11:33 AM, 6th January 2023, About 5 months ago 26
As the headline says, landlords who want to explain just how difficult life is right now to their tenants should give them this article. For tenants who believe we should have a rent freeze and all landlords are evil, then be prepared for a shock.
It’s a new year and we can expect critics to start lining up again to give all private rental sector (PRS) landlords a kicking. But hold on! I think you’ll find that landlords want to compromise and offer quality homes at a reasonable rent.
And if you think that every penny you pay to rent your home is sheer profit for the landlord, then you are sadly mistaken. Let me count the ways that highlight just how wrong you are:
Your landlord probably has a mortgage on your home and needs to pay it. Interest rates are going up and so is the mortgage (which tends to be dearer than residential mortgages). This is an expense few landlords can avoid but many will not want to increase rent for this reason alone. See ‘Inflation’, below.
Your boiler has broken? There’s a leak that needs fixing? One of the benefits as a tenant is that these are bills for the landlord. You don’t have to organise and then pay for repairs. Your landlord does and this will come out of the profits that he or she expects to make every year.
Yes, that horrible word. Did you know that landlords pay tax on their earnings (or turnover)? That’s not on the profits – minus their running costs – like other businesses. And some landlords will be pushed into a higher tax bracket, so they’ll pay more tax on their work earnings too. Basically, should your landlord make a loss, he will still have to pay tax on the total earnings! Crazy, right??
Hopefully, you have paid for contents insurance, so your belongings are protected. Your landlord will have to pay for the buildings cover and may have extra insurance such as paying the rent when no-one is living in the property.
If you don’t contact your landlord directly when you have an issue, then it will be the letting agent. They need paying.
You have a Gas Safety check carried out every year to ensure that you and your family are kept safe. If there is a problem, the landlord must fix it. This certificate also needs paying for. Landlords also have to carry out electric checks on your home too every few years.
A real bugbear for landlords is for councils who introduce licensing to ‘improve standards in the PRS’. There are two problems that tenants need to understand: a) there will rarely be any checking of properties so no-one will ever know if you live in a sub-standard home, so a scheme has effectively been created to employ council staff. And b) who pays for this license? You do! The council may say that the landlord will pay – which they do – but this is a cost that is passed onto the tenant with higher rent.
Have you wondered when you watch the news about rising inflation and prices whether your rent will increase by the same amount? Probably not. Rising prices affect all of us, landlords included. It’s likely that if you do get a rent rise it will be at a rate BELOW the official inflation rate. That means you benefit.
I could wax lyrical about Section 21 – also known as the ‘no fault’ eviction notice. This is a misunderstood way for a landlord to get their property back when they need it. It doesn’t mean that landlords will evict you should you complain. Let’s put it this way, if you owned a home and trusted someone to pay rent and look after it while living there but they didn’t, what would you do? Would you think it would be OK for the tenant to live in your property rent free? Lots of people think this way and it is driving landlords out.
Sounds great, doesn’t it? A rent freeze will mean you won’t have to pay more in rent while prices rise. But the landlord’s outgoings don’t just stop rising. A rent freeze damages the sector and will see landlords selling up to avoid being told by the government what they can and can’t do with their rental property. That means fewer homes to rent.
Did you enjoy the two years you spent at home while the government (AKA the taxpayer) paid your wages? Great. Landlords got no help.
Did you know that finding tenants and checking their references is a costly and time-consuming exercise? We can’t pass these costs on.
If you do have an issue with rising rent prices and fewer homes to choose from, don’t blame the landlord. Blame the government for not building enough homes in recent years – especially social housing.
I’ve left this favourite of mine until last. EPC stands for energy performance certificate, and we need one for a tenancy. There are plans to make all rented homes have a minimum rating of ‘C’. That means more expense. It might also mean that you have to move out while the improvement work is carried out. It might also mean your landlord decides not to bother and will sell-up instead. By the way, there is no legal deadline for this to happen – it is meant to be 2025 but the government has gone quiet which means they may have calculated how many landlords will quit!
Why is any of this important to you? Because The Deposit Scheme carried out a survey recently and found that awareness of rental reforms planned for this year are unknown by 60% of tenants. Surprisingly, 26% had heard about the reforms but had no idea what the proposals are.
The big change will be the end of Section 21 notices – see above. Look at the problem this way: If you had a valuable asset that you had no guarantee of getting back, would you run that risk? I know this plan plays well with the likes of Shelter and Generation Rent but in reality, it will force lots of landlords from the sector.
And other landlords who are fed-up with the proliferation of laws and regulations and more taxation will follow them.
But that’s good right? There will be fewer landlords left to exploit the poor tenant. Landlords not getting rich on rents that people like you work hard to pay.
Well, it’s not quite like that. With fewer landlords and rental properties available means that demand will increase, and rents will rise too.
When rents rise you might find yourself locked out of the market and need to find social housing instead. Good luck with that.
This situation isn’t getting easier for landlords or tenants, but don’t worry, with lots of landlords leaving there will be lots of homes for you to buy. Oh, wait…
So, when you read or see a news story about poor tenants being evicted for no reason, or that rents are rising, just for once spare a thought for the landlord involved. Most of them are decent, hardworking people who want to provide a quality home for rent.
The constant flow of negativity and criticism is also another reason why landlords are packing in.
As your mother might have said, be careful what you wish for.
Until next time,
The Landlord Crusader
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12:09 PM, 6th January 2023, About 5 months ago
great - BUT....giving this to a tenant will only serve to cut your own throat.
I am more than happy to list all these categories (and more) so the tenant can see why for example I am raising the rent or perhaps selling up. While we want to be open and honest - as it reads it sounds like more of a rant and there is no way a tenant is going to have any sympathy.
Term it much clearer in terms of how each of these GOVERNMENT decisions directly effect them (yes show them the figures and costs of the exact property they rent) plus the implications and it brings it right home.
What you don't want to do is scare them so much into handing their notice in - or looking at ways of making sure they stay in your house by using some of these things against you. Remember if S21 is ousted, its open season in court so expect a whole raft of allegations against you if you are seeking possession as there will be very little mandatory grounds AND by default they can still claim disrepair etc even if it doesn't exist just to protract the claim.... Even if all allegations are false, it means they stay in your property longer while the case progresses.....and we all know how judges like kicking the can down the road to NOT evict anyone don't we.....
12:20 PM, 6th January 2023, About 5 months ago
I became involved with a FB spat from someone who posted - hashtag abolish all landlords.
I explained there are really good landlords who provide great properties for reasonable rent . I tried to explain that insurance companies have for your years been renting out commercial premises and are moving into the private rental sector and it won’t be cheap.
Result - I wasted my breath ! Her bottom line is that no one should be allowed to profit in anyway from the private rental sector !
13:13 PM, 6th January 2023, About 5 months ago
Reply to the comment left by Caroline Nicholls at 06/01/2023 - 12:20
This is why I gave my property to a reputable letting agent in the local area. It seems a lot of people have this odd mindset that only companies are allowed to make a profit. I had one non paying tennant say to me, " I havent paid the rent because you have enough money already". I tried to explain the the property is highly mortgaged, and the bank will throw him out if I cant, but he wasn't interested, he just had this excuse that he tried to justify his non payment of rent. He was just that stupid!
At the end of the day, it's like everything, a pendulum that swings one way, and then the other. When there are no homes available to rent, and those that are available are too expensive, the Govenment will win votes by introducing "new" legislation to encourage new landlords to rent out homes, just like Thatcher did in the 1980's with the new Shorthold Tenancy Agreement. Give it 20 years and it will all change. Rent caps dont work. They have been tried, and it fails everytime. Make it impossible for Landlords, and it becomes impossible for their tennants. Make it impossible for companies, and it will become impossible for their customers.
13:18 PM, 6th January 2023, About 5 months ago
Reply to the comment left by DSR at 06/01/2023 - 12:09
We should be grateful of course to the landlord crusader for the excellent summary of landlord woes but I agree that it won’t exactly engender a warm fuzzy feeling towards landlords. If you have multiple tenants perhaps a more sympathetic tone and perhaps test it on a sample of tenants. I myself will be writing to tenants and have been mulling over the best approach.
13:21 PM, 6th January 2023, About 5 months ago
What many tenants don't appreciate is, if they get into arrears, they have to pay them, plus their ongoing rent. The longer they leave it, the worse their problem. If/when they are evicted, they will be required to pay their debts, and will have a massive black mark against their credit worthiness. This will prevent them obtaining future rentals, loans, credit cards, bank accounts, mortgages, maybe even employment.
I tried to explain this to a young, feckless tenant with 6 months of arrears, and to set up a repayment plan. He ignored me, and 10 months later I managed to evict him.
He may think he's been clever and saved himself £12,000, and I can't get it back because he's self-employed. I suspect he's now finding life somewhat more difficult, and he has the rest of his life ahead of him. Clever, eh?
13:24 PM, 6th January 2023, About 5 months ago
Reply to the comment left by NewYorkie at 06/01/2023 - 13:21
The moral of that story is, never take on a self-employed or young tenant without a house-owning guarantor
13:42 PM, 6th January 2023, About 5 months ago
Reply to the comment left by Neilt at 06/01/2023 - 13:24
My agent did the vetting, and apparently, he wasn't self-employed. I take your point and it won't happen again... because I'm exiting the PRS.
14:06 PM, 6th January 2023, About 5 months ago
As a landlord of 30 years + I am now going to start a a plan to sell my portfolio. My mortgage payments on some of the properties will double and the odd one will triple. I cannot raise rents to cover the costs so I am now going to sell. There will be others like me in the same position. The level of available properties for rent will diminish and therefore the government will have a greater homeless problem.
I am totally fed up of being a target for government tax so I am getting out.
14:25 PM, 6th January 2023, About 5 months ago
Reply to the comment left by DSR at 06/01/2023 - 12:09
I couldn't agree more. Sending a note with sarcastic comments to your tenants, most of whom are decent people and many of whom are struggling financially with inflation and the increase in fuel bills, will only alienate them.
Far better to produce more measured arguments and try to persuade MPs that they are hurting the people they profess to help.
15:23 PM, 6th January 2023, About 5 months ago
Section 24 and Tax
One of the things is that mortgage interest is no longer a deduction from profits. It is instead a 20% tax reducer only.
It is always suggested, those with several rental properties (in excess of half a dozen normally) to either incorporate or transfer the properties to an LLP and then incorporate a few years later. The corporation tax rates are lower than income tax rates (potentially) and you are only taxed on profits withdrawn from the company and not on rental profits earned.
You do get relief, as an unincorporated, on your running costs, so this bit, is a little misleading.