CGT 30 day payment on account – HMRC consultation

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A new HMRC consultation proposes that any Capital Gains Tax (CGT) liability that arises out of the sale or disposal of residential property will need to be paid on account within 30 days from April 2020.

These changes will mainly affect Landlords with rental property.

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Friday 13th – Accidental damage…unlucky for some

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Landlords’ Insurance:

It’s Friday 13th, and whether you are superstitious or not, we all know that accidents can and do happen! In 2017, Total Landlord Insurance (TLI) paid on average £759 for accidental damage claims, reminding landlords of the importance of having insurance cover and ensuring it is up to date.

According to TLI, the most common causes of accidental damage claims in 2017 were:

1. Flooding due to tenants leaving bath taps on
2. Tenants dropping the shower head and cracking shower trays
3. Spillage up walls and on carpets e.g. tenant walking across the hallway, falling and spilling red wine up the walls
4. Damage caused by children e.g. children kicking a football and accidentally smashing the policyholder’s window

The highest ever accidental damage claim received by Total Landlord Insurance was worth £19,000. The tenant left the taps on and went to work only to return at the end of the day to find the property flooded.

The brand-new kitchen work surfaces, doors, hob/cooker and vinyl flooring were all warped. The building was soaked throughout, and the ceiling and walls had bulged, along with the light fittings and smoke alarms which were destroyed. The tenant was unable to use the property whilst the property was repaired so loss of rent was also paid out.

Eddie Hooker, CEO of Total Landlord Insurance, comments “Buildings and contents insurance needs to be based on rebuild or replacement values. Landlords should base their contents insurance on the cost of replacing all household contents, including all furniture and appliances provided to tenants such as fridge/freezer, television and sofa.

Landlords should be mindful they need to be as accurate as possible to ensure they have sufficient cover, and if you have a new kitchen fitted, for example, keep hold of the invoices so you can prove its value in the event something gets damaged.”

Based in Borehamwood, Hamilton Fraser, (parent company to Total Landlord Insurance, mydeposits, Property Redress Scheme, CMP and Landlord Action) provides specialist insurance and ancillary services for the private rented sector.

https://hf.totallandlordinsurance.co.uk

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Friday 13th – Accidental damage…unlucky for some | LandlordZONE.

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The Problems with Rental Affordability

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Private Renting & Social Housing:

Joanna Fletcher lives in a one-bedroom apartment with her 10-year-old son. The building she lives in has mould and vermin and her landlord is threatening her with eviction.

While she would like to leave, she’s doing her best to stay the eviction as long as possible because she can’t find anywhere locally that she can afford, and she doesn’t want to leave the area because of her son’s schooling.

Sound a familiar scene? Well it’s not London, or even Manchester, its Vancouver Canada.

Joanna Fletcher is not alone in feeling the impact of the housing affordability crisis affecting cities across the world.

It’s a universal problem and far from being confined to the British Isles, as many UK residents might imagine. They would be excused for thinking so, given the regular media hype and general anti-landlord sentiment, but the problem runs deep.

It’s a problem that no western government can easily solve. It’s the same problem from Warrington to Wellington New Zealand, from Swansea to San Francisco.

The Canada Mortgage and Housing Corporation says that average rents in Canada have increased by 2.7% in 2017, while the availability of rental accommodation has become increasingly limited.

The overall vacancy rate for cities across Canada was just three per cent in 2017, down from 3.7 per cent in 2016 – demand for rentals is outpacing the growth in supply, a result in the decline in government spending on social housing.

Across the world, low cost housing is in short supply, for the simple reason that private developers go for middle and up-market developments, which are the most profitable. At the same time cash strapped local authorities and central governments just don’t have the necessary resources to alleviate the situation.

Craig Jones, a University of British Columbia PhD candidate, says that the situation in Canada is largely the result of the government’s move away from building rental housing in the early 1990s.

Statistics Canada say that nearly a quarter of Canadians spent more than 30 per cent of their income last year on housing costs, which is recognised as the marker for affordability. Jones says that these statistics show that many people are living in precarious circumstances.

“It’s taken us a long time to get here, it’s taken decades of ignoring the system,” Jones says., and adding that it will take at least 10 years of government commitments to resolve the problem. “That is something that is difficult to do because it’s expensive and it doesn’t show immediate results.”

Meanwhile, according to a recent report by the The Homelessness Monitor, in England over 100,000 households in England are likely to be living in temporary housing within two years on existing trends, an increase of over a quarter on the current total.

This explosion in the placement of homeless families in temporary homes, many of them many miles from where they work and go to school, it is said is driven by a dwindling supply of social and private rented housing.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The Problems with Rental Affordability | LandlordZONE.

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TMW remove age limit for max 65% LTV experienced landlords

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From April 18th The Mortgage Works (TMW) will be removing the maximum age limit criteria on its Buy to Let mortgages up to a maximum of 65% Loan to Value for ‘experienced’ landlords for both purchases and remortgages. This will also include Limited company mortgages.

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Anti-social Tenants in the flat above

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I am having problems with anti-social tenants at the moment – not in my rented flat, but the one above.

About 9 months ago the flat above was rented out and it soon became clear that the tenants liked to drink and subsequently have full blown marital disputes with foul language.

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Multiple Gas Safety inspection costs?

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How much is everyone paying for Gas safety inspections?

I have 8 properties, all on the same site. All have gas combi boilers & 1 gas appliance, a hob. I routinely get the combi’s serviced at the same time.

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430% more English landlords operating in Scotland since 2012

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Since 2012, the number of English landlords registering tenancy deposits on properties in Scotland has risen by over 430%, according to new research by SafeDeposits Scotland.

The country’s leading tenancy deposit protection scheme found that in 2012, 260 landlords living in England registered deposits with them on rental properties in Scotland.

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The Crossrail Effect

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Focus on Slough:

Thanks to Crossrail, commuter towns such as Slough are set to see property prices rise by around 35% by 2020, as 1.5 million more people are brought within a 45-minute commute of London.

Crossrail, also known as the Elizabeth Line, is a new railway that will create a door to door connection between key parts of London and commuter towns in the South East. When fully operational in December 2019 its fleet of 70, 200-metre long trains each carrying up to 1,500 passengers will mean a 10% increase to London’s rail capacity. This will have a significant and positive impact on the commute in, out and across central London, and as a result has already seen property prices appreciate in areas along its route as commuters have begun to take advantage of this improved access.

Figures already show that throughout 2017, Slough house price growth hit a 13.8% increase, while on average, house prices within a mile of Crossrail stations have risen by 66% since 2009.

Free Property Seminar

Discover more about the ‘Crossrail Effect’ and how you can benefit from it at a free seminar, ‘The Crossrail Effect: Focus on Slough’ on April 18. In partnership with JLL, our free seminar will delve into the details of how and why Crossrail will have such an impact, looking particularly at Slough.

Book your place

‘The Crossrail Effect: Focus on Slough’ will take place on Wednesday April 18 at the Hilton London Paddington. The session will run from 6 – 9pm and refreshments will be provided for you to enjoy.

The seminar will be delivered by Neil Chegwidden (Director of Research at JLL) and Andy Foote (Director at SevenCapital) and will cover key topics that include:

• How the Crossrail is benefitting property prices and regeneration around the Commuter Belt
• Which areas along the Crossrail route have become investment hotspots
• Residential developments within Slough and the surrounding area
• Property value forecasts that will showcase potential opportunities

You can book your space on the free seminar by completing the form on the SevenCapital website.

About SevenCapital

Here at SevenCapital we understand property investment. Established in 2009, we’ve since developed a vast portfolio spanning the residential, commercial and hospitality sectors. We strongly believe that you should be at the heart of everything we do and we’re always looking to offer insight, advice and support – whether you’re a first-time buyer or a seasoned investor.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The Crossrail Effect | LandlordZONE.

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Limited Edition BTL Portfolio Products with Free Valuation & Cashback

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Mortgages and Insurers Solutions have access to a number of limited edition buy to let portfolio products. The limited edition rates are available on properties with HMO status, limited company SPVs, single self-contained and multi unit blocks.

Products for single self contained units include a limited edition 2 year fixed rate at 3.40% (APR 5.20%) and a
75% LTV (loan to value) this product includes a free mortgage valuation

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Freehold, Shared Freehold or Leasehold?

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Landlords often buy flats which are either Leasehold or Shared Freehold. What are these tenures and what should landlords look out for in these different forms of ownership?

Leasehold is one of three forms of tenure (property/land ownership) almost exclusively peculiar to the United Kingdom, though Scotland has a different legal system and few leaseholds. Alternatives are Freehold and Commonhold.

The legal concepts go back to antiquity in a tenure system where, unlike some other countries (USA for example, remember the land grabs) where ownership of land can be outright, the Crown owns all the land in the UK.

Freehold gives the stronger form of tenure, giving outright “ownership” of the land in perpetuity (forever). There is no landlord to answer to: to pay ground rent to, or annual service charges, or to get permission to do alterations.

Leasehold (sometimes known as long-leasehold) gives a time limited form of ownership (a tenancy) but there is a legal right to extend the lease. Especially in cities like London, leasehold ownership houses millions of people. The landlord may be a large property owning estate (The Devonshire Estate for example) which retains the freehold.

Commonhold is a relatively new form of property/land ownership in the UK, introduced in 2002 as an alternative to the long leasehold system. Commonhold is an attempt to bring flat ownership into the 21st century and it’s the equivalent of the US-style Condo (Condominium) system. Despite the innovation, take-up has been minimal.

As a Freeholder (outright owner) you have responsibility for your own property, insuring, repairing and maintaining. If you allow the property to decline and fall down that’s your own affair, you “own” it and the land it stands on.

As a Leaseholder, you are responsible for the internal repair and insuring (your possessions), but not for common areas, and externals such as roofs, drains, walls etc. All this is the freeholder’s (landowner’s) responsibility. Any one leaseholder would not be in a position to do this work; it needs to be organised centrally and for all, but of course it is charged back to each flat leaseholder in the form of service charges.

Service charges vary from block to block as they may involve paying for things like maintaining large communal gardens, electricity bills for communal areas, repair and maintenance of exterior walls, roofs and lifts.

The advantage of normal leaseholds is that the freeholder or his managing agent does all the organising and work to keep the property (the block) up to scratch. No one leaseholder can neglect her flat and devalue the whole building. The disadvantage is that some freeholders are better than others at managing blocks, plus repairs are invariably more expensive than if you were a freeholder doing and making your own decisions, mainly because of all the people involved and their fees.

There are legal safeguards to prevent freeholders overcharging leaseholders or doing sub-standard work, and this can be challenged through the Leasehold Valuation Tribunal. Nevertheless, disputes can prove very expensive to leaseholders as the freeholder’s legal costs in defending an action by leaseholders are usually charged-back to the leaseholders through service charges.

With commonhold, the individual flat owners (i.e. residents) own everything in perpetuity. There’s no landlord, freeholder or lease. The land the building sits on is registered as commonhold land (as opposed to freehold land), and each flat owner (unit owner) has two distinct legal interests:

(1) in his own individual flat, and (2) a collective interest as a member of a Commonhold Association (in effect a residents association), which owns the land and manages the shared parts of the property on behalf of all the residents. In the UK, commonhold ownership hasn’t really taken off since the 2002 Leasehold Reform Act introduced it, so commonhold is not so common in the UK.

Developers of blocks of flats like to retain ownership as freeholders through leaseholds, which gives them a long-term income through ground rents, and other fees when people renew leases and make alterations. There is therefore no incentive for the UK developer to sell on as a commonhold.

With Leaseholds there are two other aspects or forms of sub-ownership: shared management and shared freehold.

With shared management (Right to Manage) the leaseholders club together, form a management company, and run the block as a leaseholder management committee in their own company. The Right to Manage legislation lets leaseholders take over certain management tasks from the landlord without having to prove bad management. Leaseholders have a right to manage only when certain strict conditions are met – see Leasehold Reform Act 2002.

Leaseholders can buy a share of the freehold with the other leaseholders (such as other people living in a small block of flats) as long as at least half of them agree to buy a share, but if there are commercial parts (a ground floor retail premises for example) this complicates matters considerably.

With shared or “share of” freehold there are two basic set-ups for the ownership of the freehold: (1) the freehold is owned jointly by a number (up to four) of the flat owners in their personal names, and (2) a company is the owner of the freehold and each of the tenants hold a share or membership in that company – they are directors of the company.

Leaseholders therefore, in obtaining a share in the freehold, their name will either be noted on the title deeds or will be issued as a share in the company that owns the freehold. In either case shared freeholders will own a share in the freehold.

Implications of Leasehold

As a leaseholder you have a lease from the freeholder (sometimes called the landlord) to use for a specific number of years. Leases commonly give 90 years, 12o or 150 years, but less common in London, can be as long as 999 years – known as a virtual freehold. Every leaseholder has a contract (lease agreement) with the freeholder, which sets down the legal rights and responsibilities of either side

The value of a lease starts diminishing from the day it is signed, year by year until it runs out at year zero when, if not renewed, the freeholder takes back ownership. Leaseholders can extend a lease at any time and have a legal right to do so. This should be done before a lease reaches 80 years as the value of the lease will diminish rapidly and the cost of extension increases inexorably below this point. That’s because most mortgage companies will not lend below 80 years or absolute minimum 70 years. Lenders will normally want the lease to run for 25 to 30 years beyond the end of a mortgage.

When buying a leasehold property always have an expert look over the small print of the lease document. Make sure that no one leaseholder can start legal actions against the freeholder, for which you are liable to pay for through service charges. This is just one aspect that can prove to be a liability.

Implications – Share of Freehold

Agents usually sell “share of freehold” as a positive, and in most cases it is. A straightforward lease is a wasting asset and becomes less valuable as it gets shorter. Eventually you will need to extend the lease, but normally if you have a share of freehold you will not be required to pay for this. It is therefore cheap and easy to achieve. This can be a significant saving. For example to extend a lease gone down to around 70 years for a £400,000 flat could be anything around £25,000 and upwards, paid to an independent landlord.

Make sure there is a proper management system in place for repairs and that there are no problems or disputes between the tenants before you buy.

Management

In the case of leaseholds, a good freeholder or managing agent will manage professionally and will save the leaseholders having the responsibility for keeping the block well maintained. However, this is rarely cheap and can be very costly in terms of poor maintenance or high fees or both if your block manager is bad.

Shared freehold is more common in small blocks where there will be obligations on the tenants to manage: filing accounts, annual returns for the freehold company, arranging tenant meetings and organising insurance and repairs.

Proper maintenance needs to be planned on an annual basis, but sometimes major works are required in any one year. This can cause volatility in the amount of service charges due, so to counter this effect a sort of saving-up, sinking or reserve fund can be set up which is paid in to each year.

Generally these types of arrangements are put in place where there is a professional managing agent running the block, usual for large blocks with multiple leaseholders or a sharing of freehold. But for smaller blocks the administration costs charged by a management agent may be out of proportion and too expensive.

Where a freehold is owned jointly in the personal names of the tenants, difficulties can arise in getting agreement on permissions for alterations / extensions and to get the other owner/s to sign a transfer of the freehold of the flat if it is to be sold. The Land Registry will require identification from each owner which can also cause further problems on transfers. Generally though, shared ownership advantages outweigh their disadvantages and share-of-freehold ownership helps the marketability of a flat.

Buying a Freehold

Leasehold Disputes

Leasehold Advisory Service

How Can a Flat Management Company Help You?

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Freehold, Shared Freehold or Leasehold? | LandlordZONE.

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