Housing Benefit has often been criticised as an overly complex benefit that does not promote self responsibility and can even act as a deterrent to working.  So with a view to improving the current system the government is introducing some major changes.

The Local Housing Allowance is a new way of working out how much Housing Benefit private tenants will receive and has been undergoing trials in 18 different areas of the country. From the 7th April 2008, the system will be rolled out across all of England and Wales.

From the private landlord's viewpoint this new system carries some mixed signals. Although there are definite benefits from letting to Housing Benefit tenants there are an equal number of problems.  Currently it can take a long  time to process claims leading to uncertainty about how much benefit a tenant is going to receive, if indeed they are going to receive any at all.  On the plus side it is common practice for local authorities to pay the Housing Benefit directly to the landlord giving some piece of mind.

In theory landlords with tenants on Housing Benefit can be subject to payment claw-backs where a tenant's circumstances have changed and authorities have not been informed, although this is rarely enforced.

One of the main objectives of the introduction of the Local Housing Allowance system is to give tenants more responsibility for running their own lives, to encourage them to open bank accounts and to get them into an employment.

More worryingly for the landlord the introduction of the Local Housing Allowance will mean that rents will in future be paid direct to the tenant and not to the landlord, unless the tenant has a history of rent arrears and debt.  During the trials it was found that a tenant had to actually be in arrears with their current landlord for this to happen.  Simply proving that a tenant had a history of rent arrears was not sufficient to trigger payments to the landlord or agent.

Many landlords are sceptical and concerned about this change and fear future rent money will be used for other other living expenses instead of rent. The new system is intended to give the tenant more choice of where they live and the types of accommodation open to them.  As per the current Housing Benefit system  the option for the tenant to top-up their rent exists.

The Housing Benefit entitlement rules are not about change.  Housing Benefit will still depend on personal circumstance: age, incomes, savings etc. although it is hoped that the Local Housing Allowance process should speed-up decisions on whether or not a tenant gets the benefits and how much.
Speed of decision making has often been cited as the major stumbling block for many landlords accepting Housing Benefit so any improvement is to be welcomed.

The local authority housing officer will publish reference rents for their local area which will give landlords and tenants a quicker way of determining likely Housing benefit payments meaning that they will no longer need to wait for Rent Offer assessment visits.

A letting salesperson is more than just a "sales person." A good lettings agent will act on your behalf and offer suggestions and guidance making sure that you get the best rent for your property.

From the point of view of the prospective tenant the lettings agent will help fine tune the search process and select the most suitable properties to view.  They can also offer advice on such things as housing benefit and council tax bandings.  Although most lettings agents are genuine in their desire to help, one should be wary of the agent who tries "too hard" to push you in to a particular property.

Once a prospective tenant has located a suitable property the lettings agent's next job is to help negotiate with the landlord to finalise the deal.  It is worth remembering that the agent is working for the landlord and will obviously be trying to safeguard his income.  That being said, a good agent will recognise that a done deal is a better deal that one that does not complete.

When dealing with a letting agent it is is also worth finding out whether the agent is acting as a managing agent or simply a tenant-finder.  The chances are that the agent will be much more proactive with the properties that they manage, as they are the ones that will have ongoing contact with the tenant.

The Internet has opened up a world of information that wasn't before accessible to landlords and prospective tenants.  There are generic property finder sites such as Right Move and Primelocation, however the information on those sites is can vary wildly.

When it comes to locating a good lettings agent it is a good idea to use the internet to search.  Having created a list of agents the next step is to find each agent's website and check it to see how up to date it is.  Whilst searching the internet for lettings agents you may come across a review site, a good example of one such site is the Cheltenham Lettings Review, this site is well used by tenants, landlords and agents.

The role of an agent has altered in the last couple of years. In the past, agents were the merely way tenants and landlords could access information. Now agents are much more involved in the whole process, from tenant finding to negotiation and management.

Whilst helping a friend work out the costs involved in raising a commercial mortgage recently I suggested that they use a commercial mortgage calculator.  It turns out that this simple piece of advice actually involves a lot more work.

With home loans it is quite easy to find a calculator which will quickly display the total costs involved in setting up home loan.  Despite the fact that the principle behind both mortgages is the same, it is quite hard work finding a good quality commercial mortgage calculator. But, lets take a step back and consider what exactly is the point of finding a calculator:

To establish the basic costs of borrowing a fixed amount of money.

If a business takes out a loan over the full term of a mortgage then the interest rate is the single biggest factor, however what most commercial mortgage calculators do not take into account is the costs associated with arranging the finance.  Given that the vast majority of commercial mortgages are refinanced inside 10 years you must factor in the set up costs, administration fees, and any early repayment charges.

To compare 2 or more commercial mortgages side-by-side.

Shopping round is is vital, so it's perfectly reasonable that you might end up with two or more quotes from different lenders.  Using a simple mortgage calculator you can quickly assess the impact of small interest rate variations on your day-to-day cash flow.  This is particularly useful when comparing a fixed rate to a variable mortgage rate.

To double check whether an existing quote is accurate.

Thankfully commercial mortgage brokers are coming under increasing pressure to disclose fees, however there are still some who will try to hide the true figure.  One way of doing this is to provide a business client with mortgage illustration showing the repayments based on the loan amount, but actually putting the broker fee onto the loan amount without adjusting the repayments.  Using a simple mortgage calculator will immediately spot if there is a discrepancy in the loan amount.

Using a commercial mortgage calculator can really help a business workout the true cost of finance and compare mortgages.

Although the majority of landlords will not accept tenants on Housing Benefit  there are many landlords who will.  This situation has the potential to change when the new rules affecting housing benefit take effect from April 2008.

There is concern within housing charities such as Citizens Advice and Shelter that the new scheme could result in fewer landlords being prepared to accept tenants on housing benefit.  Under the current rules the Local Housing Authority can pay the housing benefit directly to the landlord thereby by-passing the claimant.  Although cumbersome this method does at least ensure that the majority of the landlord's income is safe.

Under the new rules the Local Housing Allowance will be paid directly to the claimant.  Landlords are fearful that the tenant may use this money for other things and fall into arrears with their rent.

Obviously the rules surrounding housing benefit are complex, so landlords who currently accept DHS tenants should contact their local housing authority or managing agents to see how the new rules are going to be implemented.

Is It All Bad?

Well actually no, it depends on how you interpret the rules.

The current system is quite rigid and pays a fixed amount depending on the amount of the rent, whereas the new system will pay an amount dependant on the size of the property.

Advocates of the new system claim that this new method of calculating housing benefit will encourage claimants to "top-up" their benefit to rent better properties.

As the amount payable will be set locally by the housing officer it will be interesting to see the regional variations.

The mandatory licensing of some Houses in Multiple Occupation (HMO's) came in to force 18 months ago, however there is still some confusion over the different definitions of a HMO.

The maximum fine for non-compliance with the law is a fine of up to £20,000, which means that it is imperative that landlords are made aware of the regulations.  It is also very important that brokers and lenders are also aware of the rules so as to avoid giving their clients bad advice.

What is an HMO?

Not an easy question to answer in a clear way.  The simple answer would be that a HMO is any property which has three or more tenants from two or more households and who share a kitchen, bathroom or toilet.  Although there are actually five definitions stipulated by the government the above answer will cover most scenarios.

Probably the most relevant aspect about HMO's is the licensing process.  There are three different types of licensing required:

1. Mandatory Licences are required on HMOs that contain three or more storeys and are occupied by five or more persons from two or more households.
2. Discretionary Licences are required if any Local Housing Authority (LHA) deems a certain type of HMO to be in need of a license.  The LHA can actually choose its own definitions.
3. Selective Licences are required if any LHA deems a specified area to be in need of licensing.  Such areas may have a reputation for low housing quality or have significant levels of anti-social behaviour.  Interestingly the selective licensing designation would apply to all rented property in an area and not just HMOs.

Although it can be quite straightforward to identify a property that definitely is a HMO by virtue of the mandatory license, getting a definitive answer about the Discretionary or Selective licencing of a property is not quite so easy.  In the first instance a prospective purchaser would need to approach the Local Housing Authority for guidance on the HMO licensing status.

There is a huge variation in interpretation of The Housing Act 2004, largely because much of the implementation and enforcement of HMO licencing rests with the LHAs.  For this reason it is vital to carry out your own research into any HMO you are considering purchasing.

Despite a few recent hiccups the UK economy is strong and in particular the UK property market generating excellent returns for investors.  The UK property market is not only attractive to overseas institutional investors like banks, but also to individuals.

There are three distinct types of foreign investor we can consider; foreign UK residents, ex-pats and foreign residents.  Each type of investor can get UK based funding for buy to let investment, but each category does present increased risk to lenders.

Foreign UK Residents

Foreign nationals residing in the UK should not have any problems arranging finance assuming that they have been resident for 2 to 3 years and are able to pass the standard credit checks.  Lenders will seek assurances that the applicant is not planing on leaving the UK in the near future, usually evidenced by the applicant having a permanent right to reside or at least 2 years left on their visa.

Foreign Nationals

Applications coming from individuals who were neither born or reside in the UK carry the highest level of perceived risk to lenders, therefore the loan to values will be quite restricted.  There are fewer lenders active in this market so rates will also be correspondingly higher, which is not surprising given that it is near impossible to carry out credit checks etc.  A lot of consideration will be given to the country of residence, with certain countries being excluded.

Ex-pats

Defined at UK passport holders who have left Britain to live abroad, it is not unusual for an individual to want to rent their UK residence whilst setting up a new life abroad.  Providing that the applicants are able to pass the standard credit checks and prove their employment/income abroad the usual application process will apply.

The UK property market will almost certainly remain attractive to overseas investors, particularly people looking to spread their risk across several boundaries.  Whilst there are plenty of UK lenders willing to fund these investments it still pays to shop around and even consider raising finance in the country of residence.

Some confusion exists as to what a buy to let commercial mortgage actually is. Some brokers and lenders used to regard residential buy to let mortgages as commercial propositions, leading to a mindset that all buy to let mortgages were commercial in their nature.

With more property investors eager to include commercial property in their portfolio commercial lenders were forced to create mortgage products specially crafted for the commercial property investor. Taking a look at the whole market the main types of buy to let commercial mortgage products can be defined under the headings "the good", "the not-bad" and "the ugly".

The Good

The highest quality of investment property would have very good quality tenants on a long lease and occupy the best location. Because of the stability of the tenant these properties become very attractive to the institutional investors, resulting in slightly inflated values. These higher values can put pressure on the buy to let commercial mortgage by reducing yields.

The Not-Bad

These investments would similar to blue chips, with the likely exception of the quality of the tenant. Instead of a well established business, such as a national chain or franchise, the tenant may be a smaller concern. Because the values of these properties are more realistic they can offer more attractive rental yields, resulting in more interest from smaller investors.

The two types of propositions described above are the ones most likely to be funded by banks or building societies. These high quality buy to let commercial mortgages will obviously attract the most impressive rates and flexible terms.

The Ugly

Well, OK, ugly is probably a bit harsh.  These are the self-cert type of investments.  The property may be purchased speculatively or in need of upgrading before being returned to the rental market.

Investors in this market have historically struggled to find a buy to let commercial mortgage at sensible rates, however specialist commercial lenders have entered the marketplace, meaning that there are more opportunities to be seized.

Buy to let commercial mortgages present an great opportunity to take advantage of the rich vein of commercial investment properties available at the moment. You must look carefully at all the criteria which go to make it a good investment and get some professional guidance to find the best mortgage arrangement.

Home Information Pack (HIP) providers have joined forces to offer home sellers a deferred payment scheme.  The idea behind the scheme is that vendors enter into a 10 month deal where they only pay for theHIPs they request once the sale of the subject property has completed.

HIP Payment Services are behind the scheme and boast that most of the big names in HIPs have already signed up.  They say that whilst the cost of a HIP is minimal compared with the overall costs incurred in selling a home the majority of consumers have indicated that they would prefer to pay for their HIP at the end of the process rather than paying "upfront"

Some estate agents had expressed concern that chasing customers for payments for HIPs would add to their overheads. Bearing in mind that typically estate agents are paid on completion directly from the seller's solicitors they do not have to invest in the "credit control" processes that other business do.  This deferred payment scheme may also lead to "valued added extras" being easier to sell to the customer too.

Ultimately this idea could also be helpful in making the whole HIP's process less objectionable to vendors by removing the number one objection - upfront costs.

According to the Communities and Local Government website the average HIP is taking around 5 days to compile, with major estate agents charging in the region of £300 plus VAT for a HIP.

Currently the packs are only required for homes with more than 3 bedroom, it is widely expected that the next move will broaden the scope to cover all houses in England and Wales, probably early in the new year.

Through the day we get updates and press releases from property finance publications and various trade bodies.
On Tuesday (18th September) The Building Societies Association (BSA) reported "unwavering consumer confidence" within the housing market.
They went on to explain that their report is the first look at the public's view on residential property purchases.  Unsurprisingly the report found that most people (88%) were buying a property because they wanted to own their own home (duh!).  The headline from the report was that the housing market is in good shape.

However, last Friday (14th September) the RICS report for August had a completely different take on the situation.  They were reporting that more of their members had seen a fall in house prices that had seen an increase.

It was quite interesting to read two different views of the same market, the consumers expressing confidence and the professionals expressing misgivings- only time will tell who is right.

The on the same day, we see this headline:

UK housing market ‘in trouble’

A fast commercial mortgage is easy to get but be prepared to pay a little extra.