This week’s edition looks at energy efficiency improvement trouble for landlords plus we have an important decision on Rent Repayments Orders.
But first –
Do you know how many landlords there are?
Quite a lot – in answer to a Parliamentary question, Lord Agnew of Oulton revealed information obtained from HMRC showing that the total landlord population now exceeds 2.65 million.
You can see details in the Negotiator here with numbers given foe each Local Authority.
Rakusen v. Jepson decision overturned on appeal
This is the case which is discussed here, where at the first instance hearings the Judges found for the tenants and allowed the order to be made against a landlord who had sublet to a ‘rent to rent’ tenant who was the applicant’s direct landlord.
In a way, I can see that this is a fair decision – as it is supposed to be a ‘repayment’ order. So arguably it is unfair to order the superior landlord to replay money which has not been paid directly to him by the tenants. For example what if his tenant (and the applicant’s landlord) is in arrears with his rent payments to the superior landlord. Surely it would be most unfair for the superior landlord to pay out when he has had no rent in.
However, the problem, with rent to rent situations, is that frequently the rent to rent landlord has no assets leaving tenants effectively without a remedy.
This is what Giles Peaker had to say about it on Nearly Legal:
Practically, this will make a significant difference to those seeking RROs against less than salubrious landlords.
Firstly, there is the problem that many ‘rent to rent’ setups are companies or persons of straw. An RRO may be made against them, but never recovered as the company will just fold, to be replaced by another which is suspiciously similar. For tenants, this means that they are expected to take on the expense of the application and the difficulty of establishing to the criminal standard that a relevant offence has been committed by the landlord, while facing a very high degree of uncertainty that they will ever recover any sums ordered. This is not a way to encourage RROs as a wing of enforcement, driving bad landlords out of the sector.
Secondly, there is the ‘criminal’ problem, as set out by Safer Renting here, where multiple disposable ‘companies’ are involved precisely to obscure responsibility and liability. Being able to enforce against the property owner (often, in the dodgier end of the market, the actual beneficiary of the rent) was an effective way to short circuit the tangled web of intermediate companies.
But, barring any appeal to the Supreme Court, that is now a matter for the Government and Parliament to resolve. In express terms. We will see if it is taken up in the allegedly forthcoming Renters Reform Bill…
Note that Tessa Shepperson will be speaking to Justin Bates, the barrister for Safer Housing, the interveners in the case, on 8 September 2021 at 10.30 am. It will be a free webinar and you can sign up to it here.
Support for landlords making energy efficiency improvements to their home is failing says the NRLA
The NRLA this week have argued that the government support is not good enough regarding landlords making energy-efficient improvements to their properties. Only 5% of private rented households have received government help to fund energy efficiency measures despite having the greatest need compared to other areas of the property industry.
Currently, in England, a property can only be let out if it has a minimum EPC rating of ‘E’. By 2025, the government aims to have all new private rented tenancies to be in properties that have a minimum EPC rating of at least ‘C’.
What makes it so difficult for landlords to upgrade properties to level ‘E’ and then subsequently to level ‘C’ by 2025, is that making these changes are often very expensive.
According to government figures, it would cost an average of over £7,500 to bring rental properties needing it to an energy rating of at least C, whereas the average net annual income for a rental property for a landlord is less than £4,500.
With this in mind, it is understandable why landlords are baulking at the size of investment needed and why the NRLA are calling for more financial support for landlords.
The NRLA is calling for energy efficiency measures carried out by a landlord to be offset against tax, as is the case with repairs and maintenances, rather than as an improvement at sale against Capital Gains Tax. This would address anomalies including that whilst replacing a broken boiler is tax-deductible, replacing one for a more energy-efficient system is not.
Ben Beadle, head of the NRLA saying:
The Chancellor needs to develop a financial support package that works for landlords and tenants. This should especially be targeted at the hardest to treat properties where the cost of work will be prohibitive for landlords.
EPCs labelled unfair by a growing amount of landlords
Following on from the previous items, a recent article has been published claiming that a growing number of landlords are calling for an updated EPC rating system.
In a recent survey by Countrywide Surveying Services, more than 30% of valuers said EPC’s were not accurate or a reliable source or of high quality. The reason for this is the growing assumptions attributed when trying to evaluate a property meaning that EPC ratings can be based on misguided information.
An NRLA spokeswoman said:
EPC assessments don’t take into account measures which may be hidden, for example cavity wall insulation, unless the property owner has documentary evidence that they have been installed…We are calling for building renovation passports to replace EPCs.
Agents – watch out for fraudulent tenancy applications
There are increasing and agents should be on the watch for them.
Propertymark wants to strengthen its message to government and illustrate the wide range of fraudulent tenancy applications its members deal with regularly, and is asking for agents to write in with their experiences.
Falsified bank statements, references and payslips have become more prevalent as a way for dishonest tenants to apply for properties they can’t afford.
However, here are a few ways you can spot the fraudsters:
- If the applicant is renting a property through a company or if they are a member of a company, look it up on Companies House. Looking for details such as when the company was founded and if they file their annual accounts can let landlords and agents know whether the company is big or well managed enough to look after a property.
- Scrutinise bank statements closely. A bank statement must reflect a real person living their life and should contain their income.
- The use of open banking allows a tenant to share their financial information with a referencing agency which can validate their bank statement and check to see if the bank balances match up.
Many agents are now using a specialist independent referencing agency to verify as far as possible that the information received is valid and this is probably the best course thing to do.
Nathan Emerson, Propertymark’s CEO, commented:
Fraudulent tenants who are acquiring often high-end properties fully knowing they cannot afford them is a growing problem which needs immediate attention. With the increase in cases and the sophisticated ways these people are producing falsified documents, agents can be completely unaware of this fraudulent activity until faced with the devastating consequences. Agents should remain vigilant and do all they can to weed out the criminals from the law-abiding tenants.
Oxford to ban agents and landlords who discriminate against universal credit tenants
In a report made by Oxford councillors, it argued that letting agents and landlords ‘overtly and covertly’ discriminate against tenants who are in receipt of benefits. The report also argues that there is a ‘systematic favouring non-benefit claimants’ when deciding who can live within properties.
The council has also argued that DSS discrimination has become more widespread as a result of the lockdown and the pandemic.
The council have committed to preventing discrimination against DSS tenants through several measures, however, most notably is through it’s selective licensing scheme.
In a Blog post recently, which can be found here, we discussed property supply to the lower end of the private renters market and why it is struggling.
One of the most significant reasons was the over-regulation which the author, Julie Rugg, argued was one of the reasons why landlords are leaving the lower end of the market. Licensing and other such regulations increase expenses for landlords, eating into their rental income.
While the selective licensing is reasonably priced in Oxford, compared to other areas in the country, and improves housing standards in areas, Councils could consider offering incentives for landlords to bring in DSS tenants, which might encourage more to do so.
- Buy to let insurance company suggests that landlords may be more successful if they allow pets.
- Article revealing how many MP’s are landlords
- Housing conditions in the PRS a national scandal claims letting agent
- Savills says House Prices set to continue rising as supply shrinks
- Revealed: What letting agents hate (and love) about their jobs
- Labour unhappy at multi-month up-front rent demanded by landlords
- Politicians want action on Airbnb lets using ex-council houses
- Agents who charge tenants £30 for viewings risk Tenant Fees Act prosecution
Newsround will be back next week.