National Rent Rise Day 5 April 2017

by Readers Question

12:32 PM, 10th October 2016
About 2 years ago

National Rent Rise Day 5 April 2017

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National Rent Rise Day 5 April 2017

Unless the government confirms a U-turn on section 24, I suggest ALL LANDLORDS make it widely publicised that as of 5th April 2017 they will in unison apply a Tenant Tax to their passing rents. i.e. current rent plus X% tenant tax. (The actual % applied will probably be circa 8% but should be independently forecast by a respected national firm of accountants in conjunction with RLA and NLA)april 5th

A similar tax rise should also be applied in April 2018 and April 2019 depending on the forecast tax impact of prevailing interest rates.

Once the hard reality of THE TENANT TAX is nationally recognised especially by tenants, then the Government and Local Councils will have to make plans for the colossal impact in six months time.

I am not proposing to inflate rent for profit, but purely for my business to stand still. I suspect like many other landlords, I have never increased a rent to a sitting tenant, and only increase to the current market rent upon a natural change of tenant.

Likewise I am not proposing some form of price fixing, just merely to keep the status quo for the property business I started in 1989.

Once the NATIONAL RENT RISE DAY is widely publicised, one would hope that the Government can see the folly of their proposed tax grab, and realise the direct consequences of their actions on tenants.

Like the utility firms or any other business in the UK, when costs are rising the consequent impact has to be passed on to the consumer if the business is to remain viable.

My biggest bug bear is that as an industry with a national average yield of 5% we are portrayed as “greedy landlords” by the media and politicians. The country fails to realise that 5% yield is turnover not the profit margin, and that in reality the army of “cottage industry” landlords make a tiny rental profit and that is only because they are doing the work unpaid in their own time. Also that without the effect of some mortgage gearing or hope of long term capital growth the PRS business model is utterly futile.

Jason



Comments

H B

19:48 PM, 10th October 2016
About 2 years ago

Hi Jason,

Rents will rise for sure, but as has been pointed out before, price setting in concert with others is an imprisonable offence.

Mark Shine

20:46 PM, 10th October 2016
About 2 years ago

Apart from the legality of such an idea, not sure there is any need to try and force it? 'The market' will always determine rental levels. Section 24 (Rental Tax for Unincorporated Landlords with Mortgages) will continually exert upward pressure on rents as it will continually encourage more LLs to continually reassess rents.

Robert Mellors

8:31 AM, 11th October 2016
About 2 years ago

Reply to the comment left by "H B" at "10/10/2016 - 19:48":

Hi HB

I don't think that having a set date on which to implement a rent increase is the same as a scheme to "price setting in concert with others" as nobody is setting a particular rent, they are simply advising tenants that there is an x% tax being added on to the rent by the government and the landlord needs to raise the rent from 1st April 2017 in order to pay that tax.

This is a bit like when the VAT rate went up, the increase in VAT (extra tax that the seller has to pay to the government) was passed on to the consumer as from the date the tax became chargeable, i.e. from that date the consumers had to pay more for the same goods/services, so that the seller could maintain their profit margin and still pay their VAT (tax) to the government (HMRC). There was a set date when the increased VAT started to apply, and shops did try to warn consumers of that tax increase. There was nothing illegal about the sellers all increasing their prices on a set date (the date the tax increase applies from), so there should be nothing illegal about landlords all increasing their prices on a set date (the date the tenant tax applies from).

Robert Mellors

8:36 AM, 11th October 2016
About 2 years ago

The problem is that the % increase needed to cover the tenant tax (i.e. the amount of extra rent that needs to be paid in order for the landlord to maintain the exact same profit margin as before the tenant tax), will vary from one landlord to another and even from one letting to another, so establishing a universal fair % increase would be virtually impossible. Some landlords will have no mortgage and so would not need to increase their rents at all, while others may have 90% LTV on an interest only mortgage so would need to increase their rents massively just to break even. (and of course some landlords will be companies, so may or may not need to increase their rents, as the tenant tax does not affect them directly, but may do so indirectly).

Gromit

8:52 AM, 11th October 2016
About 2 years ago

Can we use the hash tag #NationalRentRiseDay

Paul Million

9:04 AM, 11th October 2016
About 2 years ago

This is a brilliant suggestion and one I am 100% behind. If you are worried about the legalities of this then refer to the rough justice ( or no justice re lack of a Judicial Review!) we are getting from the authorities in the face of very questionable reasons which they are using to tax us unfairly. We have tried to do this fairly and now it is time to take the gloves off and show the Government what 'fair' means. Each ( unjust ) force will have an equal and opposite reaction force! Its shoulder to shoulder or take it lying down. The choice is ours....

Chris Clare

9:07 AM, 11th October 2016
About 2 years ago

Whilst I am in total agreement that rents will rise as a result in tax changes for mortgage holding landlords, I cannot help thinking that a unified approach will only look like blackmail and could result in a knee jerk reaction from the government to regulate the sector.

With everything else that is going on do we really want that?

I am all for putting rents up to cover increased costs I just think that a more considered and less militant approach may look more reasonable.

I can hear the headlines now "Money grabbing landlords" "landlords put rents up on mass to cover mortgage interest relief changes, 60% of them don't even have a mortgage."

We need to learn to play the game.

Paul Million

9:14 AM, 11th October 2016
About 2 years ago

Reply to the comment left by "Robert Mellors" at "11/10/2016 - 08:36":

Hi Robert, if it is illegal to implement the same rent rise across the board in unison then it makes it fairer to the tenant if we all increase by the amount that it will cost us and make it completely legal and legitimate. If the Revenue needs us to collect more taxes on their behalf then the only way most of us can make a fair profit for our extensive efforts is to charge more for our service. I feel line a charity already, never mind in 4 years time or so. Hundreds of thousands of landlords will go bankrupt over this unjust taxation method. I wonder at what point the Government will realise it has added to the housing crisis. Too late for some no doubt.

Robert Mellors

9:37 AM, 11th October 2016
About 2 years ago

Reply to the comment left by "Paul Million" at "11/10/2016 - 09:14":

Hi Paul

It is HB that thought it may be illegal, my comment was that it is not illegal. To my mind it is completely legal AND FAIR to increase rents by the amount of tenant tax that landlords will have to pay to the government. The problem is that this amount is different for everyone. Yes, it all comes in on the same day, so it is reasonable to all increase the rents on the same day, but the problem is how much to increase the rent by (without being accused of profiteering from the tenant tax).

money manager

9:40 AM, 11th October 2016
About 2 years ago

Unlike most businesses who can increase prices to cover a VAT increase as and when it happen, or even mortage lenders when there is a rate increase, unilatteral rent increases are precluded by the terms of the tenancy agreement.

Instead, how about inserting a line in letting advertisments, tenancy applications and agreements which clearly shows the hypotecated additional tax charge?

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