Breathing Space scheme: Landlords with ‘problem debt’ tenants face new hurdles after May 4th

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Landlords face more eviction hurdles after May 4th when a government scheme to protect people who have ‘problem debt’ comes into force.

As the NRLA highlighted earlier this week, although the scheme was meant to cover banks and other large lenders, it believes tenants
will be included in the scheme.

Although only applicable to the most serious debt cases, the scheme – which was announced in July but will only go live in May – will complicate both the evictions process and how landlord interact with guarantors.

It is also feared that tenant advocacy groups such as Shelter will encourage tenants who have built up rent arrears to use the new regulations to fend off attempts by landlords to recoup rental debt.

Called the Debt Respite or ‘Breathing Space’ Scheme, it is designed to protect a variety of people who may have built up problem debt caused by the pandemic.

Breathing spaces

“These breathing spaces come in two forms – standard and mental health,” says Mike Morgan of HF Assist and Mediation.

“A standard breathing space means landlords cannot contact a tenant to collect rent arrears for 60 days, while a mental health breathing space lasts for 30 days or until the ‘mental health crisis’ ends.

“One problem is that this latter part of the scheme is open ended – tenants can enter multiple mental health crisis Breathing Spaces almost indefinitely if an approved professional agrees.”

But the scheme is not the debt free-for-all landlords imagine – a Breathing Space must be approved by either local authority, charity or FCA-approved debt advisors.

But once they are, landlords’ hands are tied; they cannot serve a Section 8 eviction notice, apply for a warrant or money judgement or receive a possession order.

“Also, during a Breathing Space, landlords should not contact the tenant to ask for payment of the debt,” says Morgan (pictured).

“But mediation can continue during this process, albeit between the landlord and the tenant’s debt counsellor.”

The scheme will be administered by the Insolvency Service, which will notify landlords if their tenants has successfully entered the Breathing Space scheme.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Breathing Space scheme: Landlords with ‘problem debt’ tenants face new hurdles after May 4th | LandlordZONE.

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Property investors now due ‘millions’ in stamp duty refunds, claims campaigning tax firm

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Many buy-to-let investors could now be owed million of pounds collectively by HMRC after its tax guidance on paying the additional 3% second homes stamp duty following the amendment of its official online guidance.

Cornerstone Tax has argued in the past including during several court hearings that some investors who bought residential properties within mixed-use developments only had to pay an additional 1% in stamp duty, not the full 3%.

It successfully argued that the Additional Dwelling Supplement (ADS) could only apply where the transaction consisted wholly of residential properties, and not to Multiple Dwellings Relief claims.

Cornerstone found that in certain circumstances, the default minimum rate of 1%, which remained on the statute book, was still in force.

Incorrect guidance

As well as saving many new buy-to-let investors thousands of pounds in stamp duty the company says that, due to the incorrect guidance, many developers and investors have paid 3% on the residential element of a multiple dwellings relief claim, and not the 1% minimum rate that they were eligible for.

“We currently have a number of cases before the courts on multiple dwellings relief, mixed use properties, and other important issues to the taxpaying public,” says David Hannah, Chairman and Chief Executive of Cornerstone Tax (pictured).

“The total bill for repayments could run into tens of millions of pounds, given the popularity of ‘convert to rent’ and ‘convert to sell’ schemes, which have been run on commercial properties in the last four years.

“There is normally a four year time limit for making reclaims, but due to incorrect guidance from HMRC, it may be possible to claim as far back as when the surcharge was introduced in April 2016.”

Read more about this story.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Property investors now due ‘millions’ in stamp duty refunds, claims campaigning tax firm | LandlordZONE.

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Right to Regenerate consultation

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The public will be able to convert vacant plots of land and derelict buildings into new homes or community spaces, under plans announced by the Housing Secretary, Robert Jenrick.

The ‘Right to Regenerate’ proposals would make it easier to challenge councils and other public organisations to release land for redevelopment – helping communities make better use of public land and give a new lease of life to unloved buildings.

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5 Tenant Tricks to throw out a Section 21 notice

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Landlords need to be in no doubt that tenants are being educed by councils, shelter, a wide range of no-win, no-fee ambulance chasers and now tenants unions too.

Tenants are not only shown the ‘tricks and hacks’ they can use to stop you being able to gain possession (no matter how much they haven’t paid in rent) but also (because there is money in it for all of these organisations one way or another) how to hit you the landlord with Rent Repayments Orders for a full years’ rent and various other forms of compensation claim.

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Tenants are ‘sitting tight’ and not moving until Covid is over

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Tenants are increasingly looking for homes they can move into at the end of the year rather than next month, as many delay moving during the pandemic, according to Barrows and Forrester.

The Birmingham-based lettings agent reports that the usual urgency to secure a property is taking a back seat while lockdown restrictions remain.

It found 38% of all rental properties listed as available within 12 months have already seen a let agreed on them, while tenant demand for rental homes that are immediately available is far lower, with just 24% of properties having had a let agreed.

Barrows and Forrester analysed nearly 50,000 listings in the UK’s major cities, looking at tenant demand based on the ratio of properties already let.

Results show that the current trend is prominent across all but three of the 23 major cities, with just Belfast, Bournemouth and Aberdeen seeing stronger demand for more immediately available rental properties.

In Swansea, demand for immediate properties stands at 11% while those available in 12 months is 33%, while in Plymouth it’s 27% and 60% respectively.

MD James Forrester (pictured) says many tenants are in doubt over their current financial situation.

He explains: “As a result, many are wary about entering into lengthy tenancy agreements across our major cities when they may be able to secure a more affordable option in the surrounding areas.

“This has caused a major shift in rental market trends, with many choosing to sit tight and plan for life after Covid.

“This is a stark contrast to traditional market speeds where you could quite literally blink and miss a newly listed rental property within hours of it being listed because demand was so high.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tenants are ‘sitting tight’ and not moving until Covid is over | LandlordZONE.

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Taken to Court by no win no fee solicitor?

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My tenant complained of mould, but would not let me or my workers into the property. He then said he had decorated (he hadn’t) and no more mention of mould.

He was clearly causing this by various things he was doing including a tumble dryer with no outlet and a paraffin heater.

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EXCLUSIVE: Proportion of landlords refusing face-to-face viewings jumps by 20%

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The proportion of landlords not prepared to do face-to-face viewings with tenants has increased from 43% at the start of the second lockdown to 63.1% now, our latest poll of over 1,800 landlords has revealed.

This means that fewer than 37% of landlords are now happy to meet tenants face-to-face and confirms that worries over the rapid spread of the new-variant Covid strain is beginning to change attitudes within the private rental market.

During the first poll some of those voting registered their continuing scepticism about the dangers of Covid, with one respondent asking why other landlords were afraid of a ‘cold and a bit of flu’.

The significant shift in mood among landlords about safety during viewings has taken place during relative short period – it is only 12 weeks since the start of the second lockdown in early November.

Despite media headlines about individual cases of rule flouting, government information gatherers at the Office for National Statistics says compliance remains high.

High compliance

Some 90% of those it canvassed said they always or often handwashing after returning home, 96% use face covering, and 93% avoided physical contact when outside their home.

“This week, more people are telling us that they are staying at home compared with previous weeks, and fewer of us are meeting up with family and friends outside home,” says Tim Vizard, Principal Research Officer at the ONS (pictured).

Accompanied viewings are still allowed under the current lockdown regulations but landlords and potential tenants must observe social distancing, wear face masks and initial viewings should be done virtually, with only those serious about renting a property being shown around in person by a landlord or letting agent.

Read how landlords can protect themselves from Covid.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: Proportion of landlords refusing face-to-face viewings jumps by 20% | LandlordZONE.

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We rented a property to 2 friends of ours who were in dire straits?

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We have rented a property to 2 friends of ours who were in dire straits. They partially renovated a house we own, and moved in before it was finished. There are electrics. Doors and a bannister which needs finishing.

They have 3 children but asked to move in early.

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EICR report – fail (C2) smoke alarms expired?

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A recent EICR report has been returned with a FAIL on a C2, where the mains powered smoke detectors are 10 years old and classed as out of date.

All are working correctly with no faults. Where does it state in regulations that this is a FAIL and not an C3 recommended to replace?

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Life for commercial landlords is going to go through a sea change…

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Life is tough from commercial landlords at present, but there are things they can do to improve their chances as we enter a New Year, and still further Covid restrictions.

Covid has changed the dynamics of letting commercial property, especially if its on the high street or offices. It’s only in certain retail park locations and warehousing / distribution centres where some commercial landlords have seen booming demand.

Home deliveries and Internet sales have benefited these asset classes, but home working and the continued decline of an already suffering high street have, in combination, put pressure on town centres, transport links and landlords holding these kinds of investments.

What can landlords do to help themselves?

Businesses only survive and thrive if they are comprehensively meeting their customers’ needs and demands; their needs must be satisfied if property owners are themselves to benefit, so it’s accurately identifying and providing for these needs that counts.

The much touted shift to permanent home working, once we get through the worst of this pandemic, is almost certainly exaggerated, but there will undoubtedly be a shift, possibly to a hybrid style of home / office working. It doesn’t take the prophesising talent of a Nostradamus to see that there will eventually be a compromise: creative work involves team working, so working people will always need to come together in offices.

Likewise, not everyone wants to shop on the internet. People like to browse, to try on clothes and to shop in nice places where they can eat and drink coffee and be entertained. The high street is suffering but it’s far from dead. We may well see a concentration of activity in certain cities and towns that can adapt, while other town centres may have to move away from pure retail and office activity.

Landlords cannot be too complacent; they need to accept that in most cases it’s no longer a case of providing a square footage of space that simply brings in a rental income stream ad infinitum. It needs to be worked at, first to identify a need, and secondly to provide what is needed given the advantages and the constraints of location. Marketing is far more than selling a product, it’s about doing just those things and then effectively promoting the asset to likely occupiers.

When the dynamics of the market change we need to change our mindset with them. We are likely to be faced with continual and accelerating change of one sort or another into the future. As we face this virus, and the technology changes on the way, the way we live, work and play will not be the same again.

Not only will landlords need to reassess what they are offering to the market, they will need to re-think the way that they manage it, and that may mean taking on more risk and more work. Letting and forgetting has been the norm with commercial property in the past. With a full repairing and insuring lease landlords have had the luxury of risk-free clear returns over very long lease periods, 15, 20 and even 25 year leases were the norm in the past. Those days have gone for most locations.

After this latest pandemic episode, many retail tenants are demanding risk sharing in the form of turnover rents, rents tied to the profitability of a store or other business. This arrangement involves landlords in quite a bit of extra management and accounting work, and it also requires a good degree of trust between landlords and tenants, if the arrangement is to be successful.

After the Covid lockdowns, premises will need to be virus free, safe and secure. Those landlords who are agile enough to provide this level of safety will reap the benefit. Whereas office space pre-Covid was moving increasingly to open plan and shared work-stations, Covid safety requires individual office work spaces, possibly even a move back to single offices, and really good ventilation systems.

Internet connectivity and gigabit broadband with advanced internet, national and international communications devices goes without saying, these will be vital business tools of the future. The “work-from-anywhere” culture is upon us and is not going away, but work teams will still need a base to come together and communicate face to face. Studies have shown that creativity comes from co-mingling and it occurs randomly, it’s unlikely to be at its most effective over Zoom.

Offices are already being adapted with radical changes to space, taking out desks and providing sitting and lounge spaces, collaboration zones, coffee areas and even roof top garden and exercise space. First second and their floor offices, and increased stair access, may become premium office space as staff avoid using lifts.

Retail store space likewise will need a total re-think. Spacing of walkways and displays, fitting rooms, toilets and refreshments areas will all need to be made safe. And as with offices this will result in the need for more space, not less. As with offices, all these areas will need highly adequate ventilation. Simple extractor fans will no longer prove adequate when full flow floor to ceiling systems are available.

Property owners will need to be proactive in marketing their space, acting like business owners who are selling a product to their customers, adopting a new mindset with the sole aim of ‘winning’ tenants.

Future tenants may well come with their own fitting out, technology and design preferences. They will want lease lengths shortening, and there could be a continual need for change and adaptability. But for those landlords willing to provide this, the rewards will be there.

Landlords of the future will have to be more proactive and attentive, and to work harder to gain that competitive edge over their competitors; it will mean treating tenants as paying customers whose needs have to be satisfied in order to keep the space occupied and the rents coming in.

For a long time, and unlike most businesses, commercial property investment has been a landlord’s market, a take it or leave it “sit back and let the rents roll in” business which in many cases has led to complacency. It looks like we’re in for big changes in the future.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Life for commercial landlords is going to go through a sea change… | LandlordZONE.

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