In what has been described as a first by the Daily Mail, one private landlord has the unfortunate notoriety of being handed a property rental ASBO (along with a massive fine and court costs).

Plymouth Council has prosecuted the landlord, who has been in the property rental business for more than thirty years, for repeated breaches of housing regulations and failing to clean up.

Two of the properties had been divided into six bedsits and were let to vulnerable tenants claiming housing benefit, many of whom had serious problems such as alcoholism. Representatives from the council say they did try and work with the landlord, but despite their efforts, he refused to comply with the improvement notices he received and do any of the necessary work.

What kind of condition are the properties in?

The pictures of these properties have to be seen to be believed. In fact they make my old student houses look positively hygienic by comparison. Rotten flooring, bare wiring, rubbish strewn rooms, filthy carpets, disgusting bathrooms and kitchens, mouse droppings everywhere—basically not the kind of homes that are fit for human habitation.

Why was an ASBO handed out?

Plymouth Council felt that a £28,000 fine was not enough to make this slum landlord see the error of his ways, so it took steps, in the form of an ASBO application, to try and prevent him from being able to let rooms in his properties to any more vulnerable people claiming benefits. Let’s hope it works!

There has been much discussion of late into how the introduction of a Universal Credit will affect tenants currently in receipt of Housing Benefit, and more importantly, how it will affect Landlords who let properties to Housing Benefit tenants. Many experts fear that the planned changes to the current system of benefits payments will prove disastrous. Unfortunately a pilot report published by the Department for Work and Pensions appears to back this up.

The DWP conducted a research study in several areas around the UK. It concluded that a number of serious challenges would arise for tenants and landlords as a result of changes made to the existing Housing Benefits payment system.

• Benefits are currently paid weekly or fortnightly, so changing this to a monthly payment system is likely to leave many tenants struggling to manage their finances.
• Most of the tenants interviewed felt certain that they would run out of cash by the end of the month, which makes the threat of rent arrears a very real problem for landlords operating in this sector (most tenants on benefits have no savings to pay for unexpected bills and over 1/3 of those questioned were worried about the changes to the benefits system).
• A large number of tenants on Housing Benefits live in a cash economy and some do not have a bank account—Universal Credits will be paid electronically, which could be a problem.

Are you a concerned landlord in the social housing sector? If so, you are not alone—the RLA found that 92% of landlords were reconsidering letting their properties to benefits tenants.

As economic conditions worsen and the country slips ever further into a triple dip recession, the number of tenants claiming benefits is likely to increase. Many landlords are reluctant to let properties to tenants claiming benefits because they view them as more likely to default on their rent payments (and with the government announcing a cap on benefits payments that will mean tenants are forced to make up the shortfall from their own pockets, this is not an unlikely prediction).

Why don’t mortgage lenders want landlords letting to benefits tenants?

As I have just pointed out, tenants in receipt of benefits are considered a high risk, which is why a large number of lenders include a restriction in their loan offer documents to prevent landlords letting a property to a benefits tenant.

The restriction on benefits tenants has been in place for a number of years, but as more and more tenants are forced into claiming Housing Benefit—or the new ‘Universal Credit’ as it will soon become—the block on this type of tenant is going to affect an awful lot of landlords whose properties are financed by a loan.

Will the restriction be lifted at any point in the future?

Unlikely, although lenders may have to be a bit more lenient if the percentage of tenants claiming benefits dramatically increases in the next few years. Mortgage lenders use a number of criteria to work out risk profiles and these are constantly evolving, but if lenders don’t change their policies, many landlords may struggle to fill their mortgaged properties.

The deadline for submittals of 2011-2012 tax returns is fast approaching and if you are a sole trader who hasn’t even thought about doing their tax return yet, you are probably panicking about now. However, all is not lost—HMRC are aware that many first timers have no idea how to fill in a tax return, so to make things a bit easier, they are running a series of helpful Webinars during December and January. The dates for these are:

December Webinars

 Monday 3rd, 2pm
 Tuesday 11th, 8am
 Friday 14th, 1pm
 Friday 28th, 3pm

January Webinars

 Thursday 10th, 7pm
 Saturday 19th, 11am
 Tuesday 22nd, 2pm
 Wednesday 30th, 8am

The HMRC Webinars should be very helpful, so if you have never before filled in a tax return, sign up for one of the Webinars by visiting the HMRC website at www.hmrc.gov.uk. I know from personal experience just how complicated and confusing tax returns can be, so if you have never done a tax return before, it is sensible to see how the forms work rather than leaving it until 23:45 on January 31st (the deadline is 00:00) and being fined for submitting a late tax return.

How do I do an online tax return?

Filling out a tax return online is the quickest and easiest way, but before you have access to the online forms, you must register with HMRC. Unfortunately, this takes time, so if you haven’t already done so, give HMRC a call today and start the ball rolling.

With Christmas just around the corner, the forecasters are predicting snow and ice over the next week or so, so it looks like we may potentially have a white Christmas. Interestingly though, it also looks as if temperatures are not the only thing to hit freezing point as 2012 becomes 2013: a survey of landlords on the popular housing website, Rightmove, has revealed that nearly two thirds of landlords are planning to ‘freeze’ their rents for next year.

Rent and affordability

It doesn’t take a rocket scientist to work out that if rents continue to rise steeply, more and more tenants will be forced into homeless shelters and cardboard boxes. Quite simply, if rents are too high, tenants can’t afford to pay.

It’s a vicious circle

Many people living in rented accommodation are not there through choice. They may have had a mortgage and been forced to sell to pay off debts, or they might be unable to get a foothold on the property ladder because of lender restrictions and an inability to save enough for a hefty deposit. All of these reasons have led to a massive demand for rental accommodation, which in turn has fuelled the meteoric rise in rents across the UK.

However, despite the demand, it seems that many landlords are starting to realise that increasing rents to make a bigger profit is not necessarily the right move. Price the rent too high and you risk dealing with the issue of rent arrears, which is a problem faced by many landlords as the rising cost of living squeezes everyone’s income.

I read an interesting article in The Guardian the other day. Written by a fellow landlord, the article discussed the innovative notion of whether landlords should stop asking their tenants for a deposit at the start of a tenancy and instead ask them to name a guarantor, a person who becomes legally responsible for any future liabilities that may arise as a result of rent arrears or property damage.

In the writer’s opinion, this was a far more sensible approach for many reasons. Since a large number of tenants do not have one month’s rent (or more) lying around in their bank accounts, asking for a large deposit up front can put families under enormous financial hardship. There are also a number of stringent guidelines to follow when dealing with a tenant’s deposit, and if you screw up, you face a minefield of problems.

Asking a tenant to provide a guarantor is certainly one way of ensuring that someone pays when things go wrong, and if the guarantor is a member of the tenant’s family, they are less likely to default on the rent or trash the property. However, guarantees still have to be enforced when the need arises, which can be a lengthy process, so some kind of insurance cover would be a better idea.

There is no right or wrong way of tackling the issue. Ultimately it is whatever works for you, but the best way (for me) is to find a reliable tenant who pays their rent on time and keeps the property clean, tidy, and damage free.

You might assume that if you have gone to the time and trouble to take a tenant to court after they failed to pay their rent, the debt would subsequently appear on their credit history and prevent them from doing it all over again to another landlord. However, this is apparently not the case thanks to a recently discovered ‘loophole’ in the system.

Once a country court judge has ruled in a landlord’s favour and granted him a possession order, the tenant is then ordered to settle his or her rent arrears. Unfortunately, thanks to a glitch in the system, if a landlord doesn’t enforce the order, the rent debt won’t be added to the tenant’s credit file in the form of a country court judgement (CCJ).

Credit checks help make sure landlords don’t inadvertently offer a tenancy to someone who has a history of failing to pay the rent. Lenders and rent guarantee insurance companies also use credit histories to help them decide whether a tenant is a good or bad proposition, so if the information on the tenant’s file is incorrect, these companies can easily end up offering finance to unsuitable people or paying out on unpaid rent claims multiple times.

So if you have been awarded a possession order against your tenant, instead of thanking your lucky stars that you can now say good riddance to bad rubbish and forget about your tenant from Hell, make sure you enforce the court order. This will register the debt on the tenant’s credit file and help to ensure the tenant isn’t able to repeat their bad behaviour yet again.

Shaun Doran writing in the Guardian a couple of weeks ago thinks so. His argument is that continuing financial pressures faced by low income families mean that many are struggling to stay on top of their living expenses, which in real terms means that the rent goes unpaid and eventually the landlord is forced to issue an eviction notice.

Tenants in receipt of benefits are often living hand to mouth. There are always stories of some families who manage to beat the system and live a very comfortable lifestyle in a Mayfair mansion, but the vast majority can barely afford to eat let alone buy furniture and white goods for their new home. Consequently, the lure of payday loans and companies such as Bright House, where instead of paying upfront for a new washing machine or sofa they can pay for the goods on a weekly rent to own basis, is a very attractive option for many families. It sounds like a good deal, but interest rates on these agreements are very high and over the course of a few months, the customer ends up paying significantly more.

What difference will furnishing a social housing property make?

Offering furnished properties can help vulnerable tenants create a decent home for their families. It also enables social landlords to reduce the likelihood of rent arrears and enjoy a regular income afforded by a long-term tenant, instead of having to deal with a tenant up to their eyeballs in debt. You don’t even have to spend a fortune on expensive furniture—there are plenty of opportunities to find good quality second hand furnishings for rented homes.

The Royal Institution of Chartered Surveyors has issued a call to the government to take steps to regulate letting agents because it says not enough is being done to protect landlords (and tenants) from the actions of a corrupt minority.

Why are letting agents not regulated?

It is all too easy for anyone to set up as a letting agent and start taking people’s money. Anyone can open a letting agency on the high street—they don’t need any kind of qualifications and they don’t need to register with an industry body. Unfortunately, this means that some disreputable types are seeing the lettings industry as their own personal cash cow, which has left some landlords out of pocket to the tune of thousands of pounds when the agent has unexpectedly gone out of business.

The report published by the RICS revealed that many letting agents were not fulfilling their obligations: deposits were not correctly registered with the DPS, inventories were not being drawn up, and in the worst of cases, excessive fees were charged and agreements broken. Because of these issues, the RICS says the industry needs to be regulated by the government, which would then help to protect consumers from those who seek to rip them off.

How can landlords avoid being ripped off by a corrupt letting agent?I

If you choose to use a letting agency to manage your property, always make sure you employ one that is a member of a recognised professional body. It won’t guarantee protection, but it should help to minimise the risks involved.

Trying to pull the wool over the taxman’s eyes is never a good idea. You might think you can get away with not declaring income from property investments, but eventually the long arm of HMRC is going to catch up with you. Thankfully, for all those landlords who have failed to declare taxable income, HM Revenue & Customs is giving them one final chance to put right their tax affairs in the form of a tax amnesty.

Profits gained from letting out or disposing of rental property are taxable, which means it should be declared by way of Self Assessment at the end of the financial year. Of course not everyone thinks that they should pay tax on what they earn, so instead they don’t bother submitting a Self Assessment return. However, just in case this applies to you, be warned that HMRC has specialist task forces in operation whose sole job is to uncover dodgy property dealings. Those landlords who are subsequently found to have failed to declare taxable earnings will face financial penalties, and in the worst cases, may even be sent to prison for a spell.

The tax amnesty is designed to encourage offenders to come forward and admit they are in the wrong. Genuine mistakes will be treated leniently and may even escape punishment, particularly if a landlord has been given the wrong advice by an HMRC advisor. But if you have been avoiding paying your taxes, it is a good idea to come clean now before a tax inspector comes knocking on your door!