Landlord Investor OCT 2015

OCTO

BER

2015

LANDLORD | PROPERTY | INVESTMENT

W R I T T E N B Y I N D U S T R Y E X P E R T S C O V E R I N G A L L A S P E C T S O F B U Y - T O - L E T

letting to students:what you should Know

- Tom Entwistle

Manchester:every buy to let investors dreaM

- Christine Schulz

- Steve Cox

the roller coaster ride continues:the story of buy to let

landlord investorCELEBRATES FIRST BIRTHDAY

HAPPY 1ST BIRTHDAY

C O N TA C T S H A W B R O O K T O D A Y

T 01277 751 112

[email protected]

W W W . S H A W B R O O K . C O . U K

ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT

S P E C I A L I S T

B U Y TO L E T

S H O RT T E R M LOA N S

& R E F U R B I S H M E N T S

C O M M E RC I A L

I N V E S T M E N T S

T R A D I N G

B U S I N E S S E S

T R A N S P A R E N T

L E N D I N G

Our commitment to sustainability and transparency has delivered over £1bn

in lending to property professionals, investors and SMEs.

Shawbrook helps property professionals succeed:

• Transparent finance underpinned by a responsible lending framework

• Personal, case-by-case approach to funding

• Clarity of fees and charges across all products, at all times

• Broad range of competitive short term and term products

• Lending available for individuals, LLPs and Ltd companies

MOST INNOVATIVE LENDER

2013 & 2014

BEST COMMERCIAL MORTGAGE PROVIDER

2015

Awards 2014

BEST SERVICE FROM A COMMERCIAL

MORTGAGE PROVIDER 2012, 2013 & 2014

COMMERCIAL LENDER OF THE YEAR

2013 & 2014

210x297_SB_CM_Transparent_Q2.indd 1 06/05/2015 13:21

landlord investor October 2015

06

2428

1814

38

3034

20

welcoMe to the birthday issue of landlord investor!We are celebrating our 1st Birthday this month and I cannot believe how quickly the year has gone! I would like to thank all our contributors, feature writers, advertisers and indeed our designer Craig Edmonds for all of the hard work that goes into producing this magazine each month, we hope you have enjoyed reading each issue.

We had our 25th Landlord Investment Show on Thursday 24th September in North London. The day was extremely busy from start to fi nish with over 500 Landlords & Investors in attendance. The exhibition room was buzzing all day long and delegates were greeted by over 40 exhibitors covering all aspects of buy to let. A big thank you to everyone who attended, as well as our exhibitors and guest speakers! In this month Tom Entwistle explains the roller coaster ride that Landlord face, Christine Schulz explains why Manchester is every buy-to-let Investors dream and Steve Cox explains everything to consider when renting to students.

Our October events include: Manchester Landlord Investment Show – Thursday 1st October – Old Traff ord Football Stadium Maidstone Landlord Investment Show – Thursday 22nd October – Mercure Hotel We hope you enjoy this issue, happy reading and we look forward to see you at one of our events soon!

www.landlordinvestmentshow.co.uk

C O N TA C T S H A W B R O O K T O D A Y

T 01277 751 112

[email protected]

W W W . S H A W B R O O K . C O . U K

ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT

S P E C I A L I S T

B U Y TO L E T

S H O RT T E R M LOA N S

& R E F U R B I S H M E N T S

C O M M E RC I A L

I N V E S T M E N T S

T R A D I N G

B U S I N E S S E S

T R A N S P A R E N T

L E N D I N G

Our commitment to sustainability and transparency has delivered over £1bn

in lending to property professionals, investors and SMEs.

Shawbrook helps property professionals succeed:

• Transparent finance underpinned by a responsible lending framework

• Personal, case-by-case approach to funding

• Clarity of fees and charges across all products, at all times

• Broad range of competitive short term and term products

• Lending available for individuals, LLPs and Ltd companies

MOST INNOVATIVE LENDER

2013 & 2014

BEST COMMERCIAL MORTGAGE PROVIDER

2015

Awards 2014

BEST SERVICE FROM A COMMERCIAL

MORTGAGE PROVIDER 2012, 2013 & 2014

COMMERCIAL LENDER OF THE YEAR

2013 & 2014

210x297_SB_CM_Transparent_Q2.indd 1 06/05/2015 13:21

3

Buy-to-Let AnalysisExpert Advice

Industry UpdateLettings & Management

AuctionsFinancial

Leasehold ExtensionsTax Advice

Student Accommodation

contents

Tenants History LTDSouthbridge HouseSouthbridge PlaceCroydon CR0 4HA

Statements and opinions expressed in articles, reviews and other mate-rials 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 Limit-ed 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.

editorialEditor

Tracey [email protected]

Editorial Contributors

art dept.DesignCraig Edmonds

AdvertisingBeverley Meliniotis

contact0208 656 5075

landlordinvestmentshow.co.uk

/LandlordInvestmentShow

@LandlordInShow

Christine SchulzDavid HumphreysKatrine Sporle CBELee AlbinoLouie BurnsNick GillPeter LittlewoodScott HendrySpencer RoseSteve CoxTom EntwistleWayne Treveil

Tracey Hanbury | EditorLandlord Investor

Tracey Hanbury

HAPPY 1ST BIRTHDAY

October 2015 landlord investor

Meet the teaM show locations

if you would liKe any inforMation about our 2015 shows, Please get in contact with a MeMber of the teaMor alternatively, visit our website at: www.landlordinvestMentshow.co.uK

october 1st - ManchesterManchester united football club

october 22nd - Maidstone - KentMercure great danes hotel

noveMber 19th - londonolyMPia conference centre

noveMber 4th - south coastsouthaMPton football club

tracey hanburyeditor & sales directorT: 0208 656 5075M: 07931 308 [email protected]

steve hanburydirectorT: 0208 656 5075M: 07429 683 [email protected]

les hanburydirector

ryan denningtonsales & events Manager

T: 0208 656 [email protected]

beverley Meliniotisadvertising sales Manager


beth littlewoodsales & events Manager


craig edMondscreative designer


fran robinssales & events ManagerT: 0208 656 5075M: 07950 284 [email protected]

4

All together now.

Buy-to-let and commercial mortgagesIrene Thomas

Auction fi nanceScott Hendry

Secured loansNick Jones

For professional use only.Together is a trading style of Auction Finance Limited. Auction Finance Limited is registered in England and Wales - Company Registration Number 04949929. Registered o� ce address: Lake View, Lakeside, Cheadle, Cheshire SK8 3GW.

If you liked us as Auction Finance, you’re going to love us as Together. As a group, we’ve been lending for over 40 years and we’re able to help with bridging fi nance, residential mortgages, secured loans, commercial and buy-to-let mortgages.

There’s a new name and still the same expert knowledge available in person at auctions up and down the country. Good property doesn’t hang around, so neither will we when it comes to securing your funding. People, not computers make our lending decisions. It’s just common sense.

For fast, fl exible auction fi nance call the auction team on 0161 933 7155 For other products visit togethermoney.com

Residential mortgagesTracey Bailey

Residential mortgages

Bridging fi nanceChris Baguley

October 2015 LANDLORD INVESTOR

Manchester is a city that is truly flourishing: as of late, it has been voted the Most "liveable" city in the uK.This great city has something on offer for everyone, be it watching a football match at the grounds of Manchester United or Manchester City, catching a show or a concert at one of its many famous venues, enjoying a superb shopping trip to Manchester Arndale or the Trafford Centre, paying a visit to a trendy café or popular bar, or enjoying a meal in one of its many renowned restaurants.

But that’s not all. Thanks to its selection of go-to destinations, Manchester’s economy is booming. The city received one of the UK’s largest Devolution Deals last year, worth £1bn, in line with Chancellor George Osborne’s Northern Powerhouse Initiative to even out the imbalance between the country’s economic and financial north-south divide. Hereby the city’s government gained more power over decisions over the budget for the likes of infrastructure, housing and transportation, to tailor these to the city’s specific needs and requirements.

Manchester: every buy-to-let investor's dreaM

Christine Schulz - Knight Knox

If you're looking for the best place to invest in buy-to-let property, look towards the North West of the country - in particular towards Manchester.

buy

to l

et a

naly

sis

6

LANDLORD INVESTOR October 2015

Additionally, Manchester is seeing a lot of regeneration projects taking place over the next few years, such as Airport City or the highly anticipated and hotly discussed HS2 Speed Railway Network, along with a broad selection of regeneration schemes throughout the city. In fact Manchester is said to be the nation’s favourite destination in terms of foreign investment outside of London, having attracted a total of over £1bn worth of property investment alone over the past few years.

but why exactly is Manchester such a thriving buy-to-let destination? According to HSBC, Manchester is Britain’s top buy-to-let hotspot, yielding its investors as much as 7.98%, the highest returns in the country. Comparatively, the capital’s property market is slowing down as house prices skyrocket to new extremes, causing families and professionals to seek out more affordable cities to live in. Due to extreme house prices locking people out of homeownership, demand for rental accommodation is growing, causing rental prices to rise in line. In general, it is estimated that investors in the capital’s buy-to-let market are seeing yields of approx. 6%, a lot lower results compared to top-performing regional cities such as Manchester and Liverpool. Whilst these northern cities typically have lower house prices, they are simultaneously seeing growing rents due to strong demand for rented accommodation in their city centres.

In addition to people flocking out of the country’s capital, businesses are also increasingly toying with the idea of leaving behind the extreme house prices in the London property market and re-locating their offices to more affordable major cities such as Manchester. An example of this is the BBC and ITV, who have both moved their headquarters to the Salford Quays area of Greater Manchester.

However, it is particularly the demographic of young professionals that are turning away from the capital in favour of regional cities like Manchester, Liverpool and Leeds. The country’s house-price gap between the north and south has widened dramatically: nowadays the price of a detached house in London has increased to £849,653, meaning that for the price of one detached house in the capital, you would be able to purchase a total of four in Manchester.

Due to their preference for flexible tenures and central city centre locations, young professionals have changed the landscape of Manchester’s property market: buy-to-let properties today make up in excess of 25% of Manchester’s total housing stock, more than anywhere else in the UK. Additionally Manchester’s student population of over 70,000 is causing the rise in demand for rented accommodation.

Looking forward, it is estimated that Manchester is set to see even more positive changes: economically, Manchester is set to create as many as 5,000 additional jobs every year, as it will increasingly position itself as the leading force of the Northern Powerhouse. Its overall population is forecasted to increase by as much as 125,000 over the next decade thanks to a thriving economy and overall increase in student numbers.

With Greater Manchester’s economy and population both set to increase, 10,000 new homes will be needed each year to meet the increasing demand for housing stock. Yet the Government continues to struggle to meet the the demand for rented accommodation in the city. This presents a favourable market opportunity for property developers and savvy investors alike who are increasingly realising the market potential of Manchester’s thriving buy-to-let market.

Given that Manchester is the preferred investment destination outside the capital, with more international businesses and thus an increasing numbers of jobs and people coming into the city, Manchester has become one of the fastest growing cities across the UK. ⌂

buy to let analysis

7


exPe

rt a

dvic

e

8

the roller coaster ride continues as the uK's Private rental sector (Prs) goes through yet another Period of its develoPMent; a Period of change and challenge for those involved.You could say it's an exciting time, if you're one of the winners, but for some it could be a bitter sweet time.

Will the good times continue, or will the weight of an increasing regulatory burden, a less favourable tax regime and concerted anti-landlord media cam-paigns finally “turn the tide” and start another long-term decline in the buy-to-let market?

Since the recession hit in 2007/8, apart from a minor blip, the private rented sector has fared extreme-ly well: buy-to-let has just had its best year for new investment since before the panic, so much so that the Chancellor, in his post-election Summer Budget, took serious steps to cool the market down.

The Government and the Bank of England were get-ting “twitchy” about the success of buy-to-let, despite the dire need for housing, because of the amount of money out on loan to landlords. They feared that a small rise in interest rates could result in serious problems for the banks if landlords struggle to ser-vice their debt and consequently there’s a landlord stampede out of the market, causing property prices drop suddenly.

the story of buy-to-letTom Entwistle - LandlordZONE


exPert advice

9

the regulatory burdenA raft of new regulations affecting buy-to-let came into effect from the 1st of October and most oner-ous of all, “Right to Rent” immigration checks are on the way. So, couple this with the Budget measures, the serious tax changes curbing mortgage interest relief and the wear and tear allowance, and you have in prospect a more challenging environment for the average buy-to-let landlord going forward.

The Deregulation Bill 2015, which ironically adds a slew of new regulations to the private rented sec-tor (PRS), introduces measures which will restrict the eviction of those tenants that can show that so called “retaliatory eviction” is threatened, when re-pairs have already been reported.

Efficacious as this may seem, there will inevitably be those tenants who try to use this to their advantage, and therefore landlords will need to have manage-ment strategies in place to stymie any attempt at this. We will be publishing some guidelines to help landlords with this in the near future on the Land-lordZONE® website, and useful control documents can be downloaded here: http://www.landlordzone.co.uk/documents

There will at least be welcome changes to the sec-tion 21 notices, which should simplify the process of serving a valid s21 notice. It should help prevent the many errors which occur with this process resulting in many eviction claims being thrown out because of technical defects in the notices, particularly wrong end-dates.

Other not so welcome changes mean that landlords and agents will need to provide tenants (and also for court possession claims) with current Gas Safety and Energy Performance Certificates (EPC), along with proof of timely deposit protection, correctly served deposit statutory notices, and of course the letting agreement itself. There is also a requirement to pro-vide tenants with the current version of a Govern-ment (DCLG) booklet on “How to Rent” at the start of every new tenancy. Those landlords with licensable HMOs will also need to show a current licence is in place. There is also the possibility that mandatory li-censing will be extended to all shared accommoda-tion in the near future.

All relatively straightforward and some would argue sensible measures, but taken together they repre-sent a lot of administration work for landlords and agents, which if not done correctly can result in very costly legal problems. Coupled with the less favour-able tax regime going forward, the result is likely to be some landlords running for the exit and, inevita-bly, tenants paying more in rent.

But some want to go further. Changes coming in Scotland and Wales could bring in even more restric-tions on landlords and move back to a more “tenant friendly” pre-deregulation era. The Scottish Govern-ment has recently completed its second consultation on reform of private tenancy legislation.

The Scottish and Welsh governments are consider-ing ways to give tenants more security by limiting the landlord’s right to recover possession and allowing longer lease terms. What is worrying for developers and investors with large schemes under way is that these regimes are toying with some measures to control rents, a move which is not lost on campaign-ers in England.


exPe

rt a

dvic

e

10

buy to let - a Major industryBuy-to-let is now a mainstream industry vying with the motor industry in size, albeit consisting of lots of small-scale landlords, most with just one or two properties, housing 4.4 million households in En-gland. 95% of all private residential landlords in Brit-ain own between one and four properties according to one private landlord’s survey carried out in 2010.

Although the quality of privately rented housing has improved markedly over the past decade, with sur-veys showing that 84% of private renters are satis-fied with their accommodation, and staying in their homes for an average of 3.5 years, there’s a hard core of rogue landlords that have brought the regu-latory and media spotlight upon the industry.

anti-landlord Media caMPaignsListen to the emotive rhetoric from the left-wing of politics and you would think landlords were the scum of the earth, the scourge of tenants, rather than people investing their hard-earned cash, their savings and borrowings, into renovating dwellings to let out which benefit the whole community.

Here is a sample from Bright Green, a “green pro-gressive movement” and other similar press:

“In 1988, Margaret Thatcher scrapped rent controls… laws limiting the amount landlords can charge in rent that had been in place since 1915. And it’s been a di-saster."

“Sky-rocketing house prices mean few can buy, the demolition and privatisation of social housing mean waiting lists are decades long, and so the young and the poor have nowhere else to go but to rent."

"The size of the sector has exploded, and rents have exploded with it. Rents are now so high that tenants become completely trapped… driven into poverty and homelessness by the greed of private landlords."

"In the UK private landlords make £77.7 billion pounds a year, four billion more than the entire GDP of Morocco. They are also subsidised to the tune of £26.7bn in tax breaks and housing benefit. The cost of landlord subsidies to Britons is £1011 per house-hold."

Shelter says it conducted a survey of 3,792 renters and found 60 claimed their landlord or letting agent had been abusive towards them or another tenant in the last year. (It appears the organisation, which relies on charitable donations from the public and other organisations, simply extrapolated their survey figures to the total landlord-tenant populations us-ing the English Housing Survey and Census data to arrive at the figure of 125,000 tenants being abused.)

This kind of rhetoric from campaigning groups, and most noticeably The Guardian newspaper, has gained traction within the public psyche. House pric-es have been driven up through a shortage of sup-ply, through no fault of buy-to-let landlords, but still, this kind of publicity does little to help those land-lords trying to earn an honest living. It leads to this kind of comment:

"I am currently a provider of affordable accommoda-tion, but increasingly demanding tenants (whose dis-satisfaction with perfectly decent properties is fuelled by anti-Landlord propaganda) combined with the imposition of ever more costly regulations, Local Au-thority licensing schemes and so on, are taking their toll on returns… This has led me to consider taking my properties out of the private rental sector and into holiday lets instead."

(Recent comment on LandlordZONE®)


the worKing landlordWe’ve moved on from the days of the “landed-gen-try” landlord. Now the average Joe can own a buy-to-let portfolio; one which provides a public service, by providing much needed housing for a flexible workforce, while at the same time a safe and secure income and pension pot for the enterprising man in the street. This is all funded through private money that social housing providers – councils and housing associations - have failed to match by a country mile.

One hundred years ago the private rented sector (PRS) consisted of wealthy private investors owning around 90 per cent of all British homes. From the war time measure of rent control brought in in 1915, until the 1988 Housing Act, the PRS went into termi-nal decline. After all, what would-be landlord would put their hard earned cash into property for rent when the law prevented them from ever getting their property back, but forced them to maintain it on a peppercorn rent, with not a prospect of an economic increase?

Consequently, over a 75 year period, until the then Thatcher government de-regulated the PRS in 1988, rent controls, right to buy, lifetime security of ten-ure for private tenants, and a big increase in council house supply effectively killed off the private rented sector. In the 1970s no new private rentals were coming onto the market and tenants were desperate for homes. When I started letting property, an ad-vertisement in the local press would bring up to 30 telephone enquiries on day one, the shortage was so severe.

the buy-to-let booMThe post deregulation turn-around in the last 25 years has been dramatic. Growing from less than 10% of all housing in 1990 the private rented sector now represents just short of 20% and heading for 25% over the next 5 years. The growth in demand for private renting in a growing economy has been largely met by private “buy-to-let” landlords.

During that same period, demographic and social changes; rises in house prices, student loans and an increasingly mobile work force, with a far greater number of temporary workers from overseas, have meant that the average 30-year-old was an owner as recently as 10 years ago, but is now a renter.

The situation is unlikely to change over the next 15 years, so despite the noted threats, the prospects for buy-to-let and the private sector still look extremely good. To quote John Tovey, John Laing’s boss:

“The population is growing out of control, there’s go-ing to be another 15m people in Britain over the next 15 years, that’s equivalent to two new cities the size of London now… what are we going to do to house, transport and take care of these people?”

The recent changes may discourage some private buy-to-let investors. The recently announced tax changes (restricting mortgage interest relief to 20 per cent) as well as the confirmed or threatened stream of regulation, but the PRS is now just too big and too important to be allowed to fail.

In the meantime, part of the housing market solution may come from the emerging “build for rent” (BFR) sector. This form of PRS sees pension funds and oth-er institutions financing large scale development of new housing specifically built for rent, not for sale.

This can be seen in London where a new wave of government incentivised investment and develop-ment in the PRS sector is taking place. There is no doubt that this is a good thing to keep rents reason-able for the current and next generation of work-force in London who need to be accommodated to keep the capital’s wheels turning - schools, hospitals, public transport and so on.

exPert advice

11


exPe

rt a

dvic

e

12

Despite all the hysteria over shrinking property own-ership, the rise of a strong, well-run private rental sector is to be encouraged and does present lots of opportunities for private as well as corporate in-vestment. It is important therefore that the diverse interests of parties either living in or involved in this growing sector are considered carefully by all gov-ernments, as only then will it thrive.

From a consumer’s perspective, there’s a lot of work to do in changing expectations so that renting is viewed as a viable, safe and sustainable alternative to home ownership. The product needs to evolve and adapt to meet the needs and aspirations of “gener-ation rent”, without too much market interference from government. For today’s landlords keeping up-to-date with and complying with the increasing regu-lation and standards will be challenging enough, but it is achievable.

There is no doubt that there needs to be a shift to-wards a more professional private rental sector as demand for rental properties increases. Local au-thorities and government need to redouble their efforts to drive out the rogues, without making life intolerable for the responsible landlords.

what of the future?Will buy to let be sustainable given what’s been said already? There is no doubt that the Chancellor’s buy-to-let property tax regime changes are a bit of a game changer. But the lenders, whose money it is that’s at risk, still seem pretty sanguine:

Joe Macklin, senior manager, risk & analytics at MIAC Acadametrics:

“…it is difficult to conclude that the sector is more exposed to default risk than other mortgage sub sec-tors. The buoyant rental market coupled with bor-rower’s resources as a backup means there is built-in default resilience. Whilst lending criteria stays as prudent as it is today, and challenges remain with getting on the bottom rung of the housing ladder, the BTL market will continue to prosper.”

A Government drive for a large institutionally fund-ed house building programme is unlikely to be the whole solution to the housing shortage; private rent-ing by the small scale-landlord will still be extremely important to government and the nation.

The finance writer Bob Panell for the Council of Mort-gage Lenders (CML), says:

Even if government policy helps to deliver the 250,000 or so homes needed in England (and 300,000 in the UK as a whole) over the next decade, 90% or more of the housing stock that will exist in 2025 has already been built, and is being lived in by somebody. Gov-ernment measures that nudge towards better use of the current stock could contribute materially to the supply-demand picture.

Property prices look set to remain stretched relative to incomes because of this long-term imbalance be-tween supply and demand. And the widening gap between house prices and earnings has been exac-erbated by low inflation and interest rates, therefore keeping property ownership out of reach for many people. Private renting is here to stay, and whatever measures the bureaucrats bring in, they will need to be tempered by these realities. ⌂

Tom Entwistle is an experienced landlord and Editor of the LandlordZONE® website.

®

Professionals Rely on TenantVERIFY®

Established - 1999 - 0845 260 4421 - TenantVERIFY.co.uk

TenantVERIFY®

for Landlords & Letting Agents Credit Checks & ReferencingWe verify thousands of Tenants and Guarantors for busy Landlords & Agents every year.

We pride ourselves on our First Class, Fast & Efficient Credit Checks & Referencing -Residential & Commercial Tenants, Guarantors & Limited Companies.

Basic Credit Checks within 2 hours, full Referencing Checks normally within 2 days, & International Checks within 5 days.

C

M

Y

CM

MY

CY

CMY

K

TV_LALS_v14-2.pdf 1 2/5/2014 9:52:43 AM


14

From 1 November 2015, Katrine Sporle CBE will take up the role of Ombudsman at The Property Om-budsman, taking over from her predecessor Christo-pher Hamer, whose nine year term comes to an end on 30th November.

Previously, Katrine Sporle was Chief Executive of the Planning Inspectorate for England and Wales (2003-2011), which involved being responsible for all aspects of the Government Executive Agency, 1000 members of staff and a £60m budget.

She was directly answerable to Parliament and reg-ularly reported to the Secretary of State for Commu-nities and Local Government (CLG), and the Minister for Housing and Planning in the National Assembly for Wales. “The scope for influence on the economic, environmental and social wellbeing of the nation as a whole was enormous, and exercised through im-partiality of decision making to the highest level of professional expertise” comments Katrine Sporle.

Prior to that, Katrine was Chief Executive of Bas-ingstoke and Deane Borough Council for eight years, controlling an overall budget of circa £58m. She pro-vided inspirational leadership to develop the poten-tial of the Borough as a whole, gaining a reputation for economic, cultural and social success.

Katrine Sporle’s role as the new Property Ombuds-man is to impartially review complaints made by members of the public against agents, based on the evidence submitted. The aim is to promote a resolu-tion in full and final settlement of a complaint.

Where the Ombudsman is satisfied that the actions of an agent have disadvantaged a complainant, and taking into account relevant parts of the TPO Codes of Practice, she will determine appropriate redress.

Upon appointment of the new Property Ombuds-man, Lord Richard Best OBE, Chairman of the TPO Council since 2009, commented "Selecting our Om-budsman is a key responsibility of the independent TPO Council and we are truly delighted to have se-cured someone with the breadth and depth of ex-perience - at local and national levels - which Katrine brings to this role.

Christopher Hamer is a very hard act to follow; but I am confident we have found a great successor. I know all TPO's members and well-wishers will join me in extending the warmest of welcomes to Katrine when she starts in November."

Bill McClintock, Board Chairman of The Property Om-budsman Scheme added: 'I welcome Katrine Sporle as the new Ombudsman and endorse Lord Best's comments. I believe her broad employment back-ground will be a huge benefit in performing her new role.' ⌂

indu

stry

uPd

ate

tPo announces new ProPerty oMbudsMan

Katrine Sporle CBEThe Property Ombudsman


www.bishopandsewell.co.uk

If it matters to you, it matters to us

We can assist you with a full range of legal services including:

• Landlord and Tenant • Extending your lease • Buying your freehold• Right to Manage • Commercial Property • Residential Property

We are committed to supporting our clients with all leasehold property matters and are proud of the outstanding reputation and knowledge of our team of legal professionals.

Please contact Mark Chick’s team for an initial discussion:

T: (+44) 020 7631 4141 E: [email protected]

Bishop & Sewell LLP59-60 Russell Square, London, WC1B 4HP

Mark Chick Partner and ALEP Director

View our massive range online at: www.mattressman.co.uk/contract* Orders over £45 qualify for FREE NEXT DAY DELIVERY made before 4pm Monday to Thursday.

With FREE Next Day Delivery* no matter how many mattresses or beds you need!

Call Us NOW for our Best Offers on: 0800 5677625

One of the Leading Suppliers of Beds & Mattresses with FREE FAST DELIVERY ACROSS THE UKWe can supply you and your business with;• Mattresses • Bed Frames • Divans • Pillows & more

TRADE SALESTRADE SALES

Pillows & more

With our

Custom & Special Sizes,

we are con� dent

we can supply You with

the beds you need at a

price that can’t

be beaten!

15


There are a lot of changes heading your way, but the Government keeps messing it up!

what is the governMent doing?

Peter LittlewoodSouthern Landlords Association

section 21There is a new Section 21 being released for use for new AST’s commencing after October 1st. First-ly the guidance notes to be used in conjunction will not be released until October 1st, so I can’t tell you what they contain; secondly, there is a major error in the legislation which might (but unlikely) make the planned release date late.

Assuming it still goes ahead, the points about the new Section 21 are:

� To be ‘prescribed form’, and same format for both types of tenancies (Fixed Term & Periodic).

� Cannotbeissuedinthefirst4monthsofthe tenancy.

� Must be used within 6 months of service – i.e., use it, or loose it;

� Landlord required to give tenant a booklet entitled ‘How To Rent’ with information about their rights;

� Invalid if no valid EPC; gas safety inspection report; correctly protected deposit; property licence (if required);

� Tenants will have statutory right to claim back over-paid rent if S21 used.

indu

stry

uPd

ate

16


retaliatory eviction: tenancies after oct 1st 2015

Where a tenant makes a complaint about the condition of a property in writing, the landlord will have to respond within 14 days in writing setting out what they intend to do about it and what the

timeline for doing this is.

If the local authority then serves an improvement notice or carries out emergency remedial action,

any section 21 notice already served will be renderedineffectiveandnofurthernoticecan

then be served for six months.

If the landlord (a) fails to reply or (b) replies by serving a section 21 notice or (c) gives a reply that is inadequate, then the tenant may complain to

the local authority who must inspect the property.

The new S21 has to be used on all AST’s commencing after October 1st, additionally can be used on any existing AST, and will have to be used

after 3 years (currently October 1st 2018).

coMMentsThe major error is that the legislation currently states thatwhereafixedtermtenancyendsandthenturnsinto a rolling or periodic tenancy the section 21 no-tice would only bevalid for four months from the date that it is served on the tenant.

This contradicts the Deregulation Act, which makes clear that the required period to regain possession of a property where a tenancy is a rolling or period-ic tenancy, should instead be four months from the date the section 21 notice expires.

The new format is quite easy to use, and the fact that it applies to all AST’s is a bonus. Previously a S21 to be used for Periodic AST’s had to expire on the last day of the period of the agreement. We were told that over 80% of these S21’s going to court were in-correct, generally because of the complication of this requirement;

If you intend to get a tenant to leave after 6 months, you will have to be very quick to issue this S21 on the firstdayofmonth5.Notethatwillyouhavetoallowtime for the actual service.

It is not clear if the booklet referred to has to be issued at the commencement of the AST, or at the timeof issueoftheS21.Welookforwardtoclarifi-cation of this.

Also, not clear if the EPC has not been issued at the commencement of the AST (as currently required) whether it can be arranged after the commence-ment, but prior to the S21.

industry uPdate

17


Whilst the legislation states it should be a working solid fuel heater, I would strongly suggest you in-cludeone ina roomwithanopenfire,even if it isnever used. I can see a zealous EHO claiming it is working.

Perversely this does not cover gas heaters, but the DCLG ‘strongly recommendone tobefitted’.Quitewhy they didn’t include them is beyond me.

green dealAmber Rudd, the new DECC minister has abandoned theflawedGreenDealpolicy.

However, the Energy Act is due to be enacted next April, which will lead to it being illegal to rent a prop-erty with an EPC rating of less than E after 2018. This was initially brought in in the basis there was no ex-cuse for landlords to improve their EPC rating be-cause it could (generally) be done free under Green Deal.

Additionally the EPC still has the Green Tick at the bottom to indicate work can be done under the Green Deal. ⌂

This also applies to the gas safety inspection report – butthatisacriminaloffencenottohave.

But the most important one is the Retaliatory Evic-tion part.

If a landlord gets a complaint about work to be done to the property they MUST respond in writing, within 14 days. The legislation states that the tenant should complain in writing, but I would strongly recommend responding to all complaints, no matter how they are received.

That response might be that nothing needs doing, or that the matter can’t be progressed in the 14 days – especially if quotes are required. The main thing is to get an ‘adequate response’ within 14 days, in writing.

Mandatory sMoKe and co alarMsFinally became law, but had a rocky ride because the House of Lords initially threw it out because the Gov-ernment hadn’t done enough to inform landlords. Forced through on the second reading.

This covers all properties, so make sure you adhere immediately.

AsmokealarmneedstobefittedtoeveryfloorofLetproperty. Any requirements for more alarms under Licensing law still apply.

Acarbonmonoxidealarmhas tobefitted ineveryroom having a solid fuel heater – i.e. wood burning stove;openfireetc.

indu

stry

uPd

ate

18


LANDLORDSGUARANTEED market rent for your property for up to 5 years – UK WIDE

Call Dave on 07412 487926 www.fastcompletion.com

BENEFITS TO YOU

• No voids• Guaranteed monthly payment• Property maintained and managed by us

HASSLE – FREE SOLUTION

FOR YOU

Landlord Accounting Services Self-assessment tax returns Rental property accounts Tax planning & advice

Lambert Chapman LLP is an approachable and independent practice of Chartered Accountants, Auditors and Business Advisors with offices in Braintree, Maldon and London.

We provide a full range of services to help private landlords file their tax returns efficiently and help property developers unlock their business potential by offering a one-stop-shop for all your accountancy and taxation needs.

Contact Nick Forsyth to arrange a complimentary introduction meeting to discuss your property portfolio.

Making life simpler for you Nick Forsyth: 01376 326266 [email protected] www.lambert-chapman.co.uk Offices in Braintree, London and Maldon

Contact Chris Harman to arrange a complimentary introduction meeting to discuss your property portfolio

Chris Harman: 020 7148 [email protected]

19


20

the Private rental sector continues to eMbrace technological innovation that enhances the services Provided by letting agents to their clients. However, Wayne Treveil, Founder and Chief Execu-tive Officer of Tenants Plus, noted one thread that remained unchanged which significantly affected all parties involved in a lettings transaction, “no system was available in the market that helped prevent letting transactions falling through due to failed referencing.”

He says. “After spending 15 years working in the lettings and property management industry, and being concerned about this situation, I have devel-oped a service that provides the solution.”

“Currently, referencing and credit checks are car-ried out after a viewing has taken place and an offer made. At this point the tenant has paid a holding deposit to secure the property as well as administrative and referencing fees that are gen-erally non-refundable. If the tenant fails the refer-encing there are significant delays and cost impli-cations for the letting agent.”

Tenants Plus provides pre referenced tenants to agents prior to viewings taking place as well as matching them with their available properties. Wayne says: “In a market that can be fairly com-plex, our service provides invaluable benefits for agents which will undoubtedly make their job much easier.

lett

ings

& M

anag

eMen

t tenants Plus, a uniQue new service for letting agents

Wayne Treveil - Tenants Plus

Tenants Plus, a new service that matches pre-referenced and credit checked tenants to properties available for let, has launched to the market increasing effi ciency and reducing costs for letting

agents during the renting process.


Agents can conduct viewings with peace of mind that the tenant is ready to go and

when an offer is accepted, there is no chance of a deal collapsing due to failed

referencing.

Pre tenancy admin and collection of documents, ID and references are

completed before viewings take place which speeds up the letting process.

Less time and delays waiting for referencing information to come back. If

an agent has an offer from a Tenants Plus tenant, its money in the bank.

The only cost to the agent is when they purchase a report from Tenants Plus

which they would only do after they have negotiated an offer. Agents do not pay for the lead and there are no monthly

membership fees.

21

benefits includeHaving only just launched, Tenants Plus is already marketing over 2000 rental properties in London, with this number growing daily, for those agents registered to use this unique marketing and tenant lead service.

Tenants Plus is not a property portal, the only peo-ple who can view the available properties are ac-tive tenants who have registered to find a property through Tenants Plus.

“We are receiving new agent registrations every day” confirms Wayne.

Getting started is simple. Agents need to create an account to set up a company profile. Once they have done this, they can either manually upload properties or it can be done via an automated data feed, and they are then ready to receive pre ref-erenced tenant leads from customers who have been matched to their properties.

For more information or to register please visit: www.tenantsplus.co.uk ⌂

lettings & ManageM

ent


24

"Our site has been successfully tested with great results. A number of bids have gone through and both tenants and landlords have been happy with their service and the outcome."

“We know our concept works, we know landlords and tenants want it, but what we now need to do is spread the word in order for us to develop the business further and re-launch. This is why we have decided to actively seek investors whether it’s via crowdfunding or through private investors.”

The property finding site enables landlords to upload their vacant properties whilst potential pre-qualified, referenced tenants can bid on the property they desire. All properties are advertised on Rightmove. AuctionLets offers all the online savings all the others do, but presents the ability to landlords to maximise their rental income, as well as offering tenants the chance to let the property they can afford.

Spencer continues: “Tenants bid for the property in a legally binding online auction, a new concept in the rental sector. They are pre-vetted so that they can only bid for what they can afford and have the ability to bid on multiple properties until they are success-ful. To avoid signing up for more than one property, prospective tenants are only able to be the current highest bidder on one property, once they are outbid

they can move onto another property. Landlords on the other hand, get the reassurance that the tenants bidding on their properties are quality pre-refer-enced tenants whilst having the opportunity to maxi-mise their rental income or let their property quickly. They decide a realistic minimum rent per month and simply sit back and wait for the bids to come in. They also control the end time of the auction and move-in date.”

Spencer believes that the market is now ready for a change and for AuctionLets to really ‘shake up’ the property industry. He says: “Tenants and landlords have been in the hands of agents, whether these are online or with a high street presence, for far too long now. It’s time for landlords and tenants to take a bit more control.”

For more information, visit www.AuctionLets.com.

If you’re interested in talking to someone about the possibility of investment, please contact Spencer on 020 8281 1010 or [email protected].

Due to the success of AuctionLets, Spencer has plans in place for AuctionSales next year providing further cost savings to buyers and purchasers. ⌂

auct

ions

auctionlets looKing for investors following a successful year in

business

Spencer Rose - AuctionLets

AuctionLets, which follows a similar easy-to-use format to that of one of the most popular mainstream auction sites, has been providing landlords with a unique alternative to the way property has

traditionally been let since its launch in January last year.

TO RECIEVE A HARD-COPY OF LANDLORD INVESTOR MAGAZINE:PLEASE EMAIL: [email protected] YOU WISH TO SUBSCRIBE TO THE HARD-COPY, OUR ANNUAL SUBSCRIPTION FEE IS £54.99 FOR 12 ISSUES. DIGITAL SUBSCRIPTIONS ARE FREE.

LANDLORD | PROPERTY | INVESTMENT

W R I T T E N B Y I N D U S T R Y E X P E R T S C O V E R I N G A L L A S P E C T S O F B U Y - T O - L E T

AUCTION | COMMERCIAL | COMPANY SPOTLIGHT | DEVELOPMENTS | EXPERT ADVICE | GREEN DEALINVESTMENTS | NEW INVESTORS | LANDLORD ASSOCIATIONS | LANDLORD INSURANCE | LEGAL

LOCAL PROPERTY MEETINGS | NEWS | TAX ADVICE


26

auct

ions

auction finance director scott hendry froM sPecialist lender together has established a rePutation nationwide as an industry exPert.With more than 20 years’ experience in financial ser-vices, and over 10 of those specializing in finance for auction purchases at Together, Scott deals with landlords and property investors on a daily basis and helps them find the funding solution that’s right for them. Here, Scott shares a few of his top tips for things that even the seasoned buyer needs to look out for.

He says, “Often properties which come up at auction may need more work, change of use, or some imag-inative and creative thinking to make them commer-cially viable – all of which an experienced property professional can take in their stride.

“However, as in any fast paced environment, there are ever-changing rules, regulations and circum-stances which even the seasoned auction bidder needs to remember to consider.

checK the legal PacKYou may have seen legal packs hundreds of times, but each one will have differences relating to the par-ticular property. Make sure you’ve read it carefully, especially the small print, as it’s often in these sec-tions where surprises such as covenants, restrictions and rights of access are noted.

don't get caught out by the six Month ruleBanks generally won’t lend on a property until it has been owned for six months. However, what is not as commonly known is that the vendor should also have owned it for at least six months. When buying at auction even seasoned professionals can be caught out by this, so it’s important to find out how long the vendor has had the property, otherwise it could be a problem with a high street lender.

together's toP tiPs for auction house

Professionals

Scott Hendry - Together


27

be aware of Potential issues with the ProPertyThere are some things which will immediately make funding more difficult, such as kitchens and bath-rooms which are not up to scratch and can be con-sidered unsanitary, or Japanese knotweed which can damage the property and make it very difficult to ob-tain finance from traditional banks. Knowing about these in advance means you can approach special-ist lenders, like Together, who are flexible when it comes to funding less standard properties.

checK the Planning consentsIf there is planning attached to a property, be careful to check when it expires. If it is due to lapse, don’t automatically assume you’ll be able to get it again. Check with the local planning department what the likelihood is of renewing.

hMo regulation Many property professionals look to auctions to pick up houses of multiple occupation or HMO in-vestments. These are growing in popularity amongst buy-to-let investors. However, you may not be aware that for larger HMOs, by law, the property has to be licensed with the local council. These licences usual-ly have to be renewed every five years and you can be fined up to £20,000 for renting out an unlicensed HMO. Each council has different rules and regula-tions for these licenses so make sure you speak to the local authority for your planned property bid about what’s required, to avoid any nasty surprises.

investigate any tenanciesIf the property you are planning to purchase is ten-anted, take the time to find out some background information about both the tenant and the tenancy agreement. Regulated or life tenancies can cause is-sues for finance as the tenant has the right to remain throughout their lifetime and can sometimes trans-fer the tenancy to a child, so you need to be aware of the specifics of the agreement.

“Our team are at auction houses up and down the country, so If you need more advice just come and speak to us - we’re always happy to help.” ⌂

Find out more about auction finance at www.togethermoney.com

auctions


28

fina

ncia

l

"fliPPing ProPerty" seeMs to be a PoPular activity...Both for those actively doing the “flipping” and also for those just thinking about entering this space in some way (which is essentially everyone), it’s a good bet that this concept has been around since the dawn of time where one caveman installed a ‘central fireplace’ at home and persuaded the couple a few caves down to part with a few extra mammoth hides at point of exchange.

Purchasing property and conducting some light re-furbishment to increase capital value for sale or to benefit from potentially attractive rental income re-mains a huge market - not just within the UK but on a global scale. For your average landlord, this type of investment is an important part of portfolio activity but this sector brings with it several challenges with sourcing appropriate finance being the most crucial.

There are a multitude of lenders operating in this space from the high street banks to the more spe-cialist lenders and challenger banks. It is important not to discount the alternative finance market out of hand as this avenue can often yield far more tai-lored, service driven products to suit the needs of the property investor.

Shawbrook is a well established challenger bank of-fering a suite of lending options for property inves-tors. Our range of Short Term lending products have been carefully designed with refurbishment in mind and provide a range of products for various levels including light and heavy refurbishment. Perhaps most interestingly from a customer point of view are the rates available on the range of Short Term loan products which start at 0.59%...

short terM finance: MaKing your Money

worK harder

Lee Albino - Shawbrook Bank


29

Shawbrook work exclusively through the intermedi-ary channel, using professional brokers as our route to market. This underutilized model brings a great deal to the table for customers wishing to source tai-lor made finance as it provides a whole market view across multiple lenders. With speed often being the driving factor in the short term lending space, (auc-tion purchases being just one example), the dedicat-ed Short Term Lending teams within the Bank have a reputation for their efficiency in dealing with brokers to secure the desired finance for landlords, investors and property professionals. Amongst several ‘service level agreements’ within the bank, one is the pledge to deliver terms backed with a credit profile assess-ment within 4 working hours - hugely attractive for customers wishing to move quickly.

An additional advantage is the ability to move the short term loan onto a term product once it reach-es maturity. The benefits are threefold – firstly this allows the investor to change their mind should the capital value not stack up as predicted (or if the rental income is too good to ignore), and tenant the property over the longer term. Secondly, should a mainstream lending institution have a problem with an aspect of the property that the bridging or short term lender has overlooked, the customer may be stuck with no exit at maturity – quite a serious pre-dicament.

Shawbrook provide this strategy for our short term loan customers offering security of exit. A final ben-efit is that there is no minimum ownership required. Typically, the high street lenders will insist on the property being held for at least 6 months before sale whereas Shawbrook do not. In fact even if you were to carry out your light refurbishment within a week, we are comfortable for you to swiftly re-finance - a refreshing product highlight bringing even more flex-ibility to the process.

Although we do not currently offer much for the first time investor and operate more with seasoned property investors, in no way should this be seen as a negative. The Bank is here for the long term and we are determined to build a sustainable future for our customers driven from a highly stable and service focused lending platform that is designed to deliver the best possible outcome. We have a commitment to transparency that ensures our customers are fully aware of all costs and fees associated with any given product, and all this is built within a robust risk frame-work that manages to retain a sense of the person-al. Even though we transact via the broker channel, there is always a Shawbrook voice at the end of the phone should you have any queries across existing or new property deals. ⌂

If you would like to talk through any potential invest-ments with the team, please contact our sales desk on 01277 751 112 or [email protected].

THE OVERALL COST FOR COMPARISON IS 12.8% APR. THE ACTUAL RATE AVAILABLE WILL DEPEND UPON YOUR CIRCUMSTANCES. ASK FOR A PERSONALISED ILLUSTRATION. ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. A BROKER FEE MAY APPLY.

financial


if you are a leaseholder trying to decide how best to Proceed down the Path of extending your lease, an inforMal offer froM your freeholder to do so Might seeM liKe a Perfect and tiMely solution. but, in My exPerience, nothing could be further froM the truth!Theseinformaloffersareofferedtoyoubyyourfreeholder when you want to extend your lease and aredesigned,atfirstglance,tolookasthoughyouare getting a great deal.

At Leasehold Solutionswe call these offers ‘TrojanHorse’offers;theylooklikeagiftbut,whenyoulookinside, the details can be catastrophic.

have you been offered an 'inforMal' lease extension?stoP! do nothing until you have read on...

Louie Burns - Leasehold SolutionsLouie Burns, Managing Director, Leasehold Solutions, and Partner, Leasehold Valuers,

explains the dangers of informal deals.

30

leas

e ex

tens

ions


freeholdersFreeholders, who are often property professionals and not ‘accidental landlords’, buy freeholds of buildings to make as much money as they can from eachleaseholdflatwithinit;iftheycanconvinceyouto accept an informal lease extension, it can turn into many thousands of pounds for them.

How do freeholders make their money? They make their money from some or all of the following:

brilliant deal! or is it? Byofferingtoextendtheleasebackupto99years,the lease would need extending again in 17 years - so the freeholder gets paid to extend the lease – AGAIN! Alternatively, youmight get offered a 125-year lease extension. Sounds better? Watch out for this common trick, as what your freeholder may have omitted to mention is that the 125-year extension starts from when the original lease was granted and theoffer isNOT the74-year leaseextendedup to125 years! If you are unhappy with this, you have no legal recourse to argue with your freeholder. You do not have the legal right to an informal lease extension – it is a take-it-or-leave-it deal.

what about ground rent?

If you extend your lease using your statutory legal right, the ground rent is reduced to zero. Informal offerswill contain details of ground rent; the offercould be £250 a year, doubling every ten years, instead of the original ground rent of £75 per year, doubling every 33 years. Which is actually £2,500 morethanitwouldhavebeeniftheflatownerhadexercised their statutory rights for the next ten years! The ground rent then increases as the lease ontheflatisextendedtimeandtimeagain.Thisisconsidered to be an onerous ground rent schedule andcouldaffectthefuturesaleabilityoftheflat.

Lease terms are also a very important consideration. If you extend your lease using your statutory rights, you are protected by law and your freeholder cannot alter the existing terms of your lease.

Licensing fees hidden in the terms of the lease

Service charge fees

The money you have to pay them for thelease extension itself

’Finder’s fees’ they get back from yourbuilding insurance

The ground rent you pay each year

Let’ssaythatyourflathasacurrentleaselengthof75 years. If you extend your lease by exercising your statutory legal right, the lease would then be 165 years with zero ground rent and it would be 85 years before the lease needed extending again. It would also be a reasonably cheap exercise as there would no longer be a ground rent element. Furthermore, theleaselengthissueswillhavebeenrectifiedonceand for all and therefore present no future value for your freeholder.

On the other hand, if your freeholder can convince you to take an informal lease extension, it can turn into many thousands of pounds. It’s worth remembering that you do not have any legal right to an informal lease extension.

So, what does an informal offer to extend a leaseback up to 99 years look like?

Typically, an informal lease extension could offersavings in excess of £1,500 in costs to extend and the associated fees. Furthermore, ground rent is reduced and the terms of the lease merely modernised (more of which later).

Oh, and they’ll complete the whole process in just three months instead of the minimum of 12 it would take on the statutory route.

31

lease extensions


If,however,youacceptaninformaloffer,youarenotprotected and your freeholder can make any changes they wish. If you think the terms of your lease will have little impact, think again! Your leaseholder can insist on additional licences to your lease that mean youwillhavetopaythemtoalteryourflatinanyway/sell it/rent it out/get satellite television, and so on. The list is extensive.

If you sign a new lease, with any new terms and conditions, it is now your reality and there is nothing you can do to remove them.

The other area to keep an eye on is timescales – and with this the tricks freeholders employ to make more money. By dragging their heels after making an offer, the time for you to extend usingthe legal process reduces, as the statutory route has very strict timescales by which all parties - your freeholderincluded–mustabide.Oftentheofferisthen withdrawn and the freeholder’s investment has risen by thousands of pounds.

Perhapsyouaresellingyourflatandhaveabuyerlined up, with everything resting on this lease extension. Freeholders have a tendency suddenly tofindamistakeonthevaluation,whichleadstoademand for a higher sum. The chances are you will just pay it; after all what choice do you have?

Asyoucansee, informaloffersand theassociatedprocess can be highly complicated. At Leasehold Solutions andour partner firm, LeaseholdValuers,we have spent 13 years empowering flat ownerstotakecontrolanddealwith informaloffersonanalmost daily basis. Whatever your predicament, we are sure to have seen it before and know all the tricks a freeholder will use. ⌂

For further information on how we can help you, please call us for a no-obligation conversation with one of our expert team:

Leasehold Solutions: 0808 1311 109 (Freephone) [email protected] www.leaseholdsolutions.com Leasehold Valuers: 020 8688 8984 [email protected] www.leasehold-valuers.com

32

leas

e ex

tens

ions


IDEAS EXPERTISE

Right-To-Rent Checking ServiceSafeguarding landlords from facing a £3k fine and five years in prison

üZero liability for landlords and estate agents

üFree access to our immigration helpline

üGuaranteed compliance with the Immigration Act

ü20% off your first ten right-to-rent tenant checks

üInstant turnaround – no delay on tenancy

üRight-to-rent certificate

Protect yourself today

0843 357 [email protected]

33


tax free rent:rePair vs iMProveMent

David HumphreysProperty Investor Online

rePair (renovation) versus iMProveMent. in last Month's article i talKed about generating tax-free rent by "renovating" ProPerty rather than use the terM "rePairing" ProPerty.My use of the word "renovation" rather than "repair" could lead to misunderstanding the rules regarding the treatment of tax-deductible maintenance & re-pair costs of properties being let.

In simple terms, the cost of a repairing a habitable property, except for a PPR before the 1st let, is tax de-ductible against the rental income whereas the cost of any improvement is only tax-deductible against any CGT liability arising on the sale of the property.

Some/most might think that “renovation” would inev-itably result in improvement but that doesn’t matter for our purposes except where the property was not habitable prior to works, when all works are an im-provement.

So, what exactly constitutes a repair or an improve-ment for tax-treatment purposes? Certain works such as re-decoration are always a repair, the intro-duction of the letters "re" indicate that the property has been/was decorated and now is being "re"-deco-rated", a repair, whereas the installation of a fixture/fitting that did not exist before, such as an extractor fan/shower would be an "improvement" and not tax-deductible against the rent but would be tax-de-ductible against any CGT liability, if and when the property is sold.

tax

advi

ce

Last month, I outlined a 5-Year Strategy of generating Tax Free Rent with NMLI (No Money Left In) the deals, allowing investors to perpetually develop their portfolios without relying on market-driven increases in value for re-mortgage purposes and ended the article by saying that, next month I would

look at the type(s) of property that is ideal for this strategy.

34


So, in simple terms, repairing/replacing what exists, walls, roof, fall into the "repair" pot whereas installing or upgrading what exists, therefore improving, falls into the "improvement" pot.

And yet there are some contradictions. Replace an existing 4 unit kitchen with 5 units is an "improve-ment. In the past you were able to split the cost, apportioning 4/5 to the "repair" pot and 1/5 to the "improvement" pot, but no more. If the renovation/repair includes any element of "improvement" the whole becomes an improvement with the full cost dropping into the capital pot.

And yet if you were to replace existing single glazed metal frame windows with double/triple glazed UPVC windows, which most would regard as an "improve-ment", the whole cost is deemed to be a "repair" and therefore tax-deductible, because, in the words of HMRC, you are using "modern technology". This rul-ing has been made by HMRC.

I often wonder whether HMRC would apply the same logic to replacing an old coal/wood burning open fire with an up-to-date gas-fired central heating system including a condensing boiler! Of course replacing an existing non-condensing boiler with a condensing boiler, now a requirement, would be tax-deductible.

In last month's article I said that the concept was rel-atively simple, it's the execution that is not so simple and generally speaking, requires knowledge on the part of the investor.

The aim is to achieve 2 objectives. 1, tax-free rent by carrying out substantial "repairs". Two examples, UPVC double glazing and re-roofing. 2, NMLI, no money left in the deal following re-mortgage.

For NMLI, read profit, the greater the profit percent-age, the greater your chance of achieving NMLI, also the higher the LTV (loan to value) that you are pre-pared to operate at, again, the greater the chance of achieving NMLI.

So let's look at numbers in simple terms. To achieve NMLI, the fixed up value must be greater than the overall cost of the project, which is the property cost, fixup cost plus transaction costs.

Take a fixed up value of 100 K, at 75% LTV (common-ly available) the overall project cost must be no high-er than 75K. Increase the LTV to 85% and the overall project cost can rise to 85K and still achieve NMLI.

It should be remembered that valuers, valuing for re-mortgage purposes, are generally more conser-vative in their assessment than is the case when the property is being valued for mortgage purposes to fund the purchase.

Also, the more you spend on repairing/renovating a property, the greater the percentage uplift. Buy a property for 50 K needing "refreshing", new kitchen, bathroom, redec and a few repairs costing say 7K, giving an overall project cost of 58K, including trans-action costs, is unlikely to value higher than 65K, un-less the buy price was a real bargain, releasing 55K at 85% LTV, 3K short of NMLI.

Whereas buy the same property, by type & location, for 34 K, spend 24 K on a much higher spec repair/renovation achieving a slightly higher fixed up value, after all everything is new, of 70 K then, at 85% LTV, a re-mortgage releases 59,500 against a project cost of 58K and NMLI has been achieved and you can move on to the next similar repeat project.

Now you need to have a high degree of certainty about both the type of property and the numbers.

In the last article I told you how to find locations that suited your budget, your buying cash pot, by looking at the auction results published by EIGroup.

Having identified your "investment location", next job is to put numbers to the various works that you are going to carry out using local labour & material rates, so much for the redec, re-roof, rewire, replas-ter, re-render, replacement kitchen, bathroom, heat-ing, windows, DPC, wall ties, rotten timbers. Note all the "re’s" and for "re" read "repair" for tax-deductible purposes.

tax advice

35


Next job is to identify a local valuer who is on the list (panel) of local mortgage valuers. What you need to know from him/her is what they "like" and equally "don't like" and the value they would place on your property properly fixed up to your pre-agreed/ex-plained spec.

When I started to develop tax-free, NMLI portfolios in the North East (County Durham), I used to work with Colleys. The deal was that we discussed in advance the repair/renovation spec that we would carry out in every property to achieve the maximum fixed up value. Before buying we had already agreed with our preferred lender that they would use Colleys for val-uation purposes.

On identifying a property that might work we got a fixed up desktop/drive-by valuation from Colleys, which gave us our buy/hammer price. Fixed up value less fixup & transaction costs, less re-mortgage de-posit. Taking the above example, fixed up value 70 K, fixup cost 24K, 85% LTV releases 59K, buy/hammer price 35.5 K.

The only way to increase the buy/hammer price, and increase your buying success rate, is to reduce the fixup cost accepting that there is little chance of achieving a higher valuation. This is why it is import-ant to cost every individual job, however small, and don't expect to increase the buy price by reducing the quality of your work. A reduction in quality will impact on the valuation and probably result in a loss of confidence on the part of your valuer.

Now we negotiated and dealt with the manager of the local Colleys’ office, which gave rise to an inter-esting situation. With one deal we got a drive-by val-uation from the manager at 60K but when we came to have the property valued, post refit, by the “local” Colleys’ valuer, responsible for the neighbourhood, she valued the property at 55K. No, I said, Mr Manag-er gave me a post refit drive-by based on the spec-ification that we have carried out of 60K, so please adjust your figures. The answer, No!

Back to Mr Manager, told him what had happened and asked him to sort it out, and sort it out he did. Came back and said that he couldn't override the opinion of his valuer because it was her name on the block and, as it was her location, she was more up to speed on values in that location than he was! Result our re-mortgage was based on 55K, so if you're going to use this strategy as a basis for your numbers it's important to double-check how reliable any post fix-up valuation is when it is being used in the buy price calculations.

It's also important to know whether your valuer has any prejudices that could/would impact on their opinion. In other words, start off with “look for and buy what your lender loves” and likewise, include what your valuer also loves.

At the end of the day the valuer always applies a few rules to keep himself out of trouble. All valuers assume that you will go belly up resulting in re-pos-session. So, in that case, will the property be easily lettable and easily & quickly saleable (at auction) to recover the lender’s money.

tax

advi

ce

36


tax advice

Next month I will go into much more detail on what is possible with different types of property in the UK, detached, semi, terraced, maisonette, flat etc, to gen-erate both Tax-Free Rent & NMLI but, in the mean-time, I want to leave you with another, virtually un-known, source of free valuable information to help in tracking down properties which are "fit for purpose", distressed needing fixing up, and that is the EPC Reg-ister. www.epcregister.com.

Whether a property is being sold through an estate agent or at auction, it has to have an EPC Certificate. In last month's article I referred to a property, a 2 bed semi in Hartlepool (lot 36) that sold for 35K. It had an EPC rating of "G", the lowest band, with a "po-tential" rating of "B", 2nd highest. Judging by the auc-tion detail pics, this property is capable of being lived in; judging by the EPC Summary, there is little that does not need repairing/renovating.

Google street view shows a tidy street of ELA semi’s off a quiet dual carriageway opposite more, possibly private, semi’s. Had it not been sold it would certain-ly be worth more Due Diligence including viewing because it would appear to be an ideal candidate for both aspects of this strategy, Tax-Free Rent & NMLI and right by sea at that, but but, is that a der-elict sewage works over the bank at the back of the houses!? ⌂

So what sort of property generally fails these tests? Some, but not all, flats over shops, houses/flats close to shops, property overlooking rail lines & major roads, property liable to flooding damage, property close to power lines, phone masts.

These are a few, but not all, and don't include a lo-cal valuer’s personal idiosyncrasies/prejudices. Two examples, I had a house in a quiet village down-val-ued because it was too close to a pub where there had been "trouble" in the past. Somewhat surprised I made enquiries locally and learned that the "trouble" referred to had been a single brawl between guys from rival villages and had taken place about three years earlier, also my house, was about 300 yards from the pub, though on the same road.

2nd example, the house was about 100 yards from a development of council houses which were now in the process of being extensively renovated because of the historic problems. With this example the valu-ation was 15% lower than a duplicate property that we had also bought and fixed up in the same street, in fact it was opposite this down-valuation. Suffice to say that we refused to have this particular valuer work with us anymore.

37


letting to students: what you should Know

Steve Cox - Alan Boswell Group

with a new university terM well underway it's highly liKely that you have been aPProached by or are already letting your ProPerty to students.

Letting to this audience is generally seen as a safe bet for property owners. While other letting markets can be unpredictable, the demand from students remains constant, is remarkably resilient and surprisingly lucrative. Steve Cox, Property Insurance expert from Alan Boswell Group, discusses what you need to consider when renting your property to students.

Steve Cox, Property Insurance expert from Alan Boswell Group, discusses some of the common issues when considering leting to students and tells you what you should know.

stud

ent

acco

MM

odat

ion

38


what students needThe majority of students won’t be able to affordexorbitant rents but they generally don't expect too much in return. A roof over their heads, somewhere warm, dry and secure where they can sleep, study and socialise is all they really need. Because they've only just left home and aren't earning they will expect a property to be at least partly furnished, with beds, desks in each bedroom and a sofa and chairs in the communal lounge. These don't have to be brand new, just robust; indeed, you should be prepared for an above-average level of wear and tear with a group of young people living together away from home for thefirsttime.

Pros and cons of letting to studentsStudents' reputation for rowdy and destructive behaviour is generally over-stated; The Young Ones was only a TV show and most of today's students are respectful and reasonably conscious of their responsibilities. However, you will need to make allowances for youth, inexperience and occasional over-exuberance. Noisy parties are an occupational hazard and complaints from neighbours must be dealtwithfairlybutfirmly.

On the plus side, if you get a reputation as a good landlord with the university accommodation agency then you'll have a regular flow of tenants withoutneeding to advertise. Remember, you'll generally only be renting for nine months of the year but the assurance of new tenants should make up for this, and you can use the summer months to carry out repairs and refurbishment.

your resPonsibilitiesYou will of course also need comprehensive landlord insurance, including contents insurance for items you provide, like sofa’s and furniture, plus buildings, liability and rent guarantee insurance cover. Some insurance companies are wary of insuring student properties but don't be tempted to conceal the nature of your tenants. If you do have to claim this could be considered withholding a material fact, and your insurers could refuse to pay out.

Check with the local council about your specificobligations as a student landlord. Most student houses count as multiple occupation in respect of gas, electric and fire safety regulations.Make sureyou check with your insurance company that they provide cover for a property where three or more tenants live (forming more than one household) and share a toilet, bathroom or kitchen facilities.

Alan Boswell Group are one of the UK’s leading experts in Landlords Insurance and can help arrange suitable cover for your buy-to-let properties. For further advice contact Steve Cox. ⌂

T: 01603 218031 M: 07766 715654 W: alanboswell.com/landlords E: [email protected] Alan Boswell Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority.

student accoMM

odation

39


for a long tiMe the choice of whether to furnish or not furnish rental accoMModation has left landlords divided.There are practical pros and cons to both sides of the argument. Landlords don’t want to lose out on tenants who don’t want to have to buy furniture; neither do they want to alienate tenants who already have their own things.

However, when it comes down to the wire, it has recently been revealed that tenants are willing to pay significantly more for a home with furnishings included. A Countrywide report highlighted the importance of furnishing to potential tenants- on average, a furnished apartment can charge 8.1% more, and a furnished house can expect 2.8% more, than an unfurnished property.

stud

ent

acco

MM

odat

ion to furnish or

not to furnish?

Nick Gill - Intus Lettings

40


Download all the FREE checklists a Buy to Let Investor will need

Independent expert advice on:

• Property prices, rents, returns and forecasts

• Analysing your buy to let

• How to buy property below market value

• How to choose the right buy to-let services

SEE OUR CHECKLISTS FOR ALL THE BUY TO LET HELP YOU WILL NEED

www.propertychecklists.co.uk T: 01652 641 722

if you would liKe to ProMote your coMPany to thousands of landlords,

investors and ProPerty Professionals

by utilising this sPace,

Please contact our advertising Manager beverley by:

eMailing:[email protected]

or calling:0208 240 4470 or 0208 656 5075

41


Money aside, furnished apartments also offer a host of additional benefits to landlords. For example on the whole, void periods tend to be reduced because tenants don’t need to organise removal companies, either taking their furniture in or out of the flat, which facilitates a quick change over and minimal losses of rent for the landlord.

Another advantage of furnished properties is how they appear when taking potential tenants on viewings. When considering a property, already having furniture, as well as more homely touches- a laid dining room table and a nicely made bed, allows tenants to imagine actually living there. On the other hand, an empty room may seem cold and less welcoming. Even if they have their own furniture, it is not always easy to picture it in an unfamiliar home, and this can leave potential tenants not choosing that property.

However, despite all the advantages of furnishing your property, it does not suit every type of tenant. It is crucial that a landlord thinks about what kind of tenant they expect to attract to their flat or house when making the decision of whether to invest in furniture for it.

Furnished properties favour students, who are unlikely to own any furniture themselves or are able to pay for it, and instead will pay more rent for fully-furnished accommodation. Similarly, young professionals are also attracted to already furnished properties so they can take advantage of the efficient

move-in procedures, making going from one property to the next a lot easier. On the other hand, a more settled couple or family for example, are more likely to already have their own furniture that they would like to bring with them to their new home.

As for the professional opinion- Nick Gill, Lettings Manager of Intus Lettings, an innovative national lettings and management company noted, “The buoyant rental market really favours furnished properties at the moment as tenants are looking for the perfect houses and apartments to move into quickly.”

“We are certainly seeing more interest in our furnished properties at the moment, particularly when it comes to students and first-time renters who are newly moving out of the family household and who don’t have the money to completely furnish their new home.”

Regardless of whether you have furnished or unfurnished properties in your portfolio, the ease with which they are rented out can certainly be helped by using an experienced lettings agent.

Contact Intus Lettings today for advice on managing your portfolio and to take advantage of a fantastic introductory rate. ⌂

stud

ent

acco

MM

odat

ion

42

For more information about the show and how to register your attendance, visit the website or call us on:

0208 656 5075 // WWW.LANDLORDINVESTMENTSHOW.CO.UK

“Connecting Landlords, Investors and Property Professionals”

LEGALSERVICES

TAX ADVICE INSURANCE MORTGAGES REFERENCINGINVESTMENT

OPPORTUNITIESSEMINARS DEPOSIT

SCHEMESLANDLORD

ASSOCIATIONSNETWORKING

OPPORTUNITIES

A FREE ONE DAY EVENT FOR LANDLORDS & INVESTORS COVERING:

SEMINARS DELIVERED BY

INDUSTRYEXPERTS

WE BRING OUR EVENTS TOBUY-TO-LETHOT SPOTS

ALL ASPECTS OF THE PROPERTY

SECTOR COVERED

WE HAVE ORGANISED 25+ SHOWS IN JUST

TWO YEARS

NETWORK WITH PROPERTY

PROFESSIONALS, LANDLORDS &

INVESTORS

THOUSANDSOF LANDLORDS & INVESTORS ATTENDING

BUY-TO-LETCOMPANIES

SHOWCASING THEIR SERVICES

22nd OCTOBER MAIDSTONE KENT4th NOVEMBER SOUTHAMPTON SOUTH COAST

19th NOVEMBER LONDON OLYMPIA

PLAN YOUR DIARY - REMAINING 2015 SHOWS

Our shows are supported by:

T H E U. K ’ S F A S T E S T G R O W I N G P R O P E R T Y R O A D S H O W

020 3096 5412

Documents

Landlord Investor OCT 2015