Valissa Burnett

Buy-to-let lending restrictions being considered by the Treasury

11899881

The 3% increase on Buy-to-let SDLT appears not to be just an easy tax option for the government. Reports from the Bank of England (BoE) reveal the high concern the BoE has given that Buy-to-let lending has increased by 40% since the 2008 financial crash compared to a 2% increase in owner occupier lending.

The BoE is concerned that the large levels of lending to Landlords could be a threat to banks and general financial stability, as buy-to-let landlords appear to be more vulnerable to an unexpected rise in interest rates or falls to income from void periods or decreasing rentals.

Officials on the BoE Financial Policy Committee stated in the last quarters meeting “new loans to buy-to-let investors were often subject to less stringent affordability tests than loans to owner-occupiers.”

The Financial Policy Committee is now asking for restrictions on buy-to-let lending in the same way as owner occupier mortgage lending. The Treasury are considering such actions and are consulting with the BoE, but wants to see if the 3% SDLT rises cools the market down at all.

Should such restrictions come into effect they would primarily effect large portfolio holders who rely on property portfolio price increases to remortage to raise deposits for new investments. Most large portfolio holders have very high LTV rates of borrowing against their properties.

Further interesting times ahead….

Buy To Let Landlords – Stamp Duty Tax to increase by 3% in April 2016

11749794

Well yet another blow to buy to let property investors after the Chancellors Autumn budget announcement that from April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band.

For properties purchases between £125,000 and £250,000, where the stamp duty is 2%, buy-to-let landlords will pay 5%.

Based on an average nationwide buy-to-let purchase of £184,000, Landlords will pay an extra £5,520 from April 2016.

The Government will be consulting on whether commercial property investors and funds with more than 15 properties will be exempt from the new charges. Although this is likely, confirmation still needs to be received. Corporate investors such as housing associations will be exempt.

Stamp Duty Rates (on purchases)

Property value Standard rate Buy-to-let/second home rate (April 2016)

Up to £125,000 0% 3%

£125 – £250,000 2% 5%

£250 – £925,000 5% 8%

£925-£1.5m 10% 13%

over £1.5m 12% 15%

Source: HMRC

The UK property market is such a good investment that most UK Landlords will just factor in the additional costs and continue to make good returns.

There will probably be some panic buying between now and April 2016, but after that life will return to normal.

For those looking at increasing the size of their buy to let portfolio take care not to be rushed into purchases without ensuring that the property the type and in an area of demand, and also that the rental return will be sufficient to meet your needs.

Please speak to Valissa Burnett for free advice on any buy to let purchases.

For Corporate bodies and Overseas Property Investors

SDLT is charged at 15% on residential properties costing more than £500,000 bought by certain corporate bodies (or ‘non-natural persons’). These include:

companies
partnerships including companies
collective investment schemes

If the properties are not to be rented out, they may also need to pay Annual Tax on Enveloped Dwellings.

The 15% rate doesn’t apply to property bought by trustees of a settlement or bought by a UK resident company to be used for:

a property rental business
property developers and trader
property occupied by employees

The standard residential rate of applies in these cases.

Non resident companies will also have 20% Capital Gains Tax to pay when they sell the investment properties.

Those letting agents like us at Regency Lettings & Property Management Limited, who assist their clients with property investments will have a lot more work and number crunching to do when we advise our clients.

Landlords Rent Recovery & Legal Guarantee Cover

Regency Lettings & Property Management are delighted to be able to offer what is possibly the most competitive and comprehensive rental recovery and legal guarantee cover available.

100% of the monthly rent paid for up to six months from the date of the first arrears.

Legal expenses up to £50,000 to cover eviction costs or breaches of tenancy agreement. 50% of the rent paid for up to two months after vacant possession has been obtained, whilst new tenants are found. The cover we can offer to all Landlords including Tenant Find only. Cover starts from as little as £12 per month.

At Regency Lettings & Property Management we carry out stringent vetting of prospective tenants and thorough market leading insurance & referencing provider Homelet carry out full credit checks and referencing on all tenants. Such stringent vetting makes it unlikely for our Landlords to experience problems with non-paying tenants. Occasionally however tenants can encounter difficulties beyond their control such as losing their job and being unable to pay the rent or full rent, even more rarely tenants may fail to move out of the property at the end of the tenancy or break the terms of their tenancy agreement.

For most Landlords their rented property is one of the largest assets they own, and in many cases the property is owned via a Buy to Let mortgage, with reliance on rental payments to meet their mortgage commitments. To seek possession of the property through the courts can be costly and more importantly can take three or more months, with no guarantee of getting your rent arrears at the end.

Rent Guarantee policies are available to cover such eventualities but many are expensive, complicated to manage and often will not cover properties which let for over £3,000 pcm or will not cover Let Only Landlords. Regency Lettings & Property Management are therefore delighted to be able to offer what is possibly the most competitive and comprehensive rent recovery and legal guarantee coverage available for all Landlords on properties with rentals up to £5,000 pcm.

The guarantee coverage is taken out on your whole property, regardless of tenants or change of tenants. Regency Lettings & Property Management directly insure your property with Homelet on a policy underwritten by Propgen Insurance Limited, with your interest being registered. This enables us to offer the Regency Lettings Rent Recovery & Legal Guarantee Cover to all Landlords including Tenant Find only clients.

Regency Lettings & Property Management are able to offer you the coverage at highly competitive rates, as unlike some agencies we do not ‘front load’ the cover with costs that we hope you will never need – such as Court Appearance day/half day charges, preparing and sending documents to solicitors for rent arrears and possession. In the unlikely event that you will need to use the cover any such costs will be charged only as and when you need them.

Health & Safety Advice for Tenants

The Smoke and Carbon Monoxide Alarm (England) Regulations 2015

As from 1st October 2015 it is law that all let properties must be fitted with Smoke Alarms on every floor, and that Carbon Monoxide (CO) Alarms in every room where there is a solid fuel appliance. Gas boilers and fires are not included in the regulations, (and are required to be safety checked annually), but we have recommended to our Landlords to have a CO Alarm in any room with a gas appliance. As from 1st October 2015 Landlords need to ensure all alarms are checked and recorded to be working before tenant moves in. It will then be the responsibility of the Tenant to check the alarms are working throughout the tenancy and change batteries as required.

For properties supplied with mobile Carbon Monoxide alarms ensure that you follow the instructions provided with the alarm and do not locate the alarm in an inappropriate location.

We will be carrying out our own testing of the alarms during the tenancy as part of our Managed Service routine inspections and are planning on using ‘smoke testers’.

It is the responsibility of the tenant to check alarms throughout the tenancy and batteries should be replaced once a year. Houses built since 1992 will have at least one hard-wired alarm, more recently built houses will have all alarms hard wired with a battery backup. Older houses are likely to have battery only alarms. Alarms normally have a 5 year or 10 year recommended life before replacement is required. When tenants change batteries please advise us immediately if you see the life date has expired, or if you notice any part of any alarm is broken or not working.

Tenants should not remove alarms, or remove batteries from alarms. Troublesome alarms (such as near kitchens) may need replacing with optical alarms which will not sound when you burn the toast! Let us know if you have such a troublesome alarm.

We have commenced a new register to start to record the installation date, alarm life and testing of alarms. Understandably it may take us some time to get all of the information recorded for all properties.

Gas Appliances Gas Safety (Installation & Use) Regulations 1998

Landlords must ensure that gas appliances are checked for safety every year by a Capita ‘GAS SAFE’ (formerly CORGI) registered engineer and a certificate of it is provided to the tenant and/or prospective tenants, and records are kept for 2 years. Maintenance and installation of gas appliances must be carried out by a GAS SAFE (formerly CORGI) registered engineer.

For managed properties we organise the annual gas safety checks and either us or the ‘Gas Safe’ engineer will supply you with a copy of the certificate. Please keep a copy of the certificate in the Property Maintenance Folder supplied.

For tenant find and rent collection properties it is the Landlords responsibility to have the boiler and any gas appliances checked annually. If you do not have a valid gas safe certificate, please remind your landlord and also notify us, we can take up the matter with your landlord.

Consumer Protection Act 1987

The Electrical Equipment (Safety) Regulations 1994

Plugs and Sockets (Safety) Regulations 1994

Building Regulations (Part P) 2005

Landlord and Tenant Act 1985, Section 11

It is the Landlords duty to ensure that the electrical system is safe, e.g. sockets and light fittings and all appliances they supply are safe.

Regulations change constantly which may result in equipment or fittings needing to be replaced. Such changes as replacing light fittings in bathrooms with IP rated fittings (protected against moisture i.e. plastic or glass cover over fitting so that bare bulb cannot be touched or affected by moisture).

Newer Electrical Consumer Units are far more sensitive with trip switches. The switches may trip if a light bulb blows, or if an appliance is faulty. If you cannot reset a tripped switch, try unplugging all appliances on the circuit, reset the switch and then plug in each appliance until you find the faulty appliance. If you still cannot reset the tripped switch notify us or your Landlord immediately so that a qualified engineer can be booked. Please note should it be found that the cause is a tenants own faulty appliance, the tenant will be liable for the engineers call out cost.

For managed properties we organize 5 Year Periodic Electrical Inspections (recommended) by qualified electrical engineers and also periodic PAT testing of appliances. If you have any concerns about any fittings or appliances, or notice that any lights, sockets or switches are cracked or broken notify us immediately.

Light bulbs / lamps / spotlights – please take care to replace bulbs/lamps with like for like. The incorrect bulb/lamp can overload the circuit or light fitting and in some cases can cause fires. Many light fittings will have an advice label on them.

Legionella and Legionnaires’ disease

Legionellosis is a collective term for diseases caused by legionella bacteria including the most serious Legionnaires’ disease, as well as the similar but less serious conditions of Pontiac fever and Lochgoilhead fever. Legionnaires’ disease is a potentially fatal form of pneumonia. The risk increases with age but some people are at higher risk including people suffering from chronic respiratory or kidney disease, diabetes, lung and heart disease and anyone with an impaired immune system.

The bacterium Legionella pneumophila and related bacteria are common in natural water sources such as rivers, lakes and reservoirs, but usually in low numbers. They may also be found in purpose-built water systems such as cooling towers, evaporative condensers, hot and cold water systems and spa pools. People contract Legionnaires’ disease by inhaling small droplets of water (aerosols), suspended in the air, containing the bacteria. Certain conditions increase the risk from legionella if the water temperature in all or some parts of the system may be between 20-45 °C, which is suitable for growth; it is possible for breathable water droplets to be created and dispersed e.g. aerosol created by a cooling tower, or water outlets; water is stored and/or re-circulated.

Although the risk is minimal, where a property has been vacant for a number of weeks the outlets should be left running to flush through any water for at least two minutes before using. In guest bathrooms or where toilets, taps and shower fittings are used infrequently tenants should run water in these locations regularly. It is also strongly recommended that shower heads should be descaled regularly.

Cold water storage tanks in lofts should be covered and insulated. Hot water tank / boiler temperature should be set above 50 degrees and ideally at 60 degrees. Care should be taken with children and the elderly not to scold themselves with hot water.

Child Safety – EU Regulation for Blind Safety

EU legislation has come into effect that new blinds sold / installed since 2014 are designed with safety features to prevent entanglement and accidental strangulation to young children. Existing blinds in rental properties with young children, with a pull cord should have a cleat to tie up the cord out of the way of children 0-24 months. Blinds with long chains can have a tensioner or chain break connector.

If you are not happy with the safety of any blinds installed in your property please contact us or your Landlord.