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UK Landlord Regulation Proposals Scrapped

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Sometimes a change is as good as a holiday. In this case I am talking about a change of housing minister. Grant Shapps announced yesterday that the proposals for huge regulation of landlords and letting agencies are to be totally scrapped.  This will come as relief to a lot of industry experts who were expressing grave concerns about over regulation.

Other people will, of course, be concerned that the findings and recommendations of the Rugg review are to be so totally ignored. Mr Shapps take on the proposals that were tabled in response to the review, however, is that they were burdensome. This is a position that is largely in line with what the industry has been saying all along.

Mr Shapps said: “With the vast majority of England’s three million tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords.”

There is some sense it that. The decision though will leave the industry in the UK completely unregulated as it has always been. It will be interesting to see how long that situation will be allowed to continue.

CGT Increase Causes Crisis Of Confidence

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A recent survey carried out by Upad showed that 54% of current landlord felt more confident about the future of the property market in the UK. That is largely good news but it does leave 46% who are not sure and one thing the survey showed clearly is that those who were not as as confident blamed the increase in CGT almost entirely. And you can hardly blame them.

They also voiced their opinion tht as well as having a good long hink about the proposed raise to he CGT the current government should think about trying to rid the industry of some of the ridiculous red tape the last administration put in place. Many people feel that a reduction in bureaucracy would go a long way towards attracting people to the sector.

The gist of the feelings expressed in the survey was that the government has an opportunity to help and encourage the housing private sector for the good of the whole country. The alternative is to leave it struggling with over regulation and hugely increased taxation and run the risk of a large dip in this vitally important sector of the economy.

Which way will they jump?

Landlord’s First in Cases of Insolvency

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A recent ruling in a landmark case involving insolvency had landlords rejoicing. They thought they had one the right to be paid first, ahead of other creditors when a tenant (usually a retailer) became insolvent.

The judge in the case ruled that rent in on all properties leased should be treated as part of the administration of the insolvency and as such paid first. The insolvency practitioner would have to honour the existing landlord contract.

No sooner was the ruling out f the judge’s mouth though than business advisors found a way around it.

Basically it is all about the timing. Without getting too complicated the idea is that the upcoming quarter of rent is due as part of admin costs if the insolvency procedure starts before the quarter does. If the director of the business decides to wait until the quarter has begun then they can effectively gain nearly three months of free rent.

On the question of whether this is entirely legal and leading expert had this to say.

“The directors will have to satisfy themselves to do that. If they believe insolvency is pretty likely they may feel a duty to creditors that if they wait they won’t have this big administrator expense which has to be paid ahead of other creditors,”

Looks like landlords may have rejoiced too early though the ruling will probably have some positive effects.

BTL Emblematic Of Housing Boom

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At the height of the British housing boom buy to let represented twelve percent of the buoyed British mortgage market. Money was pouring into real estate and the property sector was flying due in part to the amount of people interested in buy to let. We all know that what happens next is not pretty, as the global recession hit and the sector shrunk to a fraction of it size.

The good news is that a strong UK rental market and just the merest whiff of a recovery in mortgage backed securities are beginning to see a growth in property once again.

The recovery sins are modest but they are there.

The CEO of Nationwide, owner of The Mortgage Works said last month, “We think there is a strong market and demand has increased.”

Most people seem to think that even as the property sector shows signs of growth it is unlikely to be as attractive to amateurs this time as it was last time round. According to the Nationwide most of the renewed interest it is seeing is from existing players in the BTL market.

But there are clear signs of life in the property sector in general and the buy to let market in particular.

Some would be moved to say that with a housing crisis looming this comes not a moment too soon.

UK House Prices Are Generally Stable

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Despite the specter of the dreaded capital gains tax rise hanging over us there is good news in that UK house prices seem to be holding stable for now. The banks are showing slightly conflicting statistics but mainly they agree that things are fairly steady.

The Halifax points out that dips in April and February raised some doubts about the strength of a recovery but things have even out since then. Nationwide figures, however, showed a one percent increase in prices in April and this put the annual rate of increase into double figures for the first time in three years.

Chief Executive Graham Bell said “Unless there is a significant spike in interest rates, which we are not expecting, a major dip in prices is unlikely to occur over the next year,”

That is at least good news though many would be looking for something a little stronger such as a predicted increase, even a slight one. I guess the silver lining is the capital gains tax will not bite if there is no gain to tax. People will just be more likely to be patient and sit and wait for prices to begin rising.

Landlords Suffer Double Rental Arrears In 2010

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It does not come as a big shock to anyone to find that landlords are suffering through a terrible period of rental arrears at the moment. With unemployment on the rise and people having real financial difficulties rental arrears have more than doubled over the past 12 months.

As I think I have said before, landlords in the UK have a real image problem. I would like to use an example to illustrate. Say there was a huge car company that ceased paying its employers their wages. Where do you think all the sympathy would be directed? Towards the poor people being robbed of their income I would hazard a guess. And yet when a landlord’s income, on which they rely, is suddenly stopped the sympathy is usually directed at the person who has stopped paying.

I am not saying I have no understanding for the tenants who are good payers who have something go wrong in their lives I am just making the point that landlords do it tough when their living is stopped too. The reason I choose to make this point now is because I think a lot of the things that are happening to landlords can be traced back to this image problem.

Things such as a huge hike in CGT is seen by the public as mainly affecting professional property investors and why should they care about them. The politicians have a free pass to do as they please as public perception is that landlords are a group of rich fat cats.

If only it were true.

Capital Gains Tax Rise Incompetent

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After having failed miserably in my attempt to remain neutral on the issue of CGT in yesterday’s blog covering a story that was pro the rise, I think I am on safer ground today. I want to talk about an article that has sentiments much closer to my own heart.

In the Scotsman late last week political commentator Alex Orr wrote a strong condemnation of plans to hike CGT up to frightening levels. He pulled no punches as he branded the move by the coalition incompetent. His reasoning was fairly straight forward. The hike will strangle the life out of the budding UK economic recovery. Rather than resulting in money pouring into the nation’s coffers to be paid off the deficit, the opposite is likely to be true. The move will slow the trickle of money to the government even further as everyone shuts up shop and battens down the hatches. Investment will all but grind to a halt.

He further goes on to say that the government should not feel compelled to make its own mistakes when it can study the result of this kind of move by looking at what happened in the USA and Australia when they tried this trick. A drastic drop in revenue for anyone who is curious. I am all for learning from the mistakes of others, it is far less painful.

I, not surprisingly agree wholeheartedly with Mr Orr. I hazard that most professional landlords do. 

Tenants Persuade Landlords To Be More Environmentally Friendly

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The issue of environmentally friendly housing is not one that looks set to go away anytime soon. The whole issue of a sustainable environment is a huge one in today’s society. It is even the excuse that the council uses to explain only collecting my rubbish every two weeks. The housing market is being dragged into the issue, even if some landlords are going kicking and screaming.

For those landlords that are a little reluctant to spend money to save the environment, the Energy Saving Trust have come up with a new idea. A letter from tenant to landlords. In this letter, which the Energy Saving Trust provides, the tenant a property which is warm, comfortable and cheap to run is far more desirable to tenants than the opposite. The point, I should imagine, being that those who do make an effort with energy saving measures are sure to get better tenants and keep them longer.

The letter also points out the measures such as tax breaks and government grants that are available for those landlords who do wan to ‘green up’ their property.

For me the issue of this being the best time to do something about properties that are inefficient, with everything that is on offer has always been the winning point. Hopefully this letter from the tenant reminding landlords that in the near future they may find themselves at the back of the line for the best tenants, will do the trick.

We all want a sustainable environment really, even if I do complain about the lack of rubbish collections.

Long Term Investment the Key to Success

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Most experienced landlords are well aware of the statement made in the headline of my blog. Sometimes, however, it is easy to forget that especially in more difficult times. It is worth restating it so that we can all strengthen our resolve.

This week it was Mike Goddard, CEO of Belvoir, one of the UK’s biggest specialist lettings agencies, who chimed in with a timely reminder.

His statement was closely linked to yesterday’s topic the hot rumours of huge rises in capital gains tax. Mr Goddard preaches caution and patience as the sensible reaction the talk of the CGT hikes. In part this is what he had to say

“At present I don’t think we need to view the situation with the rental market as all doom and gloom, particularly for those investors who are in this business for the long haul. I strongly advise potential investors to always seek the advice of a specialist lettings agent who is able to provide realistic and unbiased advice about rental yields.”

This seems like sage advice and I believe that most landlords will have been thinking in these terms anyway. At the risk of stating the obvious capital gains tax only applies if you sell.

Man Jailed For Killing Landlord

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We have heard a lot recently about the failure of landlords resulting in them being jailed and fined for damage caused to others. This week the shoe was on the other foot but it has to be said, the story is still not one that is likely to make landlords feel good.

Michal Kalinowski was this week jailed for life with a minimum of seventeen years after he was found guilty of murdering his landlord. The crime was a particularly brutal one and the details probably do not have a place here but suffice to say that the whole incident is an awful reminder of the fact that landlords are sometimes putting themselves in a vulnerable position.

It is believed that the victim, Peter Berkley, had agreed to meet Mr Kalinowski on the evening of the murder to discuss rental arrears. Clearly most tenants are not going to resort to this kind of drastic action over a few missed rental payments but it bears keeping in mind that for some people financial difficulties place a real strain on their mental health so particularly in these times it pays to take all precautions.

Make sure you either take someone with you when you go to see a tenant or arrange to meet in a public place, especially if the tenant is one that you have not had much dealing with.