Why are buy-to-let landlords rushing for the exit?

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The Government has given buy-to-let landlords two compelling reason to sell-up, and fast: first is the overhaul of the rental rules coming next year, with indefinite tenancies and the end of section 21 evictions, and second comes the eroding of capital gains tax, tax free allowances.

A crisis in rental housing

When letting agents are resorting to sealed bids for tenancies, and bidding wars that are driving would-be tenants crazy are in evidence across the country, it underscores crisis description, and the plight that people are going through, desperate for good quality rental accommodation at a reasonable price.

The big landlord sell-off is not only creating this massive problem at the middle and top end of the rental market, its exacerbating the eviction problem at the bottom end, resulting in a homelessness crisis.

The shortage of housing is seeing tenants queuing in the streets for a viewing at one end of the spectrum, and rents are being pushed up, while at the same time tenants are being thrown out onto the streets.

Some agents are even asking for tenant CVs to evaluate their applicants backgrounds as if applying for a job, before agreeing a new let. According to one London letting agency, Atlas Property, managing over 500 properties, the number of tenants submitting CVs to help them secure a let has jumped by 20 per cent over the last 12 months.

A radical overhaul of tenancy laws

The Conservative Government after media pressure promised to end the practice of no-fault evictions over three years ago, and this is due to become law next year under the passing of the Renters’ Reform Bill. So time is pressing for landlords. This Bill and its radical overhaul of the Private Rented Sector in England is set out in the white paper, A fairer private rented sector.

The proposed new reforming legislation includes some sweeping changes such as no fixed-term tenancies, restrictions on rent increases, longer notice periods, increasing tenants powers to challenge evictions, no bans on pets, DSS and families etc.

The pendulum appears to be swinging, shifting the balance of power away from landlords and putting it more into the hands of their tenants. What is frightening many landlords is that these laws could make difficult to remove bad tenants.

Reduced capital gains tax allowances

The reduction in capital gains tax (CGT) allowances from April next rear is prompting a further exodus of landlords, now desperately looking to sell-up quickly to beat the April 2023 deadline.

Since last month’s Autumn Statement announcing the reduction in CGT allowances, coupled with the regulatory threat, agents are reporting an unprecedented number of landlords looking to sell-up with enquiries hitting a 13-year high.

The Chancellor Jeremy Hunt announced the changes to CGT allowances last month which means that people disposing of most types of investment assets will pay more CGT from next April: the personal allowance will fall from the current £12,300 to £6,000 in April 2023, and will fall further in April 2024 to £3,000.

Whereas a coup selling a jointly owned buy-to-let are currently allowed a gain of £24,600 before paying any CGT, they will only be allowed a £12,000 gain next year and a £6,000 gain in 2024, a massive reduction.

Tom Cranenburgh of the GetAnOffer Estate Agency told City A.M. that enquires by landlords wanting to sell were multiplying, hitting a 13 year high.

“The changes to Capital Gains Allowance couldn’t really have come at a worse time for landlords. Right now many are already facing a reduction in property values, rafts of new regulation and the prospect of many of their tenants struggling to pay their rent due to the cost of living crisis. Many are reacting to this unwelcome blow by already opting to quit the market and sell up,” Mr Cranenburgh says.

Selling with vacant possession

It is generally easier and more lucrative to sell a house or flat with vacant possession, so many landlords are opting to serve a Section 21 notice (two months notice) whilst they are still available – next year they will be gone.

It can still take several months to remove a tenant with Section 21 so time is pressing as there’s no telling exactly when the ban will apply next year, but probably unlikely before April. However, catching the capital gains tax higher allowance means the sale needs to go through before then.

Some landlords will attempt to sell-up with tenants in situ, but finding another landlord willing to buy a tenanted property may not be so easy.

Capital Gains Tax rates in the UK for 2022/23

For the current year, 2022/2023 tax year capital gains tax rates will be:

18% for residential property for your capital gain if your overall annual income is below £50,270

28% for residential property for your capital gain if your overall annual income is above the £50,270 threshold

For other assets basic rate taxpayers pay 10 per cent CGT on most asset sales and higher rate taxpayers pay 20 per cent CGT on most asset sales.

You then have the current £12,300 capital gains tax allowance per person which means your capital gains up to £12,300 are tax free.

Company dividends

Landlords who manage their rental properties through a limited company will usually pay themselves through dividends. These payments will also be affected by the changes to dividend allowances announced by Jeremy Hunt last month: this means for next April the £2,000 a year tax free allowance (previously £5,000) comes down to £1,000, and from April 2024 this will halve again to £500.

View Full Article: Why are buy-to-let landlords rushing for the exit?

CGT and Exit Planning for UK Landlords

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Property118 TV is Back, this time to discuss CGT and Exit Planning for UK Landlords.

It’s been 13 months since I last published a new video but I’m delighted to announce that Property118 TV is back for a short series before I hand over to a brand new presenter

The post CGT and Exit Planning for UK Landlords appeared first on Property118.

View Full Article: CGT and Exit Planning for UK Landlords

You need to be Precise with Precise Mortgages?

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I wanted to share a recent experience I’ve had with Precise Mortgages, which other borrowers/prospective borrowers/IFAs may find of interest.

5 years ago I bought a BTL property with a 75% loan from Precise Mortgages, fixed for 5 years at 3.39%

The post You need to be Precise with Precise Mortgages? appeared first on Property118.

View Full Article: You need to be Precise with Precise Mortgages?

Bill that would bring in licencing for holiday homes to get second reading

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A new law that would require holiday let properties in tourist hotspots to have a licence is to get its second reading in the House of Commons on Friday.

MP Rachael Maskell’s Short-term and Holiday-Let Accommodation (Licensing) Bill will be debated in the chamber and follows its introduction in September.

Ahead of the debate, Generation Rent has published research that says England’s housing supply lost nearly 11,000 properties to the second home and holiday-let sector between 2021 and 2022.

The campaigning group says that in some areas 2% of the housing stock has been converted to short-lets tourist accommodation over the paste three years leading to greater competition for vacant homes and inflationary pressure on house prices and rents for locals.

Areas most affected by the trend include Leicester, Scarborough, South Hams in Devon, the London Borough of Southwark and Copeland in Cumbria, which all saw more than 1% of their housing stock move into the second homes and holiday lets sector since 2019.

While holiday lets in London let out for 90 days or more a year are supposed to be licenced, Rachael Maskell MP is taking a different approach nationally.

Licences

Her Bill would enable councils to issue temporary licences and cap their number.

Dan Wilson Craw (pictured), Deputy Director of Generation Rent, says: “High nightly rents and the lack of tax and regulation have fueled an explosion in holiday lets at the expense of people who just need a place to live.

“The government is beginning to recognise the need to intervene… councils should have the power to require holiday lets to have a time-limited licence, and cap their number where there is a severe shortage of homes.”

View Full Article: Bill that would bring in licencing for holiday homes to get second reading

Landlord accused of rogue behavior to repay tenant couple £15,000

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A rogue landlord who harassed tenants living in his unlicensed HMO has been ordered to pay rent repayment orders totalling nearly £15,000.

Mohsin Hassan tried to argue that only two people had been living in the three-bedroom flat in Bancroft House (main picture), but a First Tier Property Tribunal ruled there had been three tenants, and that it would have needed a licence under Tower Hamlets’ additional licensing scheme.

The tenants told the court how Hassan started appearing at the property without notice which made them feel unsafe and which they described as harassment.

Sidney Cialec and Sarah-Maeva Cialec said once they agreed to leave, he had emailed them, threating to call the police if they attempted to re-enter. Hassan and three men thezn evicted them from the property by force.

Another tenant said Hassan had often entered the house using a key, sometimes outside of normal hours and without prior notice, so she reported him to the council as a potential rogue landlord.

Licence

Hassan tried to argue that council letters sent to him at the property were not passed on and that he only became aware of a RRO claim after the tenants had left. He said the council had told him he didn’t need a licence.

The tribunal said: “The answer given by the borough was the correct answer based on the facts supplied by Mr Hassan. However, the facts supplied by Mr Hassan were incorrect.”

Hassan said he and his brothers only entered the house when he thought everyone had left. However, the tribunal ruled: “The evidence of Mr Cialec and Ms Cialec is that Mr Hassan and a few other men broke into the premises and told the Cialecs to leave. Mr Hassan’s people stayed for one and a half hours during which time the Cialecs called the police. It was…a most unsatisfactory confrontation.”

Read the Tribunal’s findings in full.

Image: Google Streetview

View Full Article: Landlord accused of rogue behavior to repay tenant couple £15,000

Additional HMO licensing coming back in Greenwich?

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Greenwich had an Additional HMO licensing scheme from 1st October 2017 to 30 Sept 2022. No review of the success or failure of that scheme has been published. Despite that they are consulting on a new scheme click here

If the first scheme was so successful why would a further scheme be needed?

The post Additional HMO licensing coming back in Greenwich? appeared first on Property118.

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Council slammed after moaning about its 8,000-strong homeless list

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A frustrated landlord has hit out after a council revealed that the housing crisis in their city is so bad that 8,000 households are waiting for a home – but they won’t engage with local landlords to help resolve the issue.

The post Council slammed after moaning about its 8,000-strong homeless list appeared first on Property118.

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INTERVIEW: Why my ‘warts and all’ landlording works on social media

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Portfolio landlord and property educator Rick Gannon insists his ‘warts and all’ social media posts are a good way to reflect a true picture of the sector.

A recent video about his tenant doing a runner owing two months’ rent garnered more than five million views and hundreds of comments – not all of them positive – as some reckoned he was out of line when revealing how he deals with absconders.

“It can be hard on social media to give the full story, but we do everything lawfully and had been told by two other tenants that this man had already gone before we entered his room,” Gannon tells LandlordZONE.

“I want to get my message across that not all landlords are bad, by featuring the reality of what I do. I’m trying to show people the right way to go about things.”

Frustrating

A tenant leaving without paying rent is rare but frustrating, particularly because Gannon doesn’t always ask for a deposit, as he is mindful of the fact that even a month’s rent can be a stretch for some HMO tenants.

“If it’s blatant, and they owe us money and they’ve done nothing to try and contact us, we’ll pursue it with a CCJ, particularly if a tenant is working and there’s no reason not to pay.”

HMOs are still worth doing, Gannon believes, despite the rise in utility bills and mortgage rates. He’s also pragmatic about upcoming potential EPC changes and believes any work to improve energy efficiency will future-proof the business. “I’m prepared to address the issue, even with our listed buildings,” he explains.

“I’ve just had three properties surveyed and they have a D or an E rating but I’m confident that it shouldn’t be too much of a battle to improve them, with either insulation, upgraded windows or LED lighting. However, I hope the government introduces some landlord grants.”

See Rick’s TikTok videos.

View Full Article: INTERVIEW: Why my ‘warts and all’ landlording works on social media

BLOG: This humdrum Tribunal case reveals how landlords come to reject risky tenants

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A document released recently by a London First Tier Tribunal outlining a recent judge’s decision over a contested tenancy deposit looks – at first glance – like any other property squabble.

But for me, it’s much more than than. What it really represents is the first public sign of a growing problem that has been quietly affecting millions of tenants for several years, and a problem that many people have been warning about ever since governments all over the UK began their tax and regulatory crackdown on landlords.

The case was brought by a tenant who along with her grown-up daughters lost her holding deposit on a rented property earlier this year after one of them failed a credit check requested by the landlord. This was after an undisclosed CCJ was discovered.

The landlord declined to enter into a tenancy agreement with them on that basis, and refused to return the holding deposit citing lost marketing time for the property as a result of it having been taken off the market pending the credit checks.

False or misleading

The tenants had applied for the holding deposit to be returned to them under the Tenant Fees Act 2019 which fortunately for the landlord does not apply if the tenant provides false or misleading information to them or their letting agent.

Happy days for the landlord, but what it illustrates is the rising number of people who are being rejected by landlords because of their poor or dubious financial histories.

Landlords are becoming increasingly risk averse as the financial pressures of extra taxation and more costly regulation bear down on them.

Section 21

As LandlordZONE reported earlier this year, this trend is in fully swing as the Government prepares to ban Section 21 evictions; referencing firm Goodlord reported that the share of those insisting that tenants pay two or more months’ rent upfront has risen by 43% since the pandemic.

This, when added to the huge imbalance between supply and demand in the rental market, means tenants with poor financial or behavioral track records are likely to find it impossible, or at the very least increasingly difficult, to secure tenancies unless they can offer guarantors or pay rent in advance. No one in Government can say they didn’t see this problem coming.

Read the Tribunal decision in full.

View Full Article: BLOG: This humdrum Tribunal case reveals how landlords come to reject risky tenants

NEW: 600 staff at housing charity Shelter go on strike over low pay

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Over 600 staff at the UK’s large housing charity Shelter are to stage an unprecedented four-week strike over low pay.

Organised through their membership of their union Unite, the strike follows a bitter dispute over the issue, it says.

This follows Shelter’s decision to impose a 3% pay increase this year which, Unite claims, has left many of its own staff being unable to pay their rent leaving some facing the possibility of being homeless. 

A statement issued over the weekend by Unite claims that Shelter’s management “has refused to enter into meaningful negotiations with representatives of Unite over this year’s pay deal and has instead sought to impose one-off payments and real terms pay cuts for the next 16 months”.

Unforgivable

Unite’s general secretary Sharon Graham (pictured) adds: “It is unforgivable that workers at Shelter find themselves actually being haunted by the prospect of being made homeless.

“Shelter has sufficient reserves to pay its hardworking and dedicated staff a decent par rise but it has chosen not to.

“Our members at Shelter will receive Unite’s complete and unyielding support in their fight for a better deal.”
Despite having cash reserves of some £14 million, Shelter last week declined to increase its pay deal for this year, instead proposing a pay increase of four per cent for 2023/24 with no further pay increase for staff until April 2024.

Shelter says it has given all its staff a one-off payment of £1,500 this year to help them cope with the cost-of-living crisis, adding that: ““Our ambition remains trying to support colleagues through this difficult period, while being able to deliver our front-line services and campaign work.

Read more about Shelter.

“As a Real Living Wage employer, Shelter is also implementing the Real Living Wage Foundation’s increase of 10.1 per cent from December 2022, much earlier than required, benefiting the colleagues who receive this at the earliest opportunity.”

Pic credit: Shelter.

View Full Article: NEW: 600 staff at housing charity Shelter go on strike over low pay