RESEARCH: Why landlords are becoming more semi-detached

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Semi-detached houses have overtaken terraced homes as the most popular properties with landlords looking to buy, as tenants search for more space. 

Research firm BVA BDRC’s survey of 800 landlords for Paragon Bank found that of the 14% who are on the acquisition hunt this year, 40% want to buy semi-detached homes – up from 32% at the start of the pandemic.

If found that 39% are after terraced houses, while detached houses have also grown in popularity during the past two years, up from 9% in Q2 2019 to 18% in Q4 2021.

Other property types on landlords’ wish-list include individual flats (17%) and HMOs (16%).

Activity versus size

The survey also found that the likelihood of being active in the property market increases in line with portfolio size; 8% of single property landlords expect to buy during the next year, increasing to 24% among those with a portfolio of 11 or more homes.

Meanwhile, 52% plan to buy a property within a limited company structure.

Richard Rowntree, mortgages MD, says it has seen a trend for larger homes due to the prevalence of home working, along with more families who are selling their home to relocate and renting before they buy.

He adds: “We may also be seeing landlords anticipating the planned changes to energy performance rating of property and targeting homes that are either meeting the planned minimum EPC level C or those that will be easier to upgrade than terraced homes.

“It will be interesting to see whether this trend continues in the coming months.”

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Avoid potential problems as a result of pending carbon monoxide safety legislation

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UKALA has cautioned Landlords and letting agents to act now to avoid potential problems following the announcement that the government intends to pass legislation to extend the requirement to install carbon monoxide alarms in all rental properties in England with fixed combustion appliances.

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Housing market leaders vent frustration over stalled leasehold reform

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Leading organisations from the property sector have written to housing secretary Michael Gove imploring him to implement his government’s plans to reform the leasehold system which were announced more than a year ago.

The interest groups represented include conveyancers, deposit protection providers, mortgage lenders, surveyors, estate agents and tech firms.

All are asking Gove to bring into law the measures already announced or supported by the government over the last two to three years, including the Law Commission Reports on leasehold enfranchisement, sorting out ‘right to manage’ and Commonhold, bringing in the much-expected Leasehold Reform Act, preventing leaseholders being ripped off by management firms.

Disappointed

“We are disappointed the government has yet to implement these measures given the exploitation continues and increases with every passing day,” the letter says.

“We would therefore urge you to include the already-announced measures in future legislative plans as soon as possible to avoid further blighting of leasehold and so-called ‘fleecehold’ managed leasehold.”

Beth Rudolf (pictured), Director of Delivery at the Conveyancing Association, says: “We are simply calling on the Government to fulfil its obligations in this area.

“By doing this we can ensure leaseholders can set in motion parts of the property-owning democracy that are simply not open to many of them, such as selling their properties or securing a mortgage.

Time for action

Sean Hooker, (pictured) Head of Redress at the Property Redress Scheme, adds: “This is the time for Government action to restore the confidence of leaseholders, who currently feel like second-class citizens in the property world.”

“The redress schemes deal with the frustrations of leaseholders on a daily basis but are often powerless to help. The balance of power must shift back towards the consumer.

“The measures in the proposals will create a robust framework of rights and remedies and restore balance and fairness to the system that has been eroded as the market has evolved and changed, since the existing laws were introduced.”

Read more about leasehold flats.

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Council Bond and DPS now the rent has increased?

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The council is just about to release money held in a deposit Bond which I now have to protect in the DPS scheme. The Bond is held with the Council as such time the tenant pays the total amount of it

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Lenders catering for staycation BTL demand

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Consumers looking to take out a holiday let loan to satisfy a rise in demand for UK holidays will find a notable rise in product choice since 2020. According to analysis by Moneyfacts.co.uk, there are now more than 200 deals available in this niche arena

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LATEST: Chancellor under pressure to link stamp duty bills to EPC bands

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An influential energy coalition has called for EPC ratings to be linked to stamp duty in a bid to encourage homeowners and landlords to invest in home insulation and protect against rising bills.

The Energy Efficiency Infrastructure Group, made up of industry, businesses and charities, has written to Chancellor Rishi Sunak urging him to support a new Energy Saving Stamp Duty Incentive.

This aims to encourage people to either buy a more energy-efficient home or incentivise them to make it more energy-efficient afterwards by installing insulation or a heat pump. Households would be charged a lower level of stamp duty for doing so.

Homeowners are being encouraged to get their properties to EPC band C by 2035, while – if the new energy efficiency bill gets the green light – landlords will have to meet the target by December 2025 on new tenancies and on all rented properties by December 2028. There is mounting concern that this could spark many to quit the sector.

The group says that with so many millions of homes to retrofit, its concept of a long-term structural incentive is necessary to engage and prepare the market, and it believes this could prove more effective and simpler than a large-scale, short-term, costly grant programme – while also being revenue-neutral.

Speaking on BBC You and Yours, spokesman David Adams explained: “Stamp duty would be calculated then nudged up and down around a neutral point based on the energy performance of that dwelling, so the better performing the home from an energy perspective, the lower the stamp duty paid.

“If work is undertaken within the first two years, you can get a new EPC and then resubmit that, and you would get a rebate for the difference in stamp duty to what you paid originally and what you would have paid had that work already been undertaken.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Chancellor under pressure to link stamp duty bills to EPC bands | LandlordZONE.

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HOTTING UP: Rents rising at fastest rate ever – Rightmove

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Average asking rents have rocketed at their fastest ever rate to £1,068 per month outside London – 9.9% higher than this time last year.

Rightmove’s Quarterly Rental Trends Tracker reveals that this rapid growth, driven by high tenant demand and low numbers of available rental properties, means that rising rents are outpacing house price increases in all but three regions: East Midlands, South West and the South East.

Wales (+12.7%), the North West (+12.5%) and the South West (+11%) lead the way in annual asking rent growth, while London hit record annual growth of 10.9%, with asking rents in the capital now 3% higher than before the pandemic started – the first time they have risen beyond pre-pandemic levels.

Largest increase

Pontypool in Monmouthshire saw the largest annual increase in asking rent of any local area, jumping 20% from £562 to £674, followed by Ascot (+18%), and Littlehampton (+17%).

Rightmove predicts that asking rents will rise by 5% in 2022 as the imbalance between supply and demand continues. It also reveals the average rental yield in Great Britain is at its highest point since 2016, at 5.5%, with record yields seen in the North East and Wales.

Total rental demand is up by 32% compared to this time last year, while the number of available rental properties is 51% lower. This has led to available rental properties being snapped up by tenants in an average of 17 days.

Tenant demand

Rightmove’s director of property data, Tim Bannister (pictured), says: “Tenant demand continues to be really high entering the new year, meaning the imbalance between supply and demand is set to continue until more choice comes onto the market for tenants, which has led to our prediction of a further 5% increase in average asking rents in 2022.

“Landlords understand the importance of having a good, long-term tenant, and there is a limit to what renters can afford to pay, which will prevent rents rising at the same rate we’ve seen over the past year.”

Read the report in full.

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My dad wants to open a Ltd company in my name and buy land?

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My dad wants to create a limited company under mine and my brother’s name and then buy land with it. He plans on building something commercial and might take out a loan.

He said he would put the land and company under mine and my brother’s name.

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Ome launches new portal

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Ome is today launching a new platform for its members which will further improve the overall experience of deposit free renting and the customer journey for Ome’s Deposit Replacement members.

The innovative new portal, which has been in development since the middle of 2021

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Legal case: a question of leaseholders’ rights to manage the full estate

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The Commonhold and Leasehold Reform Act 2002 provides a right for leaseholders to acquire the freehold landlord’s management functions by transfer to a company set up by them – the Right To Manage (RTM) company.

The thinking behind the right was to empower leaseholders. The leaseholders generally hold the majority of value in the property. When they are dissatisfied with the way things are bing managed they have the option of collectively taking the responsibility for the management of their own block.

This can be a double edged sword as when leasehold owners take responsibility for managing their own block it can and often does involve a considerable amount of work, time commitment, and it can create difficulties with relationships. The management committee is composed of fellow residents instead of an independent managing agent, so friction between residents can be the result.

Setting-up a right to manage scheme:

The Right to Manage (RTM) scheme lets some leasehold property owners take over management of the building – even without the agreement of the landlord. This means they’ll be responsible for things such as:

• collecting and managing the service charge
• upkeep of communal areas (such as communal hallways and stairs)
• upkeep of the structure of the building (such as the roof)
• dealing with complaints about the building from other leaseholders
• Qualifying leaseholders can use the Right to Manage for any reason – they don’t have to prove the building has been badly managed.

Right to Manage companies

To use the right to manage, leaseholders must set up an RTM company and follow certain procedures. The RTM company can manage the building directly, or pay a managing agent to do it.

All leaseholders have the right to be a member of the RTM company and to vote on decisions. A landlord flat owner for example will get at least 1 vote, and extra votes depending how many flats they own.

Setting-up rules for right to manage:

The building must meet certain conditions and a minimum number of leaseholders are required to take part:

• at least two-thirds of the flats must be let to ‘qualifying tenants’*;
• it can be part-commercial but the non-residential part must not exceed 25% of the total floor area, excluding common parts
• RTM does not apply where the immediate landlord of any qualifying tenant is a local housing authority.
• RTM does not apply where the premises fall within the Resident Landlord Exemption. To fulfil this exemption would require the following:
  • The premises must be other than a purpose-built block (for example a converted house); AND
  • They must comprise not more than four flats; AND
  • One of the flats must be occupied by the freeholder or an adult member of their family as their only or principal home for the last twelve months.

*A ‘qualifying tenant’ is a leaseholder whose lease was originally granted for an original term of more than 21 years. There is no requirement for any past or present residence in the flats, nor any limit on the number of flats which can be owned by one person.

The case – FirstPort Property Services Ltd v Settlers Court RTM Company Ltd

In the case of FirstPort a company incorporated by the leaseholders acquired the right to manage in a block of flats. The question in dispute was, do the leaseholders also enjoy rights over the estate in which the block is situated? Does the company only acquire the right to manage the block itself, or does it also acquire the right to manage the rest of the estate?

The Appellant (“FirstPort”) is a company that manages an estate in East London containing ten blocks of flats. The Second to Fourteenth Respondents are all leaseholders of flats in one of the blocks, “Settlers Court”, with rights to access the estate’s communal areas.

FirstPort provides services on the estate which includes maintaining communal areas, services for which it is entitled to levy a service charge. The First Respondent is the RTM company established by the Settlers Court leaseholders had acquired the right to manage the block and also took on the responsibility of providing services in relation to the block itself.

A dispute arose between the parties as to whether the leaseholders still had an obligation to pay the estate service charge to FirstPort. The Respondents initially took the dispute to the First-Tier Tribunal with the result that the Tribunal decided that as the RTM had acquired the right to manage the estate, then the leaseholders had no obligation to pay the estate service charge.

FirstPort Property Services Ltd (the appellant here) appealed to the Upper Tribunal but the appeal was dismissed, the UT issuing what is know as a “leapfrog” certificate enabling it to apply for permission to appeal to the Supreme Court.

Judge Siobhan McGrath sitting in the Upper Tribunal stated that:

“…The challenges of creating a regime which gives lessees the right to manage the block of flats in which they live but which also seeks to give them rights of management in respect of the estate where the block of flats is located should not be underestimated.”

The Supreme Court case

The Supreme Court had to consider the intended purpose of the RTM regime. The outcome would have significant consequences for all those who have an interest in multi-block estates, in particular managing agents.

The Law Commission had considered the difficulties with the RTM schemes and set out several reform proposals in a July 2020 report. One proposal was that RTM companies should not automatically acquire management functions relating to “non-exclusive estate property.”

The Supreme Court judgment:

I consider that the right to manage scheme in Chapter 1 of Part 2 of the 2002 Act makes no provision within the statutory right to manage for management by the RTM company of shared estate facilities.

In FirstPort Property Services Ltd (Appellant) v Settlers Court RTM Company Ltd and others (Respondents) before Lord Briggs, Lord Sales, Lord Leggatt, Lord Burrows Lady Rose on 12 January 2022, their conclusion was as follows

“I consider that the right to manage scheme in Chapter 1 of Part 2 of the 2002 Act makes no provision within the statutory right to manage for management by the RTM company of shared estate facilities.

“It is concerned only with management of the relevant premises, that is the relevant building or part of a building, together with appurtenant property (if any) which means nearby physical property over which the occupants of the relevant building (or part) have exclusive rights.

“The right to manage is an exclusive right in the RTM company to manage the relevant premises, and no provision is made in Chapter 1 for any shared management of anything, save only where the RTM company chooses to agree otherwise.

“In my view the Gala Unity case* was wrongly decided and should be overruled. In so saying I bear in mind that it has stood as binding authority for several years, and that estate facilities in many estates may at present be being managed under sharing agreements made by RTM companies and others on the assumption that the law was as set out in that case. That is not, however, a sufficient reason to perpetuate an interpretation which is not merely causing practical difficulties but, more fundamentally, is contrary to the purpose of the statute.

I would therefore allow this appeal.

*In Gala Unity the relevant estate consisted of two blocks of flats and two detached coach houses. Each coach house contained a single first floor flat, above parking spaces. There was also further adjacent land including residents’ parking, footpaths, roads, visitor parking and grassed areas, used by the occupants of both blocks and the coach house flats in common.

The respondent RTM company in the case had given separate claim notices to manage each of the two blocks, but not the coach houses. It claimed to be entitled to manage all the parts of the estate in common use (including the parking areas under the coach houses).

Here the RTM company succeeded at all levels, LVT, the Upper Tribunal (Lands Chamber) and Court of Appeal. The objection came not from the tenants of the coach house flats They were perfectly content with the scheme for management of the whole estate by a common RTM company. It came from the freeholder.

The result of this case will come with some relief to managing agents.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Legal case: a question of leaseholders’ rights to manage the full estate | LandlordZONE.

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