Is there a future market for fully paid in advance 6 month ASTs?

admin    Uncategorized     agents

Hello, As we’ve now entered a tougher period for the prospect of increased rent arrears, what do fellow members feel about stipulating that all enquirers, for example to a self managing platform like Openrent, are to have the necessary resources to put the landlord into a positive cashflow position in advance?

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BREAKING: House prices see biggest monthly drop since dark days of pandemic

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The average house price plunged -2.3% to £285,579 last month, the biggest monthly drop since October 2008.

Halifax’s November house price index reports that the rate of annual growth slowed further to +4.7% (from +8.2%) in October, as the market was battered by strong economic headwinds and extensive house price inflation.

The slowing market is reflected across the UK, with the Northeast of England being the only exception, where the rate of annual growth edged up slightly to +10.5%. Wales (+7.9%) and the Southwest (+8.4%) saw the sharpest slowdown of annual growth, from +11.5% and +10.7% respectively.

Fine & Country MD Nicky Stevenson says there’s an expectation that the Bank of England will continue to nudge its base rate higher as it seeks to tame inflation, and a consensus that mortgage rates of between 5% and 6% may become the norm. “Against this backdrop, we expect momentum in the housing market to remain subdued as we approach the New Year,” she adds.

Not panicking

Most estate agents and mortgage brokers are not panicking however, and don’t expect prices to drop by more than 10-15% next year as inflation starts to come under control.

Matthew Jackson, director of Mint FS, believes the natural lull in November and December will be replaced with renewed activity and a semblance of calm from lenders in terms of pricing.

“We’re already starting to see that now that the shock of the mini-Budget has started to dissipate. This will see buyers and sellers return to the market, albeit not in the volumes of previous years but enough to drive growth in the market and keep prices fairly static.”

Chris Goodwin, partner at Hortons Estate Agents, strikes a note of realism. “Prices are coming down, but your home is still worth much more than it was three years ago, before the pandemic,” says Goodwin. “There is still a phenomenal lack of supply and that will support prices.”

View Full Article: BREAKING: House prices see biggest monthly drop since dark days of pandemic

New Welsh ‘occupation contracts’ will need amending by landlords, warns law expert

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Landlords must ensure they amend the Welsh government’s model tenancy agreements or risk eroding their rights, warns a leading property lawyer.

Following the introduction of the Renting Homes (Wales) Act, the government produced a model agreement to help landlords cope with the switch to the new written statement of ‘occupation contracts’.

However, Tessa Shepperson (pictured), a solicitor who runs Landlord Law, says failing to include additional terms such as not automatically being allowed a pet, making rent payable in advance, or being able to make deductions from a deposit could land them in hot water.

One positive thing about the new, but extremely complex, legislation is a new abandonment procedure. “However, the right to use this is conditional upon the contract requiring contract holders to live in the property as their only or principal home,” she tells LandlordZONE.

“This wording doesn’t appear in the model contracts – landlords need to include these clauses to protect themselves.”

Tribunal rights

Another positive for landlords is that, if they increase rent in a periodic contract using the notice procedure, contract holders no longer have the right to refer this to the First Tier Tribunal for review. 

They do need to give contract holders a copy of the agreement within two weeks of the occupation date or face a penalty of up to two months’ rent. 

“Some government officials are saying that a new occupation contract doesn’t need to be given to the contract holder in advance, so long as it is provided within 14 days of contract holders moving in,” adds Shepperson. 

“This protects them from being liable for the penalty, however contract terms are only enforceable if people agree to them in advance. 

If the contract is served late, the prescribed terms will all apply but not any ‘additional terms’ added by the landlord, as the contract holders can’t be bound by something they haven’t seen before the contract is made – and by the time they have moved in it will be too late. 

“Landlords must always ensure that contracts are signed by contract holders before they move in.”

View Full Article: New Welsh ‘occupation contracts’ will need amending by landlords, warns law expert

UK house prices dip by 2.3% – the biggest fall since 2008

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The UK’s house prices slipped by 2.3% in November which is the biggest monthly fall since October 2008, the Halifax house price index reveals.

The bank’s figures show that the annual rate of house price growth has fallen from October’s 8.2% to 4.7% in November.

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Tories scrap mandatory housebuilding targets

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The Prime Minister, Rishi Sunak, has been forced to drop mandatory housebuilding targets in a bid to see off a backbench rebellion from Tory MPs.

That would see demand remaining strong for the private rented sector (PRS) and Labour says the move shows the Prime Minister is ‘weak’.

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Why are buy-to-let landlords rushing for the exit?

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The Government has given buy-to-let landlords two compelling reason to sell-up, and fast: first is the overhaul of the rental rules coming next year, with indefinite tenancies and the end of section 21 evictions, and second comes the eroding of capital gains tax, tax free allowances.

A crisis in rental housing

When letting agents are resorting to sealed bids for tenancies, and bidding wars that are driving would-be tenants crazy are in evidence across the country, it underscores crisis description, and the plight that people are going through, desperate for good quality rental accommodation at a reasonable price.

The big landlord sell-off is not only creating this massive problem at the middle and top end of the rental market, its exacerbating the eviction problem at the bottom end, resulting in a homelessness crisis.

The shortage of housing is seeing tenants queuing in the streets for a viewing at one end of the spectrum, and rents are being pushed up, while at the same time tenants are being thrown out onto the streets.

Some agents are even asking for tenant CVs to evaluate their applicants backgrounds as if applying for a job, before agreeing a new let. According to one London letting agency, Atlas Property, managing over 500 properties, the number of tenants submitting CVs to help them secure a let has jumped by 20 per cent over the last 12 months.

A radical overhaul of tenancy laws

The Conservative Government after media pressure promised to end the practice of no-fault evictions over three years ago, and this is due to become law next year under the passing of the Renters’ Reform Bill. So time is pressing for landlords. This Bill and its radical overhaul of the Private Rented Sector in England is set out in the white paper, A fairer private rented sector.

The proposed new reforming legislation includes some sweeping changes such as no fixed-term tenancies, restrictions on rent increases, longer notice periods, increasing tenants powers to challenge evictions, no bans on pets, DSS and families etc.

The pendulum appears to be swinging, shifting the balance of power away from landlords and putting it more into the hands of their tenants. What is frightening many landlords is that these laws could make difficult to remove bad tenants.

Reduced capital gains tax allowances

The reduction in capital gains tax (CGT) allowances from April next rear is prompting a further exodus of landlords, now desperately looking to sell-up quickly to beat the April 2023 deadline.

Since last month’s Autumn Statement announcing the reduction in CGT allowances, coupled with the regulatory threat, agents are reporting an unprecedented number of landlords looking to sell-up with enquiries hitting a 13-year high.

The Chancellor Jeremy Hunt announced the changes to CGT allowances last month which means that people disposing of most types of investment assets will pay more CGT from next April: the personal allowance will fall from the current £12,300 to £6,000 in April 2023, and will fall further in April 2024 to £3,000.

Whereas a coup selling a jointly owned buy-to-let are currently allowed a gain of £24,600 before paying any CGT, they will only be allowed a £12,000 gain next year and a £6,000 gain in 2024, a massive reduction.

Tom Cranenburgh of the GetAnOffer Estate Agency told City A.M. that enquires by landlords wanting to sell were multiplying, hitting a 13 year high.

“The changes to Capital Gains Allowance couldn’t really have come at a worse time for landlords. Right now many are already facing a reduction in property values, rafts of new regulation and the prospect of many of their tenants struggling to pay their rent due to the cost of living crisis. Many are reacting to this unwelcome blow by already opting to quit the market and sell up,” Mr Cranenburgh says.

Selling with vacant possession

It is generally easier and more lucrative to sell a house or flat with vacant possession, so many landlords are opting to serve a Section 21 notice (two months notice) whilst they are still available – next year they will be gone.

It can still take several months to remove a tenant with Section 21 so time is pressing as there’s no telling exactly when the ban will apply next year, but probably unlikely before April. However, catching the capital gains tax higher allowance means the sale needs to go through before then.

Some landlords will attempt to sell-up with tenants in situ, but finding another landlord willing to buy a tenanted property may not be so easy.

Capital Gains Tax rates in the UK for 2022/23

For the current year, 2022/2023 tax year capital gains tax rates will be:

18% for residential property for your capital gain if your overall annual income is below £50,270

28% for residential property for your capital gain if your overall annual income is above the £50,270 threshold

For other assets basic rate taxpayers pay 10 per cent CGT on most asset sales and higher rate taxpayers pay 20 per cent CGT on most asset sales.

You then have the current £12,300 capital gains tax allowance per person which means your capital gains up to £12,300 are tax free.

Company dividends

Landlords who manage their rental properties through a limited company will usually pay themselves through dividends. These payments will also be affected by the changes to dividend allowances announced by Jeremy Hunt last month: this means for next April the £2,000 a year tax free allowance (previously £5,000) comes down to £1,000, and from April 2024 this will halve again to £500.

View Full Article: Why are buy-to-let landlords rushing for the exit?

CGT and Exit Planning for UK Landlords

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Property118 TV is Back, this time to discuss CGT and Exit Planning for UK Landlords.

It’s been 13 months since I last published a new video but I’m delighted to announce that Property118 TV is back for a short series before I hand over to a brand new presenter

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You need to be Precise with Precise Mortgages?

admin    Uncategorized     agents

I wanted to share a recent experience I’ve had with Precise Mortgages, which other borrowers/prospective borrowers/IFAs may find of interest.

5 years ago I bought a BTL property with a 75% loan from Precise Mortgages, fixed for 5 years at 3.39%

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Bill that would bring in licencing for holiday homes to get second reading

admin    Uncategorized     agents

A new law that would require holiday let properties in tourist hotspots to have a licence is to get its second reading in the House of Commons on Friday.

MP Rachael Maskell’s Short-term and Holiday-Let Accommodation (Licensing) Bill will be debated in the chamber and follows its introduction in September.

Ahead of the debate, Generation Rent has published research that says England’s housing supply lost nearly 11,000 properties to the second home and holiday-let sector between 2021 and 2022.

The campaigning group says that in some areas 2% of the housing stock has been converted to short-lets tourist accommodation over the paste three years leading to greater competition for vacant homes and inflationary pressure on house prices and rents for locals.

Areas most affected by the trend include Leicester, Scarborough, South Hams in Devon, the London Borough of Southwark and Copeland in Cumbria, which all saw more than 1% of their housing stock move into the second homes and holiday lets sector since 2019.

While holiday lets in London let out for 90 days or more a year are supposed to be licenced, Rachael Maskell MP is taking a different approach nationally.

Licences

Her Bill would enable councils to issue temporary licences and cap their number.

Dan Wilson Craw (pictured), Deputy Director of Generation Rent, says: “High nightly rents and the lack of tax and regulation have fueled an explosion in holiday lets at the expense of people who just need a place to live.

“The government is beginning to recognise the need to intervene… councils should have the power to require holiday lets to have a time-limited licence, and cap their number where there is a severe shortage of homes.”

View Full Article: Bill that would bring in licencing for holiday homes to get second reading

Landlord accused of rogue behavior to repay tenant couple £15,000

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A rogue landlord who harassed tenants living in his unlicensed HMO has been ordered to pay rent repayment orders totalling nearly £15,000.

Mohsin Hassan tried to argue that only two people had been living in the three-bedroom flat in Bancroft House (main picture), but a First Tier Property Tribunal ruled there had been three tenants, and that it would have needed a licence under Tower Hamlets’ additional licensing scheme.

The tenants told the court how Hassan started appearing at the property without notice which made them feel unsafe and which they described as harassment.

Sidney Cialec and Sarah-Maeva Cialec said once they agreed to leave, he had emailed them, threating to call the police if they attempted to re-enter. Hassan and three men thezn evicted them from the property by force.

Another tenant said Hassan had often entered the house using a key, sometimes outside of normal hours and without prior notice, so she reported him to the council as a potential rogue landlord.

Licence

Hassan tried to argue that council letters sent to him at the property were not passed on and that he only became aware of a RRO claim after the tenants had left. He said the council had told him he didn’t need a licence.

The tribunal said: “The answer given by the borough was the correct answer based on the facts supplied by Mr Hassan. However, the facts supplied by Mr Hassan were incorrect.”

Hassan said he and his brothers only entered the house when he thought everyone had left. However, the tribunal ruled: “The evidence of Mr Cialec and Ms Cialec is that Mr Hassan and a few other men broke into the premises and told the Cialecs to leave. Mr Hassan’s people stayed for one and a half hours during which time the Cialecs called the police. It was…a most unsatisfactory confrontation.”

Read the Tribunal’s findings in full.

Image: Google Streetview

View Full Article: Landlord accused of rogue behavior to repay tenant couple £15,000