New Council Tax Ruling is a ‘tax on Landlords’

Council tax relief may end on rental property depending on the local council

How will the new Council Tax regulations affect the Rental Market?

Rented property as Second Home 
If you own property that is rented you officially have a second home. If this property is furnished and empty for a period between tenancies, Local Councils have been obliged to offer discounts of between 10-50% on Council Tax, although in practice most councils only allowed a 10% reduction in fees.

This situation was already biased against the rental sector when you consider that a single occupier of a property can apply for a 25% reduction, but a Landlord could only get 10% relief.

Previous Legislation on Rented property and Council Tax
Previously if a rental property was empty and unfurnished there was no Council Tax due for six months, and after that period it could also qualify for up to 50% discount, as per the furnished property detailed above.

Second homes have long been controversial because owner non-occupiers have been accused of tying-up available living space while effectively draining the economy, by not being fully involved in the local community. However we argue that Landlords do not fall into this category. In fact they may be the only ones providing affordable housing in some areas of the country.

New Council Tax rates
New Government regulations announced last week, give responsibility to Local Councils for setting Council Tax discounts on second homes. As each Council comes under growing financial pressure it becomes increasingly likely that Councils will scrap any relief on Council Tax on second homes, and rental property.

While property undergoing major repair work or structural changes remains exempt from Council Tax bills for up to 12 months, each Local Council will chose what constitutes ‘major work’. It is unlikely to include upgrading heating systems, replacing windows, or redecorating – all of which responsible landlords will do periodically to protect their investment and to keep up the standard of housing.

No incentive for landlords to refurbish property
In a week where a landlord in Plymouth is in danger of getting an ASBO because of the condition of his properties, does this send out the right message to responsible landlords?

This new legislation does not take into consideration the financial pressures on private landlords who are often working on tight margins or indeed could be subsidising their investment now to gain long term benefits as ‘pension plans’ for the future. In effect they are being penalised for being fiscally responsible.

The Council housing sector is not able to place all the people who need to rent property, so if Councils put more pressure on private landlords they may decide to sell up and put their money elsewhere. After all being a landlord is not ‘easy money’.

Riley Marshall are Sales and Rental sector agents. Our blogs are intended to inform, and we welcome debate, please feel free to comment on this page or visit our Facebook page.

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Trends in the Rental Market

After fluctuations in house prices over the first half of the year are we settling down into a steadier market?

fluctuating chart

It turns out that depends on how you collect your figures. For instance Halifax announced an increase in house prices in June 2012 of 1% while Nationwide reported a 1.5% drop in the same period.

While this may seem at first glance to suggest that one provider is doing better than the other the truth is more complex. Nationwide directly compare figures for June 2012 against June 2011, Halifax take a 3 month period and average out a monthly figure over a full quarter. This ‘smoothing’ of the market effects perhaps shows the underlying trend more accurately than a direct monthly comparison, especially when the monthly figures are somewhat volatile.

The NAEA (National Association of Estate Agents) commented on their blog last week that if the market dips any further there may be terms such as slump, recession or even depression and you can see their comments here.

Buy to Let Mortgage Provider Paragon reported an increase in rental yields* on rental property from 6.1% in the first quarter of 2012 to 6.5% in the second quarter. Professional landlords reached achieved slightly better returns with an average of 6.9%.

John Heron, managing director of Paragon Mortgages, said: “Strong tenant demand has continued to place upward pressure on rents and we have as a result seen yields strengthen despite the pressure on consumers. It is no surprise to see that more experienced landlords achieve better yields with this being driven by their choice of property type and their approach to management.”

If you need buy to let information from specialist letting agents in South East London feel free to contact us to discuss your requirements info@rileymarshall.co.uk.

 

*Rental yield is defined as a property portfolio’s annual rental income as a percentage of its total value.

Thank you to Paragon for the information and quotes http://www.paragon-mortgages.co.uk

Bucking the trend of slating the ‘Olympic Landlord’

The positive side of The Olympics and the  rental market in London

While many landlords and agents have come under fire from the media because of the higher rents they are charging over the Olympic period, bear in mind that without residents offering this facility we would not be able to house all the extra visitors the Games will generate, because our hotels would be filled beyond capacity.

It may seem that some of the properties are expensive, however take an example of a three-bed house in Greenwich sleeping eight people, which is being rented for £11,000 during the Olympic Games period – including the opening and closing ceremonies. So sixteen nights’ accommodation for £85 per person per night, which sounds much more reasonable, especially when you take into account the owners higher risk and depreciation, not to mention the higher demands being made for this type of tenant who is expecting hotel-like service.

Also while these temporary tenants are staying in the community they will be spending money in local shops, cafes, restaurants and bars. This could well be happening in areas that don’t traditionally benefit from tourism.

This is not to excuse the behaviour of property owners who have treated their long-term tenants badly but, as always, this is a minority of people in a sector of the industry that has risen to the challenge of accommodating extra visitors in a creative and flexible way. Most landlords have taken the view that if their long term tenants are settled they will not try to ‘cash in’ on the Olympics, but where their property is naturally available they have tried to maximise their assets.

The role of the Agent is always to find the best (highest) rent that the market will bear for their clients property and while some Agents may have been very bullish about the market it is always easy to criticise this attitude in retrospect. Landlords were expecting high prices, tenants were expecting high prices, no one knew what the supply and demand figures would actually be and so agents had to test the market to ensure they didn’t let property too cheaply. It is worth noting that Estate Agents would have been criticised for this action as they are for charging high rents.

There are many local people who do not fancy trying to live their normal lives with the disruption of the Games going on who will be away for the duration and for them the chance to let out their property allows them to take a comfortable holiday and make a little extra money too.

Anyway with the Games almost upon us perhaps it is time to draw a line under this argument? There are unlikely to be any visitors that have left it this late to rent accommodation.

You can see out other blog on Olympic letting here.

How has the Olympics affected the London rental market?

Image

With around 4 million extra visitors to London over the Olympic period it was forecast that the rental market would explode during the games, the reality has been less inspiring.

Properties that are very luxurious, or have views of one of the venues, or those that offer the chance to stay in central London while visiting the games, have been successfully and profitably let, but the chances of renting out an average family home in the east end of London are looking increasingly less likely as the games draw nearer and landlords are accepting that they are not likely to cash in on the Olympics.

In April this year The Guardian reported one agent who has closed his books on the Olympic lets because he is oversubscribed and another manager of a chain who confesses they had let less than ten of the five hundred Olympic lets on their books.

There have been cases of unscrupulous landlords evicting tenants illegally to take advantage of the higher rents that can be achieved during the Olympics. One case highlighted by the BBC is of Ninna Thorhuge who was given two weeks’ notice to leave. This is not legal and Housing minister Grant Shapps gave a statement to the BBC condemning this behaviour “Landlords should be under no doubt that it is a criminal offence for them to evict a tenant without giving proper notice, and that anyone found guilty of doing this – or of harassing a tenant – could lead to a custodial sentence of up to two years.’

For landlords to act within the law, tenants must be served with a valid notice before they can be evicted, which is usually two months, and then they can only be evicted after a court order has been issued, and a baliffs warrant granted.

Evicting long term tenants is a very short sighted attitude that is unlikely to pay off for landlords. When the mass of people abate after the Olympics, those landlords with long term regular tenants may well feel they have the last laugh as other landlords all try to relet their Olympic lets at the same time.

In many cases the short term gains will be wiped out by the void periods between lets, the expense of adding furniture and fittings and the increased wear and tear likely to property let on this basis.

There were reports of similar property scrambles in Sydney and in in Vancouver after the Olympics in those cities, with parallel tales of disappointed Landlords and disgruntled tenants.

Landlords who are renting their property on a short term let should see our blog on the ‘legalities of renting during the Olympics’.

EPC’s required for Rented Property

EPC - Energy Performance rating chart

Are you a property landlord who wonders “how do the EPC regulations apply to me?”

Riley Marshall looks at Energy Performance Certificates in rented housing, what you need to know as a landlord and how it can even benefit you.

What is an EPC?

EPC’s or Energy Performance Certificates details information on typical energy use and costs for a property. They have been introduced to make clear to potential tenants and purchasers what energy usage is like on each property when comparing properties on the market for sale or rent. This means they can make an informed decision about whether to proceed with a purchase or tenancy.

It allows at-a-glance comparisons between properties, by grading the property on a scale of A to G – where A is most energy efficient, and G is the least efficient. (The picture at the top of this page shows this chart that makes up part of the report.) The rating is similar to those that are supplied with electrical goods such as fridges, which we are all familiar with now.

The report details which energy saving measures could be implemented to make property more efficient. It will make recommendations on which works are suggested and what that could save the occupier money. There is also a ‘potential’ grading, which shows what could be achieved if energy saving measures – such as insulating a loft – were carried out.

I am a landlord, why do I need an EPC?

An EPC is a legal requirement for any property that is newly-built, or placed on the market for sale or to rent in the UK. If you are a property owner and you need an EPC you must use an accredited domestic energy assessor DEA who will assess your property and provide the certificate. The cost will vary depending on the size of the property and the area it is located. They are valid for 10 years.

Do all properties need EPC’s?

Yes, even if they are newly built, all properties will need an EPC as soon as they come on the market for sale or rent. Where a building has been split into individual units an EPC will be required for each unit that has a heating system.

What is a Domestic Energy Assessor (DEA)?

Approved DEA’s are registered with the government scheme. The government have appointed Landmark to run the website for this scheme and details can be found here www.epcregister.com. You can opt out of displaying your own property on this site, but agents who are offering your property for sale or rent will be obliged to publish it on their website. Potential purchasers or tenants are entitled to a copy of an EPC.

What does my managing agent do?

Your Letting Agent can usually recommend contractors and can even arrange an EPC for you with a Domestic Energy Assessor. You ca can find your own, but you should check that they are members of an accredited scheme to ensure they are qualified, insured and competent, and that the certificate will be valid.

What do I need to do with the information on the report?

The recommendations made in the report are voluntary. As we write this post you are not obliged to carry out any of the works on the report, it is just for information. Obviously as the Government passes further legislation to make us greener as a nation, this may change.

What else do I need to know?

If you have had an EPC issued you can use the reference number to check out how much money and carbon emissions you can save by going to the online EPC Advisor http://epcadviser.direct.gov.uk. For more information visit the Government webpages about EPC’s and selling/renting property. 

Does my rental property qualify for the Green Deal?

If you decide to take action based on the report, then some improvements may qualify for funding through the governments ‘Green Deal’ initiative. This is a scheme which aims to reduce the national carbon emissions and make homes more energy efficient. The Green Deal launched in October 2012 and allows people to make energy-saving improvements to their property, without having to pay for the work up front. The cost will be added to the electricity bills for that property and spread over time. When the occupier moves on the debt will stay with the property, because the energy saving is also staying with the property. Further details on the Green Deal are available on our ‘Green Deal – energy improvements ‘for free’’ blog.

Is your Olympic let legal?

Many landlords are not aware of the legislation in place affecting those who intend to rent out properties during the Games, we answer the question “What are the legalities of renting during the Olympics?”

It is relatively straightforward for people to rent out rooms in their own homes during the period but if you have a whole property to rent out, proceed with caution. London Councils have different rules regarding renting out self-contained properties.

Contact your local planning department about the rules regarding lets of less than 90 days. Westminster, Kensington & Chelsea and Camden and Tower Hamlets charge £335 for a planning application to change use from Residential to Temporary Sleeping Accommodation. However it appears if you live in Southwark you may not need permission although you should contact them to discuss your plans. Their website states

… the council will not actively be taking enforcement action against those who rent out their homes as a one-off during the Olympics. http://www.southwark.gov.uk/info/100007/housing/2577/renting_out_your_home_during_the_olympics 25/06/2012

If you have a mortgage on your property you will need the permission of the mortgage company to let out your house, and you should make it clear to them that it is a short term let.

You must notify your insurer of your plans or you will not be covered. Landlords should be clear about what their insurers will cover if the property is let on short term lets, as it may not be as comprehensive as when it is owner occupied.

Landlords will need to have a Gas Safe Engineer carry out safety checks on any gas appliances and issue a Gas Safety Certificate. Fixed wiring systems should be checked for safety and any electrical equipment PAT tested to ensure they are safe for a tenants use as this proves due diligence.

Unlike longer term tenancies, where tenants would expect to bring some of their own belongings, properties will need to be fully furnished to the level that would be expected in an hotel, including crockery, kitchen utensils, bedlinen etc. The rent may include the bills as it will not be practical to register tenants for utilities – although it might be practical to read meters and charge accordingly for usage.

Landlords must be aware that they are taking a risk with items that are left in place. Anything valuable should be removed (including any of a sentimental value). It is advisable to take a deposit from tenants against damage, but accidents do happen and sometimes money alone cannot compensate for loss.

Having the money to visit the Games and pay a high level of rent does not guarantee that the tenant will be wholly reliable or responsible either, so treat the transaction as a business arrangement. Be aware of what might go wrong, limit the damage that could be done, and do not get personally involved. It is a good idea to employ an agent to oversee the legal process, compile and check inventories and deal with tenants checking in and out.

You should also be aware that some developments have Head Leases that prevent subletting on a short term basis, and may Assured Shorthold tenancies will not allow the tenant to sub-let. You should check with your Management Company or landlord before making arrangements to let. While Council tenants are not able to sublet their property, and if they are found doing so they may face eviction.

Earnings from renting out property must be declared to the tax office.

Riley Marshall Estate agents are able to give you advice to stay legal if you are considering renting your property in the short term.  Please contact us on info@rileymarshall.co.uk with your question.