News » Landlords

Squatting to become a criminal offence

mark — Fri, 11 May 2012 09:44:40 +0000

Squatting is currently only a civil offence but as of September this year new legislation will make it a criminal offence to occupy someone’s Home/property without consent. The Liberal Democrat peer Baroness Miller had sought to introduce amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill that would have meant squatting is not illegal if a property has been empty for 12 months or more and is not subject to a current planning application.
Homeless charity Crisis’s recently reported that 39 per cent of single homeless people have squatted and the charity campaigned against the proposals, saying: “Squatters already face a range of legal sanctions and, with homelessness on the rise, we would not want to see them faced with risking being criminalised simply for trying to put a roof over their head.”
The Landlord Syndicate, a network of companies providing support for landlords, welcomed the news. Syndicate member Paul Shamplina who has fought for this law and is also founder of Landlord Action said: “Squatting cases have been on the rise for some time now, many by organised gangs whom have travelled thousands of miles to engage in squatting knowing they will be protected by the law. It was only when some high profile cases hit the headlines that people sat up and took notice of the growing injustice on homeowners.”
Squatters will now face up to a £5,000 fine and a six month prison sentence if they take up residence in another person’s property.
“Enforcing a law does not mean that the activity of squatting will be eradicated, it just means there are tougher measures to deal with it which should prevent landlords and homeowners having to enter into lengthy and expensive legal battles” said Paul. “That means landlords still need to avoid void periods and ensure they invest in good preventative security measures.”

source: Alex Johnson-Independent research, Paul Shamplina-Landlord Syndicate

Tax Changes Affecting Landlords

mark — Wed, 04 Apr 2012 09:08:03 +0000

It would appear that changes in Tax allowances for residential landlords will be subject to some significant changes from April 2013.
To date, tax legislation provides for a deduction for the cost of renewing “trade tools”. Over time this definition, which was originally intended to be specific, has been extended by concession to include replacement of items of furniture by residential landlords. If for example, a cooker is purchased when fitting out a property for residential letting, the initial capital purchase cannot be claimed for; however, when the cooker needs replacing the cost of the replacement can be claimed as a renewal. Any sales proceeds from the old cooker are deducted, and the amount claimed must be adjusted to reflect any element of improvement of the new cooker over the old one.
Under current legislation a landlord of a furnished property has a choice: he can claim the renewals allowance, or he can claim a “wear and tear” allowance calculated as 10% of the rent he receives. In some cases the 10% wear and tear allowance works out to be the better option, but in other cases the renewals allowance provides the more tax advantageous route.
From April 2013 the only relief available to residential landlords will be the 10% wear and tear allowance, and this can only be claimed for fully furnished properties, so landlords of unfurnished residential accommodation will not be able to claim any relief at all for replacing such items as cookers, sinks, baths, and so on.
In terms of advancing planning those landlords who are currently using the renewals allowance should consider whether they should bring forward the replacement of any items they are due to replace in the next few years to replace them before April 2013, in order to claim the renewals allowance while they still can.
If you believe this change will impact on your tax allowances you might need to discuss this further with your accountant.

Savills and Rightmove Agree with Us!

mark — Tue, 03 Apr 2012 08:57:26 +0000

It would appear that Savills and Rightmove have now reached the same conclusions as we did last month on the future of the PRS over the next few years. They have backed up our analysis with a few more figures, but it is heartening to know we are on the right track with predicting the future!
According to their latest briefing, the number of people who are living in rented accommodation has nearly doubled since 2002. Furthermore the indicators are that by 2016 we will need more than a million additional rental properties to meet demand.
Savills are also predicting that only a quarter of the £2bn required to fund this growth will come from the buy to let sector of the market, the majority of the funding is likely to come from institutional investors (see our article on Build to Let)
Lucian Cook, director of Savills residential research, said: “Meeting the growing demand for private renting and the changing profile of tenant demand are perhaps the greatest challenges facing both the housing industry and policy makers.
“The dynamics of supply and demand make a great case for investment in this sector, and rising rents and lower capital values have begun to attract private investors back into the market. Investment returns relative to other asset classes will dictate the pace of investor entry to this sector.”
Lucian is absolutely right; however, the government have missed a trick in the last budget by not offering some Stamp Duty concessions to institutional investors buying New Build to Let. At College and County, we think that there is a need for some such incentive to get the ball rolling and trigger renewed activity in the development and construction sector.

Oxford landlords Facebook page

mark — Mon, 02 Apr 2012 13:05:47 +0000

If you are looking to diversify or expand your property portfolio or just have an interest in the Oxford buy-to-let market, the Oxford Landlords Facebook page offers some great advice and highlights some very real investment opportunities in Oxford. Each investment option comes with a full break down of likely costs to be incurred and the resulting achievable yield.
I have quoted a short extract from the pages introduction.

“I encourage you to use this page to ask questions about the Oxford market I have been a landlord in Oxford for many years and have a very good knowledge of the hurdles that now face us including HMO licencing, C3-C4 planning issues and Deposit disputes feel free to test me…
I love being a landlord and I’m keen to share my knowledge as much as i can. I think this page could become a really useful place of discussion and hopefully i may help you purchase your first buy-to-let property or expand your portfolio.”

Just Click on this Link Oxford Landlords and don’t forget to ‘like’ the page

UK Rental Market Forecast drawn together from Savills, Knight Frank and Jones Lang LaSalle 2012 reports

David — Thu, 29 Mar 2012 09:49:08 +0000

The private rented sector is growing in the UK. More households will be renting for longer as the social and demographic profile of renters changes. (Savills) As renting becomes a way of life it will increasingly be seen as a viable option to purchasing and hopefully lose the stigma attached.

Rental levels vary dramatically across the UK and Affordability relative to income also varies dramatically. In London rent for a two bedroom property is equal to 53% of the average single person’s salary. In the North East it is 25%. These affordability constraints create a natural ‘ceiling’ to rents (Knight Frank). There is evidence that many tenants are bumping against these ceilings at present, with several consecutive monthly declines in average UK rents despite Research from Rightmove indicating 63% of current tenants expect their rent to go up in the next 12 months. Jones Lang LaSalle forecast that this imbalance will lead a slowing in the annual growth of rents this year in the mainstream market. However in the longer term as employment and earnings growth picks up its likely that rental growth will resume.

Currently 200- 250,000 homes need to be built each year to meet demand in the UK, but house building has fallen to the lowest levels since World War II, with fewer than 110,000 homes completed in 2011. This lack of building is helping by putting upward pressure on rents (Knight Frank). Savills believe that £200 billion of investment is needed over the next five years to meet demand for private sector housing, but restricted levels of buy-to-let lending raise issues over the ability to meet this demand (Savills). Increasingly larger institutional investment will become critical to meet this demand, and to help facilitate this, the planning system may have to look at private rented sector housing as interchangeable with affordable housing (Savills).

We have previously blogged on the new Build-to-let trend and this is likely to be the main entry for institutional investment into the private rental sector. The 2012 budget has done its part to help encourage this type of investment with changes to the stamp duty tax on buying multiple properties and the Chancellors promises to look at tax treatment of income received by real estate investment trusts.

So all seems to be going in the right direction, Oxfords rents continue to stay strong and have so far outperformed national trends; however it would be foolish to think that these ceilings to rents do not apply and it’s important to set rents carefully to ensure that safe tenants that meet affordability requirement can be found. It is likely that the new Build-To-Let investment will start to separate the market as applicants have more choice, this is likely to raise the standard of private rented accommodation and a help address affordability issues but landlords need to ensure their houses are finished to a good standard to compete with the modern purpose built accommodation that will increasingly be on offer.

http://www.savills.co.uk/promotions/research.aspx?document=http://pdf.euro.savills.co.uk/landp-b2b/rental-britain.pdf?response=no

http://resources.knightfrank.com/getnewsresource.ashx?id=239d7069-cbc5-4452-952a-43de24673a87&type=1

http://www.kingsturge.co.uk/en-GB/sitecore/content/Global/Residential/research/residential-market-forecasts-2011.aspx

Build To Let

mark — Thu, 23 Feb 2012 13:01:53 +0000

Developers in Oxford who have been dormant for some time in the building of residential stock, might be interested in a recent report from Grainger (a big file so be patient while connecting to the link I think it makes some very interesting reading) Graingerplc_Rental_Review_2012 who are advocating tax and planning concessions for Build to Rent schemes.

It would appear that the Government are looking into viability of such a scheme in the light of some research commissioned by the largest Landlord in the Private Rental Sector which is indicating a significant shift in public attitudes to long term renting.

There has been a long running dialogue on how best to introduce further institutional investment in to the Private Rental Sector, to bring greater security and diversity to the funding and to reduce the volatility in the market place. This might be an attractive mechanism.

Schroders, a large international asset management company who have experience in mainland Europe, have recently reported an expansion of their property assets by £600m. They are well placed to act as a bridge between developers and investors were such a scheme to come to fruition.

William Hill, Head of Schroder Property, who incidentally sat on the group responsible for Grainger’s recent report, comments: “Schroders manages a number of investment trusts and adding a property investment trust to the range has been a business objective for some time. We believe the property investment trust sector has the potential to grow substantially in a savings market that is demanding both yield and liquidity.”

Let us hope that Mr Hill is not as prejudiced against the Residential sector as so many of his counterparts in other asset management companies.

It may be that these two significant players have hatched a plan that might have merit because the timing is so appropriate.

Trends in Rents and Yield

Mark Crampton Smith — Tue, 21 Feb 2012 15:31:17 +0000

There is some evidence that rents are continuing to rise against a background of shortage of supply and increased financial hardship being experienced by tenants.

LSL are claiming that this is the first time since they have been monitoring activity in the PRS that there has been a rent increase in January, which has traditionally been a relatively quiet month. LSL in their most recent Buy to Let index, are claiming that 10.7% of all rent was either late or unpaid in January. This is a slight increase on December, and brings the total amount of unpaid rent to over £300m.

Landlords are responding by taking out rent insurance, and one of the providers, Let Alliance, are claiming that they are now providing rent guarantees to nearly 50% of all tenancies for which they provide references. The rent guarantee insurance costs £60.00 per year irrespective of the rent. Apparently there is no excess to pay.

This is an interesting development; our rent arrears have fallen in the last two months, and currently are at less than 2.7% at the start of a month and down to less than 1% by the end of the month. None-the-less, we have to chase harder to manage arrears than we used to, and we have taken the view that we need to be even more careful about whom we accept for tenancies. References from both previous landlords and employers are followed up with Telephone conversations if there is any doubt.

If any client is anxious about arrears and would like to discuss strategies for protection, please do not hesitate to get in touch. If you would like us to arrange rent protection insurance, please call.

Loans, Yields and More Numbers.

mark — Thu, 16 Feb 2012 16:54:17 +0000

It is the season for mortgage data release. Every quarter, various bodies vie to try and generate headline grabbing nuggets of information that will win them publicity through publishing in the commentators journals. How are we to make sense of the information, often conflicting, that is coming at us from so many quarters? Here is a snapshot of some of the numbers put out in recent weeks………. I hope they will help!
According to the Council of Mortgage Lenders, the numbers of properties bought with buy-to-let mortgages increased by more than 80,000 in 2011. This has helped to add to the total number of stock in the Private Rented Sector, now estimated at more than 16% of the total.
Paragon have pointed out that almost a quarter of all buy-to-let mortgages in the last period of 2011 went to first time landlords, and if Knight Frank can be believed, with average annual yields at 5.4% last year, and the FTSE All-Share index only yielding of 3.8%, it is hardly surprising that there are new players entering the market.
Savills on the other hand are keen to point out that equity levels are increasing in the property market in general. Since 2001 mortgage levels have dropped from 60% to less than 46% in 2011. This may in part be driven by the extraordinary Prime Central London market where values have increased by over 11% in the last twelve months, largely because of the increase in Far Eastern money looking for a safe haven at a time of some turbulence in world markets. Most of the overseas acquisitions have been cash purchases and will have skewed the loan to value statistics.
It has been reported that in Greenwich yields are over 10% and in other hotspots in East London yields are over 9% (could this be an Olympic effect?) Here in Oxford, in recent years there have been bullish investors happy to purchase at 4% gross yield; it appears that they have been principally made up of parents buying property whilst their son or daughter is studying, and who retain the property after their child has finished. It will be interesting to see if the changes in planning locally will return the local market to a more realistic yield level, or whether the shortage of HMO stock will increase their capital value and therefore negatively impact on yield.
So back to the mortgage data………. During the fourth quarter of 2011, a total of 34,800 buy-to-let mortgages (of which 15,600 were remortgages) were advanced, with a total value of £4 billion. This was virtually identical to the volume of business in the third quarter (34,300 loans worth £4 billion) but up on the fourth quarter of 2010 (26,300 loans worth £2.9 billion). On the face of it these figures look like green shoots of recovery but compared with the height of the market in the third quarter of 2007, when quarterly lending totalled over 93,000 loans worth £12.7 billion, the buy-to-let market continues to operate at relatively subdued levels, but it is recovering from its low point in 2009.
Rental demand in Oxford remains at the highest in the last ten years. But rent increases across our portfolio are only staying in touch with inflation. There have been some increases over 10% in Prime Central North Oxford, where there is significant shortage of supply, but most of the city has taken increases of between 4 and 5%.
We have noticed that there is less mobility in the professional market with renewal rates running at between 80 and 90% month on month in the last six months.
So what can be deduced form all of this? The only thing that I can be certain of is that every time I think that I know the Oxford market, something comes along that reminds me that I never will!

Is Oxford’s Housing Policy On The Rocks?

mark — Tue, 14 Feb 2012 09:56:09 +0000

It would appear that Oxford City Council is still insisting on cutting off our noses to spite everybody’s face.
The latest threat to force the universities to reduce the number of students exercising their right to choose to “live out” might mean that new teaching space could remain un-used. This, together with the “land tax” that is also proposed, may serve to create a volatile situation in what has traditionally been a market that has been robust over recent decades; surviving down turns relatively unscathed.
There is concern expressed in some quarters that the “interference” in the free market might have significant and unforeseen consequences. Developers, who already cannot afford to build residential housing within the city limits because of a requirement to ensure 50% is designated for social housing, are now being dissuaded from building purpose built student accommodation by a proposed £140 levy per sq. meter as a condition of planning.
This would appear to be another example of a patch to fix a patch approach to local policy. The Article 4 directive, which will be determined later this month, will provide a mechanism by which the city can control the movement of property from C3 use (single family occupation) to C4 usage (House of Multiple Occupation). Whilst this appears to be a knee- jerk reaction to the “studentification” of parts of Oxford, it belies what some would perceive as a far more sinister set of possibilities. Firstly, the impact on property values; in parts of Oxford where there are high numbers of Houses of Multiple Occupation, the value of property can be related to rental yield. If legitimate landlords can no longer convert to HMO usage, they will not purchase, and vendors will find themselves in a restricted market place, especially if families really do not want to live in area of high student population. I can imagine that there will be some dissent from residents if they find that their lovely family house is now not worth as much as the shabby HMO next door? This leads on to the second unforeseen possibility, this policy, together with the additional licensing of HMOs, risks forcing the Private Rental sector into the hands of the less scrupulous landlords; it is only these who will flout the restrictions and buy family occupied units and let them as HMOs whilst paying the council tax and without formal tenancy agreements in order that they can avoid detection.
There is another, as yet unexplored legal implication of this set of policies; it may well be discriminatory legislation to say that a group of young professional sharers cannot live in a property, but a family with three teenage children can. Is it imaginable that Oxford City Council would agree to restrcit the rights of the number of any other group people to live in a street? Can you imagine the outcry if they said only one house in every hundred meters of street frontage cvan be occupied by people who have retired? If there are issues around Human Rights, at a time when central government policy in relation to housing benefit eligibility for the single under 35yr old, will put additional strain on HMO spaces, and the local authority is choosing to further restrict supply, it will make interesting work for some hungry young lawyer.

No matter what the outcome of these changes, some-one will have to pay; it is perceived as dangerous by many to interfere in what has always been a free market and one thing is for sure, rent inflation is almost inevitable as a product of this set of policies. Lawyers too, may be rubbing their hands with glee.

New Property Theft Scam

Mark Crampton Smith — Fri, 10 Feb 2012 13:16:47 +0000

The Metropolitan Police have reported on a new and complex property theft scam which is targeted at landlords who use agents. The starting point is the “identity theft” of a landlord. The fraudsters then email other letting agents in a bid to con them into believing they own the property. Through several emails, the fraudsters build up a relationship with the letting agency which, crucially, also has a sales division. After a short period, they inform the agent that they wish to sell the property or want to raise a mortgage on it.
Agents and landlords are being urged to tighten their security.
In a clear acknowlegement of the growing problem, the Land Registry has dropped it’s charge to Landlords who wish to up-date and tighten their ownership details.

The Land Registry has had to make a number of settlement payments to victims of property theft in recent years. Sadly, this problem is on-going despite efforts to raise awareness, including a 2011 Land Registry report which revealed that, since 2006, £26million compensation had been paid. In a move to close the stable door before too many horses have bolted, they have agreed that absent owners, landlords, can increase security on their property without incurring further costs.

http://www1.landregistry.gov.uk/property-information/property-fraud

From their website………… “We have launched an additional security measure aimed at owners who do not live at the registered property. This will initially be trialled for six months. Under this measure you or your conveyancer can make a request using our Form RQ asking the registrar to enter a restriction, free of charge.”

The link above will give further information and has all the requisite forms. At College and County, we strongly advise you to take up this option.