Property investor hit with £16,000 rent repayment order after licencing failure

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The director of a property investment and management firm has been stung with a £15,900 rent repayment order after failing to convince a First Tier Property Tribunal that he didn’t know about HMO licensing.

John Campbell, the boss of Hackney 4 Ltd, claimed he was unaware his three-bedroom flat in Cazenove Road (main picture), London, was covered by Hackney’s additional licensing and selective licensing schemes.

He had owned the property since 2007 but hadn’t seen any local publicity, or reference to it on internet landlord forums and received no notification from the council or from the superior landlord.

The four tenants – who shared the pay-out, along with £600 costs – pointed out that blaming his ignorance was disingenuous due to his position in the property company.

However, Campbell argued this was based upon his knowledge of property investment and management which did not include a technical expertise in legislation regulating the PRS.

Reasonable

The tribunal ruled: “The licensing scheme has been in place since 2018 in Hackney. It may have been objectively reasonable for the respondent to be ignorant of the requirement for the first six or nine months of its implementation. It is not objectively reasonable to be ignorant of the requirements for a period of one or more years.”

It had serious concerns about the landlord’s conduct in relation to standards in the property where he had delegated several management responsibilities to the tenants.

The Tribunal also pointed to persistent damp and the presence of mould, his failure to replace an ageing boiler which kept breaking down, and the fact there was no communal space other than the kitchen.

It added: “It seems unlikely to the tribunal that the property will be licenced for four separate households once it is inspected by London Borough of Hackney.”

Read the judgement in full.

View Full Article: Property investor hit with £16,000 rent repayment order after licencing failure

20 years supporting property investors

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At the Property Investor Show at Excel last Friday, I was delighted to be presented with an award for being one of the longest-standing exhibitors at the show since 2003 and having provided support to other property investors for 20 years through our property investors network (pin) monthly networking meetings all over the UK.

View Full Article: 20 years supporting property investors

Landlord given suspended prison sentence after appalling illegal eviction

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A landlord has been handed a suspended jail sentence for kicking out his tenant during a national eviction ban.

Amjad Ali Khattak removed the woman’s possessions in December 2020 and left them on the street in the rain (pictured), which was witnessed by a police officer.

Khattak admitted the offence and was sentenced to nine months in prison, suspended for two years, and ordered to pay prosecution costs of £15,000. 

Oxford Crown Court heard that the landlord, who owns the ground floor flat on Gatteridge Street (main pic), Banbury, failed to allow a Cherwell District Council environmental health officer to inspect the electrics but entered without the tenant’s permission to check the fuse board.

The tenant was forced to use old £1 coins to feed a meter and had suffered an electric shock using white goods in the kitchen.

Reference checks

The court heard that the tenant’s deposit had not been placed in a protection scheme, while Khattak had not carried out right to rent, or reference checks.

Her tenancy agreement was removed from among her personal belongings, while her cat disappeared during the eviction and has not been seen since.

Nicola Riley (pictured), the council’s assistant director for wellbeing and housing, says it advised Khattak that it would be illegal to evict his tenant; he not only ignored this warning, but also went on to disregard requests from the council and the police to allow her to re-enter her home.

“At the time of the offence, the tenant did owe a small amount of rent, but she had clearly communicated to her landlord that she would be able to catch up with payments in the coming days,” adds Riley.

“Responsible landlords will follow due process if there is a genuine need to evict a tenant, but this was not one of those cases.”

Picture credits: Cherwell council.

View Full Article: Landlord given suspended prison sentence after appalling illegal eviction

All regions see rental yields go up

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All regions have seen an annual and quarterly rise in rental yields – up from 6% a year ago, and 6.4% in the last quarter of 2022 to 6.5% now, research reveals.

According to Fleet Mortgages, the growth in yields is down to a shortage of rental stock and high tenant demand.

View Full Article: All regions see rental yields go up

Government’s war on landlords causing havoc in the rental market

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“Britain’s demented war on landlords has already backfired”, says Daily Telegraph columnist Matthew Lynn, and “There is no sign whatsoever that the Government realises it is to blame,” he says.

Furthermore Mr Lynn says that the chaos in the rental market is adding to Britain’s inflation problem because housing costs are a major factor in the inflation calculation. Rising rents are sending inflation even higher – “Now the Government seems determined to make things worse,” he says.

The latest inflation figures in April show that UK inflation remains stubbornly above 10 per cent and disappointedly overshoots the Bank of England’s prediction by at least 1 per cent, while food and housing costs are growing at at least double the 10 per cent average rate.

The Government and the Bank of England blame these persistently high inflation rates on the Ukraine war leading to high food and energy costs, as well as sluggish supplies of goods and materials following Covid. But, argues Lynn, successive Conservative Governments’ housing policies have been a major contribution to the problem.

Nine interest rate rises by the bank of England, from near zero to 4 per cent, in the last18 months have failed to quell inflation, and it looks like there’s more to come. It’s predicted that the bank rate may rise to 4.5 per cent soon, which will put more pressure on buy-to-let landlords with mortgages to show any profit at all, without putting up rents further.

Since George Osborne’s tax hikes, removing landlords’ ability to claim mortgage interest payments against income, a 3 per cent surcharge on stamp Duty (SDLT) and the removal the 10 per cent wear and tear allowance, there’s been no let up for landlords.

Next came a slew of increasingly complex regulations, tenants’ right-to-rent immigration checks, limits on damage deposits, increasingly demanding energy performance (EPC) standards for rental properties, and now imminent new laws which will give tenants far more security of tenure.

All this has put much more pressure on the small-scale landlord. The latest interest rate rises will make it more difficult for landlords with mortgages to make a profit from letting property. Is it any wonder many are considering downsizing their portfolios, if not selling-up altogether.

The result is those landlord prepared to stay the course are increasing their rents along with their costs inflation and there’s developing a real shortage of suitable rental accommodation at a reasonable price for the average renter.

So, Government action over these last 10 years is driving small-scale landlords, and those who have not had the foresight to incorporate their businesses, by far the majority, are being driven out of the market.

Even the Bank of England is now admitting that the higher tax rates, the increasing regulation of the sector, and the more recent increases in borrowing costs, are resulting dramatic rent increases and a severe shortage of rentals.

So, argues Lynn, “This demented war on landlords is now a major factor in the cost of living spiralling out of control.” While the Government continues on its current policy path with this property market, until more housing gets built, and landlords are given some incentive to invest, he sees no prospect of bringing inflation back down again.

London rents in some locations are rising at a rate approaching 30 per cent prompting the Mayor Sidiq Khan to start a campaign asking for rent controls similar to those imposed by the SNP Government in Scotland, while the rest of the country has seen rises in the region of 5 per cent, considerably more than a year ago.

The imminent ban on the Section 21 so called “no fault” evictions included in the Renter’s Reform Bill, coupled with the investment needed to upgrade much of the existing old property stock used in renting, is making many landlords take stock of their lot.

As Mr Lynn says,

“The completely predictable result is that landlords are getting out and doing something else with their money. An estimated 140,000 landlords retired, sold up and left the market last year according to research by Hampton’s and a further 500,000 are expected to follow over the next five years.”

You don’t take a master’s degree in economics to know that if you remove supply (of rental housing) while demand for renting remains the same or is rising – because first time buyers are being priced out of the owner occupier market – rents will continue to rise and fuel inflation.

It’s hard to believe that a Party in power for so long shows so little sure grasp of the real issues involved in housing and how this now fuels inflation. When rents rise at the rates they have been doing, renters will inevitably want to maintain their standard of living by asking their employers for more money. This is threatening a runaway wage-price inflationary spiral that could easily get out of control as it did in the 1970s.

As Mr Lynn says,

“The simple fact of the matter is that the Government has made an almighty mess of housing policy for years. We need lots of affordable homes for people to buy, and homes for people to rent as well, depending on their circumstances. The only way to achieve that is to rip up planning restrictions, overrule local councils and the courts, and start building a lot more.

Furthermore,

“The war on landlords has already backfired badly, sending rents spiralling out of control. And now it is driving inflation higher too. The worst part of it all is that there is no sign whatsoever that the Government realises it is to blame.”

View Full Article: Government’s war on landlords causing havoc in the rental market

ELECTIONS: ‘Get political and quiz candidates’ landlords are told

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Landlords should do their homework before voting in the local elections next week and take the chance to quiz candidates on issues affecting the PRS, advises Leaders Romans Group (LRG).

It points to a number of pressing local issues which can be determined by these elections, such as proposed changes to short term lets and selective licensing.

The agency suggests questioning what the impact any scheme has had on landlords and how the funds raised by selective licensing have been used.

Another hot topic on a local level is the re-banding of HMOs for valuation purposes and landlords should look at whether their would-be councillor is in favour of introducing individual council tax bandings per room.

Their view on issues in the Renters’ Reform Bill is worth considering, suggests LRG, and whether they have expressed any support for landlords, rather than blindly taking the tenant’s side in any dispute.

“How do they intend to work with landlords directly to ensure the right amount and type of homes are available in the PRS?” adds Allison Thompson (pictured), national lettings managing director.

Doorstepping

She tells LandlordZONE that if a candidate turns up on their doorstep, landlords could use the opportunity to lobby for much-needed change in support of the private rented sector – proper consideration of emerging legislation and initiatives to mitigate its potential impact. 

“A lessening of the existing – and future – rules and regulations and fiscal change, perhaps in relation to stamp duty, Capital Gains Tax or mortgage interest relief would go some way to improving prospects for the private rented sector,” says Thompson.

View Full Article: ELECTIONS: ‘Get political and quiz candidates’ landlords are told

Landlords and letting agents are a ‘perfect match’

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Landlords who are concerned over upcoming regulations should consider using letting agents, one firm says.

The automated rental payment service Payprop says using letting agents is an ‘obvious solution’ for landlords.

The organisation also warns that legislative changes will cause a big shake-up in the private rented sector –

View Full Article: Landlords and letting agents are a ‘perfect match’

Rent cap and evictions ban forcing landlords out say 83% of Scots agents

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Propertymark says Scotland’s emergency legislation is alienating landlords, discouraging investment, inhibiting supply, and causing rents to rise faster.

It reports that while most landlords can’t evict tenants following the Cost of Living Act extension, those with tenancies that are naturally coming to an end are now more likely to want to sell.

Propertymark’s research found that 83% of letting agents saw an increase in the number of landlords serving notice to sell because of the temporary measures, up from 69% in December.

Those that aren’t selling are securing their future financial position by raising rents in between tenancies, and when asked, 94% of agents said their landlords were now more inclined to do so, compared to 91% in December.

In January, the Scottish government announced a further six-month extension of the rules until the end of September meaning that if a landlord wants to increase a tenant’s rent mid-tenancy, this will be capped at 3%.

Enforcement of evictions continues to be paused except in a few specified circumstances. 

Exemptions

Of all the notices served, 67% do not meet the exemption criteria and are awaiting processing from October 2023, up from 44% in the last survey.

Timothy Douglas (pictured), Propertymark’s head of policy and campaigns, says rent control is causing problems for the sector in Scotland. “We know from our member agents that as a direct result of the Cost of Living legislation, rents and costs are now being more heavily scrutinised by landlords, with many putting up rents between tenancies to protect against any future cost implications.”

Adds Douglas: “The crux of the housing problem is that demand is far outstripping supply, but this legislation is counterproductive for tenants, pushing landlords out of the sector and leaving little choice for those looking for a rented home.”

View Full Article: Rent cap and evictions ban forcing landlords out say 83% of Scots agents

How to win deposit disputes

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It’s frustrating when the landlord-tenant relationship has to end with a dispute over damages in the property, the need for deep cleaning, or rent owing, but the deposit is there for these reasons. Unfortunately, tenants don’t always see it that way, and they are not always aware of the costs involved in: repairing damage, deep cleaning, replacing removed items or removing items left behind, replacing broken items, and collecting arrears of rent.

Most landlords are willing to write-off small amounts and put the loss down to experience (it’s is a tax claim expense) to avoid the hassle of taking a dispute through to a formal claim, but when there’s a substantial amount of money in involved, landlords should pursue a claim.

Fair wear a tear must be taken into account – see below – so any claim allowing for this will depend on the length of time the tenant has been in residence and the age of items claimed for among other factors.

Justifying your claim

Landlords often fail to win tenancy deposit disputes, not because the claim is unjustified, but purely because of the way they have gone about claiming, and usually because they have insufficient evidence to support their claim.

Some years ago a case involving a tenant with a pet cat leaving fleas left behind in the property is a good example of how a deposit claim can be won or lost on the way the claim is presented and the available evidence.

In this case involving a dispute of £180 for the pest controller’s fees, the dispute went to the deposit scheme’s arbitrator who awarded for the landlord.

Despite the tenant’s arguments to the contrary, and good evidence put forward the landlord claiming that the tenant left behind a flea infestation which had to be irradiated professionally, the landlord won the case.

Claims for pet related costs are likely to increase because (1) the government is encouraging landlords to take in more “well behaved” pets, and new legislation in the Renters Reform Bill going through Parliament, and (2) the tenant fees act now restricts the maximum deposit a landlord can take to 5 week’s rent, leaving landlords the only option for their protection, when pets are involved, to charge a higher rent.

According to a report in Property Eye at the time, in the cat case the landlord claimed the tenant should pay for the cost of treating the flea infestation at the property. But the tenant denied there was any evidence of fleas at the property when they left, and put forward convincing evidence that their cat was flea-treated by their vet and had never had fleas.

The landlord submitted the following evidence to the adjudicator:

• dated and signed check-in and check-out reports
• invoice in the amount claimed from a pest treatment contractor
• a statement of opinion from the contractor
• various emails between landlord and tenant
• a photograph of a flea-bitten ankle.

The tenant submitted:

• Various documents relating to their cat’s vet treatments
• receipts for the purchase of pet flea prevention treatments.

No mention of fleas was made on the check-in report, but the (dated) photograph of the landlord’s flea bitten ankle appeared to have been taken at least a week after the tenancy had ended.

This evidence the adjudicator thought was insufficient, but what swung it for the landlord was the pest controller’s statement that showed a flea infestation was present at the property, two weeks after the tenancy had ended, with no other occupation in between.

Further, the tenancy agreement set out the landlord’s agreement that the tenant could keep a cat at the property, stipulating clearly the tenant’s responsibility for any costs arising for damage or to eradicate any pests caused by or resulting from the presence of the animal in the property – the relevant clause in the agreement stated very specifically: “The tenant will be liable to compensate the landlord for any losses due to flea infestation by an animal of the tenant, his family or his visitors”.

Whether disputes like this one go to the deposit scheme’s dispute arbitration or a county court, the principles are very much the same and there are a couple of lessons to be drawn here:

1. Documentary and independent evidence is vital. This, including any photographs, must be dated and confirmed independently.
2. The tenancy agreement must set-out very clearly the obligations and responsibilities of the parties for these eventualities.

These measures noted in the contract are particularly important where pets are involved, but also for other potential damage such as condensation, rent arrears issues etc.

Landlords take deposits to give them financial security should tenants:

(1) cause damage in the property,

(2) leave the place needing extensive cleaning,

(3) take items, or leave possessions in the property which need expensive removal, or

(4) leave owing rent.

Landlords / agents should ensure that the letting agreement (contract) provides for all these reasons for retaining a deposit.

Landlords / agents should also be aware that damage deposits should not exceed 5 weeks’ rent.

Landlords and agents taking a deposit for an assured shorthold tenancy (AST) tenant must protect it in one of the approved schemes within 30 days of taking it. They are also obliged to serve on the tenant a set of statutory information regarding the scheme in question. This information and documentation (s213 notice) with instructions will be available to download from the relevant scheme’s website.

Landlords and agents are advised to get proof of service of this documentation as failure to comply with any of the deposit rules will invalidate any accelerated possession (s21) claim.

Deposit Disputes and that crucial evidence

Most tenancies end amicably and the landlord or agent will agree to either refund the full deposit or an agreement between them and the tenant will be reached, such that all or a part of the deposit is retained to cover the issues mentioned above.

However, it is sometimes not possible to reach agreement and therefore the deposit amount in dispute is put into an arbitration process, which is handled by the tenancy deposit scheme in question at no cost to the parties involved. In some cases, where complications arise, or the amounts exceeds the deposit to some degree, the dispute will be transferred to the county court, in which case fees and costs will be involved, and normally the losing side pays these.

Deposit amounts in dispute will be released from the scheme when the parties agree to this. Otherwise the scheme adjudicators will decide on the evidence presented to them who receives the money.

It is crucial therefore that landlords and agents, during the course of letting and managing a tenancy, build-up sufficient documentary evidence to enable them win a deposit dispute claim, should the need arise: a good inventory (preferably done by an independent inventory clerk) with check-in and check-out reports, including photos and tenants signature, is pretty much essential.

Further evidence would include estimates and invoices for repairs and renewals, cleaning and removal costs, rent schedules where there are arrears and statements from third parties / contractors as in the case above. It is not possible to claim for work that landlords do themselves (DIY).

Fair Wear and Tear

The contract between a landlord and a residential tenant has an implied term which means dilapidations to the property due to fair wear and tear are acceptable and cannot be claimed against the deposit.

What is fair wear and tear is a matter of subjective judgement to some extent but is informed by the experience of the landlord, agent or inventory clerk, and when in dispute will be decided by the scheme’s adjudicator.

These requirements contrast with commercial tenancies where the lease usually requires the tenant to put back the property into a tenantable state, which usually means complete repair, refurbishment and redecoration, and can even stretch to major structural repairs.

Fair wear and tear has been defined by the House of Lords as resulting from:
“Reasonable use of the premises by the Tenant and the ordinary operation of natural forces”

This statement is not all that helpful when it comes to the task of deciding what is fair wear and tear and what goes beyond that?

Reaching a decision means making allowance for:

– The original age, quality and condition of any item at the start of the tenancy
– The average useful lifespan to value ratio (depreciation) of the item
– The reasonable expected life time usage of such an item
– The number and type of occupants in the property
– The length of the tenants’ occupancy

It follows therefore from established legal practice that a landlord cannot charge its tenants the full cost of having any part of a property, or any fixture or fitting, returned to its original condition, or even the condition it was in at the start of the tenancy.

When it is not possible to make repairs, any compensation when a new for old replacement is made will therefore involve an allowance for age, quality and fair wear and tear – a contribution from the landlord.

Further, a duty is placed on landlords and agents to adopt the most reasonable, practical and appropriate cost-effective approach to achieving a remedy, usually meaning repairs rather than new for old.

Appropriate remedies might include:

Only replacing items where it is so severely and extensively damaged it is now beyond economic repair or, it has become unusable. Here, the most economic repair would be expected.

Small stains on carpets for example may be put down to fair wear and tear, whereas more extensive marks and staining or burns would not.

However, depending on their position it may be possible to cover them with strategically placed rugs and mats and the adjudicator may insist on that.

Otherwise where a replacement carpet is deemed acceptable, any compensation by the tenant would need to take into account: (1) its appropriateness for use in a rental (e.g. colour), (2) quality, its age and expected lifespan. Therefore in these cases the tenant would be asked for a contribution to the cost, new verses old.

Repairs or Cleaning

What is clean to one person is sometimes downright filthy to another.

Cleaning is the most common cause of a deposit disputes between a tenant and a landlord, with nearly a quarter of all dispute cases being attributed to issues of cleanliness.

Therefore any adjudicator’s decision will depend on the evidence submitted, how reasonable is the amount being claimed, and is the claim supported by a contractor’s statement.

Questions the adjudicator may ask:

– Who says it needs cleaning? Is this opinion independent and impartial, e.g. an inventory clerk or agent?
– Did the tenant agree to condition and cleanliness at the start of the tenancy and was it made aware of potential costs of not complying – e.g., a specific clause in the agreement?
– Was the property professionally or DIY domestically cleaned at the start of the tenancy?
– What evidence have you got that shows deterioration, start to end?

Photo & Video Evidence

Photo and video inventories (ideally produced independently) are useful for recording the condition of the property at the start and end of the tenancy and when done properly will provide a clear record of the property prior to its occupation.

You need to make sure all photographs and video evidence is clearly dated and signed and agreed by both parties. This is much easier to achieve when an independent inventory clerk completes the task.

Always make sure the tenant is given a copy at Check-in/Check-out stage, and get a signature to say they agree and understand all the implications after viewing and discussing.

The end result of adjudication will always hinge on the quality of the paper-based documentation presented, so good quality photo evidence, signed by both parties will add considerably to the weight of a landlord’s case.

Preparing a Claim

Preparation for a deposit dispute claim starts pre-tenancy. If you have not planned your management process: agreement wording, quality inventories, check-ins and check-outs, communicating to tenants your expectations, interim inspections etc., then your chances of successfully claiming against a deposit are pretty low indeed.

Putting together a good claim is time consuming and evidence heavy – the adjudicator can make a decision only on the evidence presented in document form. Furthermore, there is no appeal once the adjudicator makes a decision. You cannot challenge an adjudication decision unless it is via a court of law. The more evidence you can produce and the more transparent you are with the whole process the better your chance of success.

As a landlord or agent you need to weigh the costs of putting forward a good claim against the amount of money involved. If the one outweighs the other it is sometimes better to return the deposit to the tenants and “bite the bullet” as to the costs involved.

This can sometimes be an act of good will and will prevent any chance of retaliatory action by the tenant – it would not be the first time a landlord had a brick through the window of its rental property because the tenant felt hard done by, losing its deposit.

To help you prepare your claim properly here are two very useful guides: – Recommended Books

Understanding Fair Wear and Tear – a MyDeposits guide

How To Win Deposit Disputes by Tom Derrett

If you have further questions about any of the issues raised here, post to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.

View Full Article: How to win deposit disputes

House price growth slows down – and renters look to buy

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Economic headwinds are seeing home sellers cautiously pricing their properties to sell with April’s prices increasing less than expected, Rightmove says.

And record high rents mean that tenants who can afford a deposit and a mortgage are increasingly looking at buying.

View Full Article: House price growth slows down – and renters look to buy