A joint report produced by the Electrical Safety Council (ESC) and the Local
Government Intelligence Unit (LGiU) has concluded that there is far too much
bureaucracy in central government and this is preventing local councils from
taking steps to stamp out rogue landlords in their boroughs.

Stricter Controls Needed

The report published by the think-tank recommends that local councils should
place landlords operating in the private sector under stricter control. The
authors of the report believe that stricter controls will help to raise the
living standards of tenants living in the private sector.

Poorer Living Conditions in Buy to Let Housing

One of the claims made by the report’s authors is that tenants renting in the
private rental sector are facing living conditions that lag behind those of
people living in social housing and owner-occupied homes. They say that safety
standards in many privately rented homes. Because of this, additional safety
requirements should be introduced at a national level.

According to the chief exec of the LGiU: “The massive growth of the private
rented sector presents a variety of challenges. While most private rented
properties meet appropriate standards, a minority of landlords actively pursue
criminal activity to the detriment of those living in their properties.”

Improving Standards in the Private Sector

In order to improve standards in the private sector, the report makes a number
of suggestions, including:

• Giving councils greater powers to enforce housing laws;
• Changing the law to allow councils to licence buy to let properties of poor standard and
• Allowing councils to make their own decision on whether to introduce compulsory landlord accreditation schemes.

Landlords who have mortgages with the West Bromwich Building Society are
probably crying into their cups of tea about now. Despite the fact the Bank of
England base rate has not shifted above 0.5% for four years, the West Bromwich
Building Society has decided to hike the interest rate on their buy to let
tracker mortgages by a whopping 2%. This unwelcome change will come into
effect on December 1st.

The Building Society’s Explanation…

According to representatives from the West Bromwich Building Society, the
interest rate has been increased as a result of ‘market conditions’. Seems
unlikely, but there you go. Not all landlords will be affected, however—only
those who own multiple properties and who took out a tracker mortgage with the
West Bromwich Mortgage Company, a former specialist subsidiary of the current
West Bromwich Building Society, are going to be hit by the new increase in
interest rate.

Mortgage Brokers Express Surprise at the Move

Leading mortgage brokers are surprised that the building society has felt the
need to raise interest rates when the Bank of England Base Rate continues to
remain at an all-time historic low. Landlords won’t be too happy either—a 2%
interest rate hike will add £125 per month to a £100,000 loan, which is no
small amount if your profit margins are quite tight. But the best way to deal
with the bad news is to vote with your feet. Start looking around for a better
deal elsewhere and pray that the other high street lenders don’t decide to
follow suit.

Hundreds of letting agents have reported finding ‘ghost tenants’ living in
rented properties when inspections have been carried out and a leading insurer
believes that there could be as many as 3.3 million unauthorised people living
in buy to let homes without landlords’ knowledge.

Where Do Ghost Tenants Come From?

Ghost tenants fall into many different categories. They are often friends who
come to stay and then don’t move out, particularly in the case of student
lets. Another scenario is when a relationship becomes more serious and the
tenant invites his or her lover to move in, only they don’t bother letting the
landlord know. Unfortunately, extra tenants can cause all kinds of problems,
legal and otherwise.

Problems Caused by Ghost Tenants

There are many issues created when ghost tenants take up residence in a rental
property.

• Changed legal status – extra tenants living in a rental property covering three or more floors could inadvertently turn it into an HMO, which may require a landlord to apply for an HMO license.

• Invalid insurance – ghost tenants not listed on a tenancy agreement will invalidate a landlord’s insurance policy.

• Damage to property – extra tenants crammed into a small property will inevitably cause more wear and tear on the fixtures and fittings, particularly if rooms are converted into bedrooms without permission.

Make Regular Property Inspections

Always check your rental properties regularly and look out for signs of extra
tenants in occupation such as mattresses on the floor or complaints from the
neighbours about extra people coming and going from the property. It is also
advisable to insert a ‘no sub-letting’ clause into your tenancy agreements.

In an embarrassing U-turn, government plans to make landlords responsible for checking the immigration status of their tenants—and fining them up to £3,000 if they fail to do so—are in tatters.

Reforms First Unveiled in Queen’s Speech

The crazy plan was first aired during the Queen’s speech in May this year, as part of a new immigration Bill, but the planned reforms were quickly criticized as being unworkable and pretty much guaranteed to burden ordinary landlords with masses of red tape.

Under the terms of the legislation, landlords would be required to check migration status to ensure tenants had the right to be in the UK. If they failed to do so, they could be fined £1,000, but repeated failures to make the correct checks could result in a fine of £3,000 per illegal tenant.

Ministers Unhappy with Flagship Proposal

Several leading Tory and Lib Dem ministers are said to be seriously unhappy with the plan to make landlords responsible for checking whether potential tenants are illegal immigrants. They fear that the plan will end up criminalising ordinary people who let out second homes or take in lodgers.

Proposed Amendments to Legislation

Ministers are now proposing that several key amendments are made to the original proposal, namely that the scope of the bill is significantly narrowed so that only large scale landlords with dozens of properties are affected. In reality, many ministers believe that the legislation will be rolled out in a very small number of areas as pilot schemes, and then quietly abandoned when the dust has settled.

HM Revenue & Customs have today embarked on a campaign to try and recover more than £500 million in unpaid taxes from landlords in the UK. A joint exercise between the government’s Treasury department and HMRC has deduced that around 1.5 million landlords are underpaying their taxes every year. And since the government needs all the money it can claw back into it’s coffers, it has decided to give landlords the benefit of an 18-month amnesty.

Pay Up or Face the Consequences

Most landlords are diligent in paying their taxes, but a small minority still fail to make the right payments to HMRC. The tax office believes that although some underpayments will be as a result of genuine mistakes, the main culprits are landlords with multiple properties or those with student or holiday lets.

Help – I Think I Owe Tax!

It isn’t all doom and gloom if you have inadvertently forgotten to declare income from your rental properties. The whole idea behind an amnesty is that you have 18 months to ‘fess up and come clean to HM Revenue & Customs. If go to them, you can take advantage of a reduced penalty, but if you do nothing and a subsequent investigation finds that you have underpaid your taxes or failed to anything at all, then you will end up facing criminal proceedings, which will inevitably be a lot more costly.

The message from HMRC is pretty clear: “It is better to come to us before we come to you.”

According to recent property statistics from the Halifax, buy to let landlords
who have invested in flats in the last ten years have enjoyed a substantial
increase on their investment. Since 2009, flats have become an excellent
investment property for landlords, mainly thanks to huge rises in the London
property market. But even if you bought elsewhere, you are still on to a
winner if you own flats rather than larger properties.

Rising Property Prices in the UK

The average cost of a flat in the UK has risen by a whopping 35%. In 2003, the
average price of a flat was £47k. Today the same flat would cost £133k. A
similar increase in prices for terraced properties is also evident from the
prices published by the Halifax. The cost of buying a buy to let terraced
property has gone up by 32% during the same timeframe.

Fluctuations in the Housing Market

According to the Halifax:

“While prices have risen for all property types, there have been a number of
distinct periods of performance in the last ten years. Bungalows and detached
homes fared best during the downturn, as these property types are less popular
with first-time buyers. Since 2009, larger property has under performed flats
and terraces.”

Invest in Property Wisely

It is worth bearing this trend in mind if you are looking to expand your
property portfolio, especially if you are not looking at long-term
investments. Flats and smaller terrace properties are great for young
professionals and student lets whereas larger properties are more suited to
families and executive lets, so think about which sector of the rental market
you are aiming at before you jump in feet first.

According to Sweet & Maxwell, a leading legal information provider, tenant
evictions are up by 9% since last year. By the end of June 2012, 33,199
landlords had successfully repossessed properties. This figure had risen to
36,177 by the end of June of the current year.

Possible Reasons for Jump in Tenant Evictions

The most likely explanation for a rise in tenant evictions is the government
cuts in welfare payments. Many tenants are now struggling to pay the rent
since the highly criticised ‘bedroom tax’ was introduced. Tenants in receipt
of Housing Benefit have seen their payments slashed if they are deemed to have
a spare bedroom. Because of this, a lot of tenants are finding it hard to make
ends meet.

Soaring Rents and Rising Demand

Another possible reason for the rise in landlord repossessions is the rise in
rents on rental property in the residential sector. Demand for rental property
has soared in the last few years, particularly in London and the South East.
Landlords are no longer prepared to put up with tenants who fail to pay the
rent on time and so they waste no time in evicting them.

Falling Wages

The real value of wages has been falling for a number of years. This affects
low earners the most, so when you look at this trend in conjunction with the
rising rents, it is disastrous for families on the breadline.

Property Repossessions

Landlords can apply for a repossession order from the County Court when a
tenant defaults on the rent. However, they are legally obliged to give notice
to their tenant before doing so.

A report published by the Local Government Information Unit and the Electrical Safety Council has called for local councils to be given greater powers to license and fine landlords in the private sector. The report’s authors believe that this will help to improve the quality of housing in the private sector.

Councils Have Too Little Power

178 councils were interviewed as part of the survey and more than 80% of them were keen to become more involved in the private rented sector. The main things councils said they would like were:

• Better access to data telling them where individual private rented properties were located
• The power to introduce compulsory landlord accreditation schemes
• The power to take back Housing Benefit from landlords found to be letting sub-standard properties

Poor Electrical Safety

Another problem highlighted by the report was the issue of poor electrical safety in many homes in the buy to let rental sector. More than half of all house fires are as a result of electrical problems. Unfortunately, because there is no legal requirement for private landlords to have electrics checked or to give tenants a safety certificate, many bad landlords are putting their tenants’ lives at risk.

Councils Must Play a Bigger Role

The Chief Executive of the Local Government Information Unit and the Electrical Safety Council says local councils need to play a greater role if standards are to be improved in the private rental sector and criminal landlords driven out. Unfortunately, as things stand, local councils have very little authority to intervene.

Buy to let advertising has been under a lot of scrutiny in recent months
following numerous complaints from consumer watchdogs that many tenants were
being ripped off by unfair upfront fees.

Ruling by ASA
Six months ago, the Advertising Standards Commission (ASA) decided that many of
the advertisements being placed for buy to let properties were not transparent
in quoting various fees. As a result, tenants were being hit by ‘hidden’ fees
for all kinds of things, often cloaked under the ambiguous umbrella of ‘admin
charges’. Obviously it is not unreasonable for letting agents and landlords to
charge extra for the cost of producing itineraries and conducting credit
checks, but unless the upfront fees are clear, many tenants are unable to
budget for their move and end up suffering financial difficulties when faced
with an unexpected bill.

Transparent Fees
The ASA has now ruled that all advertisements for buy to let properties must
carry a clear notification of any up front fees being charged. This will help
tenants understand exactly what they are expected to pay before they move into
a property.

A ‘Move In’ Price
In an attempt to make the costs of moving into a rental property completely
transparent, the ASA says landlords and letting agents must give tenants a
‘move in’ price, or in other words state clearly what any extra fees will be
on top of the monthly rent.

Online Advertising
Since it is a lot more difficult to include details in an online
advertisement, landlords can offer fee information via an extra link to an
external page or state it clearly on their website.

A recent study by a major player in the finance market has revealed that the
patterns of renting and owning a home have changed dramatically in the last
decade. Ten years ago, most adults under the age of 35 aspired towards owning
their own home. They saved diligently and looked forward to being able to buy
a house. But thanks to the economic recession, owning a home is beyond the
reach of many young adults and more than half of adults 35 are under are
currently living in rental accommodation.

Seismic Shift in Attitudes

A decade ago, if you didn’t own your own home by the time you were 35 there
was something badly wrong. It was the accepted path through life, along with
getting married and having 2.4 kids. However, the study results have shown a
very different pattern of thinking amongst the 35 and under generation.

Renting is the Way Forward

Renting is considered to be normal and many of those questioned said they
preferred to rent rather than buy. Reasons cited included the benefits of not
being tied to one place and the ability to check out a neighbourhood for long
term potential before committing to the financial pressure of a mortgage.

High Property Prices

So the pattern of behaviour would suggest that rather then renting homes
because there is no other option, many under 35s are actively choosing to rent
a home instead of buying one. High property prices and the difficulties
involved in obtaining a mortgage are clearly a factor, but it seems that they
are not the piece of the puzzle.