Written By Em

Em

Em Morley

New Buy-to-Let Range Offers Cashback and Free Mortgage Valuations to Portfolio Landlords

Published On: April 9, 2018 at 9:36 am

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Categories: Finance News

Paragon Bank has recently launched a new range of Limited Edition buy-to-let mortgage products. These products are available to portfolio landlords with four or more mortgaged properties.

One of the options is a two-year fixed rate at 3.40% for landlords wanting to borrow up to 75% loan-to-value (LTV) on Single Self-Contained (SSC) units. Another is a two year fixed rate at 3.60% for those who want to borrow up to 75% LTV on House in Multiple Occupation (HMO) and Multi-Unit Block (MUB) buy-to-let properties.

For landlords looking for a longer-term assurance of cost, this range may be of interest. The Limited Edition range includes a five year fixed rate at 3.74% for borrowing up to 75% LTV on SSC units. Another option is a five year fixed rate at 3.84% up to 75% LTV for borrowing on HMO and MUB properties.

With Paragon’s new Limited Edition buy-to-let range, landlords will have access to a product that provides a free mortgage valuation and the option of cashback. £250 can be claimed back upon the release of funds for a customer who selects a two-year fixed rate mortgage, or £500 for those who opt in for a five-year fixed rate.

When shopping around for such products, it can be worth looking at the extras, in order to determine which provide the best value. Calculating the overall differences in the amount a product will cost due to interest can also help put such offers into perspective.

John Heron, Managing Director of Mortgages at Paragon has commented: “Our new Limited Edition buy-to-let range brings added choice and flexibility for portfolio landlords looking to refinance or expand.

“The addition of cashback provides an extra boost, helping landlords fund the up-front costs associated with arranging finance and enhancing value for this important segment of the market.”

Landlords must meet the specified criteria in order to access these products. An example of this is that the properties in question must meet a minimum E grade or above Energy Performance Certificate (EPC) rating, unless there is an applicable exemption. The ‘Portfolio Mortgages Criteria’ page on the Paragon website goes into more detail.

Councils Encouraged to make Blacklist of Landlords and Agents Public

Published On: April 9, 2018 at 9:11 am

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Categories: Law News

Councils are being encouraged to name and shame any landlords or letting agents who are included in the new blacklist of rogue operators, following new Government guidance.

The guidance, which is non-statutory, appears to have been issued to counter criticisms that the new blacklist of rogue landlords and agents will not be available to members of the public or to prospective employers within the industry.

The Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), David Cox, says that the secrecy of the blacklist makes it pointless.

However, the new guidance says: “We would encourage local housing authorities to make successful banning orders for individual landlords [and agents] public.

“They will wish to consider how to publish details of successful banning orders, including the names of individual landlords, at a local level.

“Many local housing authorities already publicise successful prosecutions of rogue landlords through the local press.

“A local housing authority should take their own legal advice and consider their own local circumstances in determining whether banning orders should be publicised, but we would encourage them to do so.”

Councils Encouraged to make Blacklist of Landlords and Agents Public

Councils Encouraged to make Blacklist of Landlords and Agents Public

The guidance goes on to say specifically that any letting agency that has been subject to a banning order “can be named publicly. We would encourage local housing authorities to publicise the names of all business that are subject to a banning order”.

It also says that housing authorities should make information on banned landlords available on request by a tenant. It is not clear whether this also applies to agents.

While the Government has issued this new guidance, it still means that there is no public access to the blacklist. Instead, members of the public and agency employers wanting to check out prospective new landlords/agents will have to search newspaper reports and press releases.

Banning orders can be appealed and, in some cases, delayed, in order to allow agents to wind down their businesses.

Read the full guidance from the Government here.

The Founder and CEO of online estate agent Emoov, Russell Quirk, seems supportive of the new system: “A welcome introduction from the Government and one that will hopefully go some way in improving the rental sector, not only for tenants, but also for those landlords that abide by the rules.

“Despite changes to buy-to-let Stamp Duty, the UK rental market remains a very lucrative business and, while many landlords are operating legitimately within the sector, there are those that continue to provide inadequate living conditions while charging extortionate rents.”

He continues: “With more and more aspirational homeowners remaining resigned to the rental sector due to the ever-increasing cost of homeownership, it is important we do all we can to ensure this sector is operating appropriately and legally, and not taking advantage of those with no other choice but to rent.

“Those that do break the rules must be penalised and, hopefully, this latest legislation will not only do that, but make others think twice before committing the same offence.”

Dan Wilson Craw, the Director of tenant lobby group Generation Rent, believes that leaving responsibility of exposing rogue operators to the council is a bad step: “A new central database of criminal landlords, and powers to ban them from providing homes, is a massive step forward for the rental market. But, if tenants are to benefit, we need to be able to check if a prospective landlord has a criminal record. Rather than making this the responsibility of councils, as today’s announcement does, the Government could just open up the national database to the public. Proper naming and shaming will help tenants to avoid the criminals and also deter other landlords from cutting corners.”

Do you think that the blacklist will be successful, or should it be available to the public?

Fire Safety Review is Missing an Opportunity, RLA Warns

Published On: April 9, 2018 at 8:03 am

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Categories: Law News

The Government’s current fire safety review is missing the opportunity to assess fire safety regulations across all types of housing, warns the Residential Landlords Association (RLA).

The organisation has formally responded to the interim report of the fire safety review led by Dame Judith Hackitt, following last year’s Grenfell Tower disaster.

In its response, the RLA warns: “We are concerned about the interim report’s focus on new build and high-rise residential buildings, largely to the exclusion of the existing stock of smaller residential accommodation.”

The RLA is calling for contradictory and outdated fire safety guidance across all housing to be updated to make it clearer for landlords to ensure that their properties are safe, and improve enforcement and risk assessments by the authorities. Doing so would also help to ensure that rogue landlords cannot seek to exploit potential loopholes caused by overlapping regulations, the body points out.

Of particular concern are the confused and split responsibilities of the fire services and local authorities in relation to bedsit accommodation and blocks of flats. At present, the Fire Safety Order is limited in its scope of shared spaces, such as living rooms, kitchens and hallways. The regulatory standard for private rental housing – the Housing Health and Safety Rating System – applies to the whole of a building. A different body enforces each of these. Whilst the interim report refers to this, this is no implication that it accepts it as a key flaw in the current regime that needs to be addressed.

The RLA is also calling for a clear agreement about the responsibilities of councils and fire services for fire safety standards in communal areas in blocks of flats to address the current inconsistency of approach from local authorities across the country.

Richard Jones, the Policy Consultant to the RLA, says: “Grenfell Tower was a tragedy that must never be repeated. It is vital that the Government’s review looks at fire and building safety issues in the round, and not just tower blocks.

“Ever growing volumes of complex and sometimes difficult to understand guidance causes confusion among tenants, landlords, local authorities and the fire services.”

He insists: “We need much clearer guidance, in line with current standards, to develop a strengthened risk assessment regime, with much more transparent lines of accountability about who is responsible for enforcing what. Standards for high-rise blocks clearly need to be revisited and changed.

“We owe it to the memory of all those who lost their lives, and their loved ones, to get this right once and for all.”

We have a comprehensive and complete guide to fire safety to help you, as a landlord, understand and comply with current fire safety regulations: https://landlordnews.co.uk/guides/a-landlords-guide-to-fire-safety/

Landlords – Don’t Risk Your Livelihood; Make Sure Your Letting Agency is Registered!

Published On: April 6, 2018 at 9:56 am

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Categories: Landlord News

In light of TV documentary ‘Bad Tenants, Rogue Landlords’ which was shown on Channel 5 last night, we wanted to stress the importance of landlords using a registered letting agency.

Just as you would ask for references from a potential tenant, you should be just as wary of putting your trust in a letting agency without knowing more about their trading background.

Being registered with a professional body such as the UK Association of Letting Agents, or ARLA Propertymark, provides a reference of sorts for letting agencies. It shows that a reputable organisation is happy to say that they are a trustworthy company, familiar with the rules and regulations of the lettings industry.

Understandably, there is never a guarantee that absolutely nothing will go wrong with whoever you decide to go with, as it can be circumstantial and matters can conflict with personal opinions. However, there is no reason to go with an unregistered letting agency, when there are many known names that have registered.

It also became a legal requirement in 2014 for all letting agents to register with a redress scheme. This is to ensure that tenants have a clear way to raise any serious issues with their letting agent and get them resolves quickly and effectively.

Any letting agent not signed up to a regress scheme will face a fine of up to £5,000.

The episode of ‘Bad Tenants, Rogue Landlords’ focused on English teacher Muhammad Rahman, who was left in extreme financial difficulties after falling prey to tenants refusing to pay their rent, and a rogue letting agency who are no longer trading. It has highlighted the point that as soon as you find yourself in such a situation, you should seek professional help.

Paul Shamplina, the founder of Landlord Action, an eviction service for landlords and agents, has said: “Mr Rahman fell victim not just to a rogue letting agent, but also a rogue tenant, which made this case particularly distressing. With mounting rent arrears and a mortgage to pay, Muhammad and his family were forced to live in cramped conditions in one small room at his brother’s house along with his brother’s family, including four children, and take a second job to cover the costs.”

He continued: “This was part of an organised sub-letting gang, and when we discovered the sub-tenants hidden in a room upstairs during the High Court eviction, the atmosphere became particularly hostile. The police were called and the matter was dealt with, but I hope this scene acts as a reminder to landlords watching the show not to try and deal with situations like this without seeking professional help.”

Seven in Ten Tenants Think that Deposit-Free Renting is a Good Idea

Published On: April 6, 2018 at 9:13 am

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Categories: Tenant News

Seven in ten prospective tenants registered with MovingSoon.co.uk believe that deposit-free renting is a good idea.

The survey, conducted by the website, which advertises affordable housing for tenants, found that many potential renters would like to see private landlords adopt deposit-free renting schemes in order to make renting more affordable.

With figures released by the Deposit Protection Scheme (The DPS) revealing that the average deposit for a rental property in 2017 was £967, many prospective tenants simply cannot afford the upfront costs associated with renting a private property.

However, the study also found that an alternative to a considerable deposit, such as an insurance policy, would make the private rental sector far more attractive.

The cost of the one-off insurance policy payment can often be paid by the tenant, landlord or letting agent.

There are currently several schemes available that allow the tenant to move into their next private rental home without having to fork out another month’s rent (or more) as a deposit.

Paul Malone, the Head of MovingSoon.co.uk, comments on the findings: “Many home seekers remain frozen out of private renting due to large deposits.

“Prospective tenants registered with our site strongly like the concept of an insurance scheme, but nearly half of them are undecided if the schemes are better in reality than paying a substantial deposit.”

He adds: “Tenants have far more confidence in housing associations, so private landlords need to build trust if they want to compete with social housing.”

Landlords, have you considered introducing an alternative to hefty deposits for your tenants?

At present, MPs are debating whether a deposit cap of five weeks’ rent could be beneficial to tenants. However, there are claims that this plan could result in more rent cheats, whereby tenants do not pay their final month’s rent. Are you concerned?

Second Phase of Mortgage Interest Tax Relief Changes Comes in Today

Published On: April 6, 2018 at 8:09 am

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Categories: Landlord News

The second phase of the Government’s mortgage interest tax relief changes for buy-to-let landlords comes into force today. 2017/18 marked the start of the changes linked to the restriction of tax relief on landlords’ finance costs, while 6th April this year sees the second phase of the reduction.

 

Who do the changes affect? 

The restrictions to mortgage interest tax relief apply to all landlords of residential properties falling under the individual, partnerships or trust structures. If you are based in the UK with a buy-to-let property abroad, or live outside of the UK but let a property here, the change also applies to you.

Who won’t be affected?

It’s good news for landlords with properties in a company structure, as the changes do not apply to those investors. Any furnished holiday let owners, development businesses or anyone dealing in land and property will also be exempt.

What the changes mean 

Second Phase of Mortgage Interest Tax Relief Changes Comes in Today

Second Phase of Mortgage Interest Tax Relief Changes Comes in Today

The Government’s tax changes are more far-reaching than many people expect, so make sure that you’re not caught unaware. Covering both interest and tax relief, the following finance costs are affected by the restriction:

  • Mortgage interest on buy-to-let properties
  • Interest on loans for furnishings or general expenses
  • Tax relief for the arrangement of loans and any other associated fees
  • Any costs linked to alternative finance arrangements

As of 6th April 2018, the percentage of interest that landlords can take off their property-based income will reduce from 75% to 50%. This means that the amount of tax that you will pay at both the basic and higher rate will be less, but the overall amount of tax you will pay is likely to increase.

This may sound contradictory, which is because the remaining 50% will only be eligible for basic rate tax relief and could push you into the higher Income Tax bracket.

How to work out tax relief 

To clarify, only 50% of interest can be taken off your rental income. Of the remaining pot, the basic rate of 20% can be claimed as a credit against your tax bill.

However, there are certain stipulations on this credit amount, meaning that, if the credit amount is more than (a) the tax on your rental income, or (b) your savings income, including dividends, the credit would be capped at whichever is the lowest of these two amounts. But do remember that the excess can be carried forward and can be used in a later year if needed.

The solution

Unfortunately, there is no easy way to avoid the tax changes, but one option would be to change your lettings business into a company structure. The advantage of this would be that, not only could you avoid finance cost restrictions, but you could also shield at least some of your rental profits from Income Tax of up to 45%.

You would, however, need to foot the bill for Corporation Tax, but, at the current rate of 19%, this is much more friendly on the purse strings. If you do go down this route, it’s important to remember that it could lead to other tax charges, so do take professional finance advice.

Another way to avoid the tax changes would be to reduce the interest you are paying out, for example, by accessing any savings you have to lessen the amount that is borrowed. The savings over time, based on paying less interest, will certainly be more than what the money would make in a savings account. If this isn’t an option for you, an offset mortgage could be another answer.

Although the second phase of the mortgage interest tax relief changes could cause some problems for you, try to see this as a good opportunity to refine and take stock of your lettings business, before the changes are fully implemented in 2020. This could help to lessen the financial impact of this round of the changes.