Two property developers, Steve Bolton, Chairman of Platinum Property Partners, and Chris Cooper are have raised £50,000 through a Twitter crowdfunding campaign to challenge Chancellor George Osborne’s planned tax changes for landlords. Under the Chancellor’s proposals, landlords operating as sole traders would no longer to be able to claim Mortgage Interest Relief when calculating their taxes.
Bolton and Cooper began fundraising towards the end of a Parliamentary Petition launched by the Residential Landlords Association titled: “Reverse the planned tax relief restriction on ‘individual landlords’ which argued that the Chancellor’s plans were unfair to private landlords and may result in higher tenant rents.
The Residential Landlord’s Association petition attracted 60,894 signatures, well short of the required 100,000 necessary for the motion to be considered for debate in Parliament which may leave Court action the only option to challenge the proposed tax changes. The motion did however receive enough support to merit an official response from the Government reiterating the Treasury’s support for implementation of the Chancellor’s measures. In its response the Government claimed that the tax changes were fair and merely removed tax exemptions for property investors which are not enjoyed by those in other asset classes.
Speaking about the Chancellor’s plans, Bolton stated “It’s not clear why the government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”
It is believed that the pair have sought legal advice matter from Omnia Strategy, a legal firm founded and chaired by Cherie Blair.
A petition to regulate estate agency fees has been launched on the Parliamentary Petitions website. The motion started by Nigel Whitley requires 10,000 signatures to obtain a government response and 100,000 signatures to be considered for debate in Parliament.
Titled “Regulate agency housing fees” the petition calls for regulation of estate agency and private landlord fees and the full refund of tenants’ money if a prospective tenant fails the vetting criteria.
The deadline to achieve this goal is 16th July 2016 and follows in the wake of other campaigns to regulate the private letting sector. Mr Whitney claims that many private letting agencies and landlords perform costed background checks knowing in advance that they have no intention to leasing the property to an applicant, often charging disproportionate sums for the said reference checks. Mr Whitney claims that in many cases ten or more people are invited to apply for a single property with many being deliberately failed and charged by letting agents.
Letting agent fees are currently subject of much debate in parliament with some members of Parliament attempting to introduce private members bills to regulate the sector.
The Government has responded to a question asked in the House of Lords on the action it plans to take to prevent excessive letting agent fees being charged to private-sector tenants.
The Government’s representative in the Lords, Baroness Williams of Trafford, claims that it has acted to protect tenants against unfair and excessive letting agency fees by requiring agents to publish a full breakdown of all charges prominently in their offices and on their website. Furthermore, a fine of up to £5,000 may be imposed against agent who fail to comply.
According to the Government, transparency rather than regulation is the most important factor in enabling tenants to make informed decisions and compare prices. Baroness Williams claims that such measures are adequate to facilitate competition in the letting industry which would minimize prices and keep them fair.
Some however believe that such statements often ignore significant power disparities between letting agents and prospective tenants, especially in areas of high economic activity such as London. The National Renters Alliance for example believes that in some towns and cities where letting and management agencies predominate over private landlords, referencing requirements preclude the establishment of a free market system in letting agency fees.
Multiple reports exist of prospective tenants being deliberately failed reference checks by letting agents in order to charge extra reference fees. Some have also argued that the average price of a reference check significantly overstates the genuine cost of tenant vetting.
The topic of letting agent fees is gaining increasing prominence in Parliament as the housing crisis deepens. In 2014 the MP for Dunfermline and West Fife, Thomas Docherty, proposed a private member’s bill the “Letting Agent (Fees) Bill which would prohibit the charging to tenants by letting agents of annual tenancy renewal fees. However the motion failed to gain sufficient support.
The Government has officially responded to a Parliament petition launched by the Residential Landlord’s Association. The petition seeks to challenge Chancellor George Osborne’s plan to reduce landlords’ ability to offset mortgage interest payments from their tax liabilities which were announced in the 2015 Summer Budget and Autumn Statement.
The petition titled “Reverse the planned tax relief restriction on ‘individual’ landlords” claimed that the Chancellor’s proposals to limit Mortgage Interest Relief for landlords operating as sole traders would unfairly impact their ability to conduct their business. Moreover the lobbyists claim that such restrictions are not denied to sole traders in other industries.
The Government responded officially after the motion obtained more than ten thousand signatures stating that it is committed to a fair tax system so it is “restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.” Furthermore, the government asserts that the ability to reduce tax liabilities by offsetting mortgage interest and other finance costs against their property income is not available to ordinary homebuyers and those investing in other assets such as shares.
“By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognizes the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.”
The government also states that the measures will only be introduced gradually over four years starting in April 2017 which will give landlords sufficient time to adapt to the new rules.
According to petition guidelines, a motion will be considered for debate in Parliament if it achieves over one hundred thousand signatures.