London Fire Brigade Issues a Warning!

Three years ago, the fire safety laws changed radically but it seems that some landlords, and other businesses, are still not totally aware of how that affects them.

The Regulatory Reform (Fire Safety) Order came into effect in October 2006 and replaced over 70 pieces of fire safety legislation. The Order applies to virtually all buildings, places and structures, so there is little chance it does not apply to you.

The main thrust of this legislation is that the responsibility for fire safety lies with the employer or landlord. Therefore, it makes good business sense as a landlord to have a strong knowledge of the fire safety regulations. London Fire Brigade is saying that in their experience many landlords do not.

If you are an employer or have control over a premise (known as the ‘responsible person’ landlords fit into this category) then you are required by law to carry out a fire risk assessment and act on its findings. Simply to assume that everything is OK will not cut it!

If you are one of those people who think that you will never get caught out then it bears keeping in mind that London Fire Brigade carries out around 14,000 fire inspections of premises each year. If your premises are part of this inspection and they are found wanting then you could face very hefty penalties.

Even with that aside this is the safety of people we are talking about here and none of us want a tragedy on our conscience.

Landlords Responsible for Misappropriated Tenant Deposits!

Eric Walker, managing director of Bushells, has come out and stated what many of us have been thinking; there are massive flaws in the tenancy deposit legislation.

Any system that holds one person financially responsible for another’s wrongdoing must be inherently unfair. Most people would agree with this but it does not stop the government holding landlords responsible for tenants’ lost deposits even when it is clearly the letting agency that is at fault.

Mr Walker makes a very good point when he recommends that the letting agents should have to submit to regular auditing. Anything less, potentially, puts the poor landlord in an invidious position.

He said “The real time-bomb is where agents hold the money in their own account and register it with a scheme, then for whatever reason cease to be members of that scheme. This leaves the landlord with a huge liability in the event that the tenancy is extended or renewed, as the deposit is legally no longer registered.”

Clearly this is not a situation that can be allowed to continue. Letting agents are getting away with losing, spending or just vanishing with tenants’ cash and landlords are being left holding the financial baby. It is nonsense and can surely be fixed.

Sub Tenants a Nuisance for Landlords

The recession sure has a lot to answer for in the property market. In the last 12 months there has been a fifteen percent rise in the number of overcrowding cases that Landlord Action have had to deal with. London is the worst hit and, not surprisingly, the director of Landlord Action is blaming the economic downturn.

Paul Shamplina says “The most common cases appear to be organised gangs looking for an easy money making scam. They take out a tenancy and then sublet to multiple occupants. The worst case we have dealt with was a three bedroom, one bathroom, semi detached house in North London which was found to have had 53 occupants, all illegal immigrants.

He goes on to describe frankly horrifying conditions including mattresses stretching from wall to wall.

Other terrible cases he talks about are enough to send a shiver down any landlord’s spine, with one woman finding that 18 bunk beds had been put into her lovely property and it was being used as a youth hostel. A website in China was advertising a space in the flat for £20 a night.

Mr. Shamplina highly recommends caution if you are a landlord who finds their property being put to these kinds of uses. Clearly you will be outraged but approaching the sub tenants themselves and asking for payment may open you up to a legal nightmare.

Mr. Shamplina has a lot of good advice for landlords on how to avoid this situation, and I think it is worth spending a little time on so I shall elaborate in my next blog.

Credit to Pay Monthly Rent

This is actually a quite alarming story. The Financial Times this week has reported that more and more tenants in the UK have been reduced to using their credit cards to pay their rent.

This problem is most prominent among blue collar, working class families with the figure standing at 8 percent of them having used a credit card to make a mortgage or rent payment in the last 12 months. The figure drops to 4% in the white collar sector.

It is in London where this is the most worrying with 12% saying that they have used a high interest credit card to pay their monthly rent or mortgage. The repayments on these can be quite crippling.

You do not have to be a rocket scientist to work out where the natural progression of this trend ends. Tenants who cannot afford their rent end up having credit card balances to deal with and eventually they are going to hit the wall. This leaves them in a very regrettable position financially and the landlord with a tenant that has no means of paying.

It seems inevitable then that if things continue this way, landlords are going to face a huge rise in rental arrears. A situation that none of us want to see.

The Rise of the Professional Landlord

CHL Mortgages released its quarterly survey last week to reveal a growing confidence in the property sector that has seen the return of the professional landlord.

The survey is designed to canvass opinion among landlords on a regular basis and allows us to see how they are thinking about the current state of affairs and the future. Of those that responded to this quarter’s questionnaire eighty one percent were keen to express the opinion that the future looks fairly rosy, as far as they are concerned.

The most interesting part of this attitude is the reason that they gave for this change. In the opinion of those surveyed, the credit crunch has lead to the BTL market shedding its ‘get rich quick’ image and returned to being a domain for professionals.

They believe that pressure was put on the market by amateur landlords flooding in to try and make a quick buck but has been relieved by the recession, and many are grateful for that much at least.

The survey revealed that 58% of respondents considered their property portfolio to be a profession rather than a hobby, and it also showed a strong preference for managing their properties themselves rather than allowing a letting agency to do so.

It is a good feeling to know that at a time where the buy to let sector is set to become very important it is in the hands of professionals

Tax Changes for Good of Nation’s Economy

This is the last blog that I am going to write in relation to this topic, for now anyway, but I just wanted to round off my series on the type of support that the Government needs to be giving the BTL sector. I really think it is time we all made our voices heard on this issue.

I touched on the idea of landlords being treated as traders in the last blog and I want to go into a little more detail here. The Government actually commissioned a review into this topic, the Rugg review. When they returned with their findings, one of the strongest recommendations was that private landlords be treated like businesses. Julie Rugg, head of the review, outlined to the government how important it was that landlords were taxed in the same way as other businesses. Until now they have ignored her.

The private rented sector is becoming acknowledged as the key provider of homes in the UK and this is not something that is going to go away with the recession. It started before the recession and will continue long after it. The way taxation is applied will play a vital part in how healthy this sector remains and at the moment that could mean the difference between the population having homes or not.

It is no longer just a matter of looking after private landlords, the Government needs to look after us so we can help to make other people’s lives better. These taxation changes must be made for the good of the nation’s economy.

More Taxation Pleas for the Government

In a continuation of our series supporting the RLA’s pleas to the Government, this blog is going to cover a couple of taxation topics. The first is a call for tax relief for carrying out works to comply with HMO conditions; next, a look at capital gains tax on active residential property investment businesses.

There have been a lot of regulation changes in recent years that have affected landlords and many of them have resulted in the landlord having to spend large amounts of money.  An example of this is the changes to fire regulations which resulted in the necessity to update systems. In one house this was a significant expenditure but if you had a sizable portfolio the cost was nearly backbreaking. No one is questioning the need for top notch fire safety and we all approve of the law change. Given that it is a law, however, these kinds of things should result in tax relief for landlords. It is only fair.

The next suggestion the RLA has for the Government is one that I am completely behind. It is an urgent plea for those in charge to change the status of residential property investors who are actively involved in managing their businesses to that of trader. This would allow them to claim capital gains rollover relief for residential properties and, even better, taper relief. Landlords have been calling for this change for what seems like an age now and it appears to be falling on deaf ears.

As the true worth of the BTL sector to the British economy is slowly becoming apparent it would behoove the Government of this country to start taking some notice.

Property Private Sector Confirmed As Vital!

In a speech given to the Fabian Society last week John Healy, housing minister, made it clear that the population of the UK is increasingly looking towards renting. In a statement that many with an invested interest in the BTL sector would call blindingly obvious Mr Healy confirmed that people are increasingly turning away from buying their own homes and beginning to rely on rented accommodation to house them.

Seven years ago seventy one percent of all homes in the UK were owner occupied. This figure had dropped by three percent last year and all signs indicate it is likely to decrease further. It seems that the British dream of owning your own home is starting to tarnish slightly.

Interestingly though, Healy does not seem to believe that this attitude was kick started by the recent recession. He says that this move toward the rental sector showed up in figures as far back as 2005.

I do agree with the minister when he states that this trend is not necessarily a bad thing. It is all about perception really. Continental Europe has always been happy to rent privately and use their money in other ways. Owning your own home is not the necessity that we in Britain have so long regarded it as, but rather a lifestyle choice. It may take a long time for the older among us to accept this statement but it seems that some of the younger generations are already there and quite content to rent their home.

RLA Urges Initiatives to Help Private Landlords

Yesterday the Residential Landlords’ Association ran a blog which contained some of the most insightful comments I have read in a long time.

The RLA has basically written an open blog to the Government urging them, for the good of the country, to give private landlords a break.  Their reasoning is sound.

Given the financial crisis, people are going to be turning to the private rented sector in their droves. Therefore, not only is the PRS going to be providing vital accommodation but it will also be in a position to stimulate increased economic activity. The PRS is, in fact, going to play a major part in hauling the UK out of the mire.

The point the RLA is making is that the Government should be doing more in the way of initiatives to help this critical sector.  Given the situation with loans and other recent law changes, it would often appear that the exact opposite is happening. The RLA are making some recommendations regarding taxation and other breaks that seem like common sense.

Their thoughts are very comprehensive on a number of issues so what I plan to do over the next couple of blogs is summarise them and add my two pence worth.  I think it is important that we all understand what the RLA is suggesting and get behind their campaign to have the government listen to what the PRS has to say.

Let’s Follow EU Guidelines on VAT!

In the UK many of us do not always see eye to eye with some of the recommendations of the EU. But when it comes to their recently agreed maximum 5% tax rate for renovation and repair work, landlords are right behind them.

The UK Government needs to implement this as soon as possible. This is a unique opportunity to encourage landlords to get properties up to spec. Given that a lot of the PRS (private rental sector) deals in older properties could do with a little work, this has to be viewed as a very good thing.

Of course, it is not to be ignored that a drop in tax, which will lead to an increase in renovations, will also stimulate the economy by providing work. Tradesmen have had a hard time of it lately with many people shelving any plans that they had for home improvement when the crisis hit. This would get a lot of these businesses back on track. Not to mention the huge boost that will be given to the manufactures of all kinds of building supplies.

The Government needs to stop dragging its feet on falling in line with the EU requirements. There is much to be gained and very little to lose. I am sure they can find a way to recoup any monies lost through the drop in tax.

They usually do!