Good question as George Osborne seems to have it in for Private Landlords and the Private Rental Sector in general; just when we thought that Private Landlords were providing nearly a 5th of all housing in the UK – George wants to make this sector unattractive to growth.

There are many reasons why you may choose to be a Landlord.  You may have inherited property which lends itself to being rented out and gives you an income after your expenses.  You may be what is termed an “Accidental Landlord” where you cannot sell your property and the only thing to do with it is to let it out so that it covers the expenses of still owning it.  You may choose to be a Landlord because your pension prospects are looking a little dim and you see a rental income being beneficial to supplement your pension.  Or you may be a Portfolio Landlord or Property Business where your rental properties are your livelihood as well as your investment.  So as you can see there are may reasons why anyone becomes a Landlord, some with just one property and some with hundreds of properties.

Now George has waded in and started Landlord bashing and seeing a possible “Cash Cow” ready for “milking”.  He has announced that mortgage interest relief for individual residential landlords will be restricted to the basic rate of income tax. This will be staged, beginning from 2017.

The new rules will be introduced gradually over a three year period starting from 6 April 2017, and relief will be available as follows:

  • In 2017/18, the deduction from property income will be restricted to 75% of the finance costs incurred, with the remaining 25% being available as a basic rate reduction.
  • In 2018/19, 50% of the finance costs will be given as deduction and the remaining 50% will be given as a basic rate reduction.
  • In 2019/20, 25% of the finance costs will be given as deduction and the remaining 75% will be given as a basic rate reduction.

(Figures from RLA)

Here are some sums to explain:

NOW

Your buy-to-let earns £20,000 a year and the interest-only mortgage costs £13,000 a year. Tax is due on the difference or profit. So you pay tax on £7,000, meaning £2,800 for HMRC and £4,200 for you.

2020

Tax is now due on your full rental income of £20,000, less a tax credit equivalent to basic-rate tax on the interest. So you pay 40pc tax on £20,000 (ie £8,000), less the 20pc credit (20pc of £13,000 = £2,600), meaning £5,400 for HMRC and £1,600 for you. Your tax bill has therefore gone up by 93pc.

Now, say Bank Rate – and in turn your mortgage rate – rises by a small fraction, lifting your mortgage cost to £15,000, while your rent remains at £20,000.

You will have to pay £5,000 tax in this scenario, so you make no profit at all.”

 

Winter is fast approaching and with it the perennial problem of mould –  a problem for both landlords and tenants.

There are two main reasons for mould (not definitive by any means).  One being that the fabric of the building is damaged (the landlord’s responsiblity) and secondly ; condensation mould (most likely the tenant’s responsiblity).

CONDENSATION MOULD

This is generally found in bathrooms and kitchens which have not been ventilated adequately.  It can also be found in living areas, attracted to cold surfaces such as single glazed windows, outside walls, behind furniture etc.  This kind of condensation mould can generally be attributed to life-style and mainly lack of heating and lack of ventilation.  The vast majority of rental accommodation is old, sometimes very old.  These buildings have no wall cavities and are usually single glazed and poorly insulated.

We have been encouraged to make rental accommodation air tight, by sealing up chimneys, putting upvc double glazed units in and draught proofing, so the building can no longer breathe.  The majority of landlords have complied with building regulations and provided extractors in the bathrooms, kitchens, cloakrooms and utility rooms.  However, in some cases, tenants have turned these units off, thinking they use too much electricity or are too noisy – not realising that they have been fitted for their health benefit.  With the increase in fuel prices, tenants seem to be more willing to wear extra jumpers and hats in their homes than to put the heating on – this all goes to encourage condensation mould.  Drying washing also contributes to airborne moisture unless a tumble dryer is used and extracted to the outside.

Just living in the property creates moisture, breathing (yes, breathing produces moisture), bathing, washing, steam ironing, using parafin heaters, all create moisture which will settle onto cold surfaces and could lead to black mould.  This mould is dangerous for tenants, possibly causing infections, asthma, allergies and sinusitis, for example.  If the mould is allowed to settle it can penetrate plasterwork and cause damage, which could be expensive to put right.

To prevent condensation mould, the landlord’s mantra is “heat and ventilate”.  Warm air can hold a lot more moisture than cold air.  Landlords ensure that you have adequate, working ventilation and that your tenants are encouraged to use it.  Explain that the electricity usage is minimal and the benefits of using the extractors outweigh the health problems which could occur.

It is relatively easy to clean condensation mould.  A quick wipe with a very dilute bleach solution should remove black mould from the majority of surfaces.  HG make a mould removal product which is very good too.  If you do clean in this way, please use rubber gloves and even a mask to prevent inhaling any spores.

There are also specialist companies out there who can help such as Envirovent – they may be worth a call if you are having real problems.

MOULD/DAMP – DISREPAIR

Landlords need to be on top of their building maintenance.  Buildings need to be water-tight – ie no leaky roofs, gutters, downpipes or drains; water needs to be prevented from entering the building other than by intended means.  Damp and mould caused by this kind of disrepair is the landlord’s responsibility to fix and maintain.  The property is the landlord’s investment and should always be fully maintained.

Hope this post helps, if you want to chat any further about mould, please give us a ring.

Everyone has been banging on about the changes effective from 1 October 2015, so what’s it all about?

The Deregulation Act 2015 has introduced a raft of new legislation effective from 1 October and a very important change has been to the “Landlord’s Friend” the Section 21 – no fault eviction notice.

This change only applies to NEW Assured Shorthold Tenancies starting from 1 October 2015, however once we get to 1 October 2018, it will affect all tenancies no matter when they started.

So what are the changes?

  • A Section 21 Notice cannot be served on the tenant(s) until month 4 of the fixed term – no more serving at the outset of the tenancy.
  • A valid Gas Safety Certificate must be in place.
  • A valid Energy Performance Certificate must be in place.
  • If a Security Deposit has been taken, then the Prescribed Information must have been served correctly within the 30 days time limit.
  • The DCLG booklet “How to Rent” must have been given to the tenant(s) at or before the time of signing the tenancy agreement.
  • There must be no Improvement Notice issued by the local council for the property.  If there is, then a Section 21 cannot be issued for another six months after the work contained in the improvement notice has been completed and signed off by the local council.
  • The new Section 21 has a shelf-life of 6 months – use it or lose it.

These are just the basic changes.

There is an onus on the Landlord or Letting Agent to get all the paperwork correct at the beginning of, during and at the end of the tenancy.  These changes have been introduced to offset the threat of Retaliatory Evictions – something no-one wants, no matter how small the actual percentage of retaliatory evictions in England actually is.

From 1st October 2015 all residential properties must have a minimum of one working smoke detector/alarm on each floor of the property, which must be tested at the start of every tenancy.

As Landlords we really want to avoid fire and smoke damage to our properties and worse-case scenario of any harm coming to our tenants – so I know that you will already have fitted some form of smoke detector/alarm system in your rental properties.

SMOKE DETECTORS/ALARMS

From 1st October, the Deregulation Act states that ALL rental properties must have smoke alarms, not just new tenancies – so get your skates on and fit some good 10 year battery smoke detectors NOW.

Best practice is to fit an inter-connected, hard-wired system with battery back-ups in your properties.  This means that the tenant is protected, and finds it awkward to disarm the detectors.  Call your friendly electrician to fit a system for you.  You won’t regret it.

If you want more details, please refer to LACORS (Local Authority Coordinators of Regulatory Services) which you can find details of at www.rla.org.ukl/guides/housing_act/lacors_fire_safety.shtml.  This is a very detailed document which covers all types of rental properties including Houses of Multiple Occupation.

SO WHAT DO YOU DO WITH A CARBON MONOXIDE DETECTOR/ALARM?

These alarms detect Carbon Monoxide (CO) – the silent killer.  From 1st October 2015 you will need to fit a CO detector/alarm in your properties with solid fuel burners, ie wood burning/multi fuel stoves or open fires.

It’s good practice to fit a CO detector/alarm in your rental properties which have gas boilers, hobs and fires too.  Your tenants will see you as a proactive Landlord.  Again you can ask your friendly electrician to fit a hardwired one for you, or just put up a battery operated one.  In any case, ask your Gas Safe Engineer where the best place to fit one would be.

If you would like any further information or more reading, then go to www.rla.org.uk or www.landlords.org.uk and look up their guides.