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Em Morley

Landlords being Persecuted under Licensing Schemes, Solicitor Claims

Published On: February 15, 2019 at 10:31 am

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Categories: Landlord News

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A leading solicitor has criticised Liverpool City Council’s decision to hold a public consultation into reviewing its landlord licensing scheme for a further five years, due to the so-called persecution of innocent landlords.

David Kirwan, a Managing Partner at Kirwans law firm, said that the Cabinet’s approval of the recommendation would result in more landlords being unfairly prosecuted, if the consultation leads to the initiative continuing until April 2025.

He argues that the heavy-handed nature of the penalties associated with landlord licensing schemes means that inexperienced or first time landlords, who do not realise the importance of applying for licences, could find themselves in court, forced to pay back 12 months’ rent or banned from letting properties in the area.

Liverpool City Council’s landlord licensing scheme was introduced under the Government’s selective licensing laws, meaning that all landlords with properties in the area must sign up to it. Selective licensing initiatives apply to a designated area for a period of five years, with landlords required to apply for a licence for each property affected.

They are then awarded a licence to operate their properties, only after an assessment to deem them a fit and proper person. In addition, stipulations around the management and funding of the property, as well as health and safety considerations, must be satisfied.

However, opponents of the schemes claim that they can prove confusing for landlords, who are often unaware that their properties even lie in a selective licensing area.

For those operating numerous properties across different areas, the situation can be even more bewildering, as each council can create its own set of rules for each scheme.

At the end of last month, Liverpool’s scheme resulted in more than 2,000 legal notices being issued, with 89 fixed penalty notices and 154 successful landlord prosecutions.

But Kirwan says that some of those hauled before the courts are well-meaning landlords, who have simply made an error.

Landlords being Persecuted under Licensing Schemes, Solicitor Claims

He explains his position: “Under selective licensing legislation introduced by part three of the Housing Act 2004, in areas affected by poor-quality rental properties, irresponsible landlords and anti-social behaviour, local authorities (LAs) are able to introduce penalties that go well beyond the mandatory Government landlord licensing rules for those failing to obtain a licence.

“This can result in criminal records, rent repayment or a ban from renting out property. Even if LAs opt to avoid the courts, civil penalty fines of up to £30,000can be imposed.”

Kirwan continues: “However, rather than pursue these harshest of punishments, LAs also have the option of working with those failing to comply to offer advice and support, educating them about their duties and responsibilities, and helping to create a reliable pool of landlords within the city.

“I have been extremely disappointed to learn then that, rather than choosing the option that, in some cases, would be eminently more sensible, councils such as Liverpool are all too often pursuing the harshest of punishments.”

He has found: “The outcome is such that well-meaning men and women who have ventured into property letting in a bid to provide a pension or extra income are finding themselves in a truly terrifying situation, simply for what is often a simple administration process failure.

“Meanwhile, the real rogue landlords may simply choose to avoid the licensed areas, moving their poor practices to areas where such schemes are not currently in place.”

Last summer, the Government announced a review of selective licensing schemes and how well they are working, with the findings due for publication this spring.

In the meantime, however, Kirwan warns landlords to take extra care when investing in property in the Merseyside area: “Liverpool City Council’s practice of punishing landlords who fall foul of the rules in the harshest possible way means that landlords must be extremely wary of buying in an area affected by selective licensing rules.

“Those that choose to do so must make sure that they have the necessary licences in place and ensure they comply with every obligation the scheme makes of them – or face what can be heart-breaking consequences.”

Growth in Private Sector Rents has Slowed since 2016

Published On: February 15, 2019 at 9:59 am

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Private sector rents paid by tenants in the UK increased by an average of 1.0% in the 12 months to January 2019, which is unchanged from December 2018, according to the latest Index of Private Housing Rental Prices (IPHRP) from the Office for National Statistics (ONS).

Growth in private sector rents across the UK has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period.

Private sector rents in the UK, excluding London, rose by an average of 1.5% in the 12 months to January, which is up from 1.4% in the previous month. Rent prices in the capital increased by an average of 0.1% over the same period – down from 0.2% in December.

The December 2018 Residential Market Surveyfrom the Royal Institution of Chartered Surveyors (RICS) reported demand from prospective tenants holding broadly steady for the third consecutive month. New landlord instructions remained in decline, however, rounding off a year in which they had fallen in all 12 months.

In its Private Rented Sector Report for December 2018, ARLA Propertymark (the Association of Residential Letting Agents) reported that, year-on-year, both demand from potential tenants and the supply of available properties fell.

These supply and demand pressures can take time to feed through to the IPHRP, which reflects price changes for all private rental properties, rather than only newly-advertised homes.

Growth in Private Sector Rents has Slowed since 2016

Focusing on the long-term trend, between January 2015-January 2019, private sector rents in the UK rose by an average of 7.0%.

Private sector rents in Wales increased by an average of 0.9% in the 12 months to January, which is up from 0.8% in the previous month. Wales showed a broad rise in its annual growth rate between July 2016 and the end of 2017, but has fallen back since.

In Scotland, private sector rents grew by an average of 0.7% in the year to January – up from 0.6% in December. The weaker growth since 2016 may be due to stronger supply and weaker demand north of the border.

English private sector rents rose by an average of 1.1% in the 12 months to January, which is unchanged on December. When London is excluded from England, rent prices increased by 1.6% in the year to January.

The annual rate of change for Northern Ireland (1.6%) in September 2018 is higher than the other countries of the UK. Northern Ireland has seen an increase in its annual growth rate between the end of 2016 and the end of 2017, but fell back slightly in 2018. Northern Ireland’s data has been copied forward since September 2018. The next update to Northern Ireland statistics will be in the release on 20thMarch 2019.

All UK countries have experienced rent price rises since 2015. Since January of that year, private sector rents in England increased more than in Wales, Scotland and Northern Ireland.

In the 12 months to January 2019, rent prices in London rose by an average of 0.1%, which is down from 0.2% in December. The RICS reported in its September 2018 Residential Market Surveythat tenant demand has staged a sustained recovery in the capital over recent months, increasingly outstripping supply. However, it notes that rents are still anticipated to see little change in the near-term.

Focusing on the English regions, the ONS found that the largest annual rent price growth in January was in the East Midlands, at 2.4%, which is down slightly from 2.5% in the previous month. This was followed by Yorkshire and the Humber (1.9%), which is up from 1.8% in December, and the West Midlands (1.8%), which is unchanged.

The lowest annual growth in private sector rents was in London, where prices were up by just 0.1%. The North East followed, at 0.4%, which is up from 0.3% in December 2018.

Further Weaknesses Expected in the Housing Market over the Short-Term

Published On: February 15, 2019 at 9:02 am

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Further weaknesses are expected in the UK housing market over the short-term, according to responses to the January 2019 UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS).

The results continue to signal a subdued backdrop, with enquiries, sales and new instructions all falling further over the month.

In the near-term, contributors to the survey sense little prospect of a turnaround, as concerns over the potential impact of Brexit continue to cause hesitancy, alongside affordability constraints in parts of the country. 

That said, while shorter-term sentiment remains downbeat, expectations at the 12-month outlook are modestly positive.

Housing demand

During January, new buyer enquiries declined yet again, marking the sixth successive monthly decrease. What’s more, demand softened to some degree across virtually all parts of the UK. Scotland was a slight exception, but, even here, the trend was only flat.

Alongside weakening demand, the flow of properties being listed onto the sales market also deteriorated, with the net balance reading of -25% the poorest since July 2016.

Moreover, the pipeline for sales instructions going forward still appears weak, evidenced by survey participants continuing to report that the number of appraisals is down annually.

Property sales

Rounding off a subdued month for housing market activity, agreed property sales also fell further, with the pace of decline seemingly gathering momentum compared to the December survey. 

Meanwhile, the average time taken to sell a property, from listing to completion, continued to lengthen, reaching 19.4 weeks (the longest since this series was introduced back in 2017).

Looking ahead, sales expectations for the coming three months remain downbeat, both at the national level and across most of the UK. Indeed, the headline net balance came in at -32% (which is down from -28% in December), while expectations are negative across 11 of the 12 regions/countries covered in the report. 

The outlook further down the line seems a little stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise over the next 12 months (albeit from a lower level).

property market
Further Weaknesses Expected in the Housing Market over the Short-Term

House prices

The headline price indicator softened for the fourth consecutive month, with the net balance slipping to -22%, from -19% previously.

When broken down, London and the South East continue to display the weakest readings, while pricing sentiment also remains negative in East Anglia and the South West. In each instance, strong price growth over the past six years as a whole has left measures of affordability looking stretched, with high prices therefore a key factor hampering demand at present.

Elsewhere, although house price growth seems to have lost at least some impetus in most English regions over the last six months or so, prices continue to rise firmly in Northern Ireland and Scotland.

In fact, both Northern Ireland and Scotland also display the strongest price expectations for the coming 12 months, followed by the North West and Wales. By way of contrast, respondents in London still see house prices falling at the 12-month outlook.

That said, five-year projections for house prices across the capital have risen above the national average over recent months (growth of 2.2% per year expected nationally, compared to 2.6% for London).

Lettings market

Across the lettings market, tenant demand increased modestly in the three months to January. As such, demand has now picked up in each of the last three quarters, following a flatter trend in the early part of 2018.

Nevertheless, new landlord instructions continue to dwindle, with the survey’s lettings supply indicator remaining in negative territory for an 11thconsecutive quarter.

Respondents continue to expect rent prices to rise by roughly 2% over the next 12 months, while growth is forecast to accelerate slightly over the next five years, averaging 3% per year.

Rents are Falling as a Proportion of Tenants’ Income, RLA Insists

Published On: February 14, 2019 at 11:00 am

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The proportion of tenants’ income spent on rent in the private rental sector has dropped from an average of 35.4% in 2010/11 to 32.9% in 2017/18, the Residential Landlords Association (RLA) is pointing out.

Including income from housing benefit, over the same period, the amount of tenants’ income used for rent on social housing has risen from 26.7% to 28.0%.

These figures, from the English Housing Survey for 2017/18, highlighted by the RLA, show that, over the ten years between 2008/09 and 2017/18, the average weekly rent price across England (excluding London) in the private rental sector increased by 22%, which is almost half of the 43% rise in social rents. 

In London, private rents grew by an average of 34%, compared to 55% in the social rental sector.

The data arrives as the Office for National Statistics (ONS) has reported that rents are falling in real terms, and the Government’s 2018 English Private Landlord Surveyfound that 70% of landlords kept their rent prices the same when they most recently renewed a tenancy, showing that landlords prioritise keeping good tenants for the long-term.

The RLA is warning of the risks now posed to improved affordability in the private rental sector as a result of changes, such as those to benefits and increased taxation driving landlords out of the market.

The Government’s statistics show that over 15% of private landlords in England, representing more than 23 of all tenancies in the country, plan to either decrease the number of properties that they let or leave the sector altogether. Of this group, almost 70% said that it was due to legislative changes, including the phased reduction of mortgage interest reliefto the basic rate of Income Tax and the 3% Stamp Duty surchargeon the purchase of additional properties.

This reduction in the supply of private rental housing comes at a time when demand for new rental homes shows no sign of abating, with the Royal Institution of Chartered Surveyors (RICS) reporting that demand “remains more or less steady”.

Alan Ward, the Chair of the RLA, says: “This data shows that the private rented sector is becoming more affordable, demonstrating the folly that forms of rent controls would be. We cannot, however, be complacent.

“The danger signs are there. Tax increases are choking the supply of homes to rent. Landlords like to keep their tenants who benefit from lower or no rent increases when tenancies are renewed, but fewer homes for rent means less choice for new tenants.”

He believes: “We need positive, pro-growth taxation that supports landlords investing in the new homes to rent the country desperately needs.” 

Landlords to be Sued for Substandard Conditions in their Properties

Published On: February 14, 2019 at 10:30 am

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From 20th March 2019, the Homes (Fitness for Human Habitation) Act 2018 will make landlords more accountable than ever before for conditions in their properties. Under the new law, investors could be sued for substandard conditions.

At the beginning and throughout a tenancy, landlords must make sure that their properties meet certain standards for their tenants.

The Act will also give tenants the power to take their landlords to court for substandard conditions in their properties.

For the first time, landlords will be held accountable for issues caused by damp and mould.

Chris Michael, of Meaco, a leading dehumidifier specialist, says: “Conflict between a tenant and a landlord often arises when there is a problem with damp and mould, and who has responsibility for the problem.

“If the problem has been allowed to drag on the tenants’ health and possessions could be affected, and the landlord could be faced with costs for repairs and refurbishment.”

He explains: “With damp, the first action point is to check if there is a structural fault or a lack of ventilation. In combination with this a solution will often be to buy a dehumidifier. This removes the excess moisture from the air created by lifestyle issues (bathing, cooking, drying washing, breathing etc.). It would also reduce any increase in the room’s relative humidity whilst the tenant waits for repairs to be undertaken. In many cases, a dehumidifier alone will solve the problem.

“Condensation on walls is a sign that a situation is bad, but it does not necessarily mean that there is a structural issue. It could just be that the outside air is very cold, the walls have little or no insulation and the level of moisture inside is high. Improved wall insulation can help but the internal level of moisture stills needs to be reduced.”

Michael adds: “This new law will increase pressure on landlords to be proactive with regards to damp problems. To prevent damp, mould and condensation becoming a conflict area between tenant and landlord, then use a dehumidifier on a regular basis.”

House Prices Start to Fall, after 87 Months of Growth

Published On: February 14, 2019 at 10:03 am

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House prices have started to fall nationally, by an average of 0.2%, in the year to February, following 87 months of positive growth, according to the latest Asking Price Index from Home.co.uk. 

Overall house price growth in England and Wales has not slipped into the red since November 2011, the report shows. In February last year, the average house price increased by 2.3% year-on-year.

The greatest monthly decline in February was recorded in the South West (0.6%), as supply outweighs demand. 

Sliding house prices in London, the South East, South West and East of England have served to push down the national average into the red year-on-year, Home reports. London’s loss over the past 12 months has now edged up to 3.3%, and 6.9% since the start of the slide in May 2016.

Asking prices in the South East and East are now dropping faster, with losses increasing to 2.5% and 1.8% respectively. In January, the South West became the last domino to fall, with prices in the region now down by an average of 0.5% on February 2018.

These dreary national figures do, however, obscure significant growth in other regions further north and west. Growth has been nowhere more prevalent than in Wales and the West Midlands, where house prices are now 6.4% and 5.0% higher than they were a year ago, on average. The North West, and Yorkshire and the Humber have also pushed up their average asking prices by 4.3% and 3.4% respectively over the last 12 months.

However, the West and East Midland markets are slowing, as shown in their average time on market increases. Housing supply in these regions has risen by 10% and 13% respectively, with Home expecting this to increase further over the coming months, as investors attempt to cash out at the top. This indicates that these two regions will be the next dominoes to fall (the East Midlands first), and would be consistent with market behaviour observed previously when the East and South East markets peaked.

Overall, the supply of homes for sale in the UK rose by 4% in the year to February, with total stock up by 10.1%.

The largest supply increases were seen in the West Midlands (10%), Scotland (13%) and the East Midlands (13%).

Supply in London, on the other hand, has dropped by 13% year-on-year.

The typical time on market for homes in England and Wales rose to 114 days in February, which is six days longer than in the same month of 2018.

The average time on market continues to rise in London (16%), the South West (16%), South East (19%) and East of England (19%), as prices fall in each region.

26.3% more properties were reduced in price while on the market in January, compared to the same month of last year.