Landlords, don’t get caught out by new legislation

Lesley Davis Leave a comment
Tax changes and new regulations will hit landlords again in 2020

Landlord Today has highlighted some important legal changes coming in next year that landlords need to be aware of. They are worth taking note of, as they will impact the way you run your business.

In 2020 the Minimum Energy Efficiency Standards (MEES) will be extended to cover existing, as well as new tenancies. This means rental property that doesn’t have an energy performance certificate rating higher than F or G will no longer comply with legislation and will be classed as “unrentable”. According to the press, there are “whispers” going around the industry that the standards may rise again, once we’ve all had time to get used to the new regs. So it’s vital that landlords ensure their properties are compliant now.

It is also possible that mandatory five-year electrical installation checks on private rented housing in England could be introduced next year. This has been on the cards for some time, so keep an eye out for government announcements.

Two important changes that are definitely happening next year are new rules on tax relief and private residence relief. First, claimable tax relief – which used to apply to all mortgage payments and loans –is being gradually phased out and will come to an end in the 2020/21 tax year. Instead, from April next year, landlords will receive a 20% tax credit on their interest payments.

Also from April, changes to Private Residence Relief will hit landlords who rent out a property that used to be their permanent residence. Under the law as it stands, tax relief can be claimed by landlords,not only for the time they lived in their property before letting it, but also for an additional 18 months after moving out. In future relief can only be claimed for the time they lived in their property plus nine rather than 18 months. In addition, anyone renting a property will also lose nine months’ worth of Capital Gains Tax relief should they decide to sell, with the deadline for payment of their tax bill being brought forward from 31 January in the year after the tax year they made the sale, to within 30 days of completion.

And as if this wasn’t bad enough, the £40,000 worth of lettings relief landlords are currently entitled to will be scrapped from April, unless they continue to live in a property that they also let to tenants.

Small wonder landlords feel under fire. As managing agents, we can’t do much about the tax changes that will impact our clients, but we can help keep landlords compliant. By using our PlanetRent app,  you can ensure that when the law changes, so do your processes. So download the software free today and never get caught out by new legislation again.

Labour backs down on renters’ right-to-buy

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Labour steps back from right-to-buy pledge

 As the Labour party published its manifesto last week, one pre-election idea was notable by its absence – the right for renters to buy their homes. The controversial policy, which would have allowed private tenants to buy their home at a discount, was slated by the property industry when it was announced in September.

 Two months ago shadow Chancellor John McDonnell told the Financial Times that under a future Labour government discounts could be made available to tenants, allowing houses to be bought at below market value. Understandably this went down like a lead balloon, not only with landlords but with industry bodies and commentators – including ourselves.

Two weeks ago Labour appeared to have watered-down its original proposal, saying it should only apply to the “wealthiest landlords”. What the benchmark would be for “wealthiest” was not explained. The policy has now been dropped.

 There are other pledges in the manifesto to make landlords uneasy. The scrapping of Section 21 (also a Conservative policy) and the idea of rent controls have been roundly criticised. Rightly so we think –  particularly as we continue to monitor the adverse effects of this in Germany. There, stock availability is being squeezed as landlords divest (at a time when we need more homes) or stop doing repairs in an attempt to get tenants to leave and get a vacant property back which can then be re-let for more.

However, there are some good ideas too which are likely to be welcomed by landlords and tenants alike:

  • Lifting the freeze on Local Housing Allowance (LHA) for tenants on benefits and realigning LHA to the 30th percentile of local rents.
  • Paying the housing element of Universal Credit direct to landlords,
  • Ending Right to Rent checks.

Across all the political parties it’s certainly a mixed bag for those voters with housing issues uppermost in their minds. Midnight tonight is the deadline for voter registration and tenants campaign group Generation Rent is urging renters, who move around more than homeowners, to ensure they are registered at their current address and to make their vote count. Landlords – and everyone else in the industry – should ensure they do the same.

PlanetRent fights back against rogue landlords

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Camden Council is clearly leading the way when it comes to raising standards in the private rental sector. This week, it’s been London’s first authority to issue a rogue landlord banning order after tenants’ lives were put at risk through the letting of unsafe housing.

The first-tier tribunal has banned Cesar De Sousa Melo from letting any housing in England for four years and fined him £14,000. This follows a rogue landlord referral received by Camden Council via the Greater London Authority and Mayor of London website.

The council investigated and found the landlord was letting out several unlicensed houses in multiple occupation. Overcrowding, fire alarms that didn’t work and general disrepair were discovered after a raid on his properties.

This is an extreme case – but it shows how important it is to comply with the legislation that governs the lettings market. At Ringley, we have made it really easy for landlords to meet their legal obligations and ensure their tenants live in safe, well-maintained homes.

The Ringley Group, though its PlanetRent software, helps large and small landlords manage their compliance for FREE. 

PlanetRent is the go-to destination for landlords and shows you which compliance documents are missing or expired.  Better still, when you upload documents, PlanetRent sends them automatically to your tenants or (for agents) your landlords so everyone can feel safe.   Also, when you do your offers, deals and e-contracts through PlanetRent your tenants will receive all the compliance documents they need, drip-fed to them during the first month after they move in.

You can also sign up for PlanetRent’s HMO partner to keep your HMO licencing up to date and apply for HMO licences and renewals.

FREE portals are provided for landlords, tenants and contractors and if you use the photo repairs reporting tool for tenants you can capture the whole of the necessary audit trail.

Put simply, PlanetRent delivers all the tools you need, not only to deliver a first class welcome journey to your tenants, but it also provides the audit trail to prove a job well done.

HPL cladding: More questions than answers

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Ringley CEO Mary-Anne Bowring will talk about fire safety in Manchester later this week

Footage from this weekend’s devastating fire at a student block in Bolton must have given the property industry a collective sense of deja vu. Thankfully, everyone was safely evacuated, but once again we watched flames rapidly spreading up the outside of a block, while its cladding melted in the heat. This time though, the cladding was HPL – not the ACM used on Grenfell Tower – and another can of worms was well and truly opened.

In the wake of the 2017 tragedy, experts warned that “the next Grenfell” would involve HPL cladding. Building owners were told to remove all cladding systems, including HPL, that didn’t conform to building safety standards. However, the government’s ban on combustible cladding only applies to blocks over 18m. That lets an awful lot of buildings – including the one that went up in flames in Bolton – off the hook.

Inside Housing today quotes Matt Wrack, general secretary of the Fire Brigades Union, who says “This terrible fire highlights the complete failure of the UK’s fire safety system”. We have to agree with him. Even the reforms proposed by the Hackitt Review only apply to buildings of ten storeys and above, referred to as HRRBs or high-risk residential buildings. It has to be hoped that once in place and seen to be working, these changes will be applied to all buildings, not just high rises.

So what happens now? We expect to see calls for HPL cladding to be tested and removed if it is found not to have been treated with fire retardants,  which gives it a fire safety rating of Class 0 or Euroclass B. However, it is estimated that cheaper versions graded a much lower ‘Class D’ may account for more than 80% of the market.

The continuing nightmare of residents in ACM-clad blocks are well documented. All the same issues around the rights and responsibilities of leaseholders are now likely to be extended to a new group of people. And as if that wasn’t enough, lenders have tightened up their rules since the government issued Advice note 14  last December. This leaves an increasing number of leaseholders stuck with flats that are unsellable because not only are mortgage applicants being assessed but so too are the buildings they want to live in. The Times estimates that up to 50,000 flats around the country are affected. What a mess.

So two important points for the immediate future.

  • If you manage a building with HPL cladding, talk to residents about the implications and commission a fire risk assessment if necessary. Make sure the block has an evacuation policy. If there isn’t one, make it a priority to put one in place.
  • If you own or rent a flat in a building with external cladding, contact your building manager or landlord to find out what measures they are putting in place to ensure resident safety.

Watch this space – this story is going to run and run. And one thing is crystal clear. The issues raised in the last two years around fire safety will not be resolved quickly or easily.

Mary-Anne Bowring, CEO of The Ringley Group, is speaking on this subject for the RICS in Manchester this Wednesday 20th November.


Why rent controls are not the answer to London’s housing crisis

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Our message to the London Mayor: focus on investment, not rent control

The London Mayor is being urged to forget about rent controls. Instead, say critics, he should be increasing the supply of rental homes by attracting more people to invest in the capital’s PRS. 

Earlier this year Sadiq Khan called on the Government to give him the power to cap London rents. His aim is to “fundamentally rebalance London’s private rented sector” and make it fit for purpose. There is no arguing with the fact that renting in London has become increasingly unaffordable. Average monthly rents increased by 35% between 2011 and 2018 according to the Valuation Office Agency. And the latest English Housing Survey reveals that private renters in the city spe3nd a massive 42% of their income on rent compared to 30% in the rest of the country.

So the mayor has a point. But rent controls are not the answer. As Paul Sloan, development director for Haart, said in the press last week: “Rent controls sound great in theory, but unfortunately, the reality is that they simply do not work. Around the world, we have countless examples of cities which have introduced rent controls, but that has done nothing to address affordability issues.”

Believe it or not, if you go back 80 years or so, there was significant institutional investment in housing which left the market due to rent controls. At Ringley we think it’s simply nonsensical for the Government, having spent five years enticing the institutions back into the rental market, to even consider now preventing them meeting their investment criteria by capping rents.

The problem with rent control is that landlords are put off entering or staying in the market. It’s a simple equation: fewer landlords mean fewer homes to rent. This in turn is likely to push up prices even further. And as Paul rightly points out – this is the very thing the controls are brought in to avoid. The RLA gives the example of Berlin, where rent control actually made rents rise by about ten% over two years. Before they were introduced they rose by about 1-2% per year.

The other key point is that capping rents may also make landlords more inclined to cut corners and less inclined to maintain their properties to a high standard. This means, over time, the quality of rental housing could start to fall and tenants could find repairs and redecoration being ignored or carried out less frequently.  We say the key to a properly functioning market is supply. The Government must focus on height, density, planning delays, clear guidance and other supply accelerators such as getting land banks developed and encouraging partnerships to release land. The key objective must be to better serve residents by giving them more homes to rent and more choice. Ultimately this will address affordability

Why we need Section 21: rogue tenants do exist

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One landlord is facing £29K of rent arrears

Here’s a shocking story we’ve just spotted in Letting Agent Today. It illustrates exactly why at Ringley, we have been campaigning in favour of keeping the so-called no-fault eviction process known as Section 21. There are rogue tenants out there and there must be an efficient process in place for landlords to evict them when necessary.

Landlord David Wright, who owns a property in Warrington, was recently left with rent arrears of around £29,000 by one of his tenants. When he finally regained possession of his rental home, he had to spend £2,000 on clearing the property of rubbish and waste. He faces a further bill of thousands of pounds to repair the damage that the tenant caused to the property.

According to the press report, the house was coated in grime and mould and littered with half-eaten food containers, pet food and medication. Many of the fixtures and fittings, including the carpets, were damaged beyond repair. No one should have to put up with this when all they are doing is trying to make a living by providing a home for someone in good faith.

Legal for Landlords, the law firm representing him in gaining possession of the property, does not think the landlord is likely to recoup the rent he is owed.  Sim Sekhon, managing director of the firm says “This case illustrates why plans to abolish Section 21 are so dangerous for landlords’ rights…. It’s vital to have a robust legal mechanism in place to reach a resolution in a timely manner.

In fact, a Section 8 notice was used in this case because of the amount of damage caused and the extent of the rent arrears. But, as Sim points out, there are plenty of cases where that wouldn’t be appropriate. “Section 8 alone doesn’t have enough teeth to protect the landlord and, for many, it’s frankly a terrifying thought that this outdated legislation is all they may have to protect their interests”.

We wholeheartedly agree.

Good news for broadband providers – and you!

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Faster block broadband made easier

Would you like better broadband speeds in your block? If so, here’s something for you. The government has announced new measures to make it easier to install faster internet connections in blocks of flats where landlords repeatedly ignore requests for access from broadband firms. Digital Secretary Nicky Morgan estimates that an extra 3,000 residential buildings a year will be connected as a result.

Under the law as it stands, to install gigabit-capable broadband in the UK’s estimated 480,000 blocks of flats or apartments, broadband providers need permission from landlords to enter the property and undertake the necessary works. One of the biggest obstacles preventing operators from installing new networks in residential blocks is the building owner’s failure  – in as many as 40% of cases – to respond to requests for access. And while broadband providers can already push for access via the courts, this takes time – and money.

So to solve the problem, the Government is now promising a cheaper and faster process for telecoms companies to get access rights. This will apply when a landlord has repeatedly failed to respond to requests for access to install a connection that a tenant within the building has asked for. And it will give operators a cheaper and more streamlined route via the existing Upper Tribunal (Lands Chamber) to connect the property. The aim is to lower the timescale for entering a property from six months to a matter of weeks, and at a drastically reduced cost.

Good news all round we think.

Ringley’s 12-point plan for change

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We want to see positive change in our industry – read on to find out more

In a week when all the political parties are setting out their stalls and manifestos are popping up all over the place, at Ringley we have taken the time to produce one of our own.

Yesterday, we blogged about the changes in the industry that ARLA and the NAEA want to see taken up by the new government. Today, it’s our turn. Despite moves to reform both leasehold and the rental sector, there is still a long way to go to ensure that landlords, tenants and flat owners get a fair deal. So here is how we think our industry could be changed for the better.

IF a house has to be sold leasehold, ban ground rent on it. We accept that Crown land may require leasehold sale, but there is no excuse to burden house owners with ground rent and leases of less than 999 years. 
BUT
Don’t ban ground rents on new build flats or set them at zero. If freeholders have no income to gain from their leasehold properties this could lead to an abdication of care and the potential to take no interest in the condition of the buildings, health and safety or compliance issues. None of this would benefit leaseholders.

Change the qualification criteria for freehold purchases, to ensure that all buildings can legally qualify for a freehold acquisition by the leaseholders or the Right to Manage process.

Give houses the opportunity to challenge estate charges. Like apartment leaseholders, house owners should have the right to challenge unfair charges at the FTT.
AND
Introduce Right to Manage for houses on estate developments.

Hurry up the New Homes Ombudsman scheme to ensure that owners receive transparent and fair treatment.

Regulate how client money is held. Too many letting and managing agents are not subject to RICS checks which, for example, require a three-way bank reconciliation and client balances to be proven monthly.

We would also like to see a whole tranche of new legislation to right the wrongs that, we as property managers, have to deal with every day:

  • make reserve funds mandatory to overcome the problems suffered by thousands of blocks with inadequate leases. Scotland does it, so why can’t we?
  • make it easy for leasehold blocks to make environmental improvements. Currently, most cannot, simply because the leases as drafted do not allow improvements (see our blog on solar panels here)
  • make RTM costs recoverable as service charge expenditure. That they are not, simply because these costs were never drafted into leases and are therefore the fact that they remain recoverable only from RTM members, is just unfair.
  • make the right to manage transferable – a share in the freehold is transferable – why can’t an RTM be transferable too?  The never-ending process of trying to recruit new RTM members is draining.
  • legislate so that blocks that have not had major works for sometimes 50 years+ are then not frustrated from collecting the money desperately needed by the Garside case requiring them to collect slowly.  Either the owners have benefitted from buying flats cheaply (because the block was run down) or they will have saved spending any money for years.

And finally…Grenfell has been in the news this week as the inquiry has started to report its findings. In the wake of the fire and the questions it has raised about the safety of our blocks, leaseholders should not be paying for the removal of flammable cladding. They were not responsible for choosing the construction materials for their block and bought their properties in good faith.  The government could have banned these dangerous materials when Europe and the USA did – if you allow it to be sold, you should fix your mess!

There are an estimated 4 million people in the UK living in leasehold properties and, according to the English Housing Survey, 4.7 million more rent their homes from private landlords, plus all the many block managers, property agents and suppliers that keep the sector running smoothly. That’s a lot of people whose lives are affected by government policy on property on a daily basis. And a lot of votes.

Our message to politicians is that they should give that fact due consideration when they are campaigning in constituencies around the country over the next few weeks.

Election 2019: what does the rental sector want?

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What will the election deliver for property?

Its election time again. Love it or hate it, most of us have some idea of what we want from a  new government – and the property sector is no exception. This week, Letting Agent Today published 13 key demands from ARLA and the NAEA. Both organisations want the next government to intervene in the industry in a big way.

Here’s what they set out in their manifesto:

Regulation of property agents – The new government must commit to regulating property agents and take forward the recommendations of the Regulation of Property Agents working group chaired by Lord Best.

Abolish the 3% surcharge on additional residential property – This policy has contributed to a stagnation of the private rented sector, which is now the second-largest housing tenure after owner-occupiers.

Property MOTs – An annual MOT of rental properties should replace existing discretionary licensing schemes. It would improve enforcement, and give landlords a steer on how to maintain or improve conditions for tenants.

Exempt downsizers from stamp duty or give them incentives to encourage them to move – Pensioners wanting to downsize to a smaller home should be exempt from paying stamp duty; more specialised homes should be built for older people, and the Government should introduce over-65s bonds for downsizers.

Court reform – Introducing a dedicated Housing Court for England and Wales would considerably cut the time taken for a landlord to gain possession of a property and will make the process more straightforward for all parties involved.

Digital logbooks – To cut down the number of failed property transactions and speed up the process of property buying and selling, the government should introduce a digital property logbook to allow for a more interactive, streamlined and transparent process for both home buyers and sellers.

Legislate to ensure developers remedy leasehold agreements containing onerous clauses – The next government should legislate to ensure that developers help those affected. This would encourage mortgage lenders to lend to buyers of these properties and promote the sale of existing leasehold properties.

End the Local Housing Allowance cap and improve how Universal Credit operates – The continued cap in Local Housing Allowance must be lifted to accurately reflect the cost of renting. Also, tenants should be able to choose whether the housing element of their Universal Credit is paid direct to their landlord. The new government should introduce the option for Universal Credit to be paid twice monthly to assist with budgeting.

Open up the database for rogue landlords and property agents – Access for tenants, agents, and regulatory bodies would make the database a stronger deterrent to rogue operators and would allow agents to vet potential employees, limiting rogue individuals from moving into sales from lettings.

Review landlord taxes – Investment is falling due to the phasing out of tax relief on mortgage interest for landlords, the additional SDLT surcharge on buy-to-let property and the repercussions of the Tenant Fees Act.

Introduce new regulations for short term lets – Left unchecked, Airbnb is likely to have a bigger impact on the wider lettings market. As Airbnb grows, and more legal requirements are placed on letting agents and landlords, it could take more properties out of the private rented sector because the returns on short term lets are potentially more lucrative and there are fewer regulatory requirements.”

Help the Private Rented Sector with energy efficiency and climate change – The Landlord’s Energy Saving Allowance (LESA) should be reintroduced and extended to include anything contained within the Recommendations Report of an Energy Performance Certificate (EPC).

Extend Flood Re to the leasehold and Private Rented Sectors – An estimated seven million homes remain excluded from the Flood Re insurance obligation, including 1.1m leasehold homes and three million homes in urban areas.

Do you agree with these demands? What would you like to see the new Government do to help the property sector?

We will be setting out our own Ringley wish list in a future blog but in the meantime, leave your comments below. We would love to hear your views.

Manchester tops latest BTR ratings

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Manchester is the best place in the country to rent a new build flat says Homeviews

A BTR development in Manchester has topped the polls in a new report that rounds up residents’ reviews of their rental homes. More than 100,000 people around the country now live in a Build to Rent (BTR) apartment building. Initially, the sector was focused on London but now the regions are picking up speed both in terms of completed developments and projects in the pipeline.

HomeViews publishes resident reviews that give the developments they live in a star rating out of five across a range of categories. These include facilities, design, location, value and management. Homeviews has just published its latest report, rounding up more than 5,000 reviews from tenants living in 84 BTR and 438 build-to-sell developments across eight UK cities. The message for BTR developers and operators is a positive one: new build developments are delivering for tenants with more than two-thirds of BTR developments getting ratings of more than 4 out of 5. So what does BTR have to offer that is resulting in such great reviews?

Residents talk positively about communication, reliability, personalised service, kindness and – parties! Being pet-friendly, having a concierge and gardens, as well as gyms and parking got top marks from tenants. It’s also clear that customer service and good building management really matter. Management isn’t perfect, with 10 of the 84 developments receiving a management rating of 3 or below. However, 26 developments are delivering an incredible building management service and have been rated 4.5 and above. These include schemes managed by Allsop, Essential Living, Fizzy Living, Way of Life, Greystar, be:here and Legal & General.

BTR management is being handled in different ways – from apps, third party suppliers and building managers all called ‘Bob’ – presumably to make them easy to remember! What is clear is how passionate residents can be about the management team on site. The people BTR operators employ appear to be their greatest investment and it is paying off.

The Trilogy in Manchester tops the list for the highest-rated BTR development in the UK and the city boasts three of the top ten rated schemes. The Cargo Building in Liverpool came in second, followed by Dressage Court, Sailmakers and Vantage Point in London. Schemes in Birmingham and Newcastle also made the top ten. When comparing the average ratings and scores from BTR tenants living in the regions to London, the regions scored higher on every rating.

The US rental market is already familiar with the power of reviews with 70% of renters deciding to visit a property with a higher reputation score and 73% saying reviews affected their decision to rent.

The UK BTR sector is growing at a faster rate than anyone predicted. Earlier this year Savills reported that by the end of Q1 2019, there were more than 140,000 BTR homes complete, under construction or in planning. This marks a 22% increase from 2018 and is a figure 13% higher than identified at the end of Q1 last year.

To find out more and to download the Homeviews report click here