Is mixed use the answer?

As a landlord you should already be familiar with the planned tax changes that are being gradually introduced between this year and 2020 and you might rightly be thinking about your options.

You may be aware that in some situations it can be more tax efficient to transfer your property or properties into a limited company (since you would potentially only pay corporation tax at 20% depending on how much money you took out of the company). But have you considered mixed-use such as a shop with a flat or two above?

Many investors have begun eyeing up mixed use premises as potential alternatives to residential buy to let and the reason for this is quite simply that such properties are exempt from the new tax rules meaning that there is potential to realise a larger margin – if you play your cards right.

Mixed use property incurs commercial property stamp duty rather than the now hefty residential buy to let stamp duty and if you already own residential property it might not be a bad idea to diversify your portfolio. In addition you can also claim tax relief for expenses incurred – including mortgage rate interest relief.

There are further advantage too – commercial tenants typically pick up the costs of maintenance and insurance and the leases tend to be longer meaning there is potentially less turnover of tenants. However you should also consider that void periods tend to longer and depending on where and what your commercial or mixed use premises is, you can be subject to the vagaries of the high street and local business environment.

Whilst not a panacea for the changing market place, it may well be worth keeping the idea of mixed use on your radar and keeping an eye out for opportunities that make good sense for your personal situation.

 

Is your agent on the ball?

Way back in 2014, the Advertising Standards Authority made a ruling that all property agents must display their prices as inclusive of VAT and ever since then, this has been the current advice from the Committee of Advertising Practice (CAP).

However, take a look around at some of our competitor’s advertising and you will see that there are still a few who appear to have not got the memo!

The role of a good agent, particularly a letting agent, is that of a paralegal one. There is an ever changing sea of regulation and legal obligations that landlords and by association, letting agents, must keep up to date with. An agent who is not on the ball can ultimately be exposing you, the landlord, to litigation from a number of different angles.

Of course this is not to say that you as the landlord would be held responsible for an agent failing to include VAT when advertising their fees but when you see an agent breaching regulation seemingly obliviously, it does beg the question – what else are they missing?

So please note,  if you are looking for an estate agent to sell or let your property and you are comparing prices, don’t forget that whilst the price you see should be the price that you pay, in some cases it is not!

 

 

Inventories – should they include photos?

Article reproduced from the March newsletter of the Property Redress Scheme.

All of our managed properties @ Tidmans benefit from a third party inventory which include an average of approximately 150 photographs per report, each one time stamped to avoid any confusion at the end of tenancies.

Even in this digital age, where social media and the way in which we receive information has made visual content appear more important than ever before, the use of photographs in inventory reports remains a somewhat contentious issue.

First and foremost, it’s important to remind ourselves that inventories are there to protect the interests of both landlords and tenants, helping with negotiation at the end of the tenancy and minimising the risk of a deposit dispute.  Therefore, in my opinion and experience, anything which helps provide hard evidence to support a claim made by either party is beneficial.

However, it may surprise many that there are still landlords, managing agents and inventory clerks, who choose not to use photographs in their inventories.  Maybe because they have never had any issue with their inventories, so feel no need to change their practice.

The question then is, does it matter who prepares the inventory and if they don’t include photographs, does it mean they have no value in a deposit dispute referred to an adjudicator?

The simple answer is no. The tenant’s signature in the case of an inventory compiled by a landlord or agent is essential to demonstrate the tenant has seen and had the opportunity to make any comment on the report and then it’s all about the level of written detail which is fundamental. All too often, we see check-in and check-out inventories which follow a simple tick-box format to describe the property’s condition and standard of cleanliness. Ticking a box to rate the condition of a carpet from poor to excellent, for example, is not descriptive enough. What is considered “excellent” in one person’s opinion, can be quite different to another person.

Now consider a report which says the carpets have been professionally cleaned prior to the commencement of the tenancy (receipt provided in evidence) and notes that the lounge carpet, for example, has a burn mark. This is supported by a high-quality photograph displaying the position and size of the defect.  Signed and dated by both landlord and tenant, this then provides unequivocal evidence of the condition of that carpet at the start of the tenancy.  Having this detail makes it easy to make comparisons and note any differences which have occurred during the tenancy, and can be very effective when negotiating on any deduction at the end of the tenancy.

There are, of course, limitations to the use of photographs. They shouldn’t be used as a replacement to a written report but rather to substantiate the written detail. Photos must be dated, particularly where not embedded into a report, otherwise they cannot be verified and should, where relevant, represent scale and indicate location.  Although rare, we have had cases where landlords have sent stand-alone dated photographs of damage which are not from the property they are claiming for.

What does a good inventory look like?

A good inventory will contain a comprehensive list of its contents, a thorough description of the condition and damage, supported by photographs, as well as the standard of cleanliness in each area. There are many levels in which a fridge or oven could be considered “dirty”; photos help show the extent of this, and give depth to information.

There are also some fantastic Apps available to the industry designed to help which the implementation of a robust check-in and check-out process, producing a comprehensive inventory. These Apps are so well designed and where used properly, they are found they help to substantially reduce the number of disputes.

Remember, it really is true that “the devil is in the detail” and without it, landlords expose themselves to the risks of losing a deposit dispute.

Guarantors for overseas students

At this time of year we receive many enquiries from overseas students interested in renting a student property for the forthcoming academic year. As we require a UK based guarantor for each student we recognise that this can cause a problem for many overseas students and so we would like to highlight the services of an innovative offering from a company called ‘Housing Hand’ who specialise in helping those students who would otherwise struggle to meet our requirements.

If you think that you might benefit from such a service – head over to their page and check them out https://www.housinghand.co.uk/. If you need further advice – please feel free to call the Tidmans office on 01326 218 039 and discuss your situation.

 

Bridging the gap

Bridging The Gap

Is a short term residential winter let right for you?

Buying and renting a holiday home can be a great long-term financial decision and of course one of the key considerations for most owners is that of maximising the return.

Clearly, the lion’s share of the average holiday home’s bookings will come in between Easter and the October half term but come the winter month’s bookings can drop off. Therefore, for many holiday home owners the option of a short term (up to 6 months) winter let can make good financial sense. With this in mind, we are delighted to have teamed up with Cornish Traditional Cottages to offer a great rate on short term residential letting and management to all customers of CTC who feel that they would benefit from such a service.

So what sort of tenant might you expect would be interested in a short term let? Clearly there will be a whole range of scenarios out there but more often than not the average short term tenant is in a period of transition, for example starting a new job, new to the area and wants to take some time to decide where they wish to settle. Or very often the tenant is between house sales – they might have sold their own home and in the process of buying another but need somewhere in the interim.

At Tidmans, we already let and manage a large number of winter lets and we regularly house a wide variety of quality tenants from medical staff and MOD workers to artists and writers looking for some winter inspiration away from home.

Of course we reference each applicant to ensure that they are likely to make a good tenant and our checks include credit, employment and landlord references.

Our fully managed service includes professional detailed inventory’s at the start of each new tenancy, regular inspections to ensure that all is well, online portal access for all landlords allowing you to view tenancy details including live financial statements and above all, great personal service!

So if you think a winter let might make sense for your holiday home we would be delighted to hear from you and will only be too happy to discuss our services in greater detail.

bridge gap

Why a vote for Labour could spell disaster for the PRS.

The forthcoming general election is nearly upon us and along with it comes an almost unprecedented level of uncertainty over which political party, or parties, will win power on May 7th.  Whilst an outright majority seems increasingly unlikely, it is the parties of the Conservatives or Labour that will hold either absolute power or the balance of power within a coalition. So, as they jostle for attention and ply us with their latest policies designed to win our vote, who should you as a landlord or tenant be voting for?

With the introduction of the Housing Act in 1988, Margaret Thatcher’s Conservative government effectively invented the Private Rented Sector (PRS) as we know it today. By providing fertile ground for private landlords the sector has thrived. With very light regulatory control it has grown under each successive government to the present day and currently accounts for 17% of all households.

An argument can be made that in its modern guise the PRS offers tenants and landlords alike a flexible approach to suit a variety of housing scenarios. Yes, you sometimes hear stories of rogue landlords or agents, but they are the exception to an otherwise stable, functioning market place. Yes, it can be argued that rents are high and many people struggle with the cost of living however did you know that recent data from Countrywide found that the cost of renting relative to buying is at its lowest since 2006? Someone renting in the PRS is actually better off, pound for pound in terms of their living costs than the average UK homeowner.

The modern day Conservative party favours the status quo and the only potential threat worth considering from a landlords perspective is David Cameron’s pledge to ‘liberate’ those who are ‘trapped’ in rented properties by introducing schemes such as ‘Help to Buy’ which is designed to get people on the housing ladder with only a 5% deposit – ultimately this move may see a decline in the number of young professionals in the market. This of course would have a positive effect if you are a tenant as a reduction in demand should see a reduction in rent prices but overall the policy is unlikely to have any significant impact.

Whilst the PRS grew under both Tony Blair’s and Gordon Brown’s consecutive Labour governments, Ed Milliband has made it clear that his party wants reform, and his proposals are controversial.

Miliband’s headline reforms include the creation of 3 year tenancies, aimed at offering greater security for tenants by making it difficult for a landlord to reclaim the property within this time period. Furthermore, landlords will be permitted only limited rent increases in line with inflation. He also wants to scrap fees that letting agents charge to tenants and to limit the amount of deposit that can be held against the property.

So how will these reforms effect the PRS?  In my experience of renting hundreds of properties over the last few years, 9 times out of 10 it is the tenant that moves on, and usually after a relatively short period of time i.e. under 3 years. Yes of course it can be frustrating when a landlord decides that they want their property back for whatever reason but it works both ways. Most landlords want a secure long term tenant and without the hassle of searching for and vetting new tenants. Frequent breaks between tenancies can seriously compromise a landlord’s ability to make the financials of renting a house stack up. And let’s not forget that the landlord is the one making the biggest commitment, who has a property to maintain and usually a mortgage to pay. Limiting the landlord’s ability to raise the rent may seem like a good idea for tenants but if a rise in interest rates means that your landlord struggles to cover the mortgage with the rent payments, he or she may decide that they have no option but to sell up anyway.

Scrapping letting agent fees may seem like a win for the tenant, but this cost will need to be absorbed somewhere and if it is the landlord that covers this cost, he or she may look to charge a higher rent than they might otherwise have done.

The real problem with the PRS is not rogue landlords or agents, or high deposits (which are of course refundable provided there is no legitimate claim on them) or short term tenancies – it is an undersupply of housing stock. It’s nothing other than basic economics. The trouble with Labours policy is that it will have precisely the opposite effect of its intention. Yes Labour does also plan to build new homes and this is at least a nod to the real issue, but ultimately their reforms will cause significantly more harm than good. In fact the Resident Landlords Association (RLA) estimates that up to two thirds of UK landlords will leave the PRS if labour gains power and of course basic economics dictates that a reduction in supply will lead to an increase in price.

By making the industry less attractive to private landlords there can only be one effect – an ultimate shortage of housing stock resulting in a further increase in the cost of renting. Labours intentions may be honourable, but their consequences could spell disaster for both landlords and tenants alike.

 

Robin Tidman is the owner and managing director of Tidmans Property Services, a specialist property letting and management company based in Falmouth. www.tidmans.co.uk 01326 218 039

 

 

Cannabis warning for landlords

With rental properties being used as cannabis farms becoming a more common occurrence, landlords are being warned that their insurance may not cover them for any damage caused.

Figures show that 7,865 cannabis farms were identified nationally in 2011 and 2012 – a 15% increase from 2009 and 2010.

Richard Burgess from landlord insurance specialist Cover4LetProperty.co.uk said: “Type ‘cannabis farms landlord’ into Google and you’ll see hundreds of stories of landlords facing huge repair bills, having unwittingly let their property to tenants who have then turned it in to a cannabis farm

“Sadly, most landlords assume that this type of damage – which can include ripping up floor boards, knocking through walls and creating an indoor greenhouse environment – is covered by their landlords insurance, particularly if they have the ‘malicious damage by tenant’ element of cover.

“Not all insurers provide malicious damage by tenant cover as part of a landlord insurance policy, though at Cover4LetProperty, we do. What landlords need to understand however, is that while all of our insurers will consider a cultivation of cannabis claim under the malicious damage by tenant section, some will have limits, typically up to £5,000. This means that any repairs can still end up costing a landlord tens of thousands of pounds.

“Finally, part of their contract with their insurer is that they – or a representative – makes regular, logged, checks on the property, including sheds. So, the signs of cannabis growing would be clear to see at an early stage. Ignorance is no defence.”

Burgess advises landlords to ensure their properties are regularly visited as well as carrying out the usual tenant checks before letting out a property. Warning signs of a suspect tenant include those looking to pay six months’ rent upfront; a pointed interest in the power supplies to the property; and the reasons for renting, such as a new job, not tying up with their references and other paperwork.

Tidmans say: “Whilst one can never 100% guard against such an incident, our referencing processes and, when providing managed services, regular contact  and inspections will make the possibility remote.”

 

The Landlord’s Energy Saving Allowance (LESA)

Energy efficiency is an issue that is having an increasing effect upon all of us as a society and the trend is set to continue for a long time to come. Particularly here in Britain, our ageing production facilities coupled with an increasing demand is leading towards the fabled ‘energy gap’ where demand may soon outstrip supply and energy efficiency will become an even more relevant issue.

In order to understand the demand side of energy in Europe, the European Directive on the Energy Performance of Buildings  (EPBD) saw the introduction of the much maligned Energy Performance Certificate (EPC), which sets out to measure every single property in the European Union against a benchmark of energy efficiency.  While many people have questioned the effectiveness of having an EPC in place, the real value of these assessments is in the information as a collective data set which allows policy makers to understand the existing stock and significantly how much energy is being potentially wasted through poorly equipped properties. Then, through a series of incentives (such as the poorly received Green Deal), the idea is to improve existing stock on a large scale thereby having a significant impact on energy demand.

So how does this affect landlords?

Under the UK’s interpretation of the EPBD, landlords will not, after 2015, be able to legally rent out a property if it’s energy rating is below ‘E’, and in Cornwall there are a lot of properties that will require some degree of improvement before meeting this measure.

Fear not, improvements are not necessarily expensive, in fact some of the largest gains can be made with relatively low cost investments.  The government also offers some interesting incentives available to landlords who wish to improve efficiency in their rental portfolios and this brings us to what is know as the Landlord’s Energy Saving Allowance  (LESA).

LESA is available now and essentially it allows landlords to claim up to £1500 a year back against the cost of buying and installing a range of energy efficiency products for rental properties.

These products include:

– cavity wall and loft insulation

– solid wall insulation

– draught-proofing

– hot water system insulation

and;

– floor insulation.

 

You can even claim this allowance on properties that you rent out overseas, providing that you pay tax in the UK on the profits received.

For further information give Tidmans a call or speak to your accountant. As a responsible letting agent, Tidmans can provide specific advice relating to your property and we offer EPCs as part of our commitment to provide landlords with an outstanding comprehensive service. We also produce these in house reducing the cost to you.

If you are a landlord looking for a letting agent that offers you more, give us a call, we’d love to have a chat about your requirements.

 

 

 

 

 

 

Letting agents and immigration policy

Letting agents and Estate agents will, on behalf of the landlord, soon have to vet potential tenants under new immigration laws announced in yesterday’s Queen’s Speech.

The Queens speech, which is a kind of Government ‘to-do’ list for the coming parliamentary year revealed a new legal responsibility for private landlords to ensure that they check the immigration status of potential tenants, with potentially massive (thousands of pounds) fines for those who do not comply.

The policy has already attracted heavy criticism from the letting industry with many people arguing that it is not the place of letting agents and estate agents to enforce UK immigration policy.

Although the specific details have yet to be released, many argue that it is entirely feasible that the net result of mandatory tenant immigration checks will be an increase in the end cost to the tenant.

Follow us on Twitter @tidmansproperty to keep up to date with the latest letting industry news.

Tidmans specialise in property management in Cornwall and are letting agents for Falmouth, Truro, Helston and all other areas of mid and west Cornwall. Call us for a no obligation rental appraisal 01326 218 039.

 

 

 

 

New court ruling on rent collection

There has, in the past, been some ambiguity relating to the legal position of a tenant who pays more than one month’s rent in advance but now, thanks to a new ruling, rent paid in advance cannot be considered to be a deposit and therefore it does not need to be protected in the way that a normal deposit does.

This is the latest ruling in the long-running case of Johnson v Old.

In this case the landlord required that the tenant pay 6 months rent in advance due to a negative credit history, which the tenant duly did. The tenant also paid a standard deposit which was properly protected using a recognised scheme.

A few months later, when the tenancy had become periodic, the tenant fell into arrears and the landlord decided to issue a Section 21 notice applying for possession. Unfortunately, the tenant decided to challenge the landlord and argued that the rent paid in advance should have been treated as a deposit and therefore protected as such.

In the original ruling at Brighton County Court, deputy district judge DJ Collins ruled in favour of the tenant and said the advance rent should have been protected in the same way as a deposit.

This decision was overturned on appeal, but that verdict too was granted an appeal, which was ruled on this week in favour of the landlord.

This latest ruling represents a victory for common sense and clears up what might have been some extremely costly confusion for landlords and letting agents alike. It also demonstrates the importance of ensuring that your letting agent is up to speed with the latest news and developments within the industry. If you are looking for a letting agent in Cornwall that can offer you practical help and advice on the latest issues effecting the rental market give Tidmans a call on 01326 218 039.