Remortgaging landlords hit with high rates after failing affordability tests

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Up to one in three buy-to-let landlords are struggling to remortgage after failing their lender’s affordability test, a BTL mortgage broker has revealed.

The research from Mortgages for Business shows that some buy-to-let investors are being forced to accept variable rates as high as 9.5% because they have failed remortgaging affordability.

View Full Article: Remortgaging landlords hit with high rates after failing affordability tests

Tenants with pets should pay higher rent to cover costs, says big agency

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Landlords should consider charging tenants with pets more rent to cover possible extra costs as well as conducting more frequent routine property visits, according to leading letting agency Johns & Co.

The London firm advises that potential expenses could include an additional professional deep clean including steam cleaning carpets and some decorative works at the end of the tenancy. 

“They could also consider some replacement furniture items if the property is furnished or part furnished and then add those costs to the rent,” suggests residential director Clynton Nel (pictured).

With tenants due to be given the legal right to keep pets as part of the upcoming Renters Reform Act, landlords need to adjust tenancy agreements accordingly, says Nel, who recommends that they include a pet clause in the lease agreement.

“This way, boundaries are established from the outset. If your tenants agree to the terms, you’ll have some protection if they fail to comply with the agreed terms regarding pets.”

Damage or disturbance

He suggests that landlords and letting agents should request a reference from a potential tenant’s previous landlord, based on their experience with any pets to find out if damage or disturbance was caused, as well as asking for a pet CV. 

“If they are hesitant to provide this for you then it may indicate that they know their pet is unsuitable for a rented property,” says Nel. 

“It’s likely that your concerns about accepting a tenant with a pet stem from the risk of property damage and the financial consequences this may have,” he adds.

“This is a landlord’s risk renting to tenants with or without pets. I have seen properties with serious damage from tenants without pets.”

In January last year the Government introduced a new model tenancy contract that includes provisions for pets.

View Full Article: Tenants with pets should pay higher rent to cover costs, says big agency

Wily landlord wins licencing battle after standing up to city council

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A canny landlord who stood up to council inspectors has successfully challenged a licence condition to install a new fire door at his student HMO.

Roger Braithwaite, a career and expert environmental health officer, was told by Coventry Council that he could only have a licence on the property in Cable Yard (pictured) for two instead of the normal five years.

The authority said this was due to his failure to submit a complete application in time, although the landlord explained he had had problems with the on-line process – and this complaint was partially upheld.

A First Tier Property Tribunal heard that the council also insisted that he fit a fire door at the bottom of the stairs leading to the kitchen.

However, Braithwaite argued that other similar properties in the yard did not have this requirement and stressed that safety standards in the house exceeded those required by HomeStamp Guidance, followed by the council.

An independent building engineer confirmed that the proposed fire door would constitute a breach of building regulations and cause an obstruction.

Not necessary

At the hearing, the council agreed that fire doors were not necessary but then demanded that the kitchen should be compartmentalised.

The tribunal accepted that the compartmentalisation of the kitchen including a door would obstruct the escape route and said it was satisfied the property met the general fire precautions.

It agreed with the landlord and ordered that the HMO licence should run for five years without conditions.

The judge added: “The late change of approach by the respondent [the council] was unsatisfactory and appeared to be something of a rear-guard action to justify its continued opposition to the applicant’s appeal.”

Read more about First Tier Property Tribunal decisions.

View Full Article: Wily landlord wins licencing battle after standing up to city council

1000s of ‘mortgage prisoner’ landlords still need help, says Martin Lewis

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Mortgage prisoners – many of them landlords – should be offered free financial advice and interest-free equity loans from the government to prevent them from losing their properties, a new study suggests.

About 195,000 households are still trapped in expensive variable-rate mortgage products, mostly loans that were taken out before the financial crisis of 2007/08.

These mortgage prisoners borrowed from lenders such as Northern Rock and Bradford & Bingley who went under during the crisis, and whose closed book loans were sold to investment firms that don’t offer mortgage products.

While the borrowers can’t move to a better mortgage with their lender, many find it difficult or impossible to take out new loans with active lenders because they don’t fit the criteria of a viable borrower; they can’t, or don’t know how to, meet current affordability tests for new loans.

It’s estimated that prisoners could now be paying rates as high as 8% on their home loans.

An LSE study into mortgage prisoners, backed by Martin Lewis of MoneySavingExpert, explains that the cost in human terms is high.

“Borrowers face financial pressures that affect their health, and the current economic context means that without help, an increasing number will likely lose their homes,” it says.

“Those households who are still prisoners are the victims of circumstances that were not of their own making.”

Dramatically

The situation facing these mortgage prisoners has become dramatically more difficult, according to the report, whose authors suggest providing free comprehensive financial advice to all 195,000 closed book borrowers, and interest-free equity loans to clear the unsecured element of Northern Rock’s Together mortgage.

The government could offer an equity loan for a maximum of 40% of the value of the property in London and 20% elsewhere – similar to Help to Buy.

It adds: “These will hopefully enable a majority of prisoner households to make progress towards returning to the mainstream and active mortgage market.”

View Full Article: 1000s of ‘mortgage prisoner’ landlords still need help, says Martin Lewis

Landlords are quitting the PRS because of Government ‘indifference’

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A property expert has slammed the government’s ‘indifference’ for the growing crisis in the private rented sector (PRS) as landlords flee and fewer investors step in.

That’s the view of Jonathan Rolande of the National Association of Property Buyers.

View Full Article: Landlords are quitting the PRS because of Government ‘indifference’

TV star to lead debate on ‘dramatic’ changes due in Renters Reform Bill

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Readers concerned by the looming Renters Reform Bill should make their way to the National Landlord Investment Show on 14^th March were Paul Shamplina will be leading a debate on its radical measures.

Panellists on the stage with him will include Richard Blanco from the NRLA, Julie Ford of tenancy consultancy Gothard Rowe, Sue Coulson of tenant finder service Capital Letters.

They will be talking about the multiple and dramatic changes that landlords, tenants and letting agents will face once the Bill becomes law, most likely later this year.

Although delayed, NRLA chief executive Ben Beadle this week said that the Bill is likely to enter parliament sooner rather than later, possibly before the Easter recess at the end of May.

12 proposals

Shamplina’s debate, which is taking place at Old Billingsgate in London at 2pm, will look at the 12 proposals already on the table within last June’s renting reform white paper.

This included plans to abolish Section 21 ‘no fault’ evictions, limit rent rises to once a year, a single ombudsman for the sector, a national register of landlord properties, greater investigative powers for local councils and fixed-length ‘periodic’ tenancies.

The Government has said it will give landlords a six months’ grace period to adjust to the new measures once the Bill becomes law – so a hard compliance deadline in early 2024.

As well as hosting the debate, Shamplina is also appearing on several other panel sessions at the show, and hosting his own talk.

View Full Article: TV star to lead debate on ‘dramatic’ changes due in Renters Reform Bill

House prices in Scotland start to flatline

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Scotland’s average house price is flattening – but some property types have not yet peaked, one firm of lettings and estate agents says.

DJ Alexander says that Land Registry data for last year show that while average house prices began to flatline at the end of 2022

View Full Article: House prices in Scotland start to flatline

Staggering inaccuracies in EPCs undermine net zero efforts

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The Government puts its faith in EPC ratings to measure property energy usage in order to drive up energy efficiency in properties towards its energy targets, but can owners have the same faith?

Are EPCs as they stand robust enough? Do they give valid and reliable ratings when the Government uses these as its “North Star” to satisfy its legal commitment to net zero by 2050. Also as its legal standard for all sales and lettings, and increasingly they are used by lenders as a gateway to approve mortgages?

“Taxpayers, homeowners and landlords face paying billions of pounds to upgrade the energy efficiency of their homes – but the ‘staggering inaccuracy’ of energy certificates means the upgrades will make little difference to either climate change or energy bills.”

So says Martina Lees writing for The Sunday Times last week, based on the results of an in-depth study carried out by Climate Fintech company, Carbon Lance.

And they’re not on their own. Research carried out by property industry research and measurement group, SPEC, in their report “Impacts of inaccurate area measurement on EPC rating” concludes that of 2,500,000 EPCs lodged (15%) are incorrectly rated, having a score within 2 points of an upgrade or downgrade if measured accurately.

An estimated 35,028 E-rated properties are being let illegally, having borderline EPC scores that would likely be downgraded to F if their area was accurately measured, says SPEC.

Carbon Lance reckon, after comparing EPCs across 17,000 homes, that the average electricity and gas energy usage recorded was actually 91 percent lower that the figure predicted by the obtained EPC rating.

“The inaccuracy is ‘quire staggering’ says Madhuban Kumar founder of CarbonLaces. And apparently this inaccuracy, according to their figures, increases exponentially as the rating comes down the scale, grade G being the lowest rating with the highest inaccuracy.

Cursory inspections

What is often misunderstood about these these ratings is, they are set by assessors who do few if any actual energy efficiency measurements. It is very much an observation without doing any invasive checks, obtaining data often based on visual assumptions. No thorough testing whether there is or is not cavity wall or underfloor insulation for example, resulting in data fed into a computer program whose algorithm arbitrarily works out a score.

In the case of a domestic energy assessment, the assessor visits the property and carries out a non-invasive visual inspection looking into the characteristics of the property and how they might affect energy efficiency. Key features are noted such as the type of heating system, locations of radiators, sources of heat, areas of heat loss, insulation types, construction methods, types of glazing and doors etc.

The assessor measures the floor areas of rooms in the property, a key input to the EPC rating calculation. Their observations and size measurements are then typically entered into a software program, often on an application running on a tablet or mobile, which will then automatically calculate the EPC score and band rating for the property.

There are countless stories around of owners making so called improvements only to find their EPC rating has gone down when re-assessed. Fitting an electric boiler for example, going to LPG instead of natural gas or oil, can all negatively affect the EPC score.

The Sunday Times article also cites the issue of new build quality, where EPCs have been assessed purely on building plans, or by using just one sample property assessment on a new build estate to rate the whole estate.

The “gold standard”

Introduced in 2007 the EPC was to be the “gold standard”, helping people choose a property when renting or buying to gauge the cost of running a home. And the measure is beginning to gain traction among the buying and renting public who are beginning to rely on this information as their guide to energy efficiency.

It is also an increasingly important factor relied upon by mortgage lenders, most of whom will restrict loans to those with acceptable EPC ratings and some banks even adjust their lending rates depending on the EPC scores.

The UK Government has committed to reaching net zero emissions by 2050 and as such needs a measure to help it achieve this in property. This is a laudable aim, but its system of measurement needs to give valid and reliable results.

As part of the Government’s drive to net zero it is looking to reduce emissions across a wide range of sectors, including property. From April 2023 new rules on energy efficiency come into force in England and Wales.

Commercial property lettings

From this April it will be a legal requirement for all commercial rented properties to have an EPC (Energy Performance Certificate) rating of at least E. This is currently a legal requirement for commercial and residential properties for new tenancies or on renewal, but this requirement will be extended to both new and existing commercial leases too. All residential rented properties must already have a minimum rating of “E”.

Energy Performance Certificates (EPCs) are meant to determine how energy-efficient a property is from A (most efficient) to G (least efficient). They should also show the potential level of emissions plus recommendations and associated costs of improving the rating for that property.

Owners must now obtain an EPC whenever a property is built, sold or rented. Landlords contemplating an increase in the minimum EPC rating to “C” (possibly by 2025) potentially face large bills to ensure their properties are compliant.

Minimum energy efficiency standards

So, minimum energy efficiency standards (MEES) requirements will extend to all existing commercial leases from 1 April 2023 and the rating will rise in future, with the government currently consulting on its aims to bring the majority of properties up to EPC band C by the end of the decade.

Information collected by Handelsbanken, a local relationship bank operating in Sweden and in the UK, obtained by research into the UK market to find out how prepared landlords are to meet the new regulations, found that:

• In order to meet the new EPC legislation changes 95% of commercial landlords will need to make improvements to their properties, with installing insulation (30%), double glazing (27%) and a new, energy-efficient boiler (26%) the most likely upgrades
• The anticipated cost of this investment is set to be £95,400 per corporate commercial landlord – or 3% of the total portfolio value
• Nearly a quarter of commercial landlords (23%) were not aware that this legislation was coming into effect
• One in nine (11%) plans to sell any properties with a rating of less than E as they cannot afford to make them more sustainable, while only 5% have properties with an E or below rating
• The main issues preventing landlords from making their portfolios more environmentally sustainable are not having enough knowledge (50%), regulations making it too difficult (48%) and not being able to access finance (18%)
• However, 67% of landlords believe that their portfolio is already sustainable enough.

Residential property lettings

As for EPCs for residential rental properties, the government began a consultation in 2020 about updating the MEES rules and came up with some new proposals such as reaching EPC “C” by 2025 for new lettings and 2028 for existing lettings. These proposals are not yet in law.

The cost cap to help landlords finance the improvements needed to reach the required standard would under the proposals be raised from £3,500 to £10,000 per property. The government has estimated that this would be sufficient to bring more than 90% of D-rated properties up to a C rating, as well as nearly 60% of E-rated properties. It’s not clear yet whether existing spending would count towards the new cap.

In addition, guidance is being issued on the priority routes to improvements in residential properties known as a “fabric first” policy to control the order work is carried out. Improvements to the fabric of the building (ie insulation, windows and doors) would be prioritised before other additional measures, such as new heating systems, solar, heat pumps etc are installed.

More accurate EPCs

The Government has instigated a review and EPC action plan designed to deliver an EPC system that produces accurate, reliable, and trusted EPCs. Actions delivered to date, says the Government “ include the new Energy Performance of Buildings Register (‘the Register’) designed according to government standards and extensively tested with Register users; the implementation of EPC lodgement rules that help prevent lodgement errors; and the publication of a consultation on options for the introduction of a new performance-based operational ratings scheme for non-domestic buildings.”

OPINION: The EPC ratings system is “not fit for purpose”

View Full Article: Staggering inaccuracies in EPCs undermine net zero efforts

Build to rent is UK’s fastest growing housing sector

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Build to rent (BTR) is growing more rapidly than any other housing sector, according to a new report.

The British Property Federation (BPF)’s Build to Rent Q3 2022 report revealed growth of 15% year-on-year, with more than 240,000 homes either in planning

View Full Article: Build to rent is UK’s fastest growing housing sector