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Increase of Government Focus on Measures Tackling Rogue Landlords and Agents

Published On: June 19, 2018 at 8:17 am

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By Marc Trup

While most landlords play by the rules, rogue landlords and letting agents in the private rented sector (PRS) have long been a problem in the UK, tarnishing the property industry and undermining tenants’ confidence in rental properties.

The disproportion in power in the PRS often meant that vulnerable tenants lacked legal protection from ruthless landlords, who, in many cases, retaliated against complaints from tenants living in cramped and unsafe conditions by raising rental prices and threatening evictions.

In recent years, the UK Government has introduced new measures to crack down on rogue landlords and strengthen councils’ powers to tackle poor quality homes in the private rented sector. Local councils are being given a variety of new powers to tackle the small minority of rogue landlords who rent out overcrowded or dangerous properties, imposing fines of up to £30,000 for non-compliant landlords.

Increase of Government Focus on Measures Tackling Rogue Landlords and Agents

Marc Trup, Founder and CEO of Arthur Online

Landlords convicted of a range of housing, immigration and other criminal offences, such as leasing overcrowded properties, fire and gas safety offences, and unlawful eviction, will be added to the database and their information will be available to local authorities. This will enable councils to keep a closer eye on those with a poor track record.

Furthermore, an increasing number of councils are launching licensing schemes in order to improve standards in the private rented sector. As of 2018, at least 70 councils have introduced schemes that add to the standard mandatory landlord licensing. More and more councils in England lacking a licensing scheme are consulting about bringing one in.

Government plans also include a national redress scheme during 2018/19 that landlords will have to join, enabling tenants to have a platform via which to complain about poorly managed properties.

In the past month, it has been announced that Client Money Protection (CMP) schemes will become a compulsory requirement for all letting agents from April 2019. The Ministry of Housing, Communities and Local Government has set out regulations for mandatory membership of a CMP scheme by 1st of April 2019. Any company holding client money will be required to be registered under a CMP scheme or face a maximum penalty of £30,000 for non-compliance.

Essentially, CMPs protect the rental money that a tenant pays to a letting agent to pass onto their landlord. There has never been legislation in place binding agents to separate deposit money from their own. This means that many tenants who rent through dodgy agents may never see their money again if the agent’s business went bust.

The main aim of a CMP is to help provide compensation to landlords, tenants and other clients if a property agent mishandles their rent, deposit or any other client funds. The purpose of making this scheme compulsory is to raise standards across the industry in order to protect the consumers who need it most.

Although regulations have been laid, they will not become law until April 2019. This means that, if you are a landlord relying on an agent who does not use a CMP, your money is still at risk.

Marc Trup is the Founder and CEO of Arthur Online

Marc fell into the property sector after selling his first business in 1998 to BUPA healthcare. Focusing on residential property, he built up a portfolio in and around the London area, starting off with a small block of flats.  Over the following 15 years Marc grew his portfolio to manage over 85 properties.  He wanted a system that allowed him to manage the portfolio from his iPhone, while drinking his espresso at the local coffee shop. Having searched online to find an app to help him do just that, he realised that it simply didn’t exist.  So, he founded Arthur Online to make not only his life easier but that of other property managers. Arthur Online is a cloud-based platform that enables property managers to respond instantly and solve problems fast – be it with tenants, contractors, property owners or letting agents. https://www.arthuronline.co.uk/

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Trends Update shows Strong Growth for Remortgaging in April 2018

Published On: June 18, 2018 at 9:06 am

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The latest Mortgage Trends Update by UK Finance has been released, revealing a strong growth for remortgaging in April 2018. New homeowner mortgages are up 36% and buy to let remortgages are up 32.4%, in comparison to the same month last year.

The key data highlights from this update include:

  • 26,700 new first-time buyer mortgages have been completed during April, which was 3.5% more than in the same month last year. This has resulted in £4.4bn of new lending during that month, which shows a 4.8% increase year-on-year. Average first-time buyers are 30 years old, with a gross household income of £42,000.
  • Throughout the month, 25,100 new home mover mortgages were completed. This was 4.2% less than in the same year previously. £5.4bn of new lending was obtained that month, which was 3.6% down year-on-year. The average age of home movers was 39, with a gross household income of £55,000.
  • 40,800 new homeowner remortgages were completed that month, showing a 36% increase to the figures of the same month last year. There has been a 44.2% increase year-on-year to remortgaging, standing at £7.5bn that month.
  • 5,000 new buy to let mortgages were completed in the month, resulting in a 5.7% decrease than the same month a year earlier. This contributed to £0.7bn of lending that month, down year-on-year by 12.5%.
  • Looking at buy to let remortgages completed during the month, there has been an increase of 32.4% from the same point a year earlier, bringing in a total of 14,300. By value this was £2.3bn of lending in the month, 35.3 per cent more year-on-year.

The full UK Finance analysis on the mortgage trends update is available to view here.

-26,700 new first-time buyer mortgages have been completed during April, which was 3.5% more than in the same month last year.

26,700 new first-time buyer mortgages have been completed during April, which was 3.5% more than in the same month last year.

Jackie Bennett, Director of Mortgages at UK Finance, has commented: “Remortgaging activity bounced back to strong levels in April, as both homeowners and landlords put their house in order by locking into attractive fixed-rate deals ahead of an anticipated interest rate rise.

“This spike in remortgaging was also driven by a large number of fixed-term mortgage deal rates coming to an end, combined with increased efforts by lenders to contact their customers before their deal rate expires.

“The number of first-time buyers has grown year on year, outstripping the number of home-movers. This may reflect the impact of measures such as the recent stamp duty cut and the Help to Buy scheme that are focused on getting more people onto the housing ladder.”

Research Sheds Light on How Landlords Become Buy to Let Investors

Published On: June 18, 2018 at 8:09 am

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Research by Foundation Home Loans has shown that a fifth of buy to let borrowers are “accidental landlords”.

14% of landlords questioned have stated that they first became a landlord through an accidental circumstance, such as marriage or relocation. Such an occurrence has resulted in these individuals being suddenly faced with a whole new industry to get to grips with, including many different rules and regulations to understand.

The research from this research shows that 9% of landlords inherited their properties. This alone brings with it certain tax related challenges to adhere to.

23% of the landlords include in the survey have stated that they became a property investor with financial gain in mind. They found the idea of becoming a landlord appealing, with 21% planning on using the money brought in from rental income to invest in their retirement plans.

21% responded that they saw being a landlord as a full time job. The largest proportion of those who responded as such are landlords in London. The response was that they recognised the on-going demand for rental properties in the area, due to the many young professionals looking to start a career in the capital and therefore wanting property close by.

60% stated that they have another full-time job alongside being a landlord, handling their rentals in between work. 19% of landlords responded that they have a part-time job.

Foundation Home Loans marketing director Jeff Knight has commented: “With so much regulation introduced into the Buy to Let market in the last few years, it could be easy for those who are unplanned landlords to make a swift exit rather than stay and navigate the red tape.

“That said, no matter how they found themselves owning rental property, it’s clear landlords are interested by the buy-to-let market for a variety of reasons and objectives, financial or otherwise.

“Considering the rental sector forms an increasingly important part of the housing mix, landlords need to be armed with the right advice.

“Our findings indicate plenty of the ‘accidental landlords’ are looking to expand their portfolios and remain invested in the market, which will ultimately have a positive impact on quality and choice for renters.”

Analysis shows Drop in UK Lettings Listings due to Landlords leaving PRS

Published On: June 18, 2018 at 8:06 am

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There has been a recent increase of landlords pulling out from the private rented sector, thought to be due recent tax and legislation changes. This has lead to a drop in rental properties available across the UK, according to an analysis by Home.co.uk.

Tax changes, such as the 3% Stamp Duty surcharge and the phasing out of mortgage interest relief, have been a concern for many. With the Tenant Fees Bill also progressing, it appears to have shook the confidence of many buy-to-let investors.

Home.co.uk’s research shows that there has been a 12% drop in rental property listings over a 12-month period. London specifically is seeing the worst change, with a 20% drop in properties available to rent over the last 12 months. The borough of Westminster is showing the most prominent drop within the capital city, as the analysis shows its listings to have fallen by 447 properties over a 12-month period, with average monthly rents also rising by 24% to £5,292.

A drop in lettings listings is thought to be a result of recent tax and legislation changes

A drop in lettings listings is thought to be a result of recent tax and legislation changes

Home.co.uk director Doug Shephard said: “The current situation is particularly dire for tenants, who are set to continue to face increasing competition for good quality properties and rising rents.

“Government red tape and higher taxation in the lettings market has triggered forced sales by landlords. Moreover, this additional supply is now negatively impacting on capital values. Vendor landlords have done their maths and they know that if they continue to let the property, even with a rent hike, they will be losing money overall. Conclusion: time to sell.

“The problem is, though, that the private rented sector constitutes 20% of the housing stock, the majority of which is owned by landlords with small portfolios. A recipe for disaster? Maybe. Negative sentiment in this sector is certainly sufficient to turn confidence in the wider property market to the downside, thereby creating misery for all, especially those wishing to rent.”

Landlords Must Prepare for HMO Licence Requirements due in October

Published On: June 15, 2018 at 9:36 am

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With new changes to the rules governing Houses in Multiple Occupation (HMOs) on the horizon, landlords with properties across the Ashford borough in Kent are being urged to make preparations.

From 1st October this year, all HMOs that are inhabited by five or more people comprising of two or more family units will be required to a licence in order to operate.

As it stands currently, a HMO licence is only required in the situation that a property is over three storeys high, therefore the main change will be the removal of the number of storeys from the HMO definition.

These changes can be viewed in The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018.

The Government has estimated that the changes will bring about the need for an extra 160,000 properties to be licensed in England. Ashford Borough Council is specifically estimating that up to 150 properties will need to be licensed throughout the borough.

A minimum space standard for bedrooms will also be introduced by this new legislation. The guidelines state that rooms sleeping one adult must be no smaller than 6.51m2. The rooms in HMOs that sleep two adults must be no smaller than 10.22m2. For children aged ten or younger, the rooms they sleep in must be no smaller than 4.64m2.

In the situation that these space standards are not being met, councils will be able to grant a maximum of 18 months to get the situation rectified.

As well as room size, landlords must ensure that adequate receptacles for the storage and disposal of household waste produced at the property are provided.

Landlords have until 1st October to apply for a licence. They are responsible for complying with any changes that need to be made in relation to the specification included within the order. If landlords have not complied with the new scheme by the time this period has passed, then serious penalties may be incurred, including the possibility of hefty fines and criminal prosecution.

Competitive Five-Year Fixed Rate Deals are Being Snapped up by Landlords

Published On: June 15, 2018 at 9:14 am

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The latest research from the Buy to Let Club reveals that many landlords are considering five-year fixed rate mortgages. With the general decrease in cost of longer-term products and the stringent affordability checks involved with the short-term alternatives, many are finding the longer commitments more tempting.

The analysis that the Buy to Let Club undertook shows that 42% of its landlord costumers are opting for the five-year fixed rates. This is up from 15% two years ago, before the Prudential Regulation Authority (PRA) brought in stricter stress testing. With the economy as it stands, it appears that landlords are eager to lock in to fixed terms with the aim of a more long-term guarantee in case of further changes.

With five-year fixed terms currently sitting at a record low, many landlords are finding them to be the more appealing choice. Looking at the average fixed rate of five-year buy to let products during 2008-2013, those at 75% loan-to-value had shown a fluctuation of 5% to 7%. The products available today sit considerably consistent at less than 2.7%.

Research has also been released from online mortgage broker Property Master, showing that many popular buy to let fixed rate deals have continued to fall since the start of the year. Similar to the information from the Buy to Let Club, its Mortgage Tracker has determined that five-year fixed rate mortgages remain the most competitively priced of those recorded.

The tracker’s data has revealed that the monthly repayment for a five-year fixed rate loan of £150,000, representing 65% of the value of the property, has fallen by £22.00 a month, compared with January this year. Landlords borrowing the same amount for 75% of the property’s value are paying £16.00 less per month compared to if they had taken out that loan in January.

Ying Tan, managing director of Buy to Let Club, said: “We’ve seen a steady increase in the number of clients opting for five-year fixed rates over the last few years.

“With extremely competitive rates and the added security that they present, it is not surprising that they are a popular option for investors.

“Of course they also have the added benefit of less stringent affordability tests that make them appealing for raising finance against low-yielding properties.

“We have a number of fantastic five-year rates at present including a brand new exclusive with Santander at 2.54% with a £1,999 fee up to 75% LTV that is available for both purchases and remortgages.

“Principality’s 2.55% rate and Virgin Money’s 2.64% rates at the same LTV are also proving popular.”

Angus Stewart, Property Master’s Chief Executive, commented: “Landlords are benefiting from increased competition in the mortgage market for their business – recent research revealed there are now over 2,000 different buy-to-let products available.  They are also probably benefiting from the market’s expectation that if the base rate does go up it is more likely to do so later in the year rather than now.  The feeling is there is a lot of uncertainty around at the moment in terms of the future direction of Brexit coupled with weak economic data.  But the Bank of England meets again next week and it could always surprise us.”