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.“

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Landlords face fines over immigrants

New legislation which will see landlords face fines if they rent homes to illegal immigrants without checking their “right to rent” is to be brought into force in a phased roll-out .

The new measures in the Immigration Act are to be launched first in the West Midlands, in Birmingham, Walsall, Sandwell, Dudley and Wolverhampton. The new law will mean from December 1 private landlords will have to check the right of prospective tenants to be in the country if they want to avoid potentially being fined up to £3,000.

Immigration and security minister James Brokenshire said: “We are building an immigration system that is fair to British citizens and legitimate migrants and tough on those who abuse the system or flout the law.

“The right to rent checks will be quick and simple, but will make it more difficult for immigration offenders to stay in the country when they have no right to be here.

“They will also act as a new line of attack against unscrupulous landlords who exploit people by renting out substandard, overcrowded and unsafe accommodation.”

Landlords will need to see evidence of a person’s identity and citizenship, such as a passport or biometric residence permit.

Copies of the documentation will need to be taken as evidence the checks have been carried out and retained for one year after the tenancy ends.

Following an evaluation of the implementation in the West Midlands next spring, the Home Office expects to continue with the phased introduction of checks across the UK next year.

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Are landlords legally entitled to hold keys to their rented properties?

Here is a question to the blog clinic from Hilary who is a landlord.

I have a secure tenure property. The tenants have been in residence for 74 years.

I haven’t a set of keys to this property. I’ve asked the tenant if I may get a copy cut they’ve refused this request. They are very good tenants in that they have always looked after the property but if repairs are needed I can’t access unless they are there.

Am i legally entitled to hold a set of keys for the purpose outlined? As a secure tenure there is of course no tenancy agreement.

Answer:

There is no law that I am aware of that entitles the landlord to hold keys to the property. Which is why, if you want to hold keys, this is something that needs to go in the tenancy agreement.

One of the features of a tenancy (which is a type of ownership of land) is that the tenants have the right to exclude the landlord from the property.

This is the case even if the landlord wishes to enter for an authorised purpose such as carrying out repairs.

So even if you are entitled to hold a set of keys under the terms of the tenancy agreement, it will still be trespass and make you liable to a claim for compensation if you use those keys against your tenants wishes.

If these tenants are good tenants then they will no doubt co-operate should you ever need to do major repair work to the property. If they fail to do so, then your only alternative is to get a court order.

The same rules apply for getting the gas safety inspection done, which is why I created the Gas Access Kit which includes instructions for getting an injunction order.

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Give good landlords tax breaks to make rental housing better, report urges

Good landlords should be offered extra tax breaks in order to improve private rental housing, two groups urged today.

Landlords who sign up to a minimum-standards scheme would be given incentives to improve the maintenance and management of their properties, said the Chartered Institute of Housing and the Resolution Foundation.

The report also warns that more effective regulation is needed to tackle rogue landlords and calls for letting agents to be banned from charging tenants fees.

Private landlords currently receive around £7billion in tax allowances each year, including for repairs and maintenance, but there is no incentive to carry out work above the minimum standard, the groups claim.

A study from Shelter earlier this year found that mMore than 200,000 renters in England are estimated to have been the victims of a ‘revenge eviction’ in the last year after asking for a problem with their home to be put right. 

It said one in 50 (2 per cent) private sector tenants said they had been evicted or served with an eviction notice because they had complained to their landlord or letting agent about something that was not their responsibility - such as a fault that needed repair - or had complained to their council when their landlord or letting agent had refused to carry out repairs.

The CIH, which represents housing professionals, and the RF, which campaigns for better living standards for low to modest income families, said a third of privately-rented homes failed to meet modern standards.

The private rented sector has doubled in size since 1992 to four million households and now accounts for 18 per cent of all households in England, they said.

Meanwhile, the percentage of private renters aged 25 to 34 rose from 31 per cent in 2008/09 to 45 per cent in 2012/13.

CIH chief executive Grainia Long said: 'This Government has focused on measures to boost home ownership, but with more and more people living in the private rented sector - including more older people, more families with children and more vulnerable people from the housing waiting list - it's vital that we look at new ways to raise standards.

'The cost of housing means that for many people, the private rented sector is the only option, but too many of them are having to put up with poor standards and insecurity.

'Ultimately, we want people to have a good choice of housing at a price they can afford, so we need to make private rent a better option.'

RF deputy chief executive Vidhya Alakeson added: 'Many landlords already benefit from generous public subsidy but, while many of them are responsible, not all of them give anything in return.

'By introducing the principle of getting 'something for something' from this investment we could ensure that housing is improved and works better for both tenants and landlords. Government should incentivise those who work to raise their game in order to improve the overall standards of private renting.'

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Council bills rogue landlord £10,000 after it tears down his £750-a-month ‘bed in a shed’

A London landlord who let out an outbuilding as a “bed in a shed” for £750 a month has been billed the £10,000 cost of knocking it down by the council.

Hillingdon council gave the rogue landlord three months to evict the couple who lived there and pull the building down himself.

When he ignored the request the council demolished the property, in Hayes, after the tenants voluntarily moved out. The council estimates the cost of the work at £10,000.

A council spokeswoman said: “Hillingdon council has demolished another illegal outbuilding that was being used as a ‘bed in a shed’ after a rogue landlord failed to comply with a planning enforcement notice. The council’s planning enforcement officers took action to demolish the outbuilding at the rear of a property in West Drayton Road, Hayes, and will recover the costs incurred.

“An enforcement notice had been served on the owner and occupier of the outbuilding, and they were given three months to comply. They were ordered to stop illegally renting [it] out and to then demolish it.

“After failing to do so the council intervened and took on the work, after the people living there voluntarily moved out.

“This enforcement work is part of an ongoing project to clamp down on beds in sheds. The council has a special taskforce of officers dedicated to investigating and taking action against rogue landlords.”

Councillor Keith Burrows, cabinet member for planning, transportation and recycling, added: “The council takes these matters very seriously and we will not sit by and watch rogue landlords making an illegal profit by offering such pitiful accommodation.”

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Landlords evict for good reason

A major new survey has put paid to the stereotype that landlords are keen to evict tenants, proving that they do so only for significant reasons.

Despite recent publicity in relation to ‘retaliation evictions,’ in which landlords allegedly evict tenants out of spite after they have asked for repairs, the new research by the Residential Landlord’s Association (RLA) suggests that landlords are far more reluctant to evict tenants than they are made to seem. 

The survey of 1,760 landlords found that 56 per cent were forced to evict tenants from their properties. 

However, the majority of these were for reputable reasons. 90 per cent carried out evictions for rent arrears, whilst 40 per cent did so for damage to the property. 20 per cent of landlords had to evict tenants due to drug related activity.

Whilst 30 per cent of landlords did evict tenants in order to gain repossession of the property, this was done largely for personal reasons as opposed to revenge, thus showing that landlords aren’t the villainous figures they are often portrayed to be.

RLA chairman Alan Ward said: ‘We have been very concerned about claims that retaliatory eviction is a widespread practice, when there is very little hard evidence to back up those claims. 

As our survey underlines, the vast majority of evictions are down to rent arrears or anti-social behaviour. 

Landlords are being threatened with more regulation which would simply make it harder for them to evict bad tenants when they need to.’

He also expressed concern about the potential removal of Section 21 notices, which allow landlords to gain possession of a property at the end of a shorthold tenancy. 

Ward continued: ‘If landlords see Section 21 under threat they will withdraw from the sector. Landlords are frightened that they cannot evict tenants who are in rent arrears or who are guilty of anti-social behaviour easily and cheaply. We still have complaints that even under Section 21 there are costs and delays involved in obtaining possession.’

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Large number of renters have never met their landlord

30% of private tenants deal only with their letting agent and have never met their landlord, new research conducted on behalf of mortgage and loan broker Ocean Finance has suggested. 

In comparison, nearly a quarter of these respondents (24%) work primarily with the letting agent but have met their landlord, and 46% deal with the landlord directly on issues concerning their home.

Across the country, London renters were among the most likely to only work with a letting agent, along with residents in the North East (36% and 38% respectively). 

The capital is home to the highest percentage of renters in England and Wales at 50% of all households in the city.

Ocean Finance says renters may want to speak with their landlords directly if there is a problem with the property, rather than having to wait to go through the letting agent to reach them. 

They may also see good communication with their landlord as part of the service they are paying for. 

On average, private renters spend 40% of their income on their rent, compared to the 20% of a homeowner’s income that goes on their mortgage.

Respondents aged between 18 and 24 years old were the most likely to rent their home and the most likely to have not met their landlord. 

38% of private renters in this age bracket revealed they only deal with a letting agent, compared to 15% of over-55s.

Ian Williams, spokesman for Ocean Finance, said: “It’s surprising that such a significant proportion of Brits who privately rent have never met their landlord. 

“Being able to get in touch with the person who owns their property may provide additional peace of mind to renters that they know where to turn for a speedy response should there be a problem with their home.”

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Landlords warned they may be required to check immigration status of tenants or face £3,000 fine in plan to tackle 'beds in sheds'

Landlords may be forced to check the immigration status of prospective tenants before allowing them to rent a property from next year or face a potential hefty fine, under rules in the new Immigration Bill.

The Government says it will enforce the stricter rules on one location in the UK in two months' time to check a tenant's right to be in the country - the location of which is yet to be announced. These rules could then be rolled out across the country.

Those who fail to check a new tenant’s immigration status could face a fine of up to £3,000 if the slip-up means they have someone in their property who is in the country illegally.

The measures are part of the Government’s work in tackling rogue landlords who provide substandard or illegal accommodation, with stories of low-paid immigrants living in ‘bed sheds’ rife in certain pockets of Britain. 

Office for National Statistics data shows 85 per cent of migrants who have been in the UK for less than a year end up in private rented housing.

The rules may come as a shock for some landlords, particularly the army of 'accidental landlords' that has emerged following falls in house prices after the financial crisis that meant some owners could not sell and instead chose to let their property.

A new report from AXA has suggested 38 per cent of landlords fail to vet tenants.

The Royal Institute of Chartered Surveyors warns the move could create more red tape for landlords and letting agents. The charges may result in even higher administration fees for those moving to a rental home. 

Many private landlords already make checks on tenants' identity and credit status - but not all do. 

Darrell Sansom, managing director at AXA Business Insurance, said: ‘Landlords are under more scrutiny and subject to heavier legal penalties than ever before. 

‘HMRC launched a crackdown on landlords whose tax affairs aren’t in order this March, and May’s Immigration Bill introduced fines for landlords who fail to check a tenant’s right to be in the country. 

‘While legislation toughens, we need to make sure that enough is being done to inform and educate landlords.’

AXA has warned landlords that they are leaving themselves exposed to terrible tenants by failing to carry out basic checks, especially those who are ‘accidental’ landlords.

Its data shows there are 8.3million tenants in Britain, as more people choose – or are forced – to rent in the midst of soaring house prices.

But of this figure, 60 per cent admit to breaking rental agreement terms in the past, with 26 per cent of tenants having paid their rent late at some point, 18 per cent have kept pets without permission and eight per cent have sub-let to someone else, again without permission. 

At the most serious end of the scale, eight per cent of tenants admit to committing a crime on the landlord’s premises and a similar figure say they've had the police called to the property.

Landlords do carry a legal responsibility to ensure that their premises are not used for criminal purposes. Despite the potential for misdemeanours happening in their property only five per cent carry out a criminal record check, while a third never visit during the rental. 

Under the Misuse of Drugs Act, landlords can face prosecution if a tenant is found to be producing cannabis or other banned substances on their property.

Last year, we highlighted a case of a landlord who rented out a property - to only be tipped off four months later that it was being used a cannabis factory.

And despite many landlords relying on rental income to cover expenses such as mortgage payments and basic living costs, few of them check if their tenants have the means to pay their rent. Just under a third of landlords carry out a credit check, ask for employer references or ask for references from previous landlords.

Tenancy agreements are also an important part of the picture, giving the landlord a firm foundation to evict non-paying tenants or claim damages for financial loss caused by the tenant. 

AXA found that landlords are getting better on this front – this year’s study revealed that 75 per cent of rentals are now based on a formal agreement, compared to just 52 per cent at the beginning of 2013. 

Darrell adds: ‘During the recession, we saw a significant increase in the number of accidental landlords – people who never expected to rent out their property, but couldn't sell a former home or needed the additional income. With a booming rental market, they aren't going anywhere. 

‘When you first start renting out property, you may not realise all the legal implications and duties involved. Last year, for instance, we found that a third of these landlords are, often inadvertently, breaking laws on safety checks, and a quarter have the wrong or no insurance.’

Elsewhere, AXA built a profile of the riskiest tenant in Britain by analysing the figures – male, aged between 18 and 25, in the £700 to £1,500 per month rental bracket and located in West Midlands.

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Mortgage and landlord possession statistics

Quarterly National Statistics on possession claim actions in county courts by mortgage lenders and social and private landlords.

The bulletin presents the latest statistics on the numbers of mortgage and landlord possession actions in the county courts of England and Wales. These statistics are a leading indicator of the number of properties to be repossessed and the only source of sub-national possession information. In addition to monitoring court workloads, they are used to assist in the development, monitoring and evaluation of policy both nationally and locally.

Click the links below to see the statistics.

Documents:-

Mortgage and landlord possession statistics: April to June 2014

Mortgage and landlord possession statistics: January to March 2014

Mortgage and landlord possession statistics: October to December 2013

Mortgage and landlord possession statistics: July to September 2013

Mortgage and landlord possession statistics: April to June 2013

Mortgage and landlord possession statistics: January to March 2013

Mortgage and landlord possession statistics: January 2011 to September 2012

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HMRC targets landlords

Landlords are set to receive a letter from HMRC if they are suspected of not having paid enough tax this year, writes Charlotte Lloyd.

The Sunday Telegraph reported that the taxman will send 40,000 letters over the next four months asking the recipient to arrange their affairs or risk receiving a large fine or criminal investigation.

Approximately 5,000 landlords have been sent the letters and a 30-day window to respond has been given.

Accountants have said that in the past year HMRC’s approach has toughened. It is understood that more people have been deployed to hunt down £500m underpaid each year.

Last October, a campaign to encourage landlords to come clean was launched by the taxman and accountants said that ten months on from the launch the Revenue has begun gathering information from a wider range of sources.

Mark Giddens, a partner at UHY Hacker Young, told The Sunday Telegraph: “It was not until April this year that the taxman sent out notices to letting agents in which they asked for details to be provided of everyone on their books.

“The housing benefit payments that go direct to landlords are also being monitored more closely. This information can be obtained through the local council’s records. 

“By investing all this time and effort they have certainty stepped up the pressure on landlords who are not declaring enough, and the letters are the next part of that.”

Lucy Brennan, a partner at Saffery Champness, told The Sunday Telegraph: “Those who let out a holiday home will not be registered to vote at that address.

“The Revenue has increasingly been using social media to look into cases where a holiday home is, for instance, being advertised to friends to ensure that the right amount of tax is being declared on that property.”

A spokesman for HMRC said the campaign website has had hundreds of thousands of visits but refused to disclose how many landlords have come forward since the launch.

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