Tag: Buy-to-let

Posted on

Plans to force buy-to-let owners to pay up to £10,000 to boost energy efficiency

buy to let
  • Campaigners are calling for plans to charge landlords up to £10k to be scrapped 
  • Plans are for all new rental homes to have an energy rating of C or above 

Campaigners are urging the Government to scrap proposals to make landlords pay up to £10,000 to improve the energy efficiency of their rental homes.

The National Residential Landlords Association suggested that landlords could not reasonably be expected to pick up the tab in the way that the Government is suggesting for stringent new rules affecting buy-to-let properties.

In an official statement, NRLA said that the plans were based on the ‘misguided assumption that all landlords are property tycoons with deep pockets’.

In a consultation that closed in January, the Government proposed that from 2025 where a new tenancy agreement is signed, the property will need to have an Energy Performance Certificate rating of C or above.

From 2028, all rental properties will need to meet the new standard, even where it is not a new tenancy agreement.

The Government has suggested that, in meeting these targets, landlords should be expected to pay up to £10,000 to make the necessary improvements.

However, the NRLA said that this imposed cap fails to accept the realities of different property and rental values across the country.

It follows research from NRLA that showed private landlords making an average net income from property of less than £4,500 a year. (Scroll down for more information about how this figure was calculated.)

The National Residential Landlords Association is calling on the amount that landlords should be expected to contribute to be linked to average market rents in any given area – known as broad rental market areas – as calculated by the Valuation Office Agency.

Under the NRLA’s proposals, this would mean the amount a landlord would need to contribute would gradually taper from £5,000 to £10,000, taking into account different rental values – and by implication, property values – across the country.

VAT and council tax reductions

Alongside this, the NRLA is calling for a package of fiscal measures to support property investment.

It said these should include the development of a decarbonisation tax allowance, where VAT would no longer apply to energy efficiency and low carbon work.

And it said council tax should not be charged where energy improvements are being made to rental properties when they are empty.

Ben Beadle, of the National Residential Landlords Association, said: ‘We all want to see as many energy efficient rental properties in the sector as possible.

‘Besides being good for tenants, improvements made to rental properties ensure they become more attractive to prospective tenants when being marketed by landlords and agents.’

However, he added: ‘The Government’s proposals for the sector are not good enough.

‘They rely on a misguided assumption that landlords have unlimited sums of money and fail to accept the realities of different property and rental values across the country.

‘Ministers need a smarter approach with a proper financial package if they are to ensure their ambitious objectives are to be met.’

David Reed, of Richmond estate agents Antony Roberts, said: ‘We all want to see improvements to energy efficiency but If these proposals come to fruition, there’ll be a rush of landlords with property in vast swathes of suburbs – where older, less efficient properties make up a greater proportion of the stock – selling rather than incurring what could be considerable costs in retaining an investment in property.

‘With yields so low, returns barely meet costs as they are, especially as the latter have grown significantly in recent years either directly (Tenant Fees Act and electrical regulations) or indirectly (unable to offset mortgage interest).

‘Tenants love charming period conversion flats in good commuter territory and seldom is efficiency/an EPC rating at the forefront of the search criteria, whereas location and provision of attractive accommodation win hands down. There are simply not enough newer, in theory more efficient, properties being constructed to meet tenant demand.

‘The private rental sector vitally needs a healthy supply of good property and landlords who own one or maybe two rental properties make up a large sector of the market. Many are already disgruntled by recent changes and longer-term plans are under question. If they leave, the effect on tenants will be hard felt – a further restriction of supply giving more upward pressure on rental and lack of choice.

‘Hopefully consideration will be given to where there is no easy-fix or realistic programme of improvement to achieve grade C status or better.’

How much do landlords make?

Private landlords make an average net income from property of less than £4,500 a year, according to the The National Residential Landlords Association.

Here is how the NRLA reached that figure… 

The English Private Landlord survey said that the average – median – gross rental income for a landlord before tax and other deductions is £15,000.

 Average costs for landlords would be:

– Repair and replacement of furnishings – based on the previous tax exemption for 10% of annual rent (£1,500)

– Cost of a gas safety certificate (average £80 required annually – checkatrade average)

– Electrical safety check (average £265 performed every 5 years. £53 annually – checkatrade average)

– Deposit protection (£13 from TDS)

– Tenant referencing cost (for two tenants £49 NRLA tenant referencing)

– Interest-only mortgage for the average UK property (£250,000) with a 20% deposit (cheapest available £6,096 annual)

– Insurance (£531.15 for building and contents insurance from Hamilton Fraser using average floor space for PRS property https://www.statista.com/statistics/292206/average-floor-area-size-of-dwellings-in-england-by-tenure/)

– Agency fees (£1200 based on 8% agency fees)

The NRLA based its calculation on an average landlord of a house let to a couple with an interest-only mortgage, and assumed that tenants move annually.

Total gross rental income – £15,000

Repair and replacement costs – £1,500

Tenancy management costs – £726.15 (includes average cost of insurance, gas safety certificates, 1/5 of the EICR cost, deposit protection and tenant referencing)

Agency fees – £1,200

Total deductions before tax and mortgage costs – £11,573.85

Amount that can be taxed – £2,314.77 (£11,573.85 x 0.20)

Tax after mortgage interest relief accounted for – £1,095.57 (£2,314.77 – (£6,096.00 mortgage costs x 0.20)

Remaining balance after Tax – £10,478.28 (£11,573.85 – £1,095.57)

Mortgage costs – £6,096.00 (based on cheapest available 80% Loan to Value mortgage on the average property in the UK of £250,000)

Remaining balance after all average costs deducted – £4,382.28 (£10,478.28 – £6,096.00)

Posted on

Court of Appeal sides with landlords in landmark case ruling

Court of Appeal sides with landlords in landmark case ruling

The Court of Appeal yesterday ruled that Section 21 notices issued by landlords are valid provided a gas safety certificate is issued before the notice is given to the tenant, not before a tenant moves into a property.

The case of Trecarrell v Rouncefield focussed on the relationship between Section 21 notices and gas safety certificates.

The landlord, Trecarrell House Limited, was initially granted an order to repossess the property using Section 21 powers, but the tenant successfully appealed on the grounds that they were not provided with a gas safety certificate before moving into the property.

However, the Court of Appeal ruled that failure to give the gas safety certificate before the tenant begins to occupy can be remedied by giving it at any time before service of a Section 21 notice.

The case itself was heard earlier this year and landlords in England and Wales have been waiting for the outcome of this important decision.

The judgment hinged on whether a landlord’s failure to provide a gas safety certificate before the tenant’s occupation is a breach of the prescribed requirements to serve a valid Section 21 notice under the Housing Act 1988.

This was a particularly important case as a mistake by a landlord or its agent would have consequences far greater than other breaches of legislation, which can be remedied or resolved in order to serve a fresh notice.

Without the ability to serve a section notice at any point in a tenancy the rights of landlords would be seriously curtailed and could prevent the use of possession of a property in future where the landlord has no other grounds to secure possession.

The leading ruling from Lord Justice Pattern, which will be welcomed by so many landlords, states: “Although the point is not straightforward, I am not therefore persuaded that for the purposes of Section 21 the obligation to provide the gas safety record to a new tenant prior to the tenant taking up occupation cannot be complied with by late delivery of the gas safety record.

“Late delivery of the document does provide the tenant with the information he needs. If a breach has the consequence for which Cherry contends then that must apply in every case of late delivery even if the delay is only minimal. This seems to me an unlikely result for Parliament to have intended particularly in the light of the express rejection of the 28 day deadline under paragraph (6)(a).

“Many ASTs are granted for fixed periods of one year or less so that in practice the landlord’s inability to rely upon section 21 will provide a strong incentive for the timely compliance with paragraph (6)(b).

“As a matter of construction, I, therefore, prefer the view that as a result of regulation 2(2) the time when the landlord “is in breach” of paragraph (6)(b) ends for the purposes of Section 21 once the  gas safety record is provided.”

But landlords should ensure that all other requirements such as deposit protection, for instance, are fully compliant as they can affect the validity of a Section 21 notice.

Tony Kent, head of the property litigation team at Mackrell Solicitors, said: “For landlords, this decision comes as an enormous relief since the consequences of the ruling of the lower courts have seemed disproportionately severe for them, especially when there is a gas safety record in existence and the landlord or their agent had either forgotten to serve it or the tenant has denied receipt at the beginning of the tenancy.”

Posted on

How to keep your buy-to-let afloat AND help tenants in the lockdown: From rent cuts to mortgage holidays?

“A Long Time Ago … In a Galaxy Far, Far Away…”
Landlords are eligible for three-month mortgage payment holidays
But should you offer tenants who are working from home a payment holiday?
Does offering a rent holiday place you in breach of your mortgage contract?
What legal documents do you need if you agree a rent holiday?
 
The coronavirus lockdown has caused severe financial strain for millions of people across Britain, prompting unprecedented financial aid packages from the Government for businesses and individuals alike.
 
While mortgage payment holidays of up to three months are being offered to both homeowners and landlords, who may struggle to keep up with repayments during the lockdown, renters have been told they will be able to stay in their homes during lockdown even if they fall behind with payments.
 
Meanwhile, the Government has officially asked landlords ‘to show compassion and to allow tenants who are affected by this to remain in their homes wherever possible’.
 
What does this mean for landlords in practice though? Should you be proactive with tenants and offer them a temporary rent holiday, knowing that they may be suffering?
 
From speaking to landlords and letting agents, This is Money knows that many are actively trying to help their tenants through tough times and willing to do what they can for those whose finances have been sideswiped by coronavirus.
 
On the flipside, how should you react to tenants asking for a rent reduction when you know full well they’re still working full-time from home and your checks when they moved in showed they had a big salary and lots of cash?
 
What should I do if my tenants want a rent reduction?
There’s no right answer to this but everyone agrees that the most important thing to do is talk to tenants to understand why they need a reduction.
 
Steve Harriott, chief executive of the TDS tenancy deposit protection scheme, says: ‘Under the new guidelines tenants are still liable for their rent, however, if they are facing financial hardship there is support out there.
 
‘It’s really important during this unprecedented situation that the lines of communication between renter and landlord are kept open.
 
‘Now is the time to be having an honest and frank conversation about rents and financial concerns, working together to put a rent payment scheme in place.’
 
Angus Stewart of online buy-to-let adviser Property Master argues that in most cases, it will make sense to agree to a rent reduction temporarily.
 
‘If they ask for a rent reduction it would be logical to look favourably on it if they have been a good tenant in the past,’ he advises.
 
‘If you can still afford to cover that loss for a couple of months it is a sensible thing to do as the last thing you want at the moment is an empty property.’
 
Jeni Browne, sales director at buy-to-let specialist adviser Mortgages for Business, says they have been talking to many landlords over the past fortnight and the most frequent approach is to defer rent payment rather than offer tenants a waiver.
 
The view from lenders is along the same lines. Bob Young, chief executive of specialist buy-to-let lender Fleet Mortgages, says many landlords, where possible, are already helping.
 
‘Providing temporary help, especially if they’re good tenants, is likely to be the sensible option for most landlords,’ he adds.
 
Will I be in breach of my mortgage contract?
In ordinary circumstances, it’s possible that allowing your tenants to pay less rent than agreed in their tenancy agreement would breach your contract with your lender. But these are not ordinary circumstances.
 
Young’s view, as a lender, is that you should be fine to agree a temporary rate reduction with your tenant if they require it.
 
Stewart agrees: ‘This is an exceptional situation and it is likely your lender would rather have some revenue from you than none. In these difficult times it is hard to see a lender wanting to enforce any breach of contract against you if you have explained the situation and are seeking to make some sort of payment.’
 
David Cox, chief executive of ARLA Propertymark, suggests where a rent reduction is essential, landlords, tenants and letting agents should again undertake the affordability check on the tenants’ finances that happens during the initial referencing stage.
 
‘It’s important to understand what tenants could afford on any reduced or furloughed income,’ he explains.
 
‘It would also need to be made clear whether this is a temporary rent reduction or a deferral.
 
‘If it’s a deferral, a payment plan will need to be set up to ensure the tenant clears the rent arrears that are accrued during this period.
 
‘Additionally, landlords and agents will need to be clear about whether they will implement the interest clauses that exist for rent arrears on most tenancy agreements.’
 
Should I offer my tenants a rent reduction, even if they haven’t asked for one?
 
This is Money has heard several examples of landlords generously offering tenants a temporary rent reduction during the coronavirus lockdown – even where tenants don’t request it.
 
Whether you should offer is really down to you and whether you can afford to.
 
Voluntarily getting into mortgage arrears on your buy-to-let is not sensible and will be costly.
 
Chris Sykes, a broker at Private Finance, warns: ‘Some tenants may have interpreted the government mortgage holiday announcement as a way for their landlord to simply pocket three months of rent, when, in fact, those mortgage payments will still need to be paid in the long run.
 
‘Clarifying this offers landlords a way to communicate with their tenants, understand their current position and potentially offer a reduction.’
 
He adds: ‘Every landlord will take their own approach to managing their tenants’ payments.
 
‘It often depends on a landlord’s long-term plan – and how much they value a tenant as part of this.’
 
Stewart also points out that many people won’t need a payment holiday: ‘There are still many people in secure employment and not in need of a rent reduction.
 
‘If your tenants come to you because they have for example lost their job or suffering a serious reduction in income, then you should certainly consider helping them.’
 
Will I need a legal contract in place?
It should be sufficient to have a letter confirming in writing what you have agreed with the tenant, the amount of rent they will pay and the dates the reduction applies, according to Stewart.
 
‘It is very important to have certainty on both sides and a written and signed agreement will help in this regard,’ says Stewart, who advises that landlords also think about agreeing a repayment schedule to make up any rent reductions or rent holidays.
 
‘For the tenant it may well be better off asking for a reduction in rent as less will build up in arrears,’ he says.
 
Young adds: ‘Obviously if you give a rent holiday you are not protecting your income, and you would certainly need something between you and the tenant confirming the arrangement in writing.
 
‘They may need this as evidence to support a claim for state assistance, for example.’
 
How do I apply for a buy-to-let mortgage payment holiday?
As is also the case for homeowners applying for a payment holiday, the sooner you contact your buy-to-let lender the better.
 
Nearly all lenders are reporting a huge surge in customer enquiries and we’re hearing lots of complaints about the time it’s taking to get through on the phone.
 
Depending on your lender, there may be an option to fill in a request online as a first step.
 
Many landlords have portfolios of properties and may need to make multiple applications for leeway from a number of different lenders.
 
It’s possible that your mortgage adviser will be able to assist you with this, though you should expect to pay something for this service.
 
‘It is absolutely essential to agree in advance any repayment holiday with your lender,’ warns Stewart.
 
‘To simply miss payments without that agreement will adversely affect your credit record.’
 
David Hollingworth, of mortgage broker London & Country, adds: ‘Make sure you understand the knock-on effect of a payment holiday.
 
‘Just because there are no payments made doesn’t mean that interest doesn’t continue to accrue.
 
‘At the end of the payment holiday the outstanding balance will be rescheduled over the remaining term, so payments will most likely be higher and more interest payable over the life of the loan.’
 
Will insurance pay out for rent shortfalls related to coronavirus?
There have been reports that insurers aren’t paying out where rent shortfalls due to coronavirus are given as the reason for the claim.
 
Indeed, both Young and Stewart agree that although different insurers and policies will offer different levels of cover, it’s unlikely that your rent arrears will be covered.
 
Check the small print in your policy document carefully.
 
Keep calm and carry on
While the lockdown continues, all the experts agree that finances will need to be flexible but the message to landlords is not to panic.
 
‘Landlords need to be sensible and use their common sense,’ counsels Young. ‘Some tenants will ask for relief and you’ll need to respond accordingly, weighing up both their and your situation.
 
‘This is likely to be a temporary issue and hopefully both landlord and tenant will be able to work through these issues with that in mind.
 
‘From a landlord’s perspective, investing in property has its highs and lows and you need to look at this with a long-term perspective. Indeed, investments of all kinds have their ups and downs, as those heavily invested in the equities market through their pension schemes have also discovered.
 
‘Property still remains a good long-term asset to invest in, despite what is happening in the market right now.’
Posted on

Coronavirus outbreak could cost the buy to let sector £14.9bn in three short months

Market: Brexit Bounce giving way to Corona Crippling, says agent

The latest research by Deposit Replacement Scheme, Ome, has found that the impact of the Coronavirus could cost buy to let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government yesterday.

Last night the government announced that they would suspend new evictions and halt new possessions proceedings to the court while the Coronavirus crisis persists. They have also protected landlords as well as tenants with a three-month mortgage payment holiday on buy to let mortgages.

However, if tenants simply can’t pay, this holiday will do little to help landlords who will still have to pay once the three months is up, with or without the rental income from their tenants.

Ome’s research shows that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone. Over three months this climbs to a huge £14.9bn.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

What does this mean for the average landlord?

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Not only does this huge sum have implications on a sector that has already seen its financial return stretched by the government, but it could see tenants out of pocket even further should landlords look to keep their tenancy deposit to account for lost rental income.

Co-founder of Ome, Matthew Hooker, commented: 

“It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

 

Location
Private renters
Average rent
1 month B2L lost revenue
3 months B2L lost revenue
Number of landlords
Average number of B2L properties
Cost per landlord
England
4,552,000
£852
£3,878,304,000
£11,634,912,000
2,266,770
2.0
£5,753
Wales
176,000
£515
£90,675,200
£272,025,600
104,450
1.7
£4,828
Scotland
340,000
£748
£254,481,840
£763,445,520
158,505
2.1
£6,146
Northern Ireland
138,000
£627
£86,526,000
£259,578,000
64,995
2.1
£6,083
UK
5,206,000
£955
£4,971,730,000
£14,915,190,000
2,594,720
2.0
£5,748
Location
Private renters
Average rent (2019)
1 month B2L lost revenue
3 months B2L lost revenue
London
964,000
£1,697
£1,635,908,000
£4,907,724,000
South East
713,000
£998
£711,574,000
£2,134,722,000
South West
474,000
£816
£386,784,000
£1,160,352,000
East of England
437,000
£869
£379,753,000
£1,139,259,000
North West
571,000
£621
£354,591,000
£1,063,773,000
West Midlands
405,000
£662
£268,110,000
£804,330,000
Yorkshire and the Humber
427,000
£617
£263,459,000
£790,377,000
East Midlands
359,000
£628
£225,452,000
£676,356,000
North East
202,000
£533
£107,666,000
£322,998,000
Posted on

House price gap between sellers and buyers reduces

Unmanaged vacant properties may invalidate insurance - claim

Leading lettings and sales agent, Benham and Reeves, has released the latest of its very own quarterly house price index based on data from the top four existing indices, looking at where the average house price sits and how the gap between buyer and seller expectation and actual sales has changed.

The Benham and Reeves House Price Index combines data from the four leading industry indices to give a singular figure of how the UK market is moving based on both buyer and seller sentiment, as well as looking at the difference in these indices and what they reveal about the state of the current market.

Current property values

The latest index from Benham and Reeves for Q4 2019 shows that the current overall average UK house price is sitting at £251,912 having dropped marginally by -0.2% on the previous quarter, although prices were up by 1.4% on an annual basis.

In London, the average property value also dropped marginally to £511,166, down -0.4% on the previous quarter, down -0.7% on an annual basis.

Seller and buyer expectations show signs of alignment 

The latest quarterly data from Nationwide and Halifax shows that the amount UK buyers are committing to borrowing has increased slightly by 0.31% to £225,188. At the same time, the average asking price has fallen by -1.02%, while sold prices are up 0.4% to £234,167.

Despite a market bounce following the election, it’s clear that months of Brexit uncertainty have seen the expectation gap between buyers and sellers close. The gap between buyer expectation and asking prices dropped -1% in Q4 to 35%, while there was also a -1% decrease between asking price and sold price, down to -23%.

However, in London, this gap remained consistent with a 33% increase between the price at which buyers were being approved for a mortgage and the asking price expectations of UK sellers, while there was a -22% drop between this asking price and the average sold price.

Director of Benham and Reeves, Marc von Grundherr, commented: 

“It’s only natural that asking prices will remain at a higher level than the average mortgage approval or sold price, but it’s interesting to see that months of Brexit uncertainty had started to bring this difference in buyer and seller expectations closer together.

As buyers committed to slightly more in the way of a mortgage approval price to take advantage of lower market values and lower interest rates, sellers realised they had to lower asking expectations to secure a deal in tough market conditions. This also translated to a smaller gap between asking price and the sold price accepted.

However, with a huge spike in activity following December’s election, we will no doubt see asking prices start to lift once again, as UK sellers look to take advantage of returning buyer demand.

While this asking price expectation will always be higher than the reality of the average sold price, an optimistic increase in a stronger market places sellers in a better position to negotiate a stronger sale price before accepting an offer.”

Benham and Reeves House Price Index
UK
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£245,074
–
Q2
£248,245
1.3%
Q3
£250,244
0.8%
Q4
£248,513
-0.7%
2019
Q1
£247,463
-0.4%
1.0%
Q2
£251,682
1.7%
1.4%
Q3
£252,487
0.3%
0.9%
Q4
£251,912
-0.2%
1.4%
London
Year
Quarter
Average House Price
Quarterly Change
Annual Change
2018
Q1
£519,238
–
Q2
£520,412
0.2%
Q3
£517,059
-0.6%
Q4
£514,976
-0.4%
2019
Q1
£504,731
-2.0%
-2.8%
Q2
£512,193
1.5%
-1.6%
Q3
£513,180
0.2%
-0.8%
Q4
£511,166
-0.4%
-0.7%
UK
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£218,231
37.8%
£300,684
-25.4%
£224,319
2018
Q2
£219,116
40.4%
£307,745
-26.3%
£226,869
2018
Q3
£221,959
37.4%
£305,060
-24.1%
£231,438
2018
Q4
£220,522
37.1%
£302,239
-23.8%
£230,274
2019
Q1
£221,578
35.6%
£300,481
-24.3%
£227,608
2019
Q2
£225,987
36.2%
£307,691
-25.5%
£229,276
2019
Q3
£224,490
36.5%
£306,321
-23.6%
£234,074
2019
Q4
£225,188
34.6%
£303,182
-22.8%
£234,167
London
Year
Quarter
Mortgage Approvals Price
< Difference >
Asking Price
< Difference >
Sold Price
2018
Q1
£473,776
30.8%
£619,905
-23.1%
£476,653
2018
Q2
£468,845
34.0%
£628,174
-23.8%
£478,555
2018
Q3
£468,544
31.2%
£614,537
-21.9%
£480,090
2018
Q4
£466,988
31.5%
£614,044
-22.4%
£476,273
2019
Q1
£455,594
32.8%
£605,178
-22.9%
£466,356
2019
Q2
£465,722
32.7%
£618,232
-24.5%
£466,683
2019
Q3
£460,686
33.1%
£612,967
-21.9%
£478,594
2019
Q4
£458,363
32.9%
£609,315
-21.5%
£478,227
Posted on

Barclays refuses to offer buy-to-let borrowers a payment holiday

Barclays refuses to offer buy-to-let borrowers a payment holiday

Landlords who have a buy-to-let mortgage with Barclays will not be offered a repayment holiday, despite government guidance to offer borrowers a payment referral of up to three months as a consequence of the COVID-19 pandemic.

The bank says that the support is primarily available to residential mortgage borrowers, with buy-to-let landlords not considered to be a priority.

A spokesperson for Barclays said: “This is an unprecedented and ever-changing situation, we are constantly reviewing how we best support all of our customers and are working on an appropriate solution and will provide an update later this week.”

Posted on

Useful guidance and support for dealing with tenants during Covid-19 outbreak

Useful guidance and support for dealing with tenants during Covid-19 outbreak

A high number of buy-to-let landlords are concerned about the impact of the Coronavirus, but The Guild of Letting and Management has provided some practical guidance and advice to help you cope with the existing situation.

One of the most common questions many landlords are currently asking about is the announcement the government made on the 18th March 2020, relating to evictions and support for those renting, although it is important to point out that the new legislation has not yet been released.

A key topic on the Guild’s advice line is Rent. It is important to note, that not every single tenant in the UK has been made redundant, or is experiencing difficulty, therefore, it is important to ensure that this is dealt with on a case by case basis.

Points to consider:

1. Ensure the tenant is aware that rent is still due.

2. If the tenant is experiencing difficulty, guide them to the Department of Work & Pensions website where they can obtain the guidance they require regarding pay, statutory sick pay (SSP) and other relevant up to date information.

3. Ask tenants to put their concerns to you in writing. It is important that you are able to discuss the matter with all the relevant facts to hand.

4. Speak to your lender and find out what they are putting in place. Some landlords have already offered tenants a discount on rent or a “rent holiday”. But remember, that as with the mortgage lenders, this deferred rent will have to be paid back at some point in the future.

5. Speak to the guarantor, where there is one. They should not be left out of any discussions regarding rent payments.

6. Check whether your insurer can offer rent and legal protection.

7. Keep records up to date. Every discussion, conversation over the phone, email, must be logged and documented.

8. Any pre-existing arrears (pre-18th March 2020) cannot be factored into this Coronavirus situation. Remember everyone is in the same boat. No one has experienced this before, This is not the same as the 2008 recession, this is a public health matter, so it is difficult for everyone involved on so many levels.

Posted on

Coronavirus could cost BTL landlords almost £15bn in lost rental income

Coronavirus could cost BTL landlords almost £15bn in lost rental income

The devastating impact of the Coronavirus could cost buy-to-let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government last week, new research shows.

The government has announced that they will suspend new evictions and halt new possessions proceedings to the court in light of the COVID-19 pandemic.

If tenants are unable to pay their rent, Ome calculates that this would leave landlords £14.9bn out of pocket over a three-month period.

The deposit replacement scheme’s findings are based on the fact that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Co-founder of Ome, Matthew Hooker, commented: “It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

“It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

“The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

Posted on

Landlords switching from short-term lets to longer lets before lockdown

Landlords switching from short-term lets to longer lets before lockdown

There has been a significant increase in the number of landlords and homeowners switching from short-term lets to longer rentals.

Across the UK there has been a 20% drop in people looking for rooms over the last week due primarily to the COVID-19 outbreak, according to SpareRoom.

With a possible countrywide lock down rapidly approaching, the flatsharing website reports that people with rooms to rent are understandably keen to find tenants.

SpareRoom has seen a 15% increase in adverts from agents and a 12% uplift from landlords, just in the past two days. This is driven, in part, by landlords and homeowners switching from using short-term rental sites like Airbnb as tourism tanks and looking for longer term rents for their rooms.

With supply in some parts of the country currently outstripping demand, 18% of agents have reduced their asking rents in the past two weeks, while 11% of landlords have done the same, with some directly mentioning COVID-19 as the reason for this reduction.

With the growing concern about face to face contact SpareRoom has also seen a real trend over the last week of people moving towards video calls – getting to know each other and having a first view of the property this way.

Matt Hutchinson, SpareRoom director, said: “Whenever there’s uncertainty people put off making big decisions, like moving house. We saw it during the confusion over Brexit and we’re seeing it in a much more marked way now. In contrast, people with rooms to fill are desperately hoping to get new tenants in before the country goes into lockdown.

“Although it’s still early days, we’re also seeing some interesting shifts in behaviour on both sides. Following widespread cancellations, we’re seeing both landlords and homeowners moving from short term rents to looking for longer term security.

“Tenants are getting creative by using video calls to hold virtual viewings and interviews. The people you live with make a far bigger difference to you than the property itself, and video calls are a great way to get that all important first impression before deciding to go and see a property. It also minimises the need for travel and social contact so it’s a win-win.”

Posted on

Budget 2020: ‘There must be no further taxation on landlords’

Budget 2020: ‘There must be no further taxation on landlords’

The Guild of Property Professionals is calling on the new chancellor, Rishi Sunak, to use his Budget speech, which will take place tomorrow, to support investment in the private rented sector, as research shows that buy-to-let landlords are exiting the market in droves.

Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a significant number of landlords selling buy-to-let properties with a view reducing their portfolio, or exiting the market altogether.

Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.

The government’s draconian tax changes have not just pushed a number of BTL landlords out of the PRS, but also left many prospective tenants with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.

Iain McKenzie, CEO of the Guild of Property Professionals, said: “If we wish to sustain a thriving private rented sector there must be no further taxation on landlords. Tenants want more choice not less.

“The government should do more to support landlords to remain in the sector, not drive them out, which will ultimately cut the supply of rental properties and put upward pressure on rents.”

The housing market has had a strong start to the year, with improved activity levels and property price growth across every region in the UK, and McKenzie hopes that this trend will continue for the foreseeable future.

He continued: “Ideally, the housing market needs 12 months of a stable environment to enable it to bear the fruit of pent up frustration. It would be pertinent for the government to avoid anything that could hamper consumer confidence, which is already at risk with the threat of tough measures to prevent the spread of Coronavirus.

“It is likely there will be further support for first-time buyers by way of discount through a ‘First Home’ scheme, which could see new homes discounted by up to 30%. Whilst it is fair to say that first-time buyers are the lifeblood of the property market, getting the balance right between new buyer incentives and support for second-hand house buyers is the key to a fluid market.

“With that in mind, like many, we would welcome any positive news on Stamp Duty. Boris Johnson had previously pledged to implement changes to current stamp duty legislation by raising the threshold to £500,000. Although mentions of this have been more subdued in recent months, it would relieve large sections of the country from the burden of stamp duty and go a long way to bolstering consumer confidence.”