Written By Em

Em Morley

Damage caused by Cannabis Farms not covered

Published On: March 24, 2014 at 11:25 am

More and more rental properties are being used to cultivate cannabis in the U.K. Many insurers have urged landlords to be vigilant as not all will pay out for damage caused by this activity.

Increase

Figures released recently indicate that 7, 865 cannabis farms were uncovered during 2011 and 2012, an increase of 15% from 2009 and 2010.[1]

Richard Burgess of insurance specialist website Cover4LetProperty.co.uk issued a stark warning to landlords on the growing problem. Burgess said, “Type ‘cannabis farms landlord’ into Google and you’ll see hundreds of stories of landlords facing huge repair bills, having unwittingly let their property to tenants who have then turned it in to a cannabis farm.

“Sadly, most landlords assume that this type of damage – which can include ripping up floor boards, knocking through walls and creating an indoor greenhouse environment – is covered by their landlords insurance, particularly if they have the ‘malicious damage by tenant’ element of cover.”[1]

Damage caused by Cannabis Farms not covered

Burgess reminds landlords that, ‘not all insurers provide malicious damage by tenant cover as a part of a landlord insurance policy.’ He goes on to warn that, ‘insurers will consider a cultivation of cannabis claim under the malicious damage by tenant section,’ but, ‘some will have limits, typically up to £5,000,’ which means that, ‘repairs can still end up costing a landlord tens of thousands of pounds.’[1]

Mr Burgess also says that landlords must remember to do more to eradicate problems of this nature escalating. On landlords, he says that, ‘part of their contract with their insurer is that they-or a representative-makes regular, logged checks on the property.’[1]

It is important, according to Burgess that landlords carry out thorough checks on all new tenants and look out for any early unusual signs. This may include taking an interest in the electrics of the property.

[1] http://www.landlordexpert.co.uk/2014/03/24/warnings-by-insurer-to-landlords-damage-caused-by-cannabis-farms-will-not-be-covered/

HMRC Urges Landlords to Clean up Taxes

Published On: March 21, 2014 at 9:17 am

Author: Em Morley

Categories: Finance News

Tags: HMRC,landlord tax

HMRC Urges Landlords to Clean up Taxes

Some landlords fail to pay the correct amount of tax on their rental income. HM Revenue & Customs (HMRC) has revealed that there is £550m worth of tax missing from the private sector.

The Let Property Campaign aims to get this money back, and is targeting all landlords that have not paid the right amount of Income Tax in the last few years. Offenders can take advantage of a grace period, in which they can voluntarily come forward and thus pay a 20% fine. Those caught out will be ordered to pay 100%.

It is possible that those who are found to be deliberately dodging tax payments could be prosecuted. Kevin Power, who avoided paying £84,000 in tax, was sentenced to 12 months imprisonment.

HMRC state that they are not trying to be too tough on landlords, accepting that some may have not paid the right amount by accident. Accidental landlords specifically may find it difficult to fill out their tax returns, as they may not understand what counts as deductible, such as letting agent fees and landlord insurance.

An HMRC spokesperson says, “not every landlord who owes tax is deliberately trying to cheat the system”, adding that the campaign is “not about penalising genuine mistakes.”¹

HMRC have claimed that the majority of those that have not paid the correct amount in tax are usually just a couple of hundred pounds out, and most of these landlords will not be fined.

If you could be affected by the campaign, contact HMRC as soon as possible. It could also be wise to hire an accountant who will manage your finances and complete your annual tax returns.

The private rental sector is rewarding for many, and some of those will try to take advantage of the system. The Let Property Campaign should find those landlords and reclaim the money, putting more finance into the economy and private rental market.

¹http://www.justlandlords.co.uk/news/HMRC-urges-Landlords-to-come-clean-over-Taxes-1796.html

Landlords confident of financial recovery

Published On: March 18, 2014 at 5:23 pm

Author: Em Morley

Categories: Landlord News

Tags: rising interest rates,uk financial market

New research from the National Landlords Association (NLA) suggests that confidence in the UK financial market is growing within landlords.

Raised Expectations

Findings from the report indicate that 31% of landlords would say their expectation of the UK financial market is either good or very good. This is a considerable rise of 21% in comparison to the same survey conducted last year.[1]

Growing faith in the market is underlined further with the news that 27% of landlords questioned said that they plan to add to their existing portfolio in the coming twelve months.[1]

Landlords confident of financial recovery

Interest

Despite the increased belief in the financial market, a number of landlords expressed concerns regarding potential increases in interest rates. 21% of landlords said that they would struggle to keep up with mortgage payments if interest rates rose by as little as 2%. 35% said a rise of 2.5% would cause them financial hardship, with 41% expressing a rise of 3% would be detrimental.

Despite landlords’ concern, The Bank of England stated just last week that interest rates will remain at their current rate of 0.5% until at least late 2015.

Optimism

Carolyn Uphill, Chairman of the NLA, was understandably pleased with the results of the survey. Uphill said that, “Landlord optimism around the UK’s financial recovery, coupled with the Bank of England’s announcement makes good reading for anyone considering buy-to-let investment. This is evidenced by the significant number of landlords who will be looking to add property to their portfolios over the coming months.”[1]

Uphill warns though that, “interest rates will rise as the economy improves and we move out of recession,” and that, “anyone thinking about buy-to-let investment should do so with a view to long-term sustainability.”

[1] http://www.landlords.org.uk/news-campaigns/news/landlords-confident-uks-financial-recovery

One Million People will Move Home this Year

Published On: March 18, 2014 at 4:20 pm

Author: Em Morley

Categories: Finance News

Tags: increase in housing transactions,property market recovery

During 2013, around one million people are expected to move house due to an improving property market, it was recently announced.

The Ernst & Young ITEM Club have used the Treasury’s economic models to predict that the amount of housing transactions will increase by 7.5% this year. They have also referred to Chancellor Osborne’s plans to guarantee £130 billion of mortgages leading to housing transactions rising by another 7.8% next year.

One Million People will Move Home this Year

The chief economic advisor to the ITEM Club, Peter Spencer, has discussed the predictions. He says: “With export markets continuing to disappoint, the Chancellor has focused his firepower on the home front. And the timing couldn’t have been better. Real incomes are already starting to recover, mortgages are becoming more readily available, and homes are more affordable, as the house-price-to-earnings ratio continues to fall. Although it’s not a long-term strategy, stimulating the housing market and the high street will keep GDP growth positive. Unbalanced growth is better than no growth.”

The Government’s new Funding for Lending Scheme (FLS) will allegedly lead to more people being able to buy a property, as it will decrease costs of mortgages, according to the Club. They have also supported the controversial Help to Buy scheme.

Spencer explains: “We expect [the scheme] to boost the number of housing transactions, particularly at the lower end of the market where the deposit and low equity have been a major constraint.

“We should start to feel slightly better off this year, which will help to loosen the purse strings. Consumer spending added 0.7 percentage points to GDP in 2012, and the Chancellor’s budget will help ensure the tills continue to ring for some time yet. Consumers have been burnt by the experience of the recession, and are much more cautious with their finances. Households are likely to continue paying down debt rather than racking up huge credit card bills.”¹

Progresses in the property market will also benefit landlords, as there will be less pressure on the private rented sector.

Additionally, should the property market become steadier there is the chance of landlord insurance policies becoming cheaper, as there would be less risk of tenants falling into rent arrears.

The next few months will uncover whether the ITEM Club’s forecasts are accurate, and whether the housing market will bounce back to pre-recession status.

¹http://www.justlandlords.co.uk/news/One-Million-People-to-Move-Home-this-Year-1698.html

Potential implications of long secure tenancies

Published On: March 18, 2014 at 12:39 pm

Author: Em Morley

Categories: Landlord News

Tags: long tenancies,secure tenancies

Research was recently carried out to explore potential implications of a longer, more secure tenancy for private sector tenants and landlords. The findings include landlord’s opinions, alongside those of tenants, on the perceived advantages and disadvantages of longer tenancy options.

Potential implications of long secure tenancies

Summary

In summary, the findings suggest that landlords are opposed to wholesale changes to the system. On the whole, they consider the existing Short Assured Tenancy (SAT) regime to work well. By majority, landlords believe the focus of any changes should be punishing unscrupulous colleagues who do not comply with the current system.

Tenant opinion though was much more split. Shorter-term tenants seem to think that the SAT regime works efficiently and offers flexibility. Others however are concerned, particularly those who feel that they have limited alternatives available.

Current arrangements for the issue of SAT’s and other documents were viewed as complicated by tenants and landlords alike, with smaller landlords particularly confused.

For long-term tenants, particularly those towards the bottom of the rental market, issues with property condition and repairs are more of a concern. Some of these tenants feel that they cannot approach or take on their landlord regarding issues such as breaches of tenancy legislation or regulation. Moving forwards, tenants still do not feel that changes to the tenancy regime would change this.

The full report findings can be seen here

HMRC targets landlord underpayments

Published On: March 14, 2014 at 5:20 pm

Author: Em Morley

Categories: Landlord News

Tags: accidental landlords,landlords not paying tax,underpaid taxes

HM Revenue & Customs (HMRC) are in the process of contacting landlords to ascertain additional information regarding their rental income and further measures. It is thought that landlords with property in London, East Anglia and the South of Wales are being most targeted.

Questions

Some of the information that HMRC are requesting includes property addresses and the number of tenants residing within them. In addition, landlords may be asked to provide details of how they came to acquire the property and if they have a mortgage. Landlords using Self Assessment will be asked to provide information to support their declaration of income.

HMRC targets landlord underpayments

Crackdowns

This particularly move from HMRC comes as part of the process to crackdown on rogue landlords. October last year saw the Inland Revenue start to use more extreme measures to chase landlords who had either paid little or no tax. Then, in November, a campaign was launched designed to tackle so-called accidental landlords who had underpaid taxes.

HMRC said that they were presenting landlords with a fair, “opportunity to bring their tax affairs up to date,” and to get, “the best possible terms to pay the tax they owe.”[1] This will be covered under the Let Property Scheme, which requires full information on unpaid tax in return for a fair option for preferred payment conditions.
[1] http://www.landlordexpert.co.uk/2014/03/14/residential-landlords-across-the-country-are-facing-a-new-crackdown-as-hmrc-targets-underpayment/