EPCs and self-contained units
A landlord has a property were he lets out rooms. Does he have to provide Energy Performance Certificates (EPC) for these? In the Letting Centre’s Factsheet 38 on EPC’s it states ‘…certificate detailing its energy performance compared with reference values must be made available for each self-contained accommodation unit …’
The guidance on EPCs in the private rented sector provided by the Communities and Local Government states as follows: -
‘ An EPC is only required for a dwelling that is self-contained, meaning that it does not share essential facilities such as a bathroom/shower room, toilet or kitchen with any other dwelling and that it has its own entrance either from outside or through common parts, that is not through another unit.’
Most purpose built units will require individual EPCs but rooms in shared houses, for example will not.
Can the Government ever keep it simple and one ruling instead of multiples so landlords know exactly where we stand?
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Tuesday, March 31, 2009
Deposits
A quick examination of the accounts for the National Landlords Association shows a new income stream, ‘TDSL’.
The accounts show income for the year to 31 July 2008 as £1,250,157 from this source. The Dispute Service accounts show a surplus of £1,629,655 for the first year.
It's a hard life for some businesses!!! And they tell me they can not afford to exhibit at the UK Property Investor exhibtion next month
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
A quick examination of the accounts for the National Landlords Association shows a new income stream, ‘TDSL’.
The accounts show income for the year to 31 July 2008 as £1,250,157 from this source. The Dispute Service accounts show a surplus of £1,629,655 for the first year.
It's a hard life for some businesses!!! And they tell me they can not afford to exhibit at the UK Property Investor exhibtion next month
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Monday, March 30, 2009
Online Property Auction
A website that offers ‘live’ auctions via the internet is seeking to attract buyers to properties that ‘must be sold’. The properties are sold at auctions in London and it’s possible to watch the bidding online. They are average sales of 70% so it mees to be popular form of investing.
www.mustbesold.com
www.rhettlewis.com
A website that offers ‘live’ auctions via the internet is seeking to attract buyers to properties that ‘must be sold’. The properties are sold at auctions in London and it’s possible to watch the bidding online. They are average sales of 70% so it mees to be popular form of investing.
www.mustbesold.com
www.rhettlewis.com
Investment Angels
A novel form of buy-to-let investment has emerged in the form of ‘property angels’ – someone who invests in the property for a share of the profits. The solution will only be available for a limited number of borrowers as it is targeted at the high end of the market (loans of over £5 million). Obviously, other security will be needed if the loan to value ratio is high.
www.egertonpartnersontheweb.com
Regards
www.rhettlewis.com
A novel form of buy-to-let investment has emerged in the form of ‘property angels’ – someone who invests in the property for a share of the profits. The solution will only be available for a limited number of borrowers as it is targeted at the high end of the market (loans of over £5 million). Obviously, other security will be needed if the loan to value ratio is high.
www.egertonpartnersontheweb.com
Regards
www.rhettlewis.com
Review of the book 'The Damp House' by Jonathan Hetreed
The author’s emphasis on explaining the normality of damp and the essential role it plays in our daily lives sets the scene for an objective look, starting with defining damp and its diagnosis. It continues by discussing rising damp, penetrating damp through to condensation and leaking surfaces. In each aspect, identification, causes and solutions are dealt with extensively. It concludes with chapters on remedying the effects of damp on your property and an interesting look at living with damp, suggesting ideas aimed at adjusting life style and practices as opposed to wholesale repair and modification to eradicate problems.
Verdict: It’s an informative book that can be easily absorbed by the reader. There is a high level of technical information supported by useful diagrams and images that greatly aid understanding. A suitable read for both the novice and the more experienced in this complex field.
www.rhettlewis.com
The author’s emphasis on explaining the normality of damp and the essential role it plays in our daily lives sets the scene for an objective look, starting with defining damp and its diagnosis. It continues by discussing rising damp, penetrating damp through to condensation and leaking surfaces. In each aspect, identification, causes and solutions are dealt with extensively. It concludes with chapters on remedying the effects of damp on your property and an interesting look at living with damp, suggesting ideas aimed at adjusting life style and practices as opposed to wholesale repair and modification to eradicate problems.
Verdict: It’s an informative book that can be easily absorbed by the reader. There is a high level of technical information supported by useful diagrams and images that greatly aid understanding. A suitable read for both the novice and the more experienced in this complex field.
www.rhettlewis.com
Sunday, March 29, 2009
You have no doubt heard the old saying 'Location, location, location'. However, I
don't believe that it is as important as 'Cash-flow - Cash-Flow - Cash-Flow', which
should be your 'mantra' for investing in today's property market.
Achieving positive cash flow is about how you structure the property transaction when you buy and sell.
Too many people buy property purely for long-term capital appreciation. In my experience, properties that do not generate sufficient positive cash flow should be avoided in the current phase of the property market cycle.
Mortgage lenders require you to be achieving a rental income of around 125-130% of what you pay them each month, but even this can soon get
eaten away by any upward movements in interest rates, or overheads of managing and
maintaining the property. So, this 125-130% loan coverage doesn't necessarily mean that you have a reasonable cash-flow cushion.
Especially when starting out, you need cash flow much more than capital growth in order for you to develop and grow your property portfolio. Cash flow feeds you today so that you have got a much better chance of achieving the sought-after lifestyle that property investment can give you.
In fact, I strongly believe that unless your properties aren't returning you around 150% of your initial mortgage costs, then you are exposed to the whims of the market and any unexpected hiccups that can happen along the way.
Positive cash flow is simple maths. Figure out what you can expect to get for the property in rent. Then add up all the expenses you'll have every month such as minor repairs and maintenance, mortgage repayments, and so on. After all expenses are taken into account, the money left over every month is your positive cash flow. If your expenses are more than the money you'll receive in rent, that's negative
cash flow!
"Know your numbers and invest wisely!"
www.rhettlewis.com
don't believe that it is as important as 'Cash-flow - Cash-Flow - Cash-Flow', which
should be your 'mantra' for investing in today's property market.
Achieving positive cash flow is about how you structure the property transaction when you buy and sell.
Too many people buy property purely for long-term capital appreciation. In my experience, properties that do not generate sufficient positive cash flow should be avoided in the current phase of the property market cycle.
Mortgage lenders require you to be achieving a rental income of around 125-130% of what you pay them each month, but even this can soon get
eaten away by any upward movements in interest rates, or overheads of managing and
maintaining the property. So, this 125-130% loan coverage doesn't necessarily mean that you have a reasonable cash-flow cushion.
Especially when starting out, you need cash flow much more than capital growth in order for you to develop and grow your property portfolio. Cash flow feeds you today so that you have got a much better chance of achieving the sought-after lifestyle that property investment can give you.
In fact, I strongly believe that unless your properties aren't returning you around 150% of your initial mortgage costs, then you are exposed to the whims of the market and any unexpected hiccups that can happen along the way.
Positive cash flow is simple maths. Figure out what you can expect to get for the property in rent. Then add up all the expenses you'll have every month such as minor repairs and maintenance, mortgage repayments, and so on. After all expenses are taken into account, the money left over every month is your positive cash flow. If your expenses are more than the money you'll receive in rent, that's negative
cash flow!
"Know your numbers and invest wisely!"
www.rhettlewis.com
Saturday, March 28, 2009
Self-cert’ mortgages constantly disappear from the property market
Self-certification mortgages, which do not require proof of a borrower’s earnings, have almost vanished from the market as banks no longer want to lend to customers who have no regular or reliable salaries.
Brokers report that just two providers are still offering these types of loans - The Mortgage Works, the specialist lending arm of Nationwide, and Platform, a division of Brittania. BM Solutions and Bank of Scotland, the HBOS brands that are now part of the Lloyds Banking Group, withdrew form the market last month.
Self-certification mortgages had been popular with self-employed people whose income may fluctuate. They also provided a way for employed people with additional income to make sure their total earnings were taken into account when applying for a loan.
Self-certification mortgages allow borrowers to declare their annual earnings without having to back them up formally with accounts. Lenders would still make credit checks on these customers and would typically ask for details of their accountants, but would not ask for further evidence of their income.
Banks have since pulled away from these mortgages as it became clear that some borrowers were inflating their income in order to take out larger loans. They fear that these borrowers may now struggle to keep up their repayments.
Self-certification mortgages, which do not require proof of a borrower’s earnings, have almost vanished from the market as banks no longer want to lend to customers who have no regular or reliable salaries.
Brokers report that just two providers are still offering these types of loans - The Mortgage Works, the specialist lending arm of Nationwide, and Platform, a division of Brittania. BM Solutions and Bank of Scotland, the HBOS brands that are now part of the Lloyds Banking Group, withdrew form the market last month.
Self-certification mortgages had been popular with self-employed people whose income may fluctuate. They also provided a way for employed people with additional income to make sure their total earnings were taken into account when applying for a loan.
Self-certification mortgages allow borrowers to declare their annual earnings without having to back them up formally with accounts. Lenders would still make credit checks on these customers and would typically ask for details of their accountants, but would not ask for further evidence of their income.
Banks have since pulled away from these mortgages as it became clear that some borrowers were inflating their income in order to take out larger loans. They fear that these borrowers may now struggle to keep up their repayments.
Friday, March 27, 2009
Watch on sale and rent back schemes
Property Investors that target distressed home sellers are to be regulated by the City watchdog.
Property investors who buy homes, usually at a heft discount, and then rent them back to their previous owners at agreed levels for a period of time. The market has grown rapidly as more homeowners have been forced to sell their properties quickly to generate cash, putting them in a potentially vulnerable position.
The urgency of concerns about this previously unmonitored market, the
Financial Services Authority has taken the unusual step of creating a temporary regime for sale and rent back companies before full regulation begins next year.
The FSA is consulting on its proposals before a July start date.
Property Investors will need ‘interim permission’ to continue operating, provided that they meet certain requirements and rules, although these will be less detailed than would be the case for a full regulatory regime.
Threshold conditions would include a requirement for companies to be ‘fit and proper’ as well as applying FSA endorsed principles for businesses and a number systems and controls rules. They would need to provide a range of information, such as funding details and sales procedures. There would need to be independent valuations.
The FSA’s decision to consult so quickly on the new regime comes in response to a study by the Office of Fair Trading highlighting potential abuse by sale and rent back companies. It found that some have misled consumers as to the value of their property or how long they may stay in it.
The big issue that I see is that there is little reliable data on the size of the industry, but it is likely that there are more than 1,000 companies together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date.
Rhett Lewis
www.rhettlewis.com
Property Investors that target distressed home sellers are to be regulated by the City watchdog.
Property investors who buy homes, usually at a heft discount, and then rent them back to their previous owners at agreed levels for a period of time. The market has grown rapidly as more homeowners have been forced to sell their properties quickly to generate cash, putting them in a potentially vulnerable position.
The urgency of concerns about this previously unmonitored market, the
Financial Services Authority has taken the unusual step of creating a temporary regime for sale and rent back companies before full regulation begins next year.
The FSA is consulting on its proposals before a July start date.
Property Investors will need ‘interim permission’ to continue operating, provided that they meet certain requirements and rules, although these will be less detailed than would be the case for a full regulatory regime.
Threshold conditions would include a requirement for companies to be ‘fit and proper’ as well as applying FSA endorsed principles for businesses and a number systems and controls rules. They would need to provide a range of information, such as funding details and sales procedures. There would need to be independent valuations.
The FSA’s decision to consult so quickly on the new regime comes in response to a study by the Office of Fair Trading highlighting potential abuse by sale and rent back companies. It found that some have misled consumers as to the value of their property or how long they may stay in it.
The big issue that I see is that there is little reliable data on the size of the industry, but it is likely that there are more than 1,000 companies together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date.
Rhett Lewis
www.rhettlewis.com
Late Deposit Returns
A sharp increase in work for The Dispute Service (TDS) has stretched their resources to the limit.
Members attending a recent ARLA regional meeting heard tales of tenants nearly moving out of their next property without the deposit dispute resolved from the first one! TDS say they are now dealing with over 150 disputes a week, forcing them to seek to expand their team of staff.
According to the TDS annual report, the dispute rate was 1.76% of the total number of registrations during the first year, and cases were closed within an average time of 28 days, from receiving the consent of both parties to adjudication, as demanded by government. The scheme now covers some £0.5bn of deposits.
A sharp increase in work for The Dispute Service (TDS) has stretched their resources to the limit.
Members attending a recent ARLA regional meeting heard tales of tenants nearly moving out of their next property without the deposit dispute resolved from the first one! TDS say they are now dealing with over 150 disputes a week, forcing them to seek to expand their team of staff.
According to the TDS annual report, the dispute rate was 1.76% of the total number of registrations during the first year, and cases were closed within an average time of 28 days, from receiving the consent of both parties to adjudication, as demanded by government. The scheme now covers some £0.5bn of deposits.
Wednesday, March 25, 2009
Mervyn Kings efforts to rescue the economy were thrown into doubt this week, as shock figures showed consumer inflation rising back to 3.2% in February.
Inflation, confounded all expectations by rising from 3% in January. This was driven largely by food and drink prices, which are soaring as retailers look to offset higher import costs from the weak pound.
The shock rise will raise questions of the Bank's new policy of quantitative easing which, along with rates cut to rock bottom, is aimed at boosting the real economy out of recession. The Bank of England had been assuming that the danger of price inflation was extinct, with deflation - or falling prices - the real threat.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Inflation, confounded all expectations by rising from 3% in January. This was driven largely by food and drink prices, which are soaring as retailers look to offset higher import costs from the weak pound.
The shock rise will raise questions of the Bank's new policy of quantitative easing which, along with rates cut to rock bottom, is aimed at boosting the real economy out of recession. The Bank of England had been assuming that the danger of price inflation was extinct, with deflation - or falling prices - the real threat.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Tuesday, March 24, 2009
Homeowners forced to bear sharp rent fall
Reports from various sources have suggested that rents have dropped significantly over the past few months as people unable to sell their homes have been forced to rent them out, flooding the market.
Falls of about 2.2 per cent on average since the beginning of the year – and as much as 6 per cent in saturated areas such as Oxford – has occurred as growing numbers of homeowners have reluctantly opted to become landlords while the property market finds a floor.
More than half of landlords in its research have only begun renting out property in the past two years. Areas with greater numbers of buy-to-let properties such as Oxford, Glasgow, Nottingham and Leicester were the hardest hit. There was a 3.6 per cent dip in rents in London, and drops of almost 3 per cent in Manchester, Belfast and Brighton.
It was revealed that rental prices were catching up with the property sales market, with yields reverting to 2007 levels.
Three to four-bedroom properties recorded the sharpest fall, which it suggested meant that renters were choosing to downsize from houses to flats to save money.
London’s more prestigious boroughs such as Kensington, Chelsea and Islingon took the biggest hit.
In a survey of the market commissioned by Gumtree, nearly a quarter of landlords said they were renting because they waited to move but could not sell, while four in five claimed they had not wanted to become a landlord.
The report comes after Savills yesterday warned it could take longer than expected for house prices to recover.
It stuck to its peak-to-trough forecast of 25 per cent, but said there was an increased likelihood that the recovery could be delayed by a year owing to a deeper than expected economic recession.
Even so, it said the worst of the falls in the residential property market could be over soon given the speed so far of the price decline.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Reports from various sources have suggested that rents have dropped significantly over the past few months as people unable to sell their homes have been forced to rent them out, flooding the market.
Falls of about 2.2 per cent on average since the beginning of the year – and as much as 6 per cent in saturated areas such as Oxford – has occurred as growing numbers of homeowners have reluctantly opted to become landlords while the property market finds a floor.
More than half of landlords in its research have only begun renting out property in the past two years. Areas with greater numbers of buy-to-let properties such as Oxford, Glasgow, Nottingham and Leicester were the hardest hit. There was a 3.6 per cent dip in rents in London, and drops of almost 3 per cent in Manchester, Belfast and Brighton.
It was revealed that rental prices were catching up with the property sales market, with yields reverting to 2007 levels.
Three to four-bedroom properties recorded the sharpest fall, which it suggested meant that renters were choosing to downsize from houses to flats to save money.
London’s more prestigious boroughs such as Kensington, Chelsea and Islingon took the biggest hit.
In a survey of the market commissioned by Gumtree, nearly a quarter of landlords said they were renting because they waited to move but could not sell, while four in five claimed they had not wanted to become a landlord.
The report comes after Savills yesterday warned it could take longer than expected for house prices to recover.
It stuck to its peak-to-trough forecast of 25 per cent, but said there was an increased likelihood that the recovery could be delayed by a year owing to a deeper than expected economic recession.
Even so, it said the worst of the falls in the residential property market could be over soon given the speed so far of the price decline.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Sunday, March 22, 2009
Still biting hard
The credit crisis continues to bite hard. Whilst government ministers are confidently predicting the current downturn should be reasonably short-lived, the markets are not sure. Since peaking in late 2007 when the average home sold for £201,081, prices have fallen 16,4 %, reaching £168,158 at the end of October 2008. A recent report in the Financial Times suggests that the falls will continue much further. An analysis of the residential property derivatives market indicates that the ‘smart money’ believes that prices will fall by a further third to about £113,000. This implied decline of 44% in nominal prices would wipe out all gains since 2002, and leave several million households with negative equity.
Corroborating evidence is given by the ratio of house prices to average earnings – a long-trusted comparative measure of historical price trends in the sector. This ratio has fallen to 5.5 from its peak of 6.2 last year, according to Capital Economics, but still some way away from its long-term average of 3.7, or 1995 trough of 2.7.
A tough outlook for property prices has kept buyers away, but landlords can afford some reason to be cheerful as rental demand rose 50% this year, according to the UK’s second largest lettings agency, Your Move. The agency said that the increase in demand coincided with mortgage advances being at an all-time low, indicating that would-be buyers are renting rather than buying property. It is estimated that there are 1.6 million 20 to 39-years-olds who are renting because they cannot afford to get on the property ladder, according to Hometrack, the property data company. ‘The lettings market is thriving across the UK – we are seeing the strongest demand we’ve ever had’ said David Newnes of Your Move.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
The credit crisis continues to bite hard. Whilst government ministers are confidently predicting the current downturn should be reasonably short-lived, the markets are not sure. Since peaking in late 2007 when the average home sold for £201,081, prices have fallen 16,4 %, reaching £168,158 at the end of October 2008. A recent report in the Financial Times suggests that the falls will continue much further. An analysis of the residential property derivatives market indicates that the ‘smart money’ believes that prices will fall by a further third to about £113,000. This implied decline of 44% in nominal prices would wipe out all gains since 2002, and leave several million households with negative equity.
Corroborating evidence is given by the ratio of house prices to average earnings – a long-trusted comparative measure of historical price trends in the sector. This ratio has fallen to 5.5 from its peak of 6.2 last year, according to Capital Economics, but still some way away from its long-term average of 3.7, or 1995 trough of 2.7.
A tough outlook for property prices has kept buyers away, but landlords can afford some reason to be cheerful as rental demand rose 50% this year, according to the UK’s second largest lettings agency, Your Move. The agency said that the increase in demand coincided with mortgage advances being at an all-time low, indicating that would-be buyers are renting rather than buying property. It is estimated that there are 1.6 million 20 to 39-years-olds who are renting because they cannot afford to get on the property ladder, according to Hometrack, the property data company. ‘The lettings market is thriving across the UK – we are seeing the strongest demand we’ve ever had’ said David Newnes of Your Move.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Wednesday, March 18, 2009
Debt Judgment and what you should know
The latest statistical figures (2nd quarter 2008) from Ministry Justice states that “37,609 landlord possession claims were issued using the standard and accelerated possession procedures on a seasonally adjusted basis, 2% higher than in the second quarter of 2007 and the same as the first quarter of 2008”
The volatility in lettings coupled with the likely recession in the ‘real’ economy give rise to the strong possibility that these statistics may increase.
So, if it all goes wrong, what can landlords and letting agents do to stand the best chance of recovering unpaid money?
Defaulting tenants
Broadly speaking there are two types of defaulting tenants; - the ‘can’t pays’ and the ‘won’t pays’.
Where a tenant loses his or her job, their position is understandably genuinely compromised. The chances of recovering your loses (at least to any meaningful degree) can be better than first anticipated because, often, this profile of tenant will recover their position fairly quickly. By contrast the ‘won’t pays’ can be much trickier to deal with, and often highly tactical.
The insurance option
For years, niche brokers have, for a relatively small premium, covered landlords against tenant default on rent. The insurance also covers the associated legal costs of eviction on arrears grounds. Given the latter can easily reach £500 for a straightforward undefended case, the premium (usually much less) can turn out to be a wise investment.
Main features
Upon acceptance of the claim, the insurer will typically pay out to the landlord a sum equivalent to the rental default, up to the policy limit. All payments will be subject to policy terms and conditions and key things to check including the level of excess as well as precisely when payments start. For example, a policy stipulating an ‘excess’ of one months rent, and the rental payments will be paid out two months in arrears effectively means that if a tenant fails to pay rent contractually due on January 1, this first payment will not be paid by the insurance company until 1 April – about 3 months later.
Commonly, the cost of this type of policy is bundled within full management charges; the managing agent having secured a ‘block rate’ with the insurer. For landlords acting without a letting agent, policies like this can be purchased directly over the web. Typically, cover will be subject to satisfactory references and documentation. By nature, this sort of policy can only be taken out before landlords enter into a tenancy agreement.
Like any insurance, claims will not be accepted if they fall outside policy terms and conditions. For example, a claim may have to be submitted within a certain number of days from the first default, contractual documentation will need to be in order, as will statutory obligations, e.g. proven compliance with the tenancy deposit scheme etc.
Precise statistics on the number of claims resulting are difficult to gauge, largely because only the underwriters of such policies really know the true figures, but approximately 2-4% of policies sold result in a claim.
It is important to note that this type of policy typically has a cap on payments. For example, a landlord ‘losing’ £5,000 by way of rent arrears, does not automatically gain full recovery of that loss under the policy, which might limit payments to, say, half of that.
Also, any shortfall in payment only covered by the policy becomes uninsured loss which the landlord will then have to cover the cost of recovery himself. Check with the insurer about the amount actually covered before you purchase your policy.
Other options
For those who do not take out insurance, getting money back can be less straightforward but is by no means necessarily always rocket science.
A county court judgment (CCJ) is but a piece of paper so landlords need to know how to convert that into real money.
Attachment of Earnings Order
Under the Attachment of Earnings Act 1971, anyone looking to enforce a CCJ against an individual in employment can obtain an attachment of earnings order by completing a court application form and filing a fee. The court form is to be found on www.hmcs.gov.uk under ‘Forms and Guidance’. Form N337, a largely self-explanatory form, needs to be completed, and filed at court with the requisite fee, currently of £65 (payable to HMCS).
If the debtor has moved to a different area after leaving the property, you will have asked the court to transfer the case to his or her local court for attachment purposes – court staff can be helpful in explaining this procedure. The court will require the debtor to complete details of the employer. Upon the return of these details, if the judge is satisfied that an order is justified, he or she will make an attachment order without the need for a formal hearing.
The effect of an attachment order is that each month, a cheque for a specific amount assessed by the court will be sent to you until (a) the debt is extinguished; or (b) the debtor leaves that employment.
For certain debtors, the embarrassment factor of this order (which must be notified to their employer) is high enough to result in payment. They may contact you to make you an offer without the need of an order. Under these circumstances, you can notify the court of the agreement and request a ‘suspended attachment’ of earnings order. If the offer turns out to be merely a play for time, notify the court again of the collapse. A full order can then be made.
Change of employment
If your debtor has left his or her job, the attachment of earnings order will be adjourned by the court. You will have to re-confirm your debtor’s income source and if they have started a new job, you can request a court to simply re-issue the order on form N446 – you need not start the whole process again.
Attachment of earnings orders cannot be made where debtors are self-employed.
Statutory demands
For debts over £500 a statutory demand can be served. A precursor to bankruptcy proceedings, this formal demand for payments should be personally served on the debtor. Once served, the debtor has 18 days to set aside (ask the court to overturn) the demand so that it is not longer effective.
If the debtor does not apply to set aside, bankruptcy proceedings can be commenced. Though increasingly common, bankruptcy is no soft option – the consequences being grave. Usually a statutory demand will be enough to provoke payment or at least dialogue.
Bankruptcy
The effect of this order needs little explanation. Whilst perhaps ultimately self-defeating, the value to a landlord comes essentially from the punishment factor which is so high with these proceedings that it should provide leverage for at least some payment from all but the most vanquished debtors.
Here more complex rules of court apply. A DIY approach is not generally recommended but in broad analysis a bankruptcy petition form is completed once the 18 day window for setting aside the statutory demand has expired. The completed form is taken for issue to the local District Registry division of the debtor’s local court or the high court in London, depending on where the debtor has resided for the last six months. Accompanying documentation includes a copy of the statutory demand and a statement of service form (typically) a process server. Currently the total court fee is £610.
Direct attachment to a bank account
Third Party Debt Orders, as they are known, require some knowledge of account details and the level of balance, most likely from an oral assessment of means. If these facts are known, a creditor can apply on a simple court form (Form N349) for an order securing payment directly out of the debtor’s specified bank account, the result being that payment of the whole or part of the debt will be extracted from that balance.
Charging Orders
Should the debtor have moved on to purchase a freehold or leasehold interest in a property, a charge against that property can be placed at HM Land Registry. Once obtained, the charging order can be enforced by an application for an order for sale of the property. Once obtained, it is advisable to apply for a ‘restriction’ – which prevents the property being sold without your consent (as a creditor), thereby safeguarding the debt. The charge sits on the ‘title deeds’, attracting interest, until the property is sold. Since it is an ongoing encumbrance on the debtor’s property, the charging order counts, in accounting terms, as an asset, which is something business creditors might find more attractive than bankrupting the debtor.
Conclusion
Some of these options are more straightforward than others but all provide potential solutions for landlords seeking to enforce the easily obtainable CCJ. Quite what works in any individual case depends entirely on circumstances, not least of the debtors themselves. Communication is key – an aggressive approach can be tempting but is often counter-productive and debtors often require coaxing. What is clear is that lost rent needn’t necessarily be lost forever.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
The latest statistical figures (2nd quarter 2008) from Ministry Justice states that “37,609 landlord possession claims were issued using the standard and accelerated possession procedures on a seasonally adjusted basis, 2% higher than in the second quarter of 2007 and the same as the first quarter of 2008”
The volatility in lettings coupled with the likely recession in the ‘real’ economy give rise to the strong possibility that these statistics may increase.
So, if it all goes wrong, what can landlords and letting agents do to stand the best chance of recovering unpaid money?
Defaulting tenants
Broadly speaking there are two types of defaulting tenants; - the ‘can’t pays’ and the ‘won’t pays’.
Where a tenant loses his or her job, their position is understandably genuinely compromised. The chances of recovering your loses (at least to any meaningful degree) can be better than first anticipated because, often, this profile of tenant will recover their position fairly quickly. By contrast the ‘won’t pays’ can be much trickier to deal with, and often highly tactical.
The insurance option
For years, niche brokers have, for a relatively small premium, covered landlords against tenant default on rent. The insurance also covers the associated legal costs of eviction on arrears grounds. Given the latter can easily reach £500 for a straightforward undefended case, the premium (usually much less) can turn out to be a wise investment.
Main features
Upon acceptance of the claim, the insurer will typically pay out to the landlord a sum equivalent to the rental default, up to the policy limit. All payments will be subject to policy terms and conditions and key things to check including the level of excess as well as precisely when payments start. For example, a policy stipulating an ‘excess’ of one months rent, and the rental payments will be paid out two months in arrears effectively means that if a tenant fails to pay rent contractually due on January 1, this first payment will not be paid by the insurance company until 1 April – about 3 months later.
Commonly, the cost of this type of policy is bundled within full management charges; the managing agent having secured a ‘block rate’ with the insurer. For landlords acting without a letting agent, policies like this can be purchased directly over the web. Typically, cover will be subject to satisfactory references and documentation. By nature, this sort of policy can only be taken out before landlords enter into a tenancy agreement.
Like any insurance, claims will not be accepted if they fall outside policy terms and conditions. For example, a claim may have to be submitted within a certain number of days from the first default, contractual documentation will need to be in order, as will statutory obligations, e.g. proven compliance with the tenancy deposit scheme etc.
Precise statistics on the number of claims resulting are difficult to gauge, largely because only the underwriters of such policies really know the true figures, but approximately 2-4% of policies sold result in a claim.
It is important to note that this type of policy typically has a cap on payments. For example, a landlord ‘losing’ £5,000 by way of rent arrears, does not automatically gain full recovery of that loss under the policy, which might limit payments to, say, half of that.
Also, any shortfall in payment only covered by the policy becomes uninsured loss which the landlord will then have to cover the cost of recovery himself. Check with the insurer about the amount actually covered before you purchase your policy.
Other options
For those who do not take out insurance, getting money back can be less straightforward but is by no means necessarily always rocket science.
A county court judgment (CCJ) is but a piece of paper so landlords need to know how to convert that into real money.
Attachment of Earnings Order
Under the Attachment of Earnings Act 1971, anyone looking to enforce a CCJ against an individual in employment can obtain an attachment of earnings order by completing a court application form and filing a fee. The court form is to be found on www.hmcs.gov.uk under ‘Forms and Guidance’. Form N337, a largely self-explanatory form, needs to be completed, and filed at court with the requisite fee, currently of £65 (payable to HMCS).
If the debtor has moved to a different area after leaving the property, you will have asked the court to transfer the case to his or her local court for attachment purposes – court staff can be helpful in explaining this procedure. The court will require the debtor to complete details of the employer. Upon the return of these details, if the judge is satisfied that an order is justified, he or she will make an attachment order without the need for a formal hearing.
The effect of an attachment order is that each month, a cheque for a specific amount assessed by the court will be sent to you until (a) the debt is extinguished; or (b) the debtor leaves that employment.
For certain debtors, the embarrassment factor of this order (which must be notified to their employer) is high enough to result in payment. They may contact you to make you an offer without the need of an order. Under these circumstances, you can notify the court of the agreement and request a ‘suspended attachment’ of earnings order. If the offer turns out to be merely a play for time, notify the court again of the collapse. A full order can then be made.
Change of employment
If your debtor has left his or her job, the attachment of earnings order will be adjourned by the court. You will have to re-confirm your debtor’s income source and if they have started a new job, you can request a court to simply re-issue the order on form N446 – you need not start the whole process again.
Attachment of earnings orders cannot be made where debtors are self-employed.
Statutory demands
For debts over £500 a statutory demand can be served. A precursor to bankruptcy proceedings, this formal demand for payments should be personally served on the debtor. Once served, the debtor has 18 days to set aside (ask the court to overturn) the demand so that it is not longer effective.
If the debtor does not apply to set aside, bankruptcy proceedings can be commenced. Though increasingly common, bankruptcy is no soft option – the consequences being grave. Usually a statutory demand will be enough to provoke payment or at least dialogue.
Bankruptcy
The effect of this order needs little explanation. Whilst perhaps ultimately self-defeating, the value to a landlord comes essentially from the punishment factor which is so high with these proceedings that it should provide leverage for at least some payment from all but the most vanquished debtors.
Here more complex rules of court apply. A DIY approach is not generally recommended but in broad analysis a bankruptcy petition form is completed once the 18 day window for setting aside the statutory demand has expired. The completed form is taken for issue to the local District Registry division of the debtor’s local court or the high court in London, depending on where the debtor has resided for the last six months. Accompanying documentation includes a copy of the statutory demand and a statement of service form (typically) a process server. Currently the total court fee is £610.
Direct attachment to a bank account
Third Party Debt Orders, as they are known, require some knowledge of account details and the level of balance, most likely from an oral assessment of means. If these facts are known, a creditor can apply on a simple court form (Form N349) for an order securing payment directly out of the debtor’s specified bank account, the result being that payment of the whole or part of the debt will be extracted from that balance.
Charging Orders
Should the debtor have moved on to purchase a freehold or leasehold interest in a property, a charge against that property can be placed at HM Land Registry. Once obtained, the charging order can be enforced by an application for an order for sale of the property. Once obtained, it is advisable to apply for a ‘restriction’ – which prevents the property being sold without your consent (as a creditor), thereby safeguarding the debt. The charge sits on the ‘title deeds’, attracting interest, until the property is sold. Since it is an ongoing encumbrance on the debtor’s property, the charging order counts, in accounting terms, as an asset, which is something business creditors might find more attractive than bankrupting the debtor.
Conclusion
Some of these options are more straightforward than others but all provide potential solutions for landlords seeking to enforce the easily obtainable CCJ. Quite what works in any individual case depends entirely on circumstances, not least of the debtors themselves. Communication is key – an aggressive approach can be tempting but is often counter-productive and debtors often require coaxing. What is clear is that lost rent needn’t necessarily be lost forever.
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Monday, March 16, 2009
Its time to review your purchases/transactions over the past few years! Fraud is such a grey area, and it looks to me like the hounds are off the leash and lenders are looking to recover their losses, and the real difficulty is proof.
My personal advice would be that you revisit all your transactions and dealings with MX in detail, so as to satisfy yourself that there can be no suggestion ("smell") that similar investigations might be headed your way - if in doubt please feel free to set up a session with me, but in these situations proof of disclosure to the lender is everything.
Regards
Rhett Lewis
www.rhettlewis.com
This article was in the Daily Telegraph
Hundreds of millions of pounds' worth of the "toxic debt" that caused the Government to bail out British banks is suspected to have been generated by massive mortgage frauds, The Daily Telegraph can disclose.
By Richard Edwards, Crime Correspondent and Myra Butterworth, Personal Finance Correspondent
The 'toxic debt' of Bradford & Bingley has, in part, been generated by mortgage fraud, it has emerged.
Taxpayers have effectively taken on the losses of financial institutions which police believe were targeted by organised criminal gangs of professionals - including some corrupt bank employees, solicitors and property developers - during the boom years of the property market.
They are only now being uncovered and the City of London Police yesterday launched the first raids on a syndicate suspected of targeting Bradford & Bingley in an alleged £40million buy-to-let fraud, affecting more than 500 properties in Suffolk and Sussex.
Among nine people arrested were a bank employee, a solicitor, a property developer and two mortgage brokers.
An industry source said it was just one of "half a dozen" such alleged frauds targeting Bradford & Bingley which helped to bring the bank down. The bank's mortgage arm was nationalised in September last year.
Buy-to-let fraud can typically involve a syndicate of property market professionals collaborating to over-inflate the value of properties to pocket quick profits. If the borrower defaults on the loan the banks find themselves with a "toxic" loan having repossessed a property which is of far lower value than they were led to believe.
A source said: "This is the tip of the iceberg that is melting very rapidly. It is an iceberg of titanic proportions.
"There are half a dozen cases of this that Bradford & Bingley has been dealing with. As to the figure of £40 million, I'd double it and add some".
The source added: "This type of fraud is not unique to Bradford & Bingley, it will affect all buy-to-let lenders. It will involve all the government owned lenders. And it just shows how easy it is to commit this type of fraud."
The Daily Telegraph last week revealed a 63 per cent increase in reported financial crime compared to this time last year. The City of London Police, which takes the lead nationally on fraud investigations, have 615 live investigations into 689 suspects.
Detectives have been unravelling a series of multi-million pound property frauds which were hidden during the boom years when house prices were at record highs.
Steve Head, head of economic crime at City of London Police, said: "This has been going on for a long time under the surface but as the tide goes out it has left for us to see everything that it has left behind."
The number of people investing in property has soared during the past decade from being a relatively niche form of investment to seeing more than one million borrowers with a buy-to-let mortgage today.
The source warned: "Fraud is a huge issue and I would not like to think about the thousands of buy-to-let properties lying empty across major cities because of this."
Officers searched six homes and three business premises linked to the firm Eastbourne Financial Services, a mortgage brokers based in East Sussex. The eight men and one woman arrested are between 29 and 73 years old and were arrested on suspicion of conspiracy to defraud and money laundering.
Bradford & Bingley said it was aware of the arrests and confirmed that it had been co-operating with police for some time. The bank began an intensive review of its lending when it was nationalised last year after coming close to collapse because of its exposure to the sub-prime mortgage market.
Det Supt Bob Wishart said: "The scale of today's operation shows City of London Police's commitment to investigate frauds and bring those behind them to justice."
The Association of Chief Police Officers (Acpo) last week issued new guidance to all forces warning of the massive scale of mortgage fraud and recommended that the Home Office made it a high priority.
The guidance said: "Mortgage fraud is attractive to criminals because of the current low risk of detection and high profit opportunities. In one case, a fraudster made a profit of more than £10m."
My personal advice would be that you revisit all your transactions and dealings with MX in detail, so as to satisfy yourself that there can be no suggestion ("smell") that similar investigations might be headed your way - if in doubt please feel free to set up a session with me, but in these situations proof of disclosure to the lender is everything.
Regards
Rhett Lewis
www.rhettlewis.com
This article was in the Daily Telegraph
Hundreds of millions of pounds' worth of the "toxic debt" that caused the Government to bail out British banks is suspected to have been generated by massive mortgage frauds, The Daily Telegraph can disclose.
By Richard Edwards, Crime Correspondent and Myra Butterworth, Personal Finance Correspondent
The 'toxic debt' of Bradford & Bingley has, in part, been generated by mortgage fraud, it has emerged.
Taxpayers have effectively taken on the losses of financial institutions which police believe were targeted by organised criminal gangs of professionals - including some corrupt bank employees, solicitors and property developers - during the boom years of the property market.
They are only now being uncovered and the City of London Police yesterday launched the first raids on a syndicate suspected of targeting Bradford & Bingley in an alleged £40million buy-to-let fraud, affecting more than 500 properties in Suffolk and Sussex.
Among nine people arrested were a bank employee, a solicitor, a property developer and two mortgage brokers.
An industry source said it was just one of "half a dozen" such alleged frauds targeting Bradford & Bingley which helped to bring the bank down. The bank's mortgage arm was nationalised in September last year.
Buy-to-let fraud can typically involve a syndicate of property market professionals collaborating to over-inflate the value of properties to pocket quick profits. If the borrower defaults on the loan the banks find themselves with a "toxic" loan having repossessed a property which is of far lower value than they were led to believe.
A source said: "This is the tip of the iceberg that is melting very rapidly. It is an iceberg of titanic proportions.
"There are half a dozen cases of this that Bradford & Bingley has been dealing with. As to the figure of £40 million, I'd double it and add some".
The source added: "This type of fraud is not unique to Bradford & Bingley, it will affect all buy-to-let lenders. It will involve all the government owned lenders. And it just shows how easy it is to commit this type of fraud."
The Daily Telegraph last week revealed a 63 per cent increase in reported financial crime compared to this time last year. The City of London Police, which takes the lead nationally on fraud investigations, have 615 live investigations into 689 suspects.
Detectives have been unravelling a series of multi-million pound property frauds which were hidden during the boom years when house prices were at record highs.
Steve Head, head of economic crime at City of London Police, said: "This has been going on for a long time under the surface but as the tide goes out it has left for us to see everything that it has left behind."
The number of people investing in property has soared during the past decade from being a relatively niche form of investment to seeing more than one million borrowers with a buy-to-let mortgage today.
The source warned: "Fraud is a huge issue and I would not like to think about the thousands of buy-to-let properties lying empty across major cities because of this."
Officers searched six homes and three business premises linked to the firm Eastbourne Financial Services, a mortgage brokers based in East Sussex. The eight men and one woman arrested are between 29 and 73 years old and were arrested on suspicion of conspiracy to defraud and money laundering.
Bradford & Bingley said it was aware of the arrests and confirmed that it had been co-operating with police for some time. The bank began an intensive review of its lending when it was nationalised last year after coming close to collapse because of its exposure to the sub-prime mortgage market.
Det Supt Bob Wishart said: "The scale of today's operation shows City of London Police's commitment to investigate frauds and bring those behind them to justice."
The Association of Chief Police Officers (Acpo) last week issued new guidance to all forces warning of the massive scale of mortgage fraud and recommended that the Home Office made it a high priority.
The guidance said: "Mortgage fraud is attractive to criminals because of the current low risk of detection and high profit opportunities. In one case, a fraudster made a profit of more than £10m."
Sunday, March 15, 2009
I came across this video today that I want to share with you. As a keen sportsman, I really enjoyed seeing this young boys dream come true. Jason McElwain, nicknamed "J-Mac", is a young lad with autism who made national news in 2006 when he played for four minutes during a high school basketball game and scored twenty points.
It is a timely reminder to all that we should raise our expectations and never give up until we achieve our dreams. Although the press and commentators have share their opinions advising to stay away from the property market, if you really believe that property can you provide you with the lifestyle that you want, then you must take this one chance to buy properties at 2002-04 levels again. In life we always want a shot or chance, however it is what you do with that shot that counts. Enjoy!
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
It is a timely reminder to all that we should raise our expectations and never give up until we achieve our dreams. Although the press and commentators have share their opinions advising to stay away from the property market, if you really believe that property can you provide you with the lifestyle that you want, then you must take this one chance to buy properties at 2002-04 levels again. In life we always want a shot or chance, however it is what you do with that shot that counts. Enjoy!
UK's leading website with FREE resources for property investors, go to www.rhettlewis.com
Saturday, March 14, 2009
This week, Police have arrested eight men and a woman over suspected involvement in a massive mortgage fraud worth £40m. More than 50 officers from the City of London Police force arrested the suspects early on Tuesday at homes in Sussex and north London. The Police are investigating fraudulent mortgages taken out on 500 homes in Southern England between 2005 and 2007. The authorities' investigation centres on a defunct mortgage broker called Eastbourne Financial Services. Have you ever heard about them or ever used them?
The City Police were tipped off about the large scale fraud by the Financial Services Authority (FSA) which, in the past year, has been increasingly vigorous in taking action against mortgage brokers who submit fraudulent applications to lenders. Last month, a North London mortgage brokers, Leo Kusi-Appiah, was jailed for four years and nine months for offences including mortgage fraud. Last week the FSA banned a Wakefield mortgage adviser called Mohammed Ahmed. It described him as lacking "honesty and integrity" for using false pay slips when submitting mortgage application forms to lenders, both for himself and his clients.
Last year the FSA banned 20 individual mortgage brokers as part of its crackdown and said it would continue to make an example of mortgage fraudsters. Its a shame that brokers like these give our profession a tarnished name. Four years and nine month behindd bars is not long enough in my opinion, make it 20-30 years and they might seriously consider taking advantage. Throw away the keys!!
www.rhettlewis.com
The UK's leading website with FREE resources for Property Investors
The City Police were tipped off about the large scale fraud by the Financial Services Authority (FSA) which, in the past year, has been increasingly vigorous in taking action against mortgage brokers who submit fraudulent applications to lenders. Last month, a North London mortgage brokers, Leo Kusi-Appiah, was jailed for four years and nine months for offences including mortgage fraud. Last week the FSA banned a Wakefield mortgage adviser called Mohammed Ahmed. It described him as lacking "honesty and integrity" for using false pay slips when submitting mortgage application forms to lenders, both for himself and his clients.
Last year the FSA banned 20 individual mortgage brokers as part of its crackdown and said it would continue to make an example of mortgage fraudsters. Its a shame that brokers like these give our profession a tarnished name. Four years and nine month behindd bars is not long enough in my opinion, make it 20-30 years and they might seriously consider taking advantage. Throw away the keys!!
www.rhettlewis.com
The UK's leading website with FREE resources for Property Investors
Tuesday, March 10, 2009
The past year the number of arrears increased tremendously, however, the prediction for this year is even worse. The expectation is that the number of arrears will double; this will most likely result in an increase in repossessions.
Nowadays, many homeowners are turning to investors, when facing repossessions, to buy directly from. To prevent having the stigma and credit black mark attached to their name.
The following provides basic knowledge to investors about preventing a repossession as well as advice for homeowners on what their rights are and how they can access assistance.
When you are called by a vendor who is in a state of panic, due to a possible repossession, try to find out the exact reason why one is calling.
What would be wise to keep in mind is that lenders often react to arrears by following set procedures and sending out automated letters and therefore suggest that one keeps in touch with their lender(s) to discuss where one stands.
Before a property is repossessed by the lender, the lender has to go through four stages. And these are:
1. A letter will be send to the homeowner after a minimum of three months in arrears.
2. The lender will refer the account to their solicitors if the arrears are unpaid for 3-6 months. The solicitors will send out a letter to the vendor demanding full payment and warn for the consequences when not paying the demanded amount.
3. The solicitors will issue County Court Repossession proceedings, this occurs when after a couple of months of arrears the lender is not being paid back.
4. The hearing takes place and the court makes one of the following decisions:
a. Adjourn; there is not enough information and therefore the hearing is adjourned to a later date
b. Dismiss or adjourn indefinitely; normally only when full payment of the arrears has been made
c. Issue a suspension order; the vendor comes up with an agreed arrears repayment schedule, though, if the vendor is not able to keep to the schedule the lender can obtain a possession warrant without further court hearings.
d. Notice of eviction; the vendor receives this from the court with a deadline to move out of the property. If an investor has bought the property he is able to stop the eviction from taking place by providing legal documentation as confirmation that the property has been bought.
e. Post Eviction; the lender gives ownership back to the vendor after the eviction. When this occurs the investor needs to work quickly with an experienced solicitor.
Important to know for the investor is what the rights of a vendor are, such as lenders are not allowed to pressure customers through excessive telephone calls or correspondence and only contact the customer at a reasonable hour; this means between 8am and 9pm.
Moreover, lenders are not allowed to add charges, administrative, legal fees and interest (if it does not apply to the rest of the mortgage), to vendors in arrears without notifying the vendors about this. The lender must provide the vendor with a regular written statement, at least once a quarter, of the payments due, the actual payment shortfall, the charges incurred and the debt.
For complaints about lenders a vendor can contact the Financial Ombudsman Service (FOS). The FOS website can be found at www.financial-ombudsman.org.uk.
As mentioned at the beginning the number of arrears increases, which results in increase in the number of repossessions. Mainly this has to do with the economy which is in a recession. Another consequence of the recession is the increase in the number of people that claim housing benefit.
In order to be as helpful as one can be to its customers it might be interesting to gain some basic knowledge, therefore, the following outline about the general rules.
• The housing benefit for tenants renting accommodation from a private landlord is calculated by the Local Housing Allowance (LHA). The following website: https://lha-direct.therentservice.gov.uk provides more information about the calculation.
• The council needs to have proof that the vendor had no other choice than sell the property.
• The former homeowner must be a UK resident
• The former homeowner income and expenditure information must be provided to the local council, in order to prove that all the paperwork is up to date.
• A rent officer may be asked, by the council, to assess the market value of the property
• Race, sexuality, belief, sex, age, disability or belief should not be taken into account by the council when deciding upon the amount of housing benefit that will be awarded. Whenever this does occur the investor should suggest that the former homeowner contacts the local Citizens Advice Bureau (CBA).
www.rhettlewis.com
The UK's leading website with FREE resources for Property Investors
Nowadays, many homeowners are turning to investors, when facing repossessions, to buy directly from. To prevent having the stigma and credit black mark attached to their name.
The following provides basic knowledge to investors about preventing a repossession as well as advice for homeowners on what their rights are and how they can access assistance.
When you are called by a vendor who is in a state of panic, due to a possible repossession, try to find out the exact reason why one is calling.
What would be wise to keep in mind is that lenders often react to arrears by following set procedures and sending out automated letters and therefore suggest that one keeps in touch with their lender(s) to discuss where one stands.
Before a property is repossessed by the lender, the lender has to go through four stages. And these are:
1. A letter will be send to the homeowner after a minimum of three months in arrears.
2. The lender will refer the account to their solicitors if the arrears are unpaid for 3-6 months. The solicitors will send out a letter to the vendor demanding full payment and warn for the consequences when not paying the demanded amount.
3. The solicitors will issue County Court Repossession proceedings, this occurs when after a couple of months of arrears the lender is not being paid back.
4. The hearing takes place and the court makes one of the following decisions:
a. Adjourn; there is not enough information and therefore the hearing is adjourned to a later date
b. Dismiss or adjourn indefinitely; normally only when full payment of the arrears has been made
c. Issue a suspension order; the vendor comes up with an agreed arrears repayment schedule, though, if the vendor is not able to keep to the schedule the lender can obtain a possession warrant without further court hearings.
d. Notice of eviction; the vendor receives this from the court with a deadline to move out of the property. If an investor has bought the property he is able to stop the eviction from taking place by providing legal documentation as confirmation that the property has been bought.
e. Post Eviction; the lender gives ownership back to the vendor after the eviction. When this occurs the investor needs to work quickly with an experienced solicitor.
Important to know for the investor is what the rights of a vendor are, such as lenders are not allowed to pressure customers through excessive telephone calls or correspondence and only contact the customer at a reasonable hour; this means between 8am and 9pm.
Moreover, lenders are not allowed to add charges, administrative, legal fees and interest (if it does not apply to the rest of the mortgage), to vendors in arrears without notifying the vendors about this. The lender must provide the vendor with a regular written statement, at least once a quarter, of the payments due, the actual payment shortfall, the charges incurred and the debt.
For complaints about lenders a vendor can contact the Financial Ombudsman Service (FOS). The FOS website can be found at www.financial-ombudsman.org.uk.
As mentioned at the beginning the number of arrears increases, which results in increase in the number of repossessions. Mainly this has to do with the economy which is in a recession. Another consequence of the recession is the increase in the number of people that claim housing benefit.
In order to be as helpful as one can be to its customers it might be interesting to gain some basic knowledge, therefore, the following outline about the general rules.
• The housing benefit for tenants renting accommodation from a private landlord is calculated by the Local Housing Allowance (LHA). The following website: https://lha-direct.therentservice.gov.uk provides more information about the calculation.
• The council needs to have proof that the vendor had no other choice than sell the property.
• The former homeowner must be a UK resident
• The former homeowner income and expenditure information must be provided to the local council, in order to prove that all the paperwork is up to date.
• A rent officer may be asked, by the council, to assess the market value of the property
• Race, sexuality, belief, sex, age, disability or belief should not be taken into account by the council when deciding upon the amount of housing benefit that will be awarded. Whenever this does occur the investor should suggest that the former homeowner contacts the local Citizens Advice Bureau (CBA).
www.rhettlewis.com
The UK's leading website with FREE resources for Property Investors
Monday, March 09, 2009
Are repair costs capital or revenue expenses?
Given the collapse of the property market you have decided to stay put in your current premises. What tactics do you need to employ to ensure that you get the maximum tax relief on the cost of repairs you carry out?
Basics
Expenditure you incur on refurbishing a property will fall into three categories:
• Capital improvements. These are usually structural changes to a property e.g. moving doorways.
• Capital fixtures. These are items that when fitted become part of the building, e.g. certain electrical systems. They are known as integral features (see The Next Step).
• Repairs. These are categorised as “revenue expenses” as they may be deducted from your business income (revenue).
So what are the tax consequences for each of the above?
Capital improvements. Tax relief is deferred until the sale of the property, and under current CGT rules will only give tax relief between 10% and 18%.
Capital fixtures. These get tax relief at the highest rate of income tax you pay (currently up to 40%, increasing to 45% in April 2010) but the relief is spread over a number of years.
Repairs. Will also receive income tax relief at the highest rate of tax you pay, but usually all in the accounting year in which the expense is incurred. Therefore it’s preferred to claiming relief under the previous two headings.
Trap. You can’t have tax relief for money you set aside for future repairs. It will only be given if the need for the repair exists at the time the money is spent.
TIP. You can claim tax relief on money set aside for expenses to cover necessary repairs that are needed now but which you intend to carry out in future. A corresponding adjustment must be made in your accounts (see The Next Step).
A Grey Area
Sometimes a repair could be so significant that the Taxman will argue it’s an improvement as it increases the value of the property. In our view it’s the nature of the work that matters. Carrying out repairs that have built up over a long period does not transform them into an improvement.
Example. The Taxman will usually argue that to re-roof a property is an improvement. However, it may be that the only practical way to repair several sections of the roof that have fallen into disrepair over many years is to replace the whole thing. In our view the replacement would be cumulative repairs rather than an improvement.
Tip 1. The Taxman often looks to challenge unusually high figures in accounts, so by spreading the costs of repair between two or more years you should escape his attention. Therefore, plan you repairs accordingly.
Tip 2. It may be possible to link some alterations that would arguably be improvements to changes needed to comply with disability access e.g. moving doorways. The Taxman will accept some of these as repairs even though they are alterations (see The Next Step).
The Next Step
For information on integral features (TX 09.08.06a), accounting for repair costs (TX 09.08.06b) and the Taxman’s view on disability access costs (TX 09.08.06c) visit http://tax.indicator.co.uk.
Given the collapse of the property market you have decided to stay put in your current premises. What tactics do you need to employ to ensure that you get the maximum tax relief on the cost of repairs you carry out?
Basics
Expenditure you incur on refurbishing a property will fall into three categories:
• Capital improvements. These are usually structural changes to a property e.g. moving doorways.
• Capital fixtures. These are items that when fitted become part of the building, e.g. certain electrical systems. They are known as integral features (see The Next Step).
• Repairs. These are categorised as “revenue expenses” as they may be deducted from your business income (revenue).
So what are the tax consequences for each of the above?
Capital improvements. Tax relief is deferred until the sale of the property, and under current CGT rules will only give tax relief between 10% and 18%.
Capital fixtures. These get tax relief at the highest rate of income tax you pay (currently up to 40%, increasing to 45% in April 2010) but the relief is spread over a number of years.
Repairs. Will also receive income tax relief at the highest rate of tax you pay, but usually all in the accounting year in which the expense is incurred. Therefore it’s preferred to claiming relief under the previous two headings.
Trap. You can’t have tax relief for money you set aside for future repairs. It will only be given if the need for the repair exists at the time the money is spent.
TIP. You can claim tax relief on money set aside for expenses to cover necessary repairs that are needed now but which you intend to carry out in future. A corresponding adjustment must be made in your accounts (see The Next Step).
A Grey Area
Sometimes a repair could be so significant that the Taxman will argue it’s an improvement as it increases the value of the property. In our view it’s the nature of the work that matters. Carrying out repairs that have built up over a long period does not transform them into an improvement.
Example. The Taxman will usually argue that to re-roof a property is an improvement. However, it may be that the only practical way to repair several sections of the roof that have fallen into disrepair over many years is to replace the whole thing. In our view the replacement would be cumulative repairs rather than an improvement.
Tip 1. The Taxman often looks to challenge unusually high figures in accounts, so by spreading the costs of repair between two or more years you should escape his attention. Therefore, plan you repairs accordingly.
Tip 2. It may be possible to link some alterations that would arguably be improvements to changes needed to comply with disability access e.g. moving doorways. The Taxman will accept some of these as repairs even though they are alterations (see The Next Step).
The Next Step
For information on integral features (TX 09.08.06a), accounting for repair costs (TX 09.08.06b) and the Taxman’s view on disability access costs (TX 09.08.06c) visit http://tax.indicator.co.uk.
Thursday, March 05, 2009
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