Eviction and return of deposit from inherited tenancy?

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I have the bailiffs booked for a legal eviction at one of my properties on Thursday 30th Nov. I purchased the property in April 17 with the tenant in situ, so I inherited the original tenancy agreement which had gone periodic by then.

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Buy-to-let mortgages for holiday lets breaks lending rules…

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Short-term holiday lets:

Mortgage brokers are being warned that they could be struck off lending panels if they are complicit in providing buy-to-let loans on properties that are being used for holiday lets.

Following recent changes to landlord taxation, there has been a surge in lettings through the holiday let rental market using websites like Airbnb and Gumtree.

The fall in the pound post the Brexit vote is persuading thousands of Britons and foreign visitors to seek short-stay accommodation in the UK. This means that thousands of buy-to-let landlords have been taking advantage of the demand. Research shows that short stay holiday properties can generate double the annual income of a typical residential buy-to-let.

Another incentive for landlords to do holiday lets is it avoid the new tax rules on mortgage interest relief – purchasing a holiday let in an individual’s name can still get full tax relief on mortgage interest.

Most lenders do not allow buy-to-let properties to be used for holiday lets because holiday let mortgages follow a different criteria. They require a change of use and re-financing, and an assured shorthold tenancy is not appropriate.  In addition, landlords may fall foul of their lease conditions where the property is on a long lease.

Andy Elley, head of commercial mortgages at Mortgages for Business, told FTadvisor:

“A number of landlords had been caught out breaching their mortgage terms by using their properties as holiday lets.

“Often, the lender finds out because there has been noise complaint or they’ve checked the holiday letting sites such as AirBNB and Trip Advisor and discovered the property is listed.”

Advisers are being told to make sure that landlords are provided with clear guidance about the terms of a buy-to-let mortgage when they take one out. Otherwise the broker risks being a party to fraud.

A spokesperson for the TSB told FTAdviser:

“We expect the brokers on our panel to behave professionally and with integrity. Knowingly making false representation of an application undermines this and would risk ejection from our panel.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Buy-to-let mortgages for holiday lets breaks lending rules… | LandlordZONE.

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M&S Food for Shelter

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Along with 12 other charities our reader Luke would like to point out that Marks and Spencers supports the anti-landlord charity Shelter.

“I’ve just popped out of my office to grab a sandwich from M&S and it would appear that a number of their products (in the sandwich section

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Rental payments could be added to credit scores

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The Creditworthiness Assessment Bill has had its second reading in the House of Lords with a general debate on all aspects of the Bill on the 24th November.

The Bill is now scheduled to go to Committee stage with a line by line examination

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Freehold flat bridge construction?

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I am considering buying a freehold flat and would like some advice please. The flat is purpose built and is approx 7 years old.

It is essentially a bridge construction adjoining a 2 story leasehold building one side and a freehold house the other.

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Exception to the s24 Tenant Tax loophole?

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I have just been looking at the wording of the s24 legislation (Tenant Tax) and I noticed that one of the sub-sections state:

(4)An amount borrowed for purposes of a property business is not a dwelling-related loan so far as the amount is referable (on a just and reasonable apportionment) to so much of the property business as consists of the commercial letting of furnished holiday accommodation.

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Capital Gains Tax allowance raised in Budget

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Personal Allowances & CGT:

Investors and second home owners, and landlords, will be pleased to hear one piece of good news in this November’s budget: the Chancellor has raised the personal capital gains tax (CGT) allowance which means individuals will be able to will be able to keep more of their gains when they sell an asset – usually shares and properties.

The CGT threshold is to be increased by, £400 from £11,300 to £11,700 per person. This means that a married couple or civil partnership with jointly owned assets will have an extra £800 of gains tax free on asset disposals.

This is a small but welcome benefit for landlords after several budgets where they have faced extra taxes and will allow them to keep more of their money when they realise their gains.

Married couples and civil partners have the advantage of being able to transfer assets between each other without triggering a capital gains tax charge. This means that they can chose to transfer ownership, or a proportion of ownership, prior to a sale to give maximum tax benefit between them: by utilising a couple’s annual exempt amounts fully potential tax bills can be cut further if one in the couple pays a lower rate of tax.

The other piece of good news for landlords is that the Chancellor is delaying until April 2020 the requirement to pay CGT within 30 days of a sale. Currently landlords have up to 12 months to pay on the disposal of a property.

For foreign investors the news is not so good: for the first time they will be forced to pay CGT (non-resident gains) on the sale of UK commercial property.

What is Capital Gains Tax?

Capital gains tax (CGT) becomes payable when individuals make a profit (gain) from an asset such as a second property, shares or family heirloom.

The Budget 2016 reduced the tax rates payable on capital gains, but unfortunately, not for residential landlords when they sell their investment properties. Basic rate income taxpayers are now liable for CGT at 10% (previously 18%), while those on higher rates of income tax pay 20% (previously 28%) – applicable from April 6 2016.

However, and this is the “sting” for residential landlords, there are higher rates for gains made on the sale of residential investment properties. For landlords therefore the rates have remained at 18pc for basic rate payers and 28pc for higher rate payers.

Calculation of Liability?

Capital gains on the sale of an investment residential property (buy-to-let or holiday let) are subject to CGT but can deduct your allowances and certain expenses.

Example: A couple purchased a property in joint names for £450,000. £40,000 was spent on providing an extension to the property and £5,000 on improvements and it sold for £650,000. The gain is £200,000, but you can deduct and capital expenditure you made such as improvements, stamp duty, legal fees on purchase and sale, and estate agents’ fees.

The Calculation:

*This demonstrates the important of keeping safe all documentation concerning property purchases, sales and capital expenditure, as it will definitely be needed for tax purposes.

Depending on these two joint owner (landlords’) personal income tax status, they will pay either 18% (basic rate tax payer) or 28% (high or higher rate tax payer) £10,404 or £16,184.

Selling all or a part of a property business is also subject to CGT but in some cases you may be eligible to claim entrepreneur’s relief at 10pc.

Before making any decisions regarding disposals of property and CGT you should consult a tax specialist – these figures are only a general guide.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Capital Gains Tax allowance raised in Budget | LandlordZONE.

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The RLA Campaigns Team is pleased to report the Government listened to us on UC

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In a letter to its members the RLA said:

“The RLA Campaigns Team is pleased to report that the Government has listened to us on Universal Credit – with Work and Pensions Secretary David Gauke today confirming tenants who currently have housing benefit paid directly to their landlord

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No opportunity with the Budget?

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Where property people often go wrong is they focus on the strategy first: R2R, deal packaging, SA, HMO, lease options etc.

Too often I hear people say “I’m going to focus on serviced accommodation” or “Rent 2 Rent”

I recently presented why you should focus on the market 1st!

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Energy Efficiency Minimum Standards

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MEES 1st April 2018:

Former solicitor, Tessa Shepperson’s latest newsletter provides a timely reminder for the MEES, (Minimum Energy Efficiency Standards) affecting residential landlords from April next. This topic has been covered before here, but given its importance to landlord this should be a timely reminder.

All landlords should by now be aware that, as part of its commitment to reduce carbon and help save the planet, the Government is introducing new energy efficiency requirements for rented homes from 1 April 2018.

So you have five months to prepare!

The government has recently introduced a guidance document which sets out the new rules in some detail (see the orange button below). You need to read this (you will want the Domestic Landlord guidance document). But here is a brief guide:

The new Energy Efficiency rules:

As of 1 April 2018, you can ONLY grant new tenancies and renewals of existing tenancies for properties which have a minimum energy efficiency rating of E.

So if your property has a rating of F or G – you will be letting the property illegally.

As of 1 April 2020, this will apply also to all existing tenancies. Whether they are within their fixed term or running as a periodic tenancy. So you will not be able to let ANY properties which have a rating of F or G – unless there is an exemption.

Exemptions

There are exemptions some:

First – these rules will only apply to tenancies in the private rented sector. So if you are a registered social landlord, or if you let properties on residential licenses (eg if they are on a boat) – you do not need to worry. (Although if you let on residential licenses – check whether they really are residential licenses – they may not be).

Second – they will only apply if your property requires an EPC. Most will but some (including some HMOs) will not. So check this.

Third – If you have done all the upgrade work you can, but this is not enough to lift the property above band F – you can claim an exemption.

Fourth – If you cannot get full funding for the upgrade work you can also claim an exemption.

Those are the main exemptions but there are a few others. For example, some listed buildings may be exempt.

What you need to do now:

Make a list of all your properties. Then follow this checklist for each property and keep a record of your results:

Check whether it is subject to the rules (ie is it a tenancy and does it require an EPC?).

If the answer to both is yes – check to see what energy efficiency rating your property currently has. If it is E or above – relax! You don’t have to do anything. You are compliant.

Otherwise – check what work needs to be done and whether you can get funding.

Note that the underlying rules for EPCs have changed so if you got your EPC years ago, a new one may have a more favourable result – so you may want to get a new EPC done first.

If you can get funding – get the work done asap. But before next April.

If you can’t get funding – or if there is some reason why you can claim an exemption – get confirmation of this. Normally you will need some sort of experts report.

If you are exempt, register your exemption on the National PRS Exemptions Register, along with your supporting documentation. The register is not live yet, but hopefully will be in advance of next April. When it is live, it will be linked from the guidance page linked below. Keep your supporting documentation safe until then.

If you are a Landlord Law member I have written a fairly long article setting out the rules – you will find it via the blue button below (this link will not work unless you a logged in Landlord Law member).

You will find the government guidance page linked from the orange button below.

Make sure you do this checking exercise for ALL your rented properties – as Local Authorities will be enforcing the new rules from April 2018. Penalties include fines of up to £5,000 per property.

Tessa Shepperson is former solicitor specialising in property matters and now runs www.landlordlaw.co.uk

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Energy Efficiency Minimum Standards | LandlordZONE.

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