Li Magazine 46th edition

LANDLORD INVESTOR

WRITTEN BY INDUSTRY EXPERTS COVERING ALL ASPECTS OF BUY-TO-LET

LANDLORD | PROPERTY | INVESTMENT

46TH EDITION | 2019

Ken Livingstone joins panel debate OLY MPIA LONDON, 13 JUNE 2019

IN THIS ISSUE...

Government proposes to scrap Section 21 evictions

No landlord banning orders issued in first 12 months of new law

New enforcement team for fees ban

1+1=2 (except when it doesn't)

How to find private lenders to fund your property deals

T T he Po he Ti As M m f Tr st, P ail es eat ib r O , T ur es op nl he ed , p er ine T in lu ty , H ele : s m 11 u g an 8, P ffin rap y ro gt h, m p o or er n e. ty ..

LANDLORD INVESTMENT SHOW RETURNS 8 OCTOBER 2019

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I'm thrilled to welcome you to the 46 Edition of Landlord Investor Magazine. th

IN THIS ISSUE...

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SHOW UPDATE

May Birmingham show review

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INSURANCE Wow. How can it be our 46th Edition? How can it be summer already? How can the government still not have a plan for exiting the EU? So many questions, and we can't claim to offer answers for any of the aforementioned, but with the buyto-let market still providing a refuge for investors in times of uncertainty, I hope that LI Magazine (and Landlord Investment Show) can offer a degree of guidance to those seeking advice.

In this issue: Steve Cox shares the top 10 things to look out for with landlord insurance.

Simon Zutshi tells us how to find private lenders to fund your property deals. Paul Mahoney asks if it's time to regulate the property industry. Gavin Seaholme discusses the versatility of short term loans. Sandy Bastin explains why 1 plus 1 doesn't always equal 2. Tony Gimple muses that never in the field of British politics has so much been taken away from so many by so few. I welcome back Jackie HouguezSimmons and Ellie Broadhurst from Baya Financial to discuss bridging and short term mortgages. In PRS update I also discuss the introduction of an enforcement team for the ban on letting fees, how no landlord banning orders have been issued in first 12 months of the new law, and the reaction to the government proposal to scrap Section 21 evictions. Peter Littlewood has his usual round-up in Market Update and we review Rumble with the Agents, which has raised a staggering £19k for Make a Wish Foundation.

On the trail of the Landlord Investment Show we review the Birmingham event in Show Update and look forward to the next Olympia Show on June 13; especially in the light of former London Mayor Ken Livingstone joining the Future of the UK Housing Market debate, chaired by Andrew Neil. I'll be joining the Women in Property Debate, chaired by TV Presenter and property specialist, Sara Damergi, and Paul Mahoney will be Chairing the UK Development Hotspots Debate.

As always our events are completely free to attend, all you have to do is register.

Visit www.landlordinvestmentshow.co.uk to find out more and to subscribe to LI magazine.

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INVESTMENT

How to find private lenders to fund your property deals

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INVESTMENT

Is it time to regulate the property industry?

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FINANCE

The versatile short term loan

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TENANCY AND DEPOSITS 1 + 1 = 2 (except when it doesn't)

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JUNE SPOTLIGHT

Bridging and short term mortgages for investors

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TAXATION

Never in the field of British politics has so much been taken away from so many by so few

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PRS UPDATE

Tracey Hanbury

New enforcement team for fees ban

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LANDLORD INVESTOR MAGAZINE Editor Tracey Hanbury

Top 10 things to look out for with landlord insurance

MARKET UPDATE

The latest industry news

Editorial Contributors

Design Marc Riley

Steve Cox Simon Zutshi Paul Mahoney Gavin Seaholme Sandy Bastin Peter Littlewood Tracey Hanbury

Advertising Beverley Meliniotis

PRS UPDATE

No landlord banning orders issued in first 12 months of new law

Marketing Holly Maslin Ben Michaelis

Contact

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Follow us

Telephone: 020 8656 5075 landlordinvestmentshow.co.uk

@LandlordInShow

Tenants History Ltd, 27 Stafford Road, Croydon CR0 4NG

@LandlordInvestmentShow

Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers.

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

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CHARITY AND GIVING

Rumble with the Agents’ raises over £19k for Make-A-Wish UK

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PRS UPDATE

Government proposes to scrap Section 21 evictions

Meet the team TRACEY HANBURY EDITOR & SALES DIRECTOR T: 0208 656 5075 M: 07931 308 875 tracey@landlordinvestmentshow.co.uk

STEVE HANBURY INVE STME NT

DIRECTOR

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LAND LORD |

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Landlord Investor Magazine gives property professionals, landlords and investors monthly advice and information on the topics, news and legislation that matter to the industry.

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LANDLORD INVESTOR 46TH EDITION

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SHOW UPDATE

Landlord Investment Show, Aston Villa FC, Birmingham M A Y 15 T H 2 019

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LANDLORD INVESTOR 46TH EDITION

SHOW UPDATE

As the National Landlord Investment Show calender moves between destinations we look at the May 2019 Birmingham event at Aston Villa Football Club.

It’s easy to get stuck in a Londoncentric bubble when it comes to property investment, and from the cosy safety of LIS Towers it would be easy to fall into that trap. When we travel the country with the show it is however abundantly clear that the buy-to-let market is flourishing in the towns and cities of the UK.

LANDLORD INVESTOR 46TH EDITION

LI Magazine has reported many times about the opportunities afforded the shrewd investor in say Sheffield, Leeds or Manchester, but when we visited Birmingham on May 15th it was absolutely buzzing with those eager snaffle the knowledge and services on offer. With Brexit dominating the headlines the UK’s housing shortage has

all but disappeared from the news, but as we head towards becoming a nation of renters, opportunities in cities which aren’t as constrained by the short supply and astronomical prices of the Capital are highly attractive. Where better to start than the UK’s second City and over the next couple of pages we look at some of the Birmingham 2019 Show highlights.

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SHOW UPDATE

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LANDLORD INVESTOR 46TH EDITION

SHOW UPDATE

NEWS FL ASH

Ken Livingstone joins panel debate OLYMPIA LONDON, 13 JUNE 2019 We're thrilled to announce that Ken Livingstone, former Mayor of London, will be joining the Future of the UK Housing Market Debate at Olympia London, 13th June 2019 at 10am.

The former Mayor will be joining an esteemed panel of industry experts which includes Tony Gimple, Founder of Less Tax 4 Landlords and Steve Olejnik, MD of Mortgages for business.

LANDLORD INVESTOR 46TH EDITION

Famously left-of-centre politically, the addition of Ken Liviningstone should offer an interesting perspective to a traditionally conservative market.

crisis and the spectre of Brexit looming, this should be a stimulating debate.

As always our events are FREE to attend, all you have to do is register.

The Olympia Auditorium seats 450, but our debates are hugely popular so we advise arriving early to avoid disappointment.

With the political turmoil at Westminster, a continued housing

To find out more and register please visit www.landlordinvestmentshow.co.uk

We're also delighted to announce that Publisher and Broadcaster, Andrew Neil, will be returning as chair.

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INSURANCE

STEVE COX ALAN BOSWELL GROUP

Top 10 things to look out for with landlord insurance Comparing landlord insurance quotes can be hard work. You could put the policy documents next to each other and try to spot the differences – but what do you do if you have 20 or 30 to compare? How do you work out which one is right for you? Steve Cox, Business Account Manager at Alan Boswell Group, provides his top 10 tips to help you find the right landlord insurance for your buy-to-let property.

designed specifically for it. Make sure you seek out adequate landlord insurance and don’t leave things to chance.

4) Make sure loss-of-rent is included If your property suffers a claim, most landlord products should include cover to provide an income while the property is uninhabitable. If your insurance policy does not include this, you could end up out of pocket as the result of a claim.

1) Check for additional fees Some companies hook you with a cheap premium but charge hefty admin fees if you want to make changes down the line.

While checking the small print, it’s worth looking at the payment options and charges, because a cheap premium can get expensive if you’re paying monthly.

5) Ensure that malicious damage is covered Malicious damage by a tenant is surprisingly common. When comparing policy details, look for malicious damage cover. It may be included, but it can also be an add-on, depending on the insurer.

Make sure you’re clear about whether this is included before you buy a policy.

2) Get a UK-based claims service Insurance is a funny purchase; you buy it in the hope you never have to use it.

However, the claims process is where you see the true value of your policy. A key thing to look out for is a UK-based company that runs its own call centres and has control over the quality of its service.

3) Home insurance is not the same as landlord insurance Many landlords don’t realise they need specific insurance for their buy-to-let properties. However, home insurance is designed for owner-occupier properties, not tenanted properties. Although some home insurance products may stretch to renting out the property, they are not LANDLORD INVESTOR 46TH EDITION

6) Check excesses to avoid surprises Some claims occur more often than others and may have higher excesses applied as a result. Escape of water is the most common property claim and will often have a higher excess to cover these costs. There is generally a standard policy excess that applies, with specific excesses highlighted in your quotation documentation. Make sure you read them and be happy with what you’re signing.

7) Read the important conditions of the policy All insurance products have terms and conditions attached and it is essential that these are adhered to. An example is

the condition that a tenancy agreement is place. While this may seem obvious, if you’re letting to friends or family you may not put one in place. However, the failure to do so could invalidate your insurance.

8) Ensure cover for manufacture of drugs included This provides cover in the event that a tenant damages your property through drug production. Cannabis farms, for example, can lead to the destruction of property. Failure to insure against this could destroy your investment.

9) Review unoccupancy rules We would all love our trouble-free tenants to stay forever, but when the average length of a tenancy is under a year, the chances are you will have untenanted periods. Different insurers will cover different lengths of time. Some will give cover for up to 90 days, but others may immediately restrict cover.

10) Look at independent research The internet is a fantastic way of researching companies and products.

Check out whether the company you’re about to place your trust in has the trust of its customers and has a satisfactory claims experience. For instance, we’re proud of our outstanding, independent customer reviews, which you can read on independent review site Feefo.

If you’d like to know more about Alan Boswell Group Landlord Insurance visit www.alanboswell.com or give us a call on 01603 216399.

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To find out more about how our Real Estate Managers can support you, visit: barclays.co.uk/real-estate Let’s go forward

Barclays Business is a trading name of Barclays Bank UK PLC. Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 759676). Registered in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank UK PLC adheres to The Standards of Lending Practice which is monitored and enforced by The Lending Standards Board. Further details can be found at www.lendingstandardsboard.org.uk.

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INVESTMENT

SIMON ZUTSHI

How to find private lenders to fund your property deals

LANDLORD INVESTOR 46TH EDITION

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INVESTMENT

At some point most property investors will run out of their own deposit funds. When that happens, most investors just stop investing, but it does not have to be like that for you. In this article, I want to share with you some simple strategies which you can use, to not only find people with money, but also attract them to you, so that they want to lend to you.

Why do people lend money?

There are plenty of people who have money in the bank, which right now is not doing very much for them. With the rate of inflation over 2% and most people receiving less than 1% interest per annum from their Bank, it means that savers with money in the bank are literally losing money every day, as it is being eroded away by inflation.

Anyone with money in the bank right now, has a real issue. They are looking for alternative ways of getting a better return on their money rather than leaving it in the bank. This money might be savings they have built up over time, or from an inheritance, or sale of a business, property or shares. It does not really matter where it has come from, the fact is it's not working for them by leaving their money sat in the bank.

This is why the peer to peer lending platform www.CrowdProperty.com has been so successful, because it offers lenders the chance to earn a secured 8% per annum, on as little as £500, by lending their money to help fund property development projects. This secured 8% p.a. can even be tax free, if invested through the HMRC approved, CrowdProperty ISA. Why don’t they just invest in property?

Most people recognise that investing in property is a good idea from which they can make lots of money. That's why there are almost 2 million private landlords in the UK. These are people who have often invested their spare money into property instead of leaving it in the bank.

However, there are far more people, who have money in the bank and would love to invest in property, but they just don’t have the time, knowledge or inclination to invest in property. How do I know this? Well most of my students use other

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people’s money to invest once they have run out of their own deposit funds.

How do you find these people with money?

There are people everywhere with money, but the problem is most people in the UK don’t talk about what they have.

It is seen as rather uncouth to talk money.

In fact, I guarantee that you already know at least a few people, family, friends or work colleagues, who have got some money in the bank that you don’t know about, and why would you, because most people keep this to themselves.

You never know who might have money.

It is important not to judge people, or to make assumptions about who has money. Someone may have had no money for all their life, and then they inherit some money, or a property, from a family member and they don’t know what to do with it, so they leave it in their bank.

You have two choices First of all, you could start speaking to everyone you know. Don’t ask them directly if they have money, but instead ask them “Who do you know who might like to get a better return on their money?”. If you ask enough people, then you will find some people with money.

However, most investors don’t like asking people they know, because they are worried what they might say, or think about them, if they are asking for money.

If this is how you feel, then you need to get over it, and recognise that you can actually help your family/friends at the same time as helping yourself. It can be a mutual win win.

The only problem with asking people you know for money, is that they may not understand about property, or what’s going on in the property market right now, which means that they may be

nervous about lending you money to invest in property. This means you have to spend time and effort educating them about property and why now, is actually a good time to invest, as long as you know what you are doing.

Alternatively, you could start looking for people who have money and are already bought into the concept of investing in property, but don’t have the time, knowledge or experience to do it themselves. Where do you find these people? Well the best place is at property networking events or property seminars.

These people might be attending because they want to learn how to invest for themselves, but once they have learnt how to do it, they realise that they don’t have the time or don’t want the hassle, and would rather work with a more experienced investor like you. Sometimes people with money deliberately attend property seminars and networking events to find people like you with whom they can work.

Here is a big tip: If you are looking for cash rich investors, make sure you attend the paid for property seminars, that generally attract a better quality of investor, rather than one of the totally free property events, which are just full of sales pitches and attract all the wannabe investors, who often don’t understand about the value of investing in themselves.

Also if you can, always pay to go VIP because you want to be mixing with all the other people who have money and have also paid to go VIP. I always pay extra to go VIP at the events I attend, because I want to mix with the right kind of people, who invest in themselves.

Raising your profile When you meet people at property events you need to connect with them and start to build a trusted working

LANDLORD INVESTOR 46TH EDITION

INVESTMENT

When you meet people at property events you need to connect with them and start to build a trusted working relationship.

relationship. This can take time and so don’t expect someone to offer you £100k the first time they meet you. They need to get to know you, trust you and work out that you know what you are doing.

You can dramatically speed up the process of building your credibility by raising your personal profile. There are a number of ways of doing this.

Your social media is the easiest way to raise your profile. You need to let people know you are active in property.

Don’t keep it a secret. You also need to demonstrate your results. Posting pictures of your property on Facebook and Linkedin works really well. I am sure you have seen pictures of people holding keys in front of their new property. They may think this looks a bit cheesy, but it proves you are in the game. You could put up the Before and After pictures of your latest property project. Also post pictures of you and other investors at property networking events and training, as this show that you are investing in yourself. Don’t expect anyone to invest in you, if you don’t invest in yourself.

The next step to raise your profile is to get known at your local property networking meetings. Attend every month, arrive early and plan to leave late. Don’t spend all your time talking to people you already know. Make sure you

connect with and meet the new people who you don’t recognize. You goal is to become a recognized and trusted face at your local meetings.

can be very daunting. I used to hate it but with some training and practice it is not that bad and the benefits massively outweigh the fear.

At the property investors network (pin) meetings there is an opportunity for anyone to stand up for 20 seconds to introduce themselves and say how they can help other people in the room. This is a great opportunity to let everyone in the room know what you are doing and attract people to come and talk to you. Take this opportunity to raise your profile but make sure you prepare for it. Don’t just stand up to see what happens. Think about what you want to say and then practice it before the meeting. Remember first impressions are important, so you want to make the most of this opportunity.

And finally a fantastic way to raise your profile, to gain credibility and attract potential investors, is to be featured in a magazine like this. The editors are always looking for interesting case studies of how people like you have achieved success with different strategies. Many of my students have been featured in this publication over the years and they have often told me how they are contacted afterwards by people who want to work with them.

Even better is if you can be one of the official presenters at a property network meeting. By standing at the front of the room and giving a presentation about your journey, experience or a particular strategy, or case study, you can demonstrate your knowledge, experience and expertise. Everyone in the room gets to know you. The very fact that you have been chosen to speak automatically gives you some credibility. I know most people dread the idea of standing up in public and speaking to a group of strangers. It

So the message is, there are plenty of people out there with money in the bank, who would like to get a better return on their money. To attract these people to you, raise your profile, get out there and attend events and let people know how you can help them.

I hope this article has been useful and given you some more ideas about how to attract private lenders.

Invest with knowledge, invest with skill Simon Zutshi Author Property Magic Founder property investors network

Would you like to speak at a pin meeting?

At pin we are always looking for people to share their story and experience to add value to our network meeting attendees. If you don’t know what to talk about, or how to put your presentation together to give massive value, then I would highly recommend you attend our one-day speaker training. Learning how to speak and present is a highly valuable life skill. This is a full day of training, after which you will have the skeleton structure of your presentation, and know how to confidently present to any audience. We give you lunch and a workbook with all the notes. As usual with all of our 1 day events there is a 100% satisfaction money back guarantee. We limit this training to a small number of delegates to make sure you get the maximum benefit from attending. You will also be given the opportunity to deliver your presentation at one of our pin meetings. This training should cost thousands of pounds but is available for just £297 + VAT. We run just 4 training days per year. You can find out about dates and locations and secure your place here: www.propertyinvestorsnetwork.co.uk/speaker-training

LANDLORD INVESTOR 46TH EDITION

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INVESTMENT

PAUL MAHONEY NOVA FINANCIAL GROUP

Is it time to regulate the property industry?

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LANDLORD INVESTOR 46TH EDITION

INVESTMENT

With over 2 million landlords owning over 5 million properties in the UK which generates over £50 billion in rent per year and is worth over £1.5 trillion, is that not a market worth protecting from under qualified and quite often very misleading advice and guidance from unscrupulous and sometimes incapable individuals?

The fact that you can be a concreter one day and an estate agent the next without any qualifications and be viewed as an “expert” in your field, really concerns me! (nothing against concreters, it’s just the first example that came to mind).

Property is generally one of, if not the, biggest purchases we as individuals ever make and even if we’re building a portfolio and buying many of them, it’s still a very big decision every single time that should not to be taken lightly.

With all of the recent changes in the market with regards to finance, tax, management etc, I say very confidently that property is not a do-it-yourself (DIY) activity anymore. Property is also not a hobby, it is a business that requires an understanding of your current situation, your goals, a strategy for achieving them and careful implementation of that strategy as well as constant revision of the right strategy at various points in time.

Even before the changes, it used to shock me how many landlords I’d meet with that had done everything themselves on quite on an ad hoc basis without seeking much advice or guidance at all.

An analogy I often use for this is, if you jump in your car to drive to a destination but don’t know how to get there or have a map, then you’re very unlikely to get there. Also, if you don’t know what your destination is, then you’re quite unlikely to end up somewhere desirable.

Fair play to those that have done well without much planning but in my humble opinion, regardless of how intelligent or cunning you are, you can always benefit from qualified professional

LANDLORD INVESTOR 46TH EDITION

advice whether that be for someone to hold your hand every step of the way or just to use them as a sounding board and extra resource, over and above your limited resources as an individual.

We as individuals only have so much time, knowledge and experience, we’re limited by those factors whereas the right business that provides specialist advice in certain areas will generally have those resources in abundance compared to any one person and good advice is worth paying for to help you plug the gaps in your resources. What’s difficult in the property industry, is to know who to go to and who to trust for that advice and guidance.

I hate to be the “whinging expat” but, in Australia, which is where I am from originally, estate agents need to do the following as a minimum to be involved in the lettings, management, purchase or sale of property in any way;

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complete a qualification and certificate of registration gain experience working under a licenced estate agent

In summary, I’m a strong believer that the property industry could benefit from more qualification and registration requirements to raise the standard of professionals in the industry and give landlords and prospective landlords more confidence in those that they’re dealing with and more guidance on who to deal with.

If you have any questions or would like assistance with property selection, strategy or finance contact Nova Financial Group on 0203 8000 600, www.nova.financial or info@ nova.financial

If you don’t know what your destination is, then you’re quite unlikely to end up somewhere desirable.

gain their own licence to operate independently go through criminal record and fit and proper tests

This doesn’t necessarily mean that everyone that becomes an estate agent in Australia, is a saint but it does ensure they somewhat know what they’re talking about (due to the qualifications and experience) and keeps out some of the people that shouldn’t be in the industry.

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FINANCE

GAVIN SEAHOLME SHAWBROOK BANK

The versatile short term loan

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LANDLORD INVESTOR 46TH EDITION

FINANCE

At Shawbrook, we continue to see the many and varied ways that short term (bridging) loans can be used by property professionals and property developers, and how brokers and lenders should be increasingly focused on developing relationships that help this community on their short-term journey.

Despite historic general impressions of the short term/ bridging market being somewhat “quick and dirty”, this can often be a complex space requiring a deep level of expertise that must be deployed to fill a set of specific needs in support of investors operating in this area.

The bread and butter business of buying a property to carry out a light refurbishment, (the so-called “tart & turn” or “splash & dash”), continues apace with many opportunities still out there for investors to add value to properties. The value of advice can really shine in this space and the importance of a professional broker cannot be underestimated. Keeping customers informed across the lending landscape, ensuring they are aware of the various product innovations and improvements that frequently impact the short-term space is crucial to ensure property professionals can maximise their opportunities to build and grow.

Positively, this is a competitive space and as a result product innovation is frequent. To use an example, Shawbrook recently launched a product add-on allowing investors to access the cash necessary to complete the refurbishment works on a short-term project. The “Lending for costs” option provides the borrower with access to a bigger net loan, by allowing 100% of the cost of the works up to 85% LTV of the purchase price, and no more than 70% of the Gross Domestic Value (GDV).

This allows the investor the ability to fund all or part of the works – potentially something of real value for savvy investors looking to retain their cash.

When you add in the ability to service the loan, (evidence of the ability to service is always required), and the fact that the arrangement fee of 1.95% is added to the 85% loan (most lenders deduct it from their maximum LTV), it means the investor is required to put less cash into the project. As part of best practice, Shawbrook insist that the gross loan is capped at 70% of the GDV (end value), and if the exit is that the property is to

be retained within the portfolio, we check thoroughly that the rent fits to ensure the long-term sustainability of the project, thereby protecting both ourselves and the customer. We will always try to allow access to at least a few repayment options to ensure a viable exit and a good outcome.

Short term loans cater for innumerable investor requirements with a clever range of products available across a diverse lender spectrum.

Short term loans are used by many property developers with a standard requirement being the ability to purchase a property or properties where there is no intention of letting them out, but where the investor looks to obtain planning permission. In this circumstance we would also be able to assist with a LTV of up to 75% on residential property and 70% on commercial property at a rate of 0.7% for residential and 0.83% for commercial. With no minimum term or early repayment charges it is an efficient way of purchasing non-income generating properties.

Over the past few years and much more so over the last 12 months, we have seen property developers complete or nearly complete a development and require a re-finance away from their funder – the so-called “development exit”. This could be for several reasons; delays in the initial planning, issues with the actual build, the customer looking to release cash for their next development, the development lender wanting their debt repaid before

they advance monies for another project, or just a slowing market. While the more common phrase here is a developer exit loan, we tend to go with the label of a “marketing loan” given that it allows the investor the necessary time to market the property at full market value rather than having to drop their prices to repay the loan quickly. Working with Shawbrook the investor also can switch the properties onto a portfolio BTL loan with minimal fuss and the bonus of no new lender arrangement fees and lower, or sometimes no legal fees. This could apply to the full development or just part of the development. In the circumstance where investors look to retain some of the units within a given project, it allows them to put tenants into the property and show market rent, thereby helping a valuer with the re-inspection and access to the maximum term loan available.

Knowledge of various changes to the multitude of product offerings in the market, as well as the various ways in which these products can be used effectively, is key to allow professional investors to work the cash within each deal efficiently, allowing them to build and grow their portfolio and take advantage of the time efficiencies for things like auction purchases. Supporting and guiding this process is the professional intermediary, with access to the full gamut of lenders and experience in both simple and complex transactions.

Drawing on this expertise is a sensible way to help ensure investors have a bird’s eye view of this competitive market.

Short term loans cater for innumerable investor requirements with a clever range of products available across a diverse lender spectrum. Supporting investors along their property journey is fundamental to long-term success, and we look forward to working with the property professionals and partners across the UK to continue to build this approach into all our lending activity.

Gavin Seaholme Head of Sales Shawbrook Commercial Mortgages

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. LANDLORD INVESTOR 46TH EDITION

17

TENANCY AND DEPOSITS

SANDY BASTIN TENANCY DEPOSIT SCHEME

11 2 +

=

[except when it doesn’t]

TDS’ Deposit Cap Calculator

18

LANDLORD INVESTOR 46TH EDITION

TENANCY AND DEPOSITS

Sandy Bastin, Head of TDS Adjudication Services at Tenancy Deposit Scheme (TDS), discusses how the Tenant Fees Ban and Deposit Cap affects tenancy deposits and explains why calculating five weeks’ deposit may not be as straightforward as some landlords and letting agents think.

The Tenant Fees Act legislation, which came into force on 1 June 2019 in England, prevents landlords and letting agents charging tenants additional fees and introduces a cap on the value of the tenancy deposits that can be taken.

There is no requirement to refund deposit amounts exceeding the above limits where a fixed-term agreement, entered into before the implementation date, becomes a statutory periodic tenancy.

The largest part of the new Act is occupied by the details of the fees ban.

The ban includes all fees which a tenant is required to pay as a condition of the granting, continuance or renewal of the tenancy. This includes, but is not limited to, referencing fees, inventory fees, credit check fees and administration charges.

Where a tenant renews their tenancy by signing a new fixed term agreement, after the implementation date, any amount of their existing deposit which exceeds the above limits must be refunded.

The Act confirms that holding deposits, rent and tenancy deposits are not included in the ban, neither are charges imposed for defaulting on the agreement, including interest charges on unpaid rent and replacement keys, fobs or security devices. These charges fall under the ‘Default Fees’ part of the Act. Default Fees can be disputed by a tenant through Trading Standards and these are likely to be charges incurred during the tenancy rather than at the end of it.

Under the Fees Ban, there is a cap on the amount of deposit which you can take on Assured Shorthold Tenancies (ASTs). For tenancies where the rent is up to £50,000 per year, the deposit is capped at five weeks’ rent. For those tenancies where the rent is £50,000 or more, up to £100,000 (the maximum threshold for an Assured Shorthold Tenancy), the deposit is capped at six weeks’ rent.

Tenancies will only fall under the cap if they are renewed for a new fixed term.

Tenancies that become contractual or statutory periodic tenancies will not be affected.

Agents and landlords will therefore need to bear in mind that they cannot take any additional deposit beyond a five/six-week deposit already charged.

This means that if a tenant requests a pet part way through the tenancy, the landlord would be unable to increase the deposit to allow for carpet cleaning or fumigation.

LANDLORD INVESTOR 46TH EDITION

The Tenant Fees Ban limits holding deposits to a maximum of 1 week's rent. The legislation also dictates that the landlord will have 15 days to decide whether the tenancy proceeds once a holding deposit has been paid by a tenant.

If the tenancy doesn’t proceed, the money must be repaid to the tenant in full within 7 days of either the 15day deadline being reached, or the landlord deciding against the tenancy proceeding. This means that if the landlord decides on day 4 that the tenancy will not proceed, they have 7 days from this date to repay the funds, rather than from day 15.

If the tenancy does proceed, the holding deposit must be either returned within 7 days of agreement, or as is common now, converted into part payment of either the actual deposit or the initial rent payment, with the tenant's agreement.

We would recommend taking it towards the rent to reduce confusion as to the date the deposit (or part of it) was received.

Where a banned fee is taken, this constitutes a breach of the legislation.

Consequently, a tenant will be entitled to get the money back through the Courts.

The legislation is governed by Trading Standards and landlords and letting agents can expect a fine of up to £5,000 per offence upon first breach.

Any further breaches of the legislation constitute a criminal offence, or the landlord can be fined up to £30,000 as a civil penalty.

It is expected that Banning Orders may also be used for repeat offenders.

The legislation is here to stay, so landlords and letting agents need to take care when calculating tenancy deposits.

To help landlords and letting agents stay on the right side of the law, TDS has introduced a solution to this problem with the launch of DepositCap. com, a one-stop shop for information and useful tools to navigate the new legal landscape and includes a Deposit Cap Calculator. As well as being free to use, the calculator is also available for letting agents to embed in their own websites.

The tool, however, is not a standalone item. It forms part of a suite of information curated by TDS on the Deposit Cap and Tenant Fees Ban. As well as the calculator, the Resource Centre includes guides, a timeline, example scenarios and other tools to help provide clarity on how the Deposit Cap will affect letting agents and landlords.

A significant new feature for landlords and letting agents is the TDS Deposit Cap Solution. It is an online tool to reduce the amount of deposit protected held by the Custodial scheme or protected with the Insured scheme. If a new fixed term tenancy is created, the landlord or letting agent can simply change the deposit amount down to the new five/six-week level.

In TDS Custodial, TDS will then return any excess deposit directly to the lead tenant taking instruction from them how they would like to be repaid.

When the deposit has been reduced, a new Deposit Protection Certificate in the new amount will be available in the member’s online account. As with the TDS Insured scheme no new Prescribed Information has to be issued in these circumstances.

To use TDS’s Deposit Cap Calculator, please visit: www.depositcap.com

19

JUNE SPOTLIGHT

TRACEY HANBURY

JUNE SPOTLIGHT

Bridging and short term mortgages for investors Jackie HouguezSimmons (left) and Ellie Broadhurst (right).

20

LANDLORD INVESTOR 46TH EDITION

JUNE SPOTLIGHT

Tracey Hanbury welcomes back Jackie Houguez-Simmons and Ellie Broadhurst from Baya Financial to discuss how bridging finance and short term mortgages can be of benefit to potential investors.

TH So, welcome back Jackie and Ellie.

Bridging Trends have recently highlighted that 32% of investors don’t understand Bridging; we can try and help with this today. I was always under the impression that Bridging was expensive and only to be used when you’re desperate?

JHS To be fair, bridging finance has had a bad reputation in the past. I was always advised that it was a bit like a bad breakup… you only really know somebody when you divorce them – that, sadly, was accurate about some bridging lenders. Thankfully, this lending area has seen a huge change with more competition from lenders which is all beneficial for investors.

The unregulated market has seen the most growth in recent years, in 2018 64% of all bridging was unregulated, up 10% from 2017.

This shows how important this area of lending is to investors, whether it is for refurbishments or buying through auctions. The rest of 2019 will be interesting to see, due to the uncertainty of Brexit.

Bridging loan volumes hit £766.9m in 2018, an increase of £232.8m on the previous year (data from Bridging Trends). The average monthly interest rate for bridging fell to 0.81%, only marginally down from the 0.83% average recorded in 2017. This shows how competitive this area of lending become as new lenders enter the market.

EB I agree that historically it was viewed as an expensive option; but there are so many more products and lenders within the market now. Some specialist mortgage lenders have introduced a variety of packages using their fee scales for legal work and valuations, which has brought the costs down. We are also seeing lenders offer more ‘bridge to term’ products, which can streamline the process.

Investors need speed and flexibility when buying and refurbishing their portfolios.

Bridging is often the only option to achieve this. It allows investors to react to potential curve balls, which a term product simply cannot accommodate.

LANDLORD INVESTOR 46TH EDITION

We are also seeing clients take a more pragmatic approach to rates. If you look at the return on investment on a potential deal the rate becomes less important when you take into account other factors.

Short term lending now offers to up to a 5 year term, which can enable a more creative approach to challenging scenarios. Short term loans are generally fixed rates and can be lower than bridging. For example, where a property or portfolio is low yielding with a lot of equity, a combination of a short-term loan, alongside a retained interest bridge of the same term, can raise a higher loan amount with retained interest to keep the cash flow in check.

Running it alongside the lower rated term product will potentially give a reduced blended rate.

TH What are the most popular reasons you get for bridging?

JHS Traditionally Bridging has been used for purchases at auction, refurbishments, flips and speed. There are a couple of other areas which are increasing in popularity...

Clients are using Bridging to be creative with their projects. In this market there are plenty of opportunities to create a good return on investment and a high yielding property, but these require work to get there. Whether that is redesigning the property, creating more units or a change of use; they all require bridging finance rather than purchasing on a standard mortgage. This allows the term mortgage to be based on the new market value and market rent when the project is completed.

Another growth area is lending for refurbishment costs. This can be paid up front, or in arrears, enabling clients to consider properties that they could otherwise not afford. We are now seeing lenders wanting more control over the projects they are funding; by lending the refurbishment costs they can oversee what is being spent, giving them greater comfort in a challenging market.

TH What are the pitfalls?

EB The pitfalls can be exit, timings and costs.

Exit: The most important part of our job is to ensure as concrete an exit plan as possible. We will always aim for the client to have two exit strategies in place. This also allows, as much as we can predict, alternatives to deal with a changing market. If a facility is not exited on time, it is expensive and will eat away at any profits you have tried to achieve.

Timescales: With refurbishment projects it is important to manage your timescales as accurately as possible, factoring in as many potential issues that may arise. Works can, and often do, overrun so the term of the facility needs to be considered around this.

Costs: We ensure our clients are fully aware of the true cost of borrowing to enable them to factor it into their business plan. It is vital to know up front what affect the finance will have on your return on investment, or the deal cannot be analysed on its merits. Lenders will often offer retained interest options, which means no monthly payment is required and can help manage the cash flow. It can be cheaper to over-estimate the loan term, rather than negotiate an extension when you get to the end, as interest can be refunded. We have products that lower the fees when moving to a term mortgage; therefore we always look at the whole deal (Bridge and Term) and total cost of borrowing.

TH What about Commercial Bridging, are you seeing an increase in that as well?

EB We have focussed this article mainly on the residential and refurbishment areas.

There are more commercial Bridging and short term lenders now, but it is still a bespoke area. As it is a more specialist area, there are more caveats to the lending, so definitely not a one size fits all. As with any enquiry we are happy to talk through the options available with our clients, a phone call is an easier way to run through what’s possible!

Thanks so much for your time, both of you. Baya Financial will be speaking at all 3 of our Olympia London Shows and Manchester, visit landlordinvestmentshow.co.uk to find out more.

Tracey Hanbury 21

TAXATION

TONY GIMPLE LESS TAX 4 LANDLORDS

Never in the field of British politics has so much been taken away from so many by so few

22

LANDLORD INVESTOR 46TH EDITION

TAXATION

On August 20th, 1940 Winston Churchill delivered ‘The Few’, being one of the most recognisable speeches ever given in the English language. Wind the clock forward to 2019 and he might have been saying ‘Never in the field of British politics has so much been taken away from so many by so few’.

I’m of course talking about George Osborne’s now infamous S24 Tenant Tax. Add to that the entire Brexit debacle, a Tory party in complete disarray, ‘reforms’ to S21 notices and a political throw-back in the form of Comrade Corbyn who despite all the evidence to the contrary believes that Marxism actually works; it’s no wonder that the entire Private Rental Sector (PRS) feels as besieged as our forebears did in those dark days when we stood alone against tyranny.

Some of you may say that I’m taking my analogies too far, but when you take into account that the PRS is the only sector to be taxed on turnover and not profit, then perhaps I’m not going far enough. According to analysis by The National Landlords Association, the PRS contributes at least £3.84bn a year in taxes, which is more than the £2.9bn that the entire UK gaming and betting industry was forecast to pay in 2016-17, and greater than the banking levy of £2.6bn; add to that the hundreds of millions of pounds raised through Stamp Duty, Capital Gains Tax, Council Tax, and Licensing fees, and that these numbers quoted are pre-S24, do you still think I’m taking it too far? 1

National Landlords Association 2019

Comparison of Value to UK Exchequer Tax Paid £billions

On August 20th, 1940 Winston Churchill delivered ‘The Few’, being one of the most recognisable speeches ever given in the English language.

Wind the clock forward to 2019 and he might have been saying ‘Never in the field of British politics has so much been taken away from so many by so few’.

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

3.84 2.9

2.6

1.63

0.0617 Est. Landlord Income Tax

Banking Levy (2018)

Gambling & Gaming Industry (2016-17)

Government is being short-sighted.

So let’s now take a look at how government policy is distorting the rental property market, as well suffering from a crisis in confidence as to how far left a Tory administration can go before it becomes indistinguishable from New Labour, or worse still the neo Marxists currently threatening to renationalise the utilities at a fraction of their true worth which in turn will undermine peoples pensions and the economy as a whole.

In the excellent report by the Institute of Economic Affairs (IEA), entitled Taxation Without Justification2 , the authors write that the PRS plays a critical role in increasing and improving housing provision in the UK. Around 80% of private sector tenants are satisfied with their homes, which compares favourably with that in the social rented sector. This contribution has gone unrecognised: instead, landlords have been made convenient scapegoats for a housing crisis primarily caused by land-use planning restrictions.

The government has recently passed tax measures that discriminate against private rented housing, both as an asset class and as a form of housing tenancy.

All tax paid

by Tesco (2018)

Amazon (UK Corporation Tax 2018)

The most damaging of these measures is ‘Section 24’ which prevents landlords entirely offsetting mortgage interest costs against rents before taxable profits are calculated.

As a result of that change alone, many landlords will pay huge amounts of tax as a proportion of profits, meaning that in some cases the tax rate will exceed 100% of their underlying profit leaving landlords making losses where before they were making healthy profits.

The government has also increased Stamp Duty on buy-to-let properties.

Stamp Duty in general is widely regarded as one of the worst taxes from an economic efficiency point of view. The late James Mirrlees, Nobel Prize winner in economics wrote: ‘There is no sound case for maintaining stamp duty and we believe that it should be abolished’, and ‘Stamp duty and business rates defy the most basic of economic principles by taxing transactions and produced inputs respectively’.

Looking at Stamp Duty in particular, a House of Lords committee has called for the government to reform stamp duty because it has “seriously distorted the housing market” 3 .

1 https://landlords.org.uk/sites/default/files/2019-03/Benefits%20of%20the%20PRS.pdf 2 https://iea.org.uk/publications/taxation-without-justification/ 3 https://publications.parliament.uk/pa/ld201719/ldselect/ldintfair/329/329.pdf.

LANDLORD INVESTOR 46TH EDITION

23

TAXATION

Government policy is distorting the rental property market.

Providing her opinion, Centre for Economic Justice chief economist Carys Roberts emphasised that she had “never met an economist who thinks that stamp duty is a good tax”, while the House of Lords economic affairs committee chair Lord Forsyth added that stamp duty in the capital has “brought some sections of the housing market to a complete dead stop”.

Increases in landlord taxes are likely to reduce the supply of rental housing, increase rents, reduce quality, and reduce the size of the ‘professional’ landlord sector, being the exact opposite of George Osborne’s stated objectives to professionalise the sector.

Overall there is a huge misunderstanding at Westminster that the Private Rental Sector is doing nothing more than holding passive investments designed solely to exploit those who cannot afford to buy their homes. Whilst that view is something that we’ve come to expect from the Left, it now seems to apply to the political class as a whole.

In which regard, an analysis of Members’ financial interests carried out by FactCheck and reported on by Channel 4 News in July 2017, showed that 123 MPs earn extra money by renting out homes and private property; and that includes Philip Hammond the current Tory chancellor and his boss Theresa May, along with 85 Tory and 28 Labour MPs – who said that turkeys don’t vote for Christmas! But then wasn’t it George Orwell who said in his allegorical novel about communism that “All animals are equal, but some are more equal than others …”,

If S24 didn't exist would you still incorporate?

As Samuel Johnson so aptly said, "Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.".

Pretty much the entire PRS thought that S24 was said hangman, and there’s been

a headlong rush to take the panacea of incorporation as their last-minute reprieve, even though the ‘drop’ will be even sharper when that particular bear trap is finally sprung. The truth be told though, if it wasn’t for S24 very many BTL landlords would still be struggling and doing nothing to build, run, and grow professional businesses. So rather than being vilified as one of the four horsemen of the apocalypse, perhaps George Osborne should be seen as the landlord’s knight in shining armour by single-handedly ‘concentrating’ the sector’s collective psyche on running a business as opposed to having had an ‘accident’.

Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”

Most of us are perfectly happy to gripe about the amount of tax we have to pay the State protection racket, and rightly so; but rather than continuing to let the tax tail wag the planning dog, perhaps now is the time to turn the telescope around and start looking at the future rather than the past.

They go on to say that if the government is intent on levelling the playing field and making tax fairer, a better option would be to address this underlying issue. Otherwise, it should accept that businesses will utilise a range of structures to try to prevent their competitors from gaining a commercial advantage over them.

Meanwhile, as Lord Justice Tomlin said in his 1936 landmark ruling when the then Duke of Westminster was challenged by the HMRC of its day; “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the

Retain Property in Personal Names

According to the Chartered Institute of Tax Accountants (CIOT) there are a range of structures available when setting up a business, each with differing tax and commercial consequences. The potential tax advantages of using one structure over another, or a combination of structures, are merely one of the commercial issues to be considered when setting up any business, and derive from the inherent differences in tax rates on corporate and non-corporate structures.

With that spirit in mind, the chart below illustrates your options, and if you’d like to find out how you can stop being an accidental landlord and instead maximise the commercial benefits of building, running, and growing a professional property business insofar as the law allows, then please visit www. lesstaxforlandlords.co.uk.

Transfer to Limited Company (via S162)

Mixed Partnership Hybrid Business Model

May be possible for next generation only

All future Generations

50%** & 60%*

20%

Full Relief for Finance Costs CGT Mitigated on Entry No change in property legal ownership Re-mortgage NOT Required Inheritance Tax Mitigated on Existing Estate Value Inheritance Tax Mitigated on Future Value Likely Maximum Tax Rate

45% & 60%*

* Loss of personal allowance between £100,000-£125,000

24

**Corporation tax at 19% followed by dividend tax at 38.1%

LANDLORD INVESTOR 46TH EDITION

PRS UPDATE

TRACEY HANBURY

New enforcement team for fees ban What do landlords need to know?

26

LANDLORD INVESTOR 46TH EDITION

PRS UPDATE

With the ban on tenant fees nearly here, it was recently announced that a new team has been set up to police all estate and letting agent legislation going forward.

It was recently revealed that a new body will take over from the old National Trading Standards Estate Agency Team (NTSEAT) in policing all the legislation affecting estate and letting agents, in particular the soonto-be introduced ban on fees charged to tenants.

Expanding on NTSEAT’s remit, the new enforcement team - which is being led by National Trading Standards - will provide ‘a single combined enforcement function to protect consumers and legitimate businesses in the property sector’.

In its launch statement, it was revealed that the National Trading Standards Estate and Letting Agency Team, funded by the Ministry of Housing, Communities and Local Government, will act as the lead enforcement authority for the purposes of the Estate Agents Act 1979 and the Tenant Fees Act 2019.

Bristol City Council will lead letting agency regulation covering England, while estate agency enforcement (across the whole of the UK) will continue to be operated from Powys County Council. The new enforcement team will also work closely with local authorities who have enforcement responsibilities.

What will the team be responsible for?

The new body will chiefly be responsible for the regulation of estate agency work in the UK and letting agency work in England.

This will specifically relate to issuing prohibition and formal warning orders to those found unfit to engage in estate agency work in the UK, overseeing the operation of relevant estate and letting agency legislation, issuing guidance and advice for the public, businesses and enforcement authorities on estate agency work in the UK and relevant letting agency work in England, and approving and overseeing the UK’s consumer redress schemes, Ombudsmen, and ‘Alternative Dispute Resolution’ entities in the estate agency sector.

LANDLORD INVESTOR 46TH EDITION

Heather Wheeler, Housing Minister and MP for South Derbyshire, added: “We are determined to make the private rented sector a fairer, more accessible market that works for all and I am delighted that local authorities will now be able to access the best advice and information from this new team. There is no place for unfair fees – now, with this new enforcement authority, we will be able to stamp them out.”

On its new website, the National Trading Standards Estate and Letting Agency Team outlines guidance for landlords and agents in relation to the Tenant Fees Act 2019 – which comes into play across England from June 1 this year.

In a statement, ARLA supported the move to make Bristol Trading Standards the lead enforcement authority for the private rented sector.

“We welcome today’s announcement of the Lead Enforcement Authority, and hope this is a major step forward in improving enforcement in the private rented sector,” David Cox, the trade body’s chief executive, said: “There is a severe lack of prosecution in the industry, allowing rogue agents to operate and thrive. We look forward to building a constructive working relationship with the Lead Enforcement Authority to eliminate these agents from the sector once and for all.”

The fees ban – a quick recap One of the most controversial and divisive pieces of new legislation of recent times – the Tenant Fees Act 2019 – officially comes into force on the first day of June.

The new enforcement team will provide ‘a single combined enforcement function to protect consumers and legitimate businesses in the property sector’.

Support from the industry The new regulatory body was backed

by ARLA Propertymark, despite the lettings agents’ fees ban and deposit cap being policed by Trading Standards officers from Bristol City Council, who have – along with various community organisations in the city been viewed by some in the industry as strongly anti-landlord and antiletting agent in recent years.

From that point on, landlords and letting agents working on their behalf will only be able to charge certain fees in connection to a tenancy, including rent, a refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above, and a refundable holding deposit (to reserve a property) capped at no more than one week’s rent.

Landlords and agents can also levy fees for a change to the tenancy (when requested by the tenant), capped at £50 or ‘reasonable costs incurred if higher’, payments associated with early termination of the tenancy (when requested by the tenant), and payments for utilities, communication services, TV licence and council tax.

Additionally, a default fee can be charged for late payment of rent and replacement of a lost key or security device, where stated under a tenancy agreement.

Landlords and agents who charge unlawful fees are liable to face financial penalties or even criminal convictions.

Tracey Hanbury

27

INDUSTRY MARKET UPDATE UPDATE

PETER LITTLEWOOD iHowz

Market update After the shock news In the last magazine we reported the Government’s intention to scrap the Section 21. They have promised to conduct a review and to also conduct a review on the Section 8, and the possibility of a Housing Court.

I am pleased to be able to tell you that the industry has rallied round and I have recently attended a summit of associations representing many aspects of the PRS, including most of the landlord associations.

We propose to fight the suggestion of the abolishment of the Section 21 as well as taking the opportunity to press for a wholesale reform of the existing Section 8 and the court system.

We agreed that the majority of landlords generally have a good reason when they evict a tenant; they are the customers after all. Everyone wants long term tenancies, but everyone also wants the security of knowing a tenant can be evicted where there is a legitimate reason - especially where they are getting into debt, and/or committing anti-social behaviour.

To this end the summit agreed a statement to be given to the Secretary of State warning of the potential for unintended consequences if the Section 21 is got rid of without introducing a fully functioning eviction service.

It is true to say that the Section 21 frequently tends be used for rent arrears because it is perceived to be easier to use, and also means the accelerated

28

procedure can be use, thus avoiding going to court. Another area where it is used is for ant-social behaviour, especially for a tenant in an HMO where the other tenants are unwilling to supply evidence to allow a Section 8 to be used.

Scotland lost the (equivalent of) the Section 21 with the introduction of Private Residential Tenancies; our equivalent of an assured tenancy but have not suffered a wholesale loss of rental property. It is likely that Government will point to that ‘success’ stating there is no problem with removing the Section 21.

We have warned Government that they are creating a perfect storm with the plethora of changes already gone through; going through; and planned. If we follow Scotland with a minimal loss of rental properties, it is highly likely that landlords will be very careful who they take on; the first indication of a problem and the landlord won’t offer. The result could well be the poorer and more vulnerable tenants will find it difficult, if not impossible to find a landlord willing to take them. I’m already being told by landlords who have previously been willing to take on a risky tenant in an attempt to give them a chance will now not be doing so.

The net result, the very people who are supposed to be protected will suffer – the economically poorer; vulnerable of society.

The question is what can you do? The answer is nothing until we know the terms of any consultation and then participate in them. There is no point in issuing a Section 21 now purely to get rid of a tenant; if they

are paying rent, looking after the property you want to retain them. Although not known, it is likely a Section 21 ban will only apply to a new AST after the ban comes into place – but as with all things we don’t know until we see what the Government are proposing.

Fees

By now you will have had tasted the early days of the Fees Ban. Did you remember to amend your AST used after June 1st?

You need to remove any fees you’re not able to charge.

To remind you, you can only charge: 1. Rents: Rents have to be equally proportioned over the period.

2. Deposits: Deposits will be capped at: 5 weeks rent for rents below £50k; 6 weeks for rents above £50k.

Holding deposits will be capped at 1 weeks rent, and can only be held for a maximum of 15 days, unless agreement to extend between the parties.

3. late rents fees: It will only be possible to charge a late rent fee at 3% over the Bank of England base rate (currently 0.75%). No other fees are allowed, including the cost of sending a letter.

This rate can only be charged after the tenant has been in arrears for 14 days, but then it can be backdated to the start of the arrears.

4. Lost keys: landlords may charge a reasonable cost that can be evidenced in writing. This includes security devices

LANDLORD INVESTOR 46TH EDITION

MARKET UPDATE

We propose to fight the suggestion of the abolishment of the Section 21 as well as taking the opportunity to press for a wholesale reform of the existing Section 8 and the court system.

which access to the housing. Anything not in writing will probably be considered prohibited payment.

5. permitted payments: 1) Council Tax; 2) Electricity, gas or other fuel; 3) water or sewage; 4) TV licence; 5) communication services (e.g. broadband charges) 6) Change of sharer/early surrender of tenancy by tenant All other fees are banned.

Note that if you have entered into an agreement prior to the June 1st deadline you can still charge any (now banned) fees. Whilst unclear in the legislation, it is generally agreed that this means any AST signed before June 1st, even if it has not yet commenced.

However these fees cannot be enforced after June 1st 2020. This doesn’t mean you have to re-issue an AST after that date, just can’t use any fees specified in the agreement. The one exception to this is the 5 week deposit. If you have taken more than 5 weeks this will not have to be reduced to 5 weeks after June 1st 2020. It will not be affected unless you renew your tenancy.

Note also there is to be a new Section 21 (form 6A) – ironic really. This will mention the requirement to check for disallowed fees. There is no news when this will become available. It doesn’t have to come out until 6 months after June 1st, that being the first time you could evict someone on a new (no fees) AST. Although not announced, I would be

LANDLORD INVESTOR 46TH EDITION

surprised if we don’t also get a new ‘How to Rent’ booklet.

THURSDAY 21ST NOVEMBER G rosve n o r H o u se H otel , Pa rk L a n e, Lo n d o n W 1 K 7 TN

Be professional At risk of repeating myself, it is becoming more and more important to run your let’s professionally. Even if you have a part-time business you still have full time responsibilities.

Do ensure you carry out inspections quarterly – this might become 1/2 yearly if you know your tenants well. Ensure you check the rent has come in the day after it is due. You would be amazed how many landlords only check once in a blue moon – then find it difficult to sort the problem out.

Above all have written agreements. Again I am amazed how often we come across verbal agreements – generally because the tenant is a friend, or worse, a relative.

Don’t care who it is, always have a written contract (AST), it is better for everyone.

Above all keep informed. Join a landlord association – naturally I would prefer it to be ours, but please join one. That is the best way to keep up to date. I frequently have landlords tell me they don’t need an association as they ‘get their information off the net’. Trust me; it is hard keeping up to date.

The fact you are reading this magazine is an excellent start.

Planning changes

www.national-lisawards.co.uk

There have been several minor changes to planning recently. They are too many to go into here, but they are on our web site.

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PRS UPDATE

TRACEY HANBURY

Nothing, nada, zilch.

No landlord banning orders issued in first 12 months of new law

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LANDLORD INVESTOR 46TH EDITION

PRS UPDATE

Despite taking effect in April 2018, there hasn’t been a single new banning order issued by the government for rogue landlords.

More than a year after they were first introduced, it’s been revealed that not one single rogue landlord has received one of the government’s new banning orders.

The key new power was launched in April 2018 to help fight in the battle to eliminate the owners of UK rental property who give everyone else a bad name with their illegal or morally dubious activities.

The new laws are supposed to prevent rogue landlords from operating, with court orders banning them from letting property across England. The details of rogue landlords must also be entered on to central government’s new rogue landlord database for local authorities to share, while English councils can also make discretionary entries on to the computer system.

However, more than 12 months after it went live, a freedom of information (FOI) request has highlighted that the details of just four landlords have been placed on the database. What’s more, their names can’t be accessed.

Inaction in action Despite government estimates suggesting there are approximately 10,500 rogue landlords operating in England – as well as the government previously saying that it anticipated more than 600 of the worst offenders would be entered on to the database by now – only four entries have been made and no banning orders have been issued.

Why, the therefore, is the system proving so inefficient in rooting out the country’s worst landlords?

The ineffectiveness of banning orders and the rogue landlord database were revealed after a FOI request filed by the Guardian newspaper in March 2019.

The Ministry of Housing, Communities and Local Government (MHCLG), in its response to the FOI request, refused to disclose the identities of the four landlords now on the system. That’s in spite of Theresa May promising to give the public access to the system following a joint Guardian and ITV News investigation into rogue landlords last year.

LANDLORD INVESTOR 46TH EDITION

“Given what we know about the bad behaviour of a small number of landlords, it is very, very disappointing there aren’t more being prosecuted and banned,” said Clive Betts, a Labour MP and the chair of the housing, communities and local government select committee.

Meanwhile, Jacky Peacock, a director of the tenants’ charity Advice4Renters, said it was ‘pretty shocking’ that there had only been four entries a year after the database was established.

“Not a single banning order has been served on any rogue landlords who should be prevented from letting unsafe properties, after ignoring formal local authority notices and prosecutions,” she added.

Back in October 2018, after the Guardian/ITV News investigation had revealed that the database was almost bare, MHCLG said it expected to see entries in the database increasing in the new year, but this has failed to materialise.

Telford and Wrekin was the first council to use the new database, with a discretionary entry made in December, followed by two discretionary entries from Camden and one from Oxford in the months since.

How are banning orders issued?

Since April last year, councils in England have been obliged to use the database to enter the details of rogue landlords who are issued one of the government’s new banning orders. For a banning order to be issued to rogue operators in the private rented sector, local authorities can apply to the courts to stop a landlord from letting their property either directly or through an agent.

The government’s attempts to stamp out rogue landlords have also been criticised for not taking into account historical offences, with both banning orders and discretionary entries into the database only applying to offences committed since 6 April last year.

‘A lengthy process’ In defence of its database and plans to eradicate rogue landlords from the sector, Heather Wheeler, the minister for housing and homelessness, said that the process to build cases and secure convictions is a lengthy one and argued that it’s therefore unsurprising that there has only been a limited number of entries at this stage.

She then stuck to the line the government took after the revelation of the Guardian/ ITV News investigation. “The rogue landlord database is targeted at the most prolific and serious offenders,” she said.

“We expect the number of entries to the database to increase during the year as only offences committed from April last year can be included and it can take time to secure convictions.”

Tracey Hanbury

Not a single banning order has been served on any rogue landlords.

Jacky Peacock, Advice4Renters

In addition, local authorities can opt to use the new database to enter the details of those landlords convicted of a ‘banning order offence’ – which covers 14 offences ranging from unlawful eviction to licensing breaches and harassment.

Likewise, the details of those who have received two financial penalties for housing offences in the past 12 months can also be inputted.

31

CHARITY AND GIVING

Rumble with the Agents’ raises over £19k for MakeA-Wish UK 32

LANDLORD INVESTOR 46TH EDITION

CHARITY AND GIVING

On Thursday 23rd May, the fifth annual ‘Rumble with the Agents’ white-collar charity boxing event took place at The Holiday Inn in Finchley Central. The sell-out event, attended by more than 300 property professionals, raised in excess of £19,000 for Make-A-Wish UK, with the final total still being tallied, which will enable eight children with critical illnesses to be granted their once in a lifetime wish.

On the night, 10 boxers were paired for the five fights comprising three rounds each. Heckled and cheered on by friends, family and colleagues, each demonstrated the effort they had put into the intensive training over the last few months.

The incredible amount was raised from donations, a raffle and a live auction of sporting memorabilia, which every year Paul Shamplina , founder of Landlord Action, sources from far and wide in order to maximise the event’s charity donation.

Danielle Munday, Regional Fundraising Manager (South) for Make-A-Wish UK, commented: “Make-A-Wish UK would like to extend a huge thanks to Paul Shamplina and Landlord Action for allowing Make-A-Wish to be a part of this year’s fantastic Rumble with the Agents, raising in excess of £19,000 and far

LANDLORD INVESTOR 46TH EDITION

exceeding all hope and expectation! With your help, we will now be able to grant approximately eight transformational wishes to children enduring illness and treatment that most of us could never imagine.

Our purpose is simple. We create lifechanging wishes to children living with critical illnesses. Granting their one true wish provides seriously ill children with hope for the future, strength to cope and resilience to fight their condition. They are given quality time away from the daily realities of living with their condition and given the chance to make magical memories that they can treasure forever – whatever their future may hold. We can only grant wishes with the help and support of partners like you.

Thank you again.”

Paul Shamplina, founder of Landlord

Action and brand ambassador for Hamilton Fraser, added: “I can’t believe this has been the fifth year we have run this event. It was never my intention to launch an annual event, but every year it gets better, we raise more money and the quality of boxing from the novices improves. This year, I really wanted everyone to be able to see the tangible results of the money donated and how it makes a difference to those it goes to. Make-A-Wish UK is such a special charity and I hope by next year’s event we will be able to show everyone pictures of those eight magical wishes and what it meant to the children that received them.”

To volunteer to take part in next year’s event or donate please email Rita Shamplina on info@ rumblewiththeagents.co.uk or call 07790 569501.

33

PRS UPDATE

TRACEY HANBURY

RE ACTION

Government proposes to scrap Section 21 evictions

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LANDLORD INVESTOR 46TH EDITION

PRS UPDATE

With the government recently announcing plans to scrap Section 21 notices, we look closer at what was announced and how the rental industry reacted to the news.

In an unexpected move, the government recently proposed to scrap the divisive and controversial Section 21 eviction process.

The announcement by Housing Secretary James Brokenshire, and personally backed by Prime Minister Theresa May, said the plan to consult on scrapping Section 21 represented ‘the biggest change to the private rental sector in a generation’.

If, as seems likely, the public are in favour of the plans to remove so-called ‘no fault’ evictions, Section 21 notices could be scrapped before the year is out.

Brokenshire said the government’s hand was being forced because evidence suggests that Section 21 evictions are one of the biggest triggers of family homelessness.

notice can be used when a tenant has fallen into rent arrears, been involved in criminal or anti-social behaviour or broken terms of the tenancy agreement, for example causing damage to the property.

In an effort to reassure landlords, the government has promised to amend Section 8 to allow it to be used by landlords if they want to sell the property or move back in themselves. That said, challenges by tenants to Section 8 notices are far more commonplace than they are for Section 21.

As well as the proposal to consult on the removal of Section 21, the government put forward plans to eliminate insecure fixed-term tenancies and replace them with open-ended tenancies.

If the government’s proposals are introduced, landlords would need to provide a ‘concrete, evidenced reason already specified in law’ if they wish to bring tenancies to an end. As things stand, landlords can use Section 21 against a tenant without providing a reason.

Theresa May insists this major change to the lettings sector will safeguard responsible tenants from unethical landlords, while also offering them the ‘long-term certainty and the peace of mind they deserve’.

In a statement, the Ministry of Housing, Communities and Local Government said that court processes will be accelerated so landlords can swiftly and smoothly regain their property where rent arrears or damage to the property occurs, ‘meaning landlords have the security of knowing disputes will be resolved quickly’.

The removal of Section 21 would see landlords seeking to evict tenants needing to turn to Section 8 as an alternative. This

LANDLORD INVESTOR 46TH EDITION

This, he insisted, included ensuring that landlords can swiftly repossess properties for legitimate reasons such as rent arrears or anti-social tenant behaviour, as well in those situations where landlords are looking to sell.

“This needs to happen before any moves are made to end Section 21,” Smith added. “For all the talk of greater security for tenants, that will be nothing if the homes to rent are not there in the first place.”

The RLA said the government risks worsening the supply-side crisis at a time when demand is higher than ever, while also calling for a reformed and improved court system to ensure the capability of landlords to repossess properties is properly improved.

“By abolishing these kinds of evictions, every single person living in the private rented sector will be empowered to make the right housing choice for themselves not have it made for them,” he said when announcing the plans.

What will change?

there are serious dangers of getting such reforms wrong,” David Smith, RLA policy director, commented. “With the demand for private rented homes continuing to increase, we need the majority of good landlords to have confidence to invest in new homes.”

Theresa May insists this major change to the lettings sector will safeguard responsible tenants from unethical landlord

A furious backlash Although campaign groups such as Generation Rent and Shelter fully welcomed the announcement, hailing it as a victory for private renters, the reaction from inside the lettings industry was, unsurprisingly, far less positive.

The Residential Landlords Association (RLA) warned that a ban on Section 21 repossessions could carry severe dangers.

“Whilst [we] recognise the pressure being placed on government for change,

David Cox, chief executive of ARLA Propertymark, also warned of the possible dangers of banning Section 21 evictions. “Although in the majority of cases there is no need for Section 21 to be used, there are times when a landlord has to regain possession of their property. An end to Section 21 could be devastating for existing supply in the private rented sector and on new landlords considering investing in buy-to-let.”

The National Landlords Association was similarly damning of the plans. “Landlords currently have little choice but to use Section 21,” Richard Lambert, NLA chief executive, said. “They have no confidence in the ability or the capacity of the courts to deal with possession claims quickly and surely, regardless of the strength of the landlord’s case.”

He added: “The government should look to Scotland, where they reformed the court system before changing how tenancies work. If the government introduces yet another piece of badly thought-out legislation, there will be chaos.”

Tracey Hanbury

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N AT I O N A L L I S AWA R D S 2 0 1 9 T H U R S DAY 2 1 S T N OV E M B E R G rosve n o r H o u se H otel , Pa rk L a n e, Lo n d o n W 1 K 7 TN

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