National Landlords Association

Encouraging renting


Leave a comment

Don’t take the risk, call our experts

advice line 2

Staff photos

Of the many services provided by the National Landlords Association (NLA), perhaps the most useful and unique benefit is the help and assistance offered by the Advice Line. In an increasingly complex regulatory environment, it is a great comfort for NLA members to know that on the other end of a telephone line is the sympathetic ear of a trained adviser able to offer practical aid and pragmatic advice on any and all issues to do with running a lettings business.

The NLA receives over 38,000 calls a year covering a wide variety of issues from landlords who need some advice. We are here to give professional and practical assistance to all our members, whether small, one property landlords or larger portfolio landlords and agents. Alan Jakeway, Head of NLA Advice Line, gives you the low down on the NLA Advice Line.

Who are the advisers?

Our Advice Line consists of 18 professional members of staff all with extensive experience of the lettings business. The advisers come from various backgrounds: some are legally trained to a high level, others are housing law practitioners, and many have been trained in the gentle art of negotiation. All advisers receive regular training and professional development, so that they are all fully aware of current legislative requirements.

In most cases, the NLA member will find they are also talking to a fellow landlord, who will empathise with the issue they are discussing. The advice team all work part-time, on average two days a week; for the rest of the time they will be running their own businesses. It is not uncommon to hear an adviser say to a member: ‘Yes, the same thing happened to me only last week.’

What does the Advice Line do?

As a UK-wide organisation, we deal with queries from landlords based in England, Scotland, Wales and Northern Ireland and the role of an adviser is not just to give advice, but also to listen.

Call times can vary between five minutes to thirty minutes or more if the matter is more complex, such as assisting in the filling out of court forms. In some cases, landlords are very distressed and need time to relate the full issue and it’s vital that we tease out all the necessary information after which we can get to work on briefing them and offering advice on the most appropriate course of action.  There are times when more than one possible course of action is available; in such instances the member will be presented with the various options available to them and the likely outcome of each one.

There is always a minimum of five advisers working at any one time, with six on what we class as peak days (Mondays and Fridays). Calls are received from the moment the lines are opened at 9am and continue non-stop until 5pm when the lines close. Members who cannot get through immediately are able to leave a message and all calls are returned, usually within the hour. On a typical day, the advice line receives on average 160 calls.

What issues does the Advice Line commonly deal with?

A high percentage of calls will be concerning possession proceedings. It is an unfortunate fact that landlords will occasionally have to go to court to secure possession of a rented property. Most of the advisers have had experience of court possession procedures and assistance can be given with what to expect in court, how to instigate the process and how to correctly fill out the court forms. While there can be no guarantees, the NLA can confidently assert that if the correct procedures are followed a successful result will almost certainly be achieved. This has been our experience even with difficult and defended claims.

But there are a whole host of other issues we advise members on, and each poses a slightly different scenario. The most common subjects landlords raise with the Advice Line include:

  • Possession
  • Rent arrears
  • Dealing with letting agents
  • Contract law matters
  • Court procedures
  • Local Housing Allowance and Housing Benefit regulations
  • Council Tax liability obligations
  • How to go about serving a Section 21 and Section 8 Notices
  • Deposit protection
  • Tenancy contract issues
  • Queries relating to houses of multiple occupation (HMOs)
  • Joint Tenancies/Deed of Assignment
  • Housing Benefit regulations

Don’t take a gamble, get the right advice

If you can relate to any of these problems, or are currently grappling with an issue you’re unsure about, why turn to the internet when you’re not guaranteed a correct answer? As one of our experienced advisers has said: ‘I can look at any so-called legal advice website for landlords and within 5 minutes find a legal error.’ You could always call a solicitor, but that might prove more expensive in the long run.

Full NLA members have free access to the Advice Line as part of their membership. If you are not an NLA Full Member, then we also offer a more flexible solution in Call Credits, which gives you the opportunity to try out the Advice Line without committing to NLA membership. When you purchase Call Credits for the first time we’ll enrol you as an NLA Landlord Associate which gives you FREE access to our approved tenancy agreements, forms and letters which cover England, Wales and Scotland. We’ll also deduct the cost of previously purchased Call Credits from your membership fee if you later decide to join as a Full Member within 90 days.

Join the NLA and find out exactly how we can help support you to make a profitable success of your letting business.

NLA Full members can access the Advice Line on 020 7840 8939


18 Comments

Taxing Times Ahead

budget2015This was billed as a ‘big’ Budget, and frankly the best opportunity George Osborne would have to drive through the difficult financial policies which he may deem necessary to meet the Government’s objectives.

However, it has also proved a significant – if not outright damaging – budget for private landlords in the UK where Mr Osborne seemingly borrowed policies from Labour and the Green Party.

The Chancellor made two major announcements under the headline of ‘landlords’ reproduced below as they appear in the ‘Red Book’: 

1.191 The government will restrict the relief on finance costs that landlords of residential property can get to the basic rate of income tax. The restriction will be phased in over 4 years, starting from April 2017. This will reduce the distorting effect the tax treatment of property has on investment and mean individual landlords are not treated differently based on the rate of income tax that they pay. It will also shift the balance between landlords and homeowners. 

This is a major blow, and one the NLA feared based on speculation in the weeks leading up to Mr Osborne’s statement. In fact we wrote to the Chancellor directly ahead of the statement seeking assurances that the rumours were unfounded.

Contrary to common sense, loan interest is no longer to be considered a straightforward revenue expense, as the available relief will only be available at the basic rate of income tax.

It seems frankly ridiculous that the Treasury can announce such a cutting proposal, likely to increase operating costs and inevitably rents at a time when the private-rented sector is under such pressure to house a growing share of the country’s population.  Based on a typical rental property, valued at around £160,000, this move will hit a landlord’s margin to the effect of more than £800 per year; potentially forcing rents up by £70 per month.

This is apparently based on a belief that the ability to deduct interest payments from taxable income puts landlords at an unfair advantage over owner-occupiers – completely ignoring the fact that landlords are providing a service by way of business, while households are buying a home for their personal use.

It suggests a complete misunderstanding of landlords’ businesses and a lack of recognition for the work undertaken for largely unremarkable yields.

I suspect many landlords will be crunching their respective numbers to see if private renting remains viable post-2017 from when these measures will be phased in.

1.192 The government will also reform how landlords of residential property can account for the costs they incur in improving and maintaining rental property. Currently, landlords of furnished properties can deduct 10% of their rent from their profit to account for wear and tear, irrespective of their expenditure. This means landlords can reduce their tax liability even when they have not improved the property. From April 2016, the government will replace this allowance with a new system that enables all landlords of residential property to only deduct costs they actually incur

This point requires a little more consideration. It is difficult to understand exactly what the implications of replacing the ‘wear and tear allowance’ will be, and may result in a positive outcome for many (despite appearances).

It could be a response to the concerns raised by many in the NLA since HMRC removed the option to make ‘like-for-like’ deductions based a short while ago.

It could be that those who claim the 10 per cent allowance, without necessarily facing significant costs in that tax year will lose-out. Although this may be balanced by offering a solution for those landlords of unfurnished, or part-furnished property who are currently unable to recover any of the cost of replacing white goods, curtains or carpets etc.

The NLA will be seeking an urgent meeting with the Treasury and HMRC to discuss these issues, and the wider implications for landlords’ tax status and will update readers soon.

All in all private landlords have some hard decisions to make about where they invest, what return is possible and whether letting remains a worthwhile activity in the future – 2017 could well be make or break for many in the PRS.


Leave a comment

European Court of Justice VAT ruling could cost UK landlords so act now

Gary Rowson, One EGary Rowson, OneE, urges landlords considering energy efficiency improvements to take action.

A recent EU ruling on the application of the UK’s reduced rate of VAT for energy saving equipment and materials is likely to increase costs for landlords with domestic properties and individuals who are either building or refurbishing their homes (who are not able to recover VAT incurred on their construction works).

Under current UK legislation, a reduced VAT rate of 5% is applied to the installation of energy-saving materials to make dwellings ‘greener’ – such as solar panels, insulation or micro-combi boilers.

However, the European Court of Justice has now decided that this interpretation is not in line with the relevant VAT Directive, which only allows the reduced VAT rate to be applied where there is a ‘social aspect’ to the works.

The judgement means that UK VAT legislation will have to be amended and the scope of the relief is likely to be significantly restricted.  While there’s no clear timeframe for when this will be implemented, landlords would be wise to seriously consider bringing forward any energy efficiency improvements in order to take advantage of the current situation.

If you have any questions about how this might affect your rental property business, please call OneE Group on 0207 8701234 or send an email to info@oneegroup.com.

And to find out more about how the NLA can help you to make energy efficiency improvements, visit NLA Property Services.


1 Comment

Is the grass always greener on the other side?

Matt Oliver, NLA Public Affairs Officer, on more evidence to suggest rent controls simply aren't the answer.

Matt Oliver, NLA Public Affairs Officer, on more evidence to suggest rent controls simply aren’t the answer.

Today’s publication of the interim report from LSE, commissioned by the NLA  debunks the myth that rent control is a golden bullet, easy to implement and guaranteed to work in the UK.

The launch comes on the day that the four Labour candidates aspiring to be leader (and potentially our next Prime Minster) go head-to-head in a live TV debate.  The Private Rented Sector (PRS) and housing is going to be top of the agenda, especially as Labour’s London Mayoral candidates are all advocating some form of rent control in the Capital as they pitch for votes in their separate election primary.  This is all despite the fact the Mayor has no such powers to implement such a scheme.

Rent controls are non-transferable policies

When it comes to the PRS, LSE’s report shows the grass definitely isn’t always greener. For example, the model cited for the policies advocated by Labour during the election was Ireland but, as the report concludes, the controls introduced in the last few years have had very limited effect.  In fact the country is experiencing a housing crisis, with rapidly rising rents and a near-standstill in new housing production.

Ah, but what about Germany?

Yes of course, Germany. This is often cited as the best example of a country with a stable PRS, yet LSE’s report found that the system of indefinite security and in-tenancy rent stabilisation has in the past been cushioned by low house prices and demand, something we don’t have here, whilst initial rents can be well above current market levels in high-demand areas. Meanwhile in San Francisco and New York it looks like the main beneficiaries of interventionist policies are older middle class households, with the young hardly getting a look in.

What’s the moral of the story?

Well, in a nutshell: rent controls sound great on the surface but the evidence points to the contrary. The NLA is a strictly neutral political organisation.  However, as Labour members listen to these proposals for the PRS and contemplate choosing their third leader in eight years, much like some do with Tony Blair (the only Labour leader to win three successive General Elections), they will remember that you often don’t know what you’ve got till it’s gone.

*LSE’s final report, due to be published later this year, will examine London in more detail to see specifically how renters in the Capital would be affected by various proposals for change.


Leave a comment

How to get started with buy to let financing

BTL RB blog

NLA London Rep Richard Blanco unpacks buy to let financing…  

I’m always keen to encourage people to research their own buy to let (BTL) mortgages, but there’s no doubt it can be very daunting.  There are a few key concepts you need to understand and I’m going to outline them here for you.

What mortgage do I need?

Most investors choose to take out interest only loans, because the interest can be set against your rental income, making this a relatively tax efficient transaction.  The lender will look at your credit file, and most expect borrowers to have their own home mortgaged or owned outright and have a minimum income of around £25,000 – although this varies depending on the lender.  Some major lenders like Birmingham Midshires and The Mortgageworks don’t require earned income, but their credit score is consequently more onerous, especially at higher loan-to-value ratios (LTVs).

How will my credit score and income be calculated?

Credit scoring plays a key part and having a high credit limit on a card can increase your credit score. However, using the credit facility regularly can reduce it quite dramatically and your credit score will be spared from impairment if your balance is below 50% of your total credit limit. Lenders can be fussy about what they include when calculating your income, and most disregard the forecasted rental income that the property will command.  They also tend to favour employed income from a payroll, and things like bonuses and earnings from zero-hours contracts may be overlooked.

What about lending criteria?

Rental income must cover 125% of the mortgage but almost all lenders now calculate prospective payments at a higher notional rate of 5%, rather than the agreed mortgage interested rate. This makes it harder to obtain finance and is aimed at acclimatising borrowers to the likelihood of interest rate rises in the short to medium term.  Lending policy also tends to favour landlords with smaller portfolios and most lenders place a cap on how many properties you can own, regardless of who the loan is with – usually between 3 and 10 or if not, a cap on how much you can borrow overall.

And what interest rates should I expect?

In 2009, typical buy to let interest rates were around 5.25% with often an arrangement fee of around 2.5% of the loan applied, but thankfully rates and fees have fallen considerably, and at 75% LTV you are now looking at an interest rate 2.5% to 3.5% with fixed fees of less than £2,000. If you have a bigger deposit and can stretch to a 65% LTV, rates can be as low as 2%.  New entrants like Virgin Money, The Mortgage Trust, Precise and Aldermore – though not always the cheapest – have helped to increase competition.

How long will the process take?

The whole application process can be very slow and pedantic – with an average completion of 8 weeks –and the big three BTL lenders have about two thirds of market share partly because of their speed and efficiency: TMW, BM and Godiva. 

Should I use a broker?

Around two thirds of landlords choose to use a broker but be aware they may steer you towards specialist lenders who are not necessarily the best value.  Often building societies who mostly deal direct with customers can have some of the best deals, so try carrying out your own research by looking at interest rates for example on the NLA Mortgages search engine, or Moneyfacts before deciding either way.

Is it ready to let?

Mainstream lenders will require the property to be habitable and ready to let in order to proceed, which means a working kitchen and bathroom and no damp or subsidence.  Many won’t lend to flats over four storeys high, flats over commercial outlets or to freehold buildings containing flats. For situations where the property requires works, you could try commercial lenders like Lloyds, Shawbrook, Bank of Cyprus, private or other high street banks, but expect to pay an arrangement fee of at least 1% and interest rates of around 4% on loans of up to 70% of the value of the property.  Interest-only loans are harder to come by in this sector and your repayment term will be shorter – say, 15 years instead of 25 – but there won’t be any caps on the number of properties you own. 

Is bridging finance for me?

Bridging financers are the funders of last resort, usually lend on a non status basis at 65% LTV, and involve much higher costs of generally around 1% per month with no arrangement fee. It’s a bit like buying on a credit card. The advantage is the property can be in any condition – within reason, but be warned: never obtain bridging finance without a clear exit strategy and be aware that you will be stuck on it for six months before you can apply for a remortgage.

Growing a portfolio

I hope this has all been useful. Remember, once you have a mortgage, and if the property increases in value, you can think about growing your portfolio by releasing equity and applying for a further advance.  People often release funds from their own homes in this way to buy an investment property. It’s called capital raising, and most lenders will allow it for the purposes of buying property, though they may insist you own the property for 6 or sometimes 12 months, and apply a lower LTV.

For more information about growing your portfolio, see our guide here – available to NLA Associate Members and above. Not a member? Sign up for free here


Leave a comment

Local government – their 5 year mission

Gavin Dick, NLA Local Authority Policy Officer on the significant challenges that face local councils over the next five years.

Local Authority Officer - Gavin Dick

Local Authority Officer – Gavin Dick

Councils face a simple choice in working with the private rented sector: treat it as a constructive partner or look on it as an adversary  – and risk alienation in the extreme.

While the replacement of Eric Pickles as Secretary of State will have been welcomed by many in local government finance, there is to be no return of a magic money tree. Whatever happens during this parliament, it is inevitable that the envelope of spending by local authorities is going to be reduced even further by 2020. Councils will need to engage with third parties to deliver services with greater efficiency than has been typical in recent years.

The Local Government Association (LGA) has been vocal in its criticism of cuts, stating that there should be no further reductions in the funding from central government. Some council leaders have also called for the cap on Council Tax rises to be removed. Currently a council has to call a local referendum to increase council tax above the threshold set by government.

So councils will have to generate income, or reduce services,  which could be concerning for private landlords. In many areas, the private rented sector has been identified as an easy target to increase revenue in recent years through borough-wide licensing schemes. This short-sighted policy is ultimately a tax on tenants living in the private rented sector as, just like any other industry, the increased costs incurred by suppliers get passed down to the consumer. In this case, the cost of council revenue generation is most likely to be recouped through higher rents and eventually footed by those living locally.

Will there be a Westminster Bailout?

Not likely. The Conservative Party manifesto pushed for greater home-ownership and the increase in building new homes has to be at the forefront of this effort. The Party is also committed to the roll-out of Universal Credit and further reform to welfare with an overall reduction in the welfare cap. Furthermore, the manifesto also includes proposals to extend right-to-buy to tenants of social housing. Even with the one–for-one replacement of the housing stock lost, we’ll see the continuation of large social housing waiting lists, forcing further reliance on councils to engage with the private rented sector. Subsequently, councils will need to embrace the private rented sector, abandoning any pre-conceived opinions and make efforts to understand how it operates in 2015, rather than relying on out-dated stereotypes and hearsay.

Councils will need to avoid being railroaded by overbearing politicians who wish to tell the private rented sector who to house, what to charge and how to run their businesses by introducing licensing schemes which (arguably) prioritise fundraising over problem solving.

Increasing unwillingness for landlords to home housing benefit recipients

The National Landlords Association has been conducting polling for several years, on landlords’ willingness to take different tenant types, and what’s apparent is a steady decline in the willingness to take those who rely on Local Housing Allowance (LHA).

Add to this the recently released statistics from the Ministry of Justice (MoJ) showing the increase in repossession claims by social landlords granted by the courts  and it becomes clear that councils will increasingly have to look to the private rented sector to house a wide variety of households. Despite this, many local authorities seem to be blind to the fact that that the private rented sector has a choice over its tenants and can refuse a person as well as a council. Pushing through polices such as borough wide licensing on huge swathes of the private rented sector will not encourage landlords to engage with the council, ultimately to the detriment of all involved.

What does the future hold?

The next five years will see a dramatic change in the way that the housing sector functions. Right-to-buy will alter the social housing sector; it will not be the end of the social sector, but it could force it to focus more intently on housing those in the greatest need. Councils will need the private rented sector and should not foster disaffection amongst a group that they will rely on to meet housing need,. For the time being, unfortunately too many councils find themselves doing just that.


Leave a comment

Top 5 reasons for financial loss

Top 5 reasons for financial loss

Chairman Carolyn UphillCarolyn Uphill, NLA Chairman takes us through recent figures which have revealed the top five reasons for a landlord making a loss.

Have you considered the costs that go into maintaining and running a letting business?

A recent National Landlords Association (NLA) survey confirmed that it is no easy feat being a landlord, and operational costs need to be considered as it can mean the difference between success and failure. The landlords surveyed revealed the top five reasons for their financial loss:

5.     Agency fees

12 per cent of those surveyed said that agency fees contributed to them making a loss. Varying levels of agent’s services are offered so make sure you know exactly what you’re being charged before signing on the dotted line. It is also best to check if there are any hidden extras too so that you don’t get hit with a hefty unexpected bill.

Agents will soon be required to state prominently in office and online whether or not they’re a member of a Client Money Protection (CMP) scheme so make sure they are a member of a reputable trade organisation such as UKALA.

4. Voids

14 per cent said they experienced void periods which resulted in financial loss. Being realistic about tenant turnover can save you from getting into financial difficulties. We recommend budgeting for 10 month’s income for a calendar year to cover any unexpected void periods.

3.     Rent arrears

One in five landlords (18 per cent) said they experienced loss due to rent arrears. It is so important that you address the issue of rent arrears as soon as possible. Talk to your tenant and try to ascertain why they haven’t paid on time, you can then put in place a payment plan if possible or offer them the option of ending the tenancy, so that both you and they don’t get into any further difficulties.  For more information here is a guide to rent arrears.

2.     Rental income

Two in five landlords (39 per cent) claimed that their rental income doesn’t cover their outgoing costs, which include things like agency fees, renovations, repairs, tenant checks, inventories, check in and out reports, just to name a few.

It’s understandable that you want to set a rent which is competitive and fair. However if it doesn’t cover your costs then you should look to see that, a) it is in-line with the current rental market, and b) that you have reserves which cover things such as repairs and maintenance as well as the bigger jobs of renovations and refurbishments. It could be that the property is just at a stage where there is a great deal of outgoings, which is why you should always put money away for a rainy day and budget appropriately for any unexpected costs.

1.     Renovating and refurbishing

The foremost reason given for financial loss was money spent on renovating and refurbishing properties between tenancies (53 per cent). Renovations are essential in order to keep your property looking and feeling desirable and for achieving competitive rental returns, and putting renovations off can become costly if associated problems keep adding up. 

You’ve been warned

This is a wakeup call to anyone thinking of investing in buy to let; make sure you go in with your eyes open. There will be considerable outgoings at times which can lead to serious losses unless you’ve planned ahead. This is why having a financial plan in place is so important.

Take it from those who’ve already taken the leap into buy to let. These landlord testimonials highlight the issues you might come up against when in the business:

Landlord A:

“Set up costs are extremely high, especially refurbishments e.g. kitchen, bathroom heating and subsequent marketing. Also, management fees are rising and securing extension of leasehold is difficult.”

Landlord B:

“My last tenant caused a lot of damage and the guarantor absconded, setting me back severely.”

The NLA provides a wealth of information and help to landlords, both to those just starting out and those who have been in the business for a while. Our ongoing support can help keep things on track.

Find out exactly what the NLA can do for you and how we can support you to help make a success of your letting business.

http://www.landlords.org.uk/services

Follow

Get every new post delivered to your Inbox.

Join 16,837 other followers