By Judith Loeffler

Milliband

 

With the general election campaign now in full swing, Ed Miliband has reiterated Labour’s plans for the private rental sector should Labour get to power, all under the heading of tackling the root causes of the cost-of-living crisis. The key elements of Labour’s policy are:

1. Introducing long term three-year tenancies:

Tenancies would start with a 6 month probation period at the end of which the landlord would be able to terminate the contract if tenant failed the probation (e.g. if there are rent arrears or anti-social behaviour). After the 6 months, the tenancy would automatically run for a further 2.5 years. Tenants would be able to terminate contracts after the first 6 months with one month notice as they can now. Landlords would only be able to terminate contracts with 2 months’ notice if one of the following elements apply:
a) The tenant falls into rent arrears, is guilty of anti-social behaviour or breaches their tenancy agreement;
b) The landlord wants to sell the property, needs the property for their own or family use;
c) The landlord plans to refurbish or change the use of the property.
Landlords would not be able to terminate tenancies simply to put rents up.

2. Ensuring predictable rents:

Landlords and tenants will set initial rents based on market value and conduct a rent review no more often than once a year. Rents could still be reviewed upwards, downwards or stay the same, subject to market conditions. The legislation would place an upper ceiling on any rent increases to prevent excessive rises. This would be based on a benchmark such as average market rents.

3. Banning letting agents’ fees for tenants:

Landlords would continue to pay charges just as people selling houses pay fees to estate agents. But letting agents would be banned from charging fees to tenants.

This clarification on Labour’s plans comes at the same time as the Scottish government launching a second consultation into the reform of the private rental sector which includes the proposal to abolishing the option to terminate a tenancy when no grounds are given. This means a tenancy would not be permitted to end automatically on its expiry date to encourage longer term tenancies.

By Judith Loeffler

Pressure

 

The pressure on landlords to improve their rental properties is increasing with properties with a low energy efficiency rating becoming non-letable as of 2018; this is likely to apply to properties with EPC energy efficiency ratings of F or G, estimated to be around 13% of properties in the private rented sector according to the English Housing Survey.

Ways to improve the energy efficiency of a property are wall, roof and floor insulation, double glazing of windows, choice of heating and hot water solutions as well as low energy lighting. This comes at a time when organisations like Citizens Advice Bureau lobby for tenants to get their money back if a landlord is not fulfilling their repairs obligations. CABs report Renting Uncovered states that ‘people are now better protected when buying a toaster than when renting a flat, while taxi drivers are more tightly governed than the landlords who let – and have access to – our homes.’

With Labour calling for stricter regulation of the private rental sector with extended tenants’ rights, it is certain this topic will continue to be in the public debate prior to the general election.

By Judith Loeffler

SDLT

 

During his autumn statement George Osborne announced an unexpected reform to Stamp Duty Land Tax (SDLT).

Previously there were 5 bands of SDLT between 1% and 7%, depending on the total value of the property purchase price. As of 4th December 2014 the slab structure for SDLT has been replaced with a structured rate comparable to the income tax bands – HM Treasury explains: ‘Under the old rules, you would have paid tax at a single rate on the entire property price. Now you will only pay the rate of tax on the part of the property price within each tax band – like income tax.’ The different rates to be applied on the different parts of the property purchase price are

  • up to £125,000 – 0%
  • £125,001 – £250,000 – 2%
  • £250,001 – £925,000 – 5%
  • £925,001 – £1,500,000 – 10%
  • above £1,500,001 – 12%

In practice, this means on a £275,000 property purchase price no SDLT has to be paid on the first £125,000, 2% has to be paid on the next £125,000 and 5% has to be paid on the last £25,000 making it a total SDLT bill of £3,750. This compares to a SDLT bill of £8,250 under the old regime. Anyone purchasing a property below the value £937,500 will be better off under the new rules with high value property buyers being put in a worse financial position than before.

Whilst for now this is applied equally across the UK, Scotland will have a different system from April 2015 when stamp duty is being replaced by Land and Building Transaction Tax (LBTT).

By Judith Loeffler

Capital gains

 

HMRC’s Property Sales campaign in 2012/13 was an opportunity for  buy to let landlords who had not declared Capital Gains Tax (CGT) on property sales to come clean. With the deadline for voluntary disclosures having passed during the 2013/14 tax year, HMRC is now using the information collected to target investors who might not have used this opportunity.

ThisIsMoney reports that ‘HMRC says it holds a database for all property sales that attract stamp duty land tax and will crosscheck this with people’s tax records to establish if they should have paid CGT – and whether they have done so.’  With HMRC estimates that only 1/3 of landlords who own second properties are registered with them, the Telegraph’s assessment is not surprising: ‘HM Revenue & Customs’ tax inspectors obtained £136m as a result of probes into underpayments of capital gains tax for the year 2013-14. This marks a 24pc increase from the previous year, when £110 million was collected.’

We covered the Let Property campaign by HMRC in our August blog last year – this one is aimed at encouraging landlords who have failed to declare rental income to make voluntary declarations. This campaign was announced in September 2013 and is expected to run for at least 18 months. In the meantime, HMRC are collecting information on rental incomes from – amongst others – lettings agents for future investigations.

By Judith Loeffler

Mortgage

 

That’s the big question many buy to let investors are facing at the moment. The answer to that question depends firstly on your perspective on when interest rates will rise: In January Mark Carney, the governor of the Bank of England (BoE) told the BBC that there is ‘no immediate need to increase interest rates’ as this would only come into consideration once the labour market picked up and unemployment rates reached around 7%.

Whilst any interest rises in 2014 are still deemed unlikely by the BoE, a steady decrease in unemployment towards the 7% mark seems to be on its way opening the way for interest rate changes potentially as early as 2015.

Secondly, it also depends on what the current mortgage deals look like – towards the end of September there have been interest rate cuts for buy to let borrowers by many of the big lenders: ‘The biggest rate cut came from Leeds Building Society which trimmed its two-year fixed from 3.49pc to 3.09pc for borrowers with a 40pc deposit. Virgin Money, Accord and Santander followed suit  with cuts to their fixed mortgage rates by around 0.1pc.’ Whilst these deals are often associated with hefty arrangement fees, the longer the fix lasts for, the more months these fees are spread across and hence the more attractive they might be.

As a simple example: getting a rate of 0.5 percentage points below your current rate on a mortgage of £150,000 will save £750 per year in interest; as long as the arrangement fee spread over the number of years it is fixed for is less than that you will be better off. As long as this is given, it feels like a good time for remortgaging to pre-empt an interest rate rise which, whilst opinions might differ about when this will happen, is bound to happen next year.

By Judith Loeffler

northernextension

 

The redevelopment process in Wandsworth just got another boost last week with the government agreeing to the £1bn Northern Line extension. A new branch will come off the Northern Line from Kennington with tube stops at Nine Elms and Battersea Station. The Nine Elms Station will be just off Wandsworth Road whilst Battersea Station will be at the revamped Battersea Power Station. Transport for London expects work to start early next year with services expected to run by 2020.

Wandsworth Council leader Ravi Govindia is already getting ready for the next phase of improving transport links within Wandsworth: ‘We are pursuing two very good prospects for connecting Clapham Junction to the Underground network.’

In the same week Wandsworth Council has approved the regeneration plans of New Covent Garden Market, another £2bn project contributing to the transformation of Wandsworth. Apart from residential property the new development will include sports, retail and health facilities.

By Judith Loeffler

Eviction 2

Liberal Democrat MP Sarah Teather presented a Bill to Parliament in July 2014 aimed at banning retaliatory tenant evictions. The purpose of the Bill is to stop the practice of landlords serving notice on tenants as a result of continued repair demands by tenants that the landlords do not want to fulfil. ‘The Bill seeks to restrict a landlord’s right to use a Section 21 notice to regain possession of their property where a tenant has made a complaint about repair or housing conditions.’ explains the Residential Landlords Association (RLA).

Landlords would not be able to use a Section 21 notice within six months of a tenant making a relevant complaint about the condition of their property. The local council would decide whether the complaint should be considered.

Whilst the Bill is supported by housing campaigners like Shelter and the Mayor of London, the RLA has launched a campaign to outline the potential unintended consequences like tenants avoiding evictions due to rent arrears or anti social behaviour by claiming retaliatory evictions. The second reading debate is expected to happen end of November, the full briefing paper for MPs is hereThe outcome of this debate is likely to be a deciding factor whether the Bill will be passed prior to the General Election in May 2015.

By Judith Loeffler

Condensation

Condensation is caused by excess moisture in the air settling on cool surfaces. If not controlled, mould will develop. It is in your interest to bring this under control as any damage caused by it is highly likely to be a tenant’s responsibility. Here’s how to help preventing it:

 1. Heat your property adequately: If water droplets form on your windows your home is too cold.

  • Keep your heating on at a constant low temperature such as 16 or 17 degrees rather than heat your property at a high temperature intermittently.  Having the heating on for 3-4 hours a day during the coldest time of the year will not be sufficiently.
  • Check that all of the radiators in the property are heating up correctly; if they are not heating up correctly then you should bleed them to remove any trapped air. Simple instructions for this are here. If this does not help contact us as there may be an underlying issue with the radiator.
  • If water droplets have developed and drop onto sills or walls, wipe this off on a regular basis.

 2. Create sufficient ventilation

  • Always use the extractor fans in bathrooms and kitchens. We also advise that doors to these rooms are closed during and just after use. If you don’t have extractors in these rooms then keep the window open for the same period of time. Let us know immediately if an extractor fan is not working properly
  • Always use extractor units in kitchen when cooking and / or producing moisture and clean extractor units in kitchen on regular basis incl exchanging of filter when needed to allow for optimum performance
  • Clean extractor fans in the bathroom on a regular basis (with a dry cloth) to avoid built up of dust etc as this reduced the efficiency of the fans
  • Open windows every day for at least a small period of time to increase ventilation in rooms and keep trickle vents open on windows where available.
  • Don’t block ventilators, air bricks and chimneys
  • Ventilate cupboards and wardrobes and avoid putting too many items in them as this stops the air circulating and can lead to mould

 3. Other preventative measures

  • Keep curtains & blinds open during the day to allow air circulation in the window area
  • Keep doors open throughout the property when you’re out during the day to allow maximum air circulation
  • Do not stack belongings / furniture right up to the wall / ceilings as this will decrease air flow allowing condensation to build up in these areas
  • Clean off any black mould with a solution of white (clear) vinegar and water. This will kill off the mould spores as vinegar is a very good natural cleaner and will stop mould building up.
  • If you do not have a dryer at your property, then make sure that the room that you are drying your clothes in has the window open and door closed. This will stop the moisture
  • If you have a condenser dryer at your property, it is important to empty out the condenser collector regularly. If this is not done then the moisture may be released back into the atmosphere.

By Judith Loeffler

slow growth

Whilst for property sales prices it sometimes seems the sky is the limit, the rise in private rental prices has been very muted over the last 12 months: Figures released by the Office for National Statistics for April to June 2014 indicate that
  • Private rental prices paid by tenants in Great Britain rose by 1.0% in the 12 months to June 2014
  • Private rental prices grew by 1.0% in England, 1.1% in Scotland and 0.2% in Wales in the 12 months to June 2014
  • Rental prices increased in all the English regions over the year to June 2014, with rental prices increasing the most in London at 1.4%.

This means rents in the private rented sector have been rising by less than inflation across the board. Looking at the broader context, rents have risen below inflation in the majority of individual months since January 2010. Over the 52 month period since the start of 2010 there were 33 months where inflation was higher than rent rises. Rents rose more quickly than inflation in only the remaining 19 individual months.

 

By Judith Loeffler

Labour TO USE

As political parties are getting ready for next year’s general election, Labour has unveiled some of its key ideas related to the rental sector over the last few months. To tackle the ‘cost of living crisis’ Ed Miliband announced that Labour would

  • cap rent increases in the private sector
  • push for longer, securer tenancies
  • scrap letting fees to be paid by tenants

On capping rent increases BBC reports ‘Mr Miliband said tenants need greater protection and predictability regarding their monthly outgoings. (…) While landlords would still be able to increase what they were charging following changes in market conditions, there would be an ‘upper ceiling’ to prevent rent hikes out of step with the overall market.’

The intent is furthermore to extend the default tenancy from one to three years. After an initial six month probationary period, tenancy agreements are proposed to run for a further 29 months. Landlords would only be able to terminate the contract with a 2 months notice if the tenant breached their agreement, the landlord needed to sell, use the property for family purposes or if the property was to be refurbished.

Whilst housing charity Shelter welcomed these proposals, the Institute of Economic Affairs said rent controls would distort the market. Ian Potter, the Managing Director of the Association of Residential Letting Agents (ARLA) states: ‘I am deeply concerned that Labour has today announced a series of ill-thought through proposals which will have an adverse effect on tenants in the private rental sector. The proposals show a real lack of understanding of the rental market.’