Category Archives: Property Finance

Reminder Time Running Out on Sale and Rent-Back!

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The NLA has issued a reminder to all landlords involved in sale and rent-back practices that their window of opportunity to register with the FSA is fast running out.

In a timely warning the National Landlord Association have told landlords they must move fast to make sure they are operating in legal manner. The new regulation will pull this previously under-regulated group into line to ensure that all customers are getting a fair deal. Once sale and rent-back becomes a regulated activity, people who use this system will have to prove that they are a fit person to be involved in the business.

Other things will be regulated as well, such as making sure that an agreement that is realistic and fair has been reached regarding how long the owner-cum-tenant may stay in the property. Claims of people being able to stay in their homes for life have been proven to often be wildly exaggerated and have created false expectations in the people entering into the sale and rent-back agreement.

Regulation should bring this form of landlord activity into line and, as I have expressed on this blog before, used properly, this sale and rent back type scheme could be a winner for all concerned. It is good to see the FSA acting quite promptly to drive the rogues out of this area and ensure that things will now be much fairer.

Tenant Checks Must Be Rigorous!

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It is really not surprising with the state the economy is in and the number of people being made redundant, but it has been reported this week that two thirds of landlords claim that there has been a sharp rise in people defaulting on their rent over the last six months.
 
Unemployment is now at its highest level in this country since 1995 and is predicted to rise even further, all of this is going to contribute to tenants having difficulties meeting their responsibilities, including paying the rent.

It is easy to be sympathetic towards people that suddenly find themselves in serious financial difficulties, but the truth is that landlords need to avoid joining them in the mire by stepping up their tenant vetting procedures. It should be a matter of course that you run a comprehensive credit check on prospective tenants but in this era it is probably best if you extend that to checking past landlord and employer references as well.

It is a good thing to remember that if you are using an agency, they should be offering you all of these services as well as a rent guarantee and, if they already do, now is the time to check what the guarantee actually covers you for.

Ideally you should be looking at loss of rent plus legal costs being covered whatever the reason for default.
 
These are certainly hard times for a lot of people but you should try to protect yourself against rent difficulties at all costs; it is a sad fact that no matter how hard times get, it is not up to private landlords to provide free or subsidised places to live for the needy. We pay our taxes so that others can take care of that.

Blacklist for Non-Paying Tenants

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This week there was an announcement of a service that will have landlords jumping for joy!

Someone has finally put up a website that allows landlords to check if a potential tenant has ever been reported by a previous landlord for skipping out on rent owed.

SureRent, is a website that will let landlords browse through a comprehensive list of tenants that have dodged rent in the past. In many cases, the site will report the exact amount owed to the previous landlord and in some cases will even allow landlords looking to rent to that person to contact the previous landlord to discuss the circumstances.

This is something that has been missing in the property rental business and it will be welcomed by the majority of landlords, most of whom are simply trying to find tenants that will stick to their end of the deal and pay their rent in a timely fashion.

It is also a bonus that the previous landlord will be contactable because we all know that sometimes circumstances are not what they seem, especially in this present financial climate. It would be sad to see someone totally blacklisted for a minor and isolated infraction if the situation did not call for it.

In the meantime perhaps the agencies involved in paying benefits could consider their role in unpaid rent situations. A return to paying rent straight to the landlord could improve things immeasurably.

Interest Rate To Remain Steady

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Despite the fact that some banks have been busy raising the rates on their set mortgages, the Bank Of England seems quite sure that there will be no official rise in this area for some time to come.

The Bank Of England has released a statement putting banks and those seeking mortgages on notice that they have no intention of raising the base rate from its historic 0.5 low any time in the foreseeable future.

This has not surprised many financial experts and many have greeted it as welcome news.

Many experts feel that England is in for a fairly drawn out recovery period from this recession, and see no reason to raise the interest rates at this stage; in fact, a lot of people have expressed the opinion that this could be counterproductive.

This will come as very welcome news for some buy to let landlords who have only recently started to benefit from those low interest rates.

Granted, buy to let loans are very difficult to get at the moment with the hoops that have to be jumped through to qualify, but if you are in a position to buy, the buy to let the interest rates are now very favorable and there is certainly money to be made.

Let’s hope some landlords now start to profit from the interest rate’s record low; it has been a long time coming for this sector.

More Rules for Sale and Rent Back

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It has been an interesting month for sale and rent-back companies with moves to regulate and control this sector going into over drive. In the last blog I talked about the couple who beat an eviction after the sale and rent-back company failed to keep up payments when they took over the mortgage. This seemed a fair and equitable result and now we are hearing that sale and rent-back landlords have less than a month to seek FSA approval to continue trading.

This, in essence, will mean that they must open up their practices to checking by the FSA. They will be required to have an independent valuation of each property done and the customer made aware of it. All this seems like a giant step in the right direction to me. In theory, a sale and rent-back scheme could benefit everyone; it just seems that things were not being done very fairly in this sector up until now. I agree with John Socha, vice chairman of the National Landlords Association, when he says:

“Although sale and rent-back will not stop repossessions, ethical sale and rent-back could be a way for homeowners to remain in their properties but become tenants. Only when sale and rent-back operators are within a more regulated environment can we be confident that consumers will be treated fairly.”.

Regulation is the first step to getting this sorted out and seems to be heading in entirely the right direction.

Family Beats Sale-and-Rent-Back Eviction!

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It seems to be the week for landmark court cases. It was great to see justice prevail in the case of Paul and Amanda Jackson who have beaten a company called Repossessions Stopped in court this week.

The couple entered into an agreement with the sale-and-rent-back company after falling behind in their mortgage in 2005. The agreement was that they would sell the company their home, which they had occupied for twenty years,  and in return the company would allow them to live there indefinitely. The problem is in 2007, less than two years after the arrangement was set up the family were served an eviction notice. The story is that the company had defaulted on the mortgage payments after taking them over from the couple.

The judge showed good sense in my opinion when he ruled that the family were entitled to stay in their home for life, either taking out a new mortgage themselves or renting the property from the mortgage lender who had reposed it.

A spokes person for Shelter ,the charity that bought the action on behalf of the family, had this to say 

“This is a huge and important victory for not only the Jackson family but everyone who is tempted by sale-and-rent-back schemes.
 
I would urge anyone having mortgage difficulties to seek independent advice from Shelter, a Citizens Advice Bureau or other debt counselling organisations before contacting these kind of companies.”

Very sound advice and well worth following

Taxman to Catch Landlord Tax Evaders!

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We have known this was coming and most landlords, who are playing by the rules, welcome its arrival. The taxman is seeking powers that will catch out thousands of buy to let landlords and potentially triple the income they receive from Britain’s 70 000 landlords.

Essentially, the law change they are after will allow them to compel letting agents to hand over the names of all landlords on their books, both past and present. Those of us who are doing things properly and have declared our properties as buy to let and paid the appropriate taxes have nothing to fear from this move, but the thousands of landlords who seek to avoid paying tax by not declaring their properties buy to let could be in for some real trouble. This is especially true as the new power also extends to accountants.

HMRC have already raised an additional 100 million pounds in taxes after a campaign to find out landlords who remained undeclared was a major success for them. They estimate the new laws will provide them with a further 200 hundred million.

As much as we may all moan about taxation, most of us realise it is a necessary evil and pay our taxes just as we should so I don’t think there will be too many legitimate landlords shedding tears over this new law.  If everyone paid the correct taxes then the burden should be reduced for the rest of us, theoretically.

Landlords Claim Back Millions!

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There was a very interesting ruling in the high court last week that could see buy to let landlords claiming back millions of pounds from estate agents.

In a landmark case against a London firm, Foxtons,  the judge presiding over the case ruled that the leasing agreements  made by the firm unfairly overcharged commissions to landlords. Mr Justice Mann even went so far as to describe the charging system as placing “traps and timebombs” for landlords. And the conditions of the agreements that were revealed in court certainly did sound unfair.

Foxtons, which lets out some of the most expensive property in Central London, charged customers 11 per cent commission when a tenant continued to occupy the property for longer than the initial term of the lease, and an additional 2.5 per cent commission payment if a tenant agreed to buy the property from the owner.  The scary thing is, they are far from the only company doing this sort of thing and we can well expect the floodgates to open with aggrieved landlords bringing cases against other estate agencies who have not been playing fair.

Konnie Huq, a former Blue Peter presenter and the public face of the campaign against the unfair charges, described the ruling as a great day for landlords and with up to 26 million pounds likely to be claimed back by landlords it does seem fair comment.

Estate agents all over the country are certain to be quickly dropping their charges to fall in line with this ruling and that can only be a good thing for us in the letting business.

House Prices to Fall a Further 40%?

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Despite the fact that there has been some great indicators that the house prices in the UK may have bottomed out, or at least be very close to doing so, some people are still far from convinced.

In a quite complicated argument this week about the fact that housing still had a way to fall, James Ferguson of the website MoneyWeek outlined why he believes that house prices could fall another 40%.

His very detailed argument is based, partially, on the fact that he believes affordability of houses in this country are still far too high. This figure is worked out by measuring initial home loan payments as a percentage of take home pay. According to James these figures show the housing downturn could be anywhere up to five years from bottoming out.

As a result he recommends that anyone wanting to make maximum profit from property in this country should wait a few years before deciding which one to purchase.

Mr Ferguson is clearly a very intelligent man, and he may well be right but personally I hope that not too many people listen to him because in the tricky way of economics, that is one definite way to make sure his predictions come true.

Mortgage Arrears Start to Come Good

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According to specialist lender CHL Mortgages, things are almost looking rosy in the area of mortgage arrears for both ordinary residents and buy to let packages.

Their figures show that arrears have dropped by 15% from its highest point in February. The most cheerful news is the fact that the indicator the mortgage lender uses to predict the likelihood of future arrears, unpaid direct debits etc., has also fallen substantially.

CHL Mortgages are not talking too much about changes in economic improvement in general, but for the improvement in their arrears situation, however. They are very firmly claiming that their policies have resulted in the  upturn in the situation.

Bob Young, Managing Director at CHL Mortgages, said “In a market short of positives, we believe that these falling arrears levels can be seen as a sign of our competency in the collections department and the strength of our underwriting in what have been particularly difficult market conditions.”

This is probably fair enough as they go to great lengths to explain all the changes they put in place to try to make things run more smoothly in terms of people meeting the conditions of their agreements but, as we all know, you cannot get blood from a stone not matter how great your policies. So, the rest of us can be hopeful that as well as reflecting best practice, this improvement also points to things looking up in terms of people’s personal finances.