Monthly Archives: March 2012

What does an EPC mean to a landlord?

NLA Representative Christine Fernandes gives a landlord's take on EPCs

Well…..probably not a lot –  most only bother with them as it is a requirement to be able to market your property to let.

Of course this is only my opinion, but I think that realistically this will be the view across the vast majority of Landlords.

Although, perhaps I am being pessimistic and not giving credit those that care. I am sure there are some landlords out there who see EPCs as more than just an obstacle to letting – but it is difficult to see their value at times.

New Legislation relating to EPC’s comes into force on 6th April 2012 . It advises  that to market a property for rent or sale the EPC must be displayed within 7 days of commencement.

This legislation, although very, commendable really doesn’t make much of a difference to me as a Landlord. I have EPCs for my properties, the fact that I now have to display them whilst I market the property is no great effort for me.

I can honestly say that not one tenant I have rented to has ever accepted my offer of providing them with an EPC. The point is further stressed when I show them a copy and you can clearly see they are not at all interested.

My disappointment is that Legislation should have scratched the surface a little bit deeper and looked at what should happen once an EPC is done.

EPC’s are held on a central register – this register should use to filter homes with lower rating EPC’s  -

This way we can identify where we can make an immediate impact. Given the poor reputation we landlords have, I would welcome the Government establishing teams to work with owners of property with poorer rating EPCs.

This would ensure that owners whether they be private landlords, owner occupiers or housing associations, in this predicament, are given support and advice about options available to them.

Ultimately, to achieve the longer-term targets of reduced emissions nearly all housing stock will have to have zero emission.

We all need to change our mind set and focus on the long-term goals. Teams, as I’ve suggested at a local level should be working with landlords, letting agents and their respective associations alike. Otherwise most of us will continue to pay little heed to EPCs or what they are supposed to represent.

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NLA members qualify for a 10 per cent discount from a NLA EPCs . To find out more about their range of professional assessments carried out by a nationwide network of fully qualified and accredited Domestic Energy Assessors please visit the NLA website.

Planning – not quite free for all

Ludwieg Mies Van Der Rohe's 'Farnsworth House' might well have been turned down by many UK planners.

The Government is expected to publish the long awaited National Planning Policy Framework, better known as the NPPF, today. This publication follows an elaborate and very high profile consultation process and a number of delays. However, the date finally chosen seems both fitting and ironic.

Firstly, today is fitting, as 27 March is (quite) well-known in housing circles as the birthdate of Ludwig Mies van der Rohe, the modernist architect remembered fondly (and not so fondly) for trying to create buildings which represented their time in a functional way which reflected his interpretation of society. Take a look at the Seagram Building in New York and make up your own mind as to whether he succeeded.

If we are fortunate the NPPF has embraced at least part of this and stripped away the existing bureaucracy of planning regulation leaving just enough behind to allow communities to address their needs – in particular the desperate need in much of the country for more appropriate housing – and to preserve the existing aesthetic and culture of their locality.

The irony is perhaps more obvious to many landlords in England today (apologies to readers in Wales and Scotland but fortunately this bit doesn’t really apply to you). The NPPF’s measures to free us from Town Hall tyranny –  in respect of new development – coincide with moves by more than one in ten relevant local authorities to drastically restrict the way in which landlords may use existing housing stock to provide homes.

Article Four Directions, those pernicious local orders dictating what kind of household may occupy a residential property, are spreading through England like an ill-conceived fashion restricting access to low cost housing in areas where it is very much in need.

As the headlines today will no-doubt be dominated by a mixture of cheers and sneers (depending on your viewpoint) aimed at the relaxation of planning restrictions. Is it too much to ask that as well as providing the means for much needed new housing in today’s NPPF, the Government also allows those of us trying to help meet housing need be permitted to do so in response to the needs of local demand?

Probably, but it’s always worth asking the question.

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If you know of a new article four direction in your area, or believe that your local authority may be considering such a policy please add a comment to this post to let us know where. 

Deposits: Whose money is it anyway?

Faiz Rashid, NLA Local Representative for Yorkshire, explains the importance of understanding the status of tenancy deposits.

Most landlords ask new tenants to pay a month’s deposit as security in case of any damage to the property or non-payment of rent by the tenant.

It’s the only real protection available to us should things go wrong later on.

However, what happens to that money at the end of the tenancy is also one of the most heavily challenged decisions a landlord has to make.

To deal with these disputes, the Government introduced mandatory tenancy deposit protection for most tenancies in England in Wales in April 2007. This wasn’t necessarily popular with all landlords then (or even now if truth be told) but it was intended to safeguard tenants’ deposits and provide a fairer system for settling disagreements about the return of any disputed at the end of a tenancy.

There are two types of government authorised schemes currently available:

-       Custodial; where the landlord or agent pays the deposit into the scheme, where it will be kept until the end of tenancy.

-       Insurance backed; where the landlord or agent holds onto the deposit but pays insurance premiums to the scheme. This means that the deposit is insured if there is any dispute, and the scheme will repay the tenant the agreed amount directly.

Personally, I use my|deposits for my tenancy deposits. This suits me because its flexible (I can use it around the clock), easy and straightforward. I can hold the deposit myself and am able to simply return it to the tenant at first opportunity at the end of the tenancy (providing all has gone well) which isn’t always so straightforward with the custodial scheme. But the custodial scheme has its merits too, especially if you don’t want the responsibility of holding onto potentially large sums of money for the duration of the tenancy.

Despite some teething problems, largely being addressed by new legislation from next month discussed in our earlier guest blog here, the three Government backed schemes have proved largely successful.

But there is still quite a lot of confusion about the status of deposits in general.

The key point which landlords often get wrong is that the deposit belongs to tenant. It never ceases to be the tenant’s money and should be returned unless the landlord can show that he or she has suffered a financial loss as a result of the tenant’s action or inaction.

This can be frustrating for landlords because as we all know it can be difficult to remain objective when carrying out an end of tenancy checkout – especially where there is obvious damage. This is why conducting a thorough and comprehensive inventory at the beginning of every tenancy is absolutely essential. Note down everything, take photographs, video if necessary and make sure that the tenant signs their agreement.

More landlords fall foul of the dispute resolution process because they cannot prove what condition a property was in before the tenancy began than for any other reason.

Should the need arise – where an agreement can’t be established over the amount of the deposit to be returned to the tenant – at the end of the tenancy all three schemes provide access to alternative dispute resolution (ADR) service gives landlord as well as tenants, the peace of mind.

Also – for all those landlords reading in Scotland, Tenancy deposit protection is coming soon! For information visit www.mydepositsscotland.co.uk for the latest news.

A Budget of Olympic proportions? Or opportunity lost?

In 2012, with the London Olympics only months away, it would be reasonable to expect  an Olympic style Budget Statement to meet Herculean challenges.

It is hard to describe George Osborne’s address to Parliament in such terms – but there were some important points of which to take note.

Heavily trailed in advance of today’s statement, the Chancellor announced significant changes to personal allowances, a reduction in the highest rate of income tax and the introduction of a new marginal rate of Stamp Duty Land Tax (SDLT).

However, once again there was no recognition of the barriers to investment presented by the current system of property taxation.

The UK economy has suffered its most damaging recession for decades, the Government has (and continues) to cut public spending while encouraging private sector investment to take its place. In fact Mr Osborne described today’s statement as “unashamedly backing business”

The Chancellor has repeatedly declared his commitment to small businesses, and the desire to see small and medium size enterprises play a much greater role in economic recovery.  Despite this, small enterprises specialising in residential housing (AKA landlords) remain unable to release gains from the sale of their assets to invest in growing their business.

Today the Chancellor unveiled more tinkering at the edges of SDLT rules, in pursuit of the perfectly reasonable objective of reducing tax avoidance by rich individuals. This year Mr Osborne has introduced two new marginal rates for property purchases in excess of £2m – 7 per cent for purchases by individuals and a whopping 15 per cent for companies.

The Government is of course justified in wanting to stop wealthy individuals exploiting loopholes to avoid paying their dues, but the Treasury should take care not to ignore the impact that measures will have on legitimate companies which buy property to let by way of business for whom an additional 15 per cent at point of purchase will drastically influence investment decisions.

Meanwhile calls for a comprehensive review of Stamp Duty continue to fall on deaf ears. It is clear from the, now annual, incentives, payment-holidays and rate changes that the successive governments recognise that SDLT is broken yet their reluctance to go back to the drawing board remains.

HM Treasury needs to realise that SDLT is about more than just mansion taxes and the wealthy, it affects investment and business and is not fit for purpose.

This is a missed opportunity to stimulate more investment and encourage growth in the housing market.

For more on the Budget 2012, visit the NLA Website

More time to protect your tenant’s deposit

Eddie Hooker, CEO, my|deposits, looks at what the changes to the Localism Bill will mean for landlords

The Localism Bill changes are set to come into force on the 6 April and it will mean some small changes to the way landlords protect their tenant’s deposit.

The good news is that that the changes will give landlords more time to protect the deposit money, but if you don’t do so, the courts will have more powers to impose penalties.

These changes only affect tenancy deposit protection in England and Wales.

Extra time to protect deposits:

  • Currently: Landlords have 14 days to protect the deposit after taking it from the tenant.
  • From 6 April 2012: Landlords will have 30 days to protect the deposit after taking it from their tenant.

Landlords must not only remember to protect the deposit within the 30 days but also provide the tenant with the deposit protection certificate and the Information for Tenants leaflet.  We’ll provide this to you when the deposit is protected but it’s up to you to pass it on to the tenant.

my|deposits will still accept the late protection of deposits by landlords after the 30 day period.  But remember that the tenant can still seek compensation through the courts.  They can do this even if you protect it before going to court.  They can also make a claim after they have left the property.

What if the deposit is not protected?:

  • Currently: Under the existing law, if the deposit is not protected, a court can order that the landlord pay the tenant three times the deposit as a penalty. The landlord is also unable to use a Section 21 notice to seek possession of the property.  There have been some cases where landlords have escaped penalty by protecting the deposit late.
  • From April 2012: If the deposit is not protected within 30 days then the landlord is certain to face penalties if taken to court by the tenant.  Courts will order that the deposit be either protected immediately or returned in full to the tenant.  As a penalty, landlords could also be ordered to pay the tenant between one and three times the deposit amount, and it won’t be possible to use a Section 21 notice until the penalty is settled with the tenant.  Importantly, the tenant can still seek this compensation even if the deposit is protected late or if they have left the property.

Landlords using us to protect their deposits can rest assured they comply with the new law.  Just remember to protect all deposits within 30 days of receiving them and provide the tenant with their Deposit Protection Certificate and the Information for Tenants leaflet.

For more information on how to protect your tenant’s deposit, download our guide here.  Or to join my|deposits and start protecting deposits right now, visit our website www.mydeposits.co.uk

Deposit protection will be introduced in Scotland this year, and more information can be found at www.mydepositsscotland.co.uk

The Return of the BTL Mortgage?

Steve Simpson, NLA Local Representative provides some insight into the BTL market

I am sure we all agree that the financial world we knew four or five years ago has changed – almost beyond recognition. However, despite the fact that bank base rates have been at a record low of 0.5% for over 3 years, finance remains difficult to obtain and relatively expensive. For landlords, both large and small, looking to expand or re-mortgage and successfully obtaining finance in the last few years has been tough; even with a successful business and a healthy deposit. When buy-to-let lending was at its peak in 2007, nearly 50,000 BTL mortgages per month were being sold. By 2009, lending dropped nearly 80% to less than 11,000 per month. But there is good news on the horizon. If you are like me and looking to increase your portfolio, as confidence slowly returns there are more lenders either entering or returning to the BTL market; especially to the smaller landlord. There are more products with a broader range of loan to values (LTV) ratios available and at better interest rates.

Bounce back: Buy-to-let is clawing its way back with monthly mortgages for new property purchases rising steadily - but it remains substantially below peak levels.

NLA Mortgages, which offers cashback for NLA members, show 24 lenders currently offering 355 BTL products. While this is slightly down on last month, it is more than double the low point in 2009. This is good news for landlords looking for finance.

What’s more, for the larger landlords, those set up as a Limited Company or those with HMOs, should watch out for some well-priced new products due to be released later this month from a lender new to the sector.

We are also seeing an increase in the ‘Silver Buy-to-Letters’. Cash remains king as far as starting or expanding your portfolio is concerned. While there are some 80% and even 85% LTV products around, the bulk of products require a landlord to place a deposit of at least a quarter of the purchase price. This has created a small but growing new landlord community: those people in their 40s and 50s, fed up with low interest rates on savings, are turning their assets into investments by purchasing property for rent. Lenders are keen to lend to this ‘silver generation’, as they have the all-important and readily available cash deposit.

With the Bank of England base rate still at an all-time low, property prices still depressed in most areas, more people turning away from traditional saving accounts causing more BTL products to enter the market. If you have the deposit, this is the time to re-finance or expand your portfolio. This confluence of events will not last forever so seek out the best product for your needs whilst you can. But remember, do not overstretch yourselves and if you are an NLA member, you can visit the online library for more information.

Good Landlording ….

The Price of Electrical Safety

Richard Price, NLA Director of Operations, joined forces with the Electrical Safety Council to raise awareness of electrical safety.

Last week we joined forces with the Electrical Safety Council (ESC) to help raise awareness about the dangers of electricity in privately rented homes.

I joined the ESC at a London-based radio studio to do almost a dozen interviews with regional radio stations right across the UK to help increase awareness about electrical safety in the private-rented sector (PRS).

Each week, at least one person is killed and 1,000 people are seriously injured in electrical accidents in UK homes.  Electricity also causes thousands of house fires each week – many of which could be avoided.

Unfortunately for landlords, the PRS is over-represented when it comes to safety incidents involving electricity.  While 16% of the UK population rents privately, they account for 20% of people who suffer an electric shock.

Research by the ESC found that the problem lies in a misunderstanding between landlords and tenants over who is responsible for ensuring the property is safe of any electrical hazards.

By law, landlords must ensure all electrical wiring and installations in their properties are safe.  So make sure you follow our advice:

  • The best way to be sure is to have it inspected (every five years) by a competent electrician.  This is a legal requirement if the property is an HMO.
  • When a tenant is moving out and a new one is moving in, do a visual inspection of the property to see if anything has been altered.  Have anything that looks dangerous looked at by a qualified electrician.
  • It’s also advisable to have Residual Current Device (RCD) protection installed in the property as well.  This will give added protection to tenants from any faulty electrical appliances.
  • Any appliances you provide as part of the tenancy (such as plug-in heaters or kitchen appliances) must be safe.  An easy way to ensure safety is through Portable Appliance Testing (PAT).  The NLA holds regular PAT courses to teach landlords how to carry out safety checks themselves.  For more information click here.
  • Any landlord found to be negligent over electrical safety can face stiff penalties of up to £5,000 on each count or imprisonment.
  • It’s also important to show tenants how to isolate the electricity if there is a problem.  When they move into the property, ensure you show them where the fuse box is and what to do in an emergency.  If the property has solar panels ensure they know how to isolate supply from them as well.
  • Give your tenants a list of what to do if there is a problem, including a telephone contact number so they can call an electrician.

The ESC has produced a simple guide for landlords outlining how to ensure the electrical safety of a property. They also have a smart phone app you can download on the site which guides you around the home in a step-by-step inspection.

Also, visit the NLA Online Library (FREE for NLA members) for more information on electrical safety, or better still, sign up to become NLA Accredited and learn about your wider responsibilities as a landlord.

If in doubt, call the NLA Advice Line (FREE for NLA members) who will be able to guide you further.

To join or to find out about the NLA Membership benefits click here