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On 27 March 2017 Housing Minster Gavin Barwell confirmed via twitter, that Client Money Protection Insurance would be made mandatory for agents in England following the recommendation of a working group set up in Autumn 2016.

What is Client Money Protection Insurance?

CMP ensures the money that a landlord or tenant pays to a letting agent is safely protected against misappropriation by the agency.

Letting agents that have CMP must maintain and operate a separate account with their bank, where all client money is held separately from their operating funds. Examples of client money can include tenants’ deposits (before and after they’re protected), landlords’ repair funds, rents, service charges and arbitration fees. So, in the unlikely event that money is mishandled by the agent, the landlord or tenant’s money is secure, and they can make a claim from the relevant CMP insurance scheme for its return.

How do I get CMP?

CMP is usually obtained as part of trade association membership. So if you join UKALA, ARLA, NALS, RICS or the NAEA then CMP is an automatic member benefit.

However, if being a member of a trade body doesn’t suit your business requirements then you can obtain standalone CMP cover from select providers, including Client Money Protect. Agents that are interested in a trade association membership should look at UKALA, who both mydeposits and Client Money Protect have a close working relationship.

Mandatory Client Money Protection is Here

H.A.S Property Management have an immediate vacancy for a Part Time Accounts Assistant to help With Financial Issues in the office – Hours can be flexible to suit the successful candidate.

The Hourly Rate will be negotiated dependant on experience – Please forward a CV to-  tammie@haspropertymanagement.co.uk

Interviews will be held very soon.

As of 1^st April 2017, hundreds of thousands of landlords who currently pay the basic rate of tax will find themselves forced into the higher tax bracket as a result of  new restrictions on landlord tax relief.  Yet despite this, very few landlords know anything about the changes or how it will affect them.

Currently, mortgage interest payments are one of a number of expenses that landlords can deduct as a business cost.  However, once changes are fully phased in by 2021, landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.

How are the changes going to be introduced?

The changes will be phased in over the next four tax years, starting from April 2017, as follows:

2017/18 tax year – Landlords can claim 75% of allowable expenses, and will receive relief at the basic rate (20%) on the remaining 25%;

2018/19 tax year – Landlords can claim 50% of allowable expenses and will receive relief at the basic rate (20%) on the remaining 50%

2019/20 tax year – Landlords can claim 25% of allowable expenses and will receive relief at the basic rate (20%) on the remaining 75%

2020/21 tax year – the switch will be complete, with the only tax relief being the basic rate of 20% on your allowable expenses.

The announcement to cut mortgage interest tax relief in the 2015 Budget came as a surprise to many landlords.

Landlords need to seriously look at how their investments are performing, just as they would if they had stocks and shares. If a stock price is falling, there is a decision to stick it out or sell. In the case of property, of course there is always capital growth, but what about monthly income versus costs?

Landlords will be faced with higher costs.  At least at present, interest rates are historically low, but what happens when rates rise?

An example of how a landlord’s tax liability could change over the next 4 years

John is a landlord. He is already a higher rate taxpayer (40%).
John’s Buy-to-let property generates £20,000 per annum.
His allowable expenses (e.g. mortgage interest) total £13,000

Tax year 2016/2017 (Old system) – John pays tax on the profit after all expenses are deducted. £20,000 – £13,000 = £7,000 (John pays 40% tax on £7000 which is £2,800)

Tax year 2020/2021 (New system) – If John’s rental income and expenses remain the same he will pay tax on his total income of £20,000 = at 40% this is £8,000 (less the basic-rate relief of 20% on expenses of £13,000, which is £2600).  £8,000-£2600 = £5,400.

What can landlords do?

Landlords should carry out a business review on each of their rental properties. Remember, banks will be more stringent on affordability checks when it comes to buy-to-let mortgages as well, so it’s vital to know how much is coming in and how much will be going out.

Landlords need to list down all their costs (letting agent fees, management fees, maintenance, etc.) and consider areas where savings could be made. It’s extremely important to seek expert advice from an independent financial advisor who can support a robust and comprehensive financial plan for both the short and long-term.

Tax changes – Are you ready?

The imminent changes to mortgage interest tax relief for the buy to let sector estimates that 1.4m landlords are still unaware of the proposals.

The Landlord Referencing website – which backs the so-called Axe The Tenant Tax campaign against the tax change contained in S24 of the Finance (No.2) Act 2015 – says that it has polled 1,000 of its members.

It says that overall some 8.2m people in England alone will be affected, because they let residential property as an individual, or in a partnership or trust.

The main campaign against the measure – which is phased, with part one coming into effect on April 1 – has the support of ARLA, the NLA and RLA, UKALA and the Scottish Association of Landlords. Last year the campaign lost a bid to trigger a judicial review of the measure, first announced in George Osborne’s post-election Budget of 2015.

https://www.lettingagenttoday.co.uk/breaking-news/2017/3/1-4m-landlords-unaware-of-mortgage-interest-tax-relief-change

CEO of mydeposits, Eddie Hooker, discusses some of the trials facing the private rented sector following the Government’s publication of the eagerly awaited white paper on the housing market.

Some of the statistics quoted in the paper on the housing market are frightening; the average home in the UK costs almost eight times the average salary, below average income earners, spend more than a third of their income on housing and more than 4 million households rent in the UK – nearly twice as many as 10 years ago.

The solution is building more houses, make renting fairer and providing financial assistance to those that need it.  But can it be realistically achieved?

The May administration has recognised that the private rented sector plays an important part of the long-term solution for the UK housing market.

The plans laid out focus on affordability for renters and driving up standards. I reinforce the government’s message:  letting agent fees to tenants will be banned. Client Money Protection insurance again is mentioned, with a clear suggestion that this important consumer protection tool will be made mandatory for all letting agents. Mandatory electrical safety checks and properly enforced licensing of Houses of Multiple Occupation are also mentioned. Finally, the question of longer fixed tenancies has been raised again. In my experience, most landlords also want the security of income to support their investment and will grant longer term tenancies wherever possible.  Flexibility is an important aspect in the rented sector.  Everyone is different.

It’s a challenging time ahead for the private rented sector.

With so much to digest it will be fascinating to watch the progress of these initiatives over the coming years. Whilst it is clear that there is still room for improvement, the report itself shows that standards are already on the rise, with 65% of private tenants happy with their tenure, increasing by 17% since 2005.

The need for letting agencies to assist landlords with the increasingly-complicated private rental sector has been hammered home by the results of a survey of almost 4,000 buy to let investors.

The Landlord Knowledge Survey, by online letting agency Urban, reveals that:

– around 20 per cent of landlords are unaware of existing EPC regulations, and 17 per cent were unaware of the MEES changes set to come in to effect from next year;

– 70 per cent of landlords are not aware of all procedures involved in the Right To Rent regulations which came into effect a year ago;

– only 34 per cent of landlords adequately test the smoke and CO2 alarms in their rental properties;

– 38 per cent did not know that a tenant could refuse them access to the rental property even with 24 hours’ notice;

– substantial numbers were unaware of the repercussions of failing to join selective or other local authority licensing schemes that exist in many areas;

90 per cent of landlords made errors when questioned on their responsibilities over tenancy agreements;

– around a third of landlords showed confusion over gas safety requirements;

– only 50 per cent of landlords appeared aware of the potential tax consequences of April’s start to the phased reduction of mortgage interest tax relief.

“One reason to explain the lack of industry knowledge could be due to the recent influx in new regulations, which have flooded the rental market” explains Adam Male, co-founder of Urban.

Source : https://www.lettingagenttoday.co.uk/breaking-news/2017/2/lettings-survey-shows-huge-lack-of-landlord-awareness

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, 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

The National Landlords Association is making only three demands on the government for its next Budget, because it recognises further reforms may be “an uphill task”.

The NLA – in a lower profile Budget submission than that from the rival Residential Landlords Association – says it continues to oppose the government’s changes to mortgage interest tax relief but admits that with Brexit and national financial issues, the government’s priorities may lie elsewhere. 

“Therefore our budget submission, whilst once again stating our opposition to Section 24, explores practical measures the government could introduce achieve their stated policy aims and to help our members plan for the future” says a statement from the NLA.

It is therefore calling for just three specific proposals:

1, The introduction a Capital Gains Tax cut or taper

2, The extension of business asset rollover relief to allow restructuring of portfolios

3, The reintroduction of the Landlords’ Energy Saving Allowance

2016 was a year of great change in the private rented sector especially for landlords and 2017 looks set to be another year of upheaval, here’s our list of some important areas of change:

Mandatory Client Money Protect

Client money protection is an insurance policy designed to protect clients’ money, such as rent, deposit or other monies, from theft or misappropriation by an agent. As it stands agents do not, by law, need client money protection, and unfortunately many landlords and tenants are still unaware that it exists. It is likely, in early 2017, that the Government will announce that client money protection will become mandatory throughout England, but it will unlikely to be made to the legislation before 2018. These changes will be positive in regulating the industry further and ensuring clients’ money is secure.

Wear and Tear Allowance

Another change commencing in 2017 is the Wear and Tear Allowance. Previously there was a 10% allowance for fair wear and tear on furnished let residential property. This has now been removed and to be eligible for any tax deductions you must prove any outlay you have incurred in maintaining the property. You can no longer simply deduct 10% as standard.

Tax Changes

Concerning tax, there appears to be further changes in the New Year, especially as the government aims to review the private rented sector. The introduction of 3% stamp duty that has been added to the purchase of a second property has already increased the cost for landlords after it came into legislation in 2016.

As of April 2017, tax relief is also changing for landlords meaning that they are unable to use their income tax bills to offset interest only mortgage costs. Instead of being taxed on profit, landlords will now be taxed according to their annual turnover amount. Until now landlords could claim complete tax relief on mortgage interest payments, however, landlords can no longer take their mortgage interest away from their own rental income, now only permitted at a basic rate.