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Abolishing Tenant Fees

On 23rd November the Chancellor announced ‘we will ban fees to tenants as soon as possible’.

We are unsure at this stage whether the ban will apply to ALL fees or just fees charged to a tenant prior to a tenancy being agreed. Some agents charge a non-refundable fee to tenants to register  – we have never done this as we feel that it is unfair.

Our tenant fees (which we believe to be the lowest in the area) cover the cost of credit checks and references; right to rent checks; viewings; negotiation; and all paperwork required prior to a tenancy commencing.

If pre-tenancy costs are soon to be borne solely by landlords, the blanket ban on tenant fees is likely to backfire on tenants as rents will rise to cover the landlord’s increased costs (rents rose by some 8% in Scotland when tenant fees were banned).

This announcement is yet another way in which the government is putting financial pressure on the small landlord – after the recent changes in mortgage interest tax relief and the increase in stamp duty for buy-to-lets, this seems unsustainable if government wants to retain a well-run private housing sector.

Our professional body, ARLA, has advised that consultation will be required and any changes may take 12-18 months to come into effect.  We will keep our clients updated as more information becomes available.

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If you are a non-resident landlord – get your property valued now!

We are urging our non-resident landlords (those who live and work abroad) to get their UK properties valued now, even if they have no intention of selling. This is to prevent you potentially paying too much tax when you do eventually sell.

Eaton-Terry Clark are not qualified to provide financial advice and always suggest you speak with your own financial/tax advisor, however changes to Capital Gains Tax in 2015  have important implications.

Until April 5, non-UK residents could potentially dispose of UK assets without incurring a capital gains tax liability. However, from April 6, capital gains tax liability can arise on non-UK residents who dispose of UK residential property, but the gains will be ONLY applicable to gains accruing after April 6 2015.

For example – a UK residential property purchased in 2000 by a non-UK resident for £100,000 is valued at April 6, 2015, at £250,000 and it is sold in June 2015 for £265,000.

For a UK resident selling a buy-to-let property the gain arising would be calculated as the difference between the sale proceeds of £265,000 and the original cost of £100,000.

However, under the new rule introduced for non-UK residents, the gain will be the difference between the sale proceeds and the value of the property as at April 6, 2015 (in the above example £15,000).

If non-UK resident property owners do not get a valuation now, then an alternative would be to apportion the total gain over the whole period of ownership, but this could result in a hefty tax bill. A non-UK resident could try to obtain a retrospective valuation, but this will be complex, time-consuming and costly.

It is likely that HMRC will penalise non-resident landlords who do not make a disclosure when they sell a UK property – even when there is no tax due. There are rules for how and when you need to notify HMRC if you sell a property – so please check with your financial/tax advisor.

 

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Changes to Section 21 – gaining possession of your rental property

From October 2015 two major changes came into effect for landlords seeking possession of their property.

Firstly a new form and procedure has come into effect. A landlord MUST give a minimum of two months’ notice on an Assured Shorthold Tenancy and this cannot be given for at least 4 months after the tenancy starts.

Old Process

  1. Notice could only take effect on a rent day
  2. There was no form but wording needed to be accurate
  3. There were two different notice depending  on type of tenancy
  4. The landlord must prove the deposit is protected

New process

  1. Notice can be given on any day
  2. Standard form is now used for ending ALL ASTs
  3. Landlord must prove that the deposit is protected,
  4. Landlord must prove the necessary CO and smoke alarms are in place
  5. There must be no outstanding local authority notices for repair against the property
  6. IF there has been a local authority repair notice, six months must have elapsed since completion of the works before possession can be sought.

Please talk to us if you want advice or assistance in gaining possession of your rental property. Initial consultations are free!

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What is a legionella risk assessment and do I need one for my rental property?

All properties let from October 2015 should have a legionella risk assessment. This news has probably struck horror in the hearts of conscientious and responsible landlords. So not only do they have to take responsibility for gas and electrical safety, furnishing fire regulations,  carbon monoxide safety , smoke alarms, HHSRS, risk assessments, lease compliance and EPCs, a new piece of paper is required.

Some suppliers have jumped on this bandwagon and are offering risk assessment surveys – the good news is that in the vast majority of cases the risk assessment can be carried out by the landlord or agent themselves.

Legionella is a very rare (but very serious) condition which can prove fatal. It is caused by bacteria breeding in stored water. In order for the bacteria to thrive the water needs to be between 25-40 degrees and the water supply used infrequently. ‘Prime suspects’ for such bacteria are water tanks which are not kept heated, dead legs (pipes that have been capped off but still contain water or sludge), long runs of pipe-work carrying hot water to a tap, and shower heads.

Where a property has a combi-boiler and modern plumbing then the risk assessment is a relatively straightforward task and could be completed during a simple site visit (excellent examples are provide on the RLA web site (www.rla.org.uk)).

If the property has a hot water tank then landlords/agents should make sure that the water is heated to a minimum of 60 degrees and it is advisable to run water through the system and shower heads if the property has been empty for more than a week. Again this risk assessment can probably be carried out by the landlord or agent.

However if your property has an older heating system, an immersion tank for hot water and/or unknown piping under the floor it would be wise to employ the services of a specialist assessor.

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Are landlords affected by the new immigration rules?

The Deregulation Bill 2015 – was rushed through in the dying weeks of the previous government. One area it addressed concerned Immigration.  Landlords (or their agents) need to undertake the necessary checks FROM FEBRUARY 1st 2016 to prevent those who have no right to live in the UK from taking up or remaining in tenancies. This can be complicated as the landlord (or his/her agent) is responsible for checking that the tenant’s visa or work permit does not expire during the tenancy, and if it does they need to inform the authorities.

The list of permitted residents is not clear to interpret and puts yet another arduous task onto the shoulders of landlords.  A degree in Geography and international politics would certainly be an asset to master this new law. (See below for details).

Not content with making landlords and agents unpaid tax collectors, property inspectors, risk assessors and (in some cases) social workers, the new regulation puts more pressure onto the private rental sector, and crippling prosecutions can be brought. There is scant guidance for situations where (for example) a joint tenancy is awarded to a couple one of whom is a ‘permitted’ resident and the other has an expiring/expired visa. There is also no continuity in the process as to what to DO should you be in this situation. If you evict your tenant they cannot be rehoused elsewhere as they are not permitted to be on the UK, so they are more likely to go ‘underground’ or rent from unregulated and immoral landlords – hence increasing the immigration issue as well as that of bad housing……

For a little light reading, the following is a summary of the requirements

Tenancies can happily be awarded to the following; British nationals, European Union citizens, non EU member states of the EEA – i.e. Norway, Lichtenstein, Iceland and members of Overseas countries and territories.

However there are 56 countries and territories that do not need an entry visa for stays of up to 6 months. Anyone planning on staying for longer than the permitted six months must obtain a proper visa (study, work, or otherwise) in order to remain in the UK legally. Nationals of the following 10 countries now need a visa when staying in the UK longer than six months – Australia, Canada, Hong Kong SAR, Japan, Malaysia, New Zealand, Singapore South Africa, South Korea and the USA.

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