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Getting Section 21 Right

Published: 19/02/2018   Last Updated: 20/02/2018 16:12:44   Author: Christopher Toynbee    Tags: Renting, Letting, Landlords

A section 21 notice is one of two ways in which a landlord can seek possession of their rental property back from their tenants (the other being a Section 8, which will form part of a later article).

A Section 21 notice is the most commonly used method of seeking possession. It can be served any time after the end of month four of a fixed term tenancy and at any point during a periodic tenancy. It provides the Tenant with a two month’s notice of the date of which the landlord will seek possession.

All it involves is the completion of a two-sided form (now a form 6A) which is then served on a Tenant. Sounds relatively simple, right? Unfortunately, not.

There is a raft of scenarios where a Landlord cannot serve a Section 21 and a seemingly endless number of hurdles the Landlord must clear for the Section 21 to be correctly issued and served.

Below is a non-exhaustive list of reasons why a Section 21 notice cannot be served/ won't be valid:

  • During the first four months of a fixed term tenancy (the original tenancy)
  • Where the Landlord is prevented from retaliatory eviction under section 33 of the Deregulation Act
  • Where the landlord has not provided the tenant with any of the following documents
  • The EPC for the property
  • A valid Gas Safety Certificate for the property
  • The DCLG’s “How to Rent” guide
  • Where the landlord has failed to comply with deposit protection legislation, including but not limited to protection, within the right time frame and issuing of all relevant documents to the tenants within strict time limits
  • Where the property requires a House of Multiple Occupation licence and doesn’t have one
  • If the Section 21 does not provide for sufficient notice
  • Where the landlord cannot prove service of such notice or it is done in a way not agreed within the tenancy agreement
  • If the Section 21 information is incorrect
  • If six months have passed since the issuing of the Section 21 notice
Even assuming all the above is undertaken correctly, the tenant doesn’t actually have to leave at on the date specified by the section 21 notice. The notice is one for ‘seeking possession’, not for eviction. Eviction is provided for by the courts.

In practice, and with the help of good management, the vast majority of tenants will leave on or before the date seeking possession.

At Redmayne Arnold & Harris we will serve section 21 notices on behalf of our landlords under our Fully Managed service. We have strict processes in place to ensure that all areas are covered so that there is no uncertainty with regards to the validity of the notices we serve.

The changing face of Buy-to-Let

Published: 18/02/2018   Last Updated: 19/02/2018 10:06:35   Author: Christopher Toynbee    Tags: Landlords, Letting, Rental Market

The world of buy to let is unrecognisable for that of 15 or even 10 years ago. Long gone are the days of 110% mortgages, self-certification and same day remortgages.

Investors now find themselves in an environment where they are seemingly being attacked from every angle. Increase in stamp duty levies, the tapering out of mortgage interest relief and the introduction of portfolio lending assessments. This is where a mortgage company will require much more detail from the Landlord in terms of personal assets and liabilities and income than they had previously.

This has led to many “one-off” landlords - and some more established portfolio landlords - selling off their investments to avoid these additional costs and difficulties in obtaining finance.

Other landlords trying to protect themselves by transferring properties into a Limited Company structure, where mortgage interest costs can still be offset against profit. We would highly recommend speaking to your accountant before pursuing such a strategy as it does come with many other tax implications.

Lending to Limited Companies is now fairly mainstream, and the cost of doing so is not dissimilar to that of personal mortgages. For example, a fixed 5 year deal at an 80% loan to value will attract an interest rate of sub 4%. However, there are also associated legal costs and the mortgage arrangement fees that can vary between 2%-3% of the amount borrowed, adding to the overall cost.

By comparison, personal lending tends to be characterised by much lower arrangement fees despite the fact that the rate of interest charged is really much the same as that for lending to Limited Companies.

Interest rates themselves have seen a recent rise and there is talk of at least one, if not two, more rises later this year. While landlords have enjoyed rock-bottom rates for a long time now, the timing of an increase in rates, combined with the harsher tax and legislative BTL environment we now find ourselves in, will be a particularly bitter pill for landlords to swallow.

10 changes you need to know as a landlord

Published: 04/12/2017   Last Updated: 04/12/2017 14:23:20   Author: Christopher Toynbee    Tags: Landlord, Letting, Buy-To-Let

While conditions in the local property market may not be offering the double-digit capital growth of recent years, property in and around Cambridge still represents a solid investment. But it's important to have a good understanding of the various new regulations and legal requirements. Here are 10 of the most important changes that are impacting landlords in today's private rented sector.

1. Mortgage interest tax relief changes Before April this year, landlords could deduct their mortgage interest costs from their income when calculating their tax bill. Now though, you can only offset 75% of your mortgage interest, and this figure is being gradually reduced to zero by 2020. Instead, landlords can claim a tax credit worth 20% of their mortgage interest – a change which will hit high-earning landlords hardest.

2. The end of the wear and tear allowance Until 2016, landlords letting furnished homes could deduct 10% of the annual rent from their profits before they paid tax to account for ‘wear and tear’. This ‘wear and tear’ allowance was permitted regardless of whether they had actually spent any money on furnishings that tax year. According to the new taxation rules, landlords can only deduct the cost of replacing or repairing household items like-for-like.

3. Right to Rent checks Under ‘Right to Rent’ legislation which came in to force in February 2016, landlords have to ensure their tenants have the legal right to live in the UK. This involves checking passport or visa paperwork before the lease is signed.  WIth RAH managing your property, we’ll deal with this on your behalf, but the consequences are severe – if you’re found to be letting to a tenant who is living in the UK illegally, you could face a fine of up to £3,000.

4. Energy efficiency regulations From 1 April next year, any properties rented out privately must have a minimum emergency performance rating of E or an Energy Performance Certificate (EPC). The rules will apply to new tenancies from April 2018 and for existing tenancies from April 2020. Fines of up to £4,000 can be imposed for landlords who breach the rules.

5. The Housing White Paper In February, the government released a White Paper on ‘fixing Britain’s broken housing market’. Primarily, the paper focuses on freeing up land for housebuilding, encouraging construction of starter homes and addressing unfair rental practices. With the uncertainty caused by the recent general election, however, it remains to be seen which – if any – policies will be implemented.

6. A property market slowdown Landlords need to be aware of market pressures caused by external events. We found that last year’s Brexit vote had little effect on \cambridge house prices, and any talk of a house price crash has so far been unfounded. That said, transaction levels have been slowing in recent months – if value growth follows suit, property investors may see weaker returns.

7. Section 21 eviction process In 2015, new regulations were brought in surrounding the Section 21 eviction process, requiring landlords to follow the rules around evictions more closely. While these requirements have existed for some time, some self-managing landlords may not be aware of the complexity of the process.  As an ARLA qualified agent, RAH is fully up to speed on the Section 21 requirements.

8. Tenancy deposit protection Compulsory tenancy deposit schemes have been around for a decade, but there are signs that the deposit system might be beginning to change. From deposit free renting in the build-to-rent sector to apps offering tenancy insurance, a number of schemes are being touted as a new alternative – so it’s important for landlords to keep abreast of the latest trends and technology.

9. Stricter buy-to-let lending regulations Last year, the Bank of England announced it would introduce tougher new requirements for buy-to-let borrowers. The new rules require landlords to bring in higher levels of rent relative to their mortgage costs. In addition, landlords with four or more properties will face additional stress testing, and be required to provide more information about their income and debts.

10. The continuing impact of stamp duty changes The stamp duty surcharge – taking effect in April 2016 – is arguably the most divisive of the measures introduced to cool the private rental sector. The 3% surcharge means, for example, that a landlord buying a £200,000 home would now pay £7,500 in stamp duty, compared to just £1,500 before the changes. Landlords need to factor in these additional costs before making a new purchase.