Landlords have demanded change in today’s budget

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Budget 2018:

Landlords demanded change in today’s Budget, but they won’t be deterred if it fails to emerge, that’s the conclusion of a recent survey by online letting agent UPad.

A review of mortgage interest relief on buy-to-let mortgages, and the removal of the 3% Stamp Duty (SDLT) surcharge top the wish-list of changes that UK private landlords would like to see.

Nevertheless, nonetheless they indicate that they won’t be deterred from the rental market whatever measures Philip Hammond comes up with today.

Despite the good news that tax receipts are strong, and the public sector net borrowing reached a 16 year low (April to August), the Chancellor is under intense pressure to meet the Government’s pledge to increase NHS spending. This is proposed to be £20bn by 2023, so his ability to produce tax giveaways will no doubt be offset by the looming needs of a potential economic shock caused by Brexit – landlords, don’t hold your breath!

The Survey

When asked what one wish the Chancellor could grant on October 29^th, 40% of landlords chose a review of recent changes to Mortgage Interest Relief, whilst over a quarter (26%) would like to see the 3% surcharge on SDLT applied to second and subsequent property purchases reversed.

However, should neither of these come to fruition, the landlords questioned don’t intend to make any rash decisions regarding their future in the market.

Almost a third (29.5%) stated that they’re a committed landlord and take a long-term view on managing their portfolios; a further third (32%) would adopt a ‘wait and see’ approach to better gauge how they might be affected.  Only 7% would take steps to start selling their properties.

These are characteristics that James Davis, CEO of Upad and himself a portfolio landlord, believes are indicative of the level-headed nature of most UK landlords:

“The decision to sell up isn’t instantly achievable and landlords need to factor in serving notice on tenants and possible renovations before tackling all the normal marketing and conveyancing hurdles.  Realistically you can be looking at a twelve-month timeframe to sell a rental property so whatever happens next Monday, we’re unlikely to see that happen quickly.

“Added to that, however, is that our landlords take a long-term performance view of their portfolios.  Over three-quarters of our respondents have been a landlord for more than five years and added to this, the clear majority have a very clear strategic reason for being so: for two-thirds, it’s a vital part of their pension planning, whilst for a fifth it’s their full-time job.  This isn’t something that they’ll simply walk away from.�

It is a position supported by John Socha, a landlord with over twenty years’ experience and a portfolio of 25 properties across Northampton that he’s already planning to expand.  He comments:

“The Chancellor needs to start viewing landlords, like myself, as a legitimate business rather than an activity to dabble in on the side.

“I have built a significant portfolio of properties and already have plans to expand this further, but if the Chancellor doesn’t announce positive moves for landlords, then I will need to start increasing rents as tenancies come to an end.  I’m not going to simply give up what I’ve worked hard to build.�

Upad’s research was conducted shortly after plans to introduce a Capital Gains Tax incentive on the sale of rental properties to sitting tenants of three years or more were first mooted.  Respondents were asked whether this might be a move they’d welcome, with results being somewhat inconclusive.  Whilst 37% agreed that yes this was something that they’d welcome, 33% confirmed that they weren’t looking to sell, so it wouldn’t affect them.

James Davis concludes:

“With 71% of our respondents confirming that they’ll maintain the size of their property portfolio in the coming year and a further 15% stating that they, in fact, plan to increase the number of properties they hold, committed landlords with a long-term, strategic view of their investments are unlikely to be deterred by whatever the Chancellor announces next week.

“They’re keen to maintain a cost-effective approach to managing their portfolios which is why they chose to work with Upad, but they also resent the burdensome nature of the tax regimes inflicted on them.  However, they’re aware of the vital role they play in the provision of homes when supply is so low, and demand is so high, so they remain resolute in their commitment to the Buy to Let market.�

These are the findings of research released today by leading online letting agency, Upad.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlords have demanded change in today’s budget | LandlordZONE.

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Taxation Questions on Formation of Property Partnerships

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I am trying to establish the CGT and Stamp Duty position on the basis of two unrelated individuals forming an ordinary partnership (not an LLP).

To simplify matters to begin with, let us assume they both own six residential rental properties worth £200,000 each

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Norwich Franchise – Lettings Director Appointed

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Lettingsupermarket.comâ„¢ are proud to introduce their Norwich lettings specialist Jenna Veneziani, director of their latest franchise, Lettingsupermarket.comâ„¢ Norwich. Jenna and her team, based in Norwich, will be providing Landlords with a personal experience and superb local knowledge to ensure that every aspect of property management is dealt with as efficiently as possible.

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LandlordZONE® Q3, 2018 Renting Survey

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Landlord Survey:

The Q3, 2018 survey of the thousands of private landlords using the LandlordZONE® website reveals that 70% of the respondents own 4 properties or less, of which 75% are self-managed. Some 60% of the respondents never let to Housing Benefit tenants. Around 10% want to buy more properties, 71% will maintain their existing portfolio size, while 19% plan on selling some units. Read on for more statistics.

Small-Scale Landlord Dominance

It is well known that the UK’s private rented sector (PRS) is dominated by small-scale landlords and survey after survey has indicated this fact. The sector is populated by these often part-time landlords, renting out their investment properties (buy-to-lets), (1) to supplement their income and provide a pension next egg, (2) when they move away with their job and want to keep their own home, or (3) when they move to a new home before selling their own property.

The results of this survey confirm this notion that the small private landlord dominates an industry within England (English Housing Survey to 2017), and this is reflected right across other UK nations. The private rented sector remains the second largest tenure now accounting for 20% of all households.

The Private Landlord Profile

The results of a recent survey by Estate Agents, Your Move showed that over 40% of buy-to-let small-scale landlords see themselves as “pension pot� landlords, most being males over the age of 45, with nearly a quarter (23 per cent) of the sample having been a landlord for 15 years or more.

“Accidental� landlords – those who were not expecting to be landlords, are most likely to be female and under the age of 45. These were the second most common type of landlord (29 per cent), followed closely by the professionals, landlords doing it as a full-time job or career (20 per cent).

Nearly three in ten (29 per cent) of “pension pot� landlords saw their rental properties as a business, with more than half (53 per cent) investing in more than one property. It was found that these landlords are more likely than the other groups to build a personal rapport with tenants and want tenants who will protect their investment.

The Size of the Rental Market

The proportion of private rented sector households renting has doubled since 1996-97 and the overall size of the private rented sector has increased over this time from 2.1 million households in 1996-97 to 4.7 million households in 2016-17. The sector grew a little between 1996-97 and 2006-07, but growth accelerated after 2006-07, with over two million additional households added to the sector. However, growth now appears to have slowed more recently.

The increasing size of the private rented sector means that across most age groups (with the exception of aged 75+), the number of private renters has increased in the last 20 years even where the proportion of private renters in that age group has not. For example, the number of private renters aged 16-24 has increased from 365,000 to 513,000 even though the proportion has decreased (from 18% to 11%).

Where the proportion of private renters has increased, the increase in numbers has been particularly pronounced. There were more than three times as many 35-44 year olds renting privately in 2016-17 than 20 years ago: an increase from 331,000 households in 1996-97 to 1.1 million in 2016-17.

Tenure by Value

According to property agents, Savills (Residential Property Focus 2017 issue 1, chart above), the value of property in the UK rental market is a massive £1,400bn, and according to the statistics produced by the LandlordZONE® Q3 2018 survey, some 70% of this property is owned by landlords owning less than than 4 rental units, which would equate to an investment of £980bn, or just short of £1trillion.

The Survey Results:

Question 1 – Properties owned: How many rental properties do you own?

Number of Properties owned by Landlords

LandlordZONE® – A Chart showing Landlord Property Ownership

As the chart above shows, only around 5% of landlords in the survey sample own more than 20 properties, with around 41 per cent owning no more than two properties and 70% owning no more than four properties. These are figures produced in October 2018 by the LandlordZONE® survey, quite closely reflect figures produced through available national statistics.

How many landlords use agents?

Question 2 –Do you use an agent or manage your tenancies yourself?

The shear amount of new legislation, regulations, taxation rules and general “red tape�, now affecting landlords means that the DIY landlord needs to have quite a bit of knowledge and ideally experience if he or she is to stay out of trouble. So, the temptation to use a professional agent is now greater than ever. However, in these days of increasing costs and taxation, one area where landlords can save a lot of money is by self-managing, so there is a countervailing motivating factor which says, “do-it-yourself�.

The survey found that one-quarter (25%) of landlords are using letting agents, as opposed to the LandlordZONE® user survey which shows (75%) are managing their own properties. That would make perfect sense as those visiting the website do so, in the main, to find information and get advice, to keep themselves up-to-date on lettings management.

Question 3 – In the next 12 months, are you planning to buy more properties, maintain your existing portfolio, or sell some properties?

Despite the government’s tax changes, countless new regulations, and threats to the shorthold tenancy, with the proposed introduction of a mandatory 3-year tenancy, landlords are still optimistic about buy-to-let.

The saving grace is the growth of renting and the continuing healthy demand for rental accommodation. Recent research by Hamiltons International, the sector to continue growing and reach six million households by 2025. By 2022, 20.5% of households will be renting in Great Britain, they say, up from 19.4% today

A new sentiment survey by Your Move interviewed almost 1,100 landlords in June this year and its survey report shows that around 52 per cent of landlords surveyed felt positive about their position in the current economic climate. This compares to only 16 per cent who felt negative about their prospects as landlords. The majority approach to the general outlook was confident, despite the stricter regulatory and tax changes introduced over the last couple of years.

These results compare to the LandlordZONE® survey which gives around 10% wanting to buy more properties, over 71% maintaining their existing portfolios, and 19% selling some units.

Question 4 – What is your 12-month property market outlook?

The survey results from LandlordZONE® visitors show that roughly 22% are very positive, 55% are neutral, and 24% are negative on in the prospects of the buy-to-let market in the future.

With Brexit uncertainty, a Budget on the horizon, a stagnating housing market, and issues over Universal Credit, its perhaps not surprising that some landlords have the jitters, but when 77% of our landlord visitors are either positive or neutral, that must be a good sign.

Question 5 – Do you currently accept benefit recipients as tenants?

It is not unusual for private landlords to advertise properties to let stating that they will not accept applications from Housing Benefit (HB) claimants. This often raises the question of whether such restrictions amount to unlawful discrimination.

Despite the controversy over this, a 2018 House of Commons briefing paper “Can private landlords refuse to let to Housing Benefit claimants?� The paper discusses private landlords’ reluctance to let to Housing Benefit claimants and considers whether this is a form of discrimination. It concluded that it is unlikely to amount to direct discrimination as income and employment status are not protected characteristics under the Equality Act 2010.

Of course, landlords sometimes have no choice in the matter, if one of their existing tenants decides to claim benefits because they are short of funds.

The results of the LandlordZONE® survey on this show that around 60% of respondents never let to HB tenants, only 3% mostly let to these types and around 37% do sometimes let to them.

Question 6 – How easy is it to find new tenants in your area?

This is perhaps as good an indication as any of the state of the letting market today. The LandlordZONE® user base is predominantly UK, with around 30% from London and the South-east and the rest spread evenly throughout the country, most in the main conurbations such as Birmingham, Manchester, Leeds, Bristol, Edinburgh etc.

The survey shows that 75% of landlords are reporting that finding tenants is easy – there is ample tenant demand in their own locations, and though we don’t have a breakdown on where these locations are, it is likely to be the main conurbations. 24% are finding it not so easy to let, and just 2% report that they find it difficult to find tenants.

Question 7 – What is your view on the proposed introduction of mandatory 3-year tenancies?

The jury is currently out on the decision as to whether a compulsory 3-year tenancy is introduced in England, as we await the result of a government consultation exercise.

The new proposal would bring in a tenancy where there is a six months’ probationary period, at which point the landlord could bring the tenancy to an end if all is not well. But if this becomes law, when this 6 month hurdle is passed, the landlord is tied-in for the duration – for the remaining two and a half years, whatever happens next. During this period though, the tenant can walk away with just a short period of notice.

It would be a major transition away from the current shorthold tenancy where the landlord can use the section 21 no fault eviction process after the initial 6 months, providing the fixed term has expired. Basically, under the current rules, it means the landlord has a degree of control and protection, should things go wrong. Under the proposed scheme, and under Labour’s plans, all this is lost.

The results of the LandlordZONE® survey shows a surprising degree of tolerance for the idea, with around 30% of landlord respondents either positive (15%) or neutral (16%), but 69% would be definitely against.

Question 8 – What do you think the impact will be of Brexit on the private rental market, if any?

There has been a lot of debate about Brexit and how it will impact the property market and the economy as a whole.  So how is it likely to affect buy-to-let investors? The short answer is that it cannot be known for sure, but generally, anecdotal evidence shows that landlords and investors fall into two camps: there are those that worry that Brexit will have a big impact on them and are reducing their exposure to UK property as a result, and those that see this as a buying opportunity.

The results of our survey show that LandordZONE® visitors are in the main in the negative camp at around 70%, while 15% are positive and another 15% neutral on the matter.

Question 9 – How will the letting fee ban affect your business?

First trailed in 2016, one of the major changes coming in next year will be the ban on letting fees charged to tenants. Under the new regime, tenants will only be able to be charged for rent, deposit, and reasonable amount of penalty if they default on their contract. This is more likely to have a serious effect on letting agents rather than private landlords as most private (DIY) lettings don’t involve any charge to the tenant, or if there is one, it is usually a small amount.

Most letting agents on the other hand rely heavily on these fees for a large part of their income. Passing on higher charges to their landlord clients is likely to be restricted because of competition, but some of this charge will be passed on, and in any case the measure is likely to result in higher rents for tenants.

The survey found that 63% of respondents were neutral on the issue, with 6% positive and 31% negative.

Question 10 – How will the introduction of mandatory client money protection (CMP) affect your trust in letting agents?

The Government has announced that legislation will be brought forward to introduce privately-led CMP schemes and civil penalties of up to £30,000 for agents who fail to comply with the scheme. According to industry estimates, £2.7 billion in client funds is held by letting agents at any one time.

Currently, CMP is voluntary with approximately 60% of letting agents signed up to a scheme. By making CMP mandatory it will ensure that every letting agent is offering the same level of protection, giving both tenants and landlords the financial protection that they need against an agent going bust, or absconding with their money.

As three-quarters of the respondents in the survey sample don’t use agents, it’s perhaps not surprising that 40% thought it would have no effect on them, 38% don’t know, 19% were positive about the change and 5% negative.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LandlordZONE® Q3, 2018 Renting Survey | LandlordZONE.

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New PIP Property Seminar date in Brentwood – Invitation to readers

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Come join us on Wednesday 28th November at Marygreen Manor Hotel in Brentwood, Essex for our last PIP seminar of the year, to talk everything property investment! Whether you are a seasoned investor or new to property, you won’t feel out of place as the night is for YOU.

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One of my tenants is not keeping the house tidy?

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I have let my house through a letting agent and the tent is a single mother of two. Shes been in the house for almost 2 years.

The house was gutted top to bottom before she moved in.

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NRAM variable rate goes up but never comes down!

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I am currently stuck with NRAM with 2 buy to lets, my problem is that since the crash they haven’t dropped their interest rate, but over the last few months as the base rate has increased they have moved up accordingly.

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BTL lenders with Ltd co products up 47% on last year

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The Mortgages for Business’ Buy to Let Index indicates an increase in the number of buy to let lenders lending to limited companies by 47% over the last year. Click here to see the full article.

The index shows:

There are now 22 BTL lenders now lending to limited companies which is up up from 15 in Q3 2017

The total number of BTL mortgage products available to limited companies has more than doubled since from 263 to 628

44% of BTL transactions are now made in the name of a limited company increased from 42% last year.

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Shelter’s strategy for 2019 – 2022

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Shelter have documented their strategy for the next three years 2019 – 2022: click here to view the full document.

Their purpose: Shelter exists to defend the right to a safe home. (note not to provide a safe home)

How they will achieve change:

“A nationwide movement demanding social housing and defending rights

• In communities we harness the power of our services

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Help your tenants feel safe with our fire safety checklist

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Fire Doors:

Fire safety is one of the most important factors for landlords to consider when it comes to making sure their tenant’s accommodation is kept safe. Howden’s comprehensive guide provided here focuses on providing the information you need to create a safe environment for your tenants.

Under the Regulatory Reform (Fire Safety) Order 2005¹, landlords have the responsibility to keep their properties and tenants safe.  The ‘responsible person’ has a legal duty of responsibility for fire safety and for complying with the Fire Safety Order on their premises. Landlords must take reasonable steps to reduce the risk from a fire and make sure people can safely escape in the event of a fire. The responsible person must take appropriate measures that will limit the spread of fire should one occur, including the installation and maintenance of fire doors.

Fire doors are a lifeline. When properly fitted and correctly maintained, they can provide people with vital time to safely escape from both fire and smoke. A fire door helps to ensure that if a fire breaks out it will be contained in the compartment in which it started. A fire door will keep fire and smoke trapped for a defined period of time, allowing individuals enough time to escape from the building via alternative routes. It will not fulfil this function, however, if it is damaged or left propped open.

Different fire door specifications provide varying protection time. An FD30 door will offer up to 30 minutes of fire resistance and an FD60 will ensure that there is up to 60 minutes of protection. Fire doors alone will not provide the necessary protection in the event of a fire. They will only be effective if installed with the correct hardware – you can find out what makes up a fire door and more in our Fire Safety Hub.

Figures show that 28% of tenants do not trust their landlord to understand and implement all the necessary fire safety measures in their building². Our fire door safety guide is a helpful source of information you can use to educate your tenants in understanding their landlord’s role and responsibilities and to alleviate any of their concerns surrounding fire safety awareness.

Fire doors are not the same as normal doors; they have been carefully engineered to maximise fire safety. Make sure all fire doors are installed by a competent and experienced fitter. Fitting a fire door incorrectly will compromise the door’s protection and both the property and lives could be at risk.

Maintaining high standards of fire door safety does not need to be difficult or costly. Explore our fire safety hub to find a series of useful articles that are full of information and advice on fire safety and how to keep your premises safe for tenants. Read our top tips on buying high quality, certified fire doors and ironmongery from reputable and trusted suppliers.

Download the fire doors safety guide

Howdens Joinery Co.

^[1] http://www.legislation.gov.uk/uksi/2005/1541/contents/made

² https://firedoorsafetyweek.co.uk/wp-content/uploads/101-facts-about-fire-doors-Fire-Door-Safety-Week-2017.pdf

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Help your tenants feel safe with our fire safety checklist | LandlordZONE.

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