Tuesday, 30 September 2014

High court to hear challenge against landlord licence scheme

A landlord is set to take Enfield Borough Council to the Royal Courts of Justice over a licensing scheme. 

The High Court will hear Constantinos Regas's case against the authority's compulsory licensing scheme on Thursday. 

The scheme, known as additional and selective licensing, requires landlords to hold a £500 five-year licence from the local authority for each property they own. 

Non-registration carries a potential £20,000 fine and a criminal record, with breach of any licence conditions carrying a £5,000 fine. 

This week's case will determine whether a judicial review will be considered in the administrative court later this year. 

The council’s scheme is set to be introduced on April 1, 2015. 

Mr Regas, who owns one property in Enfield, said: "I have always said that good quality housing is a human right. Antisocial behaviour by tenants is often linked to problems like rent arrears, so landlords already have every incentive to deal with issues when they arise. 

“Enfield Council has failed to demonstrate that housing in the borough is badly managed, or that there is a clear link between antisocial behaviour and the private rented sector. I am appalled that the council can label tenants in this way." 

The challenge is based on whether the local authorities can show that an area has low housing demand or if they can prove a link between antisocial behaviour and the private rented sector. 

Mr Regas added: "I have put the council on notice that we have strong grounds of irrationality, unlawfulness, impropriety and unreasonableness. 

“We are adding a further ground showing contravention of European law. Council officers should not keep the cabinet or the full council in the dark about the judicial review. 

“This is a public law case and it must be discussed in public." 

An Enfield Council spokesman said disclosing details of the council’s defence before the hearing could prejudice the case. 

Click here to read original article 'High court to hear challenge against landlord licence scheme' 

Friday, 26 September 2014

Buy-to-let borrowers face new costs and limits

'Accidental landlords' face new rules on borrowing, under new European laws.

Buy-to-let home owners will have to pass tough new affordability tests that could result in tens of thousands of people being denied loans, and others paying more for mortgages. 

New rules are being created after Europe insisted on changes to how “accidental landlords” are lent money. Up to a fifth of the 1.6 million existing buy-to-let mortgages are thought to be of this type. 

The changes, which have to be implemented by March 2016, are likely to weaken the housing market, which has slowed because of changes to routine mortgages. 

For the first time in 19 months, British property values showed zero growth in September, according to a survey by Hometrack, a property data specialist. 

People who have inherited property, or rent out a house after being unable to sell, will be affected by the changes. Affordability rules for typical mortgages require lenders to assess borrowers’ incomes and spending habits in great detail to ensure they can afford a loan, both now and when interest rates rise. 

According to a document published by the Treasury as part of a consultation, in “accidental” cases, the borrower is a landlord “as a result of circumstance rather than through their own active business decision”. 

“The Government’s view is that such borrowers are consumers and would need to be covered by an appropriate framework,” states the document, ushering in changes to the buy-to-let market. 

Last year, 151,000 buy-to-let mortgages were taken out. At the moment, such mortgages fall outside regulation that applies to mainstream, owner-occupier mortgages. The new rules would mean that certain buy-to-let mortgages may fall under the affordability rules to ensure applicants are protected as consumers instead of being assessed as business owners. 

Most buy-to-let mortgages are calculated in relation to the amount of rental income made from the property. If affordability is assessed, it could mean that older home owners were no longer able to take out buy-to-let mortgages. This is because mortgage companies often insist that holders plan to repay the whole amount before they retire. 

It was originally believed that the EU laws would not affect the British mortgage market, but the new plans are part of the Mortgage Credit Directive, which will also clamp down on other loans where home owners put up their property as security. 

At present, “second charge” mortgages, which are taken out on top of their existing mortgage, come under consumer credit rules, which apply to types of finance such as credit cards and personal loans. 

The Financial Conduct Authority (FCA) is proposing that instead, the second charge loan sector should be brought under its mortgage regime. This would also require lenders to comply with strict rules around affordable lending and dealing with payment difficulties. 

Rosanna Bryant, a partner in retail financial services at Addleshaw Goddard, said there was confusion about how the Government would define “not for business” mortgages. 

“Essentially, it will be looking at buy-to-let that isn’t done for business purposes; 'reluctant landlords’,” she said. 

“That may be people who are unable to sell a property and rent it out, or who can’t live in a property because they have moved away for work, or who have inherited property. The line that is drawn isn’t that obvious.” 

A spokesman for the Treasury said the Government did not know how many people would be affected by the rule changes. A spokesman for the Council of Mortgage Lenders (CML) said it would be fewer than 20 per cent of the UK’s 1.6 million buy-to-let mortgage holders, but it did not have precise data. 

David Cox, the managing director at the Association of Residential Letting Agents, said there was little clarity about the number of accidental landlords, but that the number had reduced since its peak before the property crash in 2007. 

“Obtaining exact figures for accidental landlords is difficult, because it’s an underground number – some landlords acquired residential mortgages and now rent out their properties, whilst others explicitly took out BTL [buy-to-let] mortgages,” he said. 

Fiona Hoyle, the head of consumer finance at the Finance and Leasing Association, said she was concerned by how fast the new rules would have to be implemented. 

“Firms will only have nine months to get to grips with it, and that’s not really how mortgage lending works – there is a pipeline,” she said. 

Mark Harris, the chief executive of the mortgage broker, SPF Private Clients, said that the new system would bring extra costs. 

“The decision to regulate some buy-to-let loans but not others makes little sense and is bound to confuse borrowers,” he said. “Buy-to-let is an investment, whether the property was inherited, a let-to-buy or purchased independently, and should be treated as such. 

“Regulation costs money and lenders are bound to pass these extra costs on to borrowers in the form of higher mortgage rates and heftier fees.” 

David Hollingworth, a spokesman for London and Country Mortgages, said that the mortgage industry had initially been pleased to avoid the whole of the buy-to -let market being moved into the stricter regulation regime, but were unclear about the “for business” aspect of the new rules. 

“Accidental landlords are the type of borrower that wants to move but face difficulty in selling their property and so keeps it to let,” he said. 

“After the credit crunch this became more prevalent given the slow housing market, resulting in those affected being dubbed 'accidental landlords’. Of course, you could argue that is a very considered business decision in investing for the long term, so that will certainly be one that the market is looking for clarification on.” 

There have been concerns that buy-to-let investors can price owner-occupiers out of the market, as the London property market is seen as a stable and profitable long-term investment. Fears were raised when property developers began marketing blocks of flats to overseas investors, with critics saying that the buy-to-let market should be limited. 


Thursday, 25 September 2014

Experts suggest full BTL regulation is on the cards

All mortgage market stakeholders should prepare themselves for the full regulation of the buy-to-let market in the future, according to industry experts at today’s FSE London event in Old Billingsgate.

Speaking about the forthcoming partial regulation of the buy-to-let market as part of the European Mortgage Credit Directive, in particular the focus on ‘accidental landlords’, David Whittaker of specialist brokers, Mortgages for Business, suggested full regulation was on the horizon.

Whittaker said: “I wouldn’t welcome earlier regulation of buy-to-let but it will probably happen at some point in the future for an event that will probably surprise us all. The regulator have been quite clear in their view – whilst the Treasury is obliged to follow the European Directive on two minor events of buy-to-let regulation, it’s very much the law of unintended consequences (it will affect one in 10,000 transactions), [but] there’s currently not any appetite from either the FCA or the Treasury to put the foot further inside the door of the buy-to-let camp.

Now while buy-to-let currently represents 12/13% of gross lending, that probably seems a logical explanation but if buy-to-let grows to the volumes some are predicting in the years ahead becoming 25/30% of the market, then you couldn’t have 70% of the market regulated and 25/30% of it, not. So it’s inevitably going to happen at some point...I just hope that we all behave ourselves sufficiently well not to give the regulator the reason or the excuse to hasten the day of regulation.”

Alan Cleary of Precise Mortgages had a more robust view on regulation of the sector.

He said: “I would regulate the crap out of buy-to-let. I’ve got the same view I had in 2004 – that’s not so much about lenders or brokers misbehaving but for consumer protection. The buy-to-let market [already] acts like a regulated market; all the lenders treat it as regulated so the market’s sort of regulated already, but for me, it’s about [ensuring] consumer protection.”

Whittaker suggested that before statutory regulation could be introduced, there needed to be a focus on a proper definition of ‘amateur’ and ‘professional’ landlords so that protection could be given.

Whittaker said:

“There was a rush in February 2010 to shove buy-to-let and second charges into regulation as a regulated mortgage product and perhaps the only one thing that all sides could agree upon was the necessity to find what would represent an amateur landlord, what would represent a professional who, frankly, makes his or her own business decisions and lives and dies on the basis of those decisions. No defining line was agreed.”

Whittaker said there was no need for an ‘unseemly scramble’ for regulation as had been the case in February 2010 and urged all parties to take their time to ensure agreement on definitions of landlords and the protection they required.

Wednesday, 24 September 2014

Over 400,000 private landlords' properties damaged by tenants

Research has revealed that 28% of the country's private landlords have had their property damaged by tenants in the last 12 months.

According to the National Landlords Association's (NLA) estimates, over 400,000 of the UK’s 1.5 million private landlords have been affected.

And the NLA's research shows that the North East is the most perilous place to let out a property, where 46% of landlords have encountered a problem with damage in the last year.

Landlords in the South East were least likely to experience the problem, where a mere 21% have suffered.

The figures also reveal that approximately 120,000 landlords (8%) in the UK have had to make an insurance claim of some kind in the last 12 months.

Reacting to the news, the NLA is now reminding all landlords to ensure they have the right protection in place to cover all eventualities and to insure their investment against the unexpected.

Carolyn Uphill, NLA chairman, said: “Property damage is just one of the many different problems a landlord can experience when letting property. Many are unaware that a simple home insurance policy will not provide sufficient cover for all eventualities, so we’re urging all landlords to protect their investments and ensure they have the right insurance policy in place.

“The NLA offers the most comprehensive range of support, advice and services to help landlords and property owners of all shapes and sizes to run profitable, sustainable and successful lettings businesses.

“Landlords who are unsure about what cover they need should get in touch about our bespoke property insurance offering, which includes some of the widest cover for landlords and buy to let owners in the market.”

Click here to read original article 'Over 400,000 private landlords' properties damaged by tenants'

Tuesday, 23 September 2014

A tenth of landlords unable to confirm their tenants are gas safe

One in ten landlords are unable to confirm their tenants are living in a gas safe home, according to new research by British Gas and Shelter.

The survey also revealed that 14 per cent of landlords did not know they had a legal obligation to have their properties checked for gas safety every year.

The news, which comes during Gas Safety Week, shows that many landlords in England are not aware of their obligation to keep properties gas safe. When asked whether their properties had an active gas safety certificate (CP12) and boiler serviced each year, only 90 per cent of landlords confirmed they did, with seven per cent saying ‘most/some/none’ had the relevant certificate and safety checks. This leaves a concerning three per cent unable to confirm if their tenants are protected from carbon monoxide poisoning.

An annual gas safety check and certificate is required by law for rented properties, and is the responsibility of the landlord. Those who fail to meet gas safety regulations in the homes they rent out can face fines and even imprisonment.

Shelter’s chief executive, Campbell Robb said: ‘Renters deserve to know that their homes are not just accidents waiting to happen. Landlords must carry out gas safety checks every year. Failing to do so is not just against the law, it is a danger to peoples’ lives, and that just can’t carry on.’ 

Shelter and British Gas have joined forces to improve conditions in private rental homes and this Gas Safety Week are calling on landlords to ensure they meet their gas safety responsibilities.

Landlords are reminded to be aware of their obligation to ensure that a gas safety check and record or certificate (CP12) is delivered for each property every year. They are also encouraged to install a CO monitor in all properties to monitor carbon monoxide levels.

Tenants too are encouraged to know their rights and be aware of their landlord’s obligation to carry out gas safety checks. In addition Shelter encourages tenants to look out for signs of staining, soot or discolouration on, or around, their gas boiler, fire or water heater, as these can be signs of carbon monoxide.

British Gas engineer Ben Whitehouse, added: ‘There are many things that tenants can do make sure their home is gas safe. Carbon monoxide is a silent killer and can leak from a range of household appliances. That’s why it’s so important to fit a carbon monoxide alarm.’

Click here to read original article 'A tenth of landlords unable to confirm their tenants are gas safe' 

Monday, 22 September 2014

Agents failed to inform landlords of property damage – are they liable for the loss?

Here is a question to the blog clinic from Arthur (not his real name) on behalf of his sons who are landlords:

A property my two sons own is let out by a letting agency, as they do not live permanently in the same city as the let out property. On a recent visit by my sons to the property accompanied by a representative of the letting agency, it became apparent that there had been substantial long term damage to contents and the property itself.

The last recorded visit to the property was on in the previous month. My sons were not advised of any damage to contents or buildings as a result of that visit.The estimated damage caused is in the region of £7-£8K, however the tenant has given notice that they are leaving in 2 months time and the deposit is one months rental of £550 only.

In the agreement between my 2 sons and the letting agency is a clause that the property is to be inspected every 3 months and a report produced. To date no such reports have every been forwarded to my sons even upon request and they have never been made aware of any damage to the house contents or the building itself.

I would be obliged if you could advise if the letting agency is liable to make good the difference between the value of the deposit (£550) and the estimated repair bills of £7-£8K.

Answer

It sounds to me as if the agents are definitely in breach of their agreement – as they have failed to report the damage to the property. Which is certainly something your sons needed to know – and indeed the whole point of inspections is to check up on this sort of thing.

However – does this make the agents liable for the cost of the repair work (over and above that covered by the deposit)?

I think that if this were to go to court the agents would be liable for something but probably not the whole loss. It is after all not the agents themselves who caused the damage – it is the tenants. The issue with the agents was the failure to keep your sons informed so they could do something about the situation.

Issues re compensation

The loss caused by the agents’ breach of contract will be the difference between the loss suffered now and the probable reduced loss if they had done what they were supposed to do. So you would need to find out what they have done. For example, have they spoken to the tenants about the damage, and followed this up with letters?

Once tenants are in occupation there is not a lot you can do to force them to change their behaviour. With uncooperative tenants, often the only thing you can do is to evict them – but these tenants are leaving anyway. 

So for example if the tenants have been in occupation for several years and the damage would have been reduced if the landlords had known about this and evicted the tenants after, say, the first six months, then you could justify a claim against the agents for any damage done to the property after that.

However if these tenants are leaving at the end of their first six months, and the agents have spoken to them about the damage and they have ignored this, then it is difficult to see how your sons could have done anything different. 

So although I think the agents are in breach of contract and if your sons were to bring a claim against them they should succeed and receive some financial compensation – the amount of compensation they would get would depend on the circumstances.

Other options

Your sons should also consider looking to see if the agents belong to any organisations such as ARLA of NALS or one of the Ombudsman schemes and if so consider bringing a complaint.

Note that ALL agents and property managers must belong to a Property Redress Scheme from 1 October and this is the sort of situation where a complaint might well be made.

Click here to read original article 'Agents failed to inform landlords of property damage – are they liable for the loss?' 


Friday, 19 September 2014

Landlords may become new ‘border police

Under the new Immigration Act 2014 which comes into force in December landlords have to ask prospective tenants to produce evidence of their permission to be in the UK before granting them a tenancy. The Home Office has produced lists of acceptable documents. If documents from the lists cannot be provided, the landlord must not let the property to them and if the landlord lets to someone who does not have lawful residence in the UK there will be a fine of up to £3,000. 

Landlords will now be turned into a form of border police. The rules embody a requirement to check not only the documents of those on the Tenancy Agreement but the documents of all of those who are expected to be living in the household at the start of the tenancy. Where any of the occupants have temporary visas the landlords will have to conduct repeat checks. 

The Government states that the intention of the scheme is to ensure that those without permission to be in the UK are “unable to establish a settled life in the UK’’ and to create a “hostile environment’’ for them. The new rules are to be rolled out with the pilot areas to include Birmingham and Wolverhampton from January 2015. 

The Landlord’s responsibility to make the checks and face the fines can be transferred to a Letting Agent, but that must be done specifically in writing – suggesting that Agents will have to re-visit their standard contracts Terms and Conditions. 

The immediate problems are obvious. According to the last National Census 17 per cent of the adult population (9.5 million people) do not hold any passport. A birth certificate on its own is not acceptable evidence. Women fleeing domestic violence will often leave without their possessions and could struggle to retrieve them from an abusive partner. Many homeless people will have lost or had stolen their identity documents whilst sleeping rough or moving around or living in insecure accommodation. 

These measures are likely to have unintended consequences, affecting British citizens and other lawful residents Some people tend to confuse issues of immigration status and ethnicity. Black and ethnic minority tenants may find it more difficult to find tenancies to rent and the legislation may well lead to breaches of Human Rights and Unjustified Discrimination. 

A further danger is that landlords will avoid taking tenants with restricted immigration status for fear of repercussions. This could happen to prospective tenants who have short visas or to those who are nearing the end of a long term visa but are eligible to extend. Tenants will likely experience great difficulty renting with little time remaining on a visa. The Home Office has set up a ‘Landlords Checking Service’. If a tenant’s immigration paperwork expires during the course of the tenancy then the landlord is not required to evict, but must report the tenant/occupier to the Home Office in order to avoid the penalty.

Click here to read original article 'Landlords may become new ‘border police'

Wednesday, 17 September 2014

Top areas for rental income

It’s a commonly known fact that London provides the UK’s highest rental income for landlords, and it seems its influence is spreading. Commuter belt cities such as Elmbridge in Surrey offer landlords the highest rental income outside of the capital.

Research by Direct Line for Business has revealed that whilst London landlords top the bill for rental income, earning £1,633 a month per property, investors in Elmbridge, Surrey and South Bucks, Buckinghamshire, are not far behind. The two London commuter belt areas supply a rental income of £1,579 and £1,530 respectively.


Other commuter belt areas make up the top five, with Three Rivers, Hertfordshire, and Sevenoaks, Kent both providing landlords with a monthly rental income of £1,345. Bath and the Cotswolds, despite being further from the hub of London, offer high rental yields at £900 per month.


London topped the list once again when proportion of private rental income was counted, with London landlords collecting £14bn a year. A total which exceeds that of the North East, East Midlands, West Midlands, Yorkshire and East Anglia combined. 44 per cent of the UK’s annual rental payments of £32bn are taken in London.


Click here to read original article 'Top areas for rental income'

Tuesday, 16 September 2014

Landlords not maintaining safety measures

AXA Business Insurance has researched the largest concerns of the 8.3 million residential tenants in the UK.

 The research reveals that almost 60% of tenants rent because they are priced out of the housing market, while the greatest downsides of renting are finding properties in a dirty state on moving-in day and unfriendly landlords.

In addition, only 30% of landlords carry out the annual gas inspection required by law and 58% do not have a fire alarm fitted, among other safety failings.

AXA’s survey looked at tenants’ motivations for living in a rented property. It found that there are those who have no choice: 59% told the survey they would prefer to buy, but quite simply can’t afford current house prices. At the other end of the scale, there is also a sizeable number of tenants – 17% – who say they choose to rent because they “prefer the freedom”.

The deciding factor in choosing their current rental property was the size (number of bedrooms), followed by price and being in a central location (near work and shops/amenities). When asked which feature they would most appreciate added to the property, the top answer (cited by 35% of tenants) was an outdoors area, such as a patio, garden or balcony. Use of a garage was the second most desirable feature cited by a quarter of tenants.

The biggest gripe among tenants was dealing with other people’s dirt and grime when they move into a property, the top complaint for 38% of respondents. Meanwhile, one in five tenants named décor issues – peeling paintwork or a bad colour scheme – as their pet hate. The most detested colour for interior décor was brown, closely followed by avocado green and orange. Even black, in fourth place, was considered less offensive than these colours.

Meanwhile, 15% of tenants said that an unfriendly landlord would deter them more than anything else.

The improvement to their current rental demanded by most tenants was better energy efficiency (through insulation, newer boilers, double-glazing, green technologies, etc.). AXA said this concern is unsurprising given government estimates that one in five tenants live in fuel poverty.

Tenants are not the only ones concerned about poor energy arrangements in rental properties: the government is also looking to introduce new energy legislation for landlords.

For instance, by April 2016, landlords will be obliged to introduce any ‘reasonable’ energy efficiency measure (like insulation, double-glazing, etc.) that a tenant requests. Meanwhile, by 2018, it will be an offence to let a property in the lowest energy efficiency categories (F and G), which currently applies to one in ten rentals on the market[1].

After poor energy performance, tenants’ top complaint was that their landlords do not pay enough attention to routine maintenance. 17% even said that their landlords had outright refused to carry out essential repairs when requested.

On the flip side, half of tenants had a high opinion of their landlord as an individual: given a list of options, 29% said he/she was ‘helpful’, and a further 20% described their landlord as ‘trustworthy’. Meanwhile, a minority – 13% – described their landlord as ‘greedy’, and 4% said he /she was ‘ruthless’.

Darrell Sansom, managing director at AXA Business Insurance, said: “It’s easy to present modern Britain as a world of greedy landlords on the one side and resentful tenants on the other – that’s certainly been the stereotype. However, we’ve found that their attitude to their landlords is largely positive, indicating that the problems aren’t caused so much by a bad attitude on either side, but just poor awareness of who is responsible for what.

“There are simple things landlords need to do to comply with the law and ensure decent safety standards for their tenants. Keeping an eye on your property must come first: we know that a third of landlords never visit their rental properties after a tenant moves in, and quarterly checks are only conducted by 17%.

“Too many landlords are leaving themselves open to serious property risks, and even prosecution, by not maintaining adequate fire and gas safety measures. Arranging annual gas inspections and ensuring tenants aren’t at risk of fires from old wiring are one part of the picture. Landlords are also going to face increased pressure from government to update their heating and energy systems in order to keep tenants’ bills down.”

Monday, 15 September 2014

Gas Safety Week 2014

Gas Safety Week is a national safety campaign to raise awareness of gas safety in the UK's 23 million gas fuelled homes. It is co-ordinated by Gas Safe Register with support from the gas industry including retailers, manufacturers, consumer bodies and the public.


Gas Safety Week 2014 will take place 15th-21st September 2014, with national advertising, media coverage and events throughout the week. Gas safety messages will reach far and wide right at the start of heating season.

Friday, 12 September 2014

English rents almost total £2.7bn pcm

Landlords in England are witnessing a booming rental market, with earnings from rental payments in excess of £32 billion per year, or almost £2.7 billion per month, according to analysis conducted by Direct Line for Business.

 Landlords in London collect the largest proportion of private rental income in England at £14 billion per year, more than the North East, East Midlands, West Midlands, Yorkshire and East Anglia combined. In total, 44% of the entire country’s rent is paid in London. Outside the capital, Leeds pays the greatest amount of any city, with annual private rent totalling £565 million, followed by Birmingham (£521 million) and Manchester (£401 million).

The research reveals that London and the Home Counties dominate rental incomes, with the highest average rents sitting in Inner London (£19,596 per year or £1,633 per month). Elmbridge, Surrey, has the highest rents outside London, worth (£18,948 per year or £1,579 per month), followed by South Bucks, where monthly rental costs are £1,530 in the private sector.

Meanwhile, landlords outside of these regions can also make a healthy rental income. Many areas outside the London commuter belt can command high rental costs, for example Bath and North Somerset, and the Cotswolds both command annual rental incomes of more than £11,000 per year. 

Outside of the capital, Bournemouth leads in terms of private rentals with 30% of households there privately rented. The isles of Scilly (29.7%) and Brighton and Hove (29.6%) follow in second and third place respectively. Across the country, Inner London has the highest proportion of private renters, at 30.7%. 

Jazz Gakhal, head of Direct Line for Business, said: “Buy-to-let is becoming an increasingly attractive option for people as property prices continue to soar.

“Landlords and potential landlords looking to take advantage of this should also appreciate the risks involved. Bad payers and potential damage to property are but just a few of the costs that can lead to landlords paying out 25% of the revenues they receive in rental payments annually. 

“Taking the necessary precautions such as letting through an agency and taking out landlord insurance can help to alleviate concerns and ease the rental process.”

To help landlords keep track of charges paid, ongoing expenses and to assist in calculating the yield on their portfolio, Direct Line for Business has launched a new landlord app, Mobile Landlord. This app enables landlords to manage up to five properties on the go through a single online, mobile portal. 

Mobile Landlord is free to download and available immediately on both iOS and Android platforms.

Private landlords attack government over support for ‘revenge evictions’ bill

Private landlords today rounded on the government for giving its backing to a private member's bill seeking to outlaw 'revenge evictions' Explaining its opposition to the bill, the Residential Landlords Association says the unintended consequences of limiting landlords’ right to re-possess a property could lose market confidence and further buy-to-let investment at a time when the private rented sector is "the only area of growth in rented homes".

The RLA claims that by supporting the bill, ministers are handing "nightmare tenants who bring misery to the lives of their neighbours and landlords alike, another weapon to prevent their removal". Making it more difficult to evict anti-social tenants, the RLA says, will make the good landlords think twice about investing in much needed new homes, leaving the market more open for crooked landlords who operate under the radar. 

Commenting on the developments, RLA chairman, Alan Ward said: “Revenge evictions should not have any place in a today’s rental market and we would condemn strongly any landlord caught doing it.

“However, by backing a measure to tackle the minority of criminal landlords, ministers will be penalising the vast majority of good landlords by making it ever easier for nightmare tenants to hold up eviction proceedings and continue causing misery for communities.“We need a rational debate. Sadly today’s announcement is once again polarising the sector and giving a false impression that you can be on the side of the landlord or the tenant, but not both.”

The RLA is concerned that in supporting the bill, Communities Minister Stephen Williams failed to mention government statistics that showed only 9% of tenancies are ended by a landlord largely on the basis of rent not being paid or tenants committing anti-social behaviour.

The government's decision marks a sea change in its approach to private rented sector evictions. In 2011, the former Lib Dem communities minister Andrew Stunnell, said: “The ability to gain possession of their property is key to a landlord’s confidence in letting out that property in the first place, and in the current economic climate, we would not want to undermine that confidence.”

Richard Lambert, Chief Executive Officer at the National Landlords Association (NLA), echoed the views of the RLA. He said: “Retaliatory eviction, if and where it does happen, is an unacceptable and completely unprofessional response. Tenants should be able to raise issues with their landlords without the fear of losing their home.

“However, it should not be confused with using the no fault possession procedure to end a tenancy, which in the vast majority of cases is the final resort, not a response to a request for repairs or because landlords are out for revenge. 

We don’t talk about any other service provider seeking revenge from their customers and there is no reason to suspect landlords are any different. “Sarah Teather’s private member’s bill is aimed at tackling a perception of the ‘worst case scenario’, which is not the experience of the majority of renters who rely on private housing.

"There is a lack of hard evidence to support a need for the changes proposed and as such the NLA is yet to be convinced that it is a fair or balanced approach to help end the issue of so-called ‘revenge evictions’.

“Courts are already at bursting point and unable to deal with the volume of housing issues we have and this will only add to that burden. Any substantial changes to the landlord’s ability to end a tenancy risks exacerbating the housing crisis by unnerving lenders, and will jeopardise much-needed investment in providing more homes for the future”.

Today's announcement has been welcomed by housing campaign groups including Generation Rent and Crisis.

Click here to read original article'Private landlords attack government over support for ‘revenge evictions’ bill'

Tenants may win protection from eviction by rogue landlords

Nine million private tenants in the UK could be given extra protection from landlords who try to evict them.

The government has decided to back a private member's bill, which would make it illegal to evict tenants who make justifiable complaints.

It would mean that people who complain about faulty boilers, leaky roofs or dangerous electrical items would no longer have to fear eviction.

However it is uncertain whether it will become law before next year's election. Nevertheless the news was welcomed by campaign groups, including Shelter and Crisis. According to Shelter, more than 200,000 people suffered from so-called "revenge" evictions last year.

The government said it would back the private member's bill from Sarah Teather, a Liberal Democrat MP, providing it only targets bad landlords - and does not stop legitimate evictions.

'Outlaw' evictions

The bill is due to get its second reading on November 28th, 2014. However it will need to be prioritised by the parliamentary authorities to have a chance of becoming law before next year's May election. It have to be granted Royal Assent by the end of March, which will be a tall order.

To get legal protection tenants would need to call in the council to confirm there was a health and safety issue.They could then complain freely to the landlord, knowing he or she could not throw them out on that basis alone.

Minister for Communities Stephen Williams said he wanted to "outlaw revenge evictions once and for all - ensuring tenants do not face the prospect of losing their home simply because they've asked for essential repairs to be made". The move had been called for by the housing charity Shelter.


"Nobody should have to raise their children in a place where their health and well-being are at risk, let alone live in fear of being thrown out simply for complaining about a problem in their home," said Campbell Robb, Shelter's chief executive.

Thursday, 11 September 2014

Accidental landlords set to be banned by the EU as directive may force lenders to regulate certain buy-to-let mortgages

  • Buy-to-let lending currently unregulated unlike mainstream mortgages
  • But from 2016 accidental landlords could be blocked
  • Treasury says lenders will have to treat some landlords as consumers not businesses
  • Move would lead to tougher checks on landlords

  • Property owners could find it much harder to become accidental landlords within the next two years as a result of forthcoming European legislation. 

    Many of Britain's small army of landlords ended up letting out a property originally purchased with a mainstream mortgage - often when they decided to hold onto it as an investment after a change of circumstances, such as moving in with a partner, relocation or failure to sell. However, the Treasury has said a new European Mortgage Credit Directive, which comes into force in 2016, will result in some landlord mortgages facing regulation - and this would stop homeowners making an easy move to being a landlord.

    At present, buy-to-let mortgages are non-regulated, unlike mainstream owner-occupier mortgages.This is because landlords are usually viewed as business borrowers and thus require less supervision. Those with a regular mortgage are viewed as consumers and so need tougher rules, and the regulations lenders must abide by were tightened up this April by the Financial Conduct Authority.

    It means currently older people can obtain landlord loans, as opposed to stricter age limits on mainstream mortgages - and it means lenders do not have to apply stricter affordability criteria and take almost all new borrowers through a mortgage advice process. But from 2016, banks may have to start refusing to lend to homeowners not intending to treat their buy-to-let portfolio as a business. This could hit those hoping to simply hold onto their existing mortgage and pay a small premium to let their property, or complete an easy switch to a buy-to-let rate.

    Banks will usually allow homeowners to simply switch over to a landlord loan when there is a change of circumstances, or pay charges to be allowed to keep their residential mortgage and let the property. For instance, one This is Money reader last month asked if she could change her Nationwide Building Society terms after deciding to let out her property. The answer was yes, but only if she paid more interest on the mortgage to convert it. 

    In the future, the answer will probably be no under the stricter rules. This is because under certain circumstances, some landlord lending will be viewed as consumer lending and will therefore require regulation.  In the Treasury document, it said: ‘For the majority of buy-to-let transactions, the borrower is making an active decision to become a landlord, an activity for which they will receive an income and for which they will be taxed as a business.

    ‘There are some situations where borrowers do not seem to be acting in a business capacity. The Government’s view is that such borrowers are consumers and would need to be covered by an appropriate framework.’ It goes on to add that instances where regulation is needed will be a ‘small proportion’ of total buy-to-let transactions.

    The Treasury document shows in 2013, 151,000 buy-to-let mortgages were taken out for house purchase or remortaging, making up 12 per cent of total lending. There is no breakdown in the figures to show many were for those with just one buy-to-let property.
    The numbers are significantly higher than the trough in buy-to-let lending that the UK experienced after the financial crisis, where some lenders closed their doors to new business.However, it is still below the peak of buy-to-let lending in 2007 where 339,000 mortgages were taken out for buy-to-let purposes.'Move will add a layer of cost and confusion for all involved'

    The news has been met with a wave of criticism by experts who say there is no need to regulate any part of the buy-to-let industry. The Council of Mortgage Lenders say lenders might struggle to distinguish between ‘consumer’ landlords and buy-to-let professionals. 
    Paul Smee, CML director general, said: ‘It is frustrating that, despite earlier assurances, the buy-to-let position turns out not to have been adequately resolved, resulting in a new proposal for regulating part of the buy-to-let mortgage market.

    ‘The regulatory regime now being proposed is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met.’

    Mark Harris, chief executive of mortgage broker SPF Private Clients, said: 'A buy-to-let is an investment, whether the property was inherited, a let-to-buy or purchased independently, and should be treated as such. 'Regulating some buy-to-let loans but not others will add another layer of cost and confusion for lenders, brokers and borrowers alike.

    'Buy-to-let lenders already require that borrowers meet certain criteria including have an income and have tough regimes in place to prevent gaming - trying to get around the new affordability rules introduced in the mortgage market review. ‘Formally regulating buy-to-let is unnecessary and is not being done to provide additional protection to consumers.'

    Click here to read the full article 'Accidental landlords set to be banned by the EU as directive may force lenders to regulate certain buy-to-let mortgages '

    Wednesday, 10 September 2014

    Landlords are entrepreneurs who should be encouraged

    Instead of helping landlords, the Government has come up with a raft of new requirements, including checking that tenants have the right to be in the country.

    What’s the fastest-growing British industry of the last decade? Apps for smartphones perhaps? Web retailing? Payday lending? Actually, it is probably renting out property. The buy-to-let boom has seen a huge growth in the number of landlords, and the number of properties available to rent. 

    In 1999 private rentals accounted for 9.9pc of households, but that has now almost doubled to 17pc, and it is growing all the time. And yet the words “landlord” and “crackdown” now seem to be irredeemably joined together, like salt ’n’ vinegar. Hardly a week goes by without someone calling for a crackdown on rogue landlords, calls for controls on rents, or campaigns by the Revenue to collect more tax from them. Only this week, the Treasury came up with some new rules to restrict buy-to-let mortgages. 

    But if you pause for a moment and think of this as an industry, and all those buy-to-let landlords as entrepreneurs, then it is all very odd. For how many other industries does the Treasury specifically try to make it harder for small businesses to raise finance? Which other group of entrepreneurs gets targeted for price controls, or anti-tax avoidance campaigns? 

    The growth of the private rental industry has been phenomenal by any standards. 

    In the 1960s and 1970s, it was just about killed off by rent controls. Anyone who wanted somewhere to live in Britain had two choices – they could buy a home, or rent one from the council. The private market was hounded out of existence. But from the 1980s onwards, that all changed. Landlords were given the freedom to set rents and allowed to evict tenants who didn’t pay. It took time, but the market has since flourished. 

    According to a recent report by the select committee for communities and local government, back in 1999 there were 2m privately rented homes, out of a total of 20m households. Now there are 3.8m, out of 22m homes. There are slightly more owner occupiers – up from 14m to 14.3m – but significantly fewer people renting social housing. In effect, private rentals account for most of the increase in the supply of housing over the past 15 years. 

    This is a big business. With a current average rent of £723 per month, excluding London where it is more than £1,400 a month, rental income comes to about £33bn a year. It is in the same ball park as the restaurant industry, currently worth about £40bn a year in the UK, and bigger than the fashion industry, currently worth about £26bn. 

    You might think that would get some kind of support from the Government. But you’d be wrong. The average private landlord is about as popular as a man selling David Moyes scarves at Old Trafford on a Saturday afternoon. Only this week, the Treasury unveiled a move against “accidental” landlords, that is people who rent out a home they have inherited or they have found hard to sell. There will be tougher regulations on their ability to raise finance. 

    The Government has come up with a raft of new requirements for landlords, including checking that tenants have the right to be in the country, and that their properties are not being used for organised crime. The Revenue has launched a series of campaigns to make sure landlords are paying their tax. 

    Standard letting agreements have been introduced. Lobby groups have campaigned for rogue landlords to face prosecution, and for compulsory inspection of rental properties. The Labour leader Ed Miliband has promised to stop excessive rent rises, a national register of landlords, and more security for tenants. By comparison, even the cocaine industry gets let off fairly lightly. 

    Of course, there are some terrible landlords out there. Then again, there are some lawyers who overcharge their clients, and doctors who don’t run proper checks on their patients, and plumbers who insist you need a new boiler when all that is required is a minor repair. 

    The bad ones are more than likely to go out of business, the same way as anyone offering a poor service to their customers does. Nor is there any reason to think they dodge their taxes – at least any more than, say, plumbers. All of them have invested substantial sums of capital in their properties, which suggests they are financially savvy. By all means take action if they don’t declare their income, but there is little reason to specifically target them. 

    Worse, is it really necessary to make them check the immigration status of their tenants? No one asks restaurants to check the migration status of their diners? Or garages to make sure those slick tyres aren’t being fitted for a getaway car? Why should landlords be the only small businesses expected to work as part-time – and unpaid - policemen? 

    No one would deny that Britain has a dysfunctional housing market. Land is too scarce and credit too cheap, and that has made house prices higher than they should be. It may well be the case that the rental sector has boomed because many young people can’t afford to buy their own home. But it is surely unfair to blame that on landlords. 

    In reality, we don’t know what the right balance is between owner-occupied, private rented and social housing is. Owner occupation has dropped from a high of 70.5pc of homes in 2000 to 65pc now. That may be in part because some people can’t afford to buy. But it may also reflect a rising demand for more flexibility. A Polish scaffolder might be happy to rent so he can save up for a house in Krakow rather than Coventry. 

    It is certainly not very surprising that a country with very high levels of immigration – such as the UK – has seen a rising demand for rental property. It is completely wrong to assume landlords are squeezing people who would prefer to buy out of the market. In fact, they are providing much-needed housing for a more mobile workforce. They are also, remember, entrepreneurs. 

    Most are doing it in a small way, and with little more ambition than supplementing their pension. There is nothing wrong with that – people looking after themselves and their families are to be admired. But a few will go to create bigger business. If they were doing anything else – making clothes, or running websites, or opening restaurants - we would be encouraging them. Landlords shouldn’t be treated any worse than any other small business. 

    The only thing that needs cracking down on is the crackdowns. 

    Monday, 8 September 2014

    Landlords: buy renovated for better returns

    The buy-to-let industry is booming. Landlords are increasing their portfolios, rents are rising and the pension freedoms set to grace the market means there could soon be a whole new wave of landlords getting in on the action, but to really make a success of it, it all comes down to choosing the right property. So, what type of property will work for you?

    Well, if research from HSBC is anything to go by, your best bet will be to go for a property that's already renovated. According to a survey, 43% of UK landlords who have only one buy-to-let (BTL) property plan to expand their portfolio in the near-future, with the majority – two-thirds, in fact – seeking a property that requires no renovation.

    The figures show that the most popular choice for a second buy-to-let property is a two-bedroom flat that's ready for tenants to move into, with only 38% of landlords prepared to take on the challenge of a fixer-upper. This is despite the fact that a fully-renovated two-bedroom property will cost, on average, 43% (£58,500) more than one requiring refurbishment – or £194,599 rather than £136,042.

    It sounds like a significant extra outlay, and it could make a lot of people think that a fixer-upper is the better-value option. But, when you consider the increased yields that can be achieved with a fully renovated property, it makes a lot of sense to give the run-down homes a miss.

    According to HSBC's calculations, landlords who purchase a BTL property requiring no renovation receive an average yield of 5.4%, or 1% higher than those who purchase a property that requires extensive refurbishment (4.4%). 

    The difference is equally as noticeable in terms of rental prospects: the average rental income for a two-bedroom property in immaculate condition is £872 per month, or 75% higher than the typical rental income achieved for lesser-standard properties (£498).

    As you can see, the yields could largely counteract the initial outlay. If you were to buy a property that needed work doing, you'd need to consider the extra void periods – you couldn't move tenants in until the renovations were complete, and that could potentially mean several months of no rental income – not to mention the cost of doing the work itself, and the chance of finding further problems that will take longer, and cost more, to put right. Then there's the extra rent that can be charged, which helps explain why average yields are so much higher for properties in good condition.

    Peter Dockar, head of mortgages at HSBC, commented: "Ready-to-move-into properties are often the savvier choice for landlords looking to purchase additional BTL properties. Not only does this avoid the need for lengthy and expensive renovations, it can also result in higher yields in most areas of the country. While the initial purchase price will be significantly higher, rental returns are also improved, making monthly mortgage and maintenance costs more palatable."

    However, there's still the chance that you may not be able to foot the bill for a refurbished property – a barrier for 27% of landlords. Those that don't mind taking on extra work could therefore find it cheaper to buy a property in need of renovation – the yields will be lower in the short-term, but if you can foot the bill for renovation costs, you'll eventually achieve a higher rental income and overall yield.

    Make sure you factor in all the costs, however. A new kitchen, new bathroom and redecoration of four rooms will cost around £10,428, according to HSBC's figures, but could add some £58,557 to the value of the property, so if you've got the time and the money it may be worth considering. It could work out well when it's time to remortgage, too, as the higher property price could mean you're able to benefit from a lower loan-to-value mortgage and, therefore, a better rate.

    This will often only be an option for landlords that have spare savings to devote to refurbishments, and who can afford to have their property un-let for a few months. 

    Ultimately, it all comes down to personal circumstances and overall financial situations, but the general preference would probably be for landlords to purchase a property that's in as good a state as possible. 

    Peter Dockar concludes: "The choice is clear for landlords hoping to make the most out of their buy-to-let investment: either purchase or renovate a property to good condition or risk lower rental income and reduced overall yields. 

    Maximising return on investment is crucial for landlords hoping to add more properties to their portfolio, and will help build a solid stream of income to supplement existing earnings or act as an alternative savings plan."

    Click here to read original article 'Landlords: buy renovated for better returns'

    Friday, 5 September 2014

    Tax cuts for good landlords report gets support

    Calls for tax breaks for good landlords have been hailed as a “helpful contribution to the debate” by a leading property expert.

    The Chartered Institute of Housing this week recommended new tax incentives for landlords willing to sign up to a national accreditation scheme designed to raise rented home standards – with an estimated 1 in every 3 properties now failing to reach the government’s Decent Homes standard.

    The report argues this would encourage landlords to improve the condition and management of their properties by offering them the resources and incentive to do so.  

    Alongside advocating for the creation of a widely publicised and easily understood set of minimum management and property condition standards for rented homes and sufficient resources to enforce them, the report’s suggestions for encouraging landlords to commit to higher standards include:

     •    Giving accredited landlords a more generous tax allowance for ‘allowable expenses’, where landlords deduct the cost of repairs from their profits for income tax purposes. 

    •    The ability to treat any improvements needed to bring a property up to standard as an ‘allowable expense’, instead of deducting it from their capital gains tax liability. 

    •    Allowing accredited landlords to benefit from capital gains tax rollover relief if they invest the proceeds from the sale of a rental property in another property.

    Ajay Jagota of Letting Agent of the Year KIS offered a cautious welcome to the CIH proposals.

    The firm – famous for becoming the first letting agency to abolish deposits – manages properties for 700 landlords from branches in Sunderland, North Shields, South Shields and Welwyn Garden City and this year expanded into residential sales.

    Ajay said: “At KIS we do not rent out substandard homes – but sadly some do. My concern with many of the previously proposed remedies like accreditation schemes is they risk placing huge financial and administrative burdens on law-abiding landlords without doing a thing to tackle the villains who give everyone in our industry a bad name.

    “A genuine carrot and stick approach, rigorously enforced but potentially rewarding, approach may be just the thing to encourage the disreputable to clean up their act while also empowering the good landlords who want to improve their properties but can’t.

    “You can expect to make a third more rent for a furnished property compared to an unfurnished one, for example, but you’ve got to remember that improvements like this aren’t always realistic.

    “A significant number of landlords are only covering their costs and don’t actually make a penny out of their properties. I’m sure many of them would love to improve them, either to maximise their income or to give a better service to their tenants, but they simply can’t afford to.  

    “Proposals like these ones could give them both the resources and incentive to improve their homes, and may be even give them the capital to invest in new properties, which could have the added benefit of helping to tackle Britain’s housing shortage – and they’re also proposals which might be worth considering to raise standards in the lettings industry.“

    Click here to read original article 'Tax cuts for good landlords report gets support'