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Conservative Peer Attacks Tax Hikes for Landlords

Published On: October 17, 2016 at 9:18 am

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A senior Conservative peer has accused the former Chancellor, George Osborne, of exacerbating the housing crisis through his tax hikes for landlords.

Conservative Peer Attacks Tax Hikes for Landlords

Conservative Peer Attacks Tax Hikes for Landlords

Lord Flight, who previously served as the Shadow Chief Secretary to the Treasury, has written an article on the Residential Landlords Association (RLA) website to warn all those in the sector that tax hikes for landlords will “drive up rents” and “drive out investment in the sector”, at a time when 1.8m new homes to rent are needed by 2025.

Lord Flight referred specifically to decisions to tax landlords on their income rather than profit and the higher rate of Stamp Duty on additional homes.

In his article, Lord Flight highlights evidence from the London School of Economics that challenges the previous Government’s claims that landlords are buying homes that first time buyers could have purchased. He also points out statements by the Institute for Fiscal Studies that landlords are taxed more heavily than homeowners.

The peer calls on landlords to lobby their local MPs, informing them of the damaging impact that the tax changes will have on the supply of affordable homes to rent, and encourage them to seek changes in the new Chancellor’s Autumn Statement on 23rd November.

Recently, the Society of Licensed Conveyancers called on the Chancellor, Philip Hammond, to scrap Osborne’s Stamp Duty reforms in next month’s Autumn Statement.

Commenting on Lord Flight’s article, the Chairman of the RLA, Alan Ward, says: “Lord Flight’s analysis is correct. When we need almost two million more homes to rent by 2025, recent tax changes will choke off investment, increase rents and make it more difficult for tenants to save for a home of their own.

“The new Chancellor has an important opportunity next month to correct the previous Government’s changes to the way the rented sector is taxed. We call on him to seize this opportunity with both hands.”

Worryingly, landlords have revealed that the changes to mortgage interest tax relief are most likely to discourage them from investing further in the property market.

Which tax hikes for landlords are you most concerned about?

Tenant Group Supports New Tax Changes for Landlords

Published On: October 11, 2016 at 8:32 am

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Generation Rent, the tenant lobby group, has spoken out in support of new tax changes for landlords.

The comment arrives following a call from the Royal Institution of Chartered Surveyors (RICS) to scrap the additional Stamp Duty charge on second homes and two landlords’ fight in court to repeal the forthcoming mortgage interest tax relief reduction.

Tenant Group Supports New Tax Changes for Landlords

Tenant Group Supports New Tax Changes for Landlords

Disappointingly for property investors, the landlords lost their challenge on Thursday. This means that if all goes to plan, the amount of tax relief that landlords can claim on mortgage interest will be cut to the basic rate from April 2017. The Government has provided a guide on how the change will affect you: /government-guide-tax-relief-changes-residential-landlords/

However, the Director of Generation Rent, Betsy Dillner, believes that the tax system has favoured landlords for too long, and the new tax changes should help first time buyers get onto the property ladder.

“For too long, the tax system has favoured people who bought homes to make a profit over people who just wanted somewhere to live,” she insists. “The Government’s recent tax changes should help to dampen speculation and give an advantage to people who have to date been shut out of the housing market.”

She continues: “These are long-term measures whose success depends on house prices slowing down. Warnings about the impact on the overall supply of private rented housing are premature, and clouded by the result of the EU referendum.

“Despite the prospect of mortgage interest tax relief being phased out for landlords paying the higher rate of income tax, the number of purchases with a buy-to-let mortgage increased by 14% in the 12 months since George Osborne announced the policy in July 2015.

“And despite the introduction of the surcharge in April, and the subsequent dip in sales to landlords, Stamp Duty receipts increased in the second quarter of the year, from £1.75 billion to £1.98 billion.”

She concludes: “As important as it is to dismantle the damaging culture of property speculation, tax is only one part of the solution to the housing crisis. We need to build more homes for low-income households, and the tax reforms mean there’s a new source of revenue for this. We also need to improve protections for tenants whose lack of rights mean they face a high risk of eviction.”

Despite Generation Rent’s beliefs, industry professionals have supported RICS’s calls, claiming that the new tax changes for landlords will hinder investment in the private rental sector, and thus make rental accommodation more expensive for tenants.

Additionally, the Residential Landlords Association warns that tenants will face rent rises as a result of the new taxes.

Government urged to scrap tax to boost supply

Published On: October 7, 2016 at 12:07 pm

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The Government is being called upon to take new steps to combat the shortage of home in the UK by giving landowners and developers incentives to increase supply.

This includes building more affordable homes through the introduction of temporary capital taxation reliefs.

Proposal

The new proposal has been forwarded by London-based chartered accountants Blick Rothenberg LLP and follows a warning from RICS over the shortage of homes to rent.

Frank Nash, partner at Blick Rothenberg, commented: ‘RICS are pushing to loosen tax rules on the buy-to-let market and go even further by suggesting pension fund could be engaged to provide large scale housing schemes. This added pressure puts the Government in a difficult position given their pledge to ensure younger generations become owner-occupiers rather than renters.’[1]

‘We could use the tax system to boost the supply of affordable housing by temporarily reducing capital gains tax, corporation tax and stamp duty land tax on development land where affordable housing quota is met. House builders and landowners are motivated to achieve competitive returns and tax savings would incentivise them to work with local authorities and meet their affordable housing targets without degrading the competitive returns provided through private house sales,’ he added.[1]

Government urged to scrap tax to boost supply

Government urged to scrap tax to boost supply

 

Support

In the week that the Government said it would assist in the construction of additional homes for people to buy, Mr Nash added: ‘There are too many prospective homeowners chasing too few properties and competing with the private rental sector.’[1]

‘Temporary tax exemptions on the disposal of land for housing should inject a new supply dimension into the housing market, but these reliefs should be conditional upon achieving a minimum percentage of affordable homes within a give time frame, in line with each local authority’s own affordable housing targets,’ Nash concluded.[1]

[1] https://www.propertyinvestortoday.co.uk/breaking-news/2016/10/government-urged-to-scrap-tax-on-development-land-to-boost-housing-supply

 

No Judicial Review of Section 24 Rules for Landlords

Published On: October 7, 2016 at 8:46 am

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Yesterday, a judge ruled against a judicial review of forthcoming section 24 rules for landlords.

Landlords Steve Bolton and Chris Cooper had joined forces to challenge the measure, which was announced in last year’s summer Budget. Chancellor George Osborne introduced the plan to restrict the amount of mortgage interest that buy-to-let landlords can offset against tax.

The Government has provided a guide on how the new tax measures, set to be gradually phased in from April 2017, will affect landlords: /government-guide-tax-relief-changes-residential-landlords/

Bolton and Cooper, who are thought to be unlikely to appeal the ruling, said they were “outraged” by the judge’s decision.

However, they added that although their legal challenge, which was crowdfunded by around £180,000, has come to an end, they will not give up their fight.

Without a judicial review or Government U-turn, the restriction on mortgage interest tax relief to the basic rate (20%) will be phased in from April next year.

Bolton and Cooper argue that the measure means that most landlords will pay extra tax, of 20% or more, on their mortgage interest. They warn that the tax landlords will have to pay could be bigger than their profit, leaving them with losses.

They insist that the real losers of the tax change will be tenants, as many landlords will be forced to put rents up or leave the market.

At yesterday’s hearing at the Royal Courts of Justice in London, Bolton and Cooper were represented by Omnia Strategy, led by Cherie Blair, whose own family is thought to own at least ten houses and 27 flats.

Blair’s legal team argued that section 24 is unlawful on the grounds that the restriction on landlords’ ability to deduct finance costs as a business expense may constitute an illegal grant of state aid to corporate landlords and owners of commercially let holiday homes, and may breach the European Convention on Human Rights.

No Judicial Review of Section 24 Rules for Landlords

No Judicial Review of Section 24 Rules for Landlords

In court, Blair was initially applauded from the public gallery, when she said that the Government was unfairly penalising individual buy-to-let landlords by “singling them out”, while allowing others, such as limited company landlords, to keep their tax perks.

However, Timothy Brennan QC, representing HM Revenue & Customs and the Treasury, said the claim was arguable: “There are cases which justify the courts looking at them in the public interest. This is not one of them.”

After the hearing, Blair said: “The court’s decision that our clients’ legal challenge should not proceed is very disappointing. Steve and Chris, and many others, have dedicated a lot of time and energy into putting forward the best case possible.

“We know the case has been supported and followed with interest by a large number of individual landlords. Many of these landlords now face challenging times ahead.”

She added: “From the outset, the legal process was just one aspect of our clients’ fight against this unfair measure. Together with their impressive and growing coalition, they will continue to engage with the Government, and the legal team wishes them every success.”

In a joint statement, Bolton and Cooper said: “We are outraged by the court’s decision. It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of section 24.

“From April 2017, the negative impact of this previously failed tax experiment from Ireland, where rents increased by 50% over a three-year period, will be felt far and wide. Sadly, it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.

“For many, it will also mean the loss of their homes, because vast numbers of landlords will be forced to exit the market. Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.”

They look ahead: “Now that the legal route has run its course, we will be focusing 100% of our attention and resources on taking our case more forcefully, more powerfully and more directly right to the heart of the Government.

“Our goal is simple: to abolish this tax or to remove the retrospective nature of it. We will be launching a range of lobbying, media and grassroots activism measures over the coming days and weeks. We will also be encouraging all of our landlords to write to their tenants if they have to increase their rents or sell up, clearly explaining that it is this Conservative tax policy that has forced them into this situation.”

Landlord groups have also spoken out in support of the cause.

The Chief Executive of the National Landlords Association, Richard Lambert, responds to the court ruling: “This decision is ultimately disappointing, not just for landlords, but for the tenants who will see their rents rise as a consequence of the changes to landlord taxation.

“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the courts would be prepared at least to listen to the arguments.

“We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be dramatic change to the ability of hard-working people to provide homes for others.”

David Smith, the Policy Director for the Residential Landlords Association, also comments: “Having provided support for this case, the RLA is disappointed it will not progress to a full judicial review.

“The campaign to seek changes that will address the more difficult aspects of recent tax reforms to the private rented sector must now focus on a political path.

“The Autumn Statement next month provides an important opportunity for the Government to make changes that will support the development of the new homes to rent the country desperately needs.

“The RLA has already met with Treasury officials to discuss the issue, and it will continue to lobby for changes that are good for tenants and landlords, whilst recognising the Government’s limited financial room for manoeuvre.”

Landlords Could Take Council to Ombudsman over Maladministration

Published On: October 6, 2016 at 9:48 am

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A group of landlords in Bristol could take their council to the ombudsman over maladministration regarding a proposed selective licensing scheme.

Following the success of the Somerset Property Network this summer, a group of landlords met in Bristol to discuss the way forward on selective licensing issues last week.

On the eve of the Eastville and St George licensing application deadline, the buy-to-let landlords got together to discuss their collective belief that the process of the initial licensing consultation was careless and unnecessary.

Back in August, the Somerset Property Network was formed after a group of landlords teamed up to challenge North Somerset Council’s proposed selective licensing scheme for Weston-super-Mare.

The group threatened to take the council to judicial review if the plans went ahead. At the start of September, it was announced that the Somerset Property Network had overthrown the council’s proposals.

Although the deadline for judicial review has passed for the Eastville and St George scheme – it must be put in within three months of the scheme being approved – there is still the option of taking Bristol City Council to the ombudsman over maladministration.

This came to light after Bristol landlord Anne Pargeter told her story at last week’s meeting:

“I believe that the whole thing was a shambles from the very beginning; the statistics they’ve come out with, how the consultation said the areas of Eastville and St George are in the lowest 10% for deprivation, and yet their own stats on the Bristol Council website on multiple deprivation figures state that Eastville and St George are in the top 13th and 15th, and not in the lowest 10% at all.

“I looked at this and kept thinking there is something really, really wrong here, so when I got the cabinet meeting papers of how they had come to the decision of how they were going to approve this scheme for Eastville and St George, they used three points of evidence. I discussed this with Dave Collis [Bristol City Council’s Private Housing Licensing Manager] last week.

Landlords Could Take Council to Ombudsman over Maladministration

Landlords Could Take Council to Ombudsman over Maladministration

“One, the housing condition survey of 2011. About 110 pages long, it talks about all the private housing in Bristol, but doesn’t distinguish between private housing and private rented accommodation, so really there were no statistics that they could use, because there weren’t any other than shaded maps for the whole of private housing in Eastville and St George. Besides, rented accommodation is only 21% of total private accommodation anyway.

“Two, the 427 complaints. I don’t know whether you’ve read the consultation, but for the year 2014/15, 427 complaints were received by the council for Eastville and St George, and, according to the council, this cabinet report was 24% of the total complaints in Bristol. When I mentioned this to Mr. Collis, he said: ‘That’s not true, that’s not true at all.’ I said: ‘I’m sorry, I’ve got your cabinet report in front of me, and that’s what is actually written down here.’ Collis replied: ‘Oh, I better go and have a look at that.’ I thought, yes, you better had.

“Three, the survey. Then we got onto this survey. According to the council, they were really pleased because 2,248 completed the online survey; e.g. 1,000 of those were tenants, 356 landlords or agents, etc. 1,287 said they were experiencing poor management by their landlord, 1,347 said they’d experienced poor housing conditions, etc. I mean, it was a sob story, it really was! And I looked on there and thought, this is a Survey Monkey you know, come on, I mean, anyone is on Survey Monkey!

“I looked up Survey Monkey and I found that somebody had actually gone on this site and said: ‘Come on guys, only 81 tenants have responded to this survey, we need to get others on it.’ And people from outside the Bristol area were responding with things like: ‘F-ing landlords, etc.’ Which is where these 2,248 people came from.”

Pargeter continued: “I took a photograph of this website, as the consultation finished on November 3rd and started in the beginning of August, and this was posted on October 6th. So by October 6th, only 81 tenants in the area had responded to this survey, which made me suspicious of these 427 complaints, because that was in the same year.

“So I asked Mr. Collis: ‘Only 81 tenants have bothered to fill in this survey, so where are these 427 complaints anyway?’ – which I’ve asked for under the Freedom of Information Act, but they keep stalling for various things, sending me wrong bits of paper, etc. – And I thought, surely these 427 complaints would be first in the queue to fill in this survey to say what they think of their local landlord? But no! His reply was: ‘Oh, they’ve probably all moved on by now.’ And I thought, what, in the same year, 2014/15?

“So anyway, I believe all this information within the consultation is fraudulent and untrue, and I said to Mr. Collis: ‘You’ve actually used this survey to fund your evidence to bring this in. And all these statistics that you’ve given to me here, that you’ve published to the council and given to the Lord Mayor – who agreed with this – they are completely false, and you can’t prove that they aren’t.’ He didn’t have anything to say and just continued to mumble in a very confused fashion and went away!

“I have now set up a meeting with Councillor Paul Smith, the Cabinet Member for Homes, on October 21st, so let’s see how that goes.”

Tenant Referencing’s Paul Routledge, responded to Pargeter: “What Anne has here is for infinity and beyond. Landlords in Eastville and St George can’t overturn the selective licensing decision, because it’s gone past its judicial review date, but the law is still on these landlords’ side, if they can prove that the case was perfunctory; that there were lies, deceit, inadequacies and corruption within the initial consultation to get it through.

“All of these are the definition of maladministration. Maladministration is actually an easier route to go down than judicial review, because you can take it to the ombudsman. So all Anne needs to do is build a case as an individual, and then make the case to the ombudsman to get her £470 back. Once she’s successfully done that, the precedent will be set for the other 2,000-odd landlords in Eastville and St George to get their perfunctory licensing fee back.”

He explains the needlessness of the scheme: “Take Stapleton road as an example. The Government guidelines on selective licensing mean that they have to be able to prove that at the point of selectively licensing an area, it has to specifically have 20% of poor housing stock. Stapleton Road figures, as supplied by Bristol City Council, show us: Out of 1,100 private rental sector homes, 199 houses had serious health and safety issues – 199 versus 1,100 is 18.9% (Remember the Government target is 20%, so that is 1.1% under what they’re allowed to selectively license under Government guidelines. So, immediately, the figures they’ve quoted are perfunctory).

“Out of those 199 serious health and safety issues, eight landlords were prosecuted; not for poor housing conditions, but for not getting a license! Three landlords were prosecuted for not bringing private rental sector housing stock up to standard. There were 250 complaints to the benefit office for benefit fraud, anti-social behaviour and violence within the family. Sorry, but what do these have to do with private rental sector landlords?

“And this is why we need more landlords behind us to take this further with Bristol Council. So Bristol landlords haven’t lost anything yet.”

He continues: “Standing alone can become quite overwhelming, but the way forward is in numbers, proven by the North Somerset campaign this summer. Selective licensing is all about public control over private rented sector homes, and has been on the agenda for a long time. Due to the housing crisis and the selling off of council houses, local authorities have to house people, and the only way they can do it is through the private rental sector. Landlords, you are their stock, you are in their sights, your stock is their stock.

“Once they’ve finished selectively licensing this country as much as they possibly can, by stealth, they will then consider capping rents. Once that’s started, it’s the beginning of the end and they’ll have complete control over the private rental sector in this country.”

He insists: “Landlords in Eastville and St George areas need to join the Bristol Landlord Facebook group and start spreading the word about Anne’s findings. I will be attending the meeting with Councillor Smith in October, as I think we have a very strong case for maladministration – Watch this space, as they say!”

If you’re a Bristol landlord, join the fight on these issues.

Complaints Against High Street Estate Agents Soar by 32%

Published On: October 6, 2016 at 8:33 am

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Complaints upheld against high street estate agents have soared by 32% in the past year, according to the latest report from The Property Ombudsman (TPO).

Almost all of the complaints were resolved in favour of the complainant, resulting in record payouts for the consumer – the largest of which was over £16,000 for a lettings dispute.

Complaints Against High Street Estate Agents Soar by 32%

Complaints Against High Street Estate Agents Soar by 32%

The Ombudsman, Katrine Sporle, warns high street estate agents of the importance of a good reputation.

She says: “Overall, this is good news for consumers and redress, but not so great for the reputation of agents, who collectively paid out over £800,000 in awards. My message for those agents is simple: Pay more attention to TPO’s Codes of Practice and raise your standards.”

Last week, TPO announced that it is updating its Codes of Practice for all those in the property industry: /property-ombudsman-updates-codes-practice/

However, the report does indicate that online and hybrid estate agents continue to wage war against their high street counterparts, with many, but not all, excelling in the customer service they provide.

One of the leading online agents in the sector, eMoov.co.uk, was voted the best in the country out of over 25,000 high street and online estate agents, based on the service it provides to customers.

The Founder and CEO of eMoov, Russell Quirk, says: “It’s almost becoming an estate agency tradition that every year, TPO releases its report on the industry, and every year, the poor practices of the high street sector in particular result in an increase in complaints on the previous year.

“The high street sector is struggling in the current industry environment to say the least, and, despite being squeezed for market share by online and hybrid agents, are only getting worse, rather than pivoting with the new age of estate agency and offering a better customer experience for a fairer price.”

He continues: “Luckily, the customer now has the choice and, thanks to websites such as TrustPilot and AllAgents, can separate the good from the bad, based on reviews from real customers. That’s why at eMoov, we concentrate on how we treat the customer, not the money we gain, and our TrustPilot rating of 9.5 and our rank as number one agent out of 25,800 via AllAgents is a testament to that.

“Despite this positive evolution in the industry, selling or buying a home can occasionally be an expensive and sometimes fraught experience. The Government must now really step in and introduce licensing for all estate agents, in order to regulate against the bad guys, of which there seems to be many.”

If you’re buying or selling a property, does this news put you off using a high street estate agent?