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7:15 AM, 17th April 2020, About 4 years ago 20
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I wrote a letter to my local MP asking for him to have a serious look at how the new legislation is effecting me. He was very sympathetic and said he would forward it to the Government for consideration, which he duly did.
I have received the usual response that I don’t think shows much understanding of the issues. My original letter is below. I would very much like some opinion and advice as to whether I should respond and with what?
Meeting with Gareth Snell MP
New & Pending Legislation/Rules Affecting Me as A Landlord
My History
I am intelligent and very hard working but unable to commit to the traditional 9-5 working day due to ill health; so, it made more sense for me to be self-employed. I worked as a beautician and then had a catering business. I soon realized that I could not work or survive financially on the basis of my man-hours in return for an hourly wage. I needed a business where I could invest time and energy at my pace to produce a passive income.
I started to purchased my houses from nothing, 20 years ago, relying on buying slowly using capital growth and equity release = huge Interest Only mortgages with very high loan to value, in some case negative equity from the start (Black Rock Mortgages).
I’ve never been able to get life insurance and due to having a shortened life expectancy there was no point in investing in a pension. My houses have been and are my income and my only financial future.
What has happened?
The government set the stage with the option to get into the buy to let business in the 1990’s. I’ve worked very hard through ill health, another 9 years on dialysis, second transplant, stage 4 cancer and treatment, seizures and other associated complications, to make a successful business that can function very well even whilst I’m ill.
So, what is the problem?
Unfortunately, the Government has decided over the last few years to introduce, take away and change many of the fundamental rules for landlords. Some examples of this are in the list at the start of this letter.
I believe some of the intentions of the many changes and this tax (as well as increasing revenue) is to get rid of bad landlords, empower tenants and restrict bad (?) practice. At every turn Landlords have had their rights restricted, their income streams dammed up and their costs increased.
This is all before we think about the interest rates!
So I now rely on the very low interest rate. It has meant that over the last few years I’ve been able to do extra work on my houses. In retrospect, I should have used this money to reduce my Interest Only Mortgages i.e. tried to survive instead of improving the living standards of my tenants.
If the interest rates go up even a little bit, I will potentially have to go bankrupt.
An Observation
Section 24 doesn’t affect landlords who can: –
This is a direct tax only on the landlords who have taken out mortgages and poorer landlords. I do wonder if this could be classed as discrimination?
Potentially the only landlords left standing could be the cash rich ones, the institutions, the landlords able to transfer their houses into limited companies or move abroad and the council.
The Consequences
Not allowing me to have my mortgage interest, tax deductible, means that the huge debt that I took on to build my business has become the very thing that could take my business down. The long-term business plan I had put in place for my financial security is no longer viable and I have potentially no other options.
A major consequence of considering changing the eviction rules without due consideration of now each change will impact, is that it is being planned to make it harder and in some cases impossible for landlords to evict tenants, here is an unfortunate example of this – There has been a case recently where a problem has been identified, under another new rule that tenants have to be given a copy of the Gas Certificate before they move in. Due to a genuine clerical error a copy was given to the tenant after move in.
A Section 21 eviction was subsequently issued and won. However, it was turned over by the court due to the late Gas Certificate.
The result – This landlord can never get this tenant evicted, as this situation can never be resolved under the newly amended rule! It has even been admitted that the Gas Cert rule was never meant to cause this situation.
I think that in theory the government, believe most people would like to buy their own home, but the reality is that many tenants rent for a reason.
The Capital Gains Trap is where the profit made on the sale of a property, after paying off the mortgage, solicitors and agency fees, is less than the tax payable to the government. This affects landlords with large mortgages, those of us who were advised to take out IOL (interest only loans). We were sold these on the basis of capital growth over the term of the loan, normally 20-30 years. This would be the case if the loans were able to see out their original term, but the Governments act of changing the goal posts is forcing us to sell before we’d expected to.
Fees are a way of recouping our costs. Most landlords relied on an Estate Agent to fairly administer this fee in finding them a tenant. Unfortunately, the Agents became very greedy, and rightly were told to correct this. Unfortunately, this resulted in all fees being banned and as a consequence becoming another cost to the landlord. I’m lucky because I manage my own houses. I used to charge £65 per applicant (guarantors free) to cover everything, so I’ve only lost the ability to cover the outgoings.
Most of these consequences are huge to me and they could also leave my tenants homeless; most of whom have been with me for many years. The countrywide impact could be disastrous, resulting in private landlords being very careful who they choose to house, there just will not be enough leeway to take on high risk tenants, i.e. DSS, universal credit, low waged, bad history, addiction etc. As a natural result of this, tenants will find that rental homes become more expensive and harder to secure.
I could get out of this situation by selling 1-2 houses per year and taking advantage of the annual CGT allowance, but it could take 2 decades for this to conclude, in which time I will potentially have passed away, and if I was still around I’d have no income! If fact there would come a point where the economies of scale would make the houses no longer able to support me, or the cost to sell more than the profit, after paying off the mortgage, agent, solicitors, tax etc. that I’d have exhausted all my funds.
I have been so upset, disheartened and unable to see a way through this. Thinking recently that my only option was bankruptcy, a life on the dole, a council flat and letting all my tenants down; I was rushed to Greenfields Mental Health Centre with suicidal thoughts. After emergency counseling and some expert guidance, I have decided to try to understand the law and fight these unfair laws and rule changes. To this end I start a law degree next month; in the meantime, I’m going to try to get my property business through the next few years.
In parallel to this, I have offered some of my working tenants the option to buy the house they rent off me. I have only 1 tenant so far who can afford to buy their rented home, I am shocked, as I believed, as I’m sure the government do, that most working tenants would prefer and could afford to own their own home.
I aim to give any tenant buyers a small reduction in the price; after all I will have saved on agency fees and avoided the rent void if I was evicting them first. I’ve tried to find out if there is a tax break if I do this, after all isn’t this one of the results the government wanted? As yet I can’t find any incentive to do this, other than to try to help my tenants.
If I end up losing my business, I will be another body on benefits and asking the government to provide me with a suitable home.
Landlord & Resident Stoke-on-Trent
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Mick Roberts
10:03 AM, 17th April 2020, About 4 years ago
Great words.
Capital cost Mortgages no longer getting interest tax relief – Section 24 = making little or no money after all other costs
Possible Changes to the eviction rules – Section 21 = stricter rules on who can rent
Capital Gains Tax Trap – hard to sell and make enough to cover the costs = landlords not able to sell.
Removal of being able to charge fees, even though costs are incurred = tenants can put applications in all over the place, knowing they are not going to fulfill their side of the arrangement even if they pass.
And u right, some of us Landlords who bought years ago, we gonna' manage, we gonna' still survive, albeit much harder work & hassle. Again the tenants end up a big loser which the Govt & Councils policies.
My long term DDS tenants can't get anywhere.
I'm offering all my working tenants to pay their 5% deposit to buy their home from me, still none got past the first stage.
Gromit
10:59 AM, 17th April 2020, About 4 years ago
Great summary.
I too have written and met with my local MP on each of the topics you mention individually. Their seems to be a standard procedure followed by MPs/Minister to put you off.
1. if you write you'll just get fobbed off
2. you then meet (6 week waiting list) with your MP who takes you a bit more seriously and the give sympathy with your case (to keep you onside/hoping to get your vote at the next GE). Who writes to the relevant Minister.
3. 6 weeks later you get a standard boiler plate response (form a minion) cut and pasted from the original announcement of the policy
4. you make another appointment (another 6 week wait) with your MP to go over the same points again as the Minister's minion didn't answer any of them.
5. another 6 week wait (by now they are hoping you've lost the will to live or just got on with your life and forgotten all about this).
6 letter again from a minion saying how valued Landlords are to the economy and society but regurgitating the policy with some acknowledgment to your own circumstances, and promising to keep the policy under review.
7. go back to 4 and repeat ad infinitum
I've no yet found away to gut through the constant delays, and barrage of platitudes.
My MP (Con) when Sec.24 was announced tried to hide behind the fact as he wasn't in "Government" he couldn't do anything (he was embarrassed when I said then why did you vote for it? ) Now he's a minister (in the Foreign Office) he hides behind "collective responsibility".
MPs are masters of stonewalling people. I haven't voted for him in the last three GE's, but sadly he's in a Tory safe seat.
Question Everything
12:20 PM, 17th April 2020, About 4 years ago
The problem is endemic in our "system". It is not the laws, it is the people who make them.
I remember that before the 2008 bank induced market crash, the government rhetoric was that the building corporations were sitting on "land banks" and eking out new properties at a rate to sustain high demand and therefore a high return. The Gov found it had no resources to force them to build, it's was/is an industry that has a strangle hold on the housing supply. They were speaking about introducing taxes to unused land, but obviously that would hurt large land-owning friends of the politicians.
The rhetoric post 2008, from probably about 2011 was that it was the "nasty" landlords that were buying all the properties and making the youth poorer by not being able to afford a first home.
If I remember correctly, in the investigations that 118 did of the S24 tax scam, it was found that the Tory party was being lobbied by building corporations. Nice gifts being donated.
Hey presto S24! Amongst many other tightening controls, and Shelter became an arm of the gov propaganda machine.
The corporations post 2011, had already realised that there was a lot more £/sqft in private homes than offices so their models changed to building apartment high-rises, that they could self manage and also take the Service charges for. Quids in!
They knew that the work-place economy was changing and more people would start to work from home, so large office high-rises were becoming uneconomical. (I have been privy to industry conferences)
The councils were happy to give them the planning approvals for their constructions because it increased the CT significantly in a small space, and they agreed humanitarian deals with "low cost" housing whereby the corporations would "sell" a certain percentage at low cost. Basically, they "sold" them for 25% market rate and rented the remaining 75% back to the shared owner. Bargain! And the Councils therefore looked good to the public for allowing old Council housing to be demolished.
The Chinese, Russians and Arabs all bought in to the shiny new London buildings, and this became the new gold.
The attack on the PRS has not relented since.
The incredible amount of virtue-signalling by .Gov over the last number of years is effectively inverse to the prosperity of the people. What does that tell you?
Sociopaths will be sociopaths, and the only gift they have is that of manipulation and control and making other's subservient and suffer, they are not clever, they just have the "gift if the gab". When the world wakes up and realises that we are not being dictated to by an "unreasonable" or "uncaring" or "incompetent" governments but rather that these traits are the character traits of Sociopathic Personalities, maybe then things will change.
The HMRC reply about the S24 initiative I remember to be quite infantile. Even a national Accountants regulatory body (can't remember the name) refused to accept it made any sense. It wasn't supposed to make sense, it is what a psychologist would call "word-salad". Politicians speak "word salad" compulsively.
I encourage you to take strength in the knowledge that you are not wrong about the unfairness, but that there are bigger things at play and we and the tenants are just the collateral damage for their manipulative games. Therefore the best reaction we can have is to be determined to not let them ruin our livelihoods.
You are not wrong to feel the way you do, and we all should all feel appalled at the situation. If enough of us did maybe some change would occur.
Property 118 has done an amazing service to us with regards to this!
We are having our prosperity robbed from us. It is not about saying this as an argument but as a truth, which is more empowering. I encourage you to look to at ways you can get around the problem, albeit not immediately apparent. It sounds like you could have enough means to create a Ltd Co out of your property portfolio, maybe speak to Mark at 118 about it.
Send in your letter anyway, the more the better.
On "fairness", I was denied a fair loan by TMW just yesterday because they said I am in the 40% tax bracket. I have never been in the 40% tax bracket, and am far off it. They say because I own more than 4 properties that is how they classify me. No figures were discussed, I pay myself only £8,000 as a director's salary from my Ltd Co, but computer says "no". Does that make any sense either? You can't argue with an inexperienced recent graduate of English Literature looking at a spreadsheet. But they have a lovely speaking voice.
This is not an economy, it is a play thing of those in power who virtue-signal to make us run from pillar to post rather than be productive. They limit our ability to produce which would give them more tax revenue, by increasing their taxes to make us work harder to make the same money. They say this is for the "greater good", their favourite virtue signal.
Good luck and stay strong.
Anne Nixon
12:24 PM, 17th April 2020, About 4 years ago
Wow! This is so powerful and you explain so eloquently your experience and the situation myself and I imagine the majority of small landlords find themselves in.
When S24 of the 2015 finance act was first introduced I was in regular contact with my MP and wrote to the then Chancellor and the then housing minister about my concern at landlords being removed from the General Accepted Accounting Principle (GAAP) of tax being levied on income after business costs have been deducted.
What I received from them was not even a considered response it was a polite verbatim regurgitation of the official line. They all spoke with regret the need to "level the playing field", they all used that exact phrase and I was left feeling that I may as well not have bothered, it was like talking to the wall and I had not been heard.
Clearly they were actually absolutely unconcerned about our plight and their only concern was for their own careers.
I don't know whether your letter will achieve anything but it certainly should.
The onslaught that small landlords have had to face over the last five years is unprecedented in business history I think.
We have little representation higher up where it matters, we are little individual people with no voice, to be bullied, demonised and taxed out of existence.
If we are to wait for the government to realise this and start to redress the balance I fear we are in for a long wait but I wish you all the very best and I think your letter should be shared and distributed as widely as possible.
Gromit
12:40 PM, 17th April 2020, About 4 years ago
Reply to the comment left by Anne Nixon at 17/04/2020 - 12:24
I'm a bit more hopeful regarding Sec.24 because of what happened in Ireland when the Government had to withdraw it due to spirally rents and homelessness.
I'm more concerned about the abolition of Sec.21 Notices and all the other c**p the Government has in store for us.
Ingrid Bacsa
1:23 AM, 18th April 2020, About 4 years ago
The government sold off council houses to get out of maintaining them. All responsibility has been forced on us even if we didnt choose to become social.landlords. But the government has maintained all control and still wants the councils to have half our rent money - through HMO Licences, annual inspections, planning inspections and hundreds of reasons to fine us.
We landlords need to stop grovelling and find a weapon by uniting and formulating a plan of protest like students and union workers do. Perhaps we can all withhold annual tax at the same time or hold a mass eviction day throughout the country. They cant jail us all! NLA has no power. Polite protest doesnt work.
Who can come up with a plan and the leadership to implement it? Come on guys. Small landlords will be ousted out and i guarantee the balance will change then - back to the feudal system where the fatcats take it all.
Question Everything
15:27 PM, 19th April 2020, About 4 years ago
Reply to the comment left by Ingrid Bacsa at 18/04/2020 - 01:23
Although I agree your sentiment, those who are actively even keeping abreast of changes are probably pretty small as compared to the number of LL out there. There is just no way to form such an "alliance" even though 118 is working hard to do so.
The issue is also that the narrative has been set. We are the "rogues", so any counter attack will be used against us with ferocity. It is all about political spin, truth is obfuscated by trashy emotional sentiment and people with degrees that are bought to write whatever the .gov wants.
Anything can be made legal/illegal under the narrative of "national security", just look at the abuse of the data and information from the COVID scam. It's in plain sight but it's not being talked about on mainstream channels. People are so easily influenced/scared by the mainstream media that they are wearing masks in their cars alone and in parks at some 100yards away from other people.
Just wait 6 months when the BOE/.gov finally say we are in a recession, and "it was all COVID's fault". Then we'll see what "national security" measures are put in place.
All we can do is educate those around us, if they will listen.
Ingrid Bacsa
0:02 AM, 20th April 2020, About 4 years ago
There must be a way to form an alliance.
Otherwise - it will be mass exit - and i suspect thats the covert plan anyway. They do not like the small landlord and cant harm the fatcat landlords who will simply get fatter.. oh Im out of it! Just letting rooms to lodgers on licence - thats it. And they can pay me in cash! Whilst secured shorthold tenants can screw everyone else. Happy days.
Anne Nixon
9:01 AM, 20th April 2020, About 4 years ago
Larry Sweeney spoke a lot about the lack of representation of landlords. Here is his post on Property 118 from August 2019 about the RLA NLA merger
https://www.property118.com/nla-rla-merger-stand-and-fight-with-us/
Question Everything
9:32 AM, 20th April 2020, About 4 years ago
Reply to the comment left by Ingrid Bacsa at 20/04/2020 - 00:02
Yes, again I agree, but the problem is way bigger than just the UK PRS.
Why is it that in the US, Wall St is getting "unlimited" funding? They have already have a couple of trillion in the last few weeks, and yet, the small businesses in the US have been told there is "no more" money for them.
Who has interests in the Stock Market?
Do the "powers that be" have interests in the US small businesses?
Why have literally thousands of apartments been built in London alone since 2011? Who lives in these very expensive apartments? Why were such things built if they were not going to be filled? Do we think it has been done for altruistic virtues?
London is already stupidly congested, we can't fit the current population on trains as it is. There is no infrastructure to handle this many people in this small a space. Do we think that the "town planning" department has made a small error?
There are still lots of Cranes over East London.
22 Million US citizens have become unemployed in the last few weeks, only 25 million jobs were created since 2008. If anyone thinks this isn't a total economic meltdown you are completely deceived. If you think that COVID is the cause you are also completely deceived. With the facts and data they, and we, have on the subject, why was there any need to push the world economy into a massive black hole? The answer is that it was already there, they just wanted a scape-goat so no-one would riot when they found out they have been scammed out of there livelihoods. People are waiting for this to "get better", I think we need to brace ourselves for much worse.
The "powers that be" want a corporate world with a corporate police state. That is neat and tidy, with a mass of people controlled under one system, under one corporate sterile politically correct and "regulated" system of moral code. The PRS is like the "small business" that is "unnecessary" and in the way of corporations who now get more revenue from residential property than office buildings (as I explained above in my other post).
We need to keep our eye on the big picture. Then the details of our own plight make sense, and our energies are used more wisely and with more effect.
Here's some data close to home which I can claim my own research on -
On getting an email from my bank, which is normally pretty unforgettable, I saw that it mentioned the FSCS (the body that secures/insures your £85k in your bank account, and chases up any financial interest you had in a financial firm that has gone bust.) I thought this was ominous so I followed it up.
In the last year up to 1 April 43 Companies have fallen over, 19 of them Pensions. Is anyone in the mainstream media talking about a pension crisis??? If you want me to get more "conspiratorial" let's start connecting this with COVID and the current economic shenanigans. Here is the data in an easy to digest form, and a link to the page to see for yourself.
https://www.fscs.org.uk/failed-firms/firms-list/#
The list goes back to -
2008 - 2 failed firms, PPI claims
2009 - 2 failed, PPI claims
2010 - 2 failed, PPI claims
2011 - 3 failed, PPI claims
2012 - 2 failed, 1 PPI, 1 "investments"
2013 - none
2014 - 1 failed, Pensions
2015 - 1 failed, PPI
2016 - 3 failed, 2 insurance , 1 Pensions
2017 - 11 failed,
2018 - 102(yes) failed, 2 pensions, some mortgage companies, financial brokers/wealth management, a few credit unions, a few insurers, some car dealers
2019 - 97 failed, 5 pensions starting August (3 in December), and as above
2020 - 43 failed up to 1 April, 19 of them are pensions, lots of PPI, some investment, some insurance.
While we still have cake (Universal Basic Income, built on a "digital" currency) there will be no revolution. Start watching for the narrative that makes it palatable, and "mortally correct" for the masses to accept a handout from the state. But know that this hand out will come with a caveat.......