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Landlord Property Management

from "UK Landlord" magazine, May 2009

This section is intended to provide assistance to landlords throughout the life-cycle of buying, renovating, letting and selling a property. It also contains practical and technical information aimed to help landlords maintain their properties effectively and in compliance with the law.

Buying & Selling Property

Property-savvy women turn their backs on banks

A new approach to property management and confidence in the sector sees female landlords predict the end of the credit crunch in nine months. New findings from the NLA show women in property are positive about the future with 62 per cent planning to expand their property portfolio in the next 12 months and a further 32 per cent admitting that the credit crunch has had no impact on their portfolio plans. 87 per cent of women surveyed also believed property brings a better return than interest in savings, while 85 per cent put their trust in bricks and mortar rather than leaving money in the bank.

Female Landlords' new approach

The survey of 500 property women revealed that women are radically revamping the sector with increased professionalism, attention to detail and greater customer service as the credit crunch demands a new approach. Over half (58 per cent) admit to upping their game in the current economic climate, with 63 per cent providing a rent freeze for long-term tenants, 10 per cent reducing rent while 27 per cent are introducing added extras including offering a free life coach, flowers and wine for tenants, free monthly window cleaner and flat screen TVs and free broadband.

London council threatens estate agent ASBOs

Estate agents who plaster their For Sale signs on properties which they are not selling could face penalties and legal action by Harrow council.

In response to what it describes as the mushrooming of estate agents' signs in its borough, Harrow Council plans to use powers under the Responsible Retailer Agreement to deter unscrupulous estate agents from putting up signs on walls and in gardens of properties they have not been instructed to market for sale.

The Responsible Retailer Agreement has been likened to an Anti-Social Behaviour Order for the retail sector. It is meant to ensure traders comply with trading standards and environmental regulations. The Council will ask property companies which have been the subject of complaints about gratuitous use of signs to sign up to the Responsible Retailer scheme for one year. If they persist in putting up a For Sale board on a private property they can face police prosecution for criminal damage and the owner of the property can take action through the civil courts for damage to property. If estate agents put up hoardings or signs on public property such as walls or road signs without permission they will face a penalty or legal action for obstruction of a public highway. Councillor Susan Hall of Harrow Council said: "A slump in housing sales is not a licence for dodgy estate agents to take a hammer and nails to any piece of the street they like for free advertising. If they do not obey the law, they will find us, and not new buyers, moving in."

Prison for buy-to-let fraudsters

Five directors of a property investment group which handled buy-to-let investments of £80m have been sentenced to jail after defrauding investors of millions of pounds.

The Practical Property Portfolio (PPP) companies sold around 4,000 residential properties in the north of England to at least 1,750 investors in exchange for an estimated £80m.

The case was brought by the Serious Fraud Office which had been alerted to the fraud by one of the investors who filmed the property that PPP had purchased on her behalf using her pension savings. In stark contract with the glamorous show home she had visited before parting with her savings, it turned out her investment was a burnt-out derelict shell of a house in a street of properties sold to other investors which had become so vandalized that nearby graffiti referred to the street as the 'Gazza [sic] strip'.

PPP's five directors John Potts, Peter Gosling, Natalie Laverick, Peter Graham and Eric Armstrong all entered guilty pleas and prison sentences were given, with John Potts, the former chairman of PPP sentenced to five years.

The large investments were used to pay the directors' extremely large salaries and fund lavish lifestyles. In passing sentence at Newcastle Crown Court, HHJ Whitburn QC said of Potts that he had "looted" from the company, "spent blatantly" and that he "demonstrates profligacy on a heroic scale".

Finding Tenants

Foxtons’ decision could be far-reaching

The Office of Fair Trading (OFT) welcomed a Court of Appeal judgment on 2nd April, confirming that if the OFT is successful in its case against unfair renewal fees, then all the existing agreements that Foxtons has with landlords will be unfair.

The fairness of the terms themselves that are used in any Foxtons' contract were considered in the High Court during the week commencing 27 April; at the time of going to press, the Court had not yet issued his decision.

The OFT had sought an injunction to prevent Foxtons Limited from using unfair terms in its lettings agreements which require landlords to pay Foxtons substantial sums in commission where a tenant continues to occupy the landlord's property after the initial fixed period of the tenancy has expired, even if Foxtons plays no part in persuading the tenant to stay and no longer collects the rent or manages the property.

The OFT has also objected to Foxtons' terms that require landlords to pay these sums after they have sold the property. The Court of Appeal rejected the decision by the judge in the High Court that enforcement action on unfair contract terms could only be taken to protect consumers in relation to future contracts. It stated that the Unfair Terms in Consumer Contract Regulations aim to protect consumers, and that traders should not have the freedom to pursue existing customers without restriction, in correspondence or by litigation, in order to enforce contractual terms that have been found to be unfair.

Landlord Tenant Relations

Spotting serial rent dodgers

It seems the current economic downturn has not deterred tenants who make it their business to professionally avoid paying rents. Tenant eviction service Landlord Action has seen an increase in tenants not paying their rents and producing false references to move to the next tenancy. Paul Shamplina of Landlord Action is recommending that all landlords look at prospective tenants' three most recent months' bank statements. You should also request proof of a regular salary being paid, the date it is paid, other living expenses and, most important, evidence that tenants have been regularly and currently paying their rent. The NLA's Tenant Check service has been developed to help landlords take informed decisions about their prospective tenants. The cost-effective online service enables landlords to obtain information fast, for example, to establish if a prospective tenant is using an alias name, multiple addresses or even a bogus employer to try and secure a property.

Bad tenant register

Under current data protection laws it is unlikely that a 'bad tenant register' could exist to warn landlords of rogue tenants. The recent case by the Information Commissioner's Office against a company which provided information to over 40 construction companies on the backgrounds of builders without their knowledge or consent was considered a breach of the Data Protection Act.

Paul Shamplina of Landlord Action confirms that "private companies such as Landlord Action do hold their own list of rogue tenants. Although you can get a register of people with County Court Judgments, unless a landlord has taken possession action in the past and actually enforced a money order, these don't get registered at all, leaving [serial rent dodging] tenants free to rent again."

Landlord Tenant Relations

Rent arrears on the increase

Research published by the NLA in March of this year details a significant rise in rental arrears. The NLA believes this goes some way to explaining the increase in repossessions as a growing number of landlords are having problems meeting their mortgage repayments. The research revealed 37 per cent of landlords were experiencing tenants with arrears in the first quarter of this year. When faced with arrears, only 50 per cent of landlords attempted to recover the loss of earnings through the courts. For the most part, landlords found the court system straightforward but many reported waiting times of over three months before their case was even heard. NLA Chairman David Salusbury recommends landlords and tenants communicate and work together to tackle financial problems before they result in a loss of rent and a potential default on mortgage repayments.

Complying With The Law

Major crackdown on fly-tipping in North East and Hull

Did you know that if you dump waste illegally you can be fined up to £50,000 and/or face up to twelve months in prison? It doesn't matter if that waste belongs to you or a previous tenant, you are still responsible. As either a householder or landlord, if you use someone to dispose of your rubbish or your tenants' rubbish and they go on to dump it illegally, you personally can be fined up to £5,000. In the North East and Hull, the Environment Agency and local authorities have launched their biggest ever crackdown on fly-tipping. The 'Fly-tipping: Serious Crime, Serious Punishment' initiative is being supported by football legend Peter Beardsley MBE. According to Kate Halka of the Environment Agency "Fly-tipping has a significant impact on the environment and on taxpayers. We have a strong enforcement team in the North East, made up of ex-police and military staff. Known as the 'Swat' team, our environmental crime officers often work undercover, using forensics to identify offenders. Our proactive approach will also help to raise awareness that there are legal alternatives for waste disposal." By law, if you carry, collect or dispose of household, commercial or industrial waste you must be registered with the Environment Agency. If you employ a person or company to take away your waste you must make sure that they are registered to do so.

For information on registered waste carriers and licences call 08708 506 506. To report a waste crime call 0800 80 70 60. Further information can be found at www.environment-agency.gov.uk/flytipping.

Unlawful eviction of council tenant

A landlord has been found guilty of unlawful eviction of a Council's private-sector tenant. The landlord was sentenced at Portsmouth Magistrates Court to a 12-month community order involving 150 hours of unpaid work. The court awarded £650 towards court costs. Portsmouth City Council took action against the landlord who had changed all the locks to the property and left all of the tenant's belongings outside following a dispute about payment of rent. This is not the first time Portsmouth has taken enforcement action on behalf of its private-sector tenants. It successfully prosecuted a landlord last year for poor maintenance and management of his properties. That landlord was fined £8,000.

Social Housing

NLA launches LHA reform campaign

The NLA has published research that shows that major changes to the way housing benefit is paid to tenants wastes millions of pounds and will result in increased homelessness. Local Housing Allowance (LHA) was introduced for new tenancies in April 2008 when it replaced the old housing benefit system. Under the new rules, instead of rent being paid directly to private landlords to cover housing costs, it now goes straight to tenants who then have the responsibility of passing on the rent money to their landlord. The NLA's research on Local Housing Allowance, which was conducted between January and March 2009 using the NLA Members' Survey Panel of 1,600 landlords, has shown that in practice many tenants are failing to pass on these payments to landlords. This is causing major problems for landlords, and the NLA has found that in the most serious cases, landlords are facing repossession because rent money does not arrive and they are therefore unable to meet their mortgage commitments. Currently, a landlord must wait for eight weeks of rental arrears before the local authority can take action and an automatic 'trigger' pays the rent directly. In reality, arrears can be as long as three months before the landlord receives their first payment. If landlords try to reclaim the lost money, they must pursue the tenant privately through the courts. If you would like to add your voice to the NLA's campaign for LHA reform, please fill in the postcard inserted in the centre pages of this magazine by Wednesday 10 June 2009.

Landlords leaving LHA market

52 per cent of landlords surveyed by the NLA have decided they would not let, or be 'less likely' to let, to LHA tenants. A further 43 per cent of those landlords who have already tried the new system said they would now be leaving this failing market because of increased uncertainty about rent payments. "It is clear that LHA is not improving access to housing and has actually reduced tenant choice. This was not the Government's intention but the new system is simply not working. If landlords are opting out of this part of the market, where will these families go? The situation is now becoming very serious," said NLA Director Richard Price. With a forecast £2.6bn being spent on LHA during 2009- 10, the NLA is calling for urgent changes to dealing with rent arrears, vulnerability and greater flexibility to allow landlords to be paid rent directly. These are set out in detail by NLA Chairman David Salusbury on page 4.

The NLA's research can be viewed here.

Credit unions’ LHA scheme

Credit Unions look set to play an increasingly useful role for landlords and tenants in the social housing sector. First-hand experiences from NLA members appear to support this. NLA member Michael Scott and his daughter Katrina now have 15 tenants who have agreed for their local housing allowance (LHA) to be paid by the Council directly to a Coastal Credit Union LHA account. The tenant signs a declaration that they will not withdraw any money paid into this account, and if they try to, the Credit Union will show them the signed document as a reminder. Credit Unions are non-profit making banks. The Coastal Credit Union in Dorset charges landlords £5 per payment. It also requires a tenant to pay a £3 joining fee and to open their account with £1, although opening an account is relatively straightforward as tenants only need to provide proof of their address (rather than passports or driving licences). "We now make it a requirement for our tenants to have a Credit Union account if they are receiving housing benefit," Katrina Scott told UK Landlord. "This provides us with a bit more security, and our tenants are happy as it means they don't have to worry about organising their rent payments, unless there is a shortfall in what the Council pays towards the rent."

LHA surplus abolished

From April 2010, households will no longer be able to keep any of the surplus if the Local Housing Allowance (LHA) they receive is higher than their rent. While the Department for Work and Pensions explains that this new measure has been introduced under the Government's 2009 Budget (see below) to support work incentives, the Treasury states that LHA costs have exceeded the planned expenditure for this policy. For those already receiving LHA, this reduction will not apply until the anniversary of their claim. This measure will only affect surpluses, and will not produce rent shortfalls.

Finance & Tax

Few surprises from 2009 Budget

The Budget for 2009 contained nothing of great cheer for landlords or the country at large. The following announcements will be of most interest to landlords:

LHA Reform. One surprise for many is the abolition of the £15/week surplus that tenants are allowed to keep if the rent of the property they have negotiated is lower than the Local Housing Allowance rate.

Stamp Duty Land Tax. The most positive part of the Budget is the Chancellors’s announcement to extend until 31st December 2009 the existing temporary relief from Stamp Duty for residential property purchases costing not more than £175,000. This will give a little more flexibility to buy-to-let investors who are looking to expand their portfolios. After that date, the threshold is due to revert to £125,000. There will also be measures to facilitate shared ownership and leasehold enfranchisement to allow relief when a group of leaseholders come together to buy the freehold of a whole block.

Furnished Holiday Lettings. Landlords who let out furnished holiday lettings in the UK were surprised that the Chancellor will withdraw as from April 2010 the tax relief that applies to this type of lettings business which is currently treated as a trade. This has meant that owners of British holiday lets can set off their losses made on their investment against other income (such as mortgage interest payments and maintenance bills) and that gains on the property can be rolled over.

Inheritance Tax. If you own woodlands or agricultural property in any country of the European Economic Area, you can claim inheritance tax relief if this land qualifies for relief and if you paid inheritance tax on this type of property that was not in the UK, you can claim a refund dating back to April 2003.

Energy efficient homes. £435m will be directed to support energy efficiency schemes for homes, firms and public buildings, and £500m has been allocated to kick-start stalled housing projects, which includes £100m for local authorities to build energy efficient homes.

The Chancellor did not heed the call from the NLA and others to reduce the VAT rate to 5 per cent for repair and maintenance of residential property, despite a decision of the EU to allow member states to reduce VAT on services. The reduction could have provided a useful benefit to landlords and a much-needed stimulus for the construction industry.

Landlords’ energy saving allowance

If you are a landlord and make energy saving improvements to your property, you could reduce the tax you pay by claiming the Landlord’s Energy Saving Allowance (LESA). Comprehensive information about the LESA is now easily accessible from one place online. The Direct Gov website sets out how to find out if you are eligible for the allowance, what the allowance covers and how to apply for it.

For more information, see www.direct.gov.uk.

New powers for HMRC

HM Revenue & Customs has new powers to carry out compliance checks covering PAYE, VAT, Income Tax, Capital Gains Tax and Corporation Tax. These allow tax inspectors to inspect business premises, assets and records. There is also now a single approach to asking taxpayers and third parties for additional information for all taxes, and there are new time limits for assessments and claims. For more details visit the HMRC website (www. hmrc.gov.uk) and speak to your tax adviser. Landlords who are self-employed can call the HMRC Self Assessment Helpline on 0845 900 0444.

HMOs

Tough licensing rules for Peterborough HMOs

Peterborough City Council is the first local authority in the country to be given the go-ahead to require houses which are two or more storeys high and have three or more people making up two or more households to be licensed. House shares, room-lets and bed-sits will also be included in the scheme. The Department of Communities and Local Government has agreed that Peterborough can as from 1st July 2009 extend the usual rules that apply to houses of multiple occupation (HMOs) to address overcrowding, poor housing conditions, poor management and antisocial behaviour. The new guidelines will initially only be enforced in Millfield and New England. However the council will continue to monitor the whole of the city to see if it is necessary to extend the additional licensing scheme to other areas. Landlords who run an HMO without a licence can be fined up £20,000.

Finance & Tax

Debt charity prioritises rent payments

NLA regional representative Maureen Treadwell has secured a useful commitment from the Debt Advice Network, a charitable organisation with a nationwide network of professional advisors who help people with debt problems.

At a landlord forum meeting at Rushmoor Council in March 2009, the charity stated that its advisors would recommend putting rental payment as the number one priority when counselling tenants. "As a charity, our main focus is in the prevention of homelessness and our approach is innovative," Rita Walsh of the Debt Advice Network told Maureen. "We can do so much to help the tenant avoid arrears and our service can start the moment the tenant misses a payment. Maintaining a roof over their head has to be their number one priority so effectively we support landlords. Many tenants fail to pay rent because they have got into financial problems with credit cards or doorstep lenders and in the current climate, individuals who would normally have been highly credit-worthy are having problems. We encourage tenants to pay the most important debts first; that means putting rent payment as number one on their list. We find tenants tend to pay the debts where the creditor is pushing the hardest and these are not always the most important debts. We can stop this harassment and can actually set in place a repayment programme with these lenders that will be manageable for the tenant."

If you want the Debt Advice Network to provide advice and support to your tenant, you need get the consent of the tenant as the Service works with the tenant rather than the landlord. Most tenants who are having problems with debts are extremely distressed and welcome the support from local counsellors who will see the tenant very quickly. The Debt Advice Network is also able to offer support to landlords who are facing financial problems themselves.

For more information: www.debtadvicenetwork.org or call 0300 011 2340

Safety in Your Rental Property

Fire prevention grants in Anglesey

Anglesey County Council is making funding available to local HMO landlords to cover 80 per cent of the costs of introducing fire prevention and fire safety measures up to a total contribution of £10,000 per HMO.

The grants are designed to cover the supply of fire fighting equipment such as fire safety blankets and fire extinguishers, as well as providing tenants of the HMO with safe means of escape, for example through the installation of fire doors. Mike Davies of the Housing Grants department at Anglesey told UK Landlord that out of a total annual budget of £115,000 for the period 2008-2009, just £40,000 had been allocated to landlords for fire safety measures. The remaining £75,000 will be made available during 2009/2010 in addition to the annual allocation of £115,000.

“Landlord interest tends to increase after a successful prosecution of a landlord who is in breach of fire safety rules and this was the case recently when a number of landlords applied for grants,” according to Mr Davies.

Where a statutory inspection by council officers reveals that an HMO does not fully comply with the relevant fire safety rules, Anglesey will write a letter of recommendation to landlords advising them what needs to be done and what grants are available. If the landlord fails to take action, legal proceedings will follow.

For more information about how to apply for fire prevention grants contact Gwynfor Davies (Grants Officer) on 01248 752217.

Expert fire safety advice

The NLA is committed to inform as many landlords as possible on the need to implement fire safety measures in their rental properties. In this regard, NLA Director Richard Price will be a member of a panel of experts taking questions from the audience at the bi-annual meeting of the international fire industry in Birmingham.

Landlords can attend the International Firex event (11-14 May 2009) for free and see a range of the latest fire safety products and devices on the market. The NLA recommends its members apply the fire safety guidance published by LACORS and use the NLA’s fire safety logbook.

Both are available here.

Maintenance & Repairs

Gas and electric meters

The article in the last issue of UK Landlord on the difficulties encountered by Derek Jones in his dealings with a utility company has struck a chord with other readers, a number of whom have telephoned and written in to share equally frustrating experiences.

NLA member Mrs Helen Murphy waited more than two months to obtain a new pre-paid gas card from British Gas after a tenant left. Without a card she was unable to get the hot water she needed to clean the property before a new tenant moved in and, worse still, the property could not be let as habitable until the gas was on. As a result of her experiences, Mrs Murphy would like to see dedicated lines at utility companies to deal with meters

Gareth C. Thomas wrote to say his tenants had also changed utility meters without his approval and that it took many visits and telephone calls to the meter company and the gas supplier to change the card meter to a credit meter. Gareth suggests that there should “some kind of obligation by utility companies to notify landlords before changing meters.”

Another NLA member, Michael Scott, a letting agent with about six hundred units under his management, confirms this is a problem he has come across all too many times. He also warns landlords to watch out for badly trained meter readers who try to collect payment for debts at properties they do not manage.

Perhaps one of the worst experiences was suffered by Colin Evans whose tenant was sent to prison. Although Colin advised all the relevant services of the tenant’s change of address, “EDF forcibly gained entry to my property and disconnected the electricity. They left no notice of gaining entry, other than muddy footprints. It was only from a friendly neighbour who contacted my agent that I knew of their actions.” Colin explains that EDF claimed not to have received his letters – despite the fact that all other services received his letters. Like Mrs Murphy, Colin had great trouble in preparing the property for a new tenant without a vital supply of energy, and “persuading EDF to reconnect the electricity supply was a saga in itself” all of which cost him time and money.

Chris Hellings of the NLA’s Advice Line says that in many cases, there is unfortunately very little that can be done with the law as it stands. When you grant a tenancy you give exclusive use of the property to the tenant, it is as though it was their house for the duration of the tenancy.

It is clear from member experiences that most utilities companies do not train their staff about how to ensure smooth handover when properties are rented out. UK Landlord hopes to interview utility companies in a future issue to find out if they are prepared to change their practices to accommodate landlords’ concerns.

EU gives green light for VAT reduction for home repairs

Following a decision by EU finance ministers, the UK would be within its rights to apply a reduced VAT rate to renovation and repairs of private housing. The political agreement allows for this reduced rate on VAT to be applied on a permanent basis. The use of certain lower VAT rates was one of the possible actions identified in the European leaders’ economic recovery plan adopted at the end of last year. By targeting local labourintensive services these measures aim at boosting consumer spending and job creation without distorting competition between companies based in different EU member states. The NLA is a member of the Cut The VAT Coalition and supports a reduction in VAT to 5 per cent for property repair work.

Sustainability

MPs back solar panels for homes

Solar photovoltaics (PV) are gaining support from MPs who believe solar panels can play an important role in helping to deliver the UK’s 2020 renewable energy target.

The Government is currently designing the UK’s Feed-in Tariff (FIT), due to be introduced in 2010, which could mean even small household generators get paid approximately three to four times more for the solar electricity they generate from solar PV than they pay for the electricity from the national grid.

Solar PV is considered by many as an effective way of generating clean electricity in the UK as it relies on daylight not heat and requires little or no maintenance. Solar electric roof tiles and slates are being planned for homes, public buildings and businesses across Europe, and the PV campaign is calling for the same in the UK as from 2010.

The campaign has attracted support from MPs from all sides of the House of Commons, including Labour former Energy Ministers John Battle MP and Peter Hain MP, and the Conservative and Liberal Democrat Shadow Secretaries of State for Energy and Climate Change. 148 MPs have signed a Commons Early Day Motion tabled by Colin Challen MP.

The campaign is supported by industry organisations such as the UK Green Building Council, National Federation of Roofing Contractors, European Photovoltaic Industry Association and Renewable Energy Association and environmental campaign groups.

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