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Back To Business As Usual For Landlords And Renters?

Back To Business As Usual For Landlords And Renters?

by | Jun 18, 2021 | Investment

Eviction protection for tenants is now running out. The exact date it ends varies by country. In England, it’s the 1st of June. Furthermore, the notice period will be reduced from six months to four. Theoretically, therefore, it’s back to “business as usual” for landlords and tenants. In practice, landlords may still have to move carefully. Here are a few points to consider.

 

Remember the law extends beyond COVID19 measures

If it’s been so long you can’t remember, here are the key points you need to keep in mind when dealing with any tenant.

 

You are responsible for keeping the property safe

There is no if, but or maybe about this. For as long as a tenant has legal possession of your property, you have to keep it safe and habitable. If a tenant is being difficult about granting you/your representatives access to your property, then it’s highly advisable to document all steps you take to resolve the situation.

It’s also advisable to contact your local authority. They may be able to help, especially if the issue could potentially have a negative impact on other properties. Realistically, however, the aim of contacting a local authority is generally just to make sure they know your side of the story. Otherwise, they might get a garbled version of events from other sources.

 

Any eviction proceedings must follow due process

Do not be tempted to take any shortcuts here, not even if they seem to be benign, for example, offering your tenant financial assistance to leave. Follow the process to the letter. It may be frustrating. It is, however, likely to be a whole lot less frustrating than the possible results of trying to work around the law.

 

Keep the Equality Act 2010 in mind

These days, it’s not just enough to avoid discrimination on the basis of protected criteria (direct or indirect). You need to be able to demonstrate that you have avoided discrimination on the basis of protected criteria. Effectively, this means that you don’t just need an audit trail of what you did but a log of why you did it. This will show that you use a legally-robust process to reach your decisions.

 

Lender forbearance also extends beyond COVID19 measures

A lot of the “COVID19 support measures” were essentially just variations on standard lender-forbearance requirements. In fact, the only real difference was that people could self-certify rather than having to go through a lender’s standard approval procedure. That is now ended and hopefully, it will not need to be brought back.

There is, however, still support for people who need it. That includes landlords who are struggling to make their mortgage payments for any reason. If the reason is due to a tenant not paying rent, then the lender would be expected to work with the landlord to come to an arrangement everyone can manage.

If you’re having issues with a tenant (or anything else), it’s advisable to contact your lender as early as possible. Remember, it’s in their interests to work cooperatively with you. Leaving aside the regulators, they have public opinion to think about, especially after 2008.

 

Landlord forbearance should also extend beyond COVID19 measures

Just because you can now evict your tenants, it doesn’t mean that you should. If a tenant is generally “low-maintenance”, then it may be in your best interests to give them some breathing space to get back on their feet.

After all, if you evict them, then not only will you have the eviction expense but you could also have a void period. What’s more, there’s no guarantee that any future tenant will be an improvement on the current one, at least not over the long term.

The reality is that the UK economy is probably going to need some time to recover from the pandemic (and Brexit). Until then, any tenant could potentially struggle for a while. In most cases, learning to work with this will prove better than resorting to evictions.

Please contact us for any more information

The truth about the landlord loophole

The truth about the landlord loophole

by | Sep 6, 2019 | Mortgage News

It’s probably fair to say that the government is not exactly popular with property investors at this point in time.  While it’s understandable that they may wish to prioritise residential buyers in general (and first-time buyers in particular), the ideal way to do this is to work to smooth the path to property ownership (and indeed moving home) rather than to keep creating obstacles for landlords, especially when the UK has such high demand for rental property.  Be that as it may, change is a constant in life and people just have to deal with it.  One way some property investors have opted to deal with the current round of changes is to move their property portfolio from a private holding to an asset held by a limited company.  This move has been widely publicised as the “landlord loophole”, but, as is often the case, the situation is rather more complex than some media articles make it appear.

It is illegal to try to use a limited company structure purely to avoid tax

Please take careful note of that previous sentence.  If you move your property portfolio into a limited company purely to avoid tax you will be breaking the law and if you are caught (which is entirely possible, if not highly probable), then the best result you can hope for is that you wind up paying HMRC the tax you would have been due in the first place, plus you will have to write off the (far from inconsiderable costs) of setting up a limited company.  A worst-case scenario is that you spend a lot of money on lawyers only to end up being convicted of tax fraud, an offence which can land you in prison (albeit typically only in the very worst cases).

Using a limited company structure the wrong way can see landlords paying more tax

Private individuals pay income tax on all income, including any rental income from property held in their own name.  Limited companies pay corporation tax on all profits generated by the company.  When company profits are handed over to third parties, they become subject to some form of taxation, the exact form of which will depend on the way in which the money is disbursed.  The likeliest options are dividend tax and income tax.  If your income from other sources is minimal, and you depend on the income from your rental property to pay your bills then switching to a limited-company structure could be an expensive mistake as the double-taxation effect might lead to higher tax bills, if not now than in the future.  By contrast, if you are a higher earner and are currently in a position where you can afford to live without the rental income from your property portfolio, then switching to a limited-company structure may reduce the level of tax you pay.  In short, if the profits from a company are held within a company, they will only be subject to corporation tax, which is likely to be much less than the income tax higher earners would have paid.  Then if/when your income drops (e.g. you retire), you can start to withdraw income in a controlled (and tax-sensitive manner).

Limited companies can be useful for estate planning

On the subject of retirement, limited companies can be useful from the point of view of estate planning especially for property investors, since they provide a convenient way to apportion the benefits of your estate.  For example, if you currently own two properties and bequeath one to each of your children, circumstances may conspire to deal one of them a much better hand than the other, whereas if both properties are held in a limited company which is bequeathed to your children in equal shares, then they benefit from it equally.

 

Your property may be repossessed if you do not keep up repayments on your mortgage.

The FCA does not regulate some forms of estate planning. For these services we act as introducer only.