OPINION: ‘Property gurus’ and their high-risk schemes are a ticking timebomb

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Last week the Financial Conduct Authority (FCA) highlighted its efforts to protect people from the dubious returns offered by ‘high risk’ investment funds.

The FCA wants to address harm to consumers from investing in inappropriate high-risk investments because many consumers don’t understand the risks involved, which can lead to “significant and unexpected losses”.

But sadly its remit does not include property investment, unless it is via a regulated fund, and even then most of its efforts are about how they are marketed.

A significant number of dodgy property gurus who preach how to make a living from, or recommend investing in, high-risk schemes have rushed into this regulatory void, muddying the reputation of the overall sector and its above-board operators.

And ‘preach’ is the right word. Level-headed and usually sceptical people who attend these courses, often in church-like venues led by a fire-and-brimstone style gurus, are persuaded to part with large sums on the spot.

Fees range from a few hundred pounds to the many thousands for courses that often counsel attendees to enter risky rent-to-rent contracts or put significant sums into perilous buy-to-let properties or developments.

The reason that the FCA has not been enabled to regulate schemes like this, even though some are as precarious for investors as the ‘high-risk funds’ the FCA covers, is that there has yet to be a high-profile scandal.

When one of these ‘get rich quick’ schemes does blow up horribly, regulators such as the FCA and the government cannot say they weren’t warned.

In the absence of regulation, Google searches are the only thing preventing people from losing life-changing amounts of money, where they will hopefully discover the handful of Facebook pages, forums such as Property Tribes and the Danny Butcher Foundation.

“Vanessa Warwick, co-founder of Property Tribes (left) says: “In the world of ‘get rich quick’ it only works if someone ‘gets poor quick’, namely the  mentees paying for a ticket to see a unicorn.

“The interesting thing is that it is easier to fool someone than to convince them that they have been fooled.

“They believe the Instagram lifestyle of flashy cars and homes and never question anything the guru claims, such is their desire to believe that there is a pot of gold at the end of the rainbow.

“Many of these people end up financially worse off and, as the sector is unregulated, there are no real routes of redress or they cannot afford to take legal action. Lives have been ruined so I applaud Landlord Zone for highlighting these issues and risks.”

As the Danny Butcher Foundation points out, this used to be a cottage industry but it is rapidly expanding into a multi-million pound sector, helped by historic low interest rates which are persuading many people to look for new places to grow their savings.

LandlordZONE is aware of at least one training academy that has dozens of risky property investments under way underpinned by investor cash which, should it all go wrong, will affect hundreds of people.

The troubling fact is that, as is always the case, the government’s gaze will only fix on this problem once millions of pounds have been lost.

Read more about the Danny Butcher Foundation.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – OPINION: ‘Property gurus’ and their high-risk schemes are a ticking timebomb | LandlordZONE.

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Tenant said it would cost thousands to get her out?

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I had an EICR assessment in October, which stated the property required rewiring. Since then there have multiple failed attempts to get this work started and completed. The tenant had Covid-19 multiple times, then her boyfriend has had it, then a boyfriend’s relative bereavement

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Landlord’s plea: Why won’t police help me evict drug-dealing tenant?

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A landlord who’s been waiting for a court to hear his application to evict a drug-dealing tenant for more than a year fears his case could be further delayed due to a lack of police co-operation, he has told LandlordZONE.

CCTV captured the woman letting people into her flat in his serviced accommodation property which was raided by police in 2019.

During subsequent raids, she appeared to be involved in County Lines drugs activities.

The landlord finally managed to get a closure order in August 2020, which flushed out London drug dealers visiting the property, but he says people still regularly turn up to buy drugs, upsetting neighbours.

After serving both a Section 21 and Section 8 notice in October, he finally has a review hearing on Monday, but has struggled to get a police statement that supports his case.

Vulnerable

He tells LandlordZONE: “They’ve promised to send it since the beginning of March but when I finally got one, it only talked about how vulnerable the tenant was and just said we, ‘felt intimidated by the environment’.

It doesn’t mention the anguish we’ve been going through for nearly two years. It’s impacted our business as it’s effectively closed me down, as well as our mental health.”

The landlord is now desperately trying to get the police to provide a more thorough statement and says if they don’t, he won’t bother submitting it to the court.

“It might suggest that I’m making things up in my statement as I’ve provided so much more detail in my report. However, without it, I don’t think it will be enough for the judge to make a decision. I feel so let down – it’s a real slap in the face.”

Please note: The landlord was only happy to talk to LandlordZONE anonymously until his eviction is over.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlord’s plea: Why won’t police help me evict drug-dealing tenant? | LandlordZONE.

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Bank Base rate remains 0.1% as pandemic slows global growth

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The Bank of Englands Monetary Policy Committee (MPC) has voted unanimously to maintain Bank Rate at 0.1% and current levels of Quantitative Easing. This was due to the fall in inflationary pressures caused by global economic activity being more adversely affected by the pandemic than predicted.

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NEW: Landlords warned to expect court delays as 100,000 evictions pile up

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Courts are set to buckle under the pressure once the eviction ban restrictions end, with most cases entering the system now not likely to be completed until well into 2022, a report has warned.

Compiled by the LSE, the report paints a bleak picture of the court system, estimating that at least 100,000 claims could be subject to court proceedings during this year.

While only a third of those that start the eviction process reach formal repossession, it says about twice as many tenants as normal are in arrears and these arrears are likely to be rising.

As a result, the time taken to get an order, let alone to reach repossession – 42 weeks on average – is unlikely to fall.

The report predicts that hardly any potential claims under either Section 21 or Section 8 will get to court until at least the second quarter and many might not even start the process through the courts until late in 2021.

The latest figures for the last quarter of 2020, compared to 2019, showed that landlord possession actions in terms of claims (8,382), orders for possession (2,195), warrants (1,792) and repossessions (548) dropped by 67%, 89%, 86% and 93% respectively.

Solutions

LSE London suggests that if social landlords who, pre-pandemic brought the majority of the cases, continue to delay starting eviction proceedings, more space would be left for private landlord cases.

The government could also put more resources into the courts. The report says: “This obviously has potential but seems to be unlikely given the priority that must be given to the criminal system and the attitude of government to private landlords during the pandemic.”

It adds: “It is likely that the need to speed up criminal cases in county courts will put further pressure on those available to deal with civil issues. Arguably therefore whether or not landlords start formal proceedings hardly matters, except for the months of insecurity, mental stress and hardship facing so many tenants and indeed landlords.”

Read the report in full.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – NEW: Landlords warned to expect court delays as 100,000 evictions pile up | LandlordZONE.

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LATEST: Rental market to take two years to recover from Covid

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Long-term arrears and loss of credit-worthiness among tenants and loss of income and confidence among landlords will continue to scar the private rented sector until 2023, warns a new landmark report.

‘Homelessness and rough sleeping in the time of Covid’ finds that the evictions ban has left tenants racking up debt while nothing has been done to help landlords facing significant losses from arrears.

The report – by a research group within the LSE – believes re-starting evictions won’t alleviate the problem for many months.

Lower rental incomes could also lead to a significant restructuring of the private rental sector, making the future even more uncertain.

It adds that normality, even with respect to court proceedings, appears to be at least two years away.

The LSE report says that more than 400,000 private tenants may be in significant rent arrears by the end of 2021 and at risk of eviction if the government lifts its suspension on eviction proceedings from 1st June.

Slow burn until 2023

But it adds that spikes in evictions are highly unlikely; rather there will be a slow burn that will go on at least into 2023.

Currently, 6-7% of tenants appear to be in arrears, which is twice the proportion of a ‘normal’ year.

But large numbers won’t immediately find themselves homeless because the courts simply won’t be able to cope with the cases.

It recommends that greater protections are put in place to protect private tenants and landlords, including immediately stopping ‘no fault’ Section 21 evictions while speeding up court proceedings for extreme cases of failure to pay rent.

It wants the government to support Discretionary Housing Payments and to help those without access to UC but in rent arrears, such as through low interest rate loans.

Dr Nancy Holman (pictured), co-author of the report, says: “Unfortunately, these solutions are partial. In a crisis of this magnitude there are no easy answers. One in five households in England rent, with many having no other option. If we are to avoid catastrophic problems in the future, we must ensure that the private rented sector remains sustainable.”

Read the report.

Read more about arrears.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Rental market to take two years to recover from Covid | LandlordZONE.

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Housing Market Update For May – Why Property Prices Will Boom?

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In this month’s UK Property Prices and Housing Market Report, I explain why I believe the current house price boom is set to continue. In this video I share:

The eight reasons why house prices are booming

Why The house price boom will continue

When the boom will end

What you need to do to capitalise on current opportunities.

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CAMPAIGNING Danny Butcher foundation donates cash to homelessness charity

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The trust set up in the memory of Danny Butcher, the former army reservist who took his own life after getting into debt after attending a Samuel Leeds ‘financial freedom’ course, has donated its first funds to charity.

Butcher’s father Alan (pictured), who runs the foundation with the help of family and supporters, says the problem of homelessness in particular among former services personnel was close to his son’s heart.

“When Danny attended the course run by Samuel Leeds he wanted to both improve his own financial position so he and his partner could lead a better life, but also said any spare cash his property investments generated would be donated to homelessness and armed forces charities,” he tells LandlordZONE.

His son, who was already in financial difficulty, borrowed £13,000 to attend a Samuel Leeds course.

“That’s why we’ve begun fund raising via the foundation and so far we’ve raised £3,000 with the first tranche of £500 going to Help 4 Homeless Veterans charity.”

Donate to the foundation here.

Danny Butcher’s desire to end his financial problems by following Leeds’ investment advice didn’t pan out as he had hoped and the then 37-year-old instead sank further into debt.

“He stood in my kitchen and told me he’d made a mess of everything but I told him we’d get through it together,” says Alan. “But I could tell something had changed within him.”

Guru regulation

The Danny Butcher Foundation is campaigning for ‘property gurus’ such as Leeds to be regulated to protect inexperienced and vulnerable people like Butcher, and has launched a petition.

“Over the last 15 years, the ‘wealth creation/property training’ market has grown to become a multi-million pound market with little regulatory oversight,” the foundation says.

“This lack of regulation has created an opportunity for unscrupulous individuals to run rampant.

“Significant numbers of people are being pushed into debt after having been sold an expensive dream of easy riches. Many more find themselves in a worse financial situation than before they signed up to the expensive ‘training’.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – CAMPAIGNING Danny Butcher foundation donates cash to homelessness charity | LandlordZONE.

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REVEALED: What are the UK political parties’ key private rented sector policies?

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Which way is the political wind blowing for landlords? Ahead of tomorrow’s local and regional elections, we take a look at the main political parties’ policies and their plans for the PRS.

Conservatives

The Conservatives have famously declared they want to turn Generation Rent into Generation Buy – evidenced by the government’s mortgage guarantee scheme announced  in the last Budget.

They are backing the introduction of the Renters’ Reform Bill and plan to remove section 21 ‘no fault’ evictions. In London, Conservative candidate Shaun Bailey has announced he wants, “more homeowners and fewer private landlords”. He wants to build 100,000 shared ownership homes available for £100,000, requiring only a £5,000 deposit.

Greens

The Greens believe assured shorthold tenancies should be phased out and replaced with a new stable rental tenancy. They have also called for the abolition of section 21 and rent controls to achieve a living rent.

To tackle rogue and slum landlords, the Green Party would simplify and toughen up the Housing Health and Safety Rating System, ensure local authorities dedicate adequate resources to proactively enforce it and has backed a national landlord licensing scheme.

Lib Dems

The Liberal Democrats have promised to scrap business rates altogether and replace them with a levy on landlords. It would also allow local authorities to increase council tax up to 500% where properties are being bought as second homes.

The party plans to introduce a new ‘rent to own’ model for social housing where rent payments give tenants an increasing stake in the property, so that they own it outright after 30 years. It’s also in favour of scrapping Section 21 and mandatory landlord licensing.

Plaid Cymru:

Plaid Cymru proposes a Fair Rents Bill, which would include measures such as ending ‘no-fault’ repossessions and providing tenancies of indefinite duration. It also wants to make tenancies more transferable between generations and to give councils the power to set a Living Rent rule to cap rent in rental pressure zones at a maximum of one third of local average income.

It would strengthen the powers to deal with poor landlords who don’t meet housing standards or social responsibilities, making them subject to annual vetting and being struck off if they fail to comply.

Labour

In London, Sadiq Khan has pledged to build 10,000 more council homes, as well as to explore a possible new fund to help local authorities buy back homes sold under the Right to Buy. He has also called for rent controls in the capital. In Manchester, Andy Burnham announced a £1.5m ‘good landlords scheme’ aimed at driving up standards in the private rented sector, and a long-term homelessness prevention strategy.

Labour wants to scrap Right to Rent, to introduce nationwide landlord licensing and ban discrimination against housing benefit tenants. It has pushed for the abolition of Section 21. It would also give councils new powers to regulate short-term lets through companies such as Airbnb.

SNP

The SNP has promised to deliver 100,000 affordable homes over the next decade, tackle high rents and increase stability for those in the private rented sector and to give local authorities the tools they need to improve access to housing in their local areas.

The party plans to improve accessibility, affordability and standards across the whole rented sector, publishing a new Rented Sector Strategy, informed by tenants, and would bring forward a new Housing Bill to strengthen tenants’ rights and improve the housing rights of people experiencing domestic abuse. A new Housing Standard would cover all new and existing homes.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – REVEALED: What are the UK political parties’ key private rented sector policies? | LandlordZONE.

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HM Treasury warns tenants Breathing Space debt scheme is not ‘rent payment holiday’

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Tenants have been warned they need to continue paying rent and bills while taking part in the new Breathing Space scheme – or their debt advisor can cancel it.

Although interest and fees are frozen, the government says it’s not a payment holiday and that anyone entering a Breathing Space has to keep up payments while they work to find a debt solution and access professional advice.

Housing law experts have also warned that the scheme isn’t a free ride for defaulting tenants, who have 60 days to get their finances back on track. Most debts will qualify, including rent arrears and Universal Credit overpayments.

If a tenant has successfully applied to the scheme, landlords have to put any action they’re taking in relation to the rent arrears (including court action) on hold for as long as the Breathing Space lasts.

Section 8

A Section 8 notice can’t be issued for rent arrears but can on any other available grounds. In a late move last week, the government announced that both landlords, agents and their solicitors will now have to include details of the scheme within paperwork when seeking to gain possession of a property, or risk the eviction being rejected.

New guidance

The Insolvency Service has also issued new guidance explaining that rent arrears on joint tenancies can be included in a Breathing Space, even if only one of the tenants goes into the scheme.

The joint debt would become a Breathing Space debt, and the protection from enforcement action would apply to both parties. Creditors could still charge the other person interest or fees and the Breathing Space wouldn’t affect the other person’s debts and liabilities in their own name.

The scheme is set to help about 700,000 people this year who are struggling with problem debt.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – HM Treasury warns tenants Breathing Space debt scheme is not ‘rent payment holiday’ | LandlordZONE.

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