Tenants will suffer as supply of rental homes dwindles…

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Private rented sector (PRS) tenants as facing a shortage of suitable rental property, just at a time when demand for renting is increasing.

According to a recent survey of almost 3,000 landlords carried out by the Residential Landlords’ Association (RLA), 22 per cent of landlords are planning to sell at least one of their properties over the next year. It is thought that this follows from the introduction of new tax rules for buy-to-let landlords, which started to kick-in from April this year.

Data published by the RLA from their latest quarterly research report shows that 33 per cent of landlords have seen an increase in demand for homes to rent over the past three years. It also shows that around 18 per cent of those surveyed are still planning to buy additional properties to let.

But this is where the tax measures are filtering through to tenants: faced by an imbalance in the supply and demand for rental properties, 47 per cent of landlords indicated that they expected to increase rents over the next year.

35 per cent indicated that the changes to mortgage interest relief, which will see landlords taxed on their turnover rather than their profit, unlike all other UK businesses, was the main reason why rents might increase.

Commenting on the findings, RLA Chairman, Alan Ward, said:

“As demand continues to increase for homes to rent, punitive tax changes are discouraging investment by the majority of good landlords who want to provide accommodation.

“Whilst efforts by the Government to support institutional investment in the sector are welcome, this will remain a drop in the ocean.

“To meet demand, we need pro-growth taxation that actively supports and encourages the majority of landlords who are individuals providing good housing, to invest in the new homes to rent we so desperately need.”

Teso-isation of Renting?

The government’s apparent drive to address the imbalance in housing supply and demand with more institutional investment, at the expense of the individual or small-scale landlord, would seem to go against the current trend: pushing back against big corporates, while backing small-scale, local independent businesses.

But, when it comes to private renting, everybody seems to want to kick the landlord, the small, independent providers. Have the rogue landlords and the bragging so-called multi-millionaire buy-to-let portfolio landlords, got the profession into such a bind that all landlords are now paying the price for this?

It would certainly seem that the rogues in the industry, constantly focussed on by the media, even though they represent a small fraction of the industry, has done the industry as a whole no good whatsoever. Couple this with the public’s view that buy-to-let landlording is the path to easy riches, and you have a perfect storm brewing against responsible small business landlords.

The government, councils and social housing providers are all getting in on the act of backing big developers and institutional investment, encouraging them into the rental housing market. Increasingly, there are moves to provide new-build housing at market rents, either directly, or through companies, or in partnership with banks and pension funds, egged on by government incentives.

This would seem like a neat solution for government: drive out the troublesome small guys by flooding the market with multi-occupied blocks of rental housing, and as long as the media focus remains on the rogues in the industry, there will be little public sympathy.

All this, including the myth that renting out property is a way to easy riches, ignores the fact that small-scale landlording is hard work.

“The independent private landlord will continue to be crucial to meeting housing need, particularly for those shut out of owner occupation and high-end rentals.

“So, it’s time to re-evaluate the private rental market, to bring the same caution to big development as we do with retail, and celebrate the small independents who can be the heroes of the housing crisis,” says the RLA.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tenants will suffer as supply of rental homes dwindles… | LandlordZONE.

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RLA call for credit referencing agencies to include rental payments

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The Residential Landlords Association (RLA) have today called for  credit referencing agencies, such as Experian and Equifax, to include rental payment history when calculating the credit rating of tenants.

This would seem only fair when the penalty for landlords and home owners for even one month of missed mortgage payment can be so severe when applying for a new loan or mortgage.

However, the practicalities of this are very difficult, because a tenancy agreement is not considered a consumer loan meaning there is currently no authority to collect this information, who would collect it and how can you be sure it is accurate.

The RLA conducted a survey of 3000 Landlords showing 61% would be in favour of rental payments being included in a credit score. This would obviously assist landlords for any reference assessment in taking on a new tenant.

Therefore the RLA is writing to the government requesting cooperation with the industry to consider how rental payment history could be included when calculating credit scores.

Alan Ward, RLA’s Chairman, said: “With many tenants wanting to buy a house of their own, it is absurd rent payment is not routinely included when undertaking credit checks for mortgage applications.

“Moving to such a scheme would help not just tenants, but also landlords by giving them a clearer sense of whether a prospective tenant has historically paid their rent in full and on time.”

Experian themselves have recently suggested a similar idea so watch this space although, government appetite for anything that may help landlords or in anyway disadvantage renters from getting on the property ladder will be low while chasing popular opinion in a hung Parliament.

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Buying freehold for our 2 bed semi

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I’m looking to purchase the freehold from Simarc for our 2 bed semi house once we’ve lived here for two years. We pay £40 per year ground rent.

By the time we look to purchase, there will be c960 years left on the lease.

Has anyone any experience in buying the freehold from a leaseholder? Do they all calculate costs in a similar way? What sort of fee should I be prepared for?

Finally, is there anyway around the £96+VAT admin fee JUST to get a quote from them? This seems excessive!

Many thanks

Kevin

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Hampshire Landlord Jailed for Tax Fraud

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A landlord from Church Crookham, Richard Fuller, 53, has been jailed for more than two years after he failed to declare capital gains on the sale of properties in the Aldershot area.

Fuller, of Bowenhurst Road, avoided paying £157,725 in Capital Gains Tax by failing to declare capital gains from the sale of his rental properties. He was given a prison sentence of two years and three months.

Fuller was arrested at Gatwick Airport in October 2014 after returning from holiday in Turkey. This followed an investigation by HM Revenue and Customs (HMRC) which revealed that between 2006 and 2013, he did not declare capital gains made from selling properties in the Aldershot area.

In court Fuller was found guilty of two counts of cheating the public revenue and three counts of fraud by false representation on July 14 (2017), and was jailed at Winchester Crown Court on Friday (August 11).

Sentencing Fuller, Judge Andrew Barnett said:

“The jury found you guilty of dishonesty. This is a serious matter, you deliberately failed to pay your capital gains tax over several years.”

The evasion was uncovered as part of HMRC’s crackdown on property tax evasion, the property taskforce campaign, and was subsequently referred for criminal investigation. Following the sentencing, confiscation will be sought to recover the proceeds of Fuller’s crimes.

Assistant director of the Fraud Investigation Service at HMRC, Richard Wilkinson, had said:

“Fuller thought he was above the law and decided not to declare or pay the tax due from the sale of some of his property portfolio.

“It is simply not acceptable to steal from UK taxpayers.

“HMRC will continue to pursue those who attempt to hide their gains on assets, their income, and investigate those who attack the tax system.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Hampshire Landlord Jailed for Tax Fraud | LandlordZONE.

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Airbnb – Overnight success or a bad night’s sleep?

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Airbnb is fast becoming the preferred method of accommodation amongst leisure and business travellers.  For Airbnb hosts it can be an easy way of making some extra cash.

However, recently there have been a number of cases where properties have been damaged by guests, sublet by tenants, people being injured at Airbnb properties and hosts left with a lot of clearing up to do.

Nicole Rogers from DAS Law answers the most important questions for existing Airbnb hosts and those thinking of renting out their properties.

Could sharing your rented or leasehold property with Airbnb cost you your tenancy or home?

Millions of Airbnb users may have unknowingly breached the terms of their leases, leaving them vulnerable to legal action or losing their tenancy.

The vast majority of tenancy and leasehold agreements are likely to state that the property in question may only be used as a private residence.  This would prevent tenants from renting out or ‘sharing’ their flat or home for short periods. It should be considered by anyone letting their property out through Airbnb to check their tenancy or leasehold agreements first.

It is not just those renting that should be wary of breaking contracts, mortgage companies may also take a dim view of home owners offering short term lettings of their property. It would be wise for owners to contact their mortgage company before offering their home out, as they may very well be breaking their mortgage contract. Whilst buy-to-let mortgages allow for assured short term tenancy, ‘short-term’ is often defined as 6 months; clearly Airbnb stays are considerably shorter than this.

What precautions do you need to take to comply with health and safety legislation?

Hosts must ensure that the premises are reasonably safe for visitors. With regards to fire safety, landlords should inform visitors of a fire evacuation route. The Regulatory Reform (Fire Safety) Order 2005 makes landlords responsible for taking steps to protect the people using your premises from the risk of fire. This means that a host should carry out a fire risk assessment, if necessary, improve the fire safety measures and keep the risks, and fire safety measures, under review.

If a visitor has suffered an injury at a host’s premises, he/she may seek to pursue a personal injury claim, particularly if the host has breached its duty of care to the visitor, which subsequently has caused foreseeable injury.

If your property or belongings are damaged or stolen, will your home and contents policy cover you?

It is unlikely as the insurer will usually not have catered for paying guests when arranging the policy. The host would need to clarify with their insurer as to whether their cover would be sufficient to cover losses.   Airbnb do offer a ‘host guarantee’ whereby the firm promises to reimburse hosts for damages of up to £600,000, the company adds that hosts should not consider this as a replacement for owners or renters home insurance.

Whilst a host is not required to take out specific landlord insurance, it would be advisable to speak with a specialist broker or insurer to ensure sufficient protection.

What are the tax implications for the income you receive?

Money received from hosting is generally regarded as income; therefore, it is likely that income tax will be payable so the host may need to declare their earnings to HMRC. It is possible that a host may be entitled to certain tax reliefs or allowances, so it is advisable to take tax advice regarding this.

As an Airbnb host, do you need to have public liability insurance?

There is no legal obligation to take out public liability insurance to host via Airbnb. However, it would be worthwhile to do so in order to protect yourself, the host in the event of an injury claim from the visitor.

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Trail of destruction by tenant from hell in Liverpool Echo

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The Liverpool Echo have shown the flip side of the landlord story with a shocking tail of wilful destruction by a tenant from hell.

Click here to see the full article and terrible photos.

The Landlord is Steve Parry, a 55 year old surveyor, who bought two rental properties to supplement his pension and retirement planning. However, the plan went ‘Bad’ for his property in Wavertree Liverpool.

Steve said he had “not made a bean” after the nightmare last tenant who cost £1,500 in court fees to evict leaving more than £2,000 in unpaid rent and at least £6,000 in damages.

The Photos in the Echo show a ceiling that collapsed after a (assumed deliberate) flood in the bathroom, piles of rubbish including bags of dog mess, trashed kitchen and smashed doors.

Steve served notice on the tenant in 2015 as she fell behind with rent and had a large frightening dog that was prohibited under the tenancy agreement.

Steve, in his Echo article, reported: “The house was wrecked, it’s shocking. She had failed to sort the rent out despite numerous promises, so I gave her two months’ notice to quit.

“I was then forced to serve two notice on her, which cost £200 each and she ignored. I had to get an order for possession in court, which I only got in the November. She was supposed to vacate by the 13th December, but despite everything I let her remain on agreement she would leave after the New Year.

“But she refused to move, saying she was looking for a new house. I had no choice but to pay for court bailiffs. She was finally removed this April.”

It was then that Steve found the trail of destruction wrought on his house.

Steve said that although he knew it was unfair to tar all benefits tenants with the same brush, he also could not take the risk again, and knew many landlords were now choosing not to rent to tenants in receipt of benefits especially with Universal Credit reforms forcing tenants to manage their own benefit payments.

He went on to say “people assume you’re loaded as a landlord, but I haven’t made a bean I’ve had that many problems. All I’m hoping is the house value will be more than I bought them for.”

Steve’s final plea to the government was to continue to crack down on bad landlords, but to also redress the balance protecting good landlords from bad tenants.

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Twelve Must-Do things when Letting a Property

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New Landlords:

Are you new to lettings, do you want to rent-out your own home for a time, or have you bought a buy-to-let and you’ve never let one before?

If you are really nervous about doing this for the first time you should think about using a good professional letting agent, one that’s qualified, and a member of one of the key professional associations: RICS, ARLA UKALA, NALS and NAEA etc.

Otherwise, you can save a lot of money by doing it yourself, but you must pay attention to a few absolute basics. If you don’t you could find yourself with a heavy fine, or you will be stuck with a bad tenant, unable to evict, not paying rent and wrecking our property.

This article applies primarily to English law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.

1. Make sure the property is safe – that there are no obvious hazards and that it complies with basic letting rules and regulations. It’s a really good idea to do a simple written risk assessment: www.landlordzone.co.uk/documents
2. You need an Energy Performance Certificate (EPC) before you can market your property. These cost in the region of £100 and last for 10 years. They give an energy rating from A to F, and after April 2018 the overall property rating must be a minimum of E. You must issue a copy of this certificate to the tenant at the start of the tenancy and on renewal.  www.landlordzone.co.uk/directory/suppliers-directory/energy-assessors-2
3. Make sure you have any gas and electrical systems and appliances in the properly checked, and a Gas Safety Certificate issued by a Registered Gas Safe Engineer. Plus the gas appliances must be serviced annually. These certificates last for 12 months, and they must be current at the start of the tenancy, a copy must be issued to the tenant, and on renewal. www.hse.gov.uk/gas/domestic/faqlandlord.htm  There is currently no legal requirement to have professional electrical checks and reports, but this is recommended.
4. Smoke Alarms must be fitted on each level of the property, preferably in the stairwell, along with Carbon Monoxide (CO) detectors in rooms where there are solid fuel appliances – including open fires.  The alarms / detectors must be tested at the start of every tenancy and tenants should have instructions to test and report faults during the tenancy – www.landlordzone.co.uk/information/are-you-properly-alarmed
5. Make sure you have done Legionella checks, especially if the property has been vacant for a period – these are basic checks which can be part of the safety risk assessment – www.landlordzone.co.uk/information/legionella-and-landlords
6. Issue your tenant with the latest version of the Government’s “How to Rent Guide”, a legal requirement: https://www.gov.uk/government/publications/how-to-rent  This document can be served as a pdf. via email if a clause in your tenancy agreement allows for documents to be served by electronic means.
7. Screening and Selecting Tenants. This is perhaps the most important thing you do to make sure you have a successful tenancy. Make sure you do property checks using this 20 point check-list provided by TenantVERIFY: “A 20 Point Checklist – TenantVERIFY® Recommended Checks” – https://www.tenantverify.co.uk/useful-documents.html
8. Protecting Deposits. Since April 2017 all security deposits taken (maximum of one month’s rent) must be protected in one of the Government approved schemes and statutory information (section 213 notice) served on the tenants or any other person that paid the deposit. www.landlordzone.co.uk/content/importance-of-protecting-deposits
9. Inventories. Since the advent of the Deposit Protection Scheme, without a good inventory you will not stand a chance of winning a claim against the deposit for damage to the property. You need documentary evidence to show before and after and ideally an independent inventory company should be used.
   www.landlordzone.co.uk/landlordzone-update/attention-to-detail-in-inventories
10. The check-in. Checking-in a new tenant is a very important process. There a lots of things to remember, so it’s wise to have a check-list in front of you so you don’t forget anything important. Find the Check-in-Check-Out Checklist here: www.landlordzone.co.uk/documents
11. Operating Instructions. You should supply a folder to new tenants with safety and operating instructions and emergency procedures for everything: how to operate the cooker, defrost the fridge, light fires, locate stop taps and electrical fuses, alarm settings etc. Also other information such as when and where the bins are emptied, where post should be forwarded to, and where the local amenities, entertainment, good pubs and restaurants, and transport routes are; this will always be appreciated.
12. Administration. Don’t forget to record all your income and expenses for the year which will be needed for your annual self-assessment tax return. A simple spread sheet will do for this if you have just one or two properties, otherwise think about investing in one of the landlord software packages – www.landlordzone.co.uk/directory/suppliers-directory/software It’s a good idea to keep all the paperwork in one place relating to the property / tenancy and keep a journal which records all communications, dates, times and conversations with tenants.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Twelve Must-Do things when Letting a Property | LandlordZONE.

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Recommended Accountants?

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Does Property118 recommend any property specific accountancy firms? If so will these complete my self assessment along with providing me the best tax planning advice?

I am a young landlord at 27 with 4 rental properties and a full time job. I feel a little bogged down in the past 12 months regarding all the recent changes and confused about the best ways to go forward. I would love some personal advice tailored to my specific circumstances.

I really need to appoint an accountant asap who can guide my through my first self assessment and hopefully advise me on what’s the best approach going forward. Is there a one stop shop or will my accountant and tax planner be two separate entities? (This rings alarm bells for bills).

I’ve seen many of the posts the two mark’s post on here regarding incorporation but wonder if it’s relevant to me and my modest portfolio.

Any comments would be greatly appreciated.

Joe

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Send in tax returns even if you don’t make a profit

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Unfortunately, we still speak with amateur landlords who may have owned a rental property for years, often by accident, who have not submitted any tax returns. This is most commonly because they think they don’t need to if they haven’t made a profit.

To be fair to HMRC if no profit hasn’t been made and you own up first they are pretty understanding about it.

However, Newham council are now working with HMRC investigating all landlords that are on their selective licencing list, but not declaring on self assessment tax returns that they own rental property. They think this could involve up to 13,000 landlords, which is about half the total number in the borough.

Sir Robin Wales, Newham Mayor, said: “In addition to uncovering large scale exploitation of vulnerable tenants, our licensing scheme has also unearthed that many unscrupulous landlords may be benefiting from undeclared tax.

“At a time when local authorities are experiencing savage cuts, and Newham alone has had half its grant funding cut, possible tax evasion on this scale takes money from vital public services. This is money out of the pockets of our poorest residents who rely on our services the most.

“While the Chancellor is scrambling around ahead of his Autumn Budget and the Prime Minister is claiming there is ‘no Magic Money Tree’, Newham has the solution in private rented licensing.“

University of London professor, Richard Murphy, claims that tax revenue losses from the PRS could amount to £1 billion per annum.

Murphy’s assessment is based upon the above Newham statistics and he said in his blog, “Their estimate is that maybe £200 million of tax is not being paid in London alone as a result of the failure of landlords to register to declare tax that they owe. This compares with HMRC’s suggestion that they may lose £550 million of tax a year in this way across the country as a whole.”

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HMO COUNCIL TAX being changed on each room!

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Hi all, I have a bed HMO which consists of having all en-suites. I’ve been battling with the local Council reference council tax since obtaining planning permission and once fully finished. As all landlords know council tax is very expensive!!

The council classed the HMO rooms as “self contained”, however after having number of site visits and local planning enforcement on site valuation office classed the property as a HMO. Now Aug 2017 valuation office have wrote letters to all tenants stating they are liable for council tax and have billed me £14,000 due to seeing the plans before in 2014 and now they say there has been have been some ” alterations ” ( en-suite in rooms), which was done when planning was put in 2014.

The valuation office doesn’t know what they are doing after number of calls and messages they still not understand. Has anyone been thought this traumatic time ???

I await messages of how you overcame this situation.

Thanks

Rahul

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