With renting as opposed to owning a property becoming the norm in the UK, landlords are finding it increasingly difficult to obtain mortgage funding for long-term tenancies. The majority of mortgage lenders are only willing to offer funding for tenancies that last between six and twelve months. Unfortunately, many landlords prefer to give their tenants long-term tenancy agreements because they offer a greater level of security to tenants.

Assured Shorthold Tenancy Agreements

In the UK, an Assured Shorthold Tenancy Agreement is the norm. Tenants are allowed to stay put in their rental homes for up to one year. Any longer than that and the tenancy agreement needs to be renewed. But a lot of landlords and tenants are not happy with this state of affairs. They want to be able to enjoy longer tenancies.

More Stability for Tenants and Landlords

Figures indicate that more than half of all tenancies in the UK last between one and three years. A further third last for four years or longer, which is similar to the situation in Europe. Since many of those living in rental accommodation are families with school age children, long-term tenancies offer more stability. Rather than moving home every year or less, which often means moving schools, too, a long-term tenancy is a much better idea for families. It is also better for landlords. Rather than having to look for new tenants and facing a possible void period, a landlord can enjoy regular rental income from a reliable tenant.

As renting grows in popularity, it looks likely that larger cities in the UK will soon have more tenants than owner-occupiers, which is a good thing for landlords.

The National Landlords Association is warning landlords that ‘no win no fee’ lawyers are beginning to jump on the deposit protection bandwagon. The claims were made during a Radio 4 programme on Friday when the chairwoman of the NLA, Carolyn Uphill, told listeners that Tenancy Deposit Protection schemes were being inundated with requests for information by no win no fee law firms hoping to make a quick buck from unwitting landlords.

Failing to Protect Deposits Could Lead to Claims

Every landlord now knows the importance of protecting a tenant’s deposit. At the beginning of a tenancy, a landlord has 30 days to place the deposit in an approved Tenancy Deposit Protection (TDP) scheme. They are also legally obliged to give their tenant important information about the scheme.

Protect Yourself from the Sharks

Most landlords do take the necessary steps to protect their tenant’s deposits. The problem is, even when a landlord places the deposit in an authorised deposit protection scheme, if he then forgets to pass on the relevant information about the scheme, he leads himself wide open to a claim. Many of the no win no fee claims lawyers are banking on the fact that inevitably some landlords will fail to pass on the prescribed information packs.
The Effect of Claims on Landlords and Tenants

The only people who really stand to gain in this situation are the no win no fee lawyers. There is very little benefit to anyone else and if such claims become more widespread, the NLA is concerned that there is a real danger relations between landlords and tenants will be adversely affected.

Tenancy deposit protection has been thrown into the spotlight recently after the Appeal Court ruling in the Superstrike v Rodrigues case held that a statutory periodic tenancy is in fact a new tenancy and therefore a deposit has to be protected anew. The Appeal Court decision also means tenancies that began prior to 2007 are no longer exempt, which many landlords were in the dark about. So what are the main points landlords need to be careful of?

Guidelines on Deposit Protection

• When a fixed term tenancy ends, always check with the deposit protection scheme you used to ensure the deposit is still protected, and if it isn’t, go through the process anew.

• When a tenancy is renewed or it changes into a statutory periodic tenancy agreement, once again, check whether the deposit is still protected. If the deposit is no longer protected, take steps to re-serve the section 213 notice.

What Happens If You Never Protected the Deposit and the Tenancy has since been Renewed?

Tenancy deposit protection legislation has become something of a legal minefield, so if in doubt about your position, it could be worth taking legal advice from a housing law specialist. Always protect yourself at all times in case a future dispute arises. The danger is that if you have not followed the correct procedures, you could end up in breech of the rules and be subjected to a fine. You will also be unable to use the possession procedure if you need to evict your tenants.

The much maligned bedroom tax came into force in April of this year. Tenants in receipt of Housing Benefit who were deemed to have spare rooms had their payments reduced. It was thought that most would downsize into smaller homes to save money, but figures released by one large Housing Association have revealed that the majority of tenants have actually stayed in their existing properties.

Why Are Tenants Not Moving?

The biggest problem faced by tenants looking to downsize into smaller homes is the lack of available and suitable properties. Many Housing Associations simply don’t have any smaller houses in their stock, which means tenants are being forced to stay put even though they are struggling to pay their rent.

Rise in Rent Arrears

Figures from the same Housing Association indicate that rent arrears rose by 9% during the first 12 weeks of the Bedroom Tax. Tenants have seen their payments reduced, but because there are no smaller properties available, they begin to fall into payment arrears.

Protest Against Bedroom Tax

Social landlords are doing their best to support tenants by giving them advice on how to better manage their money or find work, but clearly despite their best efforts, many tenants are struggling to pay the bills. In a graphic illustration of the frustration felt by many tenants, one disgruntled individual decided to cut his own throat last week whilst visiting his local benefits office. He claimed it was in protest at the Bedroom Tax. Fortunately the man survived.

Figures released by HouseMark have revealed that social landlords spent a whopping £325 million trying to resolve anti-social behaviour. This is up on last year’s figure of £300 million, which indicates that anti-social behaviour is becoming more of a problem in the rental sector.

Tragic Consequences of ASB

Dealing with anti-social behaviour is all part of being a landlord. Excessive noise is far and away the biggest problem reported, but there are many others. Some tenants are abusive to their neighbours; in other cases tenants have to deal with abuse from other residents.

One of the saddest cases of anti-social behaviour in recent years was when Suzanne Dow, a gifted academic, was driven to suicide after putting up with years of horrendous abuse from her neighbour, a social housing tenant. Despite repeated calls for help, local housing officers failed to do anything constructive to tackle the problem.

Lessons Learned

In the wake of the Suzanne Dow case, and many others besides, housing associations and councils need to start taking anti-social behaviour complaints a lot more seriously. The HouseMark report indicates that social landlords were able to resolve 9/10 cases of anti-social behaviour, which is good news for tenants.

However, a recent amendment to the ASB bill, which would have extended protection from ASB to all tenants, was defeated in parliament this month. This leaves social landlords unable to protect tenants from abusive neighbours living in private rental accommodation and although the government has promised to look further into the issue of ASB, there has been no indication of when this might happen.

Sheffield landlords are currently waiting for the results of a public consultation on a proposed selective landlord licensing scheme in the Page Hall area of the city. In line with many other councils across the UK, Sheffield City Council wants to force landlords with properties in Page Hall to apply for special licenses. The council say the introduction of such a scheme will help to protect vulnerable tenants, but landlords do not agree.

Clamping Down on Rogue Landlords

Landlords will be charged up to £750 for each property they let and the license will last for five years. Any landlords operating rental properties in the area who do not have the correct license face fines of up to £20k. In order to apply for a license, the landlord will have to prove he or she is a “fit and proper” person, which in theory should weed out those with previous criminal convictions. Landlords would also have to prove they have provided easy to understand tenancy agreements for their properties, plus gas safety certificates are in place.

Landlord Criticism of the Sheffield Licensing Scheme

Many landlords operating in the area are of the opinion that Sheffield City Council is introducing the scheme purely as a moneymaking enterprise. They say that a voluntary licensing scheme would be much better. If landlords are expected to pay out up to £750 for a rental property, rents will rise to take this extra expense into account, which will of course impact tenants who are already struggling to make ends meet.

Rogue letting agents have had almost as much bad publicity as rogue landlords in the last few years, but until recently the government has not done much to tackle the problem. Now, though, it looks as if the winds of change could be blowing in the right direction after a government select committee has released a report recommending that letting agents should be forced to meet minimum standards.

Landlords at Risk from Rogue Letting Agents

Landlords are just as likely as tenants to fall foul of rogue letting agents. The majority of landlords in the UK only have one or two properties, so they are very likely to use a letting agent for advertising or managing a property.

The RLA has long campaigned for letting agents to be regulated in the same way as estate agents currently are. Commenting on the topic, Richard Jones, Policy Director at the RLA, said:

“Almost 90 per cent of landlords in the country are either individuals or couples, many of which rely on letting agents to manage their properties properly. For too long these agents have been trusted with landlords’ and tenants’ monies without any robust regulatory system to protect it.”

Potential Ban on Rogue Letting Agents

The government select committee has recommended that agents found to be acting improperly should be banned from working in the sector. Their report also states that letting agents must be more transparent about their costs and fees. One common problem is that a letting agent can shut up shop overnight and disappear with a landlord’s cash. If letting agents are better regulated, landlords and tenants will be much better protected.

HMRC is determined to claw as much tax from landlords as possible. In recent months, HMRC inspectors have been scrutinising landlord activities, in particular the money generated by sales of buy to let investment properties. Two dedicated HMRC task forces have already been created in Yorkshire and the South East to make sure property investors are not evading their tax obligations.

Widening the Net

In a further development, HMRC has been publicising a ‘property sales campaign’ to try and round up people who have not yet declared income from the sale of rental and investment properties, so if you have recently sold a property that is not your main residence, you better hurry up and declare it to HMRC before 6th September.

An Increase in Landlord Tax Investigations

Industry experts believe that the current tax investigations are only the tip of the iceberg. They believe that HMRC is likely to ramp up its investigations after the September deadline has been and gone.

Joining the Dots

HMRC is like a dog with a bone once they have the scent of something awry, they rarely let it go. Tax investigators use paper trails to track down landlords who have failed to declare income. By correlating information from Land Registry records and tax information held by letting agents, it is pretty easy to identify any interesting discrepancies.

As the buy to let market continues to flourish and grow, it is likely that landlords will be increasingly thrown under the spotlight by HMRC tax inspectors. To avoid any penalties, it is wise to be transparent in your tax affairs and never try and outfox HMRC, or you may end up paying the price.

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BBC1 are showing the first episode tomorrow evening (10.35PM) of a new three-part documentary on Britain’s landlords. The filmmakers will be introducing a motley selection of landlords and tenants in an attempt to throw some light on the highs and lows of life as a landlord in the UK.

Generation Rent

With rental housing becoming increasingly popular, more and more families are being forced to live in rental accommodation. The rental boom is encouraging inexperienced property investors to jump on the buy to let bandwagon. Of course becoming a landlord is not without its pitfalls, and the programme seeks to illustrate what some of these might be.

First Time Landlords

One of the landlords featured in the programme only has one property, and has been unfortunate enough to land a tenant who refuses to pay the rent or move out. As a result she has fallen into arrears on her mortgage payments and is forced into the unenviable position of having to sell her belongings to make ends meet.

Another of the landlords featured in the show is at the opposite end of the scale: he owns hundreds of rental properties and makes serious cash from his HMO property empire.

Tenant Stories

In order to portray a balanced view of buy to let Britain, the show also features the stories of tenants. One tenant, a single mother who has recently been diagnosed with cancer, is facing eviction from her rental home because her landlord wants to sub-divide the property into bedsits.

So if you considering becoming a landlord make sure you watch the show so you can see how to avoid some of the problems faced by new landlords.

There have been dozens of reports of late stating that landlords have never had it so good. The buy to let market is booming and in some areas tenants are queuing up around the block for desirable properties. So on the face of it, the financial returns for landlords appear to be very good (some studies cite landlord returns of around 7% in the most sought after areas). However, the Landlords and Mortgages report recently published by YouGov has suggested that the figures are over inflated and the true situation is a lot less rosy.

Landlords and Mortgages Report

The authors of the report state that they believe total returns for UK landlords are in decline. They say that landlords’ returns were on average 5% between 2002 and 2006, but they have since fallen to 2.5%. The main reason for this, they say, is that a lot of landlords don’t take their costs into account when working out their profit margin.

Landlord Costs

There are several key costs associated with being a landlord, including mortgage interest payments and letting agency fees. These costs directly affect profit margins, so if you fail to take them into account, your rental returns will be falsely inflated. According to the report, although 93% of landlords allowed for mortgage interest payments, only 46% allowed for miscellaneous property management expenses.

Despite this, the buy to let market continues to grow, so there are plenty of landlords who see the rental sector as a good place for their cash, which is hardly surprising given the poor return offered by savings accounts.