whose services I have used myself.

I asked the question: should I do my own fire risk assessments or should I use the services of a specialist like yourselves? As you might expect, but with good reason I would argue, he said use the services of a specialist at least initially, then if you feel you are competent you can repeat the process yourself.

Risk assessments are done to identify and remove fire risks and hazards, or to reduce these as far as possible. The average price of a professional assessment is in the region of £300, though on bigger premises, HMOs, business premises and high rise blocks this price will escalate.

If you wish to carry out your own fire safety risk assessment, Total Landlord has produced a handy landlord fire assessment template which you can download here.

With a single let (single family house), fire risk assessments are not a legal requirement, though I would argue a good safety checklist used before every letting is good practice and this provides strong evidence that you are doing everything possible to comply with the regulations if dated and signed – there are just too many items to be checked to do so from from memory, so a check list or risk assessment is a very useful tool.

With HMOs and commercial (non-domestic) premises, as well as high rise blocks, risk assessments are a legal requirement and therefore very important for all the common parts. Owners, landlords, agents, managing agents (the responsible person – can be a shared responsibility) and tenants all have a role to play.

Business tenants are responsible in some circumstances for doing a written risk assessment for their own premises, though in any event they must comply with their Employer’s Health and Safety responsibilities. Residential tenants have responsibility for certain safety aspects within their own accommodation, such as checking smoke alarms and carbon monoxide alarms, as well as making sure fire doors are kept closed and passageways are clear for escape routes.

Tenants are also responsible generally for ensuring that they don’t create a fire hazard in a multi-occupied building, for example by storing flammable items or blocking fire escape routes and they should be aware of fire safety measures, including an evacuation plan for the building.

Mr Bird recommends that tenancy agreements and leases incorporate what is known as a “responsibility matrix,” a simple means of defining who is responsible for what, though landlords and agents should bear in mind that it is not possible to off-load their own responsibilities for health and safety onto their tenants.

Fire alarms

In single lets this is straightforward, with a smoke alarm required on each level of the building, preferably bottom and top of stair wells, and CO alarms where there are fire/heating appliances. Mr Bird recommends that mains wired alarms – as opposed to battery operated ones – should be provided even in single lets, though these are not strictly a legal requirement. 

Where a fire alarm system panel is provided this should be tested regularly, but if there are call points (break glass points) in the building in HMOs and in commercial premises for example, these must be tested weekly – an onerous task for landlords or managers, but something that must be done.

Fire doors

If you’re an HMO landlord, you have a multi-occupied commercial building, or you manage a high rise block, the doors in your property that lead to common areas and escape routes must be fire resistant and close automatically. Mr Bird of the Total Fire Group Ltd says that since Grenfell and the new regulations, a great deal of emphasis is being placed on fire doors and door closers by fire officers – you must ensure that they are closing at all times

It’s also advised that fire doors are fitted to rooms where there is a high risk of fire starting, such as kitchens, especially if crossed by an escape route. As such, it’s a requirement to fit fire doors throughout all HMOs and multi-occupied buildings to be sure you’re meeting your obligations.

Generally fire doors are not specified in single-family lets although local authority building inspectors may specify them on escape routes. Where there are selective licensing schemes in place in England, again your local council may specify certain fire safety obligations on landlords, which could include fire doors.

There’s nothing to stop you from fitting fire doors in single single-let properties even when they have not been specified, at least it’s a good idea to fit a fire door closer for the kitchen.

In high-traffic areas it may be inconvenient to be constantly opening a fire door against a closer, so in this case, say in offices and HMOs, it is possible to fit sound-triggered or hard-wired retainers which fit to the wall and hold the door open with a magnet. If the fire alarm system is triggered, they automatically release and the closer shuts the door.

For safety, all outside doors should be fitted with internal twist-locks rather than locks needing a key to enable quick and easy exits if there is a fire.

Fire Extinguishers

Generally, fire-fighting equipment is not required in single lets but they must be provided in HMOs and multi-occupied buildings of all types, where they should be in the common areas and on each floor of the building.

It’s a good idea to provide a kitchen fire blanket and a multi-purpose extinguisher for your tenants even in single lets as it may help your tenants stop a small fire from getting out of control and assist their escape.

Remember that where fire fighting equipment is provided, tenants should be instructed on their use and they must be serviced, along with that of the fire alarm system, which must be carried out every year by an approved specialist company.

Compliance by tenants

Landlords are sometimes put in a difficult position if tenants fail to comply with their safety obligations. Blocking escape routes with trash and bicycles, bringing in furniture or dangerous heaters that do not comply with safety standards, or smoking and using candles are all common examples.

To combat this the tenancy agreement or lease should specify examples such as these to be incorporated into the “responsibility matrix”. This means the tenants would be in breach of their contract and subject to eviction or a court injunction if they fail to comply.

Insurance claims

In the unfortunate event of a fire in the rental property, a landlord will most likely be looking to make an insurance claim. Depending on whether the property is habitable after the claim it’s possible the event will bring the tenancy to an end, in which case the tenant/s will be looking for somewhere else to live.

Most insurance policies are there to protect the landlord so may not provide money for alternative accommodation for the tenant/s. The landlord should receive sufficient funds to cover the total cost of reinstatement providing the cover was adequate (i.e. not under insured) and in some cases the landlord’s policy will provide loss of rent while the reinstatement work is carried out.

It may be the case that the insurance company will try to recover the cost if blame can be pinned on a particular cause, for example the manufacturer of a faulty tumble drier, but unlikely from a tenant who will be unlikely to have the resources to pay.

Conclusion

Safety in your rental property, whether a single let, a flat, HMO or commercial property, is too important to be left to chance. You need to read the relevant guides and make sure that not only have you provided the right equipment and facilities, but you maintain this as required. If you use an agent they will share part of your responsibility for safety and should be in a position to advise you on exactly what’s required.

For more information on how to minimise risks, protect your tenants and your property, read Total Landlord’s new guide to fire safety regulations for landlords and download the landlord fire risk assessment template.

View Full Article: Ultimate guide: Fire safety in a rental property

Report sheds light on soaring insurance premiums for cladding-hit landlords

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Insurers’ reluctance to cover buildings with flammable cladding has resulted in soaring premiums for affected leaseholders – including thousands of landlords – since the Grenfell tragedy, a new report has found.

Buyers, including property managing agents and freeholders, are finding it more difficult to get insurance, according to the Financial Conduct Authority’s (FCA) study into the insurance of multi-occupancy buildings.

It reports that the mean premium across multi-occupancy buildings with flammable cladding jumped by 187% from £26,300 in 2016 to £75,600 in 2021.

The FCA details high commissions charged by insurance brokers, and the practice of sharing these commissions with freeholders and managing agents. It says this inflates premiums paid by leaseholders, who often have limited visibility on why a particular insurance policy is chosen or few routes to challenge the insurance costs passed on to them by freeholders.

Challenge costs

It suggests cross-industry risk pooling as a way to share risk across multiple insurers and adds that leaseholders should be able to challenge insurance costs, possibly through an independent alternative dispute resolution mechanism.

Housing Minister Simon Clarke says he is committed to taking action against abuses and promises to provide an update in the autumn on the available options. “The financial pressure currently placed on leaseholders continues to be unacceptable and I want to ensure that we rectify the issues outlined in the report as a matter of urgency,” says Clarke.

James Dalton, Association of British Insurers’ director of general insurance policy (pictured), says the analysis provides a clear recognition that there is no evidence to suggest insurers are making excessive profits.

But he adds: “We remain acutely aware of the challenges leaseholders affected by the cladding and fire safety crisis are facing and support the FCA’s recommendations on a risk-sharing scheme.”

Read the FCA report in full.

View Full Article: Report sheds light on soaring insurance premiums for cladding-hit landlords

Bank of England increases interest rate to 2.25%

admin    Uncategorized     agents

The Bank of England has increased interest rates in the UK by 0.5 percentage points, to 2.25% – that’s the highest level for 14 years.

The move has been made in a bid to tackle soaring prices and the rates are now at their highest since 2008 when the global financial crisis was at its height.

View Full Article: Bank of England increases interest rate to 2.25%

Carbon monoxide alarms – balanced flue boilers?

admin    Uncategorized     agents

Hi Guys and Gals,

Can’t find a clear answer to “is a CO2 detector required for a modern balanced flue combination gas boiler installed in a purpose-built cupboard on a landing?”.

Some say yes and some say no.

View Full Article: Carbon monoxide alarms – balanced flue boilers?

Regulator of Social Housing to introduce tenant satisfaction measures

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The Regulator of Social Housing (RSH) has revealed that all registered providers of social housing will need to collect and publish information on repairs, safety checks and complaints.

The move follows a consultation on tenant satisfaction measures (TSM) that will see tenants being able to scrutinise their social landlord’s performance and give them an insight into where they can improve.

View Full Article: Regulator of Social Housing to introduce tenant satisfaction measures