Changes to HMO licensing announced

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Last week Heather Wheeler MP has laid regulations for the change to HMO licensing to be implemented in October 2018. You can read them here.

So after all this time, the net effect looks to be that from October landlords will need a licence if their HMO houses five or more people, forming two or more households – regardless of the number of storeys in the property.

It will also bring flats above or below commercial premises into the scope of licensing.

Interestingly, regulations regarding minimum room sizes, which were included in the succession of consultations, and other new mandatory conditions on waste are still to be passed.

As per the Government’s response to the consultation, it intends for the new requirements to be introduced in two phases.

There will be a 6 month grace period where licences will be required but enforcement action will not be taken. However, Section 75 of the Housing Act 2004 will remain in force meaning that any Section 21 notices issued will be invalid if the HMO is unlicensed.

What is Clause 24 and will it affect me?

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Clause 24 was implemented in April 2017 but still not many landlords are aware of the changes and how it might affect them. This might be because we’re still in the current tax year and returns wont be due for another 6 weeks or so. By the time your tax return is submitted you may find that Clause 24 is causing you some real pain. So what is Clause 24 and will it affect you?

What is Clause 24?

Section 24 of the Finance (no. 2) Act 2015 might mean that over half of UK landlords will be pushed into a higher rate of tax despite their income not having increased, and some might end up renting at a loss.

Until now, landlords have been able to deduct the full cost of their mortgage interest payments on their rental properties before they pay tax. Since April 2017, mortgage, loan and overdraft interest costs will not be considered in calculating taxable rental income.

The changes will be phased in gradually over 4 years, starting from 5th April 2017. By 2020, 100% of finance costs will be restricted to 20% tax relief only.

The change will be introduced gradually over the next 4 years and could see many landlords with interest costs affected and end up paying more tax on their property income. In addition, landlords could be pushed into higher tax brackets which in turn could affect child tax credit assessments and student loan repayments, leaving landlords even more out of pocket.

Who will be affected?

Essentially, anyone with a mortgage or that claims any kind of finance costs will be affected in one way or another.

What can I do about it?

There are a number of ways you can limit the impact this legislation has on you and it will all depend on your personal situation. Speak to your accountant about your personal situation or come to our Clause 24 seminar on 6th March and hear from Duncan & Toplis Accountants.

Nottingham’s licensing scheme has been given the green light

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It has been announced that the Government has given Nottingham City Council the green light for the proposed lincensing scheme. The scheme will be introduced on 1st August 2018 and discount will be given to DASH approved landlords. The full press release is as follows;

Private tenants in Nottingham will benefit from better quality accommodation and greater protection from rogue landlords after the Government approved a new licensing scheme.

The City Council scheme covering over 30,000 privately rented homes in Nottingham is the largest outside London to be given approval by the Secretary of State.

A report by the BRE (Building Research Establishment) Group estimated that 21% of Nottingham’s private rented properties are likely to have ‘Category 1 hazards’, examples of this type of hazard could include exposed wiring, a dangerous boiler, cold bedrooms, a leaking roof, mould on walls or ceilings and vermin infestation. Selective Licensing will help ensure these issues are addressed.

Extensive consultation with landlords, tenants and other interested parties took place on the proposed scheme which will mean that in selected areas of the city, landlords will need to obtain a licence from the Council and meet certain obligations to ensure tenant safety and good management of the property.

Money raised through the scheme will help to cover the cost and the Council hopes to be able to introduce the scheme from summer this year. Between now and the scheme coming into effect, landlords should find out if it will affect them and what they should do to prepare for this. Over 90% of privately rented houses and flats – around 31,000 properties – are estimated to benefit from this scheme.

Councillor Jane Urquhart, the City Council’s Portfolio Holder for Planning, Housing & Heritage, said: “I’m pleased that Nottingham’s selective licensing proposal has been approved by the Government. In areas that are covered it will help to improve standards for private tenants and landlords will know exactly what they must do to be able to rent their properties out.

“Having a Selective License will allow landlords to demonstrate that they provide good accommodation for tenants. The cost of licensing will be reduced for responsible landlords who gain Nottingham Standard Accreditation via DASH or Unipol. Tenants will also be able to check on both licensing and accreditation which will help to drive up private rented standards.

“This is a major step forward in improving living standards for many city residents.”

Accredited landlords can use the Nottingham Standard accreditation mark to show that they adhere to the standards required.

This will be a further tool to help tackle rogue and criminal landlords who operate poor housing and don’t manage their houses well, having a negative impact on the tenants and neighbourhoods.

The proposed cost of the licence is to be confirmed and is subject to final approval by the Council’s Executive Board. However, it is likely to be less than £2 per week, per property for accredited landlords and no more than £3 a week for non-accredited landlords.

Landlords can find if their property is covered by Selective Licensing at geoserver.nottinghamcity.gov.uk/myproperty/. There is also a link to more information including a list of FAQs and a short landlord good practice guide.

The Council recognises good landlords who go above the legal minimum, and those who are members of the Nottingham Standard accreditation scheme (DASH and Unipol) will receive a discount on the licence application fee. There is information about the Nottingham Standard at https://www.nottinghamcity.gov.uk/nottinghamstandard

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The How To Rent Guide has been updated

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Today the Government’s How To Rent Guide has been updated and this new version must be issued to tenants at the start of the tenancy. Failure to provide this (and record that you have provided it) invalidates a Section 21 notice.

Download the new version here.

If you’d like a free 10 point checklist to make sure you’re covered just drop me an email.

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Training for Property Professionals

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East Midlands Property Owners is a landlord accreditation raising the standards of the private rented sector. Here are details of the upcoming training events they are arranging.

In the fast changing world of the Private Rented Sector, professional training will keep you and your business one step ahead of the competition. Details of how to book can be found at the bottom.


Legal Update 2015 And Complete Possession Claims

Wed 05, Oct 2016, 09:30am – 04:30pm. (Nottingham)

This course covers the following:

Legal update part

• Housing & Planning Bill 2015/16 to include rogue letting agent / landlord database and abandonment

• Confirmation of the Deregulation Act changes and how they have worked in practice

• Immigration Act 2014 and the proposed amendments in the Immigration Bill

• Hidden Letting Agent Fees and an update on the Foxtons case

• Minimum EPC rating in 2018

• Supreme Court Decisions – McDonald v McDonald and Edwards v Kumarasamy

• Other current topics

Complete Possession claims online

• Get a greater knowledge of Possession Claims online

• Experience a demonstration of online form completion for both Possession Claim online (PCOL) and Accelerated Possession (APP)

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Capital Gains Tax Course

Wed 12, Oct 2016, 06:30pm – 09:00pm. (Nottingham)

This half day course will help you understand and benefit from a deeper knowledge of Capital Gains tax (CGT). The course also includes how CGT is calculated with explanations of jargon and CGT allowances and reliefs that are available.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Inheritance Tax Course

Wed 09, Nov 2016, 06:30pm – 09:00pm. (Nottingham)

This half day course will help you understand and benefit from a deeper knowledge of Inheritance tax (IHT). This may be a significant potential tax costs for property owners being up to 40% of the market value of the portfolio.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Basic Law For Lettings

Thu 24, Nov 2016, 09:30am – 04:30pm. (Derby)

Covering the following:

• Pre-Tenancy

• The responsibilities and liabilities of the landlord / letting agent

• Setting up a tenancy

• During a tenancy

• Ending a tenancy

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Understanding And Managing HMOs Including The Housing Act 2004

Tue 06, Dec 2016, 09:30am – 04:30pm. (Nottingham)

This course comprises of 2 parts

Understanding HMOs

• Licensing (Mandatory & Additional)

• HMO General information

• Management of HMO Regulations

• Amenity Standards

• Enforcement

• Register of licenses and Management Orders

• Regulatory Reform Fire Safety Order

This Course Also Includes The Following Additional Information: Housing Act 2004, HHSRS, Deposit Protection

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


Intermediate Law For Lettings

Fri 20, Jan 2017, 09:30am – 04:30pm. (Derby)

Covering the following

• Tenancy Agreements: Special clauses

• Correct dates for serving a section 21 notice

• Grounds for possession – overview

• Accelerated possession procedure

• Requirements for overseas landlords

• Considerations for instructing contractors

• Abandonment and surrender

• Deposit Protection Oddities

£ 90 / Delegate For EMPO Members
£ 140 / Delegate For Non EMPO Members


PAT Testing Course – Morning

Thu 02, Feb 2017, 09:30am – 12:45pm. (Nottingham)

3 hour PAT Testing course which will enable landlords to carry out their own PAT testing. The course which is broken into 5 Parts contains practical and theory sessions.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


PAT Testing Course – Afternoon

Thu 02, Feb 2017, 02:00pm – 05:15pm. (Nottingham)

3 hour PAT Testing course which will enable landlords to carry out their own PAT testing. The course which is broken into 5 Parts contains practical and theory sessions.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members


Landlord Responsibility And Compliance On Fire Safety

Thu 02, Mar 2017, 09:30am – 12:45pm. (Nottingham)

This half day course looks at fire safety in HMOs and highlights the responsibility of landlords and the main pitfalls and hazards.

£ 50 / Delegate For EMPO Members
£ 75 / Delegate For Non EMPO Members

For details on how to book any of these courses visit the EMPO website here.

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Private Sector Landlord Magazine Sept 16

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Here’s the August/September copy of the Private Sector Landlord Magazine.

Amongst some of the articles include;

  • An update on the selective licencing scheme to hit Nottingham City
  • The rise of built to rent
  • Overview of the housing and planning act

You can subscribe to their mailing list by emailing kate@life-magazines.co.uk.

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38% of landlords have never heard of this

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Recent research has revealed that 1 in 10 private landlords has no formal tenancy agreement in place with their tenants.

The research exposes that where contracts are in place, landlords may unwittingly be asking tenants to sign documents that are not legally compliant. Of the landlords who don’t use a letting agent, 58% used adapted tenancy agreements from either old agent contracts or other landlords (38%) or an updated template they found online (20%).

More shockingly, 38% of landlords in England have never heard of the Governments “How To Rent Guide” despite it being a legal requirement to provide this to the tenants prior to the tenancy starting.

Also concerning is that 9% of landlords have not informed their tenants that their deposit is held in a government-backed tenancy deposit protection scheme.

With the changes to the rules around Section 21 notices landlords will have to prove that they have provided the tenant the correct documents prior to the tenancy starting. Failure to do so could mean Section 21 notices are invalid.

Daniel Otton, Owner of Buttercross Estates in Newark, says “With the recent changes in legislation concerning setting up a tenancy agreement, we’ve recently launched a service for private landlords to have their property advertised and setup professionally for just £80.

This service is designed for self-managing landlords who don’t want to fall foul of the ever-changing legislation. It’s our goal to raise the standards of the private rented sector for the benefit of both landlords and tenants. Although more landlords are choosing to have their investments managed, there are still a number who choose to go it alone and they run a high risk of problems later down the line.”

For a free Tenancy Commencement Checklist, email us or visit www.buttercrossestates.com/landlords/

Stamp Duty Increase and How You Can Remain Unaffected

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Stamp Duty

Amongst the recent announcements laid out by George Osborne are the changes to Stamp Duty Land Tax. In essence, if you are buying a second (or third, or tenth etc) property an additional premium will be added to your stamp duty of 3%. That means the new thresholds from 1st April 2016 will be as follows…

£40,000 to £125,000 = 3%
£125,001 to £250,000 = 5%
£250,001 to £925,000 = 8%
£925,001 to £1,500,000 = 13%
Over £1,500,001 = 15%

Note: Houses bought under £40,000 do not attract this additional tax but if a property is bought for £45,000 say then the tax is on the whole purchase price.

So what does this look like for you?

Well, a typical property in North Nottinghamshire bought for £70,000 would not have had any stamp duty to pay under the current regime. From the 1st April 2016 the investor will have to find a further £2,100 in order to purchase this property. For more expensive properties the changes are even more severe. A purchase at £150,000 would cost you £500 if completed before 1st April. After this the stamp duty rises to an eye watering £5,000.

What are the effects?

Well, obviously it makes investing more expensive but in reality this will mean that sellers will bear the brunt and see even lower offers coming in from investors as they look to pass on their increased costs. Don’t forget investors are out to make a profit and they take into account all the costs when determining their offer level. House prices may fall as investors hold back and others offer lower.

How can you remain unaffected?

In the short term there are no ways around it. The Government has produced a guide detailing different scenarios that people may face and you can read this here. However stamp duty still remains an expense you can deduct when you sell the property to reduce your capital gains.

The best thing is to talk to an expert. Speak to your accountant and if they can’t help I’m sure they’ll know someone that can. We’d recommend Simon Shaw at Duncan & Toplis here in Newark. You can reach him on 01636 640321 to discuss this, or any other matter to do with structuring your property investments.

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FREE Tenancy Commencement Checklist

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TCC

Since the implementation of the Deregulation Act on 1st October 2015 the onus is on the landlord to prove that they have provided the tenant with the following documents;

•Energy Performance Certificate
•Gas Safety Certificate
•How To Rent Guide

We thought it would be useful to share the form we are using to ensure any Section 21 Notices aren’t thrown out by the judge, thus saving you time and money.

To grab your copy simply register for our newsletter then email us to request a copy.

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New Section 21 rules explained

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Legislation

Since the implementation of the Deregulation Act on 1st October 2015 there have been a lot of changes to the rules around Section 21 notices and after visiting one of the local landlord forums there was still a lot of confusion so I thought it would be useful to clearly explain the changes so you don’t get caught out.

These changes apply to tenancies entered into on or after the 1st October 2015.

The main changes to be aware of are:

• There is a new Section 21 Notice (Form 6A) that needs to be used as standard. You can download the form here which includes some explanatory notes.

• It will no longer be possible to serve a Section 21 Notice until the tenant has lived in the property for a minimum of four months. This is to stop landlords serving a Section 21 Notice as soon as a tenant moves in. As before, the notice can’t expire in any event before the end of any fixed term.

• A Section 21 Notice will only be valid for six months from the date it was given. This means that if the tenant doesn’t leave, possession proceedings must be commenced within six months of the service of the Section 21 Notice. Different rules apply where the notice period set out in the tenancy agreement is more than two months.

• A Section 21 Notice will no longer be invalid if the date of possession given on it is not the last day of a tenancy period. This has traditionally been one of the main reasons that a Section 21 Notice fails. As long as a full two months’ notice is given, the Section 21 Notice will be valid.

Landlords will be unable to serve a Section 21 Notice if they breach any of the following legal obligations to a tenant;

• Failure to provide an Energy Performance or valid Gas Safety certificate.

• Failure to properly register the tenant’s deposit and issue the prescribed information within the new legal time frame.

• Failure to provide the tenant with the government ‘How to Rent‘ guide..

• In addition, where a tenant has raised an issue to the landlord or agent in writing about the condition of the property and there has been a failure to action and resolve this complaint in a timely manner, the tenant will need to complain to the local authority. Until the local authority has decided whether to issue a Relevant Notice (e.g. improvement notice) on the landlord for works to be carried out then a Section 21 Notice cannot be relied upon. If a Relevant Notice is served by the local authority, a section 21 notice cannot be served for six months from the date of that notice. If the landlord/agent adequately responds within 14 days and the work is carried out this will have no impact on a Section 21 notice. The landlord will have a defence in circumstances where the tenant has failed to use the property in a tenant like manner or the disrepair is due to a breach of the tenants obligations under the tenancy agreement; where a mortgagee is seeking possession; or where the property is genuinely on the market for sale at the time the Section 21 notice is served.

• When a Section 21 Notice is served, all rent that has been paid for any period where the tenant ceases to lives in the property must be repaid to the tenant. This has implications where a tenant who has paid their rent decides to leave when they receive the Section 21 Notice rather than when the notice expires. Where a tenant pays a full month’s rent but then is required by the Section 21 Notice to vacate or voluntarily vacates mid-way through the month, the tenant is entitled to be reimbursed the overpayment of rent for that period.

Ensuring you comply

As the landlord you will need to prove that you have given the tenant the required information at the start of the tenancy. We have created a Tenancy Commencement Checklist that you can fill out and have the tenants sign on check in. To grab your copy, and ensure compliance, simply register for our newsletter and email us to request a copy.

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