Jun

Editorial, June 2017

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What a lot has changed since I last wrote an editorial for what is likely to be our last LandlordZONE® Newsletter in its current format.

From July 2017 we will be sending this Update out on a weekly basis, bringing you the latest landlord news and information along with some in-depth articles and reports on what’s important in the UK private rented sector (PRS).

We have a new Government, still a Conservative Government, but with a reduced majority. Despite Theresa May’s appeal for a “strong and stable government”, as we enter the crucial Brexit negotiations, it seems with have anything but.

Other bad news has come think and fast, leaving us with a slightly depressed feeling; the Manchester bomb, the London vehicle and knife attacks, and the Grenfell Tower fire; surely it’s time we had some good news for Great Britain.

Who knows what the future holds for the UK as we begin the process to extract ourselves from Europe; hard or soft, short or long drawn out? One thing is certain, we are told, we will be out, and what’s more, that’s what the vast majority want.

The Queens speech held few surprises with most of the promised legislation in the Conservative Manifesto stripped out, but one thing that did survive from the previous government, and with greater emphasis, is the banning of tenant lettings fees, not just by agents but by landlords as well.

Restricting holding deposits to one week’s rent makes sense and is appropriate in my view: you should be able to check out a tenant within a week, and if the tenant backs out you can retain the deposit, up to your own justified losses. If you reject the tenant, even when they fail your checks, you cannot retain the deposit.

On the other hand, restricting the security deposit to one months’ rent is more problematic for some. Landlords started to take six-week’s rent money to prevent tenants using their deposits to pay the last month’s rent, and also when landlords accept pets they usually ask for a higher deposit. These are problems that need to be ironed out before this becomes law.

The sixth edition of Kent Reliance’s half-yearly (state of the market) Buy-to-Let (BTL) Britain report indicates that landlords’ confidence has fallen back in the first quarter of 2017, with only 41% now optimistic (nearly 70% in the last study) about their buy-to-let portfolios.

However, although the rate of growth in private rented sector (PRS) has slowed, it has still expanded to reach 5.5 million households in Q1 2017, or over 20% of households, and is predicted to reach 25% of households in 5 years’ time.

The report says that around 25% of investor landlords are considering incorporating their business or transferring property assets to spouses, and limited company loans have accounted for 44% of mortgage applications during Q1 2017.

Landlords should think very carefully and take good tax planning advice before incorporating a buy-to-let business. Although incorporation works very well for a property development business, it does not suit every investment business, size comes into this as well as personal circumstances.

With the cost of incorporation, plus the extra accounting and company reporting cost, higher mortgage, transfer duties, and different tax rules on dividends and earnings, as well as regulatory risk – the possibility the government will change the rules – incorporation does not work well for everyone.

Some of you may have seen the new BBC documentary series entitled “The Week the Landlords Moved In” which has landlords swapping places with their tenants to experience life on the flipside.

The first airing this week showed one landlord’s son break down in tears after he swaps accommodation with his tenant and experiences for himself, not only the grimy conditions that his pensioner tenant lives in every day, but also living on a low income for a week, around £54, the cost of a round of drinks for him he says.

Another landlord featured, millionaire landlord Paul Preston, 40, admitting that he has “expensive tastes” living in a luxury apartment as he does with his personal trainer girlfriend Prea, who he refers to in the show as “Queen P” because of her “craving for luxury.” Paul has made a fortune dividing homes up into separate bedsits, and renting them out by the room, and just to emphasise the point he calls his business “Success HQ”.

Neither of these scenarios leave the public with a good image of landlords, rather they reinforce a stereotype which is basically a money grabbing soul, taking advantage of ordinary working people by providing shoddy and unhealthy accommodation at high prices.

Yes, damp and mould result because the tenants cannot afford decent levels of heating, but there is lots more landlords can do to make their accommodation safe, and to keep on top of maintenance, repairs and cleaning.

This is exactly the reason why Government (national and local) hates the fact that there are so many landlords like this, and why they want to encourage the build-to-rent programme to offer more accommodation which brings rents down overall, ads professional management and offers safe, clean accommodation. If private buy-to-let landlords want to compete with this in the future, they will need to up their game.

Tom Entwistle, Editor

… LandlordZONE.

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