Renters Alliance News

Renters in shared housing to gain from increased protection

housing_inspection

Around a million renters living in HMOs (Houses in Multiple Occupation) will soon benefit from extra protection from rogue landlords being planned by the government.

HMOs, familiar to many students and flat sharers, are defined as properties shared by more than one unrelated persons. Typically these may be groups of friends such as is common for student accommodation or by strangers.  Typically the house sharers will have their own bedrooms but will share communal areas such as bathrooms or kitchens.

Under the government’s proposals, tenants living in a HMO may soon benefit from:

  • minimum room size standards (6.52m2 for one person rooms and 10.32m2 for double rooms)
  • improved waste disposal facilities
  • tackling rogue landlords through the introduction of a fit and proper person test for HMO landlords

Most significant is the proposed extension of the HMO licensing regime to include small HMOs which are currently exempt from mandatory licensing.

To date only large HMOs (3 stories or more) require mandatory licensing. The government seeks to extend HMO licensing to all properties irrespective of size and will push all HMOs with five occupants or more from two different households into the mandatory HMO licensing regime (with the exception of purpose built flats).

Due to the higher risk of poor quality housing in HMOs complex licensing regimes exist which may vary significantly across the UK. The move to license all HMOs will also help reduce such  regional variation in licensing regimes and housing standards. These extra renter protections will enhance currently existing license checks for properties which currently include minimum building quality standards (gas/fire safety) and the payment of a license fee.

Currently landlords operating an unlicensed HMO which requires licensing are liable for criminal prosecution and may be subject to an unlimited fine. Under such circumstances tenants may apply for a Rent Repayment Order to receive  refund of up to 12 months’ rent on the property.

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Britain’s biggest landlord bans ‘battered wives’ and zero hours workers as tenants

Fergus Wilson and his wife Judith CREDIT: REX FEATURES
Fergus Wilson and his wife Judith CREDIT: REX FEATURES

Britain’s biggest landlord, Fergus Wilson has banned “battered wives” from his properties claiming he does not want to risk ex-husbands or boyfriends returning to destroy his houses.

Perhaps Britain’s most notorious buy-to-let landlord, Wilson is no stranger to controversy.  In 2014 he sent eviction notices to over 200 of his tenants, many from low income backgrounds, claiming that he was “sending battered wives back to their partners to be beaten up again”.  He was also convicted in the same year for assaulting an estate agent over a broken boiler which he denied, claiming that he was “too fat to punch anybody or even tie his own shoelaces”.

Posted for residents of Ashford (Kent), the list of unacceptable tenants include:

  • Zero hours workers
  • Battered wives
  • Tenants on housing benefits
  • Tenants with children under 18
  • Single parents
  • Plumbers
  • Smokers
  • People with pets
  • Low income workers

Despite Mr and Mrs Wilson’s estimated wealth of £200 million, the couple are known for penny-pinching. In 2014 Fergus Wilson lost a court battle to charge a tenant £3,000 for a broken toilet lid even though the tenant had offered to replace it out of his own pocket. Judith Wilson is also believed to owe £3,000 in court costs after a failed attempt to sue a gas engineer for £5,000. The Wilsons had claimed that the engineer’s decision to issue an “At Risk” notice on gas equipment in one of their properties had made the house unrentable. Such considerations factored into Fergus’ decision to ban plumbers as tenants in his latest letting criteria since he believes they “rip him off” about repairs and “invent” problems with the properties which he says they bill him for.

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Fergus Wilson’s ban of domestic abuse victims comes after the 69-year old’s unsuccessful bid  to stand as an independent candidate for Kent’s Police and Crime Commissioner last year which was blocked  for incorrect submission of nomination papers. It was also expected that Wilson’s candidature would be deemed ineligible for a conviction of assault for which he was fined £500. Wilson, who planned to stand as an independent, intended to run on a platform of tackling domestic violence saying that he was particularly concerned by two domestic abuse cases involving Kent Police and would have used his £85,000 salary to fund a rapid-response team of four officers.

Commenting on the tenancy rules Fergus said the criteria are revised every year and are concerned with “financial fine tuning of the business” adding: “it is just economics… I live in the big bad world of reality, if I do not let properties and do not get the rent then I do not eat, I starve to death… it is the Government’s job to help poor people.”

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One in five private rented homes suffer fuel poverty

 

fuel_costPrivate sector renters are one of the groups with the highest risk of suffering from fuel poverty according to figures recently released from the Department for Business, Energy and Industrial Strategy.

More than 2.3 million families, equivalent to around 10% of households, are living in fuel poverty in England.  The situation is particularly bad for private sector renters with one in five households renting from private landlords affected. The highest risk however, at 25% of all households, was found for single parents with dependent children.

Overall Birmingham is the most affected city in terms of absolute numbers with around 60,000 households unable to afford adequate heating with Leeds, Cornwall, Manchester and Liverpool occupying the top five local authorities where households struggle with heating costs. In terms of the proportion of households classified as fuel poor, rural areas of England are the worst affected, with more than 20% of households on the Isles of Scilly classified as fuel poor. Other areas identified as badly affected include Eden in Cumbria, Richmondshire and Ryedale in North Yorkshire, and West Devon.

Officially a household is in fuel poverty if its income would fall below the official poverty line after subtracting the cost needed to adequately heat a home. It has been calculated that on average households which meet this definition would require an extra £371 to be able to adequately heat their homes.

The issue of fuel poverty and energy costs is a recurring theme in UK politics. Reacting to the report, the shadow business secretary, Clive Lewis said that the figures showed that the Conservative Party had to take action to tackle high energy prices charged by the big energy companies.

“Under the Tories’ lack of an energy plan, Britain is facing an energy bill crisis, with over 2 million families who can’t afford their energy bills.”

Mr Lewis continued to assert that a Labour government would confront the problem by increasing clean energy generation capacity and tackling energy bill rises for households.

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To date the successive Conservative governments of David Cameron and Theresa May have favored the provision of greater consumer information and the easy switching of energy supplier as a mean to reduce household fuel expenditure. These include announcements earlier this month that the business department would publish an energy supplier league table to allow consumers to better assess their energy usage and compare energy suppliers. However, some critics of these proposals note that tariff transparency has been promoted throughout the Brown and Cameron administrations with relatively little effect on reducing household energy bills.

Announcing the league table measures, the business secretary, Greg Clark, said: “Millions of people across Britain continue to pay too much for their energy. The measures announced are a positive step to help more people benefit from increased choice and competition.As the government has made clear, where markets are not working for consumers – in energy or otherwise – we are prepared to act.”

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London house prices predicted to fall 5% in 2017

London House Prices Predicted to Fall 5 per cent

Property prices in central London are expected to fall by 5 per cent in 2017 according to property data firm Rightmove.

The situation across London as a whole however was mixed with a significant variations between market conditions in prime central London and peripheral areas.  Outer London property prices are expected to see an approximate 3% increase in prices in 2017 Rightmove suggests with prices across England and Wales expected to rise by two per cent as a whole next year.

Brexit uncertainty continues to be a serious issue  with respect to property price forecasting. As yet the government’s desired outcomes and the negotiating position it will adopt following the triggering of  Article 50 to begin the two year countdown to leave the European Union remains unknown. Prime Minister Theresa May says she is committed to triggering the start of formal Brexit negotiations by the end of March next year and is expected to make announcements on the Government’s preferred future relationship with the EU in the New Year.

The disconnect between property prices in central London and the rest of the UK may be symptomatic of London’s traditional early reaction to changes in the British economy. During the 2007 global financial crisis and subsequent recession, prime London properties were the first affected by the downturn but were also the fastest to recover.

To date predicted negative economic data following the UK’s decision to leave the EU have failed to materialize. The British Chambers of Commerce revised up its forecast for economic growth next year but downgraded the outlook for 2018 due to inflation pressures and ongoing economic uncertainty about Britain’s future trading relationships with the EU. In terms of GDP forecasts, the Chambers revised upwards UK GDP growth forecast to 1.1% from 1% for 2017 after stronger-than-expected economic performance following the June Brexit vote.

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Sadiq Khan asks LSE to investigate London housing market

sadiq_khan

London mayor, Sadiq Khan, has asked the London School of Economics to carry out a comprehensive inquiry into the impact of foreign investment on London’s housing market.

The inquiry which is expected to report back to the Mayor in the spring will investigate the dependence of property developers on foreign buyers and the number of properties kept empty.

Sadiq Khan is keen however to stress that the report is not intended to provide material which might be used to curtail the rights of overseas buyers in London.  Announcing the study, the Mayor underlined the importance of foreign investment in London but also noted that further study was needed to understand the connection between London’s property affordability crisis and foreign investment. The Mayor added that many Londoners were concerned about the number of homes left empty and the link between empty properties and overseas investors.

The current study follows numerous reports that London is being used as a safe-haven for Russian Oligarchs, Chinese Princelings and Middle Eastern Sheikhs.  Many properties in the capital are held by companies in offshore tax havens and many are unoccupied. Khan’s predecessor in City Hall, Boris Johnson, notably called for property developers to market new homes “first or equal first” to Londoners rather than to overseas buyers.

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Renters may face higher lettings fees under right to rent rules

Right to Rent

Last week the government tightened its Right to Rent rules, making it a criminal offence for a landlord to let to anyone they know, or have reasonable cause to believe, is an illegal immigrant. Previously breaches of this law were sanctioned by civil penalties. However as of 1st December the penalty for failing to check a tenant’s right to rent is a criminal offense which may risk a prison sentence. 

Under the Rent to Right policy, landlords must check that their tenants can legally rent a property. Tenants must produce a document, such as a passport or a certificate of naturalisation, to prove their Right to Rent.Under the new rules, landlords could also receive government notices to terminate tenancies for people disqualified from renting. In such circumstances renters may face eviction without a court order.

This policy has serious ramifications for renters. According to a survey conducted by the housing charity Shelter, 44% of landlords said the policy would make them less likely to rent to people who appear to be immigrants, with similar numbers saying the same about people without a British passport.

In addition to potential discrimination , reports exist of letting agents charging prospective tenants additional agency fees to conduct Right to Rent checks.

In 2015 a Home Office evaluation of the Right to Rent scheme  found that some landlords were charging a fee which ranged from £10 to £120 to carry out immigration checks which the government estimates would take around five minutes to complete.  The Right to Rent policy must be applied to all tenants and by law, landlords must check that every tenant has the right to rent in the UK which could lead to increased lettings fees for tenants.

Although the Chancellor Philip Hammond’s Autumn Statement announced plans to ban lettings agent fees, there is an important window where landlords and letting agents can pass on the enhanced Right to Rent checks to tenants.  Renters should therefore be vigilant that they check the amount charged by landlords for administration fees before the letting fee ban officially comes into force.

 

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Chancellor announces plans to ban letting agent fees in England “as soon as possible”

Letting Agent Fees
Letting Agent Fees

In his Autumn Statement today the Chancellor Philip Hammond announced plans to ban letting agent fees in England “as soon as possible” which may be save 4.3 million households hundreds of pounds. 

Currently many tenants face charges to draw up tenancy agreements, conduct immigration and credit reference checks  in addition to the payment of a non-refundable holding deposit paid before signing up to the deal.

The move comes as numerous reports have indicated that many tenants living in sub-standard housing are discouraged from moving out because of extra fee charges.  A report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees.

Nonetheless, landlords groups have claimed that banning letting fees will not necessarily reduce rental costs with landlords and letting agents increasing rental values to offset loss of income. However, renters groups assert that the ban will make it easier for tenants to compare the cost of different properties and reduce the incentive for letting agents to replace tenants.

The move is a culmination of greater regulation of the letting market and will move England further in line with  Scotland where lettings agency fees to tenants have already been banned.  Since 2015 lettings and managing agents in England and Wales have legally been obliged to clearly publicize their fees.

 

 

 

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Buy to let landlords exploiting tax loophole to invest in property

landlords-continue-fight-against-george-osborne-rental-tax-changes

Increasing numbers of landlords are using a tax loophole to avoid buy-to-let tax changes announced by former Chancellor George Osborne in 2015.  Under the rules set to be introduced next year, private landlords face restrictions on their ability to offset mortgage  interest payments against tax bills.

However, the new rules will not apply to landlords who invest through a company rather than as an individual.  Accordingly in anticipation of the changes, 63 per cent of applications for landlord loans are now being made through limited companies, up from 21 per cent before the announcement was made. Many landlords are also setting up companies and selling their existing properties to them.

According to Chief Operating Officer Steve Olejnik of the mortgage brokering firm, Mortgages for Business, the number of landlords using limited companies will rise since it will be  “more tax efficient for the majority to buy property.”  Investors who hold properties in limited companies will continue to benefit from tax relief and will be able to write off all costs of running buy-to-let properties (including mortgages) as  ‘allowable expenses.’ Incorporation would therefore effectively circumvent the rate relief restrictions.

Furthermore, despite having to pay stamp duty at the increased rate, incorporated landlords would be eligible to pay just 20 per cent corporation tax on profit as opposed to up to 45 per cent income tax if the buy-to-let were operated by an individual.  Incorporated landlords would also benefit from more relaxed affordability checks compared with individual landlords since since lenders will take into account the fact they will still benefit from tax relief.

The increase in landlords registering as companies comes following the successive failure of legal and Parliamentary challenges against former Chancellor George Osborne’s restrictions on the amount of tax relief private landlords will be able to claim on mortgage interest outlined in last year’s summer budget.

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House Prices in Chelsea fall 9.8% annually in September

London House Prices Fall

House prices in Chelsea have fallen by 9.8 per cent annually with prices for high-end homes in central London falling by 2.6 per cent in September.

Property consultants Knight Frank claims that changes in stamp duty rather than the effects of the Brexit vote in the EU referendum is the main factor for the house price decline. The firm also claims that the Brexit vote may have been “a catalyst for overdue price reductions” in the sector.

Overall the picture across London as a whole has been mixed. Some parts of prime north London have seen price falls of 7.5 for Hyde Park and 5.3 per cent for Notting Hill.  Islington on the other hand witnessed an increase in prices by 3.6 per cent. In the high-end rental sector the picture has been similarly varied with rental values for prime central London properties falling by 4.7 per cent on an annual basis with rent falls of 9.9 per cent in Marylebone and 8.3 per cent in Chelsea.

Properties are also spending more time on the market with the average number of days taken for a property to sell increasing by 14 per cent between January and August compared with the same period last year.

There are also advantages for renters in the capital with rental values also falling for high-end homes. In September, rental values for prime central London fell by 4.7 per cent on an annualized measure.

Chelsea and Marylebone notably saw rents falling by 8.3 per cent and 9.9 per cent annually.  The picture for areas further out was quite different with Areas further out saw less dramatic rent falls with King’s Cross and the City Fringe seeing average rents rise by 1.9 per cent and one per cent respectively.

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Buy-to-let landlord group represented by Cherie Blair loses court tax challenge

Cherie Blair Royal Court Justice landlord group

A landlord lobby group represented by Cherie Blair have seen a legal challenge to restrictions on buy-to-let tax relief dismissed at the Royal Courts of Justice today.

The landlord coalition called “Axe the Tenant Tax” was refused permission by a senior judge to seek a judicial review of tax changes announced by former Chancellor George Osborne in 2015 which are set to be introduced in April 2017. Under the proposed tax changes (Section 24 of the Finance (No 2) Act 2015) individual landlords with mortgages will be required to pay tax on turnover rather than the profit.

Represented by Omnia Strategy LLP,  the law firm  founded chaired by Cherie Blair in 2011, the group claimed that the tax changes were “unlawful, unreasonable and discriminatory” because they did not also apply to corporate landlords.

Mrs. Blair has previously claimed that the proposed tax changes would be challenged since they would “discriminate against landlords according to the European Convention on Human rights.” Speaking during today’s hearing, Mrs. Blair stated that the tax proposals would “unfairly result in cuts in income for ‘hard-working members of the public’ who had bought properties to rent in order to supplement their savings at a time when interest rates were low.”

Mr Justice Dingemans ruled that the legal challenge would fail rejecting claims that the changes would be contrary to EU legislation and anti-discrimination laws.  The judge added that the extent to which corporate bodies should be treated differently to individuals when it came to tax laws “raises political and economic questions, but not in this instance a legal one.”

In response to today’s court defeat, the landlord group remained defiant. In a joint statement lead claimants Steve Bolton, founder of Platinum Property Partners, and fellow landlord Chris Cooper claimed that the extra costs incurred by landlord due to the tax changes would be passed on to tenants through higher rents.

“We are outraged by the court’s decision. It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24. From April 2017 the negative impact of this previously failed tax experiment from Ireland, where rents increased by 50% over a three year period, will be felt far and wide. Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.”

Despite the failure of a previous Parliamentary petition and today’s defeat, Mrs. Blair said that the coalition would fight on and “engage with the Government” more directly over the issue.

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