Tenancy Surrender & Mitigating Loss

What if your tenant decides to surrender the tenancy midway and refuses to pay rent? As a landlord do you have the right to insist that the tenant pays the rent for the entire period he or she signed up for? According to law the landlord has a right to insist on the payment being made, and there are precedents like one of the earliest ones - the case of British Westinghouse Electric Company versus the Underground Electric Railway Company in 1912.

However, it is left to the discretion of the landlord to let the tenant go scot free and re-let the property to make up for the losses caused by the erring tenant. The other alternative is to refuse to accept the surrender and take the tenant to court, though the outcome could take quite a while, and there is no guarantee that the losses can be made up at the end.

There have been cases like the one involving Reichman (landlord) versus Beveridge & Gauntlet (a firm of solicitors). Although it was a 5-year lease, the tenants broke the contract in 3 years and vacated the premises. The tenant’s contention was that the landlord failed to re-let the premises and also refused an out of court settlement for a negotiated amount. The judge, however, ruled that the landlord did not have any obligation to mitigate the losses, though the defendants went on further appeal.

The case went to the Court of Appeal, which had to rule whether the landlord’s claim was unreasonable as far as continuing the tenancy was concerned. This is one reason why landlords need to think twice before accepting surrender when the contract is being broken well before the contract period ends. Landlords normally insist that the tenants themselves find a suitable replacement before vacating the premises, so that the losses are mitigated. However, the landlord has the right to demand rent for the entire lease period or until a suitable replacement is found, whichever is earlier.

The above case was for commercial premises, and the same yardstick may not be applied for a residential property and cannot be taken as a suitable precedent. Of course, it is the prerogative of judge to consider tenants to be consumers who need to be given due protection. If the remaining lease period is rather lengthy, it is up to the landlord to consider the case and act accordingly by accepting the surrender graciously.

Lodger landlords must carry out Right to Rent checks

Right to rent checks by lodger landlords have been made mandatory since February 2016. Hence all the landlords in U.K. have to necessarily carry out checks on the occupants and make sure they have a right to rent lest the landlords become liable to pay hefty fines.

Landlords need to go on a damage control exercise by making sure that the tenant has a genuine right to rent, and prove to the authorities that as a landlord he is following the rules by the book so that there is no need to pay fines. While the onus of keeping out illegal immigrants is the immigration department, a landlord should make sure he or she is no harbouring illegal immigrants with or without having any knowledge about it. It is better to follow some basic tips like:

  • Keeping meticulous records of every check and the findings
  • Recording the date on which the check was carried out
  • The name of the person who carried out the check
  • A transcript of the questions asked and the answers given by the tenant
  • Photo copies of ID documents provided by the tenant while moving in

The above records need to be maintained safely for at least a year after the tenant moves out of the premises.

Another important point to remember while carrying out the checks is to make sure that checks are carried out on the entire family, leaving out just the underage children. Teenagers who look suspiciously above 18 years need to be verified thoroughly by scrutinizing their papers as well. It is better to include all the names (with ages) in the tenancy agreement, and it is better to include a clause that there should strictly be no sub-letting of the premises, nor should anyone be allowed to move in after the tenant occupies the premises.

The above rules apply to landlords as well as people who take in lodgers on a temporary basis. The rules also apply to those who plan to rent out property under a license and to property guardians as well. It is advisable to keep updated with the information the Home office is constantly updating on its website. Landlords are expected to keep themselves informed of the latest developments, ignorance will not be accepted as a valid excuse. Fines can be rather stiff, with £1,000 being charged in the first instance, and £3,000 for subsequent deviations.

Current Status of Buy-to-Let Market

According to property experts most of the buy-to-let investors are seeking greener pastures and prefer investing in commercial property. Traditional residential property seems to be losing its charm, and shops, office complexes and restaurants seem to be more lucrative investment options. Most of the landlords living abroad are disposing off their buy-to-let properties, especially in the London area. Ownership of buy-to-let properties has come down drastically from 26% in 2010 to a dismal 11% currently, and is fast declining to single digit figures.

However, though overseas investors are hesitating to invest in buy-to-let properties, Britain-based investors are showing keen interest in investing in buy-to-let properties, which is keeping the prices somewhat stable for now. One major reason why foreign-based investors are fighting shy of investing in properties in the U.K. is stringent tax regimen, particularly the capital gains tax, which is a deterrent.

Although Brexit triggered a fall in the value of the sterling, foreign investors were not too keen on investing in property. There was a sharp drop in property prices post Brexit, but there were hardly any takers, especially in the buy-to-let segment. The changes brought about in the stamp duty have escalated the costs of investing in buy-to-let properties. Even owner-occupied properties did not seem to be lucrative enough to attract buyers. Looking at the buy-to-let segment alone, the decline in the number of purchases is quite alarming, what with the “additional property” stamp duty playing spoil-sport, the number of properties being bought and sold has steadily declined since April 2016.

Most of the Britain-based investors are not cash rich and all have mortgage payments to contend with. With returns from property plummeting, default in mortgage payments is a regular occurrence. However, investing in commercial property is a different ball game altogether, and the segment is attracting more investors than ever before. The commercial property range includes small garages (easy to rent out) commercial buildings and sprawling industrial estates that house a wide range of factories.

The main attraction with commercial properties is the higher return on investment, though the appreciation of commercial property is much lower than that of buy-to-let properties. Moreover, the tenants in commercial buildings do not make a fuss about amenities and go ahead and spend out of their pockets if they need small improvements. The business-folk take care of the insurance premiums and minor repairs as well. This trend is expected to continue for a while, until the next boom in buy-to-let property comes.

Two Thirds of Landlords pay Basic Rate of Tax

According to data released by the government, only two-thirds of the landlords come under the bracket of basic rate of income tax. The reaction from The Residential Landlords Association (RLA) is that this information explodes the myth that most of the landlords are rolling in money and can very well pay up their taxes.

In response to the questions put forth by DUP MP Jim Shannon in the Parliament, of the 1.9 million individual landlords who are in the disorganized sector and are not incorporated, two-thirds come under the basic tax bracket. These landlords have submitted tax returns that were self-assessed. Of the total of 1.9 million, 30% came in the higher tax bracket and only 4% paid the additional tax rate.

According to the treasury minister Mel Stride, he has confirmation that landlords end up paying more taxes than home owners. They shell out more money that goes towards taxes on rental incomes, and they also spend extra money on Stamp Duty as well as Capital Gains Tax. According to the spokesperson of the RLA the assurances given by former Chancellor George Osborne that increased tax rates levied on private landlords have created a level playing field with home owners does not sound true after all.

The Treasury has countered with a strong re-assertion that according to its estimates, only 20% of the 1.9 million odd landlords are likely to be affected by the recent reduction in the interest relief for mortgage. It is anybody’s guess on the number of properties and tenants living therein who are going to be affected by this cost pressure.

What with the urgent need for more houses on rent, the RLA is urging the government to altogether scrap the recent decision on taxing the landlord’s turnover instead of only the profit. They are also pressing for the abandonment of the mortgage interest relief changes and to also do away with the Stamp Duty levy that is being exercised on additional homes, which are certainly helping ease the pressure on the demand for more homes that can be made available on rent.

The RLA Policy Director, David Smith is of the view that the increase on taxes on the private rented sector initiated by the previous Chancellor was based purely on false assumptions and not on facts. With ministers having no clue about the number of properties or tenants that are being affected by their policies, they have no idea about the intensity of the problem. More homes need to be built to meet the growing demand, which the system should support and encourage. 

What is Tenancy Surrender?

Tenancy surrender can be a tricky affair unless you go about it in the proper manner. There are three ways in which a tenancy can be terminated:

1.     End of Term – This happens naturally at the end of the stipulated period.

2.     Unilaterally – Notice is given from either side indicating that any one of them wishes to end the tenancy contract for any reason (should be mentioned in the tenancy agreement).

3.     Surrender – Both sides voluntarily agree to terminate the tenancy contract.

Things are a lot easier if both the landlord and the tenant have mutually agreed upon a tenancy that features a fixed term, with no specific clause for breaks in between for terminating the agreement at an earlier date. This way both the parties are bound by the contract and the tenancy can come to an end naturally once the specified course of time is completed. However, if a specific clause for early termination exists, it can be exercised by mutual agreement. Both parties need to surrender the tenancy, and upon surrender all obligations cease to exist on both sides.

Surrender by law

Based on a particular circumstance, both parties can imply a surrender, which is considered as surrender by law. In such cases, both the tenant and landlord can opt to enter into a new tenancy agreement based on terms that are different from what was entered into earlier. The tenant voluntarily gives up possession of the property, and the landlord needs to acknowledge the surrender by showing his willingness to accept the keys and complete the surrender. It is better to take the consent in writing from the tenant, lest he or she claims to have been evicted illegally.

Abandonment by tenant

Sometimes a tenant may quietly vacate the premises and walk away without uttering a word to the landlord. This may happen during the term or at the end of the term, and the tenant may have some dues pending. With no notice given, such acts by tenants can cause the landlords a lot of agony and problems.

Although abandonment implies surrender, the landlord cannot assume that the tenant has left for good. The tenant may have gone in a hurry due to some emergency, or a close relative or friend may have fallen ill, or the tenant himself may have been hospitalized. It is better to wait and watch the developments before trying to let out the premises to a new party.

Investment House Fidelity raises Funds for Real Estate

Institutional investors in Europe, especially in countries like Germany, France and Switzerland have been showing a keen interest in investing in property driven investments. Although Brexit was a dampener and the property market became somewhat unstable, what with the new tax regimen adding to the woes of property owners. However, the current scenario seems to have changed with investments in the property sector steadily rising.

Investment house Fidelity, with the help of its group of faithful investors has managed to raise £111m through the Fidelity Eurozone Select Real Estate Fund. It took them just 12 weeks to complete the process with funds pouring in from financial institutions across Europe. Countries like Germany, Ireland, France and Switzerland have evinced keen interest and the investors probably still have faith in the real estate market, which showed some signs of sluggishness until recently.

With yields hovering around 6 to 7% at the outset, the fund seems to be quite popular with investors, both small and large. Clearly, real estate fundamentals seem to be on the rise making landlords a happy lot. The capital sector too seems to be in favour of investing in the property sector. Fidelity International is already busy with the next round of exercise for raising capital, and this time around the target is not only countries in Europe but several cash rich countries in the Asia-Pacific region, including Australia.

The focus still is on institutional investors, who are quite happy with the returns they have got until now. When compared to the returns generated by another fund, namely INREV Continental Europe Funds, Fidelity International fares a lot better with the returns from INREV hovering at a dismal 4%+. While INERV is liberal while picking stocks to invest in, Fidelity exercises a lot more caution, going into details of every single property and its merits.

According to Neil Cable who heads Real Estate at Fidelity International Fidelity’s focus on generating good income has been received well by institutional investors in Europe. Post Brexit, the investors see sense in the tactics deployed by Fidelity and favour investing in alternative sources of income through investments. They also believe that the Eurozone strategy offers minimum exposure to the UK and peripheries of Europe.

Fidelity has already invested in 5 prime assets with the investment totaling £129m. The properties include two DIY retail stores located in Germany and a logistics property in Paris and Germany.

Can tenants claim back their excess rental payments?

Such scenarios are quite common. So what happens when a tenant pays an excess amount by way of rent? It is logical to conclude that the tenant is entitled to be reimbursed the excess amount paid. However, it is not as easy as it seems, and here’s why.

All lease agreements for commercial and residential premises will include a clause that indicates that it is the obligation of the tenant to make payments towards the costs for maintenance of the building and towards other costs like insurance etc. But, as it is the landlord dealing with the company or individuals carrying out the maintenance tasks and the insurance companies, the tenant never really gets to know the actual figures.

Hence, disputes can easily arise, and whenever a tenant feels that he or she has overpaid rent. The landlord on his part will make demands for payments and there is no other go than to negotiate and arrive at a settlement or go in for litigation. On many occasions the tenant would have already made an excess payment without realizing it at that time.

In such cases, the tenant can opt to have the excess amount paid to be set off against the dues to be paid towards service charges for the coming year. However, if there is a specific clause with a provision for anti-set off, or if the tenant is in dire financial straits, the tenant may want the excess payment to be reimbursed immediately.

The following will be taken into account to decide the circumstances under which an overpayment was made:

  • Overpayment made due to oversight or due to an administrative error on the tenant’s part, by either reading the figure incorrectly (decimal point etc) or any error occurring during an electronic funds transfer.
  • Where an approximate sum is paid towards the estimated costs for the year, which, when worked out is found to be in excess of the actual amount.
  • Sometimes the landlords demand payments that have not been agreed upon, nor are such sums mentioned in the lease agreement. Or if it comes under the Limitation Act of 1980 or the Landlord and Tenant Act of 1985 (for residential leases).

In all above cases, the tenant is liable to get a reimbursement although in the case where an approximate sum was paid, it is difficult for the tenant to get a reimbursement as the landlord will try to justify the payment in one way or the other.

 

Problems you may Encounter with Real Estate Sales


Most people have a false notion that investing in real estate is one of the best decisions ever, and unlike dealing in stocks and shares, nothing can go wrong while selling a solid piece of property. Well, most of them are wrong, because real estate is no different from other investment options, and great care needs to be exercised while trying to sell real estate.

The first problem you can face is the lack of any takers even after several months of advertising and letting estate agents know that your property is on the block. The longer your property remains unsold, the poorer the chances of selling it at a good price. Remember that your mortgage payments have to be made on time lest you end up paying stiff penalties. Desperation will lead you to slash prices, and a seasoned buyer will bide his time and wait for the best opportunity, dangling cash in front of you to entice you into selling a prime piece of property at a throwaway price.

Another risk you can encounter while trying to sell your property is the likelihood of the sale never going through, although you received an advance. This leaves you in a dicey situation where you cannot try to sell it to another buyer, nor is the current party going to pay the balance and close the deal. Sometimes, quite unfortunately, the person wanting to buy your house may run into sudden financial difficulties and put you in the soup! Even after signing a firm contract, some buyers try to wiggle their way out and want the entire advance to be refunded.

In some cases, eager buyers pay a token advance, hoping to sell their property to come up with the rest of the money. If their property remains unsold for whatever reason, so will yours. Sometimes, a buyer may have liked your property while viewing it the first time. Later, he or she may bring in some expert or friend who will find several faults with the property and play spoilsport and stop the deal abruptly.

Of course, the picture is not as gloomy as it appears. The silver lining is that if you take enough precautions, you won’t end up with an unsold piece of property. Make sure you do your homework well, and try dealing with seasoned experts who know the business well. Get your property inspected by a professional and make sure you get a written report. Moreover, such people have their own contacts and can put you on to some genuine buyers, leading to a smooth sale.

The Pros and Cons of Buying and Owning a Timeshare

The idea of owning a timeshare may conjure images of a gala time you can have on a vacation in some remote location with very attractive terms. However, it is important to read the fine print before signing on the dotted line. Most people rush into the decision of buying a timeshare and regret it later. With timeshares coming in various types like fixed week, floating, right-to-use and points club you’ll be quite confused which one to go for. Whichever you decide upon, just make sure you know the advantages and disadvantages in buying a timeshare.

Pros

Unlike any vacation home where it could lie vacant for most part and you still get to pay for it, with a timeshare you pay only for the time you spend at the timeshare. That is probably what makes a frightfully expensive property within the easy reach of many middle-class people looking for spending quality time at a great place during a vacation. You don’t have to break your head about maintenance and repairs, nor about paying for a caretaker.

Another major advantage is that you can have a definite vacation at the destined place, and can be sure of accommodation. Unlike resorts where you have to make sure your reservations are in order, and the flights reach the destination on time.

What’s more is you have the liberty of trading destinations with other timeshare owners in various locations, and it’s like owning multiple timeshares. In case you can’t make it on a particular vacation, you can let out your timeshare and expect decent returns that you can put away for your next vacation.

You can surprise your friends and family, especially that favourite niece or nephew of yours who got married recently. You can gift your timeshare to anyone you please, or you can even put it on the block at a charity auction and feel really good about it for long.

Cons

No maintenance is fine, but the annual fees can burn a hole in your pocket. If you were not careful enough to read the agreement fully, you can be in for nasty surprises like arbitrary hike in annual fees. You’ve got to pay up the annual fees whether you use the timeshare or not.

Timeshares are not that easy to sell, and many realize that they are stuck with their timeshares for life. No wonder then that used timeshares are sold at throwaway prices, and if you’ve fallen for one of them, bad luck. Of course, you just might hit a good bargain now and then.

Going for a timeshare in some exotic island or a foreign country comes with its own hassles. You may not be familiar with the local property laws and might end up realizing that you have invested in some worthless property because some countries do not allow foreigners to hold title to any property by law. It is, after all, a lifestyle indulgence and not a healthy investment.

Residential, Commercial or Student Properties for Best ROI?

 When it comes to investing in property one can get pretty confused, what with options to invest in residential, commercial and the ever growing student property, which probably yields the highest returns. However, each segment has its own advantages and disadvantages, so let’s take a closer look and try to find out which type of property gets the best return on investment (ROI).

Residential Property

There is no doubt that investing in residential property is highly secure, and it is possible to earn handsome returns over a long term. U.K. is still one of the leading property markets in the world. Reports released by the Office of National Statistics (ONS) indicate that residential property prices rose by a good 7.2% by the end of 2016. The buy to let market is buoyant and one will certainly enjoy many advantages investing in residential property in the U.K. There is a perpetual lack of housing in the country, and buy-to-let investors are lapping up property like never before. There is a shortfall of close to a million homes, and developers are busy developing new neighbourhoods at a furious pace.

Commercial Property

Gone are the days when commercial property was in the hands of a few big players in the property market. Today, individual investors can aspire to become commercial property owners. To be precise, they can own a segment of a large property worth millions of pounds. High-spec office suites located in busy commercial areas are ripe for the plucking. You have options of letting your share of the property on either a short lease or a long lease. It is more like buy it, let it out, and forget it for a while. The property keeps earning decent returns, and you can add the increment clause while drawing up the rental agreement and seal the deal to your advantage. There are hardly any hassles in letting out commercial spaces as business houses spell the least trouble as tenants.

Student Property

The best in the pick is probably student property, what with thousands of students converging from all over the country to earn their degrees; student accommodation is always at a premium. It’s not just the domestic students; there is a huge chunk of foreign students coming in hordes to get the coveted degree from any of the several colleges in the U.K. Surveys indicate that there could be a 10% increase in international students making a beeline to Britain in the next decade or so. Student accommodation enjoys a high occupancy rate, with rental returns on the higher side when compared to other residential and commercial property. Your best bet yet is to invest in some good student property and earn handsome rental returns.

Property investment in 2017: A Good or Bad idea?

The housing market in the UK has been influenced by two major factors during 2016 – The EU referendum and the changes in stamp duty. It is almost three years since the changes in stamp duty came into force. However, the after effects are still working, and the cost of buying property has shot up. To compound the issue, the higher rate of duty imposed on second homes that followed close on the heels of the stamp duty changes has had a profound effect.

The Brexit poll created a lot of confusion and ambiguity in the property market and the ultimate result was certainly a rude shock, the effects of which are still being felt well into 2017. The Office for National Statistics re-launched the official house price index in June 2016, which replaces the existing indices published by the Land Registry and Office for National Statistics. The figures published last indicate that there is a 6.9% increase in property prices, which is the lowest recorded figure since 2015.

The start of the year has not been very encouraging for property owners as the indices indicate sluggish growth. The artificial growth witnessed is due to a shortage of houses put up for sale, according to the reports published by The Royal Institution of Chartered Surveyors (RIcs). While the number of buyers has increased substantially since Brexit, the number of properties being put up for sale has dwindled.

In June 2016, the rate of growth of property prices in the U.K. was very encouraging at 9.3%, though the same is disappointing at 6.9% in October, a sharp decline in just 3 odd months. Although RIcs predicted a 6% growth, which was substantiated by the figures quoted by ONS, the changes in the stamp duty seemed to have played the spoilsport. The effect that stamp duty changes have had on property prices has eclipsed the effect of Brexit. RIcs predicts even more dismal figures at 3% by the end of 2017.

To compound matters, inflation seems to be fuelling the fall in property prices, what with consumers struggling to make ends meet just for essentials like food and fuel. People are now thinking twice before investing in property. Even the luxury property market does not seem to be immune to the effects and has recorded a very sluggish growth. The sale of million pound homes has taken a bad hit due to changes in stamp duty, and Brexit too has had its own effect on people with money to spend.

 

General Election: Potential Impact on Landlords?

With the general elections just around the corner there is a lot of apprehension about how it is going to affect the rental as well as sales markets in the real estate sector. The general public is rather tired of the exercise where they are being called upon for the third time to turn up for exercising their franchise. The first was the EU referendum that created a lot of buzz, followed by the general election in May last year.

Landlords, agents and realtors are a concerned lot, as the vacuum and instability in the political arena has diminished the value of properties, even the ones located in prime areas. Although the call for elections came as a surprise to many, most people are down with a sense of uncertainty as to how the real estate market is going to react.

Whoever is going to make it to Downing Street will have to start from scratch, which might send some positive signals as far as the housing market is concerned. The need of the hour is a strong and stable government that can be a tough negotiator in the Brexit deal, which will be a great boost for the financial as well as property markets in Britain.

Landlords and realtors are pinning their hopes on anend to the bickering going on in Westminster, and any party coming with a clear mandate should be welcome. Mark Hayward, head of NAEA and David Cox, head of ARLA are of the opinion that the realty market is already in a severe crisis and the acute shortage in housing is causing alarm bells to ring.

The new government has to take a comprehensive view of the housing policy, bringing in drastic changes wherever necessary. The private rental market is already plagued by exorbitant tax hikes with benefits being cut ruthlessly. With a ton of regulations bogging down the industry, tenants are finding it increasingly difficult to find a place to dwell.

Landlords, on their part are finding it difficult to provide decent accommodation and are reluctant to put in any more money to improve the properties. Brexit and the consequent exit of Britain from the EU still has its effect, which will probably continue for a few more years. Unless the new government gets a favourable deal it is going to be tough going for property owners and realtors. However, people who are selling their properties will continue to do so, and new investors will probably shore up enough courage and invest their hard earned money in new property acquisitions.

How can I calculate property taxes myself?


Owning a piece of property has its own hassles and a sizable amount has to be paid as property taxes. You’ll have to first have the property assessed properly. You need to arrive at the value of the land in the particular location, and the higher the land value, the higher the property taxes. Moreover, the value of the land keeps appreciating and every year the figures are bound to change.

You will have to approach the local property assessor whose specific job is to assess properties, and he or she is the best person who can calculate the value of your home. Alternatively, you may contact the local tax authority. These days there are several online tools that will help you look up your property’s value. All you need to do is fill in your address and the tool will calculate using the current rate of taxes and help you arrive at a figure.

One other alternative is to approach any of the financial institutions who can give you estimates for the value of your home, based on which you can calculate your tax liability. In order to get the exact value of your home you need to calculate the current land value and take into account the improvements carried out on your house, this will add to the value of the house and the tax amount will be based on the new value. Here again, the local assessor should be able to help you out to arrive at a value for the land and your home.

The next thing you need to do is to find out the current tax rates being charged by the government. The property tax is arrived at on a fixed percentage of the value of the property. Hence, the tax rates can vary from year to year and there could a steep increase if the county is facing financial difficulties as it will try to make it up by increasing the tax rates. Based on the current valuation of the property and the rate of taxes being charged, it should be easy to arrive at the approximate tax amount that needs to be paid by you towards property taxes.

However, if you are not too sure that you have got the figures right, you need to either contact a property management agency or a tax consultant who will be able to guide you better. Bear in mind though, if the idea is to save on consultation fees, you should maybe take the risk and submit the taxes based on your own calculations.

How can letting agents benefit out of the government’s recent ban on fees?


With the Chancellor of the Exchequer, Philip Hammond hinting at a proposed ban on letting agents’ fees, most agents are a worried lot. However, with the Chancellor insisting that it is merely a proposal that will ‘consult’ the possibilities of effecting a ban, there’s bound to be some delay in the implementation.

What with the government consulting with industry experts, consumer forums and others with a stake, it could be a while before the ban comes into force, and the same applies for up-front fees for tenants as well.  Most letting agents are notorious for charging helpless tenants costs of references; while others use different tactics like ramping up prices for services rendered on drawing up contracts and inventories.

It is such indiscriminate and unfair charges that the Chancellor is targeting and hoping to ban, giving the tenants and landlords a much needed reprieve. However, the ban is not right around the corner, though the possibility has caused mild tremors in the industry. According to informed sources from the Department of Communities and Local Government that handles such issues, talks will not take place for some more time.

Before the ban can come into force, the Department will certainly talk to the affected parties. They include landlords, tenants and letting agents, as well as leading consumer groups such as Citizens Advice who are the tenants’ representatives. While it is certain that there cannot be an outright ban, up-front fees may be banned altogether, which is a certain dampener for letting agents.  Or, utmost, there could be a cap on the fees that can be charged, so that letting agents are allowed to collect some sum to cover the costs suffered.

However, letting agents are going to have a field and continue collecting their fees until the consultations get over and the final picture is revealed. The consultations could drag on for another three to four months. Even after the consultations are concluded, the parliament has to pass a law, which could take some more time.

A letting agent charges anywhere between £300 to £400 for renting a home, and that’s what most of the tenants in London are paying currently. There is dissent amongst tenants and complaints galore that letting agents are ramping up prices, and what is passed on as fees is far more than actuals. For instance a credit check that costs a mere £3 is charged at £50, with letting agents pocketing the difference. Hence, it is still raining money for letting agents.

How does the "ban on fees" affect letting agents?


Letting agents are in a quandary with the ban on fees looming large, and it is going to be the tenants in the UK who will be hit the hardest, losing hundreds of pounds should they continue to occupy the properties. This is what the Association of Residential Letting Agents (ARLA) strongly believes, and it also contends that there are thousands of jobs at stake, should the ban come into force.

With deliberations still on the cards about how to enforce the ban, the outcome is going to affect the tenants and letting agents alike. Landlords also are not very happy with the grim prospects and there is industry-wide discontent in the private rented sector, though the move is going to affect the economy as well.

Letting agent fees account for close to 20% of their revenues and go towards the cost of setting up important checks while drawing up a tenancy agreement. The ban though, is going to hit the landlords as the agents are simply going to pass on these costs to them by hiking agent fees. Most of the landlords in turn, would be passing the buck to the tenants who get to suffer the most.

The consequences would be inflation of rents by at least £100 per year on an average, and if the landlords manage to pass on the proposed increase in agents’ fees to the tenants, they would end up shelling out £250 to 275 per year.

With the lettings sector accounting for close to 58,000 jobs across the UK, there are going to be thousands of jobs at risk, though not all agents are expected to pass on the increased costs, with some passing on three-quarters of the cost and bearing the rest. Research reports indicate that there could be a fall in demand for properties as landlords plan to cope up with the situation and refrain from investing further in properties.

A fifth of the current landlords are expected to sell off some of their rental properties, and some plan to dispense with the services of letting agents instead of paying them more. The funds allocated for property maintenance are also expected to become scarce, with landlords being reluctant to bear any of the additional expenses.

The ban will ultimately affect the government treasury as well, as the Chancellor of the Exchequer is currently collecting close to £400 million in employee taxes from the letting agents, which will reduce drastically if the ban comes into force. Letting agents feel they have been given a raw deal, given the fact that they were being paid the lowest fees all along, as their counterparts in France and the U.S. earn much more by way of letting agent fees.

10 reasons you should choose home improvements over moving

Your family may be growing faster than you planned or expected, and your current residence may have space constraints. Moving to a new home is not the only solution you have. Selling you house and buying a new one involves a lot of effort and time.  Home improvements done to your existing home can be a great option.  Here are some reasons why you should choose to improve your home rather than move:

1.      Conveyancing Costs

A conveyancer is the person who is responsible for all the legal paperwork that is required while buying or selling a property. The conveyancer charges fees for checking for new developments in the new locality you are planning to move into. He or she will also help getting the title deed for the new home after checking the encumbrances, if any.

2.      Agents’ Fees

If you plan to sell your house there is a real estate agent who will help value your home and fix a fair selling price. He or she will arrange for the advertisements in the newspapers and internet, and will also help you find a new home. All this costs money and the going rate is anywhere between 1.5% and 2.5% of the value of the property.

3.      Stamp duty costs

Did you know that since March 2012 there’s no longer any stamp duty relief if you are a first time buyer? You will need to shell out the money for the paperwork involved in changing the ownership of the property. This is going to cost you a tidy sum, so you might as well make improvements to your current residence.

4.      Moving expenses

Having your belongings and household goods moved to the new location is going to cost a lot of money. Anywhere within a 12 to 15-mile radius, the removal costs can go up to £1,500, which is a good 10% or more of the total costs involved in moving to a new home.

5.      More beneficial to stay put

Making the necessary improvements and staying in your current home may make better sense than going for an exchange for a bigger home. It is cheaper to build an extra room than to buy a roomier house.

6.      Strange location

Moving to a new location can certainly make you feel like a stranger for quite some time. Moreover, you’ll have to find everything new – school for the kids, a good grocer, new gym for working out, a new maid etc. Hence, think twice before deciding to sell and move.

7.      Creating a new mortgage

Buying a new property involves going through all the paperwork and hassles all over again. There are umpteen documents you need to produce while drawing up a new mortgage, and the appraisal charges and processing charges are going to cost a lot of money for a second time.

8.      Paying property managing agency fees

It is quite alright if you are able to sell your current home on your own, which rarely happens. If you engage the services of a property managing agency for selling your house and for buying a new one, you’ll have to spend a lot of money on fees.

9.      Create a new garden

If you are a garden lover like most people, you will have to start from scratch. You know how difficult it is to grow a beautiful lawn, and the time involved. When moving into a new home you’ll have to spend a lot of time and money for creating a new garden.

10.   Repairs and refurbishing

While the new house may look fine on first looks, you’ll learn that there are lots of small repairs and some refurbishing work involved only after moving in. This can take up a lot of your time and money, and it will be quite a while before you settle down.

5 Common Mistakes made while Investing in a Home

Hard earned money needs to be invested wisely, especially when you are investing in a property; you need to take certain precautions. Investing in property is a major decision, so what’s the point in complicating it further by buying the wrong property? Here are 5 common mistakes that people make while investing in buying a home, and how they should avoid them:

1.      Not consulting experts

Most people try to save small money they need to pay as consultation fees and avoid taking professional advice while buying a property. It is better to go through a property management agency and pay a small price so that everything is in order. They will organize all the complicated paperwork and help with the registration and other formalities. Additionally, most property management agencies help find good tenants and will keep advising you on the current market trends in the property sector.

2.      Failing to look after the tenant

It is not enough if you enter into an agreement with a tenant and allow him or her to move in. You need to treat your tenant well and provide the basic needs for the home. Ensure that the water supply and power supply are uninterrupted (pay your taxes promptly) only then will the tenant be happy. Remember that the tenant is going to talk about you, and it’s your reputation as a landlord that is at stake. If a good word is spread about you, there won’t be any problems getting new tenants.

3.      Fixing exorbitant rent

Just because you need to pay taxes and mortgage payments it doesn’t mean that you can fix rents on the higher side. As it is the lettings market is almost saturated and one needs to be realistic while fixing rents. Fixing the price too high may not attract tenants, and keeping your property vacant for a couple of months will put you in a financial mess.  Fix a fair rent, keeping in mind the long term benefits and ensure that your property never remains vacant, or at least not for more than a week.

4.      Maintenance and upkeep

Do not neglect regular maintenance and upkeep of your property. Trying to save money on property maintenance is going to affect you badly. Not only is the life of the property reduced, an unkempt looking property will certainly not attract good tenants. The longer you put off maintenance tasks, the worse the property gets to look. Hence, get small repairs and maintenance tasks done on time.

5.      Proper advertisement and marketing

It is not enough to own a good piece of property. You need to let people know that there is an excellent property to let, and there are many ways to do this. Apart from spreading the word through agents, you should also advertise online, in the local newspapers and on public bulletin boards. This will ensure that you get a good tenant quickly, and prevent voids that

Do you make these mistakes when investing in property?

Now that you have decided to invest in property, whether to move into or if you are going to buy-to-let to make an extra quid, you need to watch for some common mistakes people make. It is true that property prices are rising and there are more tenants than ever before. However, it is not a bed of roses, as you may have imagined.  Here are some pointers that should help:

Lying vacant for too long?

You can’t afford to invest tens of thousands of pounds in a property and keep it vacant for too long. The property can fetch you decent returns only if you have some tenants occupying your property. Keep in mind that you need to pay your mortgage EMIs regularly irrespective of whether the property is fetching rent or not. Hence make sure you avoid voids while letting out, and make sure you have all the dotted lines in place while drawing up the tenant agreement. Don’t let it out to tenants who want it for a short period, look for tenants who will hang on for longer.

Be informed about tax liabilities

As a new landlord you may not be aware that you need to pay tax on the income you receive as rent from tenants occupying your property. If you are making more than £10,600, which is the threshold for personal allowance, be informed that you need to pay taxes, failing which you could be fined heavily, and worse, you can be sentenced to prison. Moreover, landlords need to remain updated as the tax structures keep changing.  Since April 2017, interest relief on mortgage interest tax is to be reduced to 20 percent (maximum), resulting in additional burden on landlords.

Look out for the hidden costs

Although buying property to let makes sense as it is a sound investment, you’ll have to shell out money initially if you want to make money in the long run. There are the mortgage repayments and letting agents’ fees and some other expenses that you hadn’t planned for. There’s building insurance premium, and payments to be made for annual checks for gas safety certification. Also, as a landlord you are expected to maintain the property in a fairly good condition.

Choose the best location

Just because it is a cheap and attractive deal, some people choose the wrong location. It could be a location that has a dubious reputation, or far away from civilization. In such cases, you can’t find a tenant that easily, even if you do, you won’t be able to charge a decent rent. It is quite difficult to predict how a locality will turn out in the future; hence it is better to go for one that is good in all aspects, in spite of the steep prices.

Increase in Property Prices in the UK after Brexit

It is not just the immigrants who were affected by Brexit, though most of them feared total displacement. A more serious concern is the possibility of drop in property prices after the mandate of the people that decided that the UK will exit from the European Union. However, in reality there have been no changes as Brexit has had little or no effect on property prices.

With homebuyers moving as they take up new jobs, or because some of the families are getting bigger, demand for property is set to remain firm and so are the property prices. The actual situation is that demand exceeds supply, and with not enough new houses being built, property values are set to peak in most areas, though at a slower pace, when compared to earlier trends.

Some other reasons throwing a spanner in the works include sluggish wage rates and the reluctance banks are showing in granting loans due to stiff mortgage regulations. Although this is a dampener as far as property prices are concerned, they won’t fall any further as well.

With Brexit negotiations still going on, and in case they turn positive, there should be some buoyancy in the economy, which could boost property prices at a faster rate than imagined by experts. Reports from the Royal Institution of Chartered Surveyors indicate that the property market is indeed a bit languid, thanks to the record low number of homes on the block. With hardly any takers, and uncertainty over the final outcome of Brexit, people are putting off property purchases for now.

According to Savills’ forecast, there could be a 15% drop in property prices come 2018, as compared to prices in 2017. However, this alone cannot cause the property prices to fall. Savills is also of the view that property prices are set to be sluggish until the end of this year, however the silver cloud for landlords is that prices could gradually rise by 12 to 13% over a 5-year period, which is some consolation.

On the whole, the timing of Article 50 seems to have been a coincidence with an all-round slowing down in the property market in several parts of London and some areas south of the U.K. While the north of England is witnessing soaring house prices (after a dull phase) the southern part of the country is yet to catch up. Yet another spoilsport seems to be the stamp duty system that has been subject to several adverse changes, and has probably pushed Brexit to the background.

What does a Tenant Screening Report mean to you?

Tenant screening reports can serve as a guide for you to find the right tenant for your property. Comprising a detailed analysis of applicants' credit reports, criminal records, references, and other important criteria, tenant screening reports help you in gaining a good idea about your applicants. Let us see what each criterion in the tenant screening report would mean to you.

Credit Report:

A detailed credit report, generated by database search through secure Websites, are a good indicator of the applicant's finances. A good credit score ensures that the applicant's finances are stable and that they would be able to make rent on time.

Rental References:

To get a better perspective of the applicant's attitude during tenancy, it is wise to enquire their previous landlords. Has the applicant been a good neighbour? Have they maintained their previous property properly? These are some of the questions that need affirmative answers for the applicant to be considered optimal. Any previous evictions are a strict no!

Eviction Records Search:

As stated in the previous section, any evidence of the applicant being evicted previously needs to be taken seriously. The reasons for eviction may vary, right from irregular rental payments to improper maintenance of property, but the very record of eviction must get your alarm ringing. You don't want to be stuck with a tenant with a track record of being unpleasant.

Criminal Records Search:

This is an essential part of the tenant screening process, as it ensures that neither you nor the neighbours of your property need to deal with a tenant with a criminal record. Of course, people change, but a search of criminal records can help you know if the applicant is hiding a dark past from you.

Sex Offender Registry Search:

The importance of this search cannot be ignored, as a tenant who is on the sex offender registry would be objectionable for neighbours, especially families with children.

Employment Verification:

Sometimes, applicants don't state their employment details on the application form truthfully, to stand a better chance of qualifying for renting/leasing your property. A thorough verification with the applicant's employer is vital in knowing if the applicant is in a solid employment bracket. Also, some applicants may overstate their income in the application, so it is prudent to verify it with the employer, along with the applicant's attitude at the workplace and the term of their job; if the applicant is in a trial/notice period or is working on a contract basis, issues may arise in the future with rental payments.

Based on the above criteria, as you can see, a tenant screening report can give you a good idea of the applicants' trustworthiness and character, thereby ensuring that you select the applicant who suitable for your property.