Fined! Landlord with ten-year track record pleads ignorance over tenancy deposit law

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A landlord who kept his tenant’s deposit in a tin at his mother’s house has been fined £1,500 for failing to lodge it in an approved protection scheme.

Mark Bradley, from Gourock, Scotland (pictured), didn’t protect his tenant’s deposit for five and a half years – instead, she paid £600 to his mother in instalments for a ‘rental bond’ in April 2014.

The money remained in the tin until the end of the tenancy in September 2019, when the tenant asked for £150 back to pay for van removals, which his mother gave her in cash.

However, when she asked for the rest of her money, Bradley said he should keep it due to rent arrears – which the tenant had agreed to pay out of the deposit – and damage to the property.

Bradley told the Housing and Property Chamber first-tier tribunal for Scotland that he still had the remaining £450 in cash as his mother had paid it back to him.

Ten years

Although he had been a landlord for 10 years, he had never managed the property himself and wasn’t aware of a landlord’s duties.

He added that his mother had forgotten to protect the money as she was dealing with other family issues.

Eddie Hooker, CEO of mydeposits, says there’s no excuse for any deposit not to be protected with an approved scheme.

“The tenant’s deposit could have easily been misplaced or misappropriated and they have also been denied access to an impartial resolution service at the end of the tenancy,” he says. “These are exactly the reasons why the deposit schemes were set up.”

Mydeposits estimates that only 85% of deposits across the country are protected in authorised schemes; including Scotland, this equates to more than 500,000 deposits that fall outside protection.

Picture credit: Dave souza – Own work, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=818190

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Is government about to do a U-turn on rent arrears loans in England?

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The Government could be considering a U-turn over its refusal to offer tenant loans after several peers called for an England-wide scheme during a debate in the House of Lords.

Last month, Housing Minister Christopher Pincher rejected calls from MPs to give tenants more financial support, but yesterday his counterpart Lord Greenhalgh wouldn’t dismiss the idea.

When asked if he would be introducing a hardship loan scheme to help pay-off COVID-related rent arrears – which both Welsh and Scottish renters now have access to – he replied: “We need to get the balance right between the rights of renters and protecting and safeguarding the interests of landlords.”

In a debate on rent, evictions and Covid-19, Lord Mackenzie of Framwellgate told peers that the welfare of tenants should be safeguarded fairly without destroying the financial viability of innocent landlords, who had an interest in maintaining good tenants.

“With rent arrears above £400 million and to avoid a future homelessness crisis, have the Government considered developing an equitable solution for both tenants and landlords by providing a financial package to pay off rent arrears built up as a direct result of the coronavirus?” he asked.

Conservative Lord Flight agreed that there should be more protection for struggling landlords.

He added: “A lot of landlords are elderly people and their source of income may be the rental from one property. We have to look at both renters and those who are renting.”

Chris Norris, policy director for the National Residential Landlords Association, says it’s been calling for months for Covid-related hardship loans that are interest free, guaranteed by the Government and paid directly to landlords.

“It is a welcome development that ministers now appear to be considering this and we urge them to act fast to help landlords and tenants to sustain tenancies,” he tells LandlordZONE.

Watch the debate in full.

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Are you a ‘Rent to Rent’ Landlord?

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Do you ‘Rent to Rent’ or Are you considering ‘Ren to Rent?

‘Rent to rent’ can be lucrative and many landlords and property owners have done very well from it:

Property owners can earn an income from their property without having to do any management work

Landlords can run a landlord business without having to invest in a property themselves

Situations where it can work well include:

• Letting agents who manage a property as tenant rather than as managing agent
• Universities and Colleges who use the property as accommodation for their students

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BREAKING: Two thirds of letting agents report 10% or less rent arrears rate

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Nearly two thirds of letting agents have said that 10% of their tenants have rent arrears, a new industry poll has revealed.

Conducted by accreditation body Safeagent, it also reveals that 21% of agents have between 10% and 20% of their tenants in arrears while 7% said they had none.

And among those tenants who are in arrears, agents said a significant majority were either one or two months’ behind (39% and 33% respectively) while only 13% of firms said tenants had arrears of more than three months. And among those who had rent arrears, a significant proportion had simply refused to pay their rent.

Most agent’s landlords were willing to help their tenants and 86% had offered those getting into arrears a payment plan, a quarter had tried mediation, 20% had decided to sell their property and 37% had chosen eviction.

The most common reason for arrears was tenants losing their jobs (see full list below), says Safeagent, revealing that agents are most worried about the ending of the furlough scheme later this month, although a new scheme is due to be introduced for areas under lockdown.

Agents also said the ongoing eviction restrictions were becoming ‘a real issue’.

Isobel Thomson, Safeagent Chief Executive (pictured, left), says: “Clearly our sector is facing tough times, but where tenants are in difficulty, it is clear that agents are working to support tenants and landlords in finding solutions to repay arrears and keep people in their homes.”

Advice: How to stop tenants falling into arrears.

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Can private landlords refuse to let to Housing Benefit claimants?

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Those who believe that Government is not aware of the issues facing landlords in the PRS  may be surprised by the detailed analysis in the Briefing Paper published on 13th October by the House of Commons library.

The summary is quoted below but I recommend reading the whole report

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CLAWBACK begins! Landlords must now pay VAT on compensation payments, says HMRC

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Landlords and agents are now likely to have to pay VAT on compensation payments including dilapidations.

As the Government begins to claw back more money as the Covid-19 bill rises, its new advice makes clear that these payments are generally liable for VAT. 

Law firm Irwin Mitchell says the guidance has come in under the radar and is a departure from the normal position where a VAT change only applies going forward.

Tax partner Sarah Cardew (pictured, below) also tells LandlordZONE that the guidance is still under discussion as it’s been met with a lot of opposition.

She explains: “Controversially, HMRC advises that any vatable person who has failed to account to HMRC for VAT on such fees must now correct their error as soon as possible.”

But it’s unlikely to include the payment of rents due when a tenant in a residential, rather than commercial, property quits a property early as residential property can’t be included within the HMRC ‘option to tax’ rule.

The option to tax allows a business to charge VAT on the sale or rental of commercial property, or in other words, to make a taxable supply from what otherwise would be a VAT exempt supply.

Cardew says that while HMRC accepts that certain payments could still be considered true compensation and therefore outside the scope of VAT, such payments are often called compensation when they are really payment for a supply. 

In the past, true dilapidations payments were considered to be compensation which fell outside the scope of VAT.

Previous HMRC guidance was that break payments didn’t attract VAT either however, it seems that they do now.

If someone has paid a dilapidations payment inclusive of VAT, depending on the wording of the clause, they could try reclaiming 20% from the recipient says Cardew, who advises landlords to check transactions over at least the last four years. 

Other payments the guidance covers include those: by tenants following an exercise of break rights, provided that the landlord has opted the property to tax; by developers wanting to back out of an obligation to take a lease if a landlord has opted to tax; by landlords exercising contractual break rights (these should be exempt if a tenant has opted to tax); and interest for late payment of rent – subject to a landlord’s option to tax.

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Mortgage payment holiday forbearance framework

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In a speech by the Director of Consumer and Retail Policy for the FCA, Nisha Arora, it was outlined how lenders should support borrowers forced into taking mortgage payments holidays during the pandemic.

In the guidance below it sets out expectations for firms on how to support customers and work with them on their finances and repayment plans.

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Residential landlords in London feel the pinch…

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Tenants were stuck in situ during lock-down until the ban on moving was lifted on the 13^th of May, many are still reluctant to make any changes until they know what their job situation is going to be, while some are moving out – the so called “second wave” is now prolonging the uncertainty.

Landlords, fearing they may lose tenants, and being unable to fill the vacancies, have become more flexible with lease renewals, most willing to extend a tenant’s stay on a reduced rent. According to a report out in the summer by Chestertons, one of London’s largest estate and letting agencies, landlords were experiencing month on month falls as around 30% more vacancies were on the market.

Chesterton’s highlighted the main reasons for the drop off in demand as:

• The overseas student market – demand fell of a cliff as many overseas failed to take up new courses in October.
• There have been far fewer corporate relocations as companies have encouraged homeworking and put a block on recruitment.
• Existing tenants are delaying committing to new leases as they either consider cheaper accommodation with rents falling, or they look further afield, outside of London.
• Some tenants are successfully renegotiating lower rents while they wait and see, avoiding the hassle and cost associated with moving.

Since the summer there has been a definite trend for inner London tenants to look for more spacious accommodation, accelerated by the pandemic and homeworking. Of those that have made a move outside of the city, over 60 per cent have moved to somewhere bigger. Typically they will be moving to somewhere that’s cheaper and more suitable for home working, leaving more vacant rentals in the city.

Whilst previously the trend to move out to suburbia had been mostly dominated by “early nesters”, couples who plan to start a family, more recently younger tenants too have started to make the move out – there’s definitely an increased appetite for more indoor work space, and more space outdoors as well.

All of this has created a supply / demand imbalance such that inner London landlords are having to substantially discount their properties, some by as much as 10-15% in order to maintain tenant occupation, or risk facing a lengthy void period with no rental income.

The outlook is likely to be leaner times in the short-term, but according to Chestertons, rent levels should to some extent be cushioned by the shortage of properties available to rent in other locations across the country. It is estimated that average UK rents may fall by 5%-7% for 2020 and are likely to remain flat next year, though the uncertainty of the “second wave”, and the prospect of a quite severe recession, adds to the uncertainty.

Earlier in the year Chesterton’s forecast was that, as the proportion of people’s incomes spent on rent is higher in Greater London, rents would likely fall by 10% to 12% and by 13% to 15% in inner London, in 2020. Their forecast for 2021 was a fall of 4%-6% and 2% to 4% respectively, though the current upsurge in Coronavirus could easily mean the these figures being revised upwards.

It is thought however that any fall will be cushioned again by the fact that some landlords, given these tough trading conditions, will sell up, reducing the supply of properties to let. And although there are still likely to be more vacancies in central London, it is thought that rents will recover quickly if there is a rapid economic recovery and when workers start to move back to their offices.

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Samuel Leeds kicks off another video attacking critic despite police warning in January

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Self-styled property guru Samuel Leeds is once again on our radar after restarting his campaign against Property Tribes community manager, Vanessa Warwick.

Leeds published a video on his YouTube channel on Friday seeking to discredit her and accusing her of “fraud” and “spreading hate”.

As many landlords will be aware, Vanessa and Property Tribes have been targeted by Leeds and his supporters in the past, largely because many of its forums include less than flattering but substantiated commentary about his courses and sales techniques.

This came to a head in May last year when Property Tribes co-founder Vanessa Warwick was the victim of an on-line malicious communications and harassment campaign using fake profiles, which resulted in a seven-month investigation by Surrey Police.

This activity, which included the placement of an advert for Vanessa as a sex worker on Gumtree with her name and phone number, went on for two months along with emails of a threatening nature sent to her husband, Nick, demanding that threads must be deleted.

Vanessa tells LandlordZONE that, when he refused to delete the threads, the activity ramped up.

This ran for two months and included the creation of four websites against Vanessa which were taken down one by one with the assistance of the police.  

Police investigation

After an exhaustive police investigation into the malicious activity, including use of the police cybercrime lab to trace the digital footprints, it was found that all roads led to Samuel Leeds’ home address.  

Leeds was interviewed under caution at Guildford police station in January this year. 

Despite this, Leeds has not been put off. His new video accuses her of hiding several aspects of her career and business dealings and of setting out to put people off investing in property in the style promoted by his academy – i.e. with little experience or money.

These have all been strongly rebutted by Warwick, including that she is a jealous of Samuel’s success, that she has hidden her ‘back story”, that she doesn’t own any investment property, and that threads critical of Leeds are deliberately started by her on Property Tribes.

Warwick says she has now reported Leeds to the police for the second time for harassment and recording telephone calls the two had without telling her.

“The first phone call published was an excerpt of the conversation when Nick and I rang Samuel Leeds in May 2019 to let him know about the campaign and to ask for his assistance to shut it down, as we did not believe he would want his brand associated with such malicious activity.  

“If Leeds had played the entire phone call, you would have heard how he said: “I’m actually quite happy with what’s being said about you so you should just delete the threads if you want it to stop.”

Out of the blue

The second phone call published was from July 2020, over a year later, when Samuel called her out of the blue.  

“Naturally, I hung up on him. I have no desire to speak to someone who harassed me for two months, put an advert for me as a sex worker on Gumtree, and also created a TrustPilot site in my name to post fake reviews for me as a sex worker,” she says.

“Samuel has used this to spin the narrative that I used the police to bully him at the start of the campaign but, in reality, I reported the malicious activity to the police, not Samuel Leeds, and there was a seven month police investigation before he was identified as the perpetrator and interviewed under caution.

“Samuel used my refusal to speak to him on the July phone call as an act of cowardice when in fact I am the victim of a serious crime and naturally have no wish to speak to the perpetrator.

“That he would think I would ever wish to speak to him after what he has done and continues to do is quite beyond me”.

Call recorded

Recording and publishing private phone calls can be a criminal offence and may form part of the new investigation by Surrey Police.  It also has serious GDPR implications.

“Anyone who wants to cut to the chase and get to the heart of this matter only needs to understand that Leeds wants the threads about him deleted off Property Tribes as they rank very high on Google organic search results.  

“As they are all substantiated, he cannot use legal means, and therefore he resorted to alternative methods which failed the first time around.”

Read Vanessa’s rebuttal of Leeds’ video on Property Tribes where she has provided screen-shotted evidence of the entire campaign.

Read her rebuttal of Leeds’ video on PropertyTribes.

Samuel Leeds has been contacted by LandlordZONE via his Property Investment academy for comment.

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‘Rent cap’ legislation scrutiny re-starts in Scotland, but will Bill ever become law?

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The Scottish Government wants landlords’ views on the ‘rent cap’ Fair Rents (Scotland) Bill but warns it might miss the deadline before the next election to become law.

The local government and communities committee at Holyrood (pictured) has opened its consultation on the bill which would cap rent rises at 1% above inflation and give renters protection against excessive or unfair rent increases.

Private landlords would also be made to enter the monthly rent and other detailed information into the Scottish Landlord Register.

Scottish Labour MSP Pauline McNeill launched the bill in June which was halted from going through the Scottish Parliament by the committee in August, blaming its failure on a heavy workload.

It’s now seeking views by 7th December with a view to deciding on the next steps early next year. However, it warns that because of its workload there may not be enough time to finish work on the bill before the May election.

Committee convener James Dornan MSP says the bill aims to move the balance of power further towards tenants.

He adds: “We are keen to hear views about whether this further change is necessary and whether the provisions are workable and will have the intended impact. We also want to find out what the financial impact would be upon private tenants, landlords, the wider rented sector and others.”

The Scottish Association of Landlords believes the proposals could lead to higher and more frequent rent increases as well as a shortage in the supply of homes.

It fears the bill would act as a disincentive to landlords considering reducing the rent below the open market level in order to attract new tenants or help existing tenants who are in financial difficulty.

Chief executive John Blackwood tells LandlordZONE: “Our focus has always been the lack of rental data – you can’t regulate for something until you know what the position on it is.”

Read our previous story about the Fair Rents bill.
Read more about rent controls.

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