Tag Archives: landlords and letting

Landlord Taxes – Is this REALLY a Conservative Government?

image of George Osborne as Boy George

Boy George and landlord taxes

When Boy George was Chancellor under the Cameron government, he introduced a whole new raft of landlord taxes aimed at ‘helping first-time buyers get on the property ladder’. But did he really want to help them? The PR theme was that demand from landlords was making it difficult for first-time-buyers to enter the property market. And as usual it had a nice ring to it.

However, I would assert, as I have before, that George was more interested in letting the City have a bigger piece of the Buy To Let Pie as the new rules did not hit large corporate bodies in the same way as small private landlords – Prudential has bought into it in a big way.

Mother Theresa dismisses Boy George

Then we all breathed a sigh of relief when Boy George was sent packing by Mother Theresa and welcomed the somewhat less boyish Phillip Hammond, assuming he would actually start acting like a Conservative chancellor. Well it seems we rejoiced too soon, because so far he still seems keen on more landlord taxes and is continuing with the policies of scrapping of tax relief for interest on buy-to let mortgages and the increased Stamp Duty for buy to let properties.

They now talk about ‘level playing fields’ – don’t politicians love metaphors? They say that mortgage tax relief for landlords gives them an unfair advantage over first-time buyers. They forget that the incredibly low interest rate environment and mass immigration has meant that buying to let is just about the only game in town that’s left for individual investors. Also, they forget that when you sell a buy-to-let property, unlike permanent private residence, you have top pay a shed-load, or rather a house-load of Capital Gains Tax. But then again, the MPs Expenses’ Scandal showed they knew only too well about the importance of flipping a property to avoid CGT.

No Opposition at All

The thing is that Mother Theresa and her chums are no longer faced with any opposition at all. Jeremy Corbyn has managed to effectively reduce Labour to a student debating society in which Diane Abbott seems to be an all purpose minister for just about anything and probably even handles any small plumbing emergencies at Labour HQ. By claiming he was present at many events he wasn’t and knew people he didn’t, Paul Nuttall managed to snatch defeat from the jaws of victory for UKIP in the Stoke by-election. And the Liberal Democrats…well they’re still very Liberal and Democratic and that’s about it.

So, the Conservatives realise that Landlords represent a very small section of their natural constituency, have become folk villains, have nowhere else to turn and as such their wishes can be safely ignored.  They are now going for the ‘middle-ground’ to further increase their majority by tempting soft Labour voters away from Jeremy.

Residential Landlords Association

As I write this, the Residential Landlords Association (RLA) have mounted a last ditch attempt before The Budget to persuade Chancellor Phillip Hammond to scrap Boy George’s tax changes that stop landlords being able to offset mortgage interest against income from buy to let properties.

Let’s wish the RLA luck.

 

Landlords and Letting – Affordable Landlord Insurance

Can you afford NOT to have landlord rent guarantee insurance?

NightmareTenantsSlumLandlords

Image Copyright Channel 5 – link no longer working

As buy-to-let has increased massively across the UK, partly due to the lamentable return on other kinds of investments, so too have the horror stories of nightmare tenants. First they suddenly stop paying the rent and when the hapless landlord finally evicts them, he or she is faced with possibly several thousands of pounds repair bills.

As a landlord, even if you’ve been lucky enough to avoid these vile people you probably know of others who have fallen prey to nightmare tenants. Just take a look at ‘Nightmare Tenants, Slum Landlords’ on Channel 5 and you’ll see dreadful cases of how a small minority of tenants can make life an absolute hell for small-time landlords.

Landlord Rent Guarantee & Legal Expenses Insurance

Admittedly there are also rogue landlords out there who equally make life hell for their tenants but that’s not what this article is about. This article is in fact about the importance of taking out Landlord Rent Guarantee and Legal Expenses Insurance – rogue landlords don’t need this insurance as they use other rather more direct methods!

In fact, the problem IS rogue landlords because I believe that it’s because of them that the law is absolutely on the side of tenants when it comes to eviction.

Firstly you need to have approved grounds for evicting the tenants, usually non-payment of rent or anti-social behaviour in your property. Then, if they won’t go voluntarily, you need to serve a Section 21 Notice.

And a Section 21 will only be regarded as valid by a court so long as the landlord has properly protected the security deposit and complied with various other procedures that now cover the commencement of any tenancy.

A Section 21 cannot be served during the first four months of tenancy. Once a Section 21 is served the tenants must be given two months notice to quit. If they fail to leave then you need to seek a Possession Order – this can easily add another month and then if the tenants ignore the Order you’ll have to spend more money and time getting bailiffs to physically evict the tenants. And in this case you should always upgrade the Order to the High Court so as to make use of proper bailiffs.

It could easily cost you around £6000.00

So, all in all it could take at least four months to evict bad tenants and often longer! In all that time you will be losing rent and ranking up legal costs. On an average property this could easily amount to well over £6000.00!  And then you will probably have extra refurbishment and cleaning costs to deal with the mess that’s left.

We are agents for Landlord Rent Guarantee & Legal Expenses Insurance, but even if we weren’t, I’d still say that at only £99.95 per property for 12 months’ cover it’s incredible value.

To maintain this low cost, tenant referencing is a condition of this insurance and it’s important to follow the correct procedures relating to taking and protecting the security deposit. If you need more information about this insurance and/or referencing just email us at info@landlordsandletting.co.uk

However, even if the tenants seem nice, strict referencing should ALWAYS be carried out whether you are taking out rent guarantee insurance or not.

What does it cover?

The premium covers your rent up to a maximum of £3000.00 pcm, with a maximum payout of £25000.00 per claim and covers up to five named tenants in the same property. After the first month your rent will be paid per month and our legal team will get to work to evict the tenants as soon as possible and, if appropriate and possible, recover costs to cover damage not covered by the security deposit. You also have the option to have your rent paid without the one month ‘grace’ period – this costs a little more at £129.95 for 12 months.

So, can you really afford NOT to have this insurance?

 

Landlords and Letting  – Affordable landlord insurances

 

 

Osborne bashes buy-to-let to boost his City pals

GeorgeOsborne

I trust that by now most small buy-to-let landlords will have woken up to the fact that Osborne and the so-called Conservative Party are out to get them.

Before the last election we all feared that Ed and his Band of Brothers would get in and introduce more anti-landlord legislation. We all hoped that shiny face Cameron & Co would ride to our rescue. But as the old saying goes, be careful what you wish for!

The Tories’ Anti-Landlord Legislation – Where we are now

These are the main anti-landlord changes that have been introduced by this ‘Conservative’ Government since they won the last general election, admittedly courtesy of the undemocratic first-past-the-post system…

  • A gradual reduction in the allowable financial costs of purchasing and owning, particularly mortgages, a buy-to-let property. By 2020 relief will only be available at the 20% rate, no matter what your total taxable income.
  • And in Osborne’s Autumn Statement from April 2016, he outrageously increased the Stamp Duty Land Tax (SDLT) by 3% specifically on buy-to-let properties and additional home purchases. So for example, the marginal SDLT on a property costing £400,000 will increase from 5% currently to 8% – on buy-to-let and additional property purchases only. The marginal rate above £250,000 for non buy to let purchasers will still amount to £7500, but for the Evil Buy To Let Investor it will be £12,000.
  • Landlords will have to pay any CGT due on selling an investment property within 30 days, as opposed to the current arrangement where it is in the January following the tax year of disposal.
  • And the tell-tale bit… Commercial Investors with more than 15 properties are expected to be exempt from Osborne’s changes.
  • Finally, although not directly instigated by central government, many local authorities (Labour and Conservative) have introduced compulsory registration schemes for private landlords. They pretend these schemes are designed to root out rogue landlords but in reality they are of course just more money making schemes because they charge landlords for registration.

‘I want to help more young couples buy their own home’

So kindly uncles George and Dave are really concerned about struggling first-time buyers are they? These are the same people who introduced draconian reductions in benefits for people on Disability Living Allowance, introduced a poorly conceived so-called ‘bedroom tax’ and wanted to strip away tax credits from people on very low incomes before any increase in the minimum wage kicked in. True, Osborne backed away from this in the Autumn Statement, but only because of huge opposition from both inside and outside the Conservative Party.

The fact is that PR politicians like Cameron love to use phrases like ‘more help for working families’, ‘getting more bobbies on the beat’ and ‘helping struggling first-time buyers’.

So what is REALLY going on?

It is my firm belief that the Conservatives are just trying to help their friends in The City and dressing it up as wanting to help first-time buyers, by hitting the Evil Buy To Let Investor, who has for years now become completely demonised.

The Tories and others claim glibly that buy to let investors are now the main cause of the unacceptable rise in the cost of owning your own home. No they are not. The causes are complex and based mainly on supply and demand. Not enough homes are being built to satisfy an out of control demand for all kinds of housing, caused mainly by uncontrolled immigration. But at the same time if we just build more homes without the related infrastructure then the country will literally grind to a halt and become a hideous place in which to live. Finally, the reason so many older people have been resorting to buying to let, is the ludicrously low rate of interest they can get by leaving their savings snoozing in the bank or trapped in a poor performing pension fund.

You see, for years now the big City institutions have been jealously looking at the level of returns private investors have been getting in the buy-to-let market. This has naturally choked off money that would otherwise have gone into their pension schemes and rip-off investment funds – where they earn high management fees.

On a personal note, I am not opposed to making life more expensive for people who wish to indulge themselves in second homes. But I am totally opposed to this continued demonisation and financial attacks on people who have bought property to let out as their business. Just increase interest rates and you’ll soon see people backing away from buy to let with all the stresses it can entail.

In short, The City wants a piece of the Buy-To-Let Pie, and Osborne plans to give it to them.

Sign The Petition

A petition has been set up to oppose the planned reduction in tax relief for buy-to-let landlords. I did not create this petition but I have signed it. This link takes you to it.

Vote!

Are the Conservatives attacking small landlords mainly to benefit The City?

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Landlords and Letting – Landlord Insurances

Leasehold Property – The Landed Gentry’s Triumph

To the best of my knowledge the only country in the world that is cursed with the concept of Leasehold Property is Britain.  And historically that is largely down to the vested interests of our landed gentry.

It is essentially a carefully crafted fraud wherein leaseholders don’t actually BUY their property, they BORROW it from the Freeholder. They own the bricks and mortar, the fitted kitchen and bathroom etc – but they DON’T own the land.  Hence the weird concept of ‘ground rent’.

Are you a Landlord or a Tenant?

Vast areas of Central London, for example, are actually owned by people like The Duke of Westminster and many of the buildings are really only ‘borrowed’ by the leaseholders who inhabit them.  The landed gentry love the idea of leasehold tenure because it means they never ever entirely let the true ownership of their land slip into others’ hands.  In fact if you are say a buy-to-let landlord you will actually often have seen the Freeholder referred to as your landlord!

Which brings me to the whole very modern concept of flat ‘ownership’.  Many major house builders and developers have seen the benefit of ‘selling’ flats on ludicrously short 99 year leases.  In fact, many people who bought 99 year leases only back in the 1990’s are already finding that their leases are approaching the all-important threshold of 80 years remaining.  In fact, when the 70 year threshold is passed it becomes almost impossible to obtain a mortgage and thus the property’s value is badly affected.

We must thank Margaret Thatcher

Thanks to Margaret Thatcher, who was never a great friend of the parasitical landed gentry, the Leasehold Reform Act finally came into law in 1993, three years after she was forced out of office.  This act at least went some way to restoring some power to leaseholders.  It meant that from then on leaseholders could force their freeholder to sell them added years.  Above 80 years there is a fairly precise formula related to the value of the property with the extended lease, the ground rent and the number of years still remaining on the existing lease.  This formula is used to calculate how much premium a leaseholder must pay to extend.  And because it’s a formula, it means there are limits on how much the freeholder can actually demand.  But if your lease is under 80 years then it is more of an ‘open-market’ negotiation and likely to be much more expensive.  The act importantly also gave groups of leaseholders in blocks of flats the right to force their freeholder to sell them the freehold.  Ultimately disputes can be settled via the Leasehold Valuation Tribunal.

Is your lease approaching the 80 year threshold?

Many leaseholders are probably blissfully unaware that their lease may be approaching the 80 year point – and freeholders love it because at some point the leaseholder will want to extend their lease… Another problem with some leasehold property is that there are penal clauses in the leases and individuals and property companies study freeholds that are up for sale to find just such leases.

What I would like to see is it being made illegal from some future point to sell any property with less than a 999 year lease. But you can be sure that the landed gentry and other major land owners would fight such a proposal tooth and nail.

If you do need assistance and advice with legal aspects of your lease there is a pretty good government funded organisation called The Leasehold Advisory Service.

 Landlords and Letting

Time to reform Stamp Duty Land Tax?

Stamp Duty Land Tax, more commonly referred to as Stamp Duty is not only yet another iniquitous government tax on property, it is a tax designed by idiots – but no surprise there!  See our Poll below…

Stamp Duty Thresholds on Residential Properties (October 2014)

  • £0 to £125,000 – No Tax
  • £125,001 to £250,000 – 1%
  • £250,001 to £500,000 – 3%
  • £500,001 to £1 million – 4%
  • Over £1 million to £2 million – 5%
  • Over £2 million – 7%

Look at the Stamp Duty thresholds above.  This shows the real idiocy of Stamp Duty.  As soon as a property transaction exceeds a specific amount – even by a £1.00, the WHOLE of the transaction is subject to the next level of tax!  Thus if you buy a property for £250,000 you will pay £2500.00 in Stamp Duty, whereas if you paid £250,001 you would pay £7500.03 in Stamp Duty!

As far as really expensive property is concerned, it’s even more ridiculous. Take an example of a property selling for £2 million the Stamp Duty would be an incredible £100,000.  But – if that same property sold for £2,000,001 the Stamp Duty would be…£140,000.07!  In other words about £40,000 more.

Distorting the market

Apart from being an outrageous amount of money, this of course badly distorts the property market, with sales just above one of the thresholds being incredibly hard to achieve.  So, a property valued at £250,000 really achieve £300,000 before you can get the real value when you sell, because buyers will be put off houses that are advertised for say £265000 and will try everything to push them below the threshold.

Dodgy Dealing

Of course, because this tax, via fiscal drag, now accounts for such a huge amount of money, people try to avoid it.  There are various schemes dreamed up by clever property lawyers that involve arcane and complex procedures to avoid SDLT but they are of course risky.  Also, some people claim that part of the price includes fixtures and fittings such as kitchens – but really there is no way to safely avoid this scurrilous tax.

What we need is for politicians to wake up to the stupidity of this tax and if it really has to be at these levels then it should work in the same way as income tax and tax the marginal amount by which a sale price crosses a threshold.  An example would be say a property selling for £260,000 would bear 1% on the first £250,000 and 3% on the final £10,000.  Also, why on earth does it jump from 1% to 3%!

In conclusion, the reason this tax exists in its present form is because it does.  Civil servants and politicians often are incapable of original thought and just go on doing something in the way it’s always been done – just because that’s the way it’s always been done.

Tell us what YOU think

See our Stamp Duty Poll below…

Does the current UK Stamp Duty system need reform?
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