The Association of Independent Inventory Clerks (AIIC) says that their inventory clerk members are frequently receiving queries about the slew of new letting industry regulations brought in over the last 18 months, and in particular they say, regarding carbon monoxide, smoke alarms, safety requirements for blinds and curtains and other health and safety rules.
AIIC has accused both landlords and letting agents of “failing to get a grip” on the new regulations, pointing to the widespread unawareness of the rules by individual landlords, and a severe lack of training by some firms of letting agents. The recent laws concerning window blinds, smoke detectors and carbon dioxide alarms are still a mystery to many in the industry. AIIC has said: “A worryingly large number of letting agents and landlords are still completely unaware of some important new regulations according to our members who are being asked to explain health and safety rules to clients.
The recent laws concerning window blinds, smoke detectors and carbon dioxide alarms are still a mystery to many in the industry. “All AIIC members were informed of the changes several months before they became part of lettings law, every member was sent updates as they became available and free downloadable information is available to them on our website. As the UK’s longest established membership organisation for Independent Inventory Clerks we take standards of working practices very seriously. There is no excuse for anyone in our industry to ignore regulations; this could be dangerous and very costly in the long run.” Smoke alarms and carbon monoxide alarms became mandatory from the 1st October 2015 in England and Wales – smoke alarms on each level of a rental property and CO alarms where there is a solid fuel appliance.
The AIIC says that the agent and landlord queries most… commonly relate to the location and the types of alarm, as well as when they need to be tested. In addition, queries from letting agents and landlords relating to safety requirements for blinds and curtains are quite common. This follows the introduction by the British Standards Institution in 2014 of new safety requirements relating to child safety risks resulting from blinds and curtains. Any curtain or blind which has cords, strings or chains must have breakaway connectors and cord and chain safety retainers. The cords and chains must also be maintained at a minimum 1.5 metres from floor level. In addition, new blinds or curtain tracks fitted by a professional must pass the new standard, meeting the necessary safety requirements and test methods. If an accident involving a non-compliant blind or curtain track takes place in a rental property, the landlord could face prosecution from trading standards.
Read more at: http://www.landlordzone.co.uk/news/landlords-worryingly-unaware-of-new-regulations#
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Chancellor George Osborne’s Autumn Statement was full of surprises. One of the biggest was reserved for Britain’s army of buy-to-let landlords, who are facing tax hikes that could seriously curtail their rental profits. Here’s what you need to know.
What has changed?
“Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy,” Osborne said in his Autumn Statement, before unveiling two key tax changes that could make buying property to rent out a lot less appealing.
Firstly, he is changing the rules on stamp duty. At present if you buy a residential home you pay stamp duty at a progressively-applied rate that depends on the value of the property. You pay nothing on the first £125,000, then at each of four value thresholds a higher rate of tax is applied on the portion of the price above that level, up to 12 per cent on anything above £1.5m.
From April 2016 anyone buying a second home or buy-to-let property will pay a 3 per cent surcharge on their stamp duty bill.
Property value Standard rate Buy-to-let/second home rate from April 2016
Up to £125,000 0% 3%
£125,000 – £250,000 2% 5%
£250,000 – £925,000 5% 8%
£925,000 – £1.5m 10% 13%
Over £1.5m 12% 15%
What other changes have there been?
Landlords are also facing a change to the way they pay tax when they sell their buy-to-let properties. At present capital gains tax isn’t due until the end of the tax year. But from April 2019 landlords will have to pay their capital gains bill within 30 days of selling a property.
“Not only will prospective landlords have to pay far more than conventional residential buyers, they also face much heavier taxes on their profits,” says Patrick Collinson in The Guardian. This is because, as announced at the previous Budget in July, the maximum tax relief available to landlords will drop from 45 per cent to 20 per cent (see below update for details).
Figures compiled by Guardian Money and Old Mutual Wealth show that tax bills for landlords buying and renting in 2017 will be triple what they are today.
Why the changes?
“The chancellor may have been tempted to tax buy-to-let more heavily as his last tax raid had little – if any – impact on the number of investors piling in,” says Collinson.
The Council of Mortgage Lenders revealed in early November that the number of buy-to-let mortgages granted had jumped by 36 per cent in the previous 12 months. In contrast lending to first-time buyers was up just 10 per cent.
“This week’s rise in stamp duty could stop this growth in its tracks,” adds Collinson.
Are landlords taking the news well?
No. Many see this as the death of the buy-to-let boom that has been occurring in this country for the past decade.
This is “catastrophic news for the private rental sector,” says David Cox, head of the Association of Residential Letting Agents in the Daily Mail. “Increasing tax for landlords will increase rents and reduce property standards for tenants.”
“The chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent,” Richard Lambert, chief executive of the National Landlords Association told the BBC. “If it’s the chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so.”
Is there going to be any fallout?
In short, yes. A survey by the the Residential Landlords Association quoted in The Times predicts that as many as one in five of the one million private landlords in the UK could sell their rental properties. “With each landlord owning an average of 2.5 homes, that would bring half a million properties on to the market.”
This could actually be a positive for those concerned about affordability, as a big influx of properties could reverse the current undersupply dynamic and weigh down house prices. On the flip side, a separate survey from the National Landlords Association suggests the changes to tax relief “will increase rents by between £29 and £113 a month”, hitting many low-income families.
The Daily Mail notes that two private landlords, Chris Cooper and Steve Bolton, have raised £50,000 in just nine days to fund an application for a judicial review against some of the changes. In particular, they are looking to challenge the change in the law that means mortgage interest is not discounted from rental income before the marginal tax rate is calculated, which would leave more paying higher rate taxes (see below update).
Is anyone pleased?
Groups that represent people who are being priced out of buying property – including an increasingly number of younger households subbed ‘generation rent’ – have responded well to the tax changes on buy-to-let.
“We welcome the continued tax clampdown…it is good to see action against investors who price out aspiring first-time buyers,” says Duncan Stott or PricedOut, which campaigns for affordable house prices, in the Guardian.
And is this the end of the intervention?
No. The Financial Times reports that the chancellor could grant new powers to the Bank of England to impose curbs on the levels at which banks and other lenders can offer loans to prospective private landlords.
At the moment buy-to-let is relatively unregulated compared to residential buying and currently regulators only have powers to ‘recommend’ changes to lending criteria. Central bankers have expressed concern that the buy-to-let boom could prompt a downward spiral in property prices if it was to burst abruptly.
Buy-to-let landlords and people buying second homes will soon have to pay more in stamp duty, the chancellor has announced.
From April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band.
George Osborne said the new surcharge would raise £1bn extra for the Treasury by 2021.
Landlords reacted angrily to the change, saying it would “choke off” investment in rented properties.
Other changes announced by the chancellor included an extended Help to Buy scheme in London, and more money for the Starter Homes programme.
The stamp duty surcharge will lift each band by 3%. That means that for properties worth between £125,000 and £250,000, where the stamp duty is 2%, buy-to-let landlords will pay 5%.
For the average buy-to-let purchase of £184,000, that means they will pay an extra £5,520 from April 2016.
Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges.
Stamp Duty Rates (on purchases)
Property value Standard rate Buy-to-let/second home rate (April 2016)
Up to £125,000 0% 3%
£125 – £250,000 2% 5%
£250 – £925,000 5% 8%
£925 – £1.5m 10% 13%
over £1.5m 12% 15%
Buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules.
From April 2019, they will have to pay any CGT due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.
Landlords are already due to get a lower rate of tax relief on mortgage payments.
In his summer Budget, the chancellor said that landlords would only receive the basic rate of tax relief – 20% – on mortgage payments, a change being phased in from 2017.
Responding to the latest changes, Richard Lambert, chief executive of the National Landlords Association said: “The chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent.
“If it’s the chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so”.
Up to £60m of the money raised from the stamp duty surcharge will go to help home-buyers in England in places where holiday homes have forced up local prices.
Help to Buy
The Help to Buy (equity loan) scheme in England will also be extended to 2021, one year longer than planned.
An extension to the scheme in London will see buyers who can find a 5% deposit given a loan worth up to 40% of the property.
The loan will be interest free for five years.
Elsewhere the existing maximum loan is for 20% of the property’s value.
In total, the government will put an extra £6.9bn into housing.
This includes an extra £2.3bn in loans for the government’s starter homes programme, and £4bn lent to housing associations and local authorities to build more homes for shared ownership.
Another £200m will be used to build homes for rent, which will allow tenants to save for a deposit.
There will also be a pilot scheme to trial the government’s Right to Buy programme for housing association tenants.
Five housing associations will take part, to help design the final scheme.
Compulsory checks by landlords on the immigration status of new tenants are to be introduced across the country from February, Home Office ministers have announced.
The decision follows an official evaluation of the first six months of a pilot scheme in the West Midlands, which concluded that there were “no major differences” for white British and black and other minority ethnic tenants in renting accommodation.
The right to rent scheme, which is being introduced as part of the government’s drive to “create a hostile environment for illegal migrants”, has been attacked by the shadow home secretary, Andy Burnham, as a modern-day equivalent of the “no dogs, no Irish, no blacks” signs seen in boarding house windows 50 years ago.
Research by the Joint Council for the Welfare of Immigrants found some landlords were reluctant to rent out properties to people with foreign-sounding names and to those without a British passport.
The report says 109 people who were in Britain illegally were identified as a result of the compulsory checks during the six-month pilot. Sixty-three of these people were previously unknown to the Home Office. Only five penalty notices were issued to landlords for failing to enforce the checks.
A “mystery shopper” exercise carried out for the official evaluation found that potential tenants who were black or from other minority ethnic groups were asked to provide more information – such as references and how long they had lived in the area – than potential white tenants.
The official report quotes the experience of one Asian “shopper” who phoned a landlord in response to a card advert: “The landlord said that if I was under that scheme he was not going to bother because he had a local person who wanted the property and it was much easier to rent to them.”
A second Asian shopper who went to an independent letting agent reported: “I was told they needed to look at what they had that was suitable for me and they needed to check with the landlords on whether the landlord wanted to do the right to rent check because it cost extra.”
The evaluation report says that while such responses appeared to imply an element of discrimination, they amounted to only a small number of instances, and the vast majority of comments from the mystery shoppers did not allude to any discrimination.
Crisis, the homelessness charity, said it was alarmed by evidence in the report that some people had become homeless as a result of the checks. Its spokesman Matt Downie said: “Crisis has already raised serious concerns that requiring landlords to check the immigration status of renters could make it even harder for homeless people to find a place to live, and this report shows that our fears are well founded.
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“It is deeply troubling that in the pilot area, six of the local charities surveyed said that people they represent had become homeless as a result of the scheme, while seven indicated that people with the right to rent were struggling to find accommodation.”
The immigration minister, James Brokenshire, said: “Right to rent checks are quick and simple, and many responsible landlords already do them as a matter of routine. We are providing landlords in England with all the advice and support they need before the checks go live on 1 February 2016.
“The new rules are part of the Immigration Act 2014 which introduced measures to reform the immigration system. Right to rent is about deterring those who are illegally resident from remaining in the UK. Those with a legitimate right to be here will be able to prove this easily and will not be adversely affected.”
Andy Burnham MP, Labour’s shadow home secretary, said: “We now know why the government tried to conceal this report before MPs voted on the Immigration Bill. It threatens to make Britain a more hostile place for anybody with a foreign-sounding name or accent. Now that the government has evidence that Right to Rent led to some landlords opting for tenants with ‘local accents’, the home secretary must find convincing answers to prevent discrimination or drop her plans. If she fails, Theresa May risks entrenching casual discrimination in the housing market, which has no place in 21st century Britain.”
A survey of 500 landlords suggest the vast majority want to avoid contact with tenants and instead want letting agents to handle property management and complaints.
The results of the survey, conducted last month, show that over 85 per cent of landlords don’t want to deal directly with tenants and almost 90 per cent are unhappy about tenants calling or emailing them directly with problems.
“Many landlords work either full or part-time and need the support of an agent to help them with managing the relationship with the tenant” claims Jane Morris, managing director of PropertyLetByUs, the online letting agency which commissioned the research.
“We know from our research that 66 per cent of landlords find managing their properties more stressful than their full, or part time jobs, and dealing with tenant complaints is a top cause of stress.
“Landlords are under a huge amount of pressure with mounting legislative and tax changes. Agents can be a big help for landlords, offering a range of services that help reduce their workload and ensure they are fully compliant with legislation” she says.
Landlords who rent properties to illegal immigrants will face up to five years in prison under a crackdown to be announced by the Government on 3 August.
The move is part a drive to make it harder for migrants to live in the UK when they have no right to be in the country. It is also aimed at landlords who house immigrants in unsafe and overcrowded properties. A blacklist of “rogue landlords” and letting agents who are repeat offenders will be created and they will be banned.
Under a law passed last year, landlords are required to check the residency status of tenants before offering them an agreement. If they fail to do so, face a civil penalty of up to £3,000 a night per adult resident. The scheme was first introduced in the West Midlands and will now be extended throughout England.
A criminal offence for landlords and agents who do not carry out the “right to rent” test or remove illegal immigrants will be included in the Immigration Bill which will be debated in Parliament this autumn. Repeat offenders could be fined, jailed for five years and have rent payments confiscated under the Proceeds of Crime Act.
The new law, which will apply in England only, will enable landlords to evict illegal immigrants more quickly. Tenancies could be ended immediately when a person’s leave to remain in the country expires – in some cases without a court order.
Greg Clark, the Communities Secretary, said: “We are determined to crack down on rogue landlords who make money out of illegal immigration – exploiting vulnerable people and undermining our immigration system. In future, landlords will be required to ensure that the people they rent their properties to are legally entitled to be in the country. We will also require them to meet their basic responsibilities as landlords, cracking down on those who rent out dangerous, dirty and overcrowded properties.”
However, the National Landlords Association has warned previously that immigration checks by landlords would drive vulnerable foreigners into the arms of an “underclass of rogue operators” as property owners would be tempted to rent only to white British people.
The UK Association of Letting Agents has said its members already carry out such checks every day but believes that it is not appropriate to make housing professionals responsible for policing the country’s borders. It said the checks could restrict access to housing to people from other countries.
The wealth controlled by Britain’s growing army of buy-to-let investors is about to pass the £1trillion (£1,000 billion) mark, according to banking trade body the Council of Mortgage Lenders.
Its latest snapshot of property wealth found that the total value of residential property was £4.8trillion.
Of that, £1.8trillion belonged to “homeowners” – or, as lenders call them, “owner-occupiers” – while £990bn was in the hands of buy-to-let investors.
In its report the CML said: “The value of the private rented sector was £990 billion in 2014 and, in all likelihood, it will exceed £1,000 billion in 2015.”
It pointed out the figure had grown 70% since the onset of the financial crisis in 2007.
The vast wealth in buy-to-let is all the more astonishing given that landlord loans only became available in the mid-Nineties. They are now the fastest-growing part of the mortgage market with the biggest lenders including Lloyds Banking Group, Nationwide Building Society and Coventry Building Society.
Even so, the scale of buy-to-let investors’ mortgage borrowing relative to their property riches is surprisingly small.
Of the £990bn buy-to-let property universe, property worth £643bn is entirely mortgage-free.
Of the remainder, the average mortgage-to-value is very low, so that in total buy-to-let loans represent just 19pc of the value of their combined property wealth.
http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11622748/Value-of-buy-to-let-properties-about-to-top-1trillion.html By Richard Dyson
The Chancellor has unveiled several measures to benefit savers in this year’s Budget, as low interest rates continue to bring disappointing returns on money stashed away.
One new policy is the “Help to Buy” ISA which is an extension on a current scheme designed to assist first-time buyers as they save up for the deposit on a property.
Here, we answer questions about how the ISA will work, along with the restrictions that are going to be placed on each account.
What is the maximum that a first-time buyer can save per month?
With a “Help to Buy” ISA, an aspiring homeowner can save up to £200 a month.
The Government will then contribute 25% on top of the money deposited, meaning there is a maximum bonus of £50 available for each calendar month.
Can an initial deposit be made?
Yes. A first-time buyer will be allowed to open the ISA with £1,000 – helping them to immediately secure a Government bonus of £250.
What is the total value of the Government’s support over the course of the ISA?
The maximum a first-time buyer will be able to save with this ISA is £12,000.
When combined with the Government bonus of 25%, this rises to £15,000. These accounts also accrue interest like any other ISA, meaning the total amount available could be considerably more.
Can a “Help to Buy” ISA be used for all properties?
No. A first-time buyer cannot use this ISA to purchase a house that they plan to rent out.
Also, the tax-free bonus can only be used for properties worth less than £450,000 in London, or £250,000 elsewhere in the UK.
The cash from the Government is released once the purchase of the home is finalised.
Do first-time buyers have to save the maximum £12,000 to benefit?
No – but they must save at least £1,600 to be eligible under the scheme.
This means they will get at least £400 in financial support from the Government.
Given the restrictions placed on monthly deposits, a first-time buyer would need to be in the scheme for at least four months.
Can first-time buyers still use another ISA?
The “Help to Buy” ISA still falls under the current rules – meaning an account holder cannot have more than one cash ISA per year.
However, if two people are planning to buy a home together, they can have one “Help to Buy” ISA each – meaning they could receive a total of £6,000 in bonuses from the Government.
Additionally, a first-time buyer will still be able to save £1,000 tax-free in a normal savings account under new personal allowance rules.
Is there a limit on how long the account can remain open for?
No. First-time buyers can have as long as they need to save up for their deposit.
When are the “Help to Buy” ISAs going to be launched?
Although the ISAs are only going to be available from this autumn, first-time buyers can begin saving for the £1,000 initial deposit now.
That way, they will benefit from the full Government bonus when banks begin to offer the accounts later this year.
Is the “Help to Buy” ISA a temporary policy?
Yes. First-time buyers have four years to open an account.
Will the policy be enough to help first-time buyers?
Although charities and estate agents have welcomed the policy, some experts have warned rising house prices are the biggest challenge facing aspiring homeowners and young people will not be able to save fast enough to keep up.
There are also concerns the scheme could actually force up property prices further.
A scheme that would force landlords to hold licences has been quashed by the High Court.
The High Court ruled that the judicial review called for by landlord Constantinos Regas challenging Enfield Borough Council’s licensing scheme was to be upheld.
The council’s scheme would have required landlords to hold a £500 five-year licence from the authority for each property they owned.
Non-registration would carry a potential £20,000 fine and a criminal record, with any breach of licence conditions carrying a £5,000 fine.
The scheme was set to commence in April 2015 but a judge found that Enfield Borough Council had not carried out adequate consultation on the scheme.
Mr Regas was initially only granted the right to proceed on the “additional licensing” element of his case, covering all privately rented shared homes in the borough, and not the “selective licensing” that covers privately rented single households.
But Lord Justice Kim Lewison said a challenge to selective licensing is “arguable” and could be added to the existing judicial review.
Issuing judgement today, Judge McKenna found that Enfield Council had failed to consult the people who should have been consulted and did not consult for the required time.
At the end of the hearing at the Royal Courts of Justice, he refused permission for Enfield Council to appeal against the decision.
Mr Regas said: “I have always maintained my view that good housing standards are a human right. But Enfield Council have not gone about this the right way. They have accused tenants of being anti-social and have sought to criminalise landlords for tenants’ behaviour. The council have now been found to have been acting unlawfully.
“The council’s cabinet and senior officers have demonised tenants, defiled democracy and disgraced themselves. They threw good money after bad in defending this case, despite me putting them on notice in June that they were not acting properly. The citizens of Enfield should welcome the resignations of the entire cabinet and senior officers.”
Primarily an update on the state of the nation’s finances, the Autumn Statement also includes some key decisions that affect the money in people’s wallets or purses.
Chancellor George Osborne said the contents were a signal of “staying on course for prosperity”. This was the final Autumn Statement before the General Election in May next year.
It follows a Budget in March that was packed with announcements affecting savings and pensions amid the continuing programme of austerity.
The Autumn Statement is always the smaller, less illustrious stablemate of the Budget, but still, some measures announced are likely to be significant for personal finances.
Not least, there was a big new change that will affect many people buying a home.
What was the big announcement for house buyers?
One move that has been made, probably with one eye on a looming election, is a complete overhaul of the stamp duty system.
Rising house prices have pushed many homes into a new bracket of tax.
Under the present system of stepped increases, £2,500 is levied in stamp duty when a house is bought for £250,000. However, this bill triples if buyers pay a penny more than that for a property.
The chancellor has announced a massive change in the way stamp duty is levied. The surprise is that this will take effect almost immediately.
The new system will mean rates apply only to the part of the property price that falls within each band when it is bought.
No stamp duty will be paid on the first £125,000 of a property, then 2% will be paid on the portion up to £250,000, then 5% up to £925,000, then 10% up to £1.5m, then 12% on anything above that.
The politics behind this is a move to tax buying mansions, instead of a tax on owning mansions, which has been suggested by Labour.
We often hear about the tax-free allowance? Has that happened this time?
Yes, the chancellor has an aspiration to make anyone who earns less than £12,500 to be free from paying income tax.
He is not near that figure yet. However, he announced that the personal allowance will rise to £10,600 in April rather than the planned £10,500 next year.
The threshold at which taxpayers start to pay the 40% higher rate will increase to £42,385 in April – again, £100 more than expected.
Savers have been hit by low rates. Was there any help for them?
Shredded bank balance
In July, a much higher limit of tax-free Individual Savings Accounts (ISAs) came into force. A total of £15,000 can be saved in an ISA in cash or shares.
This limit will be raised to £15,240 in April.
At present, any savings in an ISA lose their tax-free status when somebody dies and their spouse starts paying tax on those savings.
The chancellor said that, with immediate effect, when someone dies, their husband or wife would be able to inherit their ISA and keep its tax-free status.
I think I need a break. Any news on travel?
The cost of air tickets for children is likely to go down.
From 1 May next year, Air Passenger Duty for children under 12 will be abolished, and the same will happen for under-16s the following year.
Airlines will also be required to list the charges separately from taxes on tickets.
On the roads, as expected, drivers will not see a rise in fuel duty. It has been frozen again.
What about wages?
For some time wages were lagging behind the rising cost of living, as measured by the inflation rate.
The independent Office for Budget Responsibility (OBR) predicts that there will be above-inflation rises in wages in the next five years.
And what about benefits?
There were more welfare cuts announced, including Universal Credit work allowances being frozen for another year.
In addition, Mr Osborne said tax credits when overpayments were certain would be cut, and unemployment benefits would stop for migrants with no prospect of work. This would bring spending down a further £1bn, he said.
A number of major welfare payments already have a cap on annual increases.