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UK Landlords Face Prison for Failing to Check Immigration Documents

Last week, the Right To Rent legislation was updated and landlords now face much stricter penalties if they neglect to properly check a tenant’s residency status. Failure to carry out the required immigration checks could result in a prison sentence.

The Right To Rent rules were first delivered in February 2015, and required all landlords and letting agents to carry out immigration checks on prospective tenants before agreeing a tenancy. Initially, there was a fine of £3,000 for anybody who failed to do this.

This month, the rules were changed and significantly harsher penalties announced. In December 2015, the Home Office created four new criminal offences that extend the previous punishments for failing to manage illegal immigrants. Landlords can now be subject to a fine, a five year prison sentence, or both, if they are found to be persistently breaching the rules, or if they fail to evict illegal immigrants from a property. The criminal offences fall under the Proceeds of Crime Act.

The Home Office can now also force landlords to evict tenants if they are not allowed to rent a property in the UK. While the Home Office has emphasised that the penalties are for repeat offenders, any landlord could be prosecuted under the new rules.

Illegal immigrants have no rights to rent, and this could include people who have outstayed a visa or who arrived as an illegal immigrant.

What penalties do landlords face?
Landlords may be prosecuted if they are found to be allowing an adult to occupy a property as their main home, if the said adult does not have the right to reside in the UK. Therefore, landlords will now need to check the passports and visa papers of every person over the age of 18 years who wishes to stay in a property.

The new rules do not apply if a tenant was occupying a property before February 2016, but all new tenants must be fully checked. If the Home Office raises a concern, it is the landlord’s responsibility to evict an illegal immigrant, otherwise they will face prosecution.

Before these changes, landlords were not able to evict illegal immigrants, but they will now be able to do so, and in some cases, will be able to ask them to leave the property without a court order.

The Residential Landlords Association (RLA) says that landlords are normally required to do these checks, but it is possible to pass on the responsibility to a letting agent, as long as there is a written agreement. “This means that the agreement between the landlord and the agent must specifically refer to who is responsible for performing right to rent checks. If the agreement is silent on this, then the landlord will be responsible. Landlords and agents may wish to reconsider their current agreements as a result,” said a RLA spokesman.

David Cox, from the Association of Residential Letting Agents (ARLA), says that these changes are only welcome if they are used to target landlords who deliberately harbour illegal immigrants in poor quality housing at inflated prices.

All buy-to-let investors need to be aware of these new rules, as without a written agreement in place with an agent to carry out these checks, landlords could face prosecution. Unscrupulous agents who cut corners to save some money could land their landlord clients in deep trouble.

How To Limit Void Periods

Lengthy void periods are every landlord’s greatest fear. Whenever a rental property is empty it is known in the property investment business as being a void, or vacant, period. This is not only bad for the landlord and agent, who will be receiving no income during this period, but it also puts the property itself at risk.

There are several actions you can take to reduce the risk of dealing with void periods. In some ways, these suggestions are very similar to those an estate agent would provide when selling a property.

Set a competitive price
Prices can fluctuate rapidly, and they do go down as well as up. If you are struggling to find a tenant it may be because your property is no longer competitively-priced. Analyse the market and adjust your price accordingly.

Property condition
An older property that has not been decorated for several years will struggle to attract tenants. Today’s tenants are much fussier than they were a decade or so ago, and expect properties to be freshly painted, have exceptionally clean carpets, immaculate bathrooms and well-fitted and well-equipped kitchens. Often an older property has to compete with new apartments that are fitted out with all the latest conveniences, so bear this in mind.

Get a Good Agent
A good agent will work hard to find a tenant. Choose an ARLA licensed agent who already rents similar properties to yours. Agents often get returning customers, and if their usual property is unavailable, yours may be placed next on the agent’s list.

Don’t take the lowest agent fee
It is not always wise to hire the cheapest agent. The highest fees do often signify better quality work. Ultimately, you need your property rented – 25% lower fees are not a good deal when the property is empty for three months a year.

Be open to accepting offers. If you receive a lower offer, negotiate the terms – perhaps you could consider a longer fixed-term tenancy? It is better to take a lower rate if you have a guaranteed income for the next 12 months.

Speak to your insurance company
Another change, due to come in soon, is more stringent tests for buy to let mortgages, which is likely to further reduce the number of people who will be able to invest in a rental property.

If it looks like your property will remain void for a while, ask your insurance company if they can reduce your premiums.

Finally, some agents offer vacant management services, so before agreeing terms with an agent, ask what happens if there is a void period. Will they continue to charge a monthly fee? How hard will they work to proactively find a new tenant? Will they carry out monthly visits to check that the property is safe and secure, pick up post and check meter readings?

The rental market is very competitive, and with high house prices and economic uncertainty, more people than ever before are renting accommodation in the UK. Be flexible and keep a close eye on the markets and stay in constant contact with your agent. Listen to their advice too and act on changing marketing conditions quickly to stay ahead of the competition.

What The Autumn Statement Means for Property Investors

The Chancellor delivered his Autumn Statement last week, and while Phillip Hammond painted a poor outlook for the UK’s work force, there was some positive news for the property market. Let’s take a look at the key points that affect us.

Letting Fees
The Chancellor announced a ban on letting agent fees, which have spiralled in recent years to put an unfair burden on tenants. Hammond said: “in the private rental market, letting agents are currently able to charge unregulated fees to tenants. We have seen these fees spiral, often to hundreds of pounds. This is wrong. Landlords appoint letting agents and landlords should meet their fees. So I can announce today that we will ban fees to tenants as soon as possible.”

Although many letting agents feel that this is unfair, it does seem that there is indeed a problem when the current system can see tenants charged up to £650 just for the privilege of signing a letting agreement.

The head of the Association of Residential Letting Agents (ARLA) has warned that agents will simply increase their landlord charges, which may see a rise in rents to cover the costs.

However, improvements in regulation can benefit the buy-to-let market, as tenants will have greater confidence in the rental system. Agents that are charging reasonable rates should experience no negative effect following this change, and for landlords this has an additional advantage – agents will become more competitive and more customer focussed, which will further improve customer confidence.

Great customer confidence will see a rise in rental agreements, which means more competition and higher rents. It is likely that tenants will end up paying more, and more of it will be paid to landlords.

Better Land for Development
The Chancellor also announced that the government will invest in major infrastructure projects to help improve the quality of housing developments. Developers have complained that a lack of quality infrastructure in the form of roads and facilities makes selling new homes difficult.

There has been a rise in off-plan property investment, both from domestic and overseas investors, since the Brexit vote. This news will likely trigger new building projects.

A Brighter 2017
Although the Autumn Statement carried a fair amount of bad news, the Chancellor has decided that house building should play a major role in economic recovery. A change in the letting laws and a promise to improve the infrastructure surrounding housing developments is great news for the property market, and property investors, landlords, letting agents, and tenants, should all benefit from these changes.

Winter Fire Safety Reminder for Landlords

Winter is coming, and early forecasts predict that it will be a cold one. Now is the time for landlords with buy to let investments to carry out some fire safety checks.

As a landlord, you are legally required to ensure that electrical equipment and electric circuits are safe and in good working order. A majority of household fires are caused by electrical malfunction. To help landlords, we have put together a checklist of the Health and Safety responsibilities that you must adhere to.

Smoke Alarms
Smoke alarms must be installed on every floor in a home. Ideally they should be connected so that if one is triggered, all alarms sound. Test that all are in good working order and replace back-up batteries annually. In any room where there is a solid fuel appliance, such as a wood burning stove or open fire, there should be a carbon monoxide alarm.

Portable Appliance Tests (PAT)
You should have an annual PAT test carried out on all appliances that have a plug. Also check all electrical cables for wear and tear, and check that plug sockets are not loose.

Residual Current Device (RCD)
All modern consumer units (fusebox) have a Residual Current Device (RCD) fitted to prevent electric shocks. They also provide added protection if an appliance has an electrical fault by shutting off the power to help prevent electrical fires.

Electrical Installation Condition Report
You must have an Electrical Installation Condition Report (EICR) completed every five years – this must be done by a registered electrician.

Chimneys Cleaned Annually
Chimneys should be cleaned annually, ideally just before winter, to ensure that nesting birds and leaf fall during the summer and autumn does not create a fire hazard in the stack.

Fire Extinguishers
Although you may not have them in your own home, in a rented property you must provide a fire extinguisher in all high risk areas, such as in the kitchen. These need to be tested regularly, and you must also have adequate fire safety signage in place. Consider providing a fire blanket for kitchens too.

It is important to remember that landlords who invest in property can be held liable for any injury or fatality that occurs within their property if there is evidence of negligence. If any surveys state that improvement work is needed, it is vital to have this work carried out immediately by qualified professionals.

How To Let Out Your Investment Property

Purchasing your first buy-to-let property marks the beginning of your journey into property investment. For first timers, it can be a very daunting prospect to market and rent out a home. Follow our guide and take your first steps into this challenging yet lucrative investment niche.

Update Your Mortgage Lender
Before you can rent out a property you must inform your mortgage company. Some mortgage companies will not allow you to let out a property at all, while others will ask you to change to a new mortgage deal that allows letting. If you are lucky, you just need your mortgage provider to grant you with “consent to let”. But your mortgage provider may charge a fee, or adjust the interest payments, to achieve this.

Set Your Rental Periods
If your property can be rented to corporate clients, you should set up agreements for a minimum of two to three years, with a fair cancellation policy. For residential lettings, shorter term lettings are expected, but always try to tie tenants into a 12 month contract. Think about setting a competitive price to avoid long periods with an empty property.

Understand Your Tax Responsibilities
You must inform HM Revenue and Customs if you rent out your property, and you will need to complete an annual self-assessment tax return. You also need to ensure that you pay any capital gains tax due on the property when you sell, so consider this when determining the viability of an investment. Hiring an accountant to talk you through your options is always a good idea.

Improvements and Maintenance
With the exception of new builds, most properties require some work before they are ready to be let. Make sure all rooms are well decorated, with clean carpets, well-kept kitchen and bathroom units and functioning heating and hot water. Tenants also expect telephone lines with broadband capabilities, so ensure this is set up, too.

Safety Assessments
You will need to hold certificates to show that the property has passed safety tests for its electrics and heating, so organise Portable Appliance Tests, an Electrical Installation Condition Report, and a Gas Safety test.

You must have insurance in place, both to protect against damage to the property and also damage to fixtures and fittings. If you are providing a furnished property, you’ll need cover for the furniture. In addition, you should take out specialist landlord insurance.

Hygiene and Cleanliness
Before letting a property you should ensure that it is spotlessly clean. Your property should look like a show home to any would-be tenants, so hire professional cleaners before your first tenants arrive. You can ask your tenants to professionally clean the property when they move out to save having to do this yourself – be sure to include this condition as part of the contract.

Inventory Checks
Have an independent inventory carried out, which the new tenant must sign and agree. Anything missing can then be deducted from the tenant’s deposit when they leave.

Be Flexible and Responsive
The lettings industry can be very dynamic, so stay organised and be ready to act quickly. Keep all your paper work in order to avoid delays.

Client Money Protection Scheme

Last but not least, choose a Client Money Protection Scheme agency to work with. The main agencies for property investors are the Association of Residential Letting Agents (ARLA), the UK Association of Letting Agents (UKALA) and the National Approved Letting Scheme (NALS) – they all provide client money protection.

Follow these steps and you should have a stress-free time letting out your property! However, if you need any further advice regarding property investment opportunities, Surrenden Invest’s London-based consultants are just a phone call away. Keep an eye on our latest news section, too, for timely insights and analysis into the current state of the property market.

Woolwich House Prices Benefit From Crossrail

Crossrail continues to boost house prices across London and the Home Counties, and Woolwich, as we predicted in April 2015, has become one of the fastest growing towns.

London’s housing supply has fallen behind demand for many years now, and this has forced both house prices and rents up. London has needed 42,000 new homes per year for the last 20 years, but house building has failed to meet demand. The biggest imbalances are seen in places that offer the best investments, such as east London.

East London’s transformation started with the development of Canary Wharf during the 1990s, and then in 2012, the Olympic Games generated more investment and growth. Now with Crossrail, which is Europe’s largest construction project, prices are moving upwards again, which means Woolwich is one of London’s hottest residential investments.

The Impact of Crossrail
House prices are expected to rise in all areas surrounding Crossrail stations. Already, house prices have increased by an average of 31% since the new line was announced.

The new line is connecting in new areas to the centre of London, and dramatically shortening journey times for many locations that were already on an underground line or main line.

Much of the growth in house prices has been in the Hackney, Tower Hamlets, Lewisham, Newham and Greenwich areas. The latest predictions are that Woolwich, in the London Borough of Greenwich, will gain the most, with Whitechapel, West Drayton and Ealing Broadway all not far behind.

The JLL Crossrail tool reports that house prices around Woolwich have risen by 25% since 2008, and that prices rose by around 18% in the 12 months to August 2016. Further growth is expected in the run up to the line opening, as more business and retail investment transforms that area.

One of the biggest Crossrail inspired developments is the The Royal Arsenal Riverside development, which at a cost of GBP1.2 billion, is providing new parks, retail, food and beverage outlets and a performing arts venue, all close to 1 km of riverside environment.

Woolwich now has the largest urban supermarket in inner London, along with several other newly revitalised areas of the town. Future developments include 1,500 new homes and over a 1,000 new jobs over the next five years.

Changing Demographics
Woolwich is popular among young professionals who work in the city, Canary Wharf and central London. In 2011, 49.1% of the population was aged 20 to 44, and 39.4% of the population was in full-time work, 9.9% in part-time work and 8.9% self-employed.

Greenwich is a major commuter zone, with around 60% of its working residents commuting to the city. The most popular career sectors are IT and communications, supported by the “Digital Peninsula”, which is centred on the O2.

Healthy Rental Market
The rental market is robust in Woolwich, as it is largely supported by the excellent transport links. As well as the forthcoming Crossrail, Woolwich is also served by the DLR, mainline rail services and ferry services, as well as good bus services.

Crossrail will provide a new 8 minute link to Canary Wharf, and Liverpool Street will be just 14 minutes away – perfect for London’s financial sector.

Greenwich offers the highest yields in London too, with annual rental growth expected to rise by 5-7% up until 2020.

Crossrail is now only two years away, so now is the time to invest in the region to benefit from the surge is property prices and rental income that we expect to see over the next 24 months.

UK Landlords Fighting Section 24 Tax Changes

This week we learned that landlords have failed in an attempt to challenge the tax changes resultant from Section 24 of the Finance Act 2015. However, they will continue to campaign against the budget changes that have negatively impacted parts of the property rental sector.

The High Court has ruled that an action group cannot challenge the tax changes that will be implemented in 2017. The changes in question will reduce the number of tax-deductible expenses, such as interest payments on mortgages, which landlords can claim to reduce their tax burden.

Campaigners are now planning to make a case direct to Chancellor Philip Hammond, to ask that the planned tax changes are abolished. They also want this year’s changes to stamp duty on additional homes to be reversed – stamp duty is currently 3% on second homes.

What does this mean for the industry?
There is a general feeling that George Osborne, Hammond’s predecessor, failed to understand the importance of the private rental sector for the UK economy, and only focused on trying to help first time buyers to gain a foothold on the housing ladder.

The biggest concerns are that these changes will force landlords to raise rents to maintain their profit margins. It is also expected that some landlords will simply quit the market, or at least, stop investing in new properties, which will further reduce investment in the rental sector, and push rents up higher still.

When a similar tax change was imposed on Irish landlords, rents increased by 50% over a 3 year period. Analysts believe that the same could happen in the UK. 56% of landlords recently surveyed by the Residential Landlords’ Association said that they are planning to increase rents during the next 12 months.

These changes will also make it harder for first time buyers in rented accommodation to save a deposit, which will subsequently slow done the housing market further. Even with the Help To Buy scheme, many buyers are struggling to save a deposit, and coupled with the forthcoming closure of the mortgage guarantee scheme, the outlook for first-time buyers is bleak.

Some landlords have tried to avoid these tax changes by placing their property investments in a limited company, but Nick Cartwright of Smith & Williamson has warned that these landlords might actually face double taxation.

Another change, due to come in soon, is more stringent tests for buy to let mortgages, which is likely to further reduce the number of people who will be able to invest in a rental property.

The housing market cannot currently support these changes. The Royal Institution of Chartered Surveyors (RICS) has said that 1.8 million new rental homes are required to meet the shortage in new build homes. The rental sector is failing to keep up with demand for housing, and this is having a knock-on effect on the property market.

RICS is asking the government to scrap the 3% tax rate on additional homes, and instead pioneer a new phase of house building.

New policies that will result in higher rents and fewer properties will only make it harder for people to buy their first property. It is also feared that in the Autumn Statement, Hammond will announce tax benefits for large investors in the build-to-rent sector, which will leave smaller investors struggling to compete.

For more information, and to discuss how these changes may affect your investment portfolio, please contact our property investment consultants today.