Li Magazine 40th edition by Landlord Investor Magazine

LANDLORD INVESTOR LANDLORD | PROPERTY | INVESTMENT

40TH EDITION | 2018

N FIN O S A A L AN D LO R D I NVE STM E NT S H OW R E TU R N S TO LO N DO N O LY M PIA

IN THIS ISSUE: NEW HMO RULES 2018 / WHAT NEW REGULATIONS DO YOU NEED TO LOOK OUT FOR? / NAVIGATING AN EVER-CHANGING BTL LANDSCAPE / PARTY CONFERENCE REVIEW / EXPLAINED: RECENT CHANGES TO SECTION 21 / WHERE ARE WE GOING WITH PRIVATE RENTING? / THE PERFECT RENTAL STORM / Iâ&#x20AC;&#x2122;M A LANDLORD, GET ME OUT OF HERE! / PROPERTY PRICE VS. DESIRABILITY / WINTER IS COMING / INVEST YOUR ISA IN PROPERTY / LANDLORD'S INSURANCE: TOP 10 THINGS TO LOOK OUT FOR / MARKET UPDATE / HAPPY 15TH ANNIVERSARY PIN

FO R TH E L A ST S H OW O F 201 8

6 N OV E M B E R

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I'm thrilled to welcome you to the 40th Edition of Landlord Investor Magazine.

LANDLORD INVESTOR MAGAZINE Editor Tracey Hanbury Editorial Contributors Tom Entwistle Simon Zutshi Paul Mahoney Tony Gimple Peter Littlewood Steve Cox Russell Gould Emma Cox Gareth Lewis Gareth Bertram Russell Conway Mike Morgan Design Marc Riley Advertising Beverley Meliniotis

I can't quite believe we've published 40 editions of 'LI Mag' and would like to offer my heartfelt thanks to all the subscribers, contributors and advertisers who've helped make our magazine such a success. We really do have a bumper issue for you this month, bursting with insightful features and a heavy focus placed upon regulation; given the crucial changes to Section 21 and new rules in place for HMOs. In this month's editorial Tom Entwistle questions where we're going with private renting. Simon Zutshi reflects upon 15 years of pin. Paul Mahoney looks at the trade-off between property price versus desirability. Tony Gimple examines the reality of how private landlords are both perceived and treated. Peter Littlewood shares his usual round-up of the market. Steve Cox tells us what to look out for with Landlord Insurance. Emma Cox looks at buy-to-let: past, present and future. Gareth Lewis looks at how to navigate the ever changing BTL landscape. Gareth Bertram explains how to invest your ISA in property. Russell Conway analyses the new 2018 HMO rules. Mike Morgan advises how to get your rental properties ready for the winter months. Russell Gould looks at how a perfect storm may be brewing in the private rented sector, and I will be reviewing the Party Political conferences and feeding back the salient points, then taking a deeper look at Section 21 and other significant industry changes on the horizon.

Contact Telephone: 020 8656 5075 landlordinvestmentshow.co.uk Tenants History Ltd, 27 Stafford Road, Croydon CR0 4NG

In other news we've had a superb year with the Landlord Investment Show, and as the winter nights draw-in our attention turns to the season finale at London Olympia on November 6th (see page 4 for a full review of what to expect).

Hot on the heels of Olympia is the National Landlord Investment Show Awards at the Grosvenor House Hotel in London, on November 15. Limited places are still available if you've not yet booked your seats, please visit the dedicated show website – www.national-lis-awards.co.uk – to find out more.

@LandlordInShow @LandlordInvestmentShow

Thanks again for your support and I hope you enjoy this issue.

IN THIS ISSUE...

SHOW UPDATE

TAXATION

REGULATION UPDATE

PENSIONS

Landlord Investment Show returns to Olympia

I’m a landlord, get me out of here!

Explained: recent changes to Section 21

Invest your ISA in property

EXPERT ADVICE

MARKET UPDATE

REGULATION UPDATE

LEGAL

Where are we going with private renting?

The latest market news

What new regulations do you need to look out for?

New HMO rules 2018

INVESTMENT

POLITICS AND PROPERTY

FINANCE

Happy 15th anniversary pin

Party conference review

Buy-to-let: past, present and future

TENANCY AND DEPOSITS Winter is coming

INVESTMENT

INSURANCE

FINANCE

RENTAL REPORT

Property price vs. desirability

Top 10 things to look out for

Navigating an everchanging BTL landscape

The perfect rental storm

Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. Tenants History Limited and our contributors will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through the promoted links.

Meet the team TRACEY HANBURY

BEVERLEY MELINIOTIS

T: 0208 656 5075 M: 07931 308 875 tracey@landlordinvestmentshow.co.uk

T: 0208 656 5075 beverley@landlordinvestmentshow.co.uk

STEVE HANBURY

CHARLOTTE DYE

T: 0208 656 5075 M: 07429 683 046 steve@landlordinvestmentshow.co.uk

T: 0208 656 5075 charlotte@@landlordinvestmentshow.co.uk

EDITOR & SALES DIRECTOR

DIRECTOR

ADVERTISING SALES MANAGER

HEAD OF CLIENT RELATIONS AND OPERATIONS

ALICIA CELA

MARC RILEY

ACCOUNTS

DESIGN MANAGER

T: 0208 656 5075 accounts@landlordinvestmentshow.co.uk

T: 0208 656 5075 marc@landlordinvestmentshow.co.uk

KIERAN McCORMACK

OLLIE HANBURY

BUSINESS DEVELOPMENT MANAGER T: +44 (0)20 8 656 5075 M: +44 (0)7950 284 615 kieran@landlordinvestmentshow.co.uk

HEAD OF SECURITY AND ENTERTAINMENTS MANAGER

LES HANBURY DIRECTOR

Subscribe to LI Magazine Landlord Investor Magazine gives property professionals, landlords and investors monthly advice and information on the topics, news and legislation that matter to the industry. Your subscription gives you the latest industry information in 8 issues per year. Subscribe today for just £65.00 per year to get news, advice and comment on all areas of buy-to-let: • legal services & tax • insurance • investments • deposit schemes & landlord associations • property hotspots Call the subscription hotline on 020 8656 5075 today or visit landlordinvestormagazine/subscribe Published by LI Media, organisers of National Landlord Investment Show

LANDLORD INVESTOR 40TH EDITION

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SHOW UPDATE

Season finale National Landlord Investment Show returns to Olympia for the last show of 2018

6 N OV E M B E R

To register and attend please visit www.landlordinvestmentshow.co.uk/olympia-nov 4

LANDLORD INVESTOR 40TH EDITION

SHOW UPDATE

Expert panel and seminars return As the exhibition season draws to a close we return to London for the final show of 2018. It's been a great year and we're thrilled to be closing with a stacked itinerary at the world famous Olympia Exhibition Centre. With over 40 speakers spread across 5 theaters and a packed exhibitor hall the National Landlord Investment Show at London Olympia on November 6th is an essential event for anyone with an interest in the buy-to-let market.

Due to the huge success of our expert panels at the 2017 shows, we are delighted to announce the return of the panel which features a variety of Industry experts (see below). This is an open panel debate where landlords can voice their opinions on subjects which include legal/ eviction, finance, developments, landlord tax, tenancy deposits, build-to-rent, brexit, universal credit, immigration and everything within

the private rented sector. Entrance to this fantastic event is free-of-charge and seats are available on a first come, first served, basis. If you're interested in attending the expert panel you'll be able to indicate your interest once registration opens. In addition to the panel event we are delivering 40+ complimentary seminars which are very popular; so please arrive before each seminar starts to avoid disappointment in getting a seat.

With over 40 speakers spread across 5 theaters, the National Landlord Investment Show at London Olympia on November 6th is an essential event for anyone with an interest in the buy-to-let market.

Expert property panel

MARIE PARRIS (CHAIR) CEO of George Ellis Property Services

Head of Sales for the commercial property business within Shawbrook Bank

TONY GIMPLE

PAUL MAHONEY

Founding Director of Less Tax 4 Landlords

Founder and Managing Director at Nova Financial

STEVE HARRIOTT

SARAH DAVIDSON

Chief Executive Officer of Tenancy Deposit Scheme

Knowledge and Product Editor at the MailOnline's money section, This is Money

Sponsored by Nova Financial AUDITORIUM 10am to 11.15am Register today for your chance to attend. Attendance at the expert property panel is free and on a firstcome, first-served basis so get to the venue early to avoid disappointment. Please note our doors open at 8.30am. This expert panel will take place in the Auditorium Theatre and seat over 450 delegates. The panel will be chaired by Marie Parris and features a quorum of industry exerts.

LANDLORD INVESTOR 40TH EDITION

GAVIN SEAHOLME

SHOW UPDATE

Government Insights

VANESSA WARWICK

JAMES FRASER

Co-Founder, propertytribes.com

Conservative Councillor, Stevenage Borough Council

SEMINAR ROOM 4 11.45am to 12.30pm

DAVID SMITH

JASMINE BASRAN

Partner, Anthony Gold

Senior Policy Officer, Crisis

â&#x20AC;&#x2039; he National Landlord Investment T Show brings you a first, as, in collaboration with Property Tribes, the show presents a panel debate where several different interests and views of the private rented sector are represented. Attendance at this panel debate is free and on a first-come, firstseated basis so get to the auditorium early to avoid disappointment.

KAREN BUCK

In association with Property Tribes

MP, Labour politician, and proposer of the Homes (Fitness for Human Habitation) Bill.

In addition to the panel event we are delivering 40+ complimentary seminars which are very popular; so please arrive before each seminar starts to avoid disappointment in getting a seat.

Build-to-Rent vs Buy-to-Let: how will build-to-rent impact the market AUDITORIUM 15.30pm TO 16.30pm Many UK landlords are wary of the emergence of BTR and how it will affect the traditional private rented sector. LIS have brought together a panel of experts to answer your questions. â&#x20AC;&#x2039; Come along to get your voice heard and question answered This is a must attend event! Attendance at this panel debate is free and on a first-come, first-seated basis so get to the auditorium early to avoid disappointment.

RICHARD BOWSER (CHAIR) Editor, Property Investor News

MARTIN SKINNER CEO, Inspired Assets

JERALD SOLIS

MICHAEL JOHNS

Business Development & Acquisitions Director, Experience Invest

Senior Investment Consultant, Residential Estates

PAUL HIGGS RICS, Millbank Land Academy

To register and attend please visit www.landlordinvestmentshow.co.uk/olympia-nov

LANDLORD INVESTOR 40TH EDITION

2019 SHOW DATES ANNOUNCED 2 1

MAR CH

1 5

MA Y

AS T ON

1 3

J UNE

L ONDON

V I L LA

LONDON

OC T OB E R

NOV EMB E R

O L YMP I A FC

OL YMP I A

MANCHE S T E R

* *

LONDON

U T D

OL YMP I A

* M O R E D AT E S T O B E C O N F I R M E D *

UK’S LEADING PROPERTY INVESTMENT EVENT The National Landlord Investment Show connects 1000s of property professionals at venues throughout the country and is the UK’s leading buy-to-let event. The shows give landlords and investors the chance to connect with suppliers, network and increase their knowledge.

+ Build your knowledge through seminars from property experts + Source leading products & services from throughout the property market + Share best practice and keep up to date with UK landlords and investors + Expand your business networks via the Morning Networking Event

To find out more and register for your FREE tickets go to landlordinvestmentshow.co.uk Follow us: @LandlordInShow

@LandlordInvestmentShow

National Landlord Investment Show exhibitors include:

F C

in partnership with

YOUR TWO BIG TAX QUESTIONS FOR 2018

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Are you thinking of buying or selling your portfolio? How will you know how much tax you could save or lose? You should speak to us soon to see if your portfolio qualifies. WHY? Because we understand the law on Capital Allowances. Here is the latest guide to the law. It’s complicated and complex. Who do you know that has a 13 year track record and a 100% success in submitting provable and sustainable claims to HMRC, using this knowledge? Can we help you? Ring 01327 340408.

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Did you know that HMRC are changing the law on how you must submit your accounts? From April 2019, if your total income is over £85k you will HAVE to submit your accounts quarterly in a format acceptable to HMRC. This change could give you and your accountants a headache, with extra costs, time and effort. We have the solution for you. We have recently been judged the ‘Fastest growing firm of the Year’ at the IRIS software award conference. We can now offer you and your accountant the right software support and a full MTD accountancy service at the right price to suit your business. Just Email us at mtd@baileygroup.co.uk for help and advice and a quotation of your likely costs.

The Bailey Group has over 20 years of experience working as Property Tax Law Specialists for the benefit of over 4,000 clients, now specialising in offering tax restructuring advice and Capital Allowance expertise to owners of £1million + property portfolios. Please ring 01327 340408 or email: billloryman@thebaileygroup.co.uk Visit our website at: www.thebaileygroup.co.uk to see evidence of our success.

EXPERT ADVICE

TOM ENTWISTLE LANDLORDZONE

Where are we going with private renting?

LANDLORD INVESTOR 40TH EDITION

EXPERT ADVICE

At conference time when the political parties set-out their plans for the future, perhaps now is a good time to review the likely changes in renting.

Is renting at a cross roads? Will both Labour and Conservatives’ radical plans change the direction of the private rented sector for a generation? Will these changes incentivise or disincentivise private landlords? The latest English Housing Survey findings show that around 46 per cent of 25 to 34-year-olds now live in private rented accommodation. This compares with 27 per cent in 2006-7. In London, private renting is now the most common form of tenure, and all the forecasts show that renting will continue to grow. The Institute of Fiscal Studies (IFS) says that barriers to home ownership mean that 40% of young people aged between 25 and 34 in England could not borrow enough to buy the cheapest home in their area, and in London twothirds of you people could not buy. There are 1.15 million households on council waiting lists for social housing, and private renting has taken up much of the slack at what is roughly this bottom quartile of the letting market. Over the last few years the government has pushed through a raft of policies to help young people onto the housing market and others are aimed at making life more difficult for those private landlords, for want of a better term “the rogues”, that don’t follow the rules. But there are few signs of these policies having any appreciable impact for the young aspiring home owner, and in the process, they make life far more difficult for responsible private landlords. Generally, responsible landlords want to provide long-term accommodation for tenants who pay rent on time and look after their properties. They are not looking to evict tenants, because this process is time consuming and expensive, but if there are problems, they do want to be able to regain possession reasonably quickly, thereby reducing their risk of letting.

Most tenancies end when the tenant gives notice to their landlord. Only a small minority of tenancies are ended by landlords, and most of these cases are either because of rent arrears, or the landlord requires the property back, either to sell or for their own use. No responsible landlord condones the letting of sub-standard or dangerous accommodation, and by far the majority of private landlords do not do this. But without an adequate return, private landlords will not be in a position to provide good quality accommodation. Over time, when rents are capped, and bad tenants cannot be removed, instead of standards improving, they will inevitably decline. There is no doubt buy-to-let investing has been a victim of its own success, but the excesses of the pre-economic crisis “gold-rush” have long since subsided and the sector is populated by, in the main, responsible and serious landlords. These are part-time landlords looking to property to provide a secure pension. Then there’s the professionals, investing in and managing property on a portfolio basis as a full-time career. Next there’s the corporates, busy making inroads into what has become a rapidly expanding rental market. The Landlords’ Poor Image Traditionally, landlording has never been one of the most revered of occupations, having in many people’s minds overtones from the distant past: from the Dickensian era absentee landlord, to the notorious Peter Rachman and his slum landlord techniques of the 1950s; getting rich by using strong-arm tactics to extract money from vulnerable tenants, and riding rough-shod over the law, a national scandal at the time. All of the criticism is so frustrating to the vast majority of responsible landlords who do an excellent job of providing good quality accommodation at reasonable rents to tenants who appreciate the service they get: a timely

response when things go wrong, and generally fair treatment within the law. But even so, this bad image sticks and takes some living down doesn’t it? We thought we had achieved that: the buy-to-let landlords coming in from the 1990s onwards were not the wealthy “stinking rich” landlords of the past, but mainly middle class, and sometimes working class, hard working strivers. These were savers looking for an outlet for their spare cash, oftentimes as a part-time occupation; an investment that could provide a safety net in old age, a pension that could grow their life savings beyond the paltry return offered by the banks and building societies. The Buy-to-Let Boom What happened after the economic crisis of 2008, ten years ago now, changed the game completely. What with ultra-low interest rates and austerity measures designed to revive a sick world economy, asset prices started their inevitable climb. House prices went through an unprecedented growth period reaching levels which simply priced the younger generation out of the housing market. At the same time, the older salaried and pensioned home-owning generation were looking for a safe haven for their adequate savings. With interest rates so low, having lots of collateral, and able to supplement their comfortable resources with a low interest buy-to-let mortgage, property investment made perfect sense. A whole army of these new middle class buy-to-let investors came to the fore from the late 1990s onwards, and this is largely responsible for buy-to-let taking off, a doubling of the private rented sector (PRS) over the last 10 years. In fact the PRS overtook the social housing sector a couple of years ago. So more and more private landlords are now housing the type of tenant you would have traditionally seen in council housing.

LANDLORD INVESTOR 40TH EDITION

EXPERT ADVICE

The Growth of Renting

Labour’s Threats Landlords increasingly come under criticism, some of it deserved, most of it not. As a landlord, it would seem, we are vilified from all directions, from the present government with piles of punitive regulation, bureaucracy and red-tape, from the housing and homelessness charities, tenant groups and the media generally.

ENGLISH HOUSING SURVEY 60

1920

1940

PRIVATE RENTERS

1960 OWNER OCCUPIERS

The English Housing Survey chart above shows declining home ownership, the growth of private renting, and how it has overtaken social housing for the first time since the 1960s So, paradoxically, at a time when the young needed to get on to the housing ladder, as the previous generation had done at their age, the whole system was working against them and in favour of the old – this sort of inequality now goes beyond the housing crisis. So, without a leg-up from the “bank of mum and day”, something only the lucky ones benefit from, “generation rent” are doing just that – renting for extended periods. Just as generation rent were looking for reasonably priced accommodation, especially in the big cities, where the bulk of new work is, immigration was taking off. This increasingly put pressure on housing. Rent levels were pushed up because of the extra demand. This in turn meant that generation rent suffered yet again, because higher rents meant they found it difficult to save for a house deposit. Rent levels are now averaging around one-third of earnings and up to half of earnings in parts of London, and property prices continue to climb well above wages. The Office for National Statistics reported in April that the average house in 2017 rose 4.5 per cent to £225,000, an average house price figure which is more than double that in London. However, median gross annual full-time earnings last year were £28,952, up only 2.1 per cent over the 12 months. The median price paid for a home between 1997 and 2016 went

LANDLORD INVESTOR 40TH EDITION

1980

2000 SOCIAL RENTERS

up by 259%, while earnings rose only 68%. The house price to earnings ratio now averages around 8 across the country, and is in double figures for the capital, that’s according to the ONS’s affordability data Consequently, private renting is now so important to the British economy that it has become a political hot potato. The Conservatives are desperately trying to work out what to do about the so called “housing crisis”, the pentup resentment of younger voters, and Labour’s solution, even more radical policies than the Conservatives. As we await the results of the latest government review on long terms tenancies, neither this government nor the next, whatever its colour, give off positive vibes for the private landlord. If government wants private landlords to house more low-income tenants, as opposed to spending more on council housing, then in my view it should build more homes to increase supply and bring down market rents. It should also provide adequate housing benefits to cover market rent payments for these low-income tenants, rather than encouraged the slum landlords. No responsible landlord condones the letting of sub-standard or dangerous accommodation, and by far the majority of private landlords do not do this. But without an adequate return, private landlords will not be in a position to provide good quality accommodation, and over time, if rents are capped, and evictions prevented, instead of standards improving, they will inevitably decline.

Now it seems there is a radical threat on the horizon according to memes emanating from the Labour party conference. Should the next Labour government come to power, the nofault Section 21 possession process will be toast. Gone will be the assured shorthold tenancy (AST), replaced with a compulsory long-term tenancy, a form of rent-control will be introduced, and the formation of a national network of tenant unions is to be not only be encouraged, it will be funded by the government. If Labour’s plans for renters are anything to go by, they are certainly sticking to their maxim, for the many [tenants], and certainly not for the few [landlords]. Their policies look at face value like a radical throwback to the era of rent controls and long-term security of tenure, an era when landlords simply withdrew from providing residential accommodation. The result was a rental market shrinking to less than 10% of total housing provision, compared to 20% today. In my view, those landlords who think this would be not such a bad prospect have failed to appreciate the gravity of this. Any investor weighs risk with reward. This regime would, in my view, tip the balance far too far towards risk when letting. So yes, renting is at a crossroads in my view. Change is needed, but too radical a change will take the industry back to pre-shorthold tenancy days, with the inevitable exodus of private landlords, a decimation of the sector which ultimately will work against tenants’ interests. Boosting the supply of homes by relaxing planning restrictions, while at the same time carefully incentivising private landlords through the tax and regulatory regime could provide a sensible answer. Tom Entwistle is Editor of LandlordZONE® and an experienced residential and commercial landlord.

NATIONAL

LISAWARDS 2018

SHORTLIST ANNOUNCED Best Buy-to-Let Mortgage Provider Together Hawke Financial

Best Landlord Legal Services Provider HCE Landlord Action

Best Buy-to-Let Mortgage Broker Baya Financial Vantage Finance Property Master HD Consultants

Best Lettings Agent Elliot Lettings Portico Property 99 Home

Best Property Investment Provider Nova Financial Group Cogress Experience Invest Best Landlord Insurance Provider Alan Boswell Group Just Landlords Hamilton Fraser Bedford Insurance

Best Property Education Provider Platinum Property Partners TDS Caridon Landlord Solutions Cats Protection

Best Online Agency Make Ur Move 99Home HouseSimple

Proptech Company of the Year Sourced Spotahome Ideal Flatmate Val Pal Vesta Property

Best Products for Landlords Aspray Cromwood Social LOFT Vesta Property

Specialist Finance Provider of the Year Cogress Together Kuflink MT Finance Developer of the Year Opto Property Group Inspired Caridon Developments

For ticket sales see website www.national-lis-awards.co.uk/tickets National LIS Awards Thursday 15th November 2018 Grosvenor House Hotel, Park Lane, London W1K 7TN

INVESTMENT

SIMON ZUTSHI

Happy 15 anniversary pin th

LANDLORD INVESTOR 40TH EDITION

INVESTMENT

This November marks the 15th Anniversary of the very first property networking meeting in the UK. We thought we would ask Simon Zutshi, the founder of pin, to share with us why he started the property specialist networking group in the first place, why networking has become so popular and some top tips that you can use to get the most out of your networking.

When I first started investing in 1995, I really did not know what I was doing. I had no money but I had just started a job as a graduate trainee at Cadbury’s in Birmingham, so I was able to get a 95% first time buyer mortgage, and I borrowed the required deposit from my Grandmother. I purchased a house to live in myself, and because I did not want to live on my own, I rented out two of the rooms to friends who were still studying at University. The rent that my friends paid me, covered the cost of the mortgage and most of the bills, which meant that I pretty much lived for free. I believe that this is still probably the best way for young people to get onto the property ladder. It was only a few years later, when I realised just how powerful property investing could be. I was saving most of my salary from Cadbury’s and I had a part time business organising student night club events in Birmingham. I had built up some savings and thought about buying another property. I wanted to move into a slightly bigger house that was also closer to work. Instead of selling my first house, to give me the deposit to buy the next one, I decided to keep it to rent out to students from the University of Birmingham. I used my savings to put down as the deposit for my second house and again my friends moved in with me. Houses are like cash machines This is when I had the epiphany that houses are like cash machines. I realised that after collecting the rent each month from my new student tenants, and paying the mortgage, insurance and all

other costs, that there was some profit left over. Money that I did not have to work for and was not dependent on my time. The light bulb went on and I then speeded up my property acquisition. By the time I got to the year 2000, I had made more money part time, from my property investing, than I did as a senior manager at Cadbury’s. In 2001, I took the decision to leave my full time job and just focus on property and my student nightclub business. This was fine for two years, but I must admit being an investor was a very lonely journey. None of my family were property investors, all of my friends were at work, and although I had been successful, I realised that I had learnt the hard way, by making lots of mistakes because I was investing on my own. I had no support around me. I had attended a 3-day property seminar in 2002, at which I had learnt about a whole load of things which I just did not know were even possible, but after that seminar, I was on my own again. I thought there had to be a smarter way to get some support around me. At the time, I was attending a weekly Birmingham based breakfast networking meeting, at which I had found all the power team contacts I needed for my property business such as a mortgage broker, a solicitor, accountant and letting agent, but none of them were investors themselves and so they did not really understand me and what I was trying to achieve. I went online so see if I could find any property orientated network meetings

but there were none in the UK at that time. Realising just how important it is to get support around me and learn from other successful investors, I decided to start up my very own group in Birmingham and I called it the property investors network, or ‘pin’ for short. At first this was just about meeting other investors, sharing information and contacts, but then people started asking me to share how I had managed to replace my income, such that I had been able to leave my full time job. I started to give a small presentation each month at the pin meeting explained what I had done and this is when I realised how much I loved speaking about property, particularly when I would see people a few months later, and they would thank me for inspiring them to go and buy a property, which they had the confidence to do, based on what I had taught them. I got addicted to the good feeling of helping other people and that is why I started to run seminars to teach other people how to be more successful investors. Improve your investing knowledge One of my favourite sayings is “You don’t know, what you don’t know” The most successful people I know are always very open minded, because they know that they can always learn something from other people, to become even more successful themselves. The great thing about attending a property network meeting, is that you can meet a whole load of other investors from whom you can

LANDLORD INVESTOR 40TH EDITION

INVESTMENT

be inspired and also learn from their mistakes, instead of having to make expensive mistakes yourself. That has got to be a smart thing to do. I have made a fortune by taking action on and applying what I have learnt from other people that I have met at pin meetings. For example, in 2005 I learnt from an investor, about “Motivated Sellers” and that some sellers are so keen to sell their property, that they would sell at 20% or more off the true market value and be really happy about it, as long as the sale completes really quickly. I learnt how to find these motivated sellers and how to come up with an ethical win win solution. I then learnt from a mortgage broker how this type of property could be purchased no money down. In a very short space of time I was able to massively increase the size of my portfolio and the monthly cash flow, as a direct result of learning from other people at my pin meetings. Surround yourself with like minded people I believe one of the biggest benefits to regularly attending your local pin meeting is to surround yourself with like minded positive people, who can support and encourage you. Unfortunately, most of society is rather critical and negative. If you say you want to replace your income from property they will call you a dreamer or tell you not to be so risky, but at a pin meeting they will encourage you and help you find a way to achieve your goal. Build your power team To be a successful investor you need to build a team of professionals around you. Your core team should include: a mortgage broker, solicitor, property tax accountant, as a minimum, but also could include letting agents, estate agents, builders, architects, surveyors and a planning consultant.

Landlord Investor recommends LANDLORD INVESTOR 40TH EDITION

The most successful people I know are always very open minded, because they know that they can always learn something from other people.

you might meet and how you could help each other. And finally after the meeting, you need to follow up with people who you met at the meeting. Send them a text, email or give them a call. Have a longer chat to see how you could help them. Maybe even meet up for a coffee if you think there is potential mutual benefit. You can achieve far more by working with other people than you will on your own. One word of caution here, is that you always need to get to know people and do your own due diligence before you work with them or enter into any joint venture agreement. Celebrate your success

Finding good people to work with can be a case of trial and error but it does not have to be that way. Ask around at your local pin meeting and you should be able to get personal recommendations for reliable professionals to help support you. How to get the most out of a network meeting Before you go to your local property networking meeting, make sure you get some business cards printed with your contact details and a photo so that people will remember you. Set your intention about what you want to achieve from attending the meeting. Plan to arrive early and leave late to make the most of the opportunity to meet as many new people as possible. This is important as often people will just talk to the people they already know at the meeting, but I would encourage you to push your comfort zone and speak to as many new people as you can. You never know who

Investing in property does take some time and effort. Sometimes things do go wrong in property, and you have to deal with problems and issues. It can be difficult and stressful such that sometimes you may wonder why you are investing in property. That’s why it is important to celebrate your wins, and try to enjoy the journey as much as possible. At the end of the year in November, we always host a big party in Birmingham. It’s a formal black tie dinner, with up to 800 Investors from all over the UK and it a bit of a who’s who in property. A chance to connect with many of the speakers and experts who speak at the local pin meetings, and we always see a table of representatives from YPN magazine who enjoy a good party. This year the formal meal is on Saturday 24th November and we are celebrating 15 years of pin. At the time of writing this article there were just a few tickets left. If you want to come and join the party you can book your tickets here: www.pinannualdinner.co.uk Invest with knowledge, invest with skill. Best wishes, Simon Zutshi Founder property investors network Author Property Magic

There are no pin meetings in December because everyone is too busy doing festive things, so this month is your last chance to get a boost of property positivity from your local pin meeting, before the New Year. There are over 50 pin meetings all over the UK so there is bound to be one close to where you live or work. You can reserve your seat at your local meeting in November now at www.pinmeeting.co.uk

INVESTMENT

PAUL MAHONEY NOVA FINANCIAL GROUP

Property price vs. desirability

LANDLORD INVESTOR 40TH EDITION

INVESTMENT

Seeking value is important when it comes to making any investment but especially with property. Some property can be over priced and others under-priced and I know which side of that equation I’d prefer to be on.

Determining the price of a property isn’t an exact science as even experienced surveyors generally determine property valuations based upon comparable sales in the area and a bit of good old fashioned guess work. Websites such as Zoopla and Rightmove provide quick and easy valuation services however they often prove to be inaccurate especially if there haven’t been many comparable sales to your property in that area. When determining price, it is important to compare apples with apples. By that I mean, a brand-new property with all the latest bells and whistles as well as the top of the range fixtures and fittings isn’t comparable to a 100-yearold property on the other side of town. Searching lowest to highest on Zoopla is a terrible idea as you’ll first be presented with the cheapest and nastiest properties in an area. Balancing price with desirability is very important. The above-mentioned cheap properties are generally cheap for a reason which is usually due to a lack of demand driven by a lack of desirability. This is the opposite of what you want when investing in property as an undesirable property won’t rent or sell well. If you’re an experienced builder or fancy yourself as a “homes under the hammer contestant” then of course you could change that with a major renovation LANDLORD INVESTOR 40TH EDITION

but for most “mum and dad investors” the focus should be on passive income not the business of property development. Renovating properties to add value might be made to look easy by the likes of Sarah Beany however it is a profession and should not be taken lightly or assumed to be the easy road to riches. Many an investor has been burnt by dodgy Dave builders, perceived fixer uppers properties that cost way more to fix than they are worth and estate agents that over promise and under deliver so buyer beware.

If you have the most desirable property in the most desirable location, it will rent and sell very easily but that property will often be expensive.

Balancing desirability with price is important. If you have the most desirable property in the most desirable location, it will rent and sell very easily but that property will often be expensive. We like to target areas with strong rental yields, affordable property prices in comparison with average incomes, strong employment and employment growth as well as infrastructure in place as well as infrastructure spending underway. Essentially all the ingredients that equate to a market moving in the right direction. For more info on property investment fundamentals, strategy and asset selection or if you think we might be able to assist, contact Nova Financial Group on 0203 8000 600, www.nova. financial, info@nova.financial.

TAXATION

TONY GIMPLE LESS TAX 4 LANDLORDS

Iâ&#x20AC;&#x2122;m a landlord, get me out of here!

LANDLORD INVESTOR 40TH EDITION

TAXATION

The last few years have seen a dramatic shift in how private landlords are both perceived and treated. Apart from being demonised as being the main reason behind house price inflation and denying first-time buyers access to affordable housing, the private rental sector (PRS) is the only type of business to be effectively taxed on turnover and not profits.

examples wherein the politicians of the day either completely miscalculated the changing demography, failed to make proper provision for the future (what part of national ‘insurance’ didn’t they understand), or simply chose to ignore the ‘realpolitik’ just to secure another term. Mind you, like everyone else MPs have bills to pay, and they wouldn’t be the first ‘public servants’ to put their own needs before those they are meant to serve.

But then again, taxation 101 is all about collecting the most revenue for the least effort from something that one way or another pretty much everyone has to have, which in this case is a roof over their head. What’s even harder to believe, is that this brutal assault was instigated by a Tory chancellor who, like most politicians these days (and not just the far-Left who really do believe that property is theft), seem to put short-term poll ratings and populist electoral success before thought through policies that actually work.

In fact, when you take a closer look at the unintended consequences of S24, rather than freeing up housing stock or taking the heat out the economy, the administration of the day will have to find the money from the ever dwindling

Just look at what’s happened to the NHS, state pensions, and funding the care crisis to name but a few of the more obvious

public purse to house tens of thousands of families now made homeless, simply because their private landlord was taxed out of existence, and that’s without the other ticking timebombs of how will tenants get their deposits back, or lenders their money when for many landlords tax bills overtake profits in 2020/21. Even before the blunt instrument of taxation was so ruthlessly applied by George Osborne, by mid-2010 the PRS had already overtaken the public sector/ local authorities as being the main provider of rented (social) housing, and nothing we’ve seen is likely to change that any time soon; save Comrade Corbyn getting the keys to No.10, after which we all might as well give up the ghost.

Stock of dwellings in England, 2000 to 2016*

Source: DCLG Live Table 104

16,000 14,000 12,000

000s

10,000 8,000 6,000 4,000 2,000

Owner Occupied

Social Rented

2016

2015

2014

2013

2011

2012

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Private Rented

Sadly, it doesn’t stop there. According to the excellent report produced by the Centre for Economics and Business Research (CEBR) on behalf of Shawbrook Bank**, the tougher Prudential Regulation Authority (PRA) lending criteria mean that the changes in tax rules and underwriting criteria have impacted the BTL market via their effects on transaction costs, landlord demand and access to finance. Meaning that the CEBR’s scenario analysis approach estimates that by 2023 up to 360,000 fewer BTL mortgages will be approved due to the changes. That said, and despite the so called ‘Tenant Tax’ being trumpeted in just about every way possible various surveys, research by the University of York and the Centre for Housing Policy, and our own experience show a significant number of private landlords simply don’t understand what the changes mean in real terms. No wonder the powers that be call us ‘accidental’!

*www.nationwidefoundation.org.uk/wp-content/uploads/2018/09/Private-Rented-Sector-report.pdf **www.shawbrook.co.uk/media/1916/sb_buy_to_let_report_2018.pdf

LANDLORD INVESTOR 40TH EDITION

TAXATION

Landlord awareness and understanding of tax changes

Stamp Duty Land Tax (%)

Deductibility of mortgage interest (%)

Wear and tear allowance (%)

Differential taxation of capital gains on residential property (%)

Aware of it and fully understand the details

Aware and have a fairly good understanding of the details

Aware but do not understand the details

Not aware of this at all

Whatever you do though, don’t let the tax tail wag the planning dog!

Source: Scanlon, K. and Whitehead, C. (2016) The Profile of UK Private Landlords, London: CML, Table 13

Further Challenges

So, what are your options?

Other challenges affecting the ‘accidental’ landlord are licensing, Brexit, the general political uncertainty both here and abroad, rent controls, working with local authorities, building to rent, whether to go for capital growth or income, or following the money bubble to the northern half of the country.

Option 1 - Sell up. Take the CGT hit and mortgage penalties (if any), and either spend the lot or invest the money elsewhere. Being a landlord is not as easy as it seems, and for some the changes are simply a bridge too far.

As a result some landlords are looking at becoming an ex-pat either in the flesh (it’s not as easy as you think), or virtually via some exotic ‘Panama Papers’ type arrangement whereby they run the very real risk of changing from an ‘interesting person’ to the distinctly uncomfortable position of being a ‘person of interest’, and that’s without the perennial problem of not getting joined up properly indemnified advice. Many landlords are also looking at incorporating their property businesses as the answer to their business, tax, mortgage, and inheritance ills. This is not something we’d recommend, but more on that later. When taking it all into account, and despite the hyperbole; our experience is that those private rental sector portfolio landlords who are seeking to legitimately maximise the commercial benefits of building, running, and growing a professional property business are better placed than ever before to survive and prosper.

Option 2 - Make a positive decision to do nothing. Investigate the options as best you can and decide to stay as you are even though that may raise how much tax you pay, lower your disposable income, and leave your eventual heirs a wholly unnecessary IHT bill. Option 3 – Incorporate into a standalone limited company. Transfer your personally held investment properties to a limited company which you own. Much trumpeted elsewhere as the obvious choice, but in almost every case that’s usually an expensive and bad idea with no cost-effective way back, along with the fact that limited companies are subject to almost every tax known to man. Moreover, if you have carried-forward losses, they’ll disappear completely the minute you make the switch. Option 4 – Maximise the commercial benefits of building, growing, and running a recognised professional property business. Hybrid (Mixed Partnership) arrangements are generally the only way by which you can successfully counter the punitive tax changes, legitimately reduce your property income tax to basic rate without negatively affecting what you

can spend, keep your losses, and create a trading business capable of being passed on intact as a going concern, whilst at the same time helping to stop the wealth you create from falling into the wrong hands. FYI, despite what one may read in the various landlord forums, Mixed Partnerships have NOT been outlawed, and HMRC continue to publish how to set them up on the gov.uk website. All of that said, and as with everything else in life, there’s no one right answer. If you own up to three rental properties, are a basic rate taxpayer, and either intend to dispose of them in the short to medium term, or not to grow any bigger, then it is probably better to stay as you are. If, however, you’re already a portfolio landlord (four or more rental properties), are a higher rate taxpayer, or by 2020/21 the changes will make you one, then the Hybrid route is almost certainly the right way to go. The same applies if you’re serious about expanding your property business and have the means with which to do it. Whatever you do though, don’t let the tax tail wag the planning dog! You can complete our free assessment at lt4l.uk/s24. If you’d like to speak to us, please email info@lesstaxforlandlords.co.uk or call 0203 735 2940.

LANDLORD INVESTOR 40TH EDITION

INDUSTRY MARKET UPDATE UPDATE

PETER LITTLEWOOD iHowz

Market update Did you remember October 1st? There were two main things that happened October 1st. Firstly the rules regarding the mandatory licensing of HMO’s changed, as did the rules regarding the use of a Section 21. Mandatory licensing I would be very surprised if you haven’t heard about this. The rules regarding an HMO are still the same – it is a unit (house; flat, etc.); occupied by three of more people; forming more than one family (i.e. not related); sharing vital facilities (i.e. kitchen; bathroom; toilet). Typically HMO’s are regarded as sharers on individual agreements, e.g. students, but they could all be on one agreement. There are a few exceptions to this definition, the main one being a resident landlord. This is where a family takes in lodgers; the family can take in two lodgers and still not be an HMO, regardless of the number in the family. As soon as they take in a third the property becomes an HMO, and then the total number of occupier’s counts to the total size of the HMO. The other exemptions are: • a local housing authority, • a non-profit registered provider of social housing, • a body which is registered as a social landlord under Part 1 of the Housing Act 1996, • a police and crime commissioner, • the Mayor's Office for Policing and Crime, • a fire and rescue authority, or

• a health service body within the meaning of section 9 of the National Health Service Act 2006 as can be seen, for our purposes the standard definition is the one that counts. It was decided from the outset that the larger HMO’s would have to be licensed, and subject to extra conditions, in theory to reflect the increased risk because of their size. Initially this was set at any HMO of 5 or more occupants; on 3 or more floors. Since October 1st the floors criteria has been dropped, so any HMO having 5 or more occupants now needs a license. The two other changes that have come in with mandatory license is that the occupants must adhere to the local waste disposal policy; and that sleeping accommodation must now have a minimum size: • for children 10 years or older: 6.51 m2 for one person (70 sq ft in old money); 10.22 m2 for two persons (110 sq ft); • for children under 10 years: 4.64 m2 for one person (50 sq ft). Whether you agree with licensing or not, it is critical you apply if you need one, as it is a criminal offence not to apply. We have found that there some Local

Authorities who are very behind on bringing in these rules, and there appear to be some who don’t even know – a situation I find incredible. The things that landlords have to be aware of is where the tenant allows someone else to occupy, almost certainly creating an HMO from a straight let; and even possibly an HMO requiring a mandatory license. The difficulty is that all the occupants must reside there, i.e. it must be there only, or principal residence. At what stage is someone visiting, as against now living there? I always use the (very) rough rule of thumb, if someone were to have a bank statement posted to them on a regular basis which address would they use? Note that a student’s term time accommodation is regarded as the student’s only or principal place of residence while he/she is living there. So it’s not completely straight forward.

Section 21 A section 21 (S21) is something that was introduced in the 1988 Housing Act (in Section 21 of the Act, hence the name) and is the notice a landlord can give to a tenant to regain possession of a property at the end of an Assured Shorthold Tenancy (AST) – with no

LANDLORD INVESTOR 40TH EDITION

MARKET UPDATE

reason. Note that this applies to an AST only, other types of agreements will use other notices. However the vast majority of residential lets are AST’s. The Deregulation Act (2015) brought in a new version of the Section 21, and allowed both old and new S21 to be used on a pre Oct 2015 AST. However since October 1st only the new one can be used. The main differences are that: • the new one is a prescribed form, and format – confusingly called form 6a. •

Being prescribed format it is critical it is filled in according to the notes on the form – e.g. Block Capitals where it says; date format strictly DD/MM/YYY where it requests. If this format is not used it could be thrown out at court.

• The parts that are the same as the old S21 are: It’s a 2 month notice, expiring outside the Fixed Term; The deposit (if taken) must be properly protected; The property must have a valid license, if required. • The new one has the following additional criteria: It cannot be served in the first 4 months of an AST; The following must be issued prior to serving the S21 (form 6a): The Governments ‘How to Rent’ booklet – make sure it’s the latest version; An Energy Performance Certificate (EPC), if one is required;

A valid Gas Safety Inspection report (CP12). Note that due to an anomaly in the law you must have served it on the tenants before they moved in.

As can be seen, the Government appear to be using the S21 as a mechanism of policing the documents that should have been served. I wouldn’t be surprised if the S21 doesn’t get amended as other documents are added – but that is a personal feeling. Always make sure you are using the correct forms/documents. Rather than store the S21 and the ‘How to Rent’ booklet on your computer, go to the web each time to ensure you get the latest version.

Mandatory three year tenancies The ministry (MHCLG) conducted a consultation earlier this year to establish whether there was an appetite in the

LANDLORD INVESTOR 40TH EDITION

industry for a mandatory (minimum) 3 year tenancy; with a break clause at 6 months. It was rumoured in the Sun a few weeks ago that the Treasury and Number 10 had killed it off because they felt any legislation might be difficult to get through and could frighten off the larger investors. This was raised a PMQ’s (Prime Minister Questions) recently, and the Prime Minister gave a typical politician ‘nonanswer’ answer. Additionally a recent MHCLG newsletter said that they were analysing the results. So who knows?

Labour 23-26 September in Liverpool 1) Renter’s Unions The Labour government would back new unions for renters and fund them in every part of the country 2) Levy on holiday homes Holiday home owners would face a new £560 million tax to tackle homelessness and address rising wealth inequality under the plans. 3) Homes at one third of local incomes Labour has pledged to build one million “truly affordable” council and housing association homes.

Possible tax breaks for landlords who sell to their (long term) tenants.

The Conservative Party - 1-3 October in Birmingham

According to a paper released by the right wing think tank, Onward, private landlords who sell buy-to-let properties to sitting tenants who have lived in their home for three years or more would not have to pay capital gains tax on the sale, which is currently charged at 28 per cent on second homes for upper rate taxpayers.

1) Foreign Nationals. The Government wants to make it harder for foreign nationals to buy homes in Britain. Mrs May announced plans for a stamp duty surcharge of between 1 per cent and 3 per cent to be imposed on sales of property to foreign nationals who do not pay UK tax. The measure is designed to ease pressure on the housing market and make homes more affordable for Britons.

The tax relief would then be split equally between landlord and tenant, giving renters thousands of pounds towards a deposit and landlords a substantial tax saving.

The party political conference’s come to an end. The highlights of the conferences were: Liberal Democrats - 15-18 September in Brighton 1) Build targets & land use The conference called for the Government to deliver its commitment to building 300,000 homes a year by, firstly, ensuring the workforce in the construction industry is sufficient to build them, and by encouraging new building techniques to build quality new homes in shorter timescales. 2) Social housing promise In terms of social housing, the party would see a big expansion in 'Rent to Own' 3) Taxes To deter investors from stockpiling property, the party wants a 500% increase in council tax, levied where homes are deliberately bought as investment opportunities and left empty for long periods - with a stamp duty surcharge on overseas residents purchasing such properties.

2) All private landlords will be required to join an official redress organisation. It will now be mandatory for all private landlords to be part of an ombudsman scheme. Whilst it is already a legal requirement for letting agents to be part of a redress organisation, currently landlords are not bound by the same legislation. 3) All letting agents will now be regulated. Currently there is no regulation in place for lettings professionals. The government is proposing legislation that would require all letting agents to register with an appropriate organisation. This would mean that agents will be required to satisfy minimum training requirements, and follow an industry wide code of conduct to be able to operate in the UK. 4) The potential introduction of a dedicated housing court. The government will explore the possibility of introducing a new dedicated housing court that would streamline the current legislative process for both landlords and tenants. Currently landlords and tenants can wait months for a court date, and experience long delays throughout the legal process. However, the government has stipulated that this change will only come about if it is financially beneficial for all parties, and if it will speed up the current process they have in place.

POLITICS AND PROPERTY

TRACEY HANBURY

Party conference review what next for the property market? 24

LANDLORD INVESTOR 40TH EDITION

POLITICS AND PROPERTY

With the party conference season taking place recently, we review what housing and rental sector policies were put forward at the Conservative and Labour Party conferences and what they could mean for landlords.

Every year, around this time, the two major UK political parties hold their annual party conferences – a chance to formulate policy, fire up the grassroots and set out grand visions. In recent years, with its importance to the electorate growing, housing has very often taken centre stage. And, despite much of the focus inevitably being on Brexit, housing got a good hearing at both the Conservative event held in Birmingham and the Labour meeting in Liverpool. But what were some of the policies announced? Borrowing cap lifted on social housing While her speech might be best remembered for her jiving along to Abba’s Dancing Queen as she entered the stage, Theresa May did make a rather big announcement on housing – namely that the strict cap on local councils borrowing to fund new developments has been lifted in an effort to solve the housing crisis. “Solving the housing crisis is the biggest domestic policy challenge of our generation,” the Prime Minister said to the audience. “It doesn’t make sense to stop councils from playing their part in solving it.” “So, we are scrapping that cap,” she added. “We will help you get on the housing ladder – and we will build the homes this country needs.” The Local Government Association (LGA) welcomed the move, hailing it as ‘fantastic’ and pointing out the vital role that local councils can play when it comes to housebuilding. The government currently has a target of building 250,000 new homes a year – and this is set to rise to 300,000 by the mid-2020s – which will require the largest housebuilding drive since the 1970s. In that decade, local councils were responsible for building 40% of all

LANDLORD INVESTOR 40TH EDITION

new homes. According to government statistics, last year this had fallen to less than 2%. Sources close to the government said the cap would be scrapped completely, which could lead to an additional £1 billion in borrowing and councils building tens of thousands of new homes. However, it’s not been confirmed when the change will actually take place. Overseas investors set to face more stamp duty The Conservative Party conference kicked off with controversial plans unveiled by Theresa May to charge overseas buyers a higher rate of stamp duty tax. The additional money raised will go towards supporting the government’s rough sleeping strategy, the Prime Minister revealed. The exact rise is as yet unclear and will be decided after a consultation, but could be up to 3%. It would be on top of the existing 3% surcharge for those buying second or buy-to-let homes. May said it’s not right that it’s as easy for foreign investors to buy a home as it is for British nationals, but there are concerns that the prime end of the property market – particularly in London – could be hit by the proposals. In the capital approximately a third of homes are sold to foreign nationals, and this rises to nearly half in prime central London. Some might argue that the extra restrictions on overseas buyers will make it easier for domestic landlords to expand their portfolios, with less competition, especially at the higher end of the market. However, critics say that it paints Britain as being unfriendly to foreign investment, and won’t have any impact on the housing crisis – which will only be solved by building more affordable homes. Labour zones in on rental market At the Labour conference in Liverpool, held in the last week of September, the

focus was predominantly on the private rented sector. John Healey, the party’s shadow housing minister, outlined plans to scrap Section 21 evictions, introduce three-year tenancies and launch renters’ unions to give tenants more power. In his speech on Labour’s housing policy, Healey also unveiled the party’s ‘radical’ plans to fix the housing crisis, including a levy on holiday homes (at an average of more than £3,200 in England) to reduce wealth inequality and narrow the gap between the ‘haves’ and ‘have-nots’. The party also pledged to build one million council and housing association homes that are ‘truly affordable’. Budget to reveal more The bones of the government’s housing policies are expected to be fleshed out at the Budget, which has been brought forward by Chancellor Philip Hammond to October 29th as a result of Brexit negotiations. A number of recent Budgets have sprung a major property surprise – the abolition of stamp duty for nearly all first-time buyers last year, the ban on letting agent fees and the extra 3% levy on second homes before that – but with Brexit taking precedence the government might be taking a more cautious approach this time.

Solving the housing crisis is the biggest domestic policy challenge of our generation.

INSURANCE

STEVE COX ALAN BOSWELL GROUP

Landlord's Insurance: top 10 things to look out for 26

LANDLORD INVESTOR 40TH EDITION

INSURANCE

Comparing insurance quotes can be hard work. You could put the policy documents next to each other and try to spot the differences – but what do you do if you have 20 or 30 to compare? How do you work out which one is right for you? Steve Cox, Business Account Manager at Alan Boswell Group, provides his advice to help you find the right landlord insurance for your buy-to-let property.

1) Check for additional fees Some companies hook you with a cheap premium but charge hefty admin fees if you want to make changes down the line. While checking the small print, it’s worth looking at the payment options and charges, because a cheap premium can get expensive if you’re paying monthly. 2) Review the implications if a tenant sublets the property Insurers can be wary of sublets, but normally accept them if there is an Assured Shorthold Tenancy (AST) in place, as it means the landlord has carried out the relevant checks and knows exactly who is in the property. If the tenant sublets the property, the landlord has lost control over who is housed in the property and any potential claim could be declined. It’s important to carry out the regular checks on the property so you know who is in the property and it’s being kept in good order. If you are aware that they are subletting, make sure that you tell your insurer/broker so they can tell you if you need a different type of insurance. 3) Home insurance is not the same as landlord insurance Many landlords don’t realise they need specific insurance for their buy-to-let properties. However, home insurance is designed for owner-occupier properties, not tenanted properties. Although some home insurance products may stretch to renting out the property, they are not designed specifically for it. Make sure you seek out adequate landlord insurance and don’t leave things to chance. 4) Make sure loss-of-rent is included If your property suffers a claim, most landlord products should include cover to provide an income while the property is uninhabitable. If your insurance policy does not include this, you could end up out of pocket as the result of a claim.

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You might also want cover for the cost of alternative accommodation for tenants (if the property is temporarily uninhabitable).

conditions of your policy, aim for a UKbased company that runs its own call centres and has control over the quality of its service.

5) Ensure that malicious damage and manufacture of drugs are both covered

8) Review the rules for Serviced Accommodation

Malicious damage by a tenant is surprisingly common. When comparing policy details, look for malicious damage cover. It may be included, but it can also be an add-on, depending on the insurer. Make sure you’re clear about whether this is included before you buy a policy.

Landlord Insurance doesn’t automatically cover this sort of tenancy. This is due to a stipulation within these policies that there must be an Assured Shorthold Tenancy (AST) agreement in place, but even that doesn’t provide cover when properties or rooms are let on a per-night basis. Sometimes, Holiday Let Insurance or Serviced Accommodation Insurance might be more appropriate for you, so it’s worth reading up on the differences.

Manufacture of drugs covers you in the event that a tenant damages your property through drug production. Cannabis farms, for example, can lead to the destruction of property. Failure to insure against this could destroy your investment. 6) Check excesses to avoid surprises Some claims occur more often than others and may have higher excesses applied as a result. Escape of water is the most common property claim and will often have a higher excess to cover these costs. There is generally a standard policy excess that applies, with specific excesses highlighted in your quotation documentation. Make sure you read them and be happy with what you’re signing. 7) Read the important conditions of the policy All insurance products have terms and conditions attached and it is essential that these are adhered to. An example is the condition that a tenancy agreement is place. While this may seem obvious, if you’re letting to friends or family you may not put one in place. However, the failure to do so could invalidate your insurance. The claims process is where you see the true value of your policy. Alongside making sure you understand the

9) Review unoccupancy rules We would all love our trouble-free tenants to stay forever, but when the average length of a tenancy is under a year, the chances are you will have untenanted periods. Depending on your insurer, your cover while your property is unoccupied could be limited to 90 days, or might become immediately restricted by including or excluding certain things, such as theft or accidental damage. Some insurers won’t change your cover, but will increase your premiums. 10) Look at independent research The internet is a fantastic way of researching companies and products. Check out whether the company you’re about to place your trust in has the trust of its customers and has a satisfactory claims experience. For instance, we’re proud of our outstanding, independent customer reviews, which you can read on independent review site Feefo. If you’d like more information and advice about Alan Boswell Group Landlord Insurance visit www.alanboswell.com or give us a call on 01603 216399.

REGULATION UPDATE

TRACEY HANBURY

Explained recent changes to Section 21

LANDLORD INVESTOR 40TH EDITION

REGULATION UPDATE

With more new regulatory changes for landlords to consider, we take a closer look at the most recent update to the Deregulation Act and what that means for Section 21 evictions.

At the beginning of October, further revisions to the Section 21 eviction process were introduced as part of the Deregulation Act. Back in 2015, a host of new rules were brought in, ensuring that landlords provide a range of documents and adhere to council notices if they want to issue a Section 21 notice at a later point during a tenancy. At first, these changes were solely applicable to new tenancies granted after October 1 2015. However, the recent updates mean you'll now need to follow new procedures to issue a Section 21 notice on a periodic or Assured Shorthold Tenancy (AST) pre-dating October 2015. Section 21 evictions - which allow landlords to regain possession of their property from a tenant for no particular reason - are extremely important.

The other high-profile change in 2015 was the introduction of a new set of documents which landlords must provide to renters at the start of a tenancy in order for any Section 21 notice they issue to be valid. These documents include up-to-date versions of the government's Renting in England document, deposit protection information, the property's Energy Performance Certificate, a copy of the property's licence and its Gas Safety Certificate. It is at the moment not completely clear whether landlords will be required to provide this documentation for tenancies pre-dating October 2015 in order for Section 21 notices to be valid - something which has caused a lot of concern among landlord bodies and rental experts.

According to research by the Joseph Rowntree Foundation, approximately 80% of evictions are thought to be made via Section 21.

The advice from most quarters, however, is that there is no harm in issuing all tenants with all the required documents to ensure you are totally covered in the event you do want to issue a Section 21 notice.

With this in mind, it's crucial that as a landlord you're aware of the latest changes to the process so that in the event you do need to issue a Section 21 notice, you are compliant with the law.

"Itâ&#x20AC;&#x2122;s very unlikely that a judge would throw out a case on the basis that a [landlord] has provided the tenant with too much information," said David Cox, chief executive of ARLA Propertymark.

What's changed and what do you need to do?

"A test case before the courts is probably required to determine exactly what needs to be served for these tenancies. Therefore, we think that the safest course of action is to serve all the documentation."

One of the key changes in 2015 was the introduction of a Form 6A. This form now has to be filled in for landlords to issue a Section 21 notice, replacing the previous method of simply writing to tenants. This is one of the changes that has now become effective for all tenancies and not just those granted after October 2015. There are other rules which must now be followed for all tenancies if you want to issue a valid Section 21 notice. You are not permitted to issue a Section 21 notice in the first four months of an original AST and any Section 21 notice you do issue will only be valid for six months from the date it is served.

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What's the future of Section 21 evictions? For some years now, a number of politicians and lobbying organisations such as Generation Rent and Shelter have been campaigning for Section 21 evictions to be scrapped. This is because they say the system encourages 'retaliatory evictions' and does not provide renters with security and stability of tenure.

Most recently, at the Labour Party conference in September, shadow housing minister John Healey pledged to abolish the Section 21 system should his party come to power. "Labour's commitment is clear: we'll give renters new rights to control rental costs, improve conditions and increase security," he said. And now Croydon Council appears to have backed the campaign to scrap Section 21 of the Housing Act 1988. One of the authority's cabinet members, Alison Butler, said that evictions in the private rental sector are 'the biggest cause of homelessness' in the London borough and that it is 'unacceptable that private landlords are able to evict vulnerable tenants so easily'. As we can see, the future for Section 21 is not certain as there are many groups opposed to its existence. For now, however, landlords must focus on remaining compliant with the existing system so that they can issue valid eviction notices in the event they need to regain possession of their property.

According to research by the Joseph Rowntree Foundation, approximately 80% of evictions are thought to be made via Section 21.

REGULATION UPDATE

TRACEY HANBURY

Industry change what new regulations do you need to look out for?

LANDLORD INVESTOR 40TH EDITION

REGULATION UPDATE

With a number of new pieces of rental sector legislation coming into play, and more to come in the near future, we outline what landlords need to do to ensure they are compliant.

In recent years, there has been an increasing amount of regulation and legislation affecting the private rented sector as the government has sought to root out rogue operators and help those trying to get on to the housing ladder. The two most major pieces of legislation of recent times were introduced in April 2016 – when an additional 3% stamp duty surcharge was levied on second and buy-to-let homes – and a year later in April 2017, when the phasing out of mortgage interest tax relief began in earnest. Landlords have also had to contend with new minimum energy efficient standards (MEES), the controversial Right to Rent policy and the new Prudential Regulation Authority (PRA) guidelines for portfolio landlords. Just recently, two new pieces of crucial legislation – both coming into effect on October 1 2018 - have been implemented which you will need be aware of. Changes to Section 21 A few years ago the Deregulation Act 2015 made significant changes to Section 21 to prevent ‘retaliatory evictions’, with all new tenancies starting on or after October 1 2015 subject to the guidelines on how and when a landlord can serve a Section 21 notice. Now, though, all Assured Shorthold Tenancies (ASTs) must adhere to the guidelines, no matter when the tenancy began. You can see a more detailed breakdown of the new guidelines in the preceding article. New rules on HMOs October 1 2018 also saw new rules surrounding houses in multiple occupation (HMOs) coming into force, with mandatory licensing now applying to all HMOs where there are five or more people, forming two or more separate households.

LANDLORD INVESTOR 40TH EDITION

Before, licensing only applied to buildings containing three or more storeys, but now purpose-built flats where there are up to two flats in the block also come under the scope of compulsory licensing.

currently at the report stage in the House of Commons, while Lord Bird’s Creditworthiness Assessment Bill is steadily making its way through the same house.

There are also minimum space requirements that you must adhere to when letting out a room. For example, landlords are unable to rent a room to a single adult where the usable floor space is less than 6.51 square metres. For a room occupied by two adults, it can’t be less than 10.22 square metres.

Client Money Protection (CMP) will also be mandatory for letting agents from April 1 2019, with membership of an approved or designated CMP scheme compulsory.

An additional 177,000 homes in England are now expected to be subject to mandatory licensing as a result of the changes, on top of the 60,000 homes that already were. Landlords operating without a HMO licence, or those who fail to adhere to the conditions of the licence, face hefty fines and penalties, including financial sanctions of up to £30,000, banning orders and rent repayment orders. What else is on the horizon?

The government has also proposed plans for compulsory three-year tenancies, but this has been met with furious opposition from many and there have been noises that the idea could be scrapped to prevent an exodus of landlords from the market. The government’s controversial Right to Rent policy is also set to be challenged in the High Court in December, with charity the Joint Council for the Welfare of Immigrants set to challenge the law – which was introduced in England in February 2016 under the Immigration Act 2014 – being launched in the other constituent parts of the UK.

There’s plenty more to come in the next few years, with the proposed ban on upfront letting agent fees to set to be introduced at some point next year (spring 2019 at the earliest). This could mean higher management fees for landlords as agents try to offset a loss in revenue. From April 2019, the next stage of the phasing out of mortgage interest tax relief will hit, with the amount of mortgage tax relief you can claim falling to 25%. From April 2020, this will be reduced to 0%. There are a couple of Bills making their way through parliament that you may want to keep an eye on, too, with The Homes (Fitness for Human Habitation) Bill - which is seeking to amend the Landlord and Tenant Act 1985 to ‘require that residential rented accommodation is provided and maintained in a state of fitness for human habitation’ –

An additional 177,000 homes in England are now expected to be subject to mandatory licensing as a result of the changes, on top of the 60,000 homes that already were.

FINANCE

EMMA COX SHAWBROOK BANK

Buy-to-let: past, present and future

LANDLORD INVESTOR 40TH EDITION

FINANCE

Shawbrook recently commissioned a report covering the state of play of the buy-to-let sector with some interesting findings that follow several key interventions in this space.

After seeing strong growth in the years from 2011 to 2015, recent government interventions and a slowdown in the housing market have had a notable effect on the sector. The number of BTL mortgages for house purchases has fallen sharply in the last two years, while record low interest rates continue to support the number of remortgages taken out as landlords shop around for the best possible deal. The independently conducted research looked at three main policy changes in detail: • the introduction of a 3% stamp duty surcharge on second homes in April 2016 • the gradual phasing out of the tax deductibility of mortgage interest payments starting in 2017 • tightening of mortgage underwriting standards following a supervisory statement by the Bank of England’s Prudential Regulation Authority. The findings strongly suggest that the substantial changes in the tax code – as well as the tightening of underwriting standards – have contributed to the decrease in BTL mortgages taken out. That being said, we believe a cooling of the market would have happened regardless as the BTL sector is closely linked to the wider housing market which is facing more tepid price growth and a regional decrease in transaction levels, especially in areas where affordability ratios are stretched such as in London. Nevertheless, transaction levels have been noticeably lower since the introduction of the stamp duty surcharge. The change in mortgage interest tax relief will make BTL investments for a large number of private investors

LANDLORD INVESTOR 40TH EDITION

less profitable, an effect that still has to fully play out as the tax relief is withdrawn gradually over the next years. Further evidence from a landlord survey commissioned by UK Finance shows that more than half of the landlords who stated they planned to sell-up their rental homes within the next five years mentioned the changes in stamp duty, mortgage tax relief and wear and tear allowance as a reason for doing so. Given a generally weaker housing market and the numerous government interventions the data indicate that transaction levels will fall to around 57,500 by 2023. While the effect on overall house prices should be rather small, we would expect yields to be higher compared to a scenario where the tax changes were not implemented, given that the lack of housing supply, exacerbated in part by BTL landlords, should drive up rents. The good news is that the so called ‘professionalisation’ of the sector and more sustainable lending practices are likely to have positive effects in the long run – a trend that should benefit brokers operating in the specialist space. Given that the PRS will play an increasingly important role in the UK’s tenure mix, there is still a market for BTL landlords with a sustainable business plan and a good understanding of the legal and tax implications. Looking ahead, we expect the professionalisation of the sector to continue and BTL investors should carefully consider the latest changes in taxation when evaluating their next steps, drawing upon the advice of specialists where appropriate.

capital means that other places in the country offer better yields to investors, especially cities with large student populations. Brexit adds a further layer of uncertainty but importantly, this space remains a resilient one with opportunity for savvy investors who deploy a long-term strategy, and who draw upon the advice of mortgage brokers and other professionals across areas such as tax. With everyone on the same page in terms of cementing sustainability and supporting the market with education and awareness of regulatory and governmentled change, the future – although challenging – still appears bright. Emma Cox Sales Director Shawbrook Commercial Mortgages

The findings strongly suggest that the substantial changes in the tax code have contributed to the decrease in BTL mortgages taken out.

Additionally, the regional focus of the sector is shifting. With its larger demand for PRS housing, London has long dominated the BTL sector. But a flat housing market and limited capacity for rental growth in the

FINANCE

GARETH LEWIS MT FINANCE

Navigating an ever-changing BTL landscape

LANDLORD INVESTOR 40TH EDITION

FINANCE

The landscape for landlords has changed dramatically over the years, with many affected by the uncertainty from ongoing Brexit negotiations, combined with the barrage of tax and legislation changes from both the Government and the Bank of England.

Despite the crackdown, the buy-to-let market continues to be an effective place to invest – with many remaining drawn to the high yields and potential capital growth that buy-to-let can offer.

How could bridging finance help you navigate the changing buy-to-let landscape?

However, it’s no secret that the new legislation has introduced some stringent guidelines for lenders around affordability and stress testing, making the application process much more complex - meaning property investors may find it more difficult to access finance on the high street.

Should you be affected by the rules from the Prudential Regulation Authority, which demand a tougher lending stance on landlords with four or more mortgaged buy-to-let properties, you should be able to find a suitable bridging loan.

According to the results from mtf's latest Property Investor Survey, a majority (57%) of property investors have struggled to secure buy-to-let mortgages in the past 12 months, with 62% of respondents citing affordability criteria as the primary barrier to mainstream funding. However, 43% of those surveyed were able to fill the funding gap with other sources of liquidity, as 40% opted for secured loans and 30% raised bridging finance as an alternative. UK residential real estate is in short supply and with continued strong demand for rental properties, landlord’s ability to access funding is vital to ensure there is enough quality rental accommodation available to meet growing demand. The need for reliable, transparent, and quick access to funds is ever-critical and evidently specialist finance such as bridging loans, are stepping up to fill the liquidity gap. Bridging loans enable property investors to access funds quickly, providing an opportunity to expand their portfolio and purchase and convert properties for the rental market and can be used to work with a multitude of issues such as adverse credit, specialist mortgages for the self-employed and those with unusual income structures, loans for uninhabitable investment properties, and loans on HMOs or multi-units.

LANDLORD INVESTOR 40TH EDITION

Portfolio Landlords

Under the guidelines, mainstream lenders must take a landlord’s experience, their full portfolio, rental income, outstanding mortgages and assets and liabilities into account. Borrowers are likely to experience significant delays due to a greater volume of documentation required and an elongated underwriting process. It may also mean that some landlords are turned down for finance because they don't have enough equity in their portfolio. Fortunately, there are bridging lenders, like ourselves, whose loans do not fall under the remit of the PRA changes. Our loans can present a real-time funding solution to property investors facing the growing number of barriers and restrictions, by gifting them the ability to buy quickly when opportunities arise. Limited Company Vehicles Following the changes to property tax, many savvy investors began to adopt new strategies and opted to set up as a limited company vehicle in a bid to better manage portfolio assets. In response, several bridging lenders launched new limited company loan products to cater for this major shift in the market. At mtf we have always supported both individual and LTD company investors, so our short-term loan products are designed for all types of company landlords, with ease of use being paramount to our offering, we do not insist on personal guarantees to support these applications.

HMO Licences Mandatory licensing for landlords in England with houses in multiple occupation (HMO) has now come into effect. Under the new licensing requirement, all properties that are let to five or more people and are occupied by people living in two or more separate households are covered by the new rules. At the same time, new minimum size requirements for bedrooms in HMOs will take effect. Rooms used for sleeping by one adult will have to be no smaller than 6.51 sq metres, and those for two adults will have to be no smaller than 10.22 sq metres. For those affected by the room size requirements or want to either convert properties into HMOs or to purchase them, bridging finance is an effective means of raising funds. The main benefits of bridging finance are the speed and flexibility the product offers. A bridging lender can provide a large amount of funding, in a short time-frame- typically a bridging loan on an HMO can usually be secured within 15 working days. At mtf, we allow our clients to acquire finance from day one, before applying for planning permission, allowing for shorter turnaround times which could prove invaluable to those landlords needing to act quickly. The need for reliable, transparent, and quick access to funds is ever-critical and specialist finance, such as bridging loans, should continue to pick up where a more personalised approach to underwriting is required. With highly professional specialist lenders offering flexible products at competitive rates, bridging finance has become an attractive proposition to those property investors who are looking to expand their portfolio and need certainty when conducting their business and who often need to move swiftly to capitalise on an opportunity.

PENSIONS

GARETH BERTRAM THE LANDLORDâ&#x20AC;&#x2122;S PENSION

Invest your ISA in property No more gambling on stocks and shares 36

LANDLORD INVESTOR 40TH EDITION

PENSIONS

For the last 2 years it has been possible to invest your ISA in the property market to generate tax free returns on your savings. Quite unbelievably though, few people know that this opportunity even exists.

Until April 2016 it was only possible to invest your ISA in stocks and shares or a cash ISA. At that time the government introduced a new type of ISA known as an Innovative Finance ISA, which specifically allows people to obtain returns directly from the property market along with some other niche sectors. The introduction of the new ISA came after much lobbying by financial institutions such as Funding Circle, Seedrs and Crowd Cube, to allow a broader range of investment choice for ISA savers. Innovative Finance ISAs get all the same benefits as a traditional ISA such as a maximum contribution of £20,000 each year and full tax relief on the gains you make, but the difference is that you can now get a fixed return from property instead of risking all your money in the stock market. This is great news for property investors looking to get returns on their savings from property. The stock market is too much of a gamble for many people and can crash without warning. It’s also incredibly complex. We find that many people do not really understand where their money is invested, within a stocks and shares ISA. Ask yourself if you could define any of the following investments: - Index Trackers, OEICs, Managed Funds, Unit Trusts, or Investment Trusts? If you can’t, then you might want to think about switching over and investing your ISA in property. Property, in comparison, is a clear and simple investment to understand.

LANDLORD INVESTOR 40TH EDITION

The trouble with stocks and shares is that the entire market relies on ‘confidence’ to maintain, gain or lose value. The value of your ISA can be influenced by factors around the world that you have no control over – it really is a gamble that most people can’t afford to take. The difference is that by investing in property you can secure the value of your ISA against an asset. Property is an asset class that people understand. I’ve often said that, if I came to visit a client and explained about stocks and shares on a Monday and then on Tuesday I came back to discuss property, by the weekend most people would only remember the discussion about property. So why would you leave your money in stocks and shares? Well many people do because traditionally this is all that has been available but now could be the time to change. Moving to an Innovative Finance ISA is easy and many of our clients have done this over the last couple of years. In fact, you can set up a new Innovative Finance ISA and transfer funds out of any existing ISAs in just 2 weeks. The process is incredibly simple, as is finding investments to get a fixed and secure return on your savings.

Here at The Landlord’s Pension we have been helping people to invest in property since 2004, growing wealth and giving people greater control of their money. Our 5-star Google and Facebook ratings are testimony to the success our clients enjoy. Find out more about investing your ISA in property by contacting our team online or by phone. www.thelandlordspension.co.uk 01235426666

The trouble with stocks and shares is that the entire market relies on ‘confidence’ to maintain, gain or lose value.

In the current market a very reasonable fixed rate, tax free, of 7%pa with security over property is quite achievable. What’s more, (is that) you could even lock this up for a term of up to 5 years. An Innovative Finance ISA really is the future for property people.

LEGAL

RUSSELL CONWAY OLIVER FISHER

New HMO rules 2018 The Government gets tough on HMO owners

LANDLORD INVESTOR 40TH EDITION

LEGAL

This Government has for a long time now had a stated intention of getting tougher on Landlords who rent out unsuitable accommodation to large numbers of people.

Until now, HMOs were largely defined as properties of three storeys or more with five or more people making up two or more separate households residing within them. These were largely used by students, migrants and young professionals on low incomes. Because the demand for HMOs has been significant, Landlords have tried to avoid the mandatory Licensing provisions by letting out HMOs to properties with fewer than three storeys. Accordingly, you can have a two storey terraced house with three bedrooms and two reception rooms being turned into five small studio flats.

accommodation without a Licence this could lead to prosecution and a limited fine. Alternatively, the Local Housing Authority may impose a financial penalty up to ÂŁ30,000.00 as an alternative to prosecution. National Minimum Sleeping Room Size A second legislative measure known as a Statutory Instrument brought in new conditions as to a mandatory national minimum sleeping room size and mandatory waste disposal requirements.

HMOs are known to be potentially dangerous accommodation with an increased fire risk and, due to the fact that you are dealing with larger numbers of households, there is an increased amount of rubbish which can lead to infestations and health and safety problems if rubbish disposal is not properly dealt with.

In relation to the room sizes, a list has been provided in Guidance provided by the Government in June 2018 saying that the minimum sleeping room size for a person over ten years of age is 6.51 sq. m, for two persons over 10 years of age 10.22 sq. m and for one child under the age of 10 years 4.64 sq. m. Again, breach of these requirements may result in prosecution.

New Legislation

Waste Disposal

In April this year new legislation was approved (changing the definition of HMO) so that mandatory HMO Licensing is now relevant to HMO properties which are less than three storeys high.

Further sanctions are put in place for waste disposal and after the 1st October 2018 Licences issued to HMO owners will require compliance with Council storage and waste disposal schemes. Failure by Licence holders to comply with a Waste Disposal Scheme would be regarded as a breach of the Licence and a criminal offence.

Under the new conditions a building will be a HMO, albeit less than three storeys high, if it has two households which share a basic amenity or the living accommodation is lacking in basic amenities. A basic amenity can be a toilet, personal washing facilities or cooking facilities. Landlords should be very cautious to check whether a house could be defined as a HMO because if they run such LANDLORD INVESTOR 40TH EDITION

In the circumstances, Landlords would be well-advised to seek further guidance on the new legislation and the Ministry of Housing Communities & Local Government guidance on the same. Simply carrying on as they have done in the past could easily result in problems and at worst a prosecution.

Oliver Fisher Solicitors are experts in Houses in Multiple Occupation and Residential Property Licensing and should you require any further information please contact Russell Conway or Arman Khosravi for further advice. If you have any question or simply wish to find out more about Oliver Fisherâ&#x20AC;&#x2122;s Housing Law services then please contact Russell Conway on 0203 219 0145 or Arman Khosravi at arman@oliverfisher.co.uk Russell Conway is Senior Partner at Oliver Fisher

Under the new conditions a building will be a HMO, albeit less than three storeys high, if it has two households which share a basic amenity or the living accommodation is lacking in basic amenities.

TENANCY AND DEPOSITS

MIKE MORGAN TENANCY DEPOSIT SCHEME

Winter is coming Get your property winter ready to avoid tenancy deposit disputes

LANDLORD INVESTOR 40TH EDITION

TENANCY AND DEPOSITS

Tenancy Deposit Scheme’s (TDS) Director of Dispute Resolution, Michael Morgan, highlights winter-related tenancy deposit issues and how to prepare well to avoid them.

Colder weather, shorter days and the dreaded Christmas shopping trips all spring to mind when we think of winter, but for landlords and letting agents, preparing a property for the season should be top of that list. Winter weather and the impacts it can have on properties can create headaches for landlords, but thankfully many issues can be easily avoided through careful and thorough preparation. Landlords should carry out a winter inspection to assess the current state of the property and ensure it is ready for the winter season. If you cannot carry out the inspection or checks yourself, you could ask your agent or instruct a contractor instead. Although your tenants may be required to notify you of any problems, they may not necessarily identify them or in some cases neglect to report them. Letting agents or contractors may have more experience to spot issues and prevent problems worsening further down the line.

You should also ensure exposed pipes are suitably insulated to avoid them freezing and bursting in colder weather and that the boiler has been recently serviced. It may also be worthwhile advising tenants on the levels and intervals that heating should be set to during void periods in the winter. Another important check is for any areas of mould, damp or condensation; these problems are common in the private rental sector (PRS) and are easier to treat if it is picked up early. Your tenant may not notice the early signs however an agent or contractor may be more vigilant or aware of the indications. If damp or mould is noticed, it is important to notify your tenant so they can monitor the situation and take action to prevent the condition worsening. Gardens should be checked for hazards including overhanging branches that could blow off in high winds and damage the exterior of the property.

If you intend to carry out these checks yourself, it is important to ensure your tenancy agreement contains a clause that allows for periodic inspections to be completed as well as allowing contractors or landlords/agents access to the property to inspect maintenance issues – providing appropriate notice is given.

Gardens can be contentious in tenancies, so you should make sure that the tenancy agreement clearly outlines where responsibilities for outdoor areas lie. Be specific about the action required; a tenant may think that to ‘maintain’ a hedge simply means chop it down, so ensure you are explicit with instructions.

To ensure your property is winter ready, there are a number of areas that should be checked both inside and outside.

It is also important to consider what equipment is required to properly maintain the external areas and which of these will be provided to the tenant, as part of the tenancy. This is a regular cause of disagreement between parties at the end of the tenancy; a well-defined clause in the tenancy agreement will help reduce gardenrelated disputes.

It is important to check all external drains for any blockages and to ensure your tenant is keeping the area around them clear, as during autumn an onslaught of leaves can lead to blocked drains and gutters. In a recent dispute we managed, a landlord claimed £100 to repair blocked drains and gutters from falling leaves but the adjudicators ruled that it was the landlord’s responsibility to look after these areas, and awarded the full sum to the tenant.

LANDLORD INVESTOR 40TH EDITION

Regular inspections of your property can help identify any maintenance issues early, ensures your tenants are abiding by their responsibilities and allows you to take measures to keep your property structurally safe for your tenant. Following any inspection of a property, the tenant should be notified of the findings in writing to ensure that you have an evidence trail in the event of disagreement over the tenancy deposit. You should keep a record of all correspondence and issues highlighted so that if a dispute arises, there is clear evidence to prove any loss you may have sustained. Winter brings its own challenges for landlords and property investors, but it also presents an opportunity to assess the condition of the property and put preventative measures in place to protect against potential future issues.

Landlords should carry out a winter inspection to assess the current state of the property and ensure it is ready for the winter season.

If your property has a fireplace or chimney, you should ensure you have agreed with your tenant who is responsible for taking care of it and how it should be maintained.

RENTAL REPORT

RUSSELL GOULD CEO, VESTA PROPERTY

The perfect rental storm The private rented sector is at present a place of contradictions. Tenant demand for rental property is on the rise, and yet more landlords are calling it a day. And the commendable intentions of government to control the property market to create more opportunities for first time buyers may actually be doing more harm than good. Storm clouds may be gathering, so perhaps itâ&#x20AC;&#x2122;s time to fix the roof.

LANDLORD INVESTOR 40TH EDITION

RENTAL REPORT

Storm #1: An Unhealthy National Obsession is distorting the market We need to question how our nation’s obsession with owning property might be affecting the wellbeing of our young people unable to afford to get on to the property ladder. For some time the message has been “own property”, but current predictions are that over 40% of people in Britain born between 1980 and 1996 were renting their homes by the age of 30.i Leading financial journalist Charlotte Burns, in a Huffington Post article, proclaims that “We need to stop telling young people that renting is awful and buying is the only option”.ii But after years of being bombarded by the home ownership message, it’s a challenge to reshape thinking around renting. Yet there are plenty of alternatives to consider, such as innovative rental co-operatives, new iterations of housing associations, and stronger landlord-tenant relationships where renting becomes the preferred norm rather than the second-choice. Storm #2: Private Landlord Exodus restricting supply The Royal Institution of Chartered Surveyors (RICS) recently revealed that, following policy changes such as increases in stamp duty, more landlords are expected to leave than join the market in 2018.iii This has been further compounded by the additional pressures from mounting regulations and Section 24 tax changes. Any reduction in landlords will only exacerbate the situation. Storm #3: Sales process is disruptive for landlord, tenant and the sector The National Landlords Association predicts that approximately 380,000 landlordsiv could be offloading property this year. This shouldn’t be a problem if the properties remain in the PRS, however, the traditional sales process isn’t designed to do that. Estate agents are geared towards the owner occupier market and are most suited to finding buyers for vacant property, not tenanted property, so encouraging property to drain from the market. In order to sell vacant possession, the majority of landlords will use Section 21 notices to evict tenants or wait until the tenancy expires, and that’s a considerable number of displaced tenants looking for a new home. Of course this approach means no rental income for the seller while the property remains vacant – whichever way you look at it, the current system is not fit for purpose.

LANDLORD INVESTOR 40TH EDITION

Storm #4: Rental Prices could spiral out of control The supply-demand imbalance is placing upward pressure on rental values according to JLL Residential who reported that they have seen a 57% increase in applicant registrations and 40% rise in offers made from those looking to rent. If this trend is to continue, it could create a world of misery for new and existing tenants who, without the option of buying property are now forced to fight over rental accommodation. Just take a look at what has happened in New Zealand recently where in the major cities of Auckland and Wellington they all but ran out of rental properties causing mayhem for renters and predicted rental price hikes to crazy levels. Revitalising the sector Our view is that fresh thinking and a collaborative approach is needed across the industry. The Government has been under mounting pressure from opposition parties for a considerable amount of time to do something about the housing crisis. However, their response has been to focus on housebuilding and tactics to restrict the landlord sector in a bid to choke-off house price inflation. What is needed is a holistic view that embraces and values good landlords in order to create a more harmonious and symbiotic relationship including: The national mind-set – we have to explore alternatives to the simple mantra that homeownership is the most desirable outcome for any UK citizen. Jobs for life are no more. A UK worker will change employer every five years on average according to LV=v. That’s potentially four to five different geographical locations – potentially including oversees in today’s global market. Renting provides greater flexibility and reduces the stress of having to cover a mortgage and other expenses if required. According to JLL, tenants have more flexibility around where and the type of property they rent, so if the shoe doesn’t fit, they can easily movevi.

The landlord sector– there are groups and bodies already working hard to inject professionalism into the sector, and they need more support and public awareness including Residential Landlords Association, Association of Residential Lettings Agents, Guild of Residential Landlords and National Landlords Association. The government would do well to listen to their views, advice and their foresight in a climate when positive change can be cocreated through collaboration rather than imposed legislation and financial restrictions. Tenant choice – by encouraging landlords and developers to deliver more housing stock, we create an environment where renters have more choice of larger, better located properties. A climate where tenants feel pride in their new home and a revised culture that is nurtured to reflect that of the European rental market could benefit everyone. Keeping tenants in place - New ways of doing business are starting to change how landlords and tenants exist together in more harmonious circumstances driven largely by technology. For example, Vesta’s online buy-to-let marketplace creates an infrastructure that makes it preferable for landlords to sell property with tenants in place. This not only creates better outcomes for buyer, seller and tenant, but it does so while making the process cheaper, more streamlined and efficient. A great example of innovative thinking designed to solve the unique problems of the private rented sector. Trying to artificially correct the home-buyers’ market by blindsiding landlords ignores the facts and the fundamentals of what’s happening in the growing private rented sector. If on the other hand we learn from our European neighbours and do away with the message that an “Englishman’s home is his castle”, then, we can instead focus on how we make renting a more positive experience for everyone. At that point we will not only start to address many of the issues around demand and supply we’ll also reinvigorate the symbiotic relationship between tenant, landlord, buyer and seller.

References: i www.bbc.com/news/business-43788537 ii www.huffingtonpost.co.uk/charlotte-burns/renting-is-not-dead-money_b_14634708.html iii www.onthemarket.com/content/rental-market-will-happen-2018/ iv www.landlords.org.uk/news-campaigns/news/good-news-first-time-buyers-bad-news-renters v www.bbc.com/news/business-38828581 vi www.landlordtoday.co.uk/breaking-news/2018/4/bidding-war-for-properties-to-rent

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LANDLORD INVESTOR 40TH EDITION

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