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THE OFFICIAL PUBLICATION OF THE NRLA
SPRING 2021
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THE FUTURE IS BRIGHT Callum Stevens on building a portfolio in his 20s
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Property Technology The benefits of digital apps for landlords Going green The time for change is now
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Record growth as Covid-19 recovery begins
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t is now 12 months since the National Residential Landlords Association (NRLA) came into being following last year’s merger – and who could have imagined what a 12 months it would turn out to be? When I took on the role of chief executive, I knew it was going to be a tough job, but I had no idea of the unique challenges that Covid-19 would bring – not least gathering together colleagues who still actually haven’t met each other face to face. I am pleased to say that we have met these challenges head-on, while growing membership by 10 per cent to 90,000 members. The NRLA remained open throughout the coronavirus crisis to support members and lobby for the fair treatment of both landlords and tenants. We welcome clarification that emergency measures in the rental market will be phased out in tandem with the overall road map out of lockdown restrictions. However, with our recent research showing 60 per cent of landlords have lost income as a result of the pandemic, we continue to campaign for financial support for the sector as the recovery begins. While Covid-19 continues to dominate the headlines, the NRLA continues its day-to-day work, supporting you and your businesses, and campaigning on the issues affecting them. At the start of the year, the NRLA launched its response to the Government’s Renters’ Reform Bill proposals. This comprehensive document lays out what the NRLA wants to see in a post-Section 21 world, stressing the importance of landlords retaining the right
BEN’S TOP READS
It has been a hard 12 months for us all, but as we enter spring, the green shoots of recovery are starting to show
to regain possession of their properties in legitimate circumstances – something you can read more about on page 9. We have had a great response to the publication, with hundreds of you downloading the document. We have now presented the paper to the All-Party Parliamentary Group for the private rented sector, which will be making recommendations to Government. It has been a hard 12 months for us all, but as we enter spring, the green shoots of recovery are starting to show. Vaccines are being rolled out at speed and, at the time of going to press, infection rates were continuing to fall. There may still be tough times ahead, but working together, I am confident we can weather the storm. BEN BEADLE Chief executive, NRLA
DRIVE TO SUCCEED Callum Stevens and his journey from schoolboy entrepreneur to portfolio landlord PAGE 18
HOME SWEET HOME Our new feature series celebrates your renovation projects, with top tips on how to make the best of your rentals PAGE 54
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SPRING 2021
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National Residential Landlords Association 212 Washway Road, Sale, Manchester M33 6RN nrla.org.uk
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Published by: LPTE Limited Produced on behalf of LPTE Limited by: Think, Capital House, 25 Chapel Street, London NW1 5DH Tel: 020 3771 7200
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Editor: Sally Walmsley Commissioning editor: Alex Garrett Design: Matthew Ball, Alistair McGown, Amanda Richardson, Juanita Adu Sub-editor: Rica Dearman Advertising: Tom Fountain (tom.fountain@ thinkpublishing.co.uk) Client engagement director: Anna Vassallo Executive director: Jackie Scully
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How landlords are making their properties more energy efficient
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Printed by: Walstead Bicester, Chaucer Business Park, Launton Road, Bicester OX26 4QZ. Property magazine is printed on UPM Finesse Silk sourced from manufacturers operating within internationally recognised environmental standards, to ensure sustainable sourcing.
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All the articles in this publication are for general information only and are not intended to be advice for any specific person. Any advice contained in this publication is given in good faith, but no responsibility whatsoever is accepted by the National Residential Landlords Association (NRLA), nor shall the association be held liable for the consequences or reliance upon such advice. Readers are recommended to seek professional advice before taking or refraining from taking any action on the basis of the contents of any article in this publication. The NRLA and the publisher do not endorse or approve any advertisement and have no liability for any loss caused by any reliance on the content of any such advertisement.
SPRING 2021
IF YOU ONLY READ ONE THING Your update from the last quarter 9 RENTERS’ REFORM BILL What should a postSection 21 world look like? 12 THE VIEW FROM WESTMINSTER 14 COVID-19 IMPACT The latest NRLA data 16 VOX POP Do you give your tenants free rein in the garden?
Accreditation Code: NRLA765
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FEATURES 18 PROFILE Portfolio landlord Callum Stevens shares his journey 26 GOING GREEN Why the time for change is now 32 THINK DIGITAL As the pandemic has seen our reliance on technology increase, find out about the new products for landlords 40 GETTING IT RIGHT What is the best way to structure your portfolio?
TOOLBOX
47 IN FOCUS Covid-19 recovery road map 51 INSIDER Landlords and the Spring Budget 53 ADVICE LINE Your quickfire questions 54 REVAMPING YOUR RENTAL Property makeovers 57 ONE YEAR ON The NRLA’s first anniversary 59 MORTGAGES Coronavirus crisis sees surge in new products 63 IN THE COMMUNITY Landlord Julie Ford going the extra mile for charity 65 NRLA NEWS Our manifesto ahead of the Welsh elections 66 MEET THE LANDLORD Ashley Wong on the rewards of being a landlord
CONTACT US landlords@nrla.org.uk NRLA HELPLINE 0300 131 6400
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IF YOU ONLY READ ONE THING PROPERTY UPDATE FROM THE QUARTER
Government guidance
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REACTIVATION NOTICES Following a last-minute extension, landlords can still use a reactivation notice for possession proceedings put on hold due to the closure of the courts in 2020. The deadline for using a reactivation notice – which is needed to ‘restart’ proceedings – has been extended from 29 January 2021 to 30 April 2021.
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PET-FRIENDLY TENANCIES The Government has changed its model tenancy agreement to allow ‘well-behaved pets’ in rental homes by default. Landlords who use this specific document cannot now issue blanket bans on pets, however, the move does not affect other assured shorthold tenancies or tenancy agreements.
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City rents suffer as Covid-19 sees tenants look to suburbs Asking rents in the UK’s biggest city centres saw falls of up to 12 per cent in the last quarter of 2020 as tenants moved out of cities to the suburbs.
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EMPTY HOMES FIGURES UP BY 20 PER CENT
More than a quarter of a million homes in England are empty, despite record numbers of people needing somewhere to live. NEW DATA SHOWS: O 268,385 long-term empty homes O increases in nine out of 10 council areas
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O figures are up 20 per
cent on the previous year – that’s a rise of 42,540 and larger than the previous three years’ increases combined.
Number of city-centre rental properties available on Rightmove more than doubled in some areas:
EDINBURGH
Down 10% MANCHESTER
Down 5.3% INNER LONDON
LEEDS
+179% The NRLA wants tax breaks for landlords bringing properties back into use to help tackle the issue.
Rents saw the most dramatic falls (annually) in these areas:
NOTTINGHAM
+139% INNER LONDON
+139%
Down 12.4%
There are fears a mental health crisis could be looming in the sector after it was revealed that 40 per cent of landlords believe the pandemic has had a ‘negative or very negative’ impact on their mental health. Property will be running a feature on the issue in our summer edition and would like to hear your stories.
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NRLA NEWS
LISTEN UP LANDLORDS! Listen Up Landlords is the new podcast launched by the National Residential Landlords Association (NRLA) to bring you the very best information, insight and analysis when it comes to renting homes. The monthly podcast will cover a range of topics affecting landlords, the private rented sector and the wider housing market, from the impact of new legislation to advice on how to make the most of your properties. Hosted by NRLA chief executive Ben Beadle and veteran broadcaster and NRLA regional representative Richard Blanco, Listen Up Landlords is available on all popular podcast channels, including Apple, Spotify, Google and more, as well as the NRLA website.
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NEW NRLA COURSES Two new courses are now on offer at the NRLA Training Academy. The Property Auction and Property Refurbishment courses both give practical advice on buying properties and getting them ready for tenants. Find out more on the NRLA training pages.
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z To get involved, email landlords@nrla.org.uk
Proportion of private rented sector homes down
ELECTRICAL CHECKS DEADLINE LOOMS The proportion of homes in the private rented sector has fallen for the third year, according to the latest English Housing Survey 2019/20. It is down from 19.3 per cent to just under 18.7 per cent, although still remains well above the 10 per cent recorded in 2000. Only in London and Yorkshire and the Humber has the proportion increased since 2018/19. The fall has been most marked in the South East, down from 18.8 per cent to 16 per cent.
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19.3% 18.7%
18.8% 16%
ENGLAND
SOUTH EAST
THE PROPORTION OF HOMES IN THE PRIVATE RENTED SECTOR
THE PROPORTION OF HOMES IN THE PRIVATE RENTED SECTOR
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 came into force for new tenancies last year and will be extended to cover existing tenancies as of 1 April.
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UNDER THE RULES, LANDLORDS MUST: O have the electrical installations in their rentals inspected and tested every five years O employ a qualified and competent person to do the work O provide a report to their tenant and – if they ask for a copy – the local authority.
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Landlord mental health crisis?
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The latest view from Westminster
The economic impact of the Covid-19 pandemic
Are you happy for tenants to maintain the garden?
News: Renters' Reform Bill, 1
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The G has over scr deci nmen d ap t Se ed to cti on 21
What landlords need from the Renters’ Reform Bill The National Residential Landlords Association (NRLA) outlines its proposals for a post-Section 21 future
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he Government’s decision has been made. Section 21 – commonly referred to in the media as the ‘no-fault eviction’ – is to go. While the Government, announcing its Renters’ Reform Bill plans, said it will give ‘landlords more rights to gain
possession of their property through the courts where there is a legitimate need for them to do so’, it has not been explicit in terms of what this will look like. With plans to repeal Section 21 acknowledged by the housing minister as “the largest change to renting in 30 years”,
the NRLA has now submitted a comprehensive document to ministers outlining exactly how new legislation could operate to be fair to landlords and tenants alike. WHAT IS RENTERS’ REFORM? The Renters’ Reform Bill was announced in the Queen’s
Speech in December 2019, with the Government saying it would: O abolish Section 21 repossession and reform the grounds for possession O improve the court process for landlords to make it quicker and easier for them to get their property back Spring 2021 / 09
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News: Renters' Reform Bill, 2
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deposit so that tenants don’t need to save for a new deposit every time they move house O bring in measures to widen access to, and expand the scope of, the database of rogue landlords and property agents O give greater powers to drive improvements in standards, and empower tenants to choose who they rent from.
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WHAT THE NRLA WANTS TO SEE Key to the NRLA calls is that landlords must retain the right to repossess their rental property where there is legitimate reason to do so. The reforms are based around the concept that most landlords want to support good tenants and keep them in their rental homes. The NRLA’s proposals outline clear and comprehensive grounds upon which landlords should be
WHAT IS CONCILIATION? A conciliation service would work with landlords and tenants to resolve disagreements in a similar way to the employment dispute body Acas. While more serious cases, such as those related to criminal activity by a tenant, would need to go straight to court, most could be considered by the publicly funded service, removing the stress and costs associated with a court case. In terms of outcomes, the service would either help both parties reach an agreement on the best way to keep the tenancy going – or would support them to bring the tenancy to an end in a way that works for both parties.
“The aim is to sustain tenancies wherever possible or bring them to an end in a collaborative way” BEN BEADLE, NRLA CEO
RENTERS’ REFORM BILL PODCAST The Renters’ Reform Bill proposals were a topic of discussion during the first episode of the NRLA’s brand-new podcast, Listen Up Landlords. Presenters
NRLA CEO Ben Beadle and Richard Blanco spoke to guests
landlord and campaigner James Fraser and landlord and agent Susan Aktemel about the implications of the bill and NRLA response. Tune in at nrla. org.uk/podcast
WHAT DO YOU THINK OF THE PROPOSALS?
Both the landlord and the tenants would also be able to access the advice and support they needed to make their case through the service. Unlike mediation, once an agreement is reached, it is legally binding. If the
tenant fails to keep their side of the bargain, the case would be fast-tracked through the courts. If the landlord doesn’t keep theirs, they would be banned from being able to repossess the property on the same grounds for six months.
able to regain possession of their properties. These include: O cases of tenant rent arrears O antisocial behaviour O situations where landlords want to sell a property or move into it themselves. It also wants the Government to establish a new landlord and tenant conciliation service (see panel above), which would help more landlords and tenants come to legally binding arrangements without having to go through the courts. The proposals were developed following engagement with both NRLA members and the wider housing sector. Ben Beadle, NRLA chief executive, said: “The Government has made its
decision on Renters’ Reform. There is no ‘if’ this will happen; it is now a case of ‘when’, so it is vital landlords’ voices are heard in the decision-making process. “The bill needs to enjoy the full confidence of both landlords and tenants. “Our proposals are for a fundamental reform of repossession rights, which strike the balance between the needs of both. The overriding aim is to sustain tenancies wherever possible or bring them to an end in a collaborative way. “We hope that ministers will accept our proposals and act on them soon.” MORE INFORMATION To read the NRLA proposals in full, visit nrla.org.uk/ rentersreform
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View from Westminster, 1
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A look at key achievements, campaigns and launches over the last quarter
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MEMBERSHIP AT 90,000 National Residential Landlords Association (NRLA) numbers have reached 90,000 a year after the merged organisation came into being, marking 10 per cent growth.
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PRIVATE RENTED SECTOR (PRS) OUTPERFORMS SOCIAL SECTOR English Housing Survey figures showed six per cent of private renters were given rent reductions compared to just two per cent in the social sector since the start of the pandemic.
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CEO GIVES EVIDENCE NRLA chief executive Ben Beadle called for a comprehensive package of financial support for the PRS while giving evidence to the Housing, Communities and Local Government Select Committee on the impact of Covid-19. RENTERS’ REFORM LAUNCH The new year saw the launch of a comprehensive paper outlining how the NRLA believes the Government’s new Renters’ Reform Bill should operate to protect landlords and tenants. WELFARE RESEARCH Our latest survey focusing on housing benefits and Universal Credit is out now.
Resilience of NRLA members
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can hardly believe that it’s been a full year since I said the spring 2020 ‘view from Westminster’ was being written far from SW1, as we all came to terms with the then unfamiliar concept of lockdown. I certainly did not think that more than 12 months would pass before my colleagues and I would see Westminster and Whitehall in person, or that the National Residential Landlords Association’s (NRLA) entire freshman year would play out in the shadow of the pandemic crisis. What was never in any doubt was the way in which the NRLA and its members would react and adapt to new ways of working to support one another and ensure that the private rented sector (PRS) continues to operate as effectively as current circumstances allow. Last year was dominated by efforts to get the courts operating and the housing market moving again. This year has to look to the future – how we return to some form of normality and put in place the foundation
WESTMINSTER ANALYSIS By Chris Norris
Overall, 2021 has thrown up significant challenges for a reformed and (hopefully) reinvigorated PRS. Building on the reduction in notice periods and exceptions to the repossession bans secured last year, our immediate priority is supporting landlords as the remaining restrictions are lifted, and in finding ways to sustain those tenancies hit hard by lockdown. With the help of hundreds of NRLA members who wrote to their respective MPs, we campaigned to limit the damage many feared ahead of the Chancellor’s Budget statement. Although we did not obtain all of the commitments we called for to support incomes and sustain tenancies, we did
achieve successes around the payment of Universal Credit and some valuable exemptions to the shared room rate. We also continue to work closely with Government as we transition away from the increased notice periods and possession restrictions imposed last year. After we presented our proposals to ministers, it was confirmed restrictions on enforcement are expected to end on 31 May, along with the Government’s increased notice period, with notice periods tapering as of 1 June. The changes will take place in line with the broader road map out of lockdown. Overall, 2021 has thrown up significant challenges and we are continuing to support landlords struggling with the impact of Covid-19. But it also presents opportunities to shape our future in ways that have not existed for generations. Find out more at nrla.org. uk/campaigns/coronavirus Chris Norris is director of policy and campaigns at the NRLA.
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Something to shout about
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Covid-19 crisis – the economic impact
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Landlords across England and Wales are counting the cost of the Covid-19 pandemic, with both rental and non-rental income taking a hit. More than half of landlords have lost rental income, according to new data from the National Residential Landlords Association’s survey for Q4 2020, which also shows a third of landlords are considering offloading properties or leaving the market altogether as a result.
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PROPORTION OF PRIVATE LANDLORDS WHO HAVE LOST RENTAL INCOME AS A RESULT OF THE PANDEMIC
OF ALL THOSE WHO HAVE LOST RENTAL INCOME
LANDLORDS WHO HAVE LOST RENTAL INCOME
25% 36% 39% HAVE LOST £1,000– £5,000
%
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47% 30% 23%
SAY THE LOSSES CONTINUE TO RISE
Landlords who have lost more than 20% of their rental income
NON-RENTAL INCOME HAS THE PANDEMIC CHANGED YOUR INVESTMENT PLANS? While some landlords say they won’t make any changes – and a small number continue to invest – the data found a third plan to reduce their portfolio or sell up:
50% 5% 21% No
More likely to invest
13% 11% Plan to leave the market entirely
Are uncertain
Likely to sell some properties
26%
5%
of respondents have lost non-rental income due to the pandemic
have lost more than half their income
OF THOSE
31%
24%
have lost up to £5,000
have lost more than £5,000*
(*THE REMAINDER PREFERRED NOT TO SAY)
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Landlords who have lost less than 10% of their rental income
Landlords who have lost 10–20% of their rental income
HAVE LOST MORE THAN £5,000
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Do your tenants have free rein in the garden?
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A beautiful garden can make a house feel like a home. Do you allow your tenants to be creative in the garden, or do they need permission to make changes?
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home with a garden can be a big draw for tenants – even more so over the past 12 months with the severe restrictions on movement and socialising making outside space at home even more desirable. Lockdown saw many households begin projects to enhance their gardens, with wooden pallets across the land transformed into coffee tables, planters and even outdoor bars. But as Tenancy Deposit Scheme figures show a whopping 23 per cent of deposit disputes concern issues with the garden, it is worth giving some thought to how you approach the issue. Do you expect tenants to take responsibility for maintenance, do you pay for a gardener or do you give tenants the freedom to do what they like with the space? Would your tenants need to ask for permission to make any major changes – and if so, what would that include? Opinions – and experiences – vary. In all, 60 per cent of those who got in touch via email and our social media channels said their tenants maintain the garden but would need to ask for permission for major changes; 26 per cent said they either pay for a gardener or do it themselves; and 14 per cent give tenants free rein to do whatever they want.
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HERE’S WHAT YOU HAD TO SAY… Rosemary Hill is a landlord from Bristol with two properties. When tenants vacate my garden flat, I arrange for the gardener to give it a good clean, trim and tidy, depending on the time of year. The incoming tenant is requested in the tenancy agreement to maintain the garden and leave it as it was at the beginning of the tenancy according to the season. We provide a lawn mower. Tenants can order a green bin for fortnightly collection. “I have never charged outgoing tenants for leaving the garden in a neglected state even if they have. But now, on the basis that prevention is better than cure, I have asked the managing agents to include in their regular inspections a sentence (and if necessary a recommendation) on the upkeep of the garden. “I think, now with considerations on species loss of birds and invertebrates, I am considering a small, laminated broadsheet, encouraging the occupants to be passionate about
‘their’ garden, especially flowers for insects, but being cautious about using appropriate anti-squirrel bird feeders to avoid attracting rats.” Sundra West is a landlord from Hove with two properties in Brighton and said that, as a THE BIG student landlord, she QUESTION finds it easiest to do the garden herself or get a professional in. I have been a landlord strims the grass. I am for students for 24 years seriously thinking of putting and after many years battling up the rent when tenants to get tenants to do the move out to cover costs of garden, I gave up and now paying a gardener – then do it myself – it’s so much gardening will be included easier and less stressful for in the rent.” all. If I am unable to do this, Mark Payne is I will get my gardener to do it.” a landlord from Derbyshire with Sheena Griffin is a landlord six properties. with eight properties. My properties all have You’ve got to be very outside space. If there careful, as the landlord is grass, then I have provided is liable for any damages a lawn mower and I expect that may occur as a result tenants to cut the grass – of a tenant’s behaviour. but often I have to text them “A tenant of mine went to remind them to do so. through a water pipe while “Only one tenant does any erecting a fence without weeding. My husband usually permission, however, it was visits about twice a year and my responsibility to sort it weeds the beds and often out and pay for repairs.
Send us your views by emailing landlords@ nrla.org.uk, respond via our social media channels @nrla and the NRLA Facebook page
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“I am a landscape gardener and always try to make the gardens at my properties as low maintenance as possible. “I would always make sure your tenancy agreement is very clear as to where responsibilities lie as regards gardens and what is and isn’t permitted.” Wendy Oldfield is a long-term landlord. For years I let my tenant manage his own garden, but over time it got very neglected, so when he gave notice it took a lot of work to get it back to a condition that was acceptable for the next tenant and their family.
“So, to alleviate any future problems, while providing the family with a good outside space, I gave the new tenants the option of either doing the garden themselves or paying a little extra each month to have the garden looked after for them. “As they didn’t have the tools to cut the hedge or the grass and the time as they are a working couple with a family, they opted to pay the extra to have the garden looked after. What I charge just covers the cost of the work, but saves me time overall while keeping the property looking respectable. However, if they want to add flowers, etc, they ask, and I have no problem with them making it their own space.”
Carol Ajegbo is a landlord from Twickenham with five houses in multiple occupation in Tooting, Wimbledon and Hounslow. She approaches each property dependent on the circumstances. In one house I have a keen gardener who looks after the garden brilliantly, so I offer plants and much appreciation. “In another there are no gardeners at all, so I have done work there and paid people to work on it. “In the other three properties the tenants have a go and will generally keep the gardens looking tidy, and
I go over sometimes to do some planting. “I also paid a tenant struggling on furlough to tackle one of the gardens. “I make it clear that I expect them to keep the garden maintained – so when I do go over to help, they are appreciative. I don’t think they would want the rents to go up to include a gardening fee.” THE NEXT BIG QUESTION: Ahead of the next issue of Property, we ask: Do you let furnished or unfurnished homes? Have your say by visiting our social media channels or emailing landlords@nrla. org.uk
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Hooked on landlord life
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From selling sunglasses in the school playground to portfolio landlord by 27, Callum Stevens has harnessed his relentless work ethic to build a property business from scratch WORDS BY SALLY WALMSLEY / PHOTOGRAPHY BY WILL AMLOT
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Callum uses online platform OpenRent to manage his portfolio, but is open to different management software packages
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allum Stevens’ entrepreneurial spirit dates back to his schooldays. While others spent breaks kicking a ball around or catching up on schoolyard gossip, Callum had already dreamed up a more profitable use of his time: selling hats and sunglasses to fellow pupils in his home town of Southend-on-Sea. By the time he began his degree in computing at Bournemouth University, he had started selling CDs and DVDs online via Amazon to help fund his studies. However, it was during a talk at the university’s business society at the age of 19 that he had his real Eureka moment and when his passion for property began. Callum says: “I was living in a student house in multiple occupation [HMO] in Bournemouth and was helping to run the university’s business society. We invited an HMO landlord in to give a talk, and after listening to what he had to say, I was hooked. “I read everything I could get my hands on about property investment, joined both the Residential Landlords Association and National Landlords Association (now merged to become the National Residential Landlords Association – NRLA) and started going to landlord investment shows to soak up as much information as possible. “The advice I was given was to save hard, then as soon as I had a big enough pot, ‘just go for it’ – so that’s what I did.” Today, eight years after that fateful meeting, Callum has a portfolio of 11 rental properties and has left his job as a management consultant to become a full-time landlord. So, just how do you go from penniless student to multiple property owner?
Some of the properties that Callum purchases need significant improvement works before they can be let
BEFORE
AFTER
“The advice I was given was to save hard, then as soon as I had a big enough pot, ‘just go for it’” The answer, it seems, is simple: hard work. In order to fulfil his property dream, Callum continued to trade online alongside his studies and took on extra jobs to keep the money coming in – at the same time cutting back on his outgoings. He says: “I have definitely made sacrifices to get where I am today. I was always known as the most frugal among my friends. I was just obsessed with saving, so I made sacrifices – not getting the latest phone and a nice car – and missing out on things like expensive holidays and nights out. “I had three or four jobs going on top of my studies. I worked for the university as
Callum with his parents on graduation day
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a mentor and at events such as open days showing new students around. “I worked for a company doing ageverification checks, visiting pubs and off-licences to make sure they were asking for identification. And at the same time I was also investing in shares and getting involved in peer-to-peer lending. “In the holidays, I would get up at 5am for a shift cleaning Southend beaches, then I would be back home for 9.30am before starting my shift at Sports Direct at 10am.” BUYING THE FIRST PROPERTY It was after four years of dogged determination and saving that Callum bought his first home, a three-bedroom house in Southend-on-Sea in 2017, at the age of just 23. As it needed a significant amount of work, he was able to buy it in cash for £189,000. “I needed to buy my own property first to open the door with lenders,” he explains. “They don’t like lending to under-25s unless you are a homeowner.” Callum made the decision to invest in his home town where he was confident he knew the area, the demand and the property values. Spring 2021 / 21
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He says: “Before I started investing, I took a look at net yields, as well as what was easy to let. I could see that family homes were in demand and knew from my research that tenants also typically stay in these houses for longer, so decided that was where to invest. Also, unlike flats, there is no ground rent or service charges to consider, giving you more control. I currently have 11 properties in my portfolio and of those, there is just one flat.” On completion of the works, which saw him install a new central heating system, new double glazing, put in an open-plan kitchen and reconfigure the bathroom, he remortgaged the property and pulled out the value of his initial investment to spend on the next house. True to form, he also took in a lodger whose rent covered the mortgage payments. BUILDING UP THE BUSINESS “Things moved very quickly,” says Callum. “It took six months to do up and get the finance from the first house, and as soon as that was done, I bought my first investment
Callum purchased his second property at auction – a two-bedroom house in Southend-on-Sea
property at auction. In fact, it was just a week after the money from the remortgage landed in my account.” Typically, Callum did his research beforehand. He says: “I had gone to a couple of auctions before, just to watch. The first one I actively took part in had 12 lots and I was bidding on six of them. “I hadn’t got too emotionally attached to any one property and I was also lucky in that it was snowing, so not many people were out and about doing viewings. “The two-bedroom house I ended up buying was one of the last lots and there
was just me and one other person bidding on it. They finished quite quickly, so I got it for pretty much the guide price.” When he first started investing, Callum was running his business alongside his day job as a management consultant, something that could be challenging. He says: “When I finished university, I went into management consultancy. I was travelling up and down the country for work, which did make it tough, particularly with viewings. A lot of the bargains would only have viewing dates in the week. Thankfully, my mum stepped in to do
WHAT ADVICE WOULD YOU GIVE TO BUDDING YOUNG PROPERTY INVESTORS? While Callum has grown his portfolio quickly, he is the first to admit it hasn’t all been plain sailing and that sometimes age can act against you. He says: “If you want to build a property business, you need to really want it. Educate yourself and join organisations like the NRLA and listen to
advice. If, like me, you want to buy at auction, always read the legal pack to check the small print. “I once discovered, right at the 11th hour, that a property I was looking at had a clause that would double the ground rent. I have also seen bidders winning homes with regulated
tenancies (where rents are controlled and tenants have the right to remain for life) without realising. “The most difficult part, for me, was convincing lenders to allow me to borrow money. At the start, all I seemed to hear was that I was too young or inexperienced. “As well as rejections from lenders, I also faced a bit
of ageism from agents. They all think you haven’t got the money. “What I would say to any other young investors finding themselves in this situation, is ‘don’t give up’. If you persevere and keep applying to different lenders, you will find someone willing to give you a chance. “Keep going. It is hard, but it isn’t impossible.”
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Callum has chosen to invest in his home town of Southend-on-Sea
Roberts believes it’s important
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to follow your HOW HAS BEING Adreams, MEMBER despite the obstacles OF THE NRLA HELPED YOU?
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Callum joined the NRLA before he’d bought his first property to find out more about the industry, and has used a range of services since then. He says: “I joined the NRLA before I started buying and think it is fantastic for advice and support. “Prior to Covid-19, I attended the NRLA local meetings, where
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I could meet and talk to other local investors and keep up to date with all the local news. Since the pandemic hit, I have also signed up for the local webinars. “I have used all the document templates and guides, and called the advice line quite a bit – it’s great to be able to double-check things. The next thing on my list is to take a couple of courses.”
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“Long term, I want to keep growing my portfolio and invest in more higher-yielding properties” the weekday viewings. She would film them and send the videos on to me. “I eventually moved to another company, which offered more flexibility, but after it folded and I was made redundant, I decided I would run the property business full-time – with my mum still managing the day-today contact with the tenants.” With more time on his hands, Callum was able to focus on building the business and set up another brand, Montagna Property Partners, which helped him access the finance he needed to keep investing. He made the decision to move away from agents and fully manage the properties in-house after using a let-only service for his first rental. He says: “I didn’t feel the checks were stringent enough, so after that first time, I decided to do it myself using online platform OpenRent.” In terms of tech, Callum likes to keep an open mind. He is currently trying different management software packages. “I have looked at management software and am currently trialling a few, including
Konnexsion, which was developed by someone I know from a property networking group. I use Excel for record-keeping and upload everything to Google Drive,” he says. “OpenRent is great in terms of advertising properties. One of the real positives is that you can upload videos. I first started making videos of my properties as a result of the Covid-19 restrictions. However, I will still use them going forwards, as you know all the viewers that come to see the property have already got a feel for it through the video and are interested.” WHAT DOES THE FUTURE HOLD? Not one to let the grass grow under his feet, Callum now plans to diversify his portfolio. He says: “Most of the homes on the street where I bought my latest property have been converted into flats, so I am hoping to split up the new property that Callum founded Montagna Property Partners
way. As a back-up, if I can’t get permission for the flats, I will redevelop it as an HMO for social tenants; this means I will be able to let it on a long lease, minimising any potential voids. “Long term, I want to keep growing my portfolio and invest in more higheryielding properties.” With Callum at the helm of the business, Mum looking after the day-to-day running of the rentals and Dad pitching in to help out with the gardens, Montagna Property Partners is a real family affair, with the lettings part of the business – CDLS Property – made up of the family’s initials. Were his parents surprised he was able to build up such a successful business from scratch, and at such a young age? Callum laughs: “Not at all. They still remember the hats and sunglasses, so they have known that I liked to make money. “To get to work with my family while doing something that I love really is the icing on the cake.”
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EPC RATINGS Rental homes may need a minimum EPC rating of C under Government proposals
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MAKING HOMES GREENER Landlords may need to upgrade rentals if ambitious new energy-efficiency targets get the go-ahead BY GILL OLIVER
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andlords are going to come under increasing pressure to upgrade their properties in the next few years, thanks to the drive to establish greater energy efficiency in the private rented sector (PRS). The Government has consulted on plans to ramp up energy-efficiency standards in the PRS in England and Wales. Under the proposals, a minimum EPC rating of C would be mandatory for all new tenancies from 2025, and all tenancies from 2028. Landlords could face fines of up to £5,000 if they fail to comply. At the time of going to press, no final decision had been made. It’s all part of the Government’s commitment to reach net-zero carbon emissions by 2050 to combat climate change, but it also taps into a greater awareness of ‘green’ issues among tenants and the need to address the demand for a better standard of housing. The National Residential Landlords Association (NRLA) backs the plans to reduce carbon in homes and improve energy efficiency in the sector. “We all understand the issues around climate change and have known about the Government’s zero carbon ambitions for a while,” says NRLA deputy director for policy and research John Stewart. “We have to take that seriously, and the residential sector has to play its part.
“We’ve seen massive improvements in the energy efficiency of the PRS stock and a lot of properties taken out of the bottom two ratings. It’s to be commended that so many NRLA member landlords have taken action,” he says. That said, John recognises the challenge ahead. “The measures to reach the current minimum energy-efficiency standard of E rating have been cheaper and more accessible,” he says. “To have a similar or shorter time to reach C, where interventions are more intrusive and expensive, is a very challenging and ambitious timescale.” He says that most private sector landlords have responded positively to both existing and upcoming legislation, and many have already upgraded their properties. PRS VERSUS SOCIAL HOUSING The latest English Housing Survey, published in December, shows the energy efficiency of the 4.4 million homes in England’s PRS sector is improving. However, only 38 per cent of PRS homes are rated in the top three bands A–C, compared to 61 per cent in the social housing sector. PRS properties are on average older and therefore more likely to have problems with rising or penetrating damp. The average EPC rating of PRS stock is 64 (D) – which is some way short of the range to achieve C, at 69–80 points.
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Sixty-eight per cent are fitted with central heating, but private rental homes are more likely to have older, less efficient boiler types. Insulation is key to energy efficiency, but just eight per cent of PRS properties have solid wall insulation – compared to 28 per cent for social housing. Similarly, just over half of all private rental properties with cavity walls have cavity insulation, compared to more than twothirds for owner-occupied.
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INSIDER TIPS Nick Brereton is a qualified and accredited independent energy assessor working for The EPC Man. He suggests that landlords looking to improve their property’s EPC rating should change all light bulbs to low-energy LEDs and boost loft insulation to the recommended 270–300ml. If the property has gas central heating, add controls such as a programmer and thermostat. Each radiator should be fitted with its own thermostatic radiator valve; any missing ones knock points off the score. Other easy ways to accrue points are to fit an 80mm jacket around the hot-water cylinder, and draught-proof single-glazed windows and doors. At the other end of the scale, upgrading the fabric of the property, such as insulating interior or exterior walls and floors carries a much higher price tag – in some cases you may even need to rip out kitchens and bathrooms to gain access. One of the biggest challenges for landlords is a property with a flat roof, particularly if it’s also above a shop or other commercial unit, says West Midlandsbased surveyor and energy assessor Chris Dickens, who runs CED Property Services. Such properties have a double negative in their energy rating, he says, since heat loss from the flat roof is greater than normal, and the commercial unit is treated as unheated or partially heated. Independent energy assessor and landlord Matt Fay, who covers the Manchester region, says: “If there’s a gas boiler, regardless of age, a property will score pretty well anyway.” Electric systems don’t tend to score as highly unless they’re the new breed of electric high-heat-retention storage
SIMPLE SOLUTIONS Alterations such as draft-proofing, better loft insulation and switching to LED bulbs can make a big difference to a property’s EPC rating
heaters. Installing one could add a whopping 35 points to the EPC score. GREEN FUNDING AVAILABLE Landlords can apply for the Government’s Green Homes Grant (GHG) scheme, which runs until 31 March 2022, but is available only in England. Supporters of the scheme are fighting a rearguard action to persuade the Government not to axe £1bn of unspent money from the scheme after uptake was low during the pandemic. The NRLA welcomes GHG because it allows landlords to apply directly, unlike previous funding, which has often depended on tenants’ income and had to come via them. The drawback is that the costs fall on landlords, even though the main beneficiary may be the tenants, and this split incentive is an ongoing bugbear. “We’re not seeing an uplift in property values or the rents you might expect to go hand in hand with energy-efficiency improvements, and with the new challenging target of C, there are fears
Another issue of concern is that private landlords are being treated differently from homeowners
landlords could see a decrease in the value of their property in the future,” John warns. In some locations, the cost of improvements could be equivalent to half the property’s market value. For example, on a £50,000–£60,000 terraced house in parts of North England, improvements to reach a C rating could cost £20,000–£25,000. Another issue of concern is that private landlords are being treated differently from homeowners. Little pressure is being applied to the owner-occupier sector, despite its accounting for the largest share of the housing market. “If the Government wants to tackle this issue, it must also include the owneroccupier sector. The PRS has to play its part, but shouldn’t be doing so alone,” John states. Another potential issue with GHG is that applicants must install at least one primary measure – such as wall insulation or loft insulation, or install low-carbon heating – to qualify for funding of secondary measures, such as replacement glazing or draught-proofing. So landlords who have already carried out all the primary measures would not qualify. Spring 2021 / 29
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The application process is also considered cumbersome. Dr Paul Hampton, associate head of the school of architecture and built environment at Wolverhampton University, says smaller landlords complain that most energy-saving measures are targeted at larger portfolio landlords. Other national and local funding schemes include the Renewable Heat Incentive for larger and more expensive renewable heat measures like ground source or air source heat pumps, which gives the owner a quarterly payment for seven years calculated on the amount of green energy they are estimated to produce.
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BRINGING DOWN THE COSTS Retrofitting is most efficient when there’s volume, but unfortunately, the PRS is dominated by small portfolio landlords. John believes there’s potential to emulate energy deals, where tens of thousands of households band together to take advantage of discount rates negotiated between local councils and energy companies. “We could do with something like that to drive down the cost of some of the retrofitting work, and as there’s an EPC register, it should be possible to identify clusters of non-compliant properties,” he says. Dr Hampton also sees this as the sensible way forward, citing landlords in the Wolverhampton region who dealt directly with a national boiler manufacturer. With 200 properties between them, they wielded their collective buying power to negotiate a good price on 200 boilers. Dr Hampton believes the new C rating will be a challenge in the short term, but points to a younger generation who are accustomed to purpose-built university blocks. “They won’t put up with condensation and minimal heating in substandard properties,” he observes. Younger tenants are also more likely to care about environmental issues. He warns: “There will be a mood swing towards demand for those values, and if that’s backed up with legislation, it will drive it forward.”
“Young people won’t put up with condensation and minimal heating in substandard properties” 30 / Spring 2021
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CASE STUDY
REFURBISHING CAN SEE A DROP IN BILLS Landlords James and Tatiana Tanner took their north London property from a G to one point below an A rating The couple spent a year refurbishing their threestorey Edwardian house in Muswell Hill to make it more energy efficient. The brick property is in a conservation area, so the challenge was to carry out the changes while making sure it continued to look identical to all the other homes in the street. Internal walls were fitted with 100mm cork thermal plaster, and the suspended timber floor was insulated with 200mm of wood fibre sandwiched between two layers of airtightness membrane. All windows were replaced with custom-made timberframe, double-glazed ones. Airtightness was achieved by specialised expanding foam and airtightness tape. The roof was insulated with 80mm sheep’s wool between the rafters. Because of the limited thickness of insulation that could be installed in the roof, the ceilings were also lined with 10mm of plasterboard laminated with an aerogel layer. Solar PV panels were installed on the roof and the boiler was replaced with a more efficient combi unit, and humidistat extractors
James and Tatiana’s north London property
were installed in the bathroom. LED lights and A-rated energyefficient appliances were installed throughout, and individual temperature controls fitted to all radiators. Five of the chimneys were blocked up and the cellar was given a waterproof lining to prevent rising damp. The total refurbishment (including new bathrooms and kitchens) cost
£100,000 and the gas bill dropped from £2,500 to £850 a year. The couple have also carried out energyefficiency work in other properties they own with many ideas from energysavingtrust.org.uk Gas and electricity are included in their tenants’ rent, so James and Tatiana saw the benefit of energy bills falling by 50 per cent as a result of their work.
ENERGY-EFFICIENCY SUGGESTIONS James and Tatiana share some of their low-cost and simple measures to make property more energy efficient: O advise tenants to set
timers for hot water and heating so they are only on when needed O fit thermostat controls on all radiators O insulate the hotwater cylinder O replace lighting with LED low-energy lights O close all windows when the heating is on O draft-proof windows and external doors O bleed radiators several times a year, and arrange for a Gas Safe check
alongside an annual boiler service O use an energy provider that produces 100 per cent clean electricity O block unused chimneys O replace airbricks with sheep’s wool insulation O get a plumber to remove the sludge that builds up inside your radiator pipework O install humidistats in bathrooms to remove steam and reduce mould z add breathable insulation in the loft.
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The Covid-19 pandemic has accelerated the need for landlords to adopt digital technology in the form of apps and online platforms to manage their properties. Here, we look at the benefits of doing so BY ZOE DARE HALL
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hen Nicola Hammond, an HR manager from Nottingham, was made redundant last year, she decided to invest her savings and payout in buy-to-let properties. She bought a two-bedroom house in Blyth on the Northumberland coast at auction, and has since acquired three more similar houses nearby. “With the help of my brother, who is a trained plumber and electrician, we’ve camped in the properties while working 14-hour days on refurbishments and repairs – when Government guidelines have allowed during Covid-19,” says Nicola. “But I was struggling to manage everything on spreadsheets and calendars. I’m a remote landlord, so the thought of taking my laptop everywhere wasn’t convenient.
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I really wanted an app that would let me do everything from my phone.” The question is, where do you start? The digital age has hit the letting industry head-on with an explosion of new platforms designed to help landlords save time and money. The UK’s proptech sector is worth more than £6bn, with around 400 of its 770 or so companies focused on residential property; of them, a third are concerned with property management and 15 per cent deal with rentals, according to data from Unissu, a proptech procurement platform. EXPLORING THE APP OPTIONS New entrants in the burgeoning letting proptech marketplace include Clooper, which connects landlords, tenants and tradespeople, and enables smart notifications and secure payments; Hammock, which helps landlords manage their finances; and the
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The Covid-19 pandemic has given all these digital platforms extra relevance, too, with landlords needing to find virtual alternatives
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rental and management platforms Kiko and PlanetRent. The Covid-19 pandemic has given all these digital platforms extra relevance, too, with landlords needing to find virtual alternatives at a time when visiting properties and meeting tenants has been all but impossible. For Nicola, the answer lay in Alphaletz, a cloud-based, mobile platform that helps landlords take control of every aspect of their business. “Cash flow is very tight at the moment, so if it’s a case of weighing up building insurance versus a snazzy bit of software to make my life easier, the software won’t win,” she says. “Looking at Alphaletz pricing, I thought I could stomach that after the free trial and, having worked for a software supplier for years, I like the fact that the road map seemed to be aligned with customer demand, and that Alphaletz is constantly updating its offering.” Alphaletz’s CEO, Richard Jackson, adds that for Nicola Hammond uses the cloud-based Alphaletz app
landlords with multiple properties in diverse locations “trying to manage multiple systems such as Spreadsheet, Dropbox, Accounting Systems, calendars and ‘to do’ lists that don’t talk to each other”, the platform removes all that stress. “It enables them to keep track of everything, and have all relevant information at their fingertips, meaning they can get back to tenants within minutes, not hours,” he comments. “Landlords love the simplicity and functionality of the app. The main thing is the huge time-saving element, such as being able to instantly output income and expense reports. When you get a call from an upset tenant to say that a boiler has broken down, the landlord knows exactly who to call and if there is a warranty or insurance cover,” Richard adds. Some apps provide a one-stop-shop service – that everything-at-yourfingertips facility that handles the whole process from finding tenants and arranging lettings
to managing finances, property maintenance and legal compliance. Others specialise in one specific area of lettings. TenancyDocs, which launched in the mid-2020, offers landlords help with the compliance of their tenancies. “While landlords can advertise and show their properties through video or socially distant viewings, the restrictions imposed by lockdown impact a landlord’s ability to carry out tests, certificates, inspections and maintenance,” comments partner Nick Leventis. “Work statuses are changing so rapidly at the moment, too. A tenant could be employed today and not tomorrow, impacting their ability to pay their rent. A service like ours ensures that private landlords who have not chosen to use an agent are still protected and that their relationship with their tenants is fair and transparent.” SIMPLICITY AND SELECTIVITY OpenRent, which claims to be the UK’s largest letting agent, letting one property every three minutes, offers a preferable way of finding tenants, says one of its users, Richard Davies, a retired Spring 2021 / 35
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engineering manager from Llandudno in North Wales. He advertises his six twobedroom flats in Rugby, Banbury and Llandudno on the site. “It allows us to find and select the tenant we want rather than the one a traditional agent wants us to have, and at significantly lower cost than using a high street agent,” he says. “The platform allows us to have all relevant information in one place and filter out unsuitable tenants via integrated messaging, without the need for an awkward telephone call. It’s fast. And my tenants like it – they appreciate dealing direct with the landlord.”
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FILLING A VOID IN THE MARKET Many landlords feel these apps provide a tool that’s long overdue in the lettings sector. Adam Sturdy, a former management consultant who now runs the family business’s portfolio of 20-plus rental properties in Taunton, Reading and London, says: “When I began a few years ago, property management was a major pain point and cost drain. We were using seven different agents, where at least half were not up to scratch, and they all did things differently.”
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Adam has found his solution in Howsy, a platform that offers a full property management service for a fixed fee (from £59 a month outside of London; £89 in the capital). “I like the country coverage, price structure and technology-first approach. It doesn’t matter where I buy a property, as I know Howsy can manage it. The dashboard is ace, too. Everything is in one place.” Howsy, like many digital platforms designed to shake up lettings, was born from its founder’s personal frustration with the industry. As a landlord and a renter at the same time, Howsy’s CEO, Calum Brannan, felt the lettings world was “stuck in a time warp” riddled with “hidden costs and poor service”. It’s a similar story for former banker Raj Dosanjh, a landlord who couldn’t find a comparison website for letting agents, which didn’t, ultimately, cost him – the landlord – money. So he co-founded Rentround. “I know that choosing a letting agent can be a minefield. Do you go with the biggest name, the cheapest or the one closest? Plus agents use a lot of jargon, which can be overwhelming,” Raj comments. And landlords, he says, are a ready and willing audience for proptech.
“I’ve created a few tech businesses in the past and landlords are the most receptive to providing feedback and great suggestions. They seem to be an adopting audience driven to making things better.” Similarly started due to one landlord’s inability to find what he needed is Rentora. Its founder, John Wade, bought 12 investment properties in Doncaster in 2011. But he was “fed up” with the differing information and high management costs charged by high street letting agents. And then he had a light-bulb moment when he realised one of his tenants had been paying her rent on a different day each month, which resulted in her unwittingly defaulting on two months’ rent over time. “I was spending an entire day a week managing my portfolio and I felt stupid that I hadn’t noticed, so I developed some software to collect rents. It was originally a project for me to use, but then I realised I had something of use to others,” says John, who has seen 1,000 new landlords sign up to Rentora during the pandemic. Simplicity is key to the site’s success, he continues. “I don’t need fancy graphs showing me my return on investment. I know that. I wanted to be able to
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Howsy, like many digital platforms designed to shake up lettings, was born from its founder’s personal frustration with the industry
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in immediately. On my latest flat, one tenant moved out in the morning and the next one signed the contract that evening.”
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know when rents were due or overdue, and when they were paid, and to be able to access that information any time, anywhere. The easier you make it for tenants to pay, the more likely they will.” Rentora (which charges landlords £15 per month to advertise unlimited properties) has since evolved to include document storage, an inventory tool and job sheet share, enabling the landlord to access information and photos instantly and share with the tenant or chosen contractor within seconds.
There is also a facility for tenants (or their guarantors) to overpay while they’re flush, so they can have a rent-free month in leaner times. “It’s almost a savings scheme, and it gets used a lot,” says John. And the site’s listing tool means every property advert is saved for future use. “Every time a property sits empty – such as when you’re waiting for new photos when the tenant moves out – it mucks up your return on investment. With your advert always on the system, you can relist and get a new tenant
THE BENEFITS OF SHOPPING AROUND FOR A GOOD AGENT Twickenham-based James Sullivan (pictured) works in insurance but has a side income generated from four rental properties – two terraced houses in multiple occupation for students in Leeds and Bradford, and two semi-detached family houses in Greater London. “My Northern properties are managed by a great agent and I’m pretty much hands-off. But
in London I had a nightmare agent who wasn’t advertising my property when it was vacant and responded quite rudely when I questioned this,” says James. A Google search steered him to the lettings comparison site Rentround. “I get my insurance and utilities through comparison sites, so I liked the idea of using the same method for my agent,” he says.
“I use it to look for an agent renowned for finding tenants quickly, which is a metric that Rentround shows, and with fair – but not necessarily the cheapest – management fees. “With those criteria, I could compare about 20 agents on-screen within 20 seconds, saving me
about two hours of searching and calling agents. I also save about £1,200 a year in fees – my previous agent charged 15 per cent for management and my new agent, Accommodation. co.uk, charges 12 per cent. I have also got rid of all the tenancy-renewal fees, void periods and unreasonable management costs.”
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Apps unquestionably make life easier and suit our on-demand way of living now
A MATTER OF CONVENIENCE Apps unquestionably make life easier and suit our on-demand way of living now. “I was on holiday once and a request came through to me to book in a contractor to do some repairs. I booked the contractor by phone, using the Arthur app, all while on a ski lift,” says Arpit Patel, director of Bespoke Landlord Services in Colchester, who uses the property management and software platform Arthur to manage 54 properties. During the pandemic, Arthur’s user numbers have increased by 27 per cent, and the platform has added Covid Profile and Vulnerability Profile functions, enabling tenants to inform property managers of any health issues that might affect viewings or repair work. But there are some occasions in which digital genius cannot replace a good, old-fashioned bit of human intervention (Covid-19 lockdowns permitting). “The one thing I wouldn’t do is let one of my properties without at least talking to, or meeting, the tenant. I do all the viewings myself, as it’s like interviewing the tenant. You need to use your gut instinct,” says John. “Everything else you can do remotely.” People’s image of landlords lying on a beach while their portfolios take care of themselves may not be realistic, he says. “But digital platforms do bring us closer to that becoming reality.”
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PROPERTY OWNERSHIP OPTIONS Using different ownership structures could be of benefit to landlords – they just need to seek out the advantages and be aware of the obstacles
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BY ALEXANDER GARRETT
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PERSONAL NAME Simple ownership, but limited relief for higher-rate taxpayers
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hen George Osborne introduced Section 24 (S24) in his Summer Budget in 2015, one consequence was that many smaller landlords started thinking for the first time about the best way to own their properties. Until then, the vast majority had been content by default to own in their own personal name. But with mortgage interest being disallowed as an expense against higher-rate income tax, thousands of buy-to-let (BTL) investors realised that their finances would no longer add up. The immediate challenge was to find a cost-effective way of replicating that valuable tax benefit and, in doing so, landlords have found that there may be a wider range of benefits to using different ownership structures, beyond tax.
Research from estate agency Hamptons showed that in 2020, a record number of new limited companies were set up to hold BTL properties. Some 41,700 companies were established, an increase of 23 per cent on 2019, and up from just 5,000 a decade ago. In fact, according to Hamptons, “between the beginning of 2016 and the end of 2020, more companies were set up to hold BTL properties than in the preceding 50 years combined”.
A limited company is the obvious alternative to holding letting property in your own name, but it’s not the only one
WHAT’S IN A NAME? A limited company is the obvious alternative to holding letting property in your own name, but it’s not the only one. Limited liability partnership (LLP) and a ‘mixed partnership’ are two other options; and there are different routes to incorporating, which could see you forming multiple companies, for example, or converting your existing ownership into a limited company. Limited companies have become the main focus of interest because when rental properties are owned by such an entity, S24 doesn’t apply; corporation tax is levied at 19 per cent on profits – compared to top income tax rates of 40 per cent and 45 per cent – and companies are allowed to offset all mortgage interest against rental income when calculating the profit. Corporation tax will increase for businesses with annual profits of more than £50,000 after 2023.
OWNERSHIP TYPE 2
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LIMITED COMPANY Mortgage payments can be fully offset against tax
MIXED PARTNERSHIP Combines tax and inheritanceplanning benefits for landlords
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A STRUCTURED APPROACH The single-property limited company structure is ideal for acquiring new properties, but putting existing properties into a company presents immediate problems. If you have to sell the property, and then repurchase it through the
NUMBER OF BUY-TO-LET COMPANIES SET UP ANNUALLY (GREAT BRITAIN) 45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 SOURCE: HAMPTONS AND COMPANIES HOUSE
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In the past, there were significant obstacles to doing this, says Chris Frame, vice president of Growth and Business Development at GetGround, which specialises in company formation. “First there was the high set-up and running cost, which would often offset any savings; and it was also time-consuming – it could take weeks, if not months, to set one up.” GetGround claims to have revolutionised that process. It can establish a company for a one-off cost of £500 plus VAT, with a monthly running cost of just £20 plus VAT to include all accounting services. The entire set-up, including opening a bank account, can now be done in less than 72 hours and can all be done online, says Chris. Others point to the fact that banks used to be cautious about lending on residential property to limited companies and would often charge uncompetitive rates. If anything, that has pivoted since the wave of new company formations in the past four years, and now mortgage rates for companies are often more favourable than those for individuals. For landlords looking to acquire new properties, GetGround advocates setting up one company per property. Each company is a special-purpose vehicle designed for the sole purpose of investing in residential real estate; ownership can be divided between different parties through allocation of shares. From a tax perspective, exit costs are lower because you can dispose of a property by selling the shares in the company that owns it; that attracts a lower rate of capital gains tax (CGT) than property sale. And by structuring in this way, each property can be legally ringfenced from other assets or wealth. “Our clients are generally landlords who are looking to limit personal liability up front while at the same time making their property investment more tax efficient and liquid over time. We also have many clients who are looking to make smart decisions around inheritance planning,” says Chris.
company, you trigger CGT on the sale, Stamp Duty Land Tax (SDLT) on the repurchase, and you will also have to remortgage, which could trigger redemption penalties. All this adds up to making the process unviable for many landlords. However, if you can show that your property business really is a business, it is possible to convert it into a company and transfer the assets without incurring
Each company is a special-purpose vehicle designed for the sole purpose of investing in residential real estate
these costs. This right was established in a legal case Ramsay vs HMRC in 1992, when the owner of a small apartment block won the right to what is known as S162 incorporation relief. Azid Gungah, a London-based landlord, who built up a portfolio of more than 15 houses (with a total of 30-plus tenants) in his personal name starting from the age of 21, says that he had considered setting up a limited company before 2015, but had been put off by the cost and difficulty. When S24 was introduced, he took advice from three big accountancy firms, who helped him come up with a new strategy. Initially, the properties were kept under personal ownership but set up as an LLP between Azid and his wife. “Under that structure we had to show HMRC that we were running it as a business,” he Spring 2021 / 43
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Feature: Ownership options, 3
PORTFOLIO STRUCTURES
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The below calculation assumes a 75 per cent loan-to-value (LTV) interest-only mortgage with a rate of 2.5 per cent on a property held in a personal name and 3.5 per cent for a property held in a limited company. Gross profit is calculated after costs, but before tax. Net profit is calculated after all costs, including tax.
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LIMITED COMPANY
PERSONAL
PERSONAL
(LOWER RATE)
(HIGHER RATE)
PURCHASE PRICE
£250,000
£250,000
£250,000
£12,000
£12,000
£12,000
£6,563
£4,688
£4,688
GROSS PROFIT
£5,438
£7,313
£7,313
TAX DUE
£1,033
£1,463
£3,863
NET PROFIT
£4,404
£5,850
£3,450
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SOURCE: HAMPTONS
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RENT MORTGAGE INTEREST
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explains. “The advice we had was that if you can show you are operating as a business under an LLP structure for three years, then at the end of that you are allowed to incorporate. You transfer the LLP into a limited company structure with all the correct procedures.” Under this approach, CGT and SDLT are deferred until properties are eventually sold. But Azid says: “It works for me because I will never sell, so I will never trigger those taxes. So they are deferred in perpetuity.” He now has one company for his legacy properties, a second company for new acquisitions and a third for estate management. Azid says this structure also gives him the ability to pass his properties on to his children, through transferring company shares to them. SUCCESSION PLANNING An alternative structure, which allows you to offset your mortgage interest payments and manage S24 without selling your properties to a limited company, is what is known as a ‘mixed partnership’ or ‘hybrid structure’. This is where you form a limited company (or use an appropriate existing one) and then make that company a partner alongside individual investors in an LLP.
Less Tax 4 Landlords is a tax and business-planning consultancy that advocates this as a possible approach for landlords looking to build, run and grow a professional property business. Ben Rose, the company’s head of marketing, says this structure is also particularly suitable for those who want to start succession planning, since it enables you to bring in your children as shareholders of the company, and at the same time can, with current legislation, mitigate inheritance tax (IHT). “If you own property in a limited company, you need to be careful in your planning, as many companies that hold BTLs will be treated as investment companies, so that means it will count inside your estate for IHT,” he explains. “Whereas in a mixed partnership it is possible in the
Since everyone’s circumstances are unique, it’s essential to take advice from different sources and find the right solution for you
STAYING IN THE GAME The other challenge for landlords owning property through any of these structures is to take money out without incurring additional taxes. If you draw dividends from a limited company, for example, you pay dividend tax, which after the £2,000 tax-free allowance ranges from 7.5 per cent for basic-rate taxpayers to 38.1 per cent for additional-rate taxpayers. The usual way to sidestep this is through repaying the money the landlord has put into the structure, whether that be through a director’s loan in the case of a limited company or the capital account in a mixed partnership. What’s clear is that, with little likelihood S24 will be repealed any time soon, more landlords are going to have to find a suitable structure to own their property if they want to stay in the game. In many ways that plays to the Government’s agenda of wanting to professionalise the private rented sector, and leaves landlords who are higher-rate taxpayers, yet unable to demonstrate that they are running a proper business to HMRC’s satisfaction – for example, by committing at least 20 hours a week to running their portfolio – out on a limb. Since everyone’s circumstances are unique, it’s essential to take advice from different sources and find the right solution for you. There will always be some homeowners who find themselves as landlords by accident, but anyone who’s serious about letting property will no longer be able to ignore the question of ownership structure.
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TAX PAYABLE DURING 2020/21 TAX YEAR ON A £250K PROPERTY WITH 75 PER CENT LTV MORTGAGE
right circumstances for the whole thing to be treated as a trading entity, that means – in effect – that there would be no IHT, because you are passing on a business rather than passing on an investment company.” The hybrid route typically starts to become suitable for portfolio landlords and higher-rate taxpayers with £50,000plus of gross property income, says Ben. Landlords new to the market can also benefit, depending on their circumstances and business plans. In overall terms, he says, “it’s taking the benefits of being a sole trader, the benefits of a company and the benefits of an LLP, and smashing them all together.” He also believes that this structure is highly flexible and would be easy to unwind in the event that personal names or limited companies became more tax efficient outright.
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Lack of financial support in the Spring Budget
What the NRLA has achieved in its first year
Mortgage lenders are adapting to new demands
Covid-19 update, 1
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EXPERT ANSWERS TO LANDLORDS’ QUESTIONS
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Covid-19, the road to recovery
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With a road map now in place to exit lockdown, the Government will start easing restrictions on possessions in the coming months
urrent restrictions have left many landlords in limbo, with only the most serious cases being heard following a six-month closure of the courts last year, an extended notice period and ban on enforcement. With cases being prioritised in terms of severity, many landlords
could be facing a significant wait before their cases can progress, often while receiving no income through rent, and with some facing significant hardship themselves. According to Government figures, there were just over 21,000 successful possession orders in 2020. To put that into context, the 2019 figure was four times that amount.
O Bailiff restrictions
This is a shortfall of more than 63,000 cases over the year, with Government figures from the final quarter of 2020 showing it’s taking landlords three times longer to get a possession order or a warrant for possession than it was pre-Covid-19. CURRENT RESTRICTIONS Under the current rules, correct at the time of going to press:
are extended Bailiffs and High Court Enforcement Officers are currently banned from enforcing possession orders, other than in extreme circumstances, such as serious antisocial behaviour or trespass. This rule will remain in place until 31 May. Spring 2021 / 47
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O Judges are prioritising
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certain cases Following calls from the National Residential Landlords Association (NRLA), hearings are being prioritised for the most serious cases, including those in which tenants have built severe arrears or are breaking the law.
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O New Civil Procedure
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Rules are in place Landlords must follow new processes when making possession claims. They must now: O Issue a reactivation notice to restart proceedings put on ice by last year’s court closures by 30 April, following an extension of the dates earlier this year. O Include a statement about Covid-19’s impact on the tenant for claims made after the courts reopened, a rule in place until 30 July. O In addition to this, courts will not set a date when a claim form is issued – with no requirement to hold a hearing within the usual eight-week time frame.
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“We have approached ministers to call for extra support to help courts tackle the mounting backlog” O Extension of notice period
Most notices need to be at least six months long as of August last year. These rules will remain in place until 31 May. A number of these changes, including the extended notice period, were introduced as a result of emergency legislation brought in under the Coronavirus Act. The longer notice periods were due to come to an end on 31 March, but have now been extended to 31 May, with the tapering of notices from 1 June. Meera Chindooroy, deputy director for campaigns and
public affairs at the NRLA, said more help is needed. She said: “We welcome clarification that emergency measures in the rental market will be phased out in tandem with the overall road map out of lockdown restrictions. “However, even once enforcement is allowed and notice periods reduce, the courts risk being overwhelmed. We have approached ministers to call for extra support to help courts tackle the mounting backlog.” In addition to support for the courts, the NRLA continues to campaign for a comprehensive package of financial support for
landlords and tenants affected by Covid-19, after it was revealed that 60 per cent of landlords have lost income as a result of the pandemic. The package would include interest-free loans allowing tenants to pay off Covid-19related arrears without building more debt. It is also advising landlords, where possible, to try to come to an arrangement with their tenants to avoid potentially significant delays within the legal system. O For advice on how to come to an arrangement with your tenant, visit our coronavirus pages at nrla.org.uk O For all the latest news as regards changes to the restrictions, follow us on our social media channels.
BREATHING SPACE: WHAT YOU NEED TO KNOW With more and more people falling into debt as a result of the pandemic, the Government is introducing a new scheme, Breathing Space, which will ban lenders and landlords from pursuing tenants for unpaid debts. Tenants referred to the scheme will be given a ‘breathing space’ for a set period of
time in which to sort out their finances and come up with a way to manage their debt. Also known as The Debt Respite Scheme, it will come into force on 4 May. While the scheme was created with larger lenders in mind, it will impact on landlords, particularly those seeking possession due to arrears. Under the scheme there are two different types of ‘breathing space’. The one expected to be most commonly used, a standard breathing space, will last for a maximum
of 60 days. A tenant can only enter a standard breathing space once in a 12-month period. The second, a mental health crisis breathing space, can last longer, ending 30 days after a tenant’s treatment ends. These will only be put in places in response to a severe mental health crisis – for example, if a tenant is detained in hospital under the Mental Health Act. A tenant could potentially enter one of these multiple times. During the breathing space period, landlords
are not allowed to contact their tenants directly to request payment of the debt, or to take enforcement action to recover the debt (including by taking possession of a property). A tenant would need to be granted a breathing space by either local authorities providing debt advice and Financial Conduct Authority-approved debt advisers, and you, as their landlord, would be informed. O For more, visit nrla.org.uk/ breathing-spaces
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Covid-19 update, 2
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Landlords overlooked in Budget Spring Budget – a missed opportunity to offer landlords and tenants the financial support they need
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t could be argued a quiet budget is a good budget, but the latest included little to shout about for landlords. After shock announcements on stamp duty and mortgage interest relief in recent years, there were at least no nasty surprises, indeed, even some good news. Fears that capital gains tax could be increased in line with income tax proved unfounded, with the chancellor also confirming the current stamp duty holiday is being extended to help buyers ahead of the original 31 March deadline. However, despite Rishi Sunak pledging to do “whatever it takes to support those affected”, the National Residential Landlords Association (NRLA) was disappointed to discover there was no financial support in there for landlords and tenants. Figures show that most of those in arrears are unable
Chancellor Rishi Sunak delivered his Spring Budget on 3 March
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The NRLA will continue to campaign for financial support for the sector
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to access emergency housing support from local authorities and the potential consequences are serious. Tenants face losing their homes and serious damage to their credit score. To tackle this, the NRLA had called for a package of measures, including interestfree hardship loans, allowing
tenants affected by Covid-19 to borrow money to pay off arrears. This is key to helping tenants pay their rent and stay in their homes, and the NRLA will continue to lobby on it. The Budget also included news for incorporated landlords, who learnt that corporation tax will increase
GETTY
THE SPRING BUDGET AT A GLANCE TAX O Stamp duty holiday extended: The Government has extended the current stamp duty holiday, due to end on 31 March, until the end of June. Buyers will pay no stamp duty on purchases up to £500,000; the threshold will then reduce to £250,000 until the end of September, before reverting to £125,000 from October. O Corporation tax to increase: The chancellor announced that from 2023, corporation tax – tax levied
on a company’s profits – will increase from 19 per cent to up to 25 per cent, where profits are over £50,000 per year. The tax increase will be introduced on a sliding scale, so those with smaller profits are least affected. O Personal tax thresholds frozen: The threshold will go up from April 2021 to £12,570, but then freeze till April 2026. O VAT registration threshold: This will remain until 2024. O Inheritance tax frozen: The nil-rate band will be frozen until April 2026.
WELFARE O Increased Universal Credit maintained: The £20 weekly uplift in Universal Credit, introduced last April to mitigate the impact of coronavirus, due to end on 31 March, has been extended for six months. O Working Tax Credit payment: Eligible claimants in receipt of Working Tax Credit will receive a one-off payment of £500 – this is the equivalent of the £20 increase in Universal Credit for six months.
from 19 per cent to up to 25 per cent in 2023 where their profits are over £50,000 per year. While this will be implemented on a sliding scale – meaning those with the smallest profits see the smallest increases – it is something they will need to keep an eye on. One small silver lining was the announcement that the £20 uplift in Universal Credit payments will remain for a further six months. This was something the NRLA had called for in its Budget submission, however, what the association really wants is a long-term commitment from the Government to support those who need it most. The NRLA will continue to campaign for financial support for the sector to help sustain tenancies, particularly as possession restrictions start to lift. It will also continue to lobby the Government to ‘tax smarter’ by offering incentives to landlords who are bringing new homes to the rental market, or selling to first-time buyers. Spring 2021 / 51
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Toolbox: Spring Budget, 1
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Quickfire questions The NRLA team has been busy taking your calls. Here are some of the questions you have asked us…
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I have a potential tenant that has completed an online viewing. They want the property but obviously have never met me. I’m only allowed to take a holding deposit, but what stops them from pulling out? Are they allowed to pay in advance for the deposit and the first month’s rent? A holding deposit is taken to secure the property while reference checks are carried out and the tenancy prepared. If the tenant backs out during this process, then you can retain that fee. You should only take rent and deposit once the contracts are prepared. You should only take the first month’s rent and the deposit (minus the holding deposit amount) once you have finished referencing your tenant and you are happy to enter into a contract with them.
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A
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Q
Do we need to install a carbon monoxide alarm in a terraced house roof space where the gas boiler is located? The tenants have no access and the roof space is locked. You are only legally obliged to install a carbon monoxide alarm in a room where there is a solid fuelburning source like a log fire or an oil-fired AGA. It is, however, strongly recommended that one is installed near the boiler to make sure your tenants are as safe as possible.
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I own a two-storey end terraced house, which is let to four unrelated individuals and wonder
It is strongly recommended that a carbon monoxide alarm is installed if this is classed as a house in multiple occupation (HMO)? As far as I was aware, a two-storey house is not classed as such. A property will be an HMO if there are three people living in it and at least two of them are unrelated to each other. So your property is an HMO and will need to comply with the HMO management regulations, as these apply to all HMO properties. However, the property is not necessarily a licensed HMO. A property will only be a licensed HMO if either:
A
O the property requires a
a licence when it is needed can lead to substantial penalties.
mandatory HMO licence because there are five people or more living in the property and at least two of them are unrelated to each other; or O the local authority has implemented an additional licensing scheme in the area that includes HMO properties with four or more people in it. While this property is not a mandatorily licensed property, you should make sure to check on your local authority’s website to see if any additional schemes are in place. Failure to apply for
Q
I need the new address of my former tenant to make a money claim, but she refuses to give it to me. What are my options? You would need to instruct a tracing agent to track the tenant down. It might be worth waiting for a few months, as tenants in that situation will often stay with friends and family for a while when they first move out of their rented home before moving to somewhere permanent. It is only after she has found another rental property and/or has started applying for credit that there will be a ‘digital footprint’ for the agent to pick up.
A
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Toolbox: Quickfire questions, 1
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Tenants who love where they live tend to take better care of rented homes and stay in them for longer. So, how do you go about making your house their home?
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reating safe, secure and attractive homes that tenants want to live in is key to running a successful lettings business and we know there are many landlords out there going the extra mile to create homes tenants can be proud of. We want to celebrate this in a new series looking at the great work you are doing in creating beautiful, comfortable homes for your tenants – and any tips you have for how to do it without breaking the bank. Last issue’s cover star, Sian Astley, is no stranger to renovation projects, starting her career running a specialist building company and ‘flipping’ properties before becoming a landlord. She went on to feature on home-improvement shows including Channel 4’s Property Ladder, then present Channel 5’s Half Built House, design and build for BBC 1’s Getting the Builders In and project manage 15 property renovations for BBC 2’s flagship show Your Home Made Perfect. With 17 properties including a number of studio flats in her portfolio, Sian has – unusually
for her – seen some void periods in the past 12 months. She has made the best of this by using the time to modernise and update the homes – and make them more attractive to tenants who may need to work from home for the unforeseeable future. She says: “Apart from generally worrying about the health and wellbeing of my tenants, we’ve had the inevitable voids due to uncertainty, rapidly changing tenant circumstances and the inability to carry out viewings as pre-Covid-19. “It’s also been tricky getting tradespeople on-site, as it seems every homeowner is now doing home-improvement works. On a personal level, my other half has had two major operations and couldn’t walk for much of 2020 – that was interesting as he’s usually my right-hand man. Real life happens to landlords, too; critics sometimes forget that.”
Sian has spruced up a number of her flats over the past year during void periods 54 / Spring 2021
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AFTER Sian completely revamped the kitchen in one of her rental properties
BEFORE
MAKING THE MOST OF VOID PERIODS No stranger to carrying out home improvements herself, Sian has spruced up a number of her flats over the past year during void periods. She says: “One of the kitchens has been completely revamped using new laminate worktops, some bargain patterned tiles, freshly painted new doors on the same cupboards, plus a better sink and tap. “That flat also had new carpets and decorating in the bedroom and bathroom and ended up
costing in the region of £1,800. That’s not cheap, but it hadn’t been touched for 14 years and it’s now set for another decade of use. I don’t think that price is bad to ensure zero voids and happy tenants.” WORKING FROM HOME IN SMALLER SPACES When it comes to making the most of smaller spaces, Sian advises looking for adaptable, multifunctional furniture and thinking laterally. She says: “Could the dining area double up as a workspace, for example, or can a fold-down desk be incorporated? Is there any dead space being wasted that a shift of the existing furniture could unlock?
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Beautiful homes on a budget
Toolbox: Interiors, 1
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trends, you can create a rental home that will be desirable for years to come. She says: “There’s a lot you can transform with a lick of paint, and pretty much anyone can learn to do that. I am super canny when it comes to shopping, writing down measurements for everything I need so I can snap up a bargain when I spot it. There’s so much fabulous homeware online now; a brightly patterned rug from Dunelm will brighten up a room no end, the B&Q wallpaper selection is great and the supermarkets smash it on kitchen accessories. The high street, even now fully online, rocks my landlord world. “I stick to good-quality, scrubbable paint brands, so buying replacement paint is easy, but jazz up flats with wallpaper, which I hang myself.”
“One tenant has removed some privacy window film, as she prioritised light coming in, and we’ve moved and stored furniture in several flats to accommodate work-fromhome needs.” RENOVATING ON A BUDGET As a self-managing landlord and a self-taught DIY enthusiast, Sian keeps to a budget by doing much of the work herself, however, she says that if you have an eye for a bargain and don’t get too swept away by current Sian Astley can offer advice on your DIY problems
THE INSTA GENERATION Sian says savvy tenants no longer want simply functional homes to rent, but attractive ones, too, and that savvy landlords know that making the extra effort means homes are much easier to let. She says: “The Insta Generation wants – even demands – cool places to live. The vast amounts of money now being invested in student accommodation and build-torent has meant that the bar is being set for smaller landlords. I see more and more property people showing off what they do online and that’s good, as it means the tenants get the beautiful benefit – as long as the rents aren’t too high to pay for it all.” You can hear from Sian on the January episode of the new NRLA podcast Listen Up Landlords, available on the NRLA website and all major platforms.
WE SOLVE YOUR PROBLEMS Do you have a problem with your rental home? Sian is here to help! Let us know the challenges you are facing, ideally with pictures. In this issue Sian talks about how a few simple tricks can brighten up dark rooms. Lockdown has made us all realise the importance of light in our lives, and though dark interiors may be on-trend, living in them 24/7 is a challenge. If you’re a landlord or doerupper dealing with a room without much natural light, here are a few tips to try: Don’t just paint everything brilliant white, which is far too stark – instead, opt for slightly creamier tones. Mix different whites and various textures to add light and also interest. Mirrors bounce light around a room – use oversized versions or several grouped together. The high street has many options at great prices. Gone are the days when heavy curtains were needed in every room, and though they do keep in the heat
Creamy tones (above) and slatted blinds (left) brighten up a home
in the winter, they can be a bit depressing in summer. Maybe hang curtains that can be taken down (and washed!) seasonally to help your tenant react with the changing months. In a dark room, if it isn’t overlooked, do you even need curtains? If choosing blinds, go for 50mm, slatted, woodeneffect types, which provide controllable privacy but allow light to flood through. Online companies that make to measure are cost-effective and are of decent quality. If you have a property problem and would like Sian to help, email landlords@nrla.org.uk
SHOWCASE YOUR INTERIORS Have you transformed your rental property? Did you do it on a budget? What inspired you? And what was your tenant’s reaction? We would like to feature your home improvements, whether this is giving a dated interior an Instagram-worthy
update or a major renovation, extension or conversion project. We’d love to hear your stories and feature your before and after pictures, as well as share tips on making improvements. To get involved, email landlords@nrla.org.uk
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Toolbox: NRLA merger one year on, 1
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NRLA merger one year on The end of March marks the first anniversary of the merged NRLA, so what changes have we seen? And what comes next? CEO Ben Beadle explains
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o merge two established organisations is no easy feat at the best of times. To do so during a global pandemic brings more, unforeseen challenges, but over the past 12 months we have reacted dynamically to an everchanging landscape. Call volumes went through the roof when the pandemic first hit, with a total of 70,000 calls recorded between March and November last year. At the peak we received 3,009 calls in a single week – an average of more than 600 a day – and in response expanded our team of advisers. We created a dedicated section of the website to coronavirus support and advice, complimented by a series of webinars updating landlords on the latest news and advice. Covid-19 restrictions also forced us to move our regional
events programme online. But this did not deter you, with a total of 33,744 delegates attending webinars and virtual meetings. Training also moved online – with 92 per cent of our face-to-face courses now available online for members and an ongoing timetable of interactive virtual classroom courses.
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THE EAR OF GOVERNMENT In addition to the daily telephone calls with the Ministry of Housing, Communities and Local Government, the National Residential Landlords Association (NRLA) created guidance outlining steps landlords could take to help sustain tenancies. These ‘Golden Rules’ were then shared as best practice by the Government. Sharing landlord experiences was also key to changing public
perceptions of landlords during the crisis and, in addition to my own appearances in the national media, we gave members a voice, with many speaking to journalists about the impact of Covid-19 – particularly the courts’ closure. These experiences were used as part of our ongoing campaign to secure a package of financial support for the sector. As part of this campaigning, we both commissioned and carried out our own research on the impact of the virus on landlords and tenants, giving us firm evidence to cite in briefing papers and high-level conversations in Westminster and Cardiff Bay. In addition, I addressed the Housing, Communities and
A LOOK AT OUR FIRST YEAR IN FIGURES Since the NRLA came into being in April last year:
90,000
landlords and agents are now members
33,744
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delegates have attended our virtual events/webinars
3,116
have completed eLearning training courses with us
762
have attended virtual classroom courses introduced last autumn
2,032
people have reviewed our services on Trustpilot, with an average rating of 4.7 out of out of 5*
During the Covid-19 pandemic, we have seen:
313,251
page views of content giving advice on the coronavirus pandemic
3,409
letters and documents downloaded by members *FIGURES CORRECT AT TIME OF GOING TO PRESS
Local Government Select Committee, and our campaigns work was heavily referenced in debates in both the Commons and the Lords. We have already brought about real change. The work of the NRLA ensured a buy-to-let mortgage-deferral scheme was introduced and saw the Local Housing Allowance increased. The courts agreed to prioritise the most extreme cases when they opened their doors as a result of our lobbying and in England, our proposed exceptions to the ban on enforcement were adopted. THE FUTURE While this wasn’t the first year we had planned, it has allowed us to showcase our strengths; how to lead in a time of crisis and react to changing circumstances as a truly customer-first organisation. While there is still a way to go before the sector is operating as it was pre-pandemic, it is still operating. As we move into our second year, our aspirations remain the same: to improve services, grow membership, develop new partnerships and ultimately change attitudes to the private rented sector. Spring 2021 / 57
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Innovation in a time of crisis
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New buy-to-let mortgage products have hit the market as lenders adapt to changing demands. Doug Hall, director of mortgage broker 3mc, explains
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he property market is one of the few things that has been able to continue throughout much of the past year. Mortgage lenders have introduced new processes and technology that have enabled them to keep on lending – even with most staff working remotely. And not only have lenders kept the doors open and continued to trade, they’ve also continued to innovate. We have seen a number of new and interesting products for landlords brought to market even in the midst of Covid-19. One area of recent product innovation concerns property refurbishment. Covid-19 has driven a change in renter behaviour, with people increasingly shunning citycentre flats in favour of larger, out-of-town properties. In fact, property website Rightmove says that asking rents in some of the UK’s biggest city centres saw annual falls of up to 12 per cent in the last quarter of 2020 as some tenants swapped centres for suburbs. Rightmove has also reported on an increase in the number of renters searching in rural locations and looking for larger properties with gardens and homeworking space. So, tenant demand is shifting, but often the housing stock in
Due to the pandemic, tenants are moving to rural locations
suburban and rural locations is not suited to the rental market. This presents an investment opportunity for landlords to buy property in need of updating, renovate the property to add capital and rental value, and then to let it to tenants – or sell if they choose to do so. REFURBISHMENT PROPERTY Historically, mortgage lenders have required a property to be lettable from day one and so refurbishment projects, where the property is not in good condition, have needed to be funded either by a cash purchase or bridging finance, where there is no surety of exiting the loan. However, things are changing, and two lenders have recently
launched products that tackle this market head-on. The first is Precise Mortgages, which has relaunched its Refurbishment Buy to Let product. This product splits a refurbishment project into two parts. The first enables an investor to borrow up to 65 per cent loan-to-value (LTV) towards the purchase and refurbishment costs. Once the renovations have been completed, they can then switch onto a mortgage that is available up to 75 per cent LTV of the open-market value of the refurbished property. Hampshire Trust Bank has also launched a product in this area that allows landlords to utilise a buy-to-let (BTL)
Rightmove says that asking rents in some of the UK’s biggest city centres saw annual falls of up to 12 per cent in the last quarter of 2020
mortgage from day one, without the need for bridging finance. Castle Trust Bank has introduced a Bridge to Let product, which it says combines the benefits of a bridging loan with the certainty of a BTL mortgage in one arrangement. Landlords can purchase a rental property using a bridging loan, complete any necessary changes to the property to make it rentable, and switch onto a preapproved, 10-year BTL mortgage as soon as the property is ready to be let out. It can also be used for holiday lets as well as letting to tenants. Another innovation we have seen is increased flexibility around five-year fixed rates. Five-year fixed-rate mortgages are particularly popular among landlords, as fixing the rate for this longer period often means a lower stress rate is applied to the rental income generated by the property, and this can Spring 2021 / 59
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Toolbox: Mortgages, 1
TOOLBOX
Toolbox: Mortgages, 2
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PRODUCT INNOVATION Lenders are offering new products as tenants move out of cities to more rural areas and the suburbs
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enable a landlord to borrow slightly more if they wish to do so. It also provides peace of mind that the mortgage payments will not increase over the course of the five years. However, a five-year fixed-rate mortgage will usually carry early repayment charges (ERCs) for the entire fixed-rate period. This means that redeeming the mortgage for any reason – including selling the property or refinancing – at any point during the five years will incur a fee, and this could come to thousands of pounds.
PRODUCTION CLIENT
GREATER FLEXIBILITY Landlords usually take a long-term view with their investment and so committing to five years on a mortgage often makes a lot of sense. However, in these uncertain times, some might be concerned about being tied into a product for such a long period and would
prefer to leave their options open in case they want to sell or refinance the property in the medium term. It’s just this concern that has been addressed by a number of other new products coming onto the market. In the past year, Hampshire Trust Bank has launched a five-year fixed-rate mortgage with an ERC period for only the first two years. It means that landlords can have the advantage of the benefits of a five-year fixedrate product, but also greater flexibility to redeem the mortgage within the five years without penalty. Coventry Building Society also offers a five-year fixed-rate
SHUTTERSTOCK
We are actually approaching a period when many thousands of five-year fixed-rate BTL mortgage deals are due to expire
product, which was launched pre-Covid-19, with no ERCs from day one – providing even more flexibility for those who are concerned about what might happen in the next couple of years. Of course, this flexibility comes at a price. And while these products provide the option of redeeming within five years without penalty, it is worth pointing out that the lenders also offer five-year fixed rates, with ERCs throughout the fixed-rate period, at a slightly cheaper rate. So, you have the option as to whether you would prefer to commit for longer or pay a little more to buy yourself some flexibility. We are actually approaching a period when many thousands of five-year fixed-rate BTL mortgage deals are due to expire. In April 2016, a three per cent Stamp Duty Land Tax surcharge was added to BTL
and second-home purchases, and this naturally encouraged a surge of BTL purchases ahead of its implementation. If you are one of the thousands of landlords who bought a new investment property during this period, and you did so with a five-year fixed rate, your deal may soon be coming to an end, so do get in touch if you would like to discuss your options. The pandemic has caused many industries to grind to a halt, but the mortgage market has continued to trade and innovate, which is good news for homebuyers and for property investors. MORE INFORMATION If you would like to discuss your mortgage requirements, please give NRLA Mortgages a call on 0161 341 0581.
This is an advertisement only and in no way should be viewed as a personal recommendation or advice. Before a recommendation of the suitability of the product can be given, we will direct you to 3mc (UK) Limited who can provide independent mortgage advice. As part of this, they will ask questions so that they can fully understand your circumstances before giving advice. NRLA Mortgages is a trading name of LPTE Limited, which is an Introducer Appointed Representative of 3mc (UK) Limited who is Authorised and Regulated by the Financial Conduct Authority and is entered on the FS Register under reference 302992. Please note: 3mc can advise/arrange Business Buy to Lets (BBTL) and Consumer Buy to Lets (CBTL). Of the two, only Consumer Buy to Lets are regulated by the FCA. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. ANY PROPERTY USED AS SECURITY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. All calls are recorded for training and monitoring purposes.
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Toolbox: Community, 1
TOOLBOX
REPRO OP
When it comes to going the ‘extra mile’ for her community, there is no stopping landlord Julie Ford, who devotes her spare time to supporting a charity with a difference. She talks to Victoria Barker
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uring the week, Julie and other Bike Experience Julie Ford is busy volunteers assist one of the riders managing her lettings business and running a popular landlord forum. But when Saturday rolls around it’s a different story, with Julie swapping her ledgers for leathers at a local motorbike racing track in Hemel Hempstead. Before the coronavirus pandemic hit, Julie – who has had a lifelong passion for motorbikes – spent much of her free time volunteering with The Bike Experience, a charity dedicated to helping those living with disabilities to learn how to ride motorbikes. IN THE “Racing runs in COMMUNITY my blood,” says Julie. “I’ve always been Once discovering she involved in motorsports. could use her passion for My dad was a rally driver motorbikes to help with such and my uncle raced in the a good cause, Julie wasted no TT, so from as young as I can time in putting the wheels in remember, I’ve always spent motion to begin volunteering. time at racing tracks and events “My role is really varied: across the country.” I help hold the rider on the grid, A HELPING HAND so they are steady before the It was three years ago at one starter flag is waved, and I also such racing event when Julie catch some of the riders once first learnt about the charity. they’ve crossed the Participants can ride bikes that finishing line, because are adapted, and can complete they don’t all have the various levels of training, ability to put their building up to having the skills feet down at the end needed to race on track days. of the race,” she says. “Many of the bikes the “When you watch charity uses are adapted,” says some of the riders Julie. “For example, on some who, for example, of the bikes the rider is able have been left in a wheelchair to control the entire bike as a result of an accident, just using their hands, so if experience the freedom that someone has lost the use of riding a motorbike gives you their legs, they can still ride.” again – it’s just incredible.
“On some of the bikes the rider is able to control the entire bike just using their hands… so they can still ride” “I get choked up sometimes, because I’ll look across at some of the participants and they’ll have tears running down their cheeks under their helmets.” LANDLORD FORUM As well as renting out several properties herself, communityminded Julie, a former property manager, also runs a popular landlord forum in Hemel Hempstead to help out other landlords. The Hemel & St Albans Property Network, which she founded, marks its 10th
birthday this year. During the coronavirus pandemic, Julie has continued to run the group virtually, and presents regular ‘nuggets of knowledge’ videos for landlords live on Instagram. She believes that her community work also makes her a better landlord. “Landlords, by the nature of the role, mix with people from all walks of life, and I think making time to volunteer gives a good understanding of the people we are renting to.” The pandemic might mean that Julie’s volunteering with The Bike Experience has stalled for the time being, but she can’t wait to get back in the saddle.
TRACK ACTION PHOTOGRAPHY
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Landlord Julie’s the wheel deal
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Toolbox: Wales, 1
TOOLBOX VERSION
and financial incentives for landlords to bring empty properties back into use.
Waterfront apartments in Cardiff Bay
REPRO OP
A Welsh Housing Survey: The English Housing Survey collects a vast amount of data, essential for evidence-based policymaking, and we want to see the equivalent introduced in Wales.
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A Welsh Housing Court: A dedicated Welsh Housing Court would ensure swift justice for landlords and tenants, and would help deal with Covid-19related delays.
ART PRODUCTION
Manifesto for change
With Welsh Assembly elections to take place within weeks, the National Residential Landlords Association lays out its plan for the private rented sector of the future
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n ambitious six-point plan outlining a fresh approach to the private rented sector (PRS) in Wales has been unveiled by the National Residential Landlords Association (NRLA) ahead of this year’s Senedd election. At the time of going to press, the 2021 Welsh Parliament elections were still set to go ahead on 6 May, although they may be put back, dependent on the Covid-19 response. The NRLA has set out a concise list of priorities for all parties, which it believes will improve standards while building a stronger, fairer and more harmonious sector. It is calling for: O streamlined licensing O direct support for landlords and tenants O help to improve property standards O a Welsh Housing Survey
O a Welsh Housing Court O the rejection of right to
rent and rent controls. With four pieces of major legislation introduced since 2014, the NRLA believes it is time landlords in Wales were given the freedom and support to do what they do best: provide safe and secure homes to rent for those who need them. The key asks are as follows: Streamlining licensing – without compromising on standards: Unlike England, Wales has a national licensing body in Rent Smart Wales (RSW). Despite this, landlords still have to comply with and pay for local licensing schemes. The NRLA believes that when the Renting Homes Act is implemented (due in spring
2022), existing rules and regulations will make local licensing obsolete. It also wants RSW to be more transparent. Supporting landlords and tenants more directly: The NRLA wants support for PRS landlords to be in line with that available in the social sector. This should include funding for Landlord Support Officers in local authorities, and adding antisocial behaviour to the list of mandatory grounds for repossession. It also wants the next Welsh Government to introduce a ‘tenant passport’, allowing for a mobile deposit system and live referencing. Help to improve property conditions: This includes calls for funding to help landlords meet energy-efficiency targets
“We believe the policies outlined… will benefit both landlords and tenants”
Rejection of right to rent and rent controls: The NRLA believes any plans to adopt the UK Government’s right-to-rent scheme should be resisted along with any proposals for rent controls, which – while they may sound attractive to some – do not work in reality.
NRLA chief executive Ben Beadle said: “Private landlords in Wales are part of the solution to the housing crisis, and we believe the policies outlined in the manifesto will benefit both landlords and tenants. “The NRLA is already bringing about positive change. In the past 12 months, we have persuaded the Welsh Government to adopt a tenant loan for coronavirus-related arrears, amend their possession reform bill and look at the feasibility of a housing court. The Senedd election presents the next great opportunity to set the agenda for the next five years.” To read NRLA Wales’s 2021 manifesto and find out more about Welsh campaigning, visit nrla. org.uk/campaigns/wales. The manifesto is also available to read in Welsh.
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Meet the landlord, 1
TOOLBOX VERSION REPRO OP SUBS
I firmly believe landlords have a duty to supply housing that is comfortable, functional and, above all, safe”
ART
Are you a portfolio landlord? Yes. I first became a landlord in 2009 and have expanded my portfolio to six properties across London and the Midlands. I am looking to further invest in the Midlands and the North.
PRODUCTION CLIENT
What are the main benefits of being a landlord? I’ve always had an interest in property; it provides me with an alternative means of income should I face redundancy from my full-time job. How has being a landlord changed for you? It seems there is always some new regulation that impacts landlords. Being an educated landlord with support from professional bodies like the National Residential Landlords Association is a must. How is your relationship with your letting agent? I have a good, professional relationship with my agents, having learnt how to identify a good one. I have terminated the services of agents who repeatedly let me down. Are your properties fully managed? Yes. Having my portfolio fully managed enables me to get on with my day job and to do what I want during my spare time.
Have you ever been tempted to sell up? Definitely. However, the existing mortgage stress test imposes a cap to the loan amount, driven by the rental figure. It is a common situation with London properties that have had large capital growth to have that equity trapped MEET THE inside the property, LANDLORD What is your go-to housing that is comfortable, unable to be homeware brand? functional and, above all, safe. released through I’ve used David Phillips remortgaging, more so What advice would you pass as it has a range of quality now that rents are falling on to a would-be landlord? furniture and provides a in the capital. To access that Property investment can convenient service. capital growth, I would need be highly rewarding, but the to sell the property, but I would What corner would you management of the property face a hefty capital gains tax never cut? can be stressful, for example, bill if I do. I would never cut a corner on dealing with tenants’ What’s the best piece of any compliance aspect. When complaints, rent arrears and advice you have received? I lived in a house in multiple suchlike. One of the trainers Take care of your tenants occupation, the landlord had I use makes a distinction and they will reciprocate not followed the correct fire between a landlord and accordingly. Be reasonable regulations, although I didn’t an investor. He defines the when it comes to tenant know at the time. Apart from landlord as one who selfrequests and repairs, and the penalties that come with manages, whereas an investor they will be happy. non-compliance, I firmly believe has minimal involvement in the landlords have a duty to supply daily operations. It is important Have you ever had to be honest with yourself a favourite tenant? about the time you have to run The tenant in one of my the property and whether Northampton properties has this is something you been with me since January want to do. If not, 2018. He not only pays on time, consider using a letting but also maintains the property agent, conducting proper as if he owns it. I could not ask due diligence before OF BRAND ASHLEY’S HOMEWARE for a better tenant. appointing one. IPS FURNITURE CHOICE IS DAVID PHILL
TONY C FRENCH
ASHLEY WONG
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