The Second Reading of the Energy Bill was delivered on 10 May, and it contains some interesting bits for landlords, and yes, even small landlords.

The Energy Bill is intended to be a change in the provision of energy efficiency measures to homes, and to encourage improvements to enable low carbon energy supplies.

In the second reading new proposals included amongst other things:

• From April 2016 landlords will not be able to refuse reasonable requests from tenants, or local authorities acting on behalf of tenants, to improve their property
• From April 2018 the government will make it unlawful to rent out a house or business premise which has less than an “E” energy efficiency rating.

Chris Huhne claims that

“Our proposals provide a voice for tenants living in poorly insulated, draughty homes. The Green Deal is a win-win opportunity for landlords by removing the upfront cost of work to upgrade the property making it cheaper to run, more environmentally friendly and ultimately more attractive to rent.

For those landlords who don’t take up the Green Deal then we will get tough so that by 2018 the poorest performing rented housing stock is brought up to a decent standard.”

There has been talk about financial support for landlords in making these changes, but nothing specific and nothing that you could write a cheque with.

So it looks like the pressure will be on the providers of EPC’s to make sure that rented properties do not fall below an E rating.  And who knows what will constitute a “reasonable request” from a tenant to improve a property.

Oh, and of course any landlord receiving such a request would still be free to use section 21 to end the tenancy, wouldn’t they?

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Read more about this subject here: Who would have thought that the Energy Bill would impact landlords

Paragon have announced that they are entering the buy-to-let lending market again.

It seems that the new range of buy-to-let products will be targeted at professional landlord investors.  Paragon will apparently commence lending with immediate effect through a panel of brokers and will widen distribution over time. Paragon says it will also accept direct business.

If the investment institutions are buying securitised debt again then it is quite likely that others will start to follow. Apparently Paragon have managed to secure a £200m mortgage warehouse facility from Macquarie Bank.

Paragon have publicly stated that:

“The facility will allow the group to recommence lending to the private rented sector, a segment of the UK housing market that has seen considerable expansion in recent years and in which the group has been a major participant. Demand from tenants for rental properties in the UK has been strong and is expected to remain buoyant going forward.”

The fact that Paragon are back is not so special in itself, their rates were never that great.  It does however show that lenders can start to access funds again, which may come as a surprise on the back of reducing house prices.

No related posts.

Read more about this subject here: Paragon to start Buy to Let lending again.

85% Buy to Let Mortgages are back!

A new BTL mortgage has been released which is apparently taking the market by storm. This product is ideal for investors buying property below market value as the lender will consider loans of 70% of the open market value to 85% of the purchase price!
For Example:

Purchase price £20000     (Max 85% = £170000)

Market value   £250000     (Max 70% = £175000)

Mortgage Loan £170000    (lower of the above)

Not only that, but if you have recently purchased your property with cash, say from an [auction -> auction @ s-b-f.co.uk],  they will allow you to remortgage on the same basis even though you may have not owned the property for 6 months!

Rates and terms are competitive, and the lender will even consider multiple flats arranged on one freehold title or houses that are let to multiple tenants!

For more information about this please contact us and we will forward you details of the broker offering this deal.

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Read more about this subject here: BTL New Funding Facility 85% Purchase Price or 70% of Valuation

In their response to the Rugg Review of the Private Rented Sector the CLG clearly believe that landlordism is word that anyone involved in private lettings should be aware of!

Aside from made up words (?) there is quite a lot of good stuff in the response and I will try to summarise the main points as follows:

• The headline is the idea of a Landlord Register – web based and involving an annual fee, membership would be a prerequisite for taking any legal action and carrying a threat of strike-off if a landlord does behave.
• A requirement that all tenancies are in writing – so obvious, but it might surprise some people to find out that a tenancy does not have to be in writing.
• A minimum standard for tenancies, or possibly a guide – I’m guessing that something prescribed will be the preferred route.
• An increase to the higher limit for AST’s to £100,000
• Full regulation of Letting Agents – racing certainty that this will happen.
• Local Authorities to set up bodies to liaise with the private sector, and make better use of the housing opportunities it provides.

Inferred in the response is that there may be tax breaks for Landlords and a rather guarded hint to the voluntary sector to start building bridges with the private lettings sector ( paragraph 64 could have just said stop arguing and start talking!)

It would appear that the government is keen to keep the amount of primary legislation required to bring about these changes to a minimum so some aspects of their proposals may happen quite quickly.

What is worrying is that the attempts to regulate Tenancy Deposit Protection have been so bungled that the law is almost unenforceable, so look out!

Be interested if anyone has any other examples of the word landlordism being used in conversation!

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Read more about this subject here: Is Landlordism a real word?

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.

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Read more about this subject here: Latest News About Housing Benefit For Landlords

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.

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Read more about this subject here: Lettings Review Sites

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.

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Read more about this subject here: Landlords Warned About Housing Benefit

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.

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Read more about this subject here: Foreign Nationals and Overseas Investors

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.

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Read more about this subject here: Buy to Let Commercial Mortgage – Explained

According to recent reports there are a number of landlords ignoring the [tag]Tenancy Deposit Scheme[/tag] (TDS).  In figures released by the National Landlords Association (NLA) it is estimated that approximately 150,000 landlords have directly registered with an approved Tenancy Deposit Scheme.  This means that there is a significant number who have not.

The legislation covering [tag]tenancy deposit protection[/tag] has been in place for nearly five months which means that there is a very large number of existing tenancies exempt from the legislation as it only covers tenancies created after April 2007.

The Tenancy Deposit Scheme is designed to protect deposits taken under an Assured Short-hold Tenancy (AST) agreement in England and Wales.  There is a fear that in an attempt by some landlords to avoid regulation by letting their property under a different type of tenancy.  This could prove to be a very risky strategy for landlords as it would make it very difficult for them to apply to the courts to recover possessions.

Another fear is that landlords may be choosing not to take deposits, thereby exposing themselves to even greater risk from tenants leaving without paying the final month’s rent.  Let alone the risk of damage to property and possessions.

It would be a shame if in an attempt to avoid one small piece of legislation a landlord created more problems than simply registering with an approved Tenancy Deposit Scheme.

Whilst there could be a number of factors why so few landlords have registered with an approved scheme, there may be a minority of unscrupulous landlords who are deliberately flouting the law.  Whether deliberate of done in ignorance, the penalties for breaking the law are severe.

In the event that the matter ends up in court, a non-complying landlord can be ordered to repay the deposit, plus a penalty of 3 times the amount.  If a deposit has not been protected by an approved TDS then then the landlord will be unable to apply to the courts for fast-track possession under section 21 of the 1988 Housing Act.

Whilst some landlords my perceive the TDS as an unwelcome piece of red-tape, it should be remembered that failing to look after a tenants deposit under the Tenancy Deposit Scheme can create much more serious problems in the future.

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Read more about this subject here: Landlords Under Fire Over Tenancy Deposit Scheme