When the government first revealed plans to make UK landlords responsible for checking the immigration status of tenants, there was a largely negative response from many quarters. Unfortunately, the proposals look set to become a reality by next year.

Unhappy Landlords
The RLA carried out a study amongst its members and found that an overwhelming majority (82%) were deeply unhappy about being asked to verify whether potential tenants are allowed to be in the country. Most felt that such a proposal would be very damaging to landlord-tenant relationships. The NLA also expressed a great deal of concern about the proposals.

Passport Controls
The final details have not yet been established, but the RLA says that landlords will probably be expected to check tenants’ passports and keep a copy of it on file. However, one of the fundamental problems with this proposal is that not everyone has a passport. Many poorer people living on benefits can’t afford to apply for a passport let alone travel abroad, so the situation becomes a lot more problematic. As such, the RLA are very critical of the government’s plans to deal with the immigration problem.

“For a Government committed to reducing the burden of red tape it is ironic that they are now seeking to impose a significant extra burden on landlords making them scapegoats for the UK Border Agency’s failings.”

Government Support for Landlords
The government is expected to provide some support for landlords to help them achieve compliance. This is likely to include a telephone support line and email service, plus a fast-track option so migrants can obtain the necessary documentation for landlords.

Recent figures released by property website, Zoopla, show some interesting
patterns in student property lets. The data took the average asking prices for
four-bedroom homes in popular student towns and cities and compared these
figures with the average student rents in the same area. The end result is the
gross yield, which tells us what landlords can expect to earn from student
properties.

Gross Rental Yields

You might be forgiven for thinking that student landlords down south would be
achieving the best gross yields on their properties, but in fact the opposite
is true. The top three areas are actually up north:

1. Glasgow – 4.95%

2. Hull – 4.80%

3. Manchester – 4.59%

London is only number 10 on the list, despite the high numbers of students
living in the capital, which contradicts previous research carried out by
different property firms.

Why Are Rental Yields Higher Up North?

The most obvious reason for the significant north-south divide is down to
property prices. The property market has remained fairly stagnant in many
northern cities whereas property prices are soaring in London and the
southeast. This, combined with the increase in demand for rental properties,
has had a big effect on average gross rental yield.

Why Let to Students?

Student investment properties are not as lucrative as some other types of
rentals, but they do have a number of advantages. Students are a steady source
of income and as long as you buy a property in a popular area, you won’t ever
be short of tenants. Students are also more likely to pay their rent up front
—sometimes up to a year in advance.

Landlords are being warned to watch out for councils adding on illegal charges
for HMO licences. HMO and tenancy deposit lawyers are concerned that some
local authorities are illegally charging landlords with HMOs extra fees for
administration costs and inspections when all they are allowed by law to
charge is the cost of the actual HMO licence.

Widespread Problem

Councils are not averse to adding on extra fees wherever they can get away
with it, as a recent High Court case has proven. A group of shop owners
objected to being charged extra fees that were not related to their original
licence application. Thankfully for landlords, the ruling from that case also
affects them, so if you have recently received a bill from your local
authority in respect of an HMO licence application, you should look at it
carefully.

Property Tribunal Decision

Oxford City Council has already had a go at illegally charging landlords extra
fees. One landlord in the city was so incensed at being asked to pay a licence
fee variation charges that he consulted a lawyer. The lawyer tried to recover
the fees from the council, but they refused to backtrack. So the lawyer took
matters further and the case was heard in front of a Residential Property
Tribunal. The landlord won and the council was informed that their fees were
illegal.

Unlawful Fees

So if you were charged any extra fees when you applied for a licence from your
local council in order to operate an HMO property, the charges may be
unlawful.

The government made an announcement yesterday regarding a new code of conduct
for landlords and tenants. Speaking at the Conservative Party conference in
Manchester, Communities Secretary, Eric Pickles, unveiled the new ‘Tenants’
Charter’.

Raising Standards in the Private Sector

The Tenants’ Charter has been designed to encourage long-term, family friendly
tenancies in the private rental sector. Mr Pickles believes that the new
government reforms will help tenants get a better deal when renting a home in
the private sector. A model tenancy agreement has been drawn up to help
landlords, which is designed to set a benchmark within the industry.

What’s Included in the Tenant’s Charter?

Tenants can request a longer tenancy as long as the landlord agrees. The new
tenancy agreements will include a probation period and break clauses so both
parties have the option to end the tenancy early. This will help reduce costs:
landlords won’t have to pay letting agents for renewing contracts as
frequently. The Tenants’ Charter will also give tenants better information
about their tenancies and where to go if something goes wrong.

Helping Hard Working People in the UK

Mr Pickles says the new initiatives will help hard working families budget
better for the cost of living, as well as ridding the sector of rogue
landlords.

“The last thing we want to do is hurt hard-working tenants by increasing costs
and strangling the sector with red tape. But families deserve stability for
their children, and all tenants deserve a good and transparent service from
their landlords and lettings agents.”

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.