LATEST: HMO landlord loses Tribunal appeal but wins £6.5k fine reduction

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A rogue landlord has had his appeal thrown out after a first-tier tribunal ruled he had failed to protect tenants’ deposits and welfare at his unlicensed HMO.

Lambeth Council brought the prosecution against Fernando Brown – known as Fred – of Holmewood Road, South Norwood, who was fined £18,500 for housing eight tenants in the six-bedroom property in Herne Hill.

The council’s environmental health team was alerted by a tenant after bailiffs turned up to demand council tax arrears from Brown’s son Andrew.

The tenants confirmed their landlord collected rent money in person and always in cash. Investigations revealed Brown often failed to provide rent receipts, had no written tenancy agreement with any of the occupants and did not protect their deposits.

Ignored

During the inspection, several defects including a lack of fire precautions were spotted and an improvement notice was served. A follow-up inspection found the eight tenants were still living at the property and the previous notice had been ignored.

The council issued a proposed fine of £24,999 as it said Brown had been motivated by financial gain by not paying £1,674 for a five-year HMO licence and failing to comply with the authority for almost a year.

During the tribunal, Brown claimed he had signed a tenancy agreement with three people in 2015 and thought they still lived at the property.

He claimed to have been misled and applied for possession of the property when he found out there were eight tenants. The tribunal upheld the original decision but reduced the financial penalty to £18,500.

Councillor Maria Kay (pictured), cabinet member for housing and homelessness, says: “Unscrupulous landlords who put profit ahead of their tenants’ safety and wellbeing will not be tolerated in our borough. I am pleased that the tribunal recognised the gravity of the breach Mr Brown committed and agreed his actions were serious enough to warrant a substantial penalty.”

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FOCUS: Business rates now the biggest retail property cost over rents

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With falling rent values, business rates are now the biggest cost for many high street retailers, says Tom Entwisle.

With the long-term decline of the High Street, and now Covid, retail property values have seen a rapid decline. In some locations, rents have halved.

British Property federation (BPF) CEO Melanie Leech says that retail rents outside London had fallen by about 30% over the previous decade, even before the pandemic started. “Including inflation, it’s more like 50%.”

And commercial property agents are estimating that rents have fallen by up to another 50% since the start of the pandemic, depending on the type of retailer and location. This leaves business rates in some cases as much as 150% on top of the rent payable for tenants in some shopping centres.

The retail properties and office property sectors are expected to see major declines in rent values this year due to the Covid-19 pandemic.

More falls

According to Moody’s Analytics’ forecasts for commercial real estate average rents and vacancies, the average rents of retail properties are expected to fall again this year with wide-spread store closures and the rising threat to the sector posed by Internet sales and home delivery shopping.  

The office market is not far behind, experiencing downward pressure on the usage intensity of office space even before the pandemic, but now it is challenged by the shift to remote working. Moody’s forecasts effective rents in the sector will also fall as average vacancy rates are forecast hover around 20% over the coming two years.

Rates

Currently, business rates are based on the open market rental value of properties back in 2015.

The way these rates are calculated means that large businesses pay the tax at 51.2p on every £1 of rent payable at that time in 2015, and for small businesses the rate is 49.9p in the pound. But now that retail rents have dropped so much due to the general retail decline and the pandemic, instead of being around 50% above the rent bill, the tax can amount to over 100%.

So, business rates are becoming detached from reality; the real valuations that exist today which means, despite rate reductions and exemptions for some businesses, paying them is a strain for most retail businesses.

David Cox of Colliers Internationals says that business rates are “so far removed from the commercial reality… in historical terms, this is going to look like a window and chimney tax.”

Biggest expense

Property company British Land says that plummeting rents now mean that business rates will be the biggest property expense faced by many shopkeepers. Matt Reed, head of retail asset management at British Land, one of the UK’s biggest retail commercial landlords says:

“The current system is out of touch with economic reality as rates payable are based on valuations made years ago.”

“Across our portfolio business rates have become disconnected from rental values, meaning some occupiers are paying higher business rates than they are rent, making it harder for shop owners to keep their shops open and support jobs.”

The British Retail Consortium (BRC) property policy advisor, Dominic Curran says that rates now regularly exceed rent “especially in the north… I know of cases where rents were basically zero and yet units were still unlettable due to rates.”

Heavily criticised

Even before the pandemic the government was being heavily criticised by retailers and landlords for failing to reform business rates. But now the next business rates revaluation has been pushed back, not due until 2023. The final report on a consultation on long-promised fundamental reform of the tax is not due till the autumn.

The government has been accused of “Groundhog Day” inaction over business rates. It has recently published an interim report on its “fundamental review of business rates”, which sets out a summary of responses to last year’s call for evidence.

The review launched last July was set to be announced this spring, but on the 19 February, chancellor Rishi Sunak announced that he was delaying the Treasury’s report until autumn. The Chancellor argues that delaying the report will enable him to make decisions when the economic uncertainty due to the pandemic has reduced.

Sunak emphasised what that government has done for the industry during the pandemic by extending the business rates holiday for retail, hospitality and leisure businesses in England for a further three months until the end of June.

However, most of the industry responses to the various concerns about the businesses rates system were calling for more frequent revaluations and a reduction in the multiplier (UBR). Also mentioned was the possibility of a “zone-based” valuation system and an online sales tax.

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CPIH inflation rate has jumped to 1.6%

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The Office for National Statistics (ONS) released data for March 2021 shows the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 1.6% in the 12 months to April 2021 up from 1.0% to March.

This brings inflation levels towards the Bank of England’s medium-term target of 2% without causing immediate short term pressure on monetary policy and the Bank Base rate currently 0.1%

The largest contributors to this inflation rate increase came from housing and household services at 0.57%

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North of England prices booming amidst highest repossession levels

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With the current stamp duty holiday spurring a property market frenzy, house prices have boomed. The latest UK House Price Index shows that the North of England is leading the way, with both the North West (11.9%) and Yorkshire and Humber (10.9%) registering the highest rates of annual growth

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BREAKING: Demand for London rental property still weak as offices remain closed

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Latest research among landlords has highlighted the ongoing problems for the capital’s rental market as demand for rented property continues to wane while the rest of the UK revives.

Gleaned from a new survey by the NRLA conducted by research consultancy BVA-BDRC, landlords revealed that 56% had witnessed falling demand for their properties during the first three months of 2021 compared to the year before. Just 12% said they had seen increased demand.

This fell to 45% of landlords in outer London with 33% seeing a pick-up in demand.

The figures are confirmation that the capital has yet to re-awaken significantly from its Covid slumber – many offices remain either thinly staffed or empty and younger workers have yet to return to London to live.

The NRLA says rents are weakening, consequently. Some 46% of landlords within inner London have reduced rents to fill properties, dropping to 26% within its outer suburbs.

Stark contrast

This is in stark contrast to the rental market outside the capital.

Tenant demand was strongest in Wales, with 57 per cent of landlords renting property there having reported an increase over the same period, compared to just two per cent who registered a fall in demand.

This was followed by landlords renting property in the South West, where 53 per cent reported an increase in demand, compared to 13 per cent who registered a fall. 

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “The pandemic has seen a significant shift in where tenants want to rent, with the trend towards home working making inner cities, especially London, far less desirable.

“This poses significant challenges in determining where to invest to meet demand.

“Investors will no doubt be waiting for the market to settle, and the full roadmap out of lockdown to be realised, before making major decisions about where to invest.

“This will be particularly important as employers make decisions in the coming months about future working patterns.”

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Significant shift of tenants away from London

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Private sector tenants are leaving London in response to the COVID-19 pandemic. According to new research, landlords renting properties in London were the only ones in the country to report that tenant demand had fallen more than it increased.

A survey of National Residential Landlords Association members

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Grainger bets on London rental revival as tenants drift back

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Brittan’s biggest residential landlord says it’s still confident about demand for London homes.

Demonstrating confidence by maintaining its most recent dividend, the £1.9bn stock market quoted residential landlord company is reporting an increase in enquiry levels, and says its conviction in London’s rental market remains strong.

Grainger has said that lettings enquiries are up by nearly 90% since the start of this year, and according to the company’s CEO, Helen Gordon, much of the demand is in London.

As people drift back to office working following the lifting of the Covid restrictions, landlords worry about the long-term implications for the letting market, particularly in the capital – will demand for rentals be affected, will there be less need to live near London offices if so called “hybrid working” becomes the norm?

Companies are beginning to look to a post-Covid future and for many the vision is a model that combines remote work and office time.

Back in the bottle

As employers grapple with the issue of deciding the best way forward for their workers, it’s becoming clear that for many employees they don’t want to the genie to be pushed entirely back into the bottle.

Surveys show that, where possible, many workers prefer a mixture of home and office working, with a 60/40 office/remote working split being suggested by the experts. This shift could have huge implications for cities, particularly in terms of transport and housing.

However, homeworking is not for everyone; there are also serious drawbacks for companies with having people working off-site – there could easily be a longer-term drift back to offices as memories of the pandemic begin to recede. It is perhaps far too early to say what the real long-term affect will be on renting in cities.

Grainger says: “Despite the short-term market challenges in London of the past year, our portfolio performed well and our conviction in London’s rental market remains.

“As a leading city, London will continue to be an attractive location to live in and it will experience population and economic growth in both the near term as restrictions are lifted, and in the longer term, which will underpin rental growth and support valuations.”

CEO Helen Gordon (pictured) adds: “We have seen good demand for our rental homes as lockdown lifts, with people attracted to everything else London has to offer, such as the bars, restaurants and culture.”

Grainger is one of the biggest residential landlords with over 9,000 rental homes, one third of which are located in London. The company has more in development across sites in the capital including Tottenham Hale.

Grainger saw its rental growth increase by 1.7% over the six months to March 31 and has maintained its shareholder dividend at 1.83p per share.

Top cities

Meanwhile, concerning renting more generally, Colliers International report that the top 10 UK cities for residential investment are: Cambridge, Edinburgh, Bristol, London, Manchester, York and Belfast.

All have strong economies with highly skilled and educated workforces, house price growth, strong rental yields and low levels of income inequality, the report by the global real estate firm finds.

The Colliers’ study compared the top cities from the UK against 20 indicators in four categories: economics, property, education and liveability.

Jo Edwards, head of Colliers’ South West and Wales office of Colliers, has said of 3^rd place Bristol: “We are seeing a range of residential opportunities and developments coming forward for a variety of accommodation, and complementary commercial space.”

Andrew White, head of residential at Colliers, has said that residential investors were often attracted to the big-name cities, but the firm’s analysis offered a “wider perspective”.

In the Bristol case, Mr White says: “With its significant regeneration programme and strong house price growth it’s only natural that Bristol has come high up on the list”.

Main pic credit: Grainger’s Millett Place near the Thames Barrier where one-beds start from £1,575 a month.

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GUIDE: The risks and rewards of bridging loans for property investors

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Bridging loans are used for a numer of reasons but particularly by property investors purchasing buy-to-let or development purposes, ir buying a distressed sale or at an auction.

In their simplest form, bridging loans are used to finance the gap between buying a new home whilst waiting for your existing home to sell so you can release the equity.

As an example, let’s say you want to buy a property for £600,000, you plan to have a £200,000 deposit and a £400,000 mortgage. But you currently only have £60,000 in cash and need your existing property to sell in order to free up the rest of the deposit.

Unfortunately.the sale of your home has just fallen through and you don’t want to risk losing your dream home which you have already paid various fees on such as surveys etc. So, you take out a bridging loan for £140,000 to ‘bridge the gap’ and repay it once your property sells.

Seems likely a fairly simple solution, right? Before you make your mind up, let’s look at bridging loans in a little more detail.

Open and closed

There are two types of bridging loans.  The first is an open bridge loan which has no set end date, meaning it can be repaid when the funds become available, although typically within six to 12 months.

The other is a closed bridge loan which is used when you know exactly when you will have the funds available to repay – these are normally used for shorter term loans of a few weeks or months.

But it is important to know that bridging loans can be quite costly, particularly open bridge loans (due to their flexibility), so you need to factor this into your calculations and your plan to repay.

s an example, annual rates on bridging loans can be more than 10% and can often have fees attached to the terms such as admin, legal and even exit fees.

The pros are obviously that they can provide a great short-term source of finance to help with a property purchase and in many cases can be repaid early without penalty.

The cons are that, if you are borrowing over a longer period, then the interest charges are likely to be much higher than a standard mortgage and if you don’t keep up with payments, your home is at risk.

Remember that having another mortgage-size debt is a big financial burden. Unless you know when your home sale is going to go through, it could leave you significantly out of pocket and therefore is not always the best way of beating property-chain problems.

 During a property boom, like now, during which buyer demand is high, the risk is lower as the chances are your property will sell sooner rather than later. 

But if the market suddenly slackens off, as it very easily could as the economic impact of the pandemic becomes reality, then buyers should take a cautious approach.

If you have been considering a bridging loan, we would advise that you consider all alternatives as well, before putting yourself in greater debt.

Have you considered selling your home to a cash buyer like WeBuyProperty? If you need to have sold your property by a certain date for any reason, feel free to contact us for a no-obligation chat about how we could help you achieve this and save you having to take out a loan.

Phone number: 0207 449 9797
Email: info@webuyproperty.com

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Illegal eviction of tenant causes outrage both in UK and abroad

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A landlord has been fined for illegally evicting a tenant and his five-year-old son by changing the locks and throwing their belongings onto the street.

The unusually callous and illegal approach of his landlord has made headlines both in the UK and in Lithuania where both the tenant and landlord are from.

Antanas Danilevicius had fallen behind on his rent payments and returned home from work to find his son’s toys strewn across the pavement. His clothes were also packed up along with his TV, vacuum cleaner, collectible coins and bedding.

Landlord Antanas Klibavicius had gone to the house in Basford Place while Mr Danilevicius wasn’t in and changed the locks. 

Sheffield City Council fined Klibavicius £416 after he admitted the unlawful eviction.  Klibavicius also has to pay £650 in compensation to Mr Danilevicius and £1,283 in court costs. 

Director of housing and neighbourhood services, Janet Sharpe (pictured), says the council has one of the most robust approaches to tackling illegal evictions of any city in the country and a zero-tolerance approach to those who intimidate and exploit vulnerable tenants.

She adds: “Everyone deserves to live in safe, good quality housing regardless of whether they rent or own their home. I am determined to carry on clamping down on the very small minority of bad landlords in Sheffield who treat their tenants badly and tarnish the private rented sector.”

Read more: illegal evictions growing in number.

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Suspected gas explosion serves as wake-up call to lax landlords

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The tragic events of Sunday morning, in which two-year-old George Hinds was killed and four adults were injured in a suspected gas explosion in Heysham, Lancashire, have sent shock waves far and wide.

Two properties (pictured above, before the explosion) collapsed and a third was seriously damaged in the blast. Following the devastating incident, 30 to 40 people were evacuated from their homes. Matt House, from North West Ambulance Service, said he had not seen an explosion like this one in the UK during his 20 years of service.

The investigation into the cause of the horrific explosion is currently underway, with officers working their way through the very difficult site. Assistant chief fire officer Ben Norman, has said that investigators are viewing a gas explosion as “the most probable cause, but we’ll only confirm that clearly when the experts make their conclusions.”

How common are explosions in residential properties?

Fortunately, explosions are rare in residential properties, but when they do occur it is generally due to gas leaks. However, an article published in The Independent in February, highlighted an ‘alarming spate’ of recent incidents – nine suspected gas explosions affecting tenants and homeowners across Britain between late October 2020 and February of this year, with four people killed and 13 injured, along with dozens of others evacuated from their homes.

Although they generally happen infrequently, the spate of recent blasts follows a 33 per cent rise in the number of gas explosions and fires linked to flammable gas, according to the Health and Safety Executive’s latest annual statistics. The figures reveal that there were 41 gas explosions and fires from flammable gas causing death or injuries in the year until April 2020, an increase from 31 incidents the previous year.

A spokesperson for the HSE told The Independent there were no plans to review the rise in cases, but some safety experts and gas safety groups have been calling on government to take a wider look at gas safety in the UK, asking why so many explosions have been happening at domestic properties lately. This most recent incident serves as a stark reminder to all property owners, of the importance of doing all you can to make sure your property is safe.

What are landlords’ gas safety obligations?

As this particularly tragic case highlights, gas safety must be taken very seriously. While property can be replaced, lives cannot. Landlords have to comply with a lot of regulations, but those relating to gas safety are among the most important. Penalties for landlords who are not compliant with gas safety regulations are up to £6,000 for each offence, or six months in jail. If a tenant dies while staying in your property due to negligence, then there’s even the possibility of being prosecuted for manslaughter, which can lead to a long sentence. 

The Gas Safety (Installation and Use) Regulations 1998 apply to any landlords providing a property with a gas appliance or with gas lines connected. Landlords must make sure gas appliances and flues are safely installed and maintained by a Gas Safe registered engineer.

If you’re letting a property with gas appliances in it, you are responsible for:

1. Scheduling gas safety checks – During a gas safety check, a registered Gas Safe engineer will make sure that your boiler is working properly and that your tenants aren’t at risk. Learn more about gas safety checks.

• Maintaining a record of Gas Safety Certificates and providing your tenants with copies – landlords must provide a gas safety certificate at the start of the tenancy (before the tenant moves in), and within 28 days of each annual gas safety check, if there is a gas installation.

• Any other maintenance associated with gas appliances you’ve provided. Although landlords aren’t responsible for the safety of tenants’ gas appliances, if they connect to the property’s appliances, you are responsible for the condition of the connecting flues and pipework.

Landlords must also be aware that, in respect of Assured Shorthold Tenancies (ASTs), a Section 21 eviction cannot be used if a copy of a valid gas safety certificate has not been provided to the tenant before the tenant entered into occupation of the property.

Steve Barnes, Associate Director at Hamilton Fraser Total Landlord Insurance advises, “The best ways to prevent yourself from facing the justifiably harsh penalties for non-compliance with gas safety, are to make sure you schedule a gas safety check at least once a year (more if you have appliances that need it) and to keep a record of your Gas Safety Certificates and checks. If you use an agent to manage your property, make sure that your contract states who is responsible for what and that your agent provides you and your tenants with new Gas Safety Certificates on at least an annual basis. If you have any questions about how gas safety might affect your insurance policy, feel free to contact our team on 0800 63 43 880. Our policy will cover most eventualities but does not include incidences of faulty workmanship or any pre-existing defects or damage or wear and tear.”

What can you do to protect your tenants and your property?

Any fire needs three things to come together – fuel, oxygen and ignition. In the case of domestic gas explosions, there are four things that need to combine: gas (the fuel), oxygen (which is present in air), the ignition (for example a lighting a cooker or switching on an appliance) and a fourth cause which is almost always poor workmanship or human error of some kind, for example poor maintenance or a faulty appliance.

Preventative measures are always the best when it comes to stopping explosions caused by gas leaks from happening; fortunately these are within landlords’ control:

1. Regular maintenance – ensure installations and annual services are carried out by a Gas Safe Register engineer. Infrequent checks to heating appliances can lead to gas leaks which can result in explosions.

• Contact details – it’s crucial to act fast in an emergency. Make sure your tenants have the correct contact details if they suspect a gas leak. Gas Safe Register has detailed information on who to call and what to do if your tenants smell gas or have been feeling unwell and experiencing headaches, nausea or dizziness and suspect it’s carbon monoxide poisoning.

• Flammable substances – advise tenants to minimise the use of flammable substances and never to leave combustible substances near heat.

• Gas ovens – if you have a gas oven in your property, make sure tenants know how to use it, and remind them to turn it off correctly.

If you smell gas or suspect a carbon monoxide leak

Call the national gas emergency helpline on 0800 111 999.

• Do turn off the gas at the meter unless the meter is in a cellar/basement
• Do put out naked flames
• Do open doors and windows
• Do keep people away from the area affected
• Don’t smoke or strike matches
• Don’t turn electrical switches on or off

For more information on landlords’ responsibilities for gas safety, including what to do if your tenants prevent you from carrying out a gas safety check, read Hamilton Fraser Total Landlord Insurance’s Landlords’ guide to gas safety: everything you need to know.

As a valued LandlordZONE reader you’re entitled to 20% off Hamilton Fraser Total Landlord Insurance’s policies, call the team today on 0800 63 43 880 quoting code LZ2021 or get a quote online in under 4 minutes. 

Pic credit: Google

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