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Landlords

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Court of Appeal sides with landlords in landmark case ruling

Court of Appeal sides with landlords in landmark case ruling

The Court of Appeal yesterday ruled that Section 21 notices issued by landlords are valid provided a gas safety certificate is issued before the notice is given to the tenant, not before a tenant moves into a property.

The case of Trecarrell v Rouncefield focussed on the relationship between Section 21 notices and gas safety certificates.

The landlord, Trecarrell House Limited, was initially granted an order to repossess the property using Section 21 powers, but the tenant successfully appealed on the grounds that they were not provided with a gas safety certificate before moving into the property.

However, the Court of Appeal ruled that failure to give the gas safety certificate before the tenant begins to occupy can be remedied by giving it at any time before service of a Section 21 notice.

The case itself was heard earlier this year and landlords in England and Wales have been waiting for the outcome of this important decision.

The judgment hinged on whether a landlord’s failure to provide a gas safety certificate before the tenant’s occupation is a breach of the prescribed requirements to serve a valid Section 21 notice under the Housing Act 1988.

This was a particularly important case as a mistake by a landlord or its agent would have consequences far greater than other breaches of legislation, which can be remedied or resolved in order to serve a fresh notice.

Without the ability to serve a section notice at any point in a tenancy the rights of landlords would be seriously curtailed and could prevent the use of possession of a property in future where the landlord has no other grounds to secure possession.

The leading ruling from Lord Justice Pattern, which will be welcomed by so many landlords, states: “Although the point is not straightforward, I am not therefore persuaded that for the purposes of Section 21 the obligation to provide the gas safety record to a new tenant prior to the tenant taking up occupation cannot be complied with by late delivery of the gas safety record.

“Late delivery of the document does provide the tenant with the information he needs. If a breach has the consequence for which Cherry contends then that must apply in every case of late delivery even if the delay is only minimal. This seems to me an unlikely result for Parliament to have intended particularly in the light of the express rejection of the 28 day deadline under paragraph (6)(a).

“Many ASTs are granted for fixed periods of one year or less so that in practice the landlord’s inability to rely upon section 21 will provide a strong incentive for the timely compliance with paragraph (6)(b).

“As a matter of construction, I, therefore, prefer the view that as a result of regulation 2(2) the time when the landlord “is in breach” of paragraph (6)(b) ends for the purposes of Section 21 once the  gas safety record is provided.”

But landlords should ensure that all other requirements such as deposit protection, for instance, are fully compliant as they can affect the validity of a Section 21 notice.

Tony Kent, head of the property litigation team at Mackrell Solicitors, said: “For landlords, this decision comes as an enormous relief since the consequences of the ruling of the lower courts have seemed disproportionately severe for them, especially when there is a gas safety record in existence and the landlord or their agent had either forgotten to serve it or the tenant has denied receipt at the beginning of the tenancy.”

Coronavirus outbreak could cost the buy to let sector £14.9bn in three short months

Market: Brexit Bounce giving way to Corona Crippling, says agent

The latest research by Deposit Replacement Scheme, Ome, has found that the impact of the Coronavirus could cost buy to let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government yesterday.

Last night the government announced that they would suspend new evictions and halt new possessions proceedings to the court while the Coronavirus crisis persists. They have also protected landlords as well as tenants with a three-month mortgage payment holiday on buy to let mortgages.

However, if tenants simply can’t pay, this holiday will do little to help landlords who will still have to pay once the three months is up, with or without the rental income from their tenants.

Ome’s research shows that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone. Over three months this climbs to a huge £14.9bn.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

What does this mean for the average landlord?

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Not only does this huge sum have implications on a sector that has already seen its financial return stretched by the government, but it could see tenants out of pocket even further should landlords look to keep their tenancy deposit to account for lost rental income.

Co-founder of Ome, Matthew Hooker, commented: 

“It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

 

Location
Private renters
Average rent
1 month B2L lost revenue
3 months B2L lost revenue
Number of landlords
Average number of B2L properties
Cost per landlord
England
4,552,000
£852
£3,878,304,000
£11,634,912,000
2,266,770
2.0
£5,753
Wales
176,000
£515
£90,675,200
£272,025,600
104,450
1.7
£4,828
Scotland
340,000
£748
£254,481,840
£763,445,520
158,505
2.1
£6,146
Northern Ireland
138,000
£627
£86,526,000
£259,578,000
64,995
2.1
£6,083
UK
5,206,000
£955
£4,971,730,000
£14,915,190,000
2,594,720
2.0
£5,748
Location
Private renters
Average rent (2019)
1 month B2L lost revenue
3 months B2L lost revenue
London
964,000
£1,697
£1,635,908,000
£4,907,724,000
South East
713,000
£998
£711,574,000
£2,134,722,000
South West
474,000
£816
£386,784,000
£1,160,352,000
East of England
437,000
£869
£379,753,000
£1,139,259,000
North West
571,000
£621
£354,591,000
£1,063,773,000
West Midlands
405,000
£662
£268,110,000
£804,330,000
Yorkshire and the Humber
427,000
£617
£263,459,000
£790,377,000
East Midlands
359,000
£628
£225,452,000
£676,356,000
North East
202,000
£533
£107,666,000
£322,998,000

House price gap between sellers and buyers reduces

Unmanaged vacant properties may invalidate insurance - claim

Leading lettings and sales agent, Benham and Reeves, has released the latest of its very own quarterly house price index based on data from the top four existing indices, looking at where the average house price sits and how the gap between buyer and seller expectation and actual sales has changed.

The Benham and Reeves House Price Index combines data from the four leading industry indices to give a singular figure of how the UK market is moving based on both buyer and seller sentiment, as well as looking at the difference in these indices and what they reveal about the state of the current market.

Current property values

The latest index from Benham and Reeves for Q4 2019 shows that the current overall average UK house price is sitting at £251,912 having dropped marginally by -0.2% on the previous quarter, although prices were up by 1.4% on an annual basis.

In London, the average property value also dropped marginally to £511,166, down -0.4% on the previous quarter, down -0.7% on an annual basis.

Seller and buyer expectations show signs of alignment 

The latest quarterly data from Nationwide and Halifax shows that the amount UK buyers are committing to borrowing has increased slightly by 0.31% to £225,188. At the same time, the average asking price has fallen by -1.02%, while sold prices are up 0.4% to £234,167.

Despite a market bounce following the election, it’s clear that months of Brexit uncertainty have seen the expectation gap between buyers and sellers close. The gap between buyer expectation and asking prices dropped -1% in Q4 to 35%, while there was also a -1% decrease between asking price and sold price, down to -23%.

However, in London, this gap remained consistent with a 33% increase between the price at which buyers were being approved for a mortgage and the asking price expectations of UK sellers, while there was a -22% drop between this asking price and the average sold price.

Director of Benham and Reeves, Marc von Grundherr, commented: 

“It’s only natural that asking prices will remain at a higher level than the average mortgage approval or sold price, but it’s interesting to see that months of Brexit uncertainty had started to bring this difference in buyer and seller expectations closer together.

As buyers committed to slightly more in the way of a mortgage approval price to take advantage of lower market values and lower interest rates, sellers realised they had to lower asking expectations to secure a deal in tough market conditions. This also translated to a smaller gap between asking price and the sold price accepted.

However, with a huge spike in activity following December’s election, we will no doubt see asking prices start to lift once again, as UK sellers look to take advantage of returning buyer demand.

While this asking price expectation will always be higher than the reality of the average sold price, an optimistic increase in a stronger market places sellers in a better position to negotiate a stronger sale price before accepting an offer.”

Benham and Reeves House Price Index
UK
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£245,074
Q2
£248,245
1.3%
Q3
£250,244
0.8%
Q4
£248,513
-0.7%
2019
Q1
£247,463
-0.4%
1.0%
Q2
£251,682
1.7%
1.4%
Q3
£252,487
0.3%
0.9%
Q4
£251,912
-0.2%
1.4%
London
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£519,238
Q2
£520,412
0.2%
Q3
£517,059
-0.6%
Q4
£514,976
-0.4%
2019
Q1
£504,731
-2.0%
-2.8%
Q2
£512,193
1.5%
-1.6%
Q3
£513,180
0.2%
-0.8%
Q4
£511,166
-0.4%
-0.7%
UK
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£218,231
37.8%
£300,684
-25.4%
£224,319
2018
Q2
£219,116
40.4%
£307,745
-26.3%
£226,869
2018
Q3
£221,959
37.4%
£305,060
-24.1%
£231,438
2018
Q4
£220,522
37.1%
£302,239
-23.8%
£230,274
2019
Q1
£221,578
35.6%
£300,481
-24.3%
£227,608
2019
Q2
£225,987
36.2%
£307,691
-25.5%
£229,276
2019
Q3
£224,490
36.5%
£306,321
-23.6%
£234,074
2019
Q4
£225,188
34.6%
£303,182
-22.8%
£234,167
London
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£473,776
30.8%
£619,905
-23.1%
£476,653
2018
Q2
£468,845
34.0%
£628,174
-23.8%
£478,555
2018
Q3
£468,544
31.2%
£614,537
-21.9%
£480,090
2018
Q4
£466,988
31.5%
£614,044
-22.4%
£476,273
2019
Q1
£455,594
32.8%
£605,178
-22.9%
£466,356
2019
Q2
£465,722
32.7%
£618,232
-24.5%
£466,683
2019
Q3
£460,686
33.1%
£612,967
-21.9%
£478,594
2019
Q4
£458,363
32.9%
£609,315
-21.5%
£478,227

Barclays refuses to offer buy-to-let borrowers a payment holiday

Barclays refuses to offer buy-to-let borrowers a payment holiday

Landlords who have a buy-to-let mortgage with Barclays will not be offered a repayment holiday, despite government guidance to offer borrowers a payment referral of up to three months as a consequence of the COVID-19 pandemic.

The bank says that the support is primarily available to residential mortgage borrowers, with buy-to-let landlords not considered to be a priority.

A spokesperson for Barclays said: “This is an unprecedented and ever-changing situation, we are constantly reviewing how we best support all of our customers and are working on an appropriate solution and will provide an update later this week.”

Useful guidance and support for dealing with tenants during Covid-19 outbreak

Useful guidance and support for dealing with tenants during Covid-19 outbreak

A high number of buy-to-let landlords are concerned about the impact of the Coronavirus, but The Guild of Letting and Management has provided some practical guidance and advice to help you cope with the existing situation.

One of the most common questions many landlords are currently asking about is the announcement the government made on the 18th March 2020, relating to evictions and support for those renting, although it is important to point out that the new legislation has not yet been released.

A key topic on the Guild’s advice line is Rent. It is important to note, that not every single tenant in the UK has been made redundant, or is experiencing difficulty, therefore, it is important to ensure that this is dealt with on a case by case basis.

Points to consider:

1. Ensure the tenant is aware that rent is still due.

2. If the tenant is experiencing difficulty, guide them to the Department of Work & Pensions website where they can obtain the guidance they require regarding pay, statutory sick pay (SSP) and other relevant up to date information.

3. Ask tenants to put their concerns to you in writing. It is important that you are able to discuss the matter with all the relevant facts to hand.

4. Speak to your lender and find out what they are putting in place. Some landlords have already offered tenants a discount on rent or a “rent holiday”. But remember, that as with the mortgage lenders, this deferred rent will have to be paid back at some point in the future.

5. Speak to the guarantor, where there is one. They should not be left out of any discussions regarding rent payments.

6. Check whether your insurer can offer rent and legal protection.

7. Keep records up to date. Every discussion, conversation over the phone, email, must be logged and documented.

8. Any pre-existing arrears (pre-18th March 2020) cannot be factored into this Coronavirus situation. Remember everyone is in the same boat. No one has experienced this before, This is not the same as the 2008 recession, this is a public health matter, so it is difficult for everyone involved on so many levels.

Coronavirus could cost BTL landlords almost £15bn in lost rental income

Coronavirus could cost BTL landlords almost £15bn in lost rental income

The devastating impact of the Coronavirus could cost buy-to-let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government last week, new research shows.

The government has announced that they will suspend new evictions and halt new possessions proceedings to the court in light of the COVID-19 pandemic.

If tenants are unable to pay their rent, Ome calculates that this would leave landlords £14.9bn out of pocket over a three-month period.

The deposit replacement scheme’s findings are based on the fact that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Co-founder of Ome, Matthew Hooker, commented: “It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

“It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

“The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

Landlords switching from short-term lets to longer lets before lockdown

Landlords switching from short-term lets to longer lets before lockdown

There has been a significant increase in the number of landlords and homeowners switching from short-term lets to longer rentals.

Across the UK there has been a 20% drop in people looking for rooms over the last week due primarily to the COVID-19 outbreak, according to SpareRoom.

With a possible countrywide lock down rapidly approaching, the flatsharing website reports that people with rooms to rent are understandably keen to find tenants.

SpareRoom has seen a 15% increase in adverts from agents and a 12% uplift from landlords, just in the past two days. This is driven, in part, by landlords and homeowners switching from using short-term rental sites like Airbnb as tourism tanks and looking for longer term rents for their rooms.

With supply in some parts of the country currently outstripping demand, 18% of agents have reduced their asking rents in the past two weeks, while 11% of landlords have done the same, with some directly mentioning COVID-19 as the reason for this reduction.

With the growing concern about face to face contact SpareRoom has also seen a real trend over the last week of people moving towards video calls – getting to know each other and having a first view of the property this way.

Matt Hutchinson, SpareRoom director, said: “Whenever there’s uncertainty people put off making big decisions, like moving house. We saw it during the confusion over Brexit and we’re seeing it in a much more marked way now. In contrast, people with rooms to fill are desperately hoping to get new tenants in before the country goes into lockdown.

“Although it’s still early days, we’re also seeing some interesting shifts in behaviour on both sides. Following widespread cancellations, we’re seeing both landlords and homeowners moving from short term rents to looking for longer term security.

“Tenants are getting creative by using video calls to hold virtual viewings and interviews. The people you live with make a far bigger difference to you than the property itself, and video calls are a great way to get that all important first impression before deciding to go and see a property. It also minimises the need for travel and social contact so it’s a win-win.”

Budget 2020: ‘There must be no further taxation on landlords’

Budget 2020: ‘There must be no further taxation on landlords’

The Guild of Property Professionals is calling on the new chancellor, Rishi Sunak, to use his Budget speech, which will take place tomorrow, to support investment in the private rented sector, as research shows that buy-to-let landlords are exiting the market in droves.

Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a significant number of landlords selling buy-to-let properties with a view reducing their portfolio, or exiting the market altogether.

Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.

The government’s draconian tax changes have not just pushed a number of BTL landlords out of the PRS, but also left many prospective tenants with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.

Iain McKenzie, CEO of the Guild of Property Professionals, said: “If we wish to sustain a thriving private rented sector there must be no further taxation on landlords. Tenants want more choice not less.

“The government should do more to support landlords to remain in the sector, not drive them out, which will ultimately cut the supply of rental properties and put upward pressure on rents.”

The housing market has had a strong start to the year, with improved activity levels and property price growth across every region in the UK, and McKenzie hopes that this trend will continue for the foreseeable future.

He continued: “Ideally, the housing market needs 12 months of a stable environment to enable it to bear the fruit of pent up frustration. It would be pertinent for the government to avoid anything that could hamper consumer confidence, which is already at risk with the threat of tough measures to prevent the spread of Coronavirus.

“It is likely there will be further support for first-time buyers by way of discount through a ‘First Home’ scheme, which could see new homes discounted by up to 30%. Whilst it is fair to say that first-time buyers are the lifeblood of the property market, getting the balance right between new buyer incentives and support for second-hand house buyers is the key to a fluid market.

“With that in mind, like many, we would welcome any positive news on Stamp Duty. Boris Johnson had previously pledged to implement changes to current stamp duty legislation by raising the threshold to £500,000. Although mentions of this have been more subdued in recent months, it would relieve large sections of the country from the burden of stamp duty and go a long way to bolstering consumer confidence.”

Paws for thought: ‘no pet’ clauses contributing to loneliness

Paws for thought: ‘no pet’ clauses contributing to loneliness

Two-thirds of private renters who would like to own a pet are being forced to delay by restrictive tenancy agreements, and this is contributing to the UK’s loneliness epidemic, according to new research by YouGov and Mars Petcare.

The study found that private renters believe owning a pet would improve their lives, with four in five – 82% – of those who wish to own a pet of the opinion that it would benefit their mental well-being.

Meanwhile, 75% said it would benefit their physical health and 76% said it would make them feel less lonely. 61% of women said it would make them feel safer in their homes.

In addition, one in ten private renters surveyed said they had moved or given up a pet because of their pet being unwelcome.

The findings of the research suggest that some landlords are missing out on an additional pool of tenants.

Just 43% of private renters surveyed said their landlord offered a pet-friendly rental policy, while just over half of residendents – 53% – said they would be likely to consider a longer tenancy if their landlord allowed pets.

Some 10% of private renters said they had moved home or given up a pet as a result of restrictive tenancy agreements.

The Tenant Fees Act introduced in June 2019 has seen some pet owners paying increasingly high rents as landlords are banned from requesting pet-specific deposits. Yet, just 22% of private renters said they would welcome paying a higher rent to own a pet, with 53% instead favouring a pet-specific deposit on top of their regular deposit, while half – 50% – of those surveyed would be happy to pay for additional cleaning services.

Mars Petcare is now calling on the government to do more to guarantee the rights of private renters to own pets so that more people are able to reap the benefits.

Helen Warren-Piper, general manager at Mars Petcare UK, commented: “At Mars Petcare we have always known that pets make the world a better place, which is why we have made it our mission to create a world where they are healthy, happy, and welcome.

“Our recent survey shows that many private renters would love to own a pet, but are unable to because of unfavourable tenancy laws.

“We therefore believe that changing the rights of private tenants with respect to pet ownership, is an important step to creating that world. That’s why we are calling on the UK government to work with landlords and tenants to find an improved way forward so that more people are able to enjoy the benefits of responsible pet ownership.”

Georgie Laming, campaigns manager at Generation Rent, said: “Pets are a large part of making a house a home and whatever your tenure you should be able to keep a pet. Tenants with pets are more likely to want a stable, long term home, which benefits landlords in the long run. Whilst we welcome the Secretary of State’s commitment to updating the model tenancy agreement to make renting fairer for pet owners it’s clear that further measures are needed to guarantee the rights of renters to own pets.”

Where are BTL landlords most likely to buy property in the next 12 months?

Where are BTL landlords most likely to buy property in the next 12 months?

Buy to-to-let landlords across the Midlands are most likely to acquire new property over the next 12 months, new research show.

A survey of almost 800 landlords conducted by BVA BDRC, on behalf of Paragon, found that almost a quarter – 24% – of landlords in the East Midlands plan to purchase property in the next 12 months, with 22% of West Midlands landlords also looking to add to their portfolio.

Other regions that showed high demand for property from buy-to-let investors included the North East and Yorkshire & Humber, with 19% of landlords in both regions looking to purchase.

Landlords in the South West (8%) and central London (9%) were the least likely to purchase property over the period.

Overall, 14% of landlords plan to purchase property, with the average landlord acquiring three new properties.

More than half – 52% – of those looking to buy property are targeting terraced housing, followed by semi-detached property (32%) and flats (26%).

A quarter of landlords also intend to buy a HMO during the year, reflecting the growing popularity of this property type, particularly amongst professional, portfolio landlords.

% of landlords planning to increase portfolio in next 12 months
East of England 13
East Midlands 24
London (Central) 9
London (Outer) 17
North East 19
North West 13
South East 15
South West 8
Wales 10
West Midlands 22
Yorkshire and Humber 19

Those with larger portfolios expressed a greater desire to buy property, with the research showing that 8% of landlords with one property planning to purchase during the year, rising to 20% for those with 20 or more.

Meanwhile, 12% of landlords with between two-three properties said they will buy, whilst the proportion of landlords with between four-five (15%), six-ten (14%) and 11-19 (14%) properties looking to purchase was broadly balanced.

Richard Rowntree, Paragon’s managing director of mortgages, said: “The proportion of landlords looking to purchase new property has been largely consistent over the past two years, but we are seeing regional variations and also a greater propensity for portfolio landlords to invest in property.

“Portfolio landlords have adopted a number of strategies to adapt to the tax and regulatory changes of recent years and we’re seeing trends such as these landlords buying stock from smaller-scale participants as they exit the market, or targeting higher yielding properties, such as HMOs.”

The researched showed that nearly two thirds (63%) of landlords plan to fund their next purchase with a buy-to-let mortgage, whilst 17% will release equity from existing properties to generate purchase funds. Meanwhile, 18% said they would purchase property outright using previously invested funds.

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