Local Housing Allowance (LHA) is already a bit of a mess, with many landlords choosing to shy away from this sector of the rental market (see 2 reasons why landlords say “no” to housing benefit tenants). Now, with the Government’s budget cuts, even more landlords will be turning away housing benefit tenants.

There are two important cuts about to be made to housing benefit which landlords and tenants need to be aware of.

Cut no. 1

Currently, the amount of housing benefit paid to tenants is set at the median level of local rents. So claimants receive an amount equivalent to the price of renting a property in the middle of the range. From October 2011 however, the calculation will be made using the lowest 30th percentile of local rents. This means, tenants in receipt of housing benefit will no longer be able to afford properties priced in the middle of the range of their local markets and will be forced into cheaper properties. Otherwise, they will have to “top-up” their housing benefit with other income.

Cut no. 2

From April 2011, the amount of housing benefit paid for larger properties will be capped. The maximum that can be claimed will be as follows:

• 1 bed property – £250 per week
• 2 bed property – £290 per week
• 3 bed property – £340 per week
• 4 bed property – £400 per week

Looking at the levels of these caps, it is going to be large families and those in “expensive” cities like London or Brighton & Hove that will find their benefits cut.

Right or wrong?

Supporters of the cuts say that it is only right that those having their rent paid for by the Government should have to live in cheaper than average accommodation. Critics say that this will force housing benefit tenants into “ghettos” of low-quality social housing.

What do landlords and tenants need to do now?

In the run-up to these two cuts being implemented, tenants and landlords have decisions to make.

Tenants need to decide whether they will be able to afford to stay in their homes if that would mean “topping up” their housing benefit payments from other sources of income. If they can’t, then they need to start thinking about down-sizing to more affordable properties.

Landlords need to look at their income and expenditure for a given tenancy and decide whether they are in a position to accommodate the cuts in housing benefit by lowering their rents in order to keep their tenants. Landlords considering this option need to factor in a likely rise in interest rates just around the corner (see our recent article on landlords and interest rates).

Summary

What is obvious is that unless landlords drop their rents, many tenants will be forced to find cheaper accommodation or risk falling behind with their rent and being evicted anyway.

With demand for rental properties across East and West Sussex still very high and likely to remain so for a while, it is unlikely that landlords will feel they need to reduce rents to accommodate housing benefit tenants on lower levels of income. This will mean housing benefit tenants are forced into cheaper housing, one way or the other.

Housing benefit tenants have it tough. There’s no denying that across East and West Sussex it’s hard to find a decent property to rent where the landlord would be happy to accept tenants claiming LHA. Why?

Partly, it comes down to inadequate supply in the rental market. Because of the current lack of supply in the rental market, there are far more tenants looking for property than there are properties to rent. The sales market is slow and the mortgage market is still very restrained; this means that many people who would have bought a property, are now renting. The rental market is flooded with tenants looking for quality housing.

Because there are more tenants around than properties available to rent, landlords and letting agents are quite rightly, selecting the tenants in the best position. And given the choice, landlords would rather rent their properties to people in employment.

Why? Isn’t the rent from a tenant on housing benefit pretty much guaranteed?

No. It’s not.

There are two fundamental flaws with the current LHA system and these are the primary reasons that most landlords will say no to housing benefit tenants. One concerns how the LHA is paid and the other concerns how many local councils treat landlords in the event that a tenant needs to be evicted.

1. How LHA is paid

Under the current system, LHA is paid direct to the tenant, the idea being that the tenant then pays the landlord. This was designed to give a higher degree of responsibility to the tenant as they became more involved in their own financial management.

A laudable aim. But in reality, this system has failed. Many tenants have found they have to ‘dip into’ their LHA funds in order to pay their bills and when the rent becomes due, they don’t have the money to pay.

The landlord then has to wait until the tenant is eight full weeks in rent arrears until the local authority will divert the payments from the tenant to the landlord or letting agent.

2. Evicting a tenant

It is normal practice for notice to be served on a tenant who repeatedly pays their rent late or not at all.

In the event that notice is served on a tenant in receipt of LHA, we have found that our local councils will advise the tenants to “stay put” until a court order for possession is granted. Only then will the council re-house the tenant.

Gaining repossession of a property through the courts is a lengthy and expensive process for landlords. It is unlikely that landlords having to go through this process will want to repeat it.

Summary

Demand is high and supply is low in the rental market. Landlords of quality housing currently have a wide choice of tenants available. They are choosing tenants who are paying the rent with their own means rather than tenants claiming housing benefit.

Although the intention is to benefit the tenants, the rules around Local Housing Allowance are actually harming the tenants by leaving them with far less choice than they would have otherwise.

Capital Gains Tax (CGT) applies to many types of assets. This article discusses CGT only as it relates to properties, and specifically to landlords. For a more detailed discussion of CGT as it applies to other asset classes (such as shares and businesses), visit the HMRC website.

There was much speculation in the run up to the Government’s emergency budget on 22nd June, that CGT would be raised from 18% to 40%. Many thought this would mean landlords rushing to sell buy to let properties which would cause problems for the private rented sector as supply dried up. As it was, all that happened was that CGT was increased to 28%, and only for higher rate taxpayers.

What is Capital Gains Tax and how does it affect landlords?

Capital Gains Tax is a tax payable on a profit.

The profit is calculated when an asset is disposed of e.g sold or given away. As landlords, we pay CGT when we dispose of a property other than our main residence. Profits are subject to an 18% tax for basic-rate taxpayers and 28% for higher-rate taxpayers. You are required to pay CGT by 31 January of the year following the year in which the gain is made.

CGT is calculated on the ‘profit’, not the sale price of the property. If a property is given away or sold for less than it is worth, then the open market value of the property on the day on which the sale is made/the gift is given, is used to calculate CGT.

e.g. You purchase a buy to let property for £100,000 and you sell it for £120,000. Your profit is £20,000. As a basic-rate taxpayer, your potential CGT bill is 18% of £20,000 = £3,600.

Deduction of costs

Certain costs can be deducted from your gain before CGT is applied.

You can deduct your purchase and disposal costs (solicitors, estate agents, stamp duty etc).

You can also deduct the amounts you have spent on ‘improving’ the property e.g. £5,000 for building an extension. You cannot deduct money spent on ‘maintaining’ the property. This can lead to confusion as most ‘maintenance’ work could also be an ‘improvement’. In short, repairing or replacing something is classed as maintenance (as is decorating). Adding something new (like a room in the loft) would be classed as an improvement.

So, following on from the example above, if the property which was sold for £120,000 made a £20,000 profit, then CGT is calculated on the gain after the deduction of your costs.

Let’s say your total costs were £7,000 (£5,000 for building an extension + £500 solicitors costs when purchasing the property + £1,500 solicitors and estate agency fees when selling the property).

The £20,000 profit can now be reduced by £7,000, to £13,000 before the CGT is applied. As a basic-rate taxpayer, your potential CGT bill is now 18% of £13,000 = £2,340.

Capital Gains Tax Reliefs

There are a number of ‘reliefs’ available which reduce the amount of CGT payable:

1. Private Residence Relief

You do not have to pay CGT if the property sold has been your only or main residence throughout the period of your ownership.

If you lived in a property as your main residence and then let the property out, you will be entitled to Private Residence Relief for the period during which you lived there and then another relief, Letting Relief, for the period it was let out.

2. Letting Relief

If you have sold a property that was let out AND at some point was your main residence, then you can use Letting Relief to reduce your CGT bill.

The amount of letting relief you can apply is the lowest three figures:

• £40,000;
• The amount of Private Residence Relief due;
• The amount of the gain you’ve made during the period the property was let.

eg. Let’s say that as a landlord, you sell a property which you have let for four years and had previously lived in for one year. You make a gain of £100,000 when you sell. You are entitled to £20,000 Private Residence Relief (20% of the gain, as you had lived in the property for 20% of the period of ownership). You can then apply a further £20,000 of Letting Relief as this is the lower of the three figures in the list above. Your taxable gain is therefore reduced to £60,000.

The calculation to work out how much you can reduce your gain by is not a simple one and landlords should consult a reputable tax adviser to ensure they are making the most of all of the reliefs available.

3. Buy to Let properties, second homes, business premises and land

If you have sold a property which has never been your main residence, then you are not entitled to Private Residence Relief or Letting Relief.

You may however, be able to claim additional Capital Gains Tax Reliefs if your property has been used for business purposes. Examples of properties used for business purposes include:

• agricultural land
• farm buildings
• a shop
• a factory or warehouse
• a furnished holiday letting in the European Economic Area

So for residential landlords, if your rental property can be classed as a holiday let, then you may be able to claim three further reliefs:

• Business Asset relief – where all or part of the gain can be postponed if you buy another property or certain other assets for business use;
• Gifts Hold-Over relief – If you give away your property (for example to a member of your family), all of part of your gain may be postponed until such time as the property is sold;
• Entrepreneur’s relief – where gains made up to a lifetime limit of £5m are taxed at 10%.

The annual tax-free allowance

Every individual has an annual tax-free allowance which is an amount of profit you are allowed to make, before CGT is calculated.

For 2009/10 and 2010/11, this amount is £10,100. This is an allowance spread across all of your gains in a particular year, and is not applied per gain. e.g. Whether you sell one or twenty properties, the annual exempt amount is still £10,100.

So, following on from the example above, if the property which was sold for £120,000 made a £20,000 profit and after deducting £7,000 of costs, leaves a taxable gain of £13,000.

Assuming this is your only gain realised in a given tax year, then CGT is calculated on the gain, less the annual tax-free allowance:

£13,000 less £10,100 = £2,900.

Your CGT bill now becomes 18% (or 28% for higher-rate taxpayers) of £2,900 = £522.

Summary

Don’t pay more than you have to! Capital Gains Tax is a complicated system, with many exemptions and reliefs available. Landlords should always ensure they take the advice of a reputable tax adviser to ensure they are making the most of the exemptions and reliefs available to them.

The Bank of England announced today that it’s bank interest rate is to be held at 0.5%.

This means the bank rate in the UK  hasn’t changed since March 2009 and during this time although it’s been a struggle for landlords to arrange new mortgages, for those with existing loans, money has never been so cheap. Right now, landlords can arrange a variable-rate mortgage of around 3.7%, or a fixed-rate deal for around 4.7%.

Over the last 18 months, many landlords on variable rate deals have been making relatively low mortgage payments. In terms of cashflow at least, some landlords have never had it so good.

But what happens when interest rates go up? And they will go up.

According to a survey of economists by Reuters, most ‘experts’ agree that interest rates are likely to start going up from the beginning of 2011. What they don’t agree on, is whether rates will rise slowly or whether they will be ‘hiked’ suddenly. When interest rates started to fall in December 2007, it took less than a year for rates to go from 5.5% to 2%. If rates were to go up as quickly as they came down, landlords could end up suffering as a result of a dramatic increase in the cost of buy to let borrowing.

How will the interest rate rise affect landlords?

This all depends on the type of mortgage that a particular landlord has. Typically, for those on fixed rate mortgages, there will be no change in the monthly payment. Until, of course that fixed rate expires. Landlords on fixed-rates should check when their curernt deal is due to expire and find a good mortgage broker (with access to the whole market), who can discuss what the options will be at the expiration of the fixed-term. Also, landlords should check with the existing lender what they can offer when the rate expires.

Those landlords currently on variable-rate mortgages are probably enjoying a period of quite low mortgage payments. This can result in a decent monthly ‘profit’ on the rent, after the mortgage has been paid. Landlords on variable rate deals should keep in mind that the good times are likely to end soon and they should think about what the are going to do when their mortgage payments increase. It may be possible for landlords to use the current ‘profit’ on their rental income to make overpayments on their mortgage. Making overpayments may entitle you to a ‘payment holiday’ later on (when rates rise).

Should landlords fix?

Landlords on low variable-rate mortgages may also like to investigate  the fixed rate deals currently available. The thing with fixed rate mortgages is that they seem relatively expensive when interest rates are low (i.e right now) but when interest rates start to climb again, they soon start to look very much more attractive. The problem is, that as rates rise, the fixed rates available on mortgages start to increase too and the only winners are the people that fixed their deals before rates started to rise.

But rents are rising too

Paul Lainchbury, from Phillip James Letting Agents in Worthing and Brighton & Hove says:

“With a rate-rise just around the corner, most landlords enjoying a ‘profit’ on their rental income should start planning for a pretty rude awakening.

“The good news is that rents are climbing and providing landlords are using knowledgeable, local letting agents who are implementing rent increases when tenancies come up for renewal, landlords can minimise the disruption of interest rate rises to their income”

For more information, contact Phillip James Letting Agents in Worthing and Brighton & Hove.

Tenants are seeing an increase in rents due to a lack of supply in the rental market.

As the number of available properties to rent remains low, compared to the number of potential tenants looking for property to rent, rental prices are pushed upwards. The average rent in the UK is now £839 per calendar month (pcm), a rise of 2.3% from last quarter. Since the beginning of this year, average rents have risen by £19 pcm.

FindaProperty.com has been tracking rent values since January 2008. The average rent then was £873 pcm, so although rents are currently rising, they are still not as high as they were when the global financial crisis started to hit. The ‘stock’ levels (the amount of property available to rent) of letting agents remains at it’s lowest since October 2008 as more people temporarily shy away from the volatile sales market and rent whilst they wait for liquidity to return to the mortgage market (not that property will be anymore ‘affordable’ as an improvement in mortgage availability will inevitably push house prices up).

Landlords in East and West Sussex continue to be among the country’s winners. Rents in Brighton & Hove, and the Worthing and West Sussex areas have risen over the last year by 5%.

Renting in London remains the most expensive option for tenants in the UK. Average rents in London are now £1729 pm, an increase of 6.4% on last year.

Lyn Lainchbury of Phillip James Letting Agents in Worthing says “Prices fell after unwanted sales stock flooded the rental market in 2008 and the news of rents rising is now being welcomed by our landlords .

“What’s important is that landlords take advantage of these rises by ensuring they, or their letting agents, are charging fair market rents for properties. Phillip James Letting Agents ensures fair and responsible pricing of rental properties by making changes as tenancies come up for renewal, typically every six to twelve months. This makes sure the landlord is achieving a fair rent, and the tenant doesn’t have a nasty surprise when their rent is increased by a large amount following an overdue rent-review”.

“We expect demand to outstrip supply for some time to come as more and more people delay buying property after the Government’s emergency budget and the continuing uncertainty surrounding the sales market.”

So what does the Emergency Budget delivered yesterday mean for landlords and tenants? Here are some of the key points:

Housing

Total Government spending on Housing and the Environment for 2010-11 will be £27 billion out of total Government spending this year of £697 billion.

Capital Gains tax for landlords selling property

The Government will reform capital gains tax (CGT) to bring it closer in line with income tax rates.

With effect from 23 June 2010, CGT will rise from 18% to 28% for higher-rate taxpayers only. Basic rate taxpayers will continue to pay an 18% rate on their gains.

With effect from 23 June 2010, the lifetime limit for entrepreneurs relief will be extended from £2,000,000 to £5,000,000.

The Annual Exempt Amount (the amount you can make before CGT is applied) remains at £10,100 for 2010/11 and will continue to rise in line with inflation.

Furnished Holiday Lettings

Proposals from the former Government to impose special tax rules for furnished holiday lettings have been repealed.

The Government will consult this summer on a proposal to ensure the tax rules meet EU requirements in a fiscally responsible way, by changing the eligibility thresholds and restricting the use of loss relief.

Existing rules on furnished holiday lettings will apply until April 2011.

Housing Benefit Reform

In reponse to criticism of the current housing benefit system which has allowed tenants to rent unsuitably large properies from  landlords, the Government will make a number of reforms:

From October 2011, Local Housing Allowance rates will be set at the 30th percentile of local rents.

Deductions for non-dependents will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02.

From 2013-14, Local Housing Allowance rates will be uprated in line with the Consumer Price Index (CPI).

From April 2013, housing entitlements for working-age people in the social sector will reflect family size.

Housing Benefit awards will be reduced to 90% of the initial award after 12 months for
claimants receiving Jobseekers Allowance. This will be introduced in April 2013.

From April 2011, Housing Benefit claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom.

From April 2011, Local Housing Allowance Rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more.

The Government contribution to Discretionary Housing Payments will be increased by £10million in 2011-12 and £40 million in each year from 2012- 13.

Landlords are achieving a better rate of return on their property investments than they have since December 2009. The latest Buy to Let Index from LSL Property shows that landlords are yielding an average of 4.8% on their buy to let properties.

The Index shows that rents have risen for the last four successive months and now stand 2.7% higher than a year ago (broadly in line with the other rent price indices). This particular index differs from others however, because it takes into account the increase in capital values of buy to let properties, as well as the rental income earned. This gives us a more complete picture of the return on landlord’s investments, even though this return is in part, a ‘paper’ one.

Some landlords have found it difficult to sell in the current market as mortgage liquidity remains poor (although has shown some signs of improvement) and buyers remain sceptical of a new Government and a wallet-busting emergency budget. The good news for landlords struggling to sell is that rents have been rising at a faster rate than house prices; this means the contribution that rental income makes to the annual return on property investments, has increased against the contribution made by capital values.

The total return from buy to let investments in the twelve months to May 2010 was a healthy 13.2%. This means the average landlord would have made a total of £20,363, in theory anyway. Only £7,100 of that amount would have come from rental income, the remaining £13,263 from an increase in the capital value of the property. Many landlords hoping to realise that gain haven’t been able to sell their properties so that portion of the return remains, for the moment, intangible.

Returns on buy to let investment are expected to be in the region of 5.4% over the next 12 months, with the majority of the return coming from rental income rather than a rise in the value of the property. This can only be good news for landlords who plan to stay invested in the property market.

Housing Minister Grant Shapps MP has announced that the Government has no plans to regulate the residential property sector. This has been met with disappointment from the managers of residential leasehold properties.

ARMA (The Association of Residential Managing Agents) has been calling for regulation for over 10 years and is dismayed that the new Government has taken the decision to leave the industry as ‘self-regulating’.

ARLA (The Association of Residential Letting Agents) , of which Phillip James Letting Agents in Worthing and Brighton & Hove is a member, has also been lobbying for regulation of an industry which relies on letting agents and landlords following recognised, but not compulsory codes of practice.

Leaseholders currently have the right to take managing agents to a Leasehold Valuation Tribunal (LVT) for issues such as the reasonableness of their service charges, but this falls short of providing landlords with leasehold properties protection against lack of accounting information, poor communication and failure to ‘deliver the promise’ of sound property management.

Phillip James Letting Agents in Worthing and Brighton & Hove is a full member of the Association of Residential Letting Agents (ARLA) , the National Approved Lettings Scheme (NALS) and The Property Ombudsman for Lettings.

The Property Ombudsman (TPO), Christopher Hamer has described the Government’s decision to scrap plans to regulate letting and managing agents as ‘disappointing’.

 Housing minister Grant Shapps has announced that the he will not be going ahead with a register of landlords, or the compulsory regulation of letting agents.

TPO has submitted its Lettings Code of Practice to the Office of Fair Trading for approval.

 Mr Hamer is urging landlords and tenants to take it upon themselves to ensure they use a TPO member agent, as this gives them access to redress of up to £25,000. He also advises the use of firms that are affiliated to a recognised trade organisation. Phillip James Letting Agents in Worthing and Brighton & Hove is among the 7,500 letting agency offices which has already adopted the standards in the TPO Lettings code and is a full member of the Association of Residential Letting Agents (ARLA) and the National Approved Letting Scheme (NALS).

The latest quarterly research from BDRC Continental reveals that private landlords are at their most optimistic since the financial crisis first started to take effect in 2007.

BDRC, says that almost a third of the 519 landlords taking part in the research are making enough profit from their rental income in order to save money, and 23% are now looking to expand their property portfolios. This is helped by low interest rates and the slow but steady improvement in the availability of buy to let and professional mortgages.

The research also suggests however that even though landlords are starting to feel good about the property market again, wider economic conditions are having a negative effect on the rental market.

Rental voids – periods of time where a property is left vacant and not subject to a tenancy, and rental arrears – tenants failing to pay their rent, are (unsuprisingly) higher than they have been since the quarterly landlord survey started in 2007. In the last twelve months, 34% of landlords have been affected by rental arrears (for details of how to guarantee rental income, contact us here).

BDRC spokesman Mark Long said:

“Although there are indicators in this quarter’s research that suggest the private rental market is stabilizing, it is too early to refer to this as a ‘recovery’. Britain’s private landlords still have to cope with uncertain economic conditions and arrears are at the highest level since the research began in 2006. The research also shows that two thirds of landlords don’t intend to change the price of the rent charged to tenants in the next 3 months.”

For local information on letting property in Worthing and Brighton & Hove, contact Phillip James Letting Agents. 

Landlord’s with portfolios of properties to rent in Worthing and Brighton & Hove have (at last) seen a rise in value.

Paragon Mortgages, who provide tenant assessment services and residential mortgages for landlords, have recently released research showing the average value of landlord’s portfolios increased 6.1% during the first three months of 2010. The average value of a landlord’s portfolio is now valued at £1.52million.

The rate of growth increased throughout the quarter and showed an increase from the 4.2% growth recorded in the previous quarter. This is the first time that the value of landlord’s portfolios has grown in two successive quarters since 2008. It was then that buy to let mortgages were still widely available and landlords were more easily able to finance purchases of property. Paragon says these latest figures suggest that landlords have been adding to their portfolios or replacing cheaper properties for more expensive ones.

Landlords feeling confident

Landlords surveyed anticipate the average value of their property portfolios to be 1.2% higher at the end of the first quarter of next year. 73% of landlords said they think that property values will be stable over the next twelve months. Of those that think property prices will move, 19% think prices will rise and only 8% believe they will fall.

The confidence shown by landlords is echoed by the National Landlords Association, who say that landlord confidence in the property market is at it’s highest since 2007.

From Phillip James Letting Agents in Worthing and Brighton & Hove.

The Residential Property Tribunal Service (RPTS) is celebrating after the results of it’s latest customer survey show that it exceeded it’s target for customer satisfaction.

The RPTS act as the umbrella organisation for the five regional Rent Assessment Panels which settle disputes between landlords and tenants involving private rented property and matters relating to leasehold agreements.

The survey was carried out by GfK NOP and indicate that the satisfaction rating of landlord and tenant clients of the RPTS for the six months to March 2010 is 72%. This is just above the target of 70%.

The Rent Assessment Panels aim to settle disputes between landlords and tenants which may otherwise end up in court. Tenants may apply to a Rent Assessment Panel if they feel a proposed rent increase by a landlord is unfair.

From Phillip James Letting Agents in Worthing & Brighton & Hove.

If you are an existing client of Phillip James Letting Agents you are invited to let us know how we’re doing by completing our online Customer Satisfaction Survey.

The survey only takes 3-4 minutes to complete.

We always welcome your comments and suggestions which we will use to make improvements to our business where necessary. If you would rather give us feedback in person, you can also telephone us on 01903 286990.

Click here to take part in the survey and help us to continue to provide you with the best service in the area!

From Phillip James Letting Agents in Worthing and Brighton & Hove.

Earn £100 or reduce your management fee by referring your friends!

Recent research from Halifax has shown that less than a quarter of properties have an ‘above average’ energy efficiency rating.

Energy Performance Certificates (EPCs) are now required for all property being rented. An Energy Performance Certificate lasts for 10 years. To order your EPC, call Phillip James Letting Agents in Worthing on 01903 286990.

Properties are rated from A to G, with A being the most energy efficient and G being the least. Of the properties surveyed by Halifax, only 23% fell in the bands above D. 21% were rated in the C band, and 2% were rated in the B band. None of the properties surveyed acheived an A rating. 42% of properties were rated in the ‘average’ D band. Only 3% of homes appear in the lowest band G.

Nitesh Patel, housing economist at Halifax, said: “The overwhelming majority of homes have an energy efficiency rating that is either average or below average. Many homes could move into a higher energy efficiency band through simple energy saving measures such as the better insulation of lofts and external walls.

“Higher energy ratings mean lower fuel bills, which is an important consideration for many homeowners over the coming winter months, particularly in the current harsh economic climate.  Separate research indicates that fuel efficiency and energy saving measures, such as loft and cavity wall insulation, can add more to the value of your home than other improvements.”

It was proposed last year that landlords be automatically charged the unpaid water bills of their tenants. This led landlord organisations such as the British Property Federation (BPF), the Residential Landlord’s Association and the National Landlord’s Association to lobby the independent Review, which published its report in December.

The Review has thrown out the suggestion that landlords be charged the unpaid bills of their tenants, provided that the landlord (or the letting agent acting for the landlord) ensure that they inform the water companies of a change of tenancy.The water companies should make sure they make it as easy as possible for the landlord or the letting agents to notify them of a change of tenants.

Reacting to the Review results, Ian Fletcher, Director of Policy (Real Estate) at the BPF, said:

“Our actions have averted the immediate threat of legislation that could have seen landlords automatically liable for their tenants’ water bills. Following lengthy discussions with the water companies and Review team we believe a satisfactory outcome has been achieved.

The water companies have significant problems with bad debts. However, to make landlords instantly liable for their tenants’ water usage and debts would have been inequitable and run against the environmental objectives of wider water metering. We are pleased therefore to have thrashed out a compromise that sees landlords and water companies working together for the benefit of the wider public.”

Phillip James Letting Agents provides all landlords with a utility reporting service. We take meter readings and report these directly to the utility providers every time there is a change of tenancy.

The average landlord acheived a rental of £7,600 per property over the year – a yield of 4.6%. Although they also made an average £600 loss on the capital value of each property (in 2008, average capital losses were £23,000). Taking this loss and rental voids into account, buy to let still produced an average return on investment of 4.1%.

Over the year, average monthly rents were at their lowest point in February 2009 at £648 pcm. By the end of November 2009, they had recovered to £665 pcm (the years highest rents were recorded in Spetember at £669).

David Brown, commercial director of LSL Property Services, said: “After a difficult year, the end of 2009 has seen buy-to-let return as a profitable investment. Returns have not only turned positive- they’ve hit an 18-month high. Property bought a year ago and rented out is making a handsome profit for investors. With property prices rising, landlords are making impressive capital gains as each month goes by too. In November, landlords chalked up £1474 in capital gains on a typical rental property.”

“Houses have clawed back much of the value they lost during the downturn, fuelling returns for investors. House prices won’t race up next year at the rate we’ve seen since April.

“The impact of public spending cuts is looming on the horizon and continued mortgage rationing is still a concern. We should still see a small rise of about 5% over the next 12 months, but these factors could conspire to restrain price inflation in 2010.

“2009 marked a watershed for the private rental sector, and landlords have had to ride out the economic storm. 2010 is likely to be equally critical with regulation of buy-to let mortgage lending set to be introduced. Regulation should help filter out unscrupulous mortgage advisers which will be positive for the sector.

“The downturn has already pushed many of the short-term investors out of the market too. Buy-to-let is an essential part of our housing market – we need well capitalised, experienced, professional landlords. With returns rising, they can once again look forward to investing more in the sector to meet our housing needs.”

Buy to let to hit 10% returns in 2010

So what will buy to let investments do for landlords in 2010? According to LSL, a healthy 10% overall profit as the average capital increase should be around £8,000 with the average rental income hitting £667 pcm.

Why do most letting agents turn down potential tenants who are in receipt of Local Housing Allowance (LHA)?

Ultimately, the decision on whether to accept a tenant in receipt of LHA is down to the landlord, not the agent. One of the most common reasons that landlords do not accept tenants on LHA is that by default, the local authority will pay the allowance to the tenant, who is then expected to use this money to pay the rent. Landlords are no longer normally paid direct by the local authority (there are certain circumstances where the local authority will pay the landlord direct – these include situations where the tenant is at least 8 weeks in rental arrears).

From our own experience, the inability of most LHA tenants to have their rent paid direct to their landlords causes a problem. It’s a fact that some tenants do not cope well with handling their own rent and even though they would be willing to have the rent paid to the landlord direct, the local authority won’t allow it which means these tenants continually fall behind with payments. This means that the tenant could end up with a negative reference at the end of the tenancy, making it harder for LHA tenants to secure quality housing.

In its report “Supporting people into work: the next stage of Housing Benefit reform”, the Department for Work and Pensions (DWP) admits that the system is flawed:

“Some stakeholders have raised concerns about the operation of direct payment of Local Housing Allowance to customers and we know that, in some cases, safeguard procedures are not being operated well enough”

The National Landlord’s Asssociation (NLA) has welcomed this report, which commits to providing local authorities with better guidance on decision-making regarding the local housing allowance.

David Salusbury, Chairman, NLA, said: “This consultation is by no means perfect but the issues which affect LHA can no longer be ignored. The NLA’s response on behalf of landlords across the UK will focus on ensuring that tenants are truly empowered by having the option of being allowed to have rent payments made directly to their landlord if they wish.

“We will also be campaigning for proper safeguards which ensure that councils up and down the country are able to deal quickly and effectively where tenancies start to get into difficulties. This means a more creative engagement between town halls and their local private-rented sector.”

LHA was introduced for new tenancies in April 2008 when it replaced the old ‘housing benefit’ system

Our opinion is backed up by lettingsearch.co.uk who believe that although the outlook for the sales market over the next 12 months remains uncertain, 2010 looks set to be a good year for landlords.

The cost of rentals in Brighton & Hove will rise next year

Their report predicts that property stock levels will fall further in Quarter 1 as ‘accidental landlords’ continue to return to the sale market, the lettings market will receive new investment from professional landlords with liquid cash in the second half of the year and that rental prices will rise (with annual growth back into double figures).

The report agrees with Phillip James Letting Agents – Brighton & Hove’s prediction that our area will perform very well. Areas expected to perform well in 2010 include “desirable London commuter towns with above average house prices”.

Phil Calderbank, Director at lettingsearch.co.uk, said: “The lettings market is already undergoing a sustained period of recovery and 2010 is seen as a year of consolidation, driven by stock levels falling back to more normal levels and an increase in tenant demand as consumer uncertainty in the sales market rumbles on.

“The plethora of accidental landlords which contributed to the oversupply of lettings stock has decreased substantially and those that remain are expected to return to the sales market in the early Spring to improve their chances of securing a sale while the demand exists and prices are relatively stable.

“However, with the possibility of a double dip for house prices due to the continued weak nature of the fundamentals underpinning the market, homeowners and first-time buyers are expected to turn away from the sales market in the first half of 2010, preferring to let a property until more stability returns. This caution will be exacerbated by continued tight mortgage availability and the threat of further redundancies.

Professional landlords to benefit from a gradual increase in buy-to-let lending

“As a consequence, rents will stabilise in many areas of the country, rising in areas of particularly high demand, pushing growth back into positive figures and eventually leading to more lucrative rental yields. Professional landlords are also likely to benefit from a gradual increase in buy-to-let lending and, with investments in alternative asset classes continuing to under-perform, those with liquid cash for a deposit may look to invest in further, affordable lettings properties in the second half of the year.

“We are tipping several towns to become lettings hotspots next year. These include the Medway towns such as Canterbury, Rochester and Ashford, which are already seeing increased demand from young professionals as a result of the new high speed rail link into the capital, which entered service on 14 December.

“Traditionally desirable commuter towns with good schools, such as Tunbridge Wells and Guildford, are also set to perform well in 2010 as families choose to let in the current climate. More of an outsider, urban hub towns including Milton Keynes will be popular for lettings as they are still commutable to the capital and offer a good range of shops and services.”

Landlords are still confused by what they need to do in order to ensure that their rental properties are ready for the digital TV switchover. According to Digital UK, properties in Worthing will be switched over in 2012.

As the switchover continues across the UK, landlords of properties with shared commundal viewing (i.e blocks of flats) will need to consider their options to ensure that the properties are ready to receive the new digital signal.

The National Landlord’s Association (NLA) has recently teamed up with Sky, to help make landlords aware of what needs to be done.

Paul Berwick, Head of Marketing, NLA, said:

“Although the digital switchover has already begun, clearly many landlords are still in the dark about what they need to do. It is good to see Sky supporting landlords with the digital switchover and tailoring their products to provide specific services for them.

“We are pleased to welcome Sky to the NLA Recognised Supplier Scheme. Our landlords know they can trust the companies which make up the scheme, and that they will be provided with a competitive price and excellent service.”

In their report ‘For Whose Benefit’, housing charity Shelter agrees with us, saying that systematic flaws in the way Local Housing Allowance is administered has led to many tenants falling behind with their rent payments and facing the loss of their homes.

Rule change needs to be reversed

When Local Housing Allowance was introduced, rules for tenants living in private rented accomodation, claiming housing benefit were changed.  Tenants were no longer able to have their benefit paid direct to the landlord (which had previously helped the tenant ensure they stayed on top of their rent payments). As a result of the rule change, tenants are falling behind with rent payments and some risk eviction. Shelter  found that the majority of tenants who had experienced both types of payment scheme, preferred the old method of paying the landlord direct.

60% of tenants turned away by letting agents and landlords because of Local Housing Allowance

Shelter claims that 95% of tenants in receipt of local housing allowance are strugging to manage their finances and this can mean that money that would otherwise go towards paying the landlord their rent, could be used for something else. Up to 25% of local housing allowance tenants surveyed by Shelter said they are falling behind with their rent as a result of the way housing benefit is paid. The net result of this is that tenants in receipt of local housing benefit allowance now pose a risk to landlords; Shelter reports that 60% of tenants surveyed have been turned down by letting agents and landlords because of their benefit.

LHA is currently failing tenants and landlords

Shelter’s director of policy and campaigns, Kay Boycott, said: ‘LHA was intended to introduce desperately needed reform to housing benefit. While we support the original principles of the system, LHA is currently failing tenants and landlords. Our research shows the government must make urgent changes to LHA to ensure claimants do not continue to be disadvantaged.’

Ms Boycott added: ‘Under this system tenants have no choice about whether their benefit is paid to them or to their landlord. Many claimants are already struggling financially, so when they get rent money paid into their bank account there is a huge temptation to spend it on necessities such as food or bills rather than paying their rent.

‘It is vital that the Government makes urgent changes to LHA to ensure claimants do not continue to be disadvantaged.’

According to lettingsearch.co.uk, 65% of those currently looking at rented property would like to move in before Christmas – partly because rents are widely expected to rise early in 2010, and this is keeping landlords and letting agents busier than usual for this time of year.

Phil Calderbank, Director at lettingsearch.co.uk, said: “All signs are pointing to high levels of market activity right up until Christmas itself, which is great source of seasonal cheer for lettings professionals, allowing them to cut down on void periods and in many cases achieve the best rents possible for their properties.

“Current tenants are looking to get a good deal on the rent while they can, as supply continues to shrink and rents look likely to continue on their upward path in the New Year. Buyers are also playing a waiting game, choosing the lettings market instead of sales, until mortgage lending improves.

“Such strong levels of demand at this stage in the year suggest that the lettings market is set for a year of sustained recovery and consolidation in 2010.”

Recent months have since a decrease in the amount of property available to rent, according to the latest RICS letting survey. The fall in available property has led to surveyors feeling optimistic about rent increases for the first time since July 2008.

Of the surveyors whose opinions make up the report, 22% say they expected rents to increase in the next three months. It is the fall in supply that will lead to the rise; surveyors reported that the number of new rental instructions is at it’s lowest level since January 2008.

RICS spokesperson Jeremy Leaf said: “It seems the current upward trend in the housing market is having a more significant effect on the lettings market, with many of the accidental landlords returning to the sales market to take advantage of the recent price increases. As a result the recent oversupply is reversing, with new instructions at the lowest levels we have seen. This of course is impacting on prices and tenants no longer have as strong a bargaining power as they did.”

The figures are in line with the recent Consumer Confidence Survey from Rightmove. The survey, which canvassed 35,000 people, found that 37% of people  thought rental prices would rise in 2010 whilst just 7% of people said they thought prices would fall.

65% of South-East renters cannot afford to buy

The survey also found that 58% of people who identified themselves as tenants would prefer to buy a home but say they can’t afford it, 65% of tenants in the South East are in this position. 12% of tenants say they would like to rent long-term (with the remainder looking to buy at some point in the future).

Miles Shipside, commercial director of Rightmove, said: “With sales prices now positive year-on-year across most of the country and low stock levels driving increased up values in many areas, 2010 may see many landlords cash-in by taking their properties off the rental market and put up for sale.

“The implications of this on the rental market are two-fold. First, a limit in supply will exert further upwards pressure on rental prices. And secondly, demand for rental properties looks set to remain buoyant while property sales prices stay out of the reach of those tenants who would prefer to buy. On top of this, restrictive mortgage lending criteria looks set to keep many would-be buyers trapped in rented accommodation.”

The figures are further backed-up by the RICS Rental Market Report which reports that surveyors expect rental prices to rise in 2010 as a result of increasing demand and a reversal of the over-supply of property experienced in 2009.

Buy to let in Brighton & Hove has changed since the global financial crisis hit us. It is only eighteen months ago when it seemed that anyone could raise a mortgage for buy to let purposes. Then the money dried up, buy to let investment pretty much dissapeared overnight. The only people investing in property in Brighton & Hove were cash buyers who could afford to take advantage of a sluggish sales market. Then a wave of property to rent became available as vendors unable to sell decided to rent instead. As the sales market normalises, a new and perhaps more secure form of buy to let in Brighton & Hove is beginning to emerge.

Property investment firm Assetz has also identified this ‘new-era’ of buy to let investment and is calling on the Financial Services Authority (FSA) to offer regulation, training and guidance to the property investment industry. The company says this could help to help prevent rogue property ‘clubs’ from selling poor-quality investments to amateur investors, solicitors and mortgage brokers from ‘packaging’ zero-cash property investment deals and ultimately help entice lenders back to the traditionally more secure buy to let market.

Stuart Law, Chief Executive of Assetz, comments:

“We are delighted that the government continues to consult on the buy-to-let market with a view to extending new mortgage regulations to this type of residential property investment. We fully support any considered move to regulate the sector, and this is certainly a step in the right direction and if implemented well could deliver a greater willingness by lenders to lend again into the buy to let sector by reducing risks and further improving transaction transparency.

“Buy-to-let mortgage regulation could well stop speculators with no money entering the buy to let investment market and should also improve the transparency of individual transactions further. Far from impeding the recovery of the market, taking away the speculative, higher risk transactions will improve the risk profile of the sector from a lenders perspective. This will aid the recovery of the housing market as a whole and buy to let loan to values and interest rates will become more competitive as lenders once again view more that buy–to-let as a lower risk sector than standard home loans.”

Finding potential tenants

A good letting agent will work hard to maximize the exposure of your property to the rental market. More and more, this means advertising the property using the Internet. There are some major property portals (such as Rightmove, propertyfinder.com, findaproperty.com) that you need to make sure your agent is advertising your property through.

Referencing potential tenants

As soon as a tenant’s offer has been provisionally accepted by a landlord, it is the responsibility of the Letting Agent to conduct background research to validate a tenant’s suitability for a tenancy agreement. This process will include gathering and validating references from banks, past employers, as well as any previous landlords. If the tenant is self-employed, references from their accountant, book keeper or solicitor should be sought.

During this stage you need to be able to trust your Letting Agent and their ability to determine whether or not a tenant is suitable to move forward with a tenancy. It is the agent’s experience that you will be relying on – and you should feel safe knowing that they are screening tenants with a critical eye.

Before the tenancy

If everything has checked out, your Letting Agent will offer to put together an inventory and schedule of condition which documents the current physical condition of the property. You will typically find reports on the carpets, furniture, wallpaper/paint, appliances and anything else in and around the premises.

Your letting agent will also help you to meet your legal duty to ensure the property is safe. Gas Safety Certificates need to be updated annually and all rental properties now require an Energy Performance Certificate (EPC).

Next, the agent will begin to draft the Tenancy Agreement – which will define the length and cost of tenancy, deposit to be paid (if applicable), tenant responsibilities and other specific requirements and matters pertaining to the tenancy.

During the tenancy

Once your tenants have moved into the property, your agent should arrange to regularly visit your property to ensure it is being cared for and any special conditions contained in the tenancy agreement are being adhered to.

The letting agent will also collect the monthly rent payments from the tenants and pass these on to you. In the event that a tenant fails to pay the rent in full and/or on time, the agent will ensure that the tenant is chased legally and efficiently.

After the tenancy

When your tenants move out of the property, the letting agent should ensure that the property has been left in a good condition (fair wear and tear is allowed but any damage is the responsibility of the tenants). The agent will then arrange for the security deposit to be returned to either the landlord or tenant, or proportionately.

A good Letting Agent wants to attract good tenants. Word around the community spreads fast, so if you hear not so good things about a particular agent or agency by multiple sources – chances are you don’t want to be in business with them.

Look for an agent who is a member of a professional body such as the Association of Residential Letting Agents (ARLA), the National Approved Letting Scheme and The Property Ombudsman.

These are just a few responsibilities expected of a top notch Letting Agent. Before, during and after the tenancy has ended – they will be your eyes and ears. Take this relationship very seriously and your career in property will be very successful for years to come.

Here are 7 reasons why you should rent through a Letting Agent:

1. Letting Agents know the properties within their area.  With the better agents, any property they present you with will have a certain level of quality to meet your needs




2. You’ll have access to many more properties from which to choose




3. Gas, electric and various other safety regulations are taken care of by the Letting Agent. They will inform the gas and electric companies of new tenants moving in, which will save you time and hassle




4. If you run into any problems with the property, a good Letting Agent will be able to negotiate with the landlord on your behalf and aim to resolve the issue with as little incident as possible




5. A top-notch Letting Agent will make the rent collection process painless.  You will typically have the option of dropping it off or via a standing order with your bank




6. If you’re situation changes and becomes a little rough, you may need to apply for housing benefit payments. A letting agent can offer advice about issues you may have with your landlord




7. The Letting Agent will inform your local council of the move in order for them to update their council tax records.

There are more pros than cons when it comes to renting a property through a Letting Agent.  When you consider the current state of the housing market, having a professional on your side who is experienced, able to predict market changes and is experienced in negotiating between landlords and tenants, will prove to be a huge advantage for you.

It is their job to make your life as a tenant easier, so consider the services of a Letting Agent before you make any big commitments in today’s rental marketplace.

Being educated on the eviction process is a crucial skill that should not be overlooked by Landlords. Not only will mastering this skill save you headaches and phone calls, it will also save you from financial losses.

Let’s take a look at some important points to consider:

When to Consider Eviction

To protect your investment, it’s important for you to know when you can and cannot evict your tenant. Just because you own the property, it doesn’t mean you have the right to throw someone out on the streets without reasonable justification or a violation of the tenancy agreement. Below are some of the more common reasons for evicting your tenants:

1. Tenant has not paid rent. Non-payment of rent is by far the most common reason for eviction.
2. The tenant breaches the tenancy agreement by breaking the terms and conditions.
3. The tenant is posing a health or safety risk to the other tenants.

Evicting a tenant can be an extremely time consuming and an emotionally strenuous ordeal – so it is highly recommended that you move forward in the most peaceful way possible. Warning letters are the best way to start – be considerate, but firm and to the point. This is not an opportunity to send threats.

The final stage required before moving forward with an eviction is known as a notice to quit – which is essentially a letter of notice giving them a time-restricted period to complete various tasks. Failure to complete these tasks i.e. pay the past due rent, will result in them having to leave the property. A notice to quit will almost always fall into two categories: pay or comply. The notices you send the tenant are of a prescribed form and must be issued at certain dates – if a landlord fails to issue notices properly, they can be a complete waste of time.

In the simplest fashion, you will send a notice telling them to pay or leave, or a notice telling them to comply or leave. Regardless, the amount of time between your notice to quit being issued and you filing for possession of the property will be determined by your location (the particular county court you use).

Once this time has passed, if your tenant is still being uncooperative, you can contact the courts and take the necessary action against them. 9 times out of 10 the tenant will move out once they receive a summons to appear in court. In the scenario that they are defiant until the end, be sure to have all required documents and proof ready to present to the judge – this will save you lots of time in court.

Certain landlord/tenant documents you should prepare for the court hearing include rent payment records, any police reports and property damage repair bills, as well as copies of the written notices to quit, including printed copies of emails or transcriptions from the tenant.

Using a quality letting agent who is experienced in dealing with Section 21 notices (a notice ending the tenancy where there has been no breach by the tenant), section 8 notices (a notice ending the tenancy where the tenant has breached their agreement) and applying to court for possession orders can make a landlord’s life a good deal easier in the event that a tenant decides to cause problems.

The Property Ombudsman has said that complaints about letting agents is currently the number one reason that people contact him for help.

In his latest report which covers the second quarter of 2009, the Ombudsman, Christopher Hamer, says that 110 people a week have been contacting him about problems with their letting agents.

Since June 2009, enquiries regarding letting agents have gone up by 44%. Enquiries regarding sales have fallen by a third (although this is now on the up). Mr Hamer says that he fully expected the downturn in the sales market to have this effect:

‘This is precisely what I forecast as the property market switched emphasis from sales to lettings during the current slowdown.

‘Enquiries over lettings disputes now far outstrip those for sales and this is one of the principal reasons for asking the Office of Fair Trading to ratify The Property Ombudsman Lettings Code of Practice under its Consumer Codes Approval Scheme. We see this as the first step towards the time when all lettings agents must be legally required to sign up for a redress scheme.’

The Property Ombudsman goes on to urge landlords to ensure they are using quality letting agents:

‘My message to consumers in the lettings market is that they should only use agents who are covered by The Property Ombudsman scheme and are therefore following the standards in our Lettings Code of Practice.’

Philip James Letting Agents is a full member of The Property Ombudsman Scheme and follows the standards in the Lettings Code of Practice.

It has been reported that Landlords experiencing difficulty making their mortgage payments are being charged an average of £25–£50 for each month they are in arrears. In addition to this, many of the major mortgage lenders – like Halifax and Abbey – have the right to take a monthly ‘administration charge’, usually within the same range, in the event of arrears.

Are these charges reasonable? Or are they merely forcing landlords into the dark world of repossession? Critics seem to be leaning towards the latter statement. The landlord is clearly in some sort of financial trouble, so levying charges and administration fees is only making their situation more difficult – and ironically could contribute to making it more difficult to getting their heads back above water.

It has been claimed that a vast majority of major lenders and financial institutions will arrange to have the arrears charges stopped and a repayment schedule put into place, and all the landlord has to do is contact them to make arrangements. Regardless, several sources have confirmed that – on more than one occasion – such charges have continued, despite the new arrangement.

This issue with mortgage arrears charges has gone beyond the offices of advisers and into the County Courts. One Sussex judge, who deals with repossession cases on a regular basis, feels that the awareness is present amongst his colleagues and they are doing everything they can to keep it that way.

So what other options do landlords in trouble have?

For starters: if you have made several attempts to reach an agreement with your mortgage lender and – despite good will and perseverance – you are still unable to reach a healthy medium, it is time for you to conserve your energy and make an appointment to seek the assistance of a debt adviser. Not only are they capable of playing “let’s make a deal” with the mortgage lender, they are also well equipped to assess your financial situation and see if there are any areas in need of a trim.

Finding a good debt adviser might eliminate your mortgage arrears nightmare all together. Just remember to be informed of all your options and seek assistance when needed. Payments or no payments, it is your property and your job to keep it together! If the property is subject to a tenancy agreement, fixed or periodic, landlords need to deal with mortgage arrears as speedily as possible as the property is not simply an investment for them, it’s a home for a tenant – which they could lose.

In any event, it’s absolutely vital that if a landlord is experiencing difficulty making mortgage payments, for whatever reason, they talk to their mortgage lender, their letting agent and their tenants.