Right to rent checks are being rolled out – how will you be affected?

Matthew Oliver, NLA’s Parliamentary Officer, outlines what the changes will mean.

Matt Oliver, NLA Public Affairs Officer, explains the Immigration Act Landlords Scheme

Matt Oliver, NLA Public Affairs Officer, explains the Immigration Act Landlords Scheme

In a written ministerial statement, the government yesterday announced the areas where they will be piloting the Immigration Act Landlords Scheme.  This is the scheme where landlords are required to check the immigration status of tenants, as prescribed in the Immigration Act.

What do you need to know?

From 1 December 2014, landlords in these areas will need to check that someone has the right to live in the UK before letting a property to them. This includes landlords who take in lodgers or sub-let property.

Therefore, the right to rent checks will only apply to:

  • landlords in Birmingham, Walsall, Sandwell, Dudley and Wolverhampton
  • all adults aged 18 and over living at the property (children under 18 will not need to be checked)
  • only new tenancy agreements starting on or after 1 December 2014

Landlords will need to see evidence of a person’s identity and citizenship, for example a passport or biometric residence permit. Copies of the documentation will need to be taken as evidence the checks have been carried out and retained for one year after the tenancy ends.

Importantly, if landlords let a property after 1 December to someone who doesn’t have the right to rent, then they could be fined up to £3,000.

The landlords code of practice

The Home Office have released guidance to support landlords with the changes. The Landlords Code of Practice explains:

  • if your property is affected
  • if any exemptions apply
  • how to carry out a right to rent check
  • what documents individuals can show you as evidence of their right to rent
  • when and how to request a right to rent check from the Home Office

Our thoughts

We have to take a practical approach to the issue and it would be fruitless to make any more sweeping statements about our opposition to the plans – we’re far past that point.

However, right to rent checks bring about significant changes for landlords, so we hope that the pilot roll-out provides an opportunity for the Home Office to test the changes and to understand the implications they will have on the process of securing private rented housing.

Combatting illegal immigration is important, but we’ve always been concerned that if landlords are made responsible for making initial immigration checks then the process must be simple to carry out. And on the face of it, the system for checking and verifying a tenant’s right to rent seems both practical and workable, but only where someone’s right to rent is clear cut. Where there is doubt, landlords will need to check with the Home Office which could take up to two working days.

The changes could therefore make it harder for tenants with question marks over their eligibility to rent property in the UK, regardless of their legal status to remain,; any delay to verifying the immigration status of a given individual will hinder the usually expedient process of securing a home in the private rented sector, thus making them less desirable to let to.

What’s next?

The Home Office expects to continue with the phased introduction of checks across the UK next year.  To advise the implementation and evaluation of the measures, the Government is convening a Consultative Panel, consisting of key stakeholders, including the NLA.

We trust that our presence and feedback to the panel on the first phase of the roll-out will be thoroughly evaluated and considered to ensure a smooth transition for landlords.

Our new Housing Minister is keen to stress the positive role of the PRS

Pity the minister re-shuffled in July.  While you or I spent our summer holiday reading for pleasure, they resign themselves to packing a stack of briefing papers next to the must-read political biography and the highly recommended literary novel that they told the Sunday heavyweights were on their summer booklists.

CEO Richard Lambert on the NLA's meeting with the Housing Minister

CEO Richard Lambert on the NLA’s meeting with the Housing Minister

The new Minister for Housing and Planning Brandon Lewis doesn’t appear to have been tempted to slip a couple of thrillers surreptitiously into his suitcase.  When NLA Chairman, Carolyn Uphill and I met him yesterday, he was well on top of the subject – interested, engaged and keen to stress to us the positive role he saw the private rented sector playing in the provision of housing.

This was very much an introductory meeting.  We wanted to ensure Mr Lewis could put faces and names to the NLA when it came up in future, and that he had a sense of who we represent and what we are trying to achieve. Equally, we wanted to get a feel for how Mr Lewis was approaching the issues and to put some thoughts into his mind for the future.

Retaliatory eviction

We hoped that we would get some pointers on the Government’s attitude towards Sarah Teather’s private member’s bill on retaliatory eviction.  However, the Minister was carefully non-committal, saying that the Government was “not yet ready” to declare its position on the Bill.  Questioning whether there was the evidence that retaliatory eviction was as widespread as is often perceived, Carolyn Uphill stressed the importance the NLA and landlords in general attached to the no-fault possession procedure, and expressed our concerns over any call to reduce the flexibility section 21 gave to the market without good reason and sound evidence.

Model tenancies

We’ve been waiting through the summer for the launch of several initiatives which emerged from the Government’s response to last year’s Select Committee report, and he confirmed that we should see these shortly.  One of these will be a model tenancy agreement.  The Government’s aim was not to trump all existing tenancy agreements, but rather to change tenants’ understanding of how tenancies work, and raise awareness that longer tenancies are possible, and that they can ask for them.  This gave us the opportunity to outline the NLA’s recent campaigns which have highlighted the business benefits of long-term relationships between landlord and tenant.

Licensing

More generally, we wanted to stress our concerns over the way local authorities are using the power to introduce discretionary licensing schemes.   Over the past year or so, we’ve seen more and more councils propose selective or additional licensing schemes, and some worrying trends have emerged:

  • The growing number of proposals for blanket borough-wide licensing
  • Poorly drafted consultations, based on flimsy evidence, which do not demonstrate how the case for licensing meets the specific criteria of problems caused by low demand or anti-social behaviour
  • The imposition of additional property or management requirements as conditions of licences
  • The absence of an independent check on whether local authorities have made their case and properly justified their licensing proposals, which means that there is no scrutiny of or check on how the powers are used – or in many cases, abused.

Brandon Lewis was very sympathetic to these points and said that he was “very aware of blanket licensing as an issue, especially in London”.  We pointed out that in reality licensing is a burden on the law-abiding, as they are the ones who accept the obligation, and pressed the case for accreditation as a method to filter out the responsible landlords from those who do not comply with the law or standards, who should be subject to more rigorous enforcement.

Further reading

All in all, it was a very useful conversation.  And I’m afraid we are going to add to his reading pile: we promised a couple of recent issues of UK Landlord for his red box.

Ownership of Properties

Spofforths Chartered Accountants Student Induction Course at Spofforths in Horsham. Staff and student portraitsJo White, Tax Consultant discusses property ownership

I am often asked to advise clients on property ownership. The most common way to own property is in your personal name, whether on your own or with another person(s).  However, it is also possible to own a property in a company or Trust.

Where you own the property personally the profits generated are taxed on you.  Depending on your other income this could be at 20%, 40% or 45%.   A Trust is subject to income tax at a rate of 45% whereas a company is subject to corporation tax typically at 20%.

Whilst the rate of tax payable by a company can be lower than an individual there is a potential double tax charge.  Income Tax will be payable on any profits extracted from the company, however with careful planning your tax liabilities can be minimised.  Companies are also subject to tax on any profits made from the sale of the property at 20% as opposed to 28% for an individual or Trust.  However, the shareholders would then pay a tax charge on the extraction of these funds.

If as a landlord you are looking to reinvest any profits into new properties then it is possible that a company may be of benefit as you will not be incurring a double tax charge.  If you are a basic rate tax payer you may not benefit from the low company tax rate and personal ownership may give you more flexibility on the ultimate sale of the property.

It is also important to be aware of the other non-tax issues surrounding property ownership in different structures.  Raising finance, for example, can sometimes be more difficult in a corporate structure.

Whether you are a new landlord or have a portfolio of properties already it is important to get professional advice to ensure any decisions made reflect your personal circumstances.

Make sure you take full advantage of the tax saving opportunities open to you – call us today on

01403 253 282 or email jowhite@spofforths.co.uk. Jo is presenting at the Worthing and Chichester NLA meetings on 8 October and 25 November respectively. Click HERE for more information.

Magic Roundabout, or Puss in Boots?

Matt Oliver, NLA Public Affairs Officer, explains the latest government reshuffle

Matt Oliver, NLA Public Affairs Officer, explains the latest government reshuffle

It shouldn’t have escaped anyone’s attention that the Prime Minister recently made his most comprehensive reshuffle to date, just 10 months before Polling Day.  Barring any unexpected ‘events’, it’s clear this is the team that he wants to remain in place until May and convince the public to give the Conservatives a majority at the polls.

With this in mind, the promotion of Brandon Lewis to Minister of State for Housing and Planning, signifies a serious and welcome elevation for housing in current government thinking.

Mr Lewis has been promoted from his previous role as the Parliamentary Under-Secretary of State (wonderfully abbreviated to PUSS).  He now combines the roles of former housing minister Kris Hopkins and planning Minister, Nick Boles, which have been separate roles since 2009.  The DCLG has said housing and planning were being combined as they are ‘two sides of the same coin’.  With Labour’s plans for the PRS, it is obvious that housing will be a massive battleground over the next few months, and the NLA welcomes this move by the Government.

At the same time the outgoing housing minister, Kris Hopkins, continues to ride the ministerial roundabout – taking on responsibility for local government and homelessness.

Whilst housing is an issue for which Government seemingly recognise the need to get on the front foot, it’s all change at the Department of Energy and Climate Change.  One of the most passionate advocates of green policy in the coalition government, Gregory Barker, has resigned as Energy and Climate Change Minister.  He is also to stand down from Parliament at the next election.

Despite their determination to “get rid of green crap” there is reason to be mildly optimistic of continued Government support for the Green Deal.  Responsibility for the project has been delegated to a junior minister in comparison, Amber Rudd, the new department’s new PUSS.  However, she has previously spoken highly of the project prior to its launch, and is known to be supportive of the PRS as a whole. It can only be hoped that the PUSS will put her boot to good use by kick-starting the much maligned project into life.

Time will tell…

Revenge Evictions – The New Crisis That Isn’t

Richard Lambert Chief Executive at the National Landlords Association discusses the reality of section 21 notices

Shelter issued new figures recently suggesting there is a crisis in the private rented sector due to landlords evicting tenants for complaining about standards of their rented property –“revenge evictions” as they now call them. However, if you look more closely at these figures, their argument starts to unravel.

Retaliatory evictions

Shelter’s figures suggest there has been a rise in complaints concerning retaliatory or revenge evictions. The difficulty is how to prove that issuing possession proceedings really is an act of retaliation against a tenant.  Simply serving a Section 21 notice should not be classed as a revenge eviction. There are many reasons a landlord would need or want to serve one, and so long as they do it the right way, it is their right to do so for whatever reason they think fit. 

The overwhelming majority of landlords want their property occupied, rent paid and for their tenants to have a comfortable long-term tenancy. Like any other business they want happy customers and steady income. They’re not out for revenge; we don’t talk about any other service provider seeking revenge from their customers and there is no reason to suspect landlords are any different. 

Landlords want stable tenancies and NLA statistics show that most are. The average tenancy lasts just over two and a half years and in reality the vast majority of tenancy durations are terminated by the tenant, not the landlord.  When the landlord does terminate the tenancy, the cause more often than not is rent arrears. A property will inevitably have some problems during its lifetime as a rental property – indeed, a quarter of landlords’ rental income is spent on repairs and maintenance – but most would think evicting to avoid repairing creates two problems instead of one.  The repairs are still needed, but now there is a void, so no income coming in.

Seeking possession can be an expensive business, often stressful for the landlord as well as the tenant.  Nor is it automatically the best business option.  Ending a tenancy, re-marketing and letting all cost.

Crisis it is not

 We are all worldly enough to know that retaliatory evictions do happen, and it is terrible that anyone should lose their home due to the poor, or even criminal, behaviour of their landlord.  Nevertheless, the NLA does not believe that the figures cited by Shelter represent a ‘crisis’.

Their figure of 7,600 renters at risk of eviction equates to 0.19% of renters in England (9m), implying that that 99.81% are not experiencing these problems. 

Furthermore, the 4,000 renters ‘losing their homes’ represents 0.1% of households in England who rent privately. You have to question whether one tenth of one per cent of tenancies coming to an end is an indication of market failure.

The question remains: is a failure rate of between 0.1 and 0.19% of the market a ‘crisis’? A situation which needs improving, yes, but ‘crisis’ is stretching it too far. 

Councils to tackle the issue

The one thing we can agree with Shelter on is that there are some bad landlords, who may end a tenancy if they think they can get away with a new tenant putting up with the problems, and these landlords need to be tackled. Councils need to target bad landlords and force them out of the private rented sector. It is down to local and central government to prosecute publicly and effectively to make it clear that ignoring property standards is already illegal. 

Public prosecutions can really help to drill home that bad practice is unacceptable and that there are consequences. Unfortunately, in 2012, fewer than 500 landlords were prosecuted; compare this with the 155,000 people prosecuted for not having a TV licence. Councils should also receive a proportion of prosecution fines in order to incentivise future enforcement activity to protect tenants from the few who think they can get away with poor or illegal property practices.

Are you having abandonment issues?

Lucy Regan, London Representative for the NLA advises landlords on the issue of tenant abandonment.

Abandonment isn’t something that happens often in the private rented sector but when it does it can be distressing and confusing. But how do you know if your proREGAN Lperty has been abandoned and what are the steps you need to take?

Things you need to consider

Has the property been abandoned?

First of all a landlord must decide if the property has been abandoned. If a tenant has given notice or handed back the keys this is then termed ‘surrender of tenancy’. Secondly a landlord must establish the reason: there may be a valid reason as to why a property is left unattended, for instance a hospital stay, an extended holiday or the tenant has gone to prison.

Insurance

Your insurance may not be valid if the property has been left unattended for more that the stipulated period. This could prove costly as empty properties are susceptible to squatters and vandals.

How to check that property has been abandoned

  • Contact – A landlord should first attempt to contact the tenant. If they do not respond to calls, voicemails, text messages or emails, it could be the first bit of evidence that the property has been abandoned?
  • Is the tenant still making rent payments? – When did they stop? Is that normal or have they been late with payments before?
  • Are the tenant’s possessions still at the property? If they have been removed, it could be another tick in the box of abandonment. Checking for possessions can be difficult. In some cases a landlord may be able to see through a window, but if this is not possible, they must then seek permission from the tenant to access the property. But with the suspicion of abandonment this may not be possible. However if a landlord thinks the property is in an unsafe state they may enter, but they must be cautious and make sure there is a clear reason for entering. It would also be a good idea to have a witness come along.
  • Is the tenant claiming housing benefits? If so, then a landlord can contact the Housing Department. They may even be in contact with the tenant and could shed some light on the situation.

Where do you stand legally?
A landlord needs to be aware that the tenant is legally entitled to return and take up residence again, and that the landlord is responsible for the tenant’s possessions.

If a landlord takes over the property and re-lets it, there could be serious trouble as it is a civil offence relating to the breach of the existing tenancy contract. It is also a criminal offence to prevent the continuation of the tenancy.
There have been cases where landlords have been fined up to £20,000 for re-letting their properties when then tenant is clearly not coming back.

The safest way to deal with abandonment is to get a court possession order before taking over the property.

What to do next

If a landlord has established significant evidence that the property has potentially been abandoned they should follow these steps:

  • Remember to ensure that all communications and actions are documented.
  • Make sure that there is a witness available and willing to give a statement at any time when at or dealing with the property and tenant. A local authority’s Tenant Relations Officer can help with this.
  • Serve an Abandonment Notice. This note must be placed on the tenant’s door. However, be aware that this may attract squatters, so do it as discreetly as possible. It is advisable to take a picture of this with a newspaper to show the date. To be safe, post a copy through the door. After five days, the locks may then be changed (unless already done so to secure the property or see to any present dangers).
  • Any possessions remaining in the property must be stored for a reasonable amount of time.
  • Under no circumstance must you deprive the tenant of their rights to access.
  • Inform the local authority rent officer of your actions in writing.
  • Seek expert advice: the NLA advice line is on hand for NLA members.
  • Always obtain a court possession order before taking over the property or re-letting if there is any doubt.

To avoid getting into this kind of situation it is best practice to get a thorough reference on the tenant at the start of the tenancy. Check for rent payments, and visit the property regularly. If you are on good terms with a neighbour, you could ask them to keep an eye on any suspicious movements, or provide a weekly cleaning service.

Finally, it is a good idea to build up a relationship with the tenant and make them aware that if they do go away for an extended period of time that they can let you know.

New guidance to promote successful tenancies

Make sure you know your rights as a renter

Make sure you know your rights as a renter

New guidance has been produced to help private renters in England who are looking for a house or flat to rent.

The guidance has been produced by the Department for Communities and Local Government (DCLG) and provides a checklist of the most important and common aspects to help protect renters from problems at every stage of looking for, and moving in to, private rented property.

The guidance is for renters who are entering in to an assured shorthold tenancy (AST) agreement – the most commonly used tenancy agreement in the private sector – but doesn’t cover lodgers or people with licences , nor tenants where the property is not their main or only home.

What’s in it?

It provides a host of information that should enable a better understanding about the rights of the tenant, and their responsibilities so that a positive relationship with their landlord can be maintained. It contains lots of detailed information about what to consider:

  • before searching for a property –  whether through  letting agent or directly from a landlord;
  • once you’ve found a place –information about the important documentation tenants should receive from their landlord or agent;
  • during the tenancy –  including the rights and what’s expected of tenants, and how to deal with problems or issues;
  • When the tenancy is coming to an end –how to renew or extend the tenancy and how the property should be left upon tenancy expiry to ensure no issues arise.

What if problems arise?

The guidance also contains important information about tenant’s legal rights and offers further sources of information and support for renters who experience problems during the tenancy, such as:

  • financial problems
  • Concerns over the safety of the property
  • Fear of or actual harassment by the landlord/ illegal eviction.

Download the full guide now

You can download the guidance from he DCLG’s website here.

Most of it will equally apply if you are in a shared property but in certain cases your rights and responsibilities will vary.