My Rent Increases Due to Clause 24

My Rent Increases Due to Clause 24

13:34 PM, 13th February 2016, About 6 years ago 21

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I have always tried to keep my rents low, and like many other full-time ‘professional’ landlords I have the ethos that I don’t increase rents on tenants in situ.  In recent years this has been relatively easy as interest rates have been low (though my HMOs have seen utility bills rise significantly). My Rent Increases Due to Clause 24

Clause 24 has overturned this philosophy and is forcing me to take action that hitherto I have never considered.  ARLA forecast that rents will have increased by 25% by 2020/21 and this assumes interest rates staying low.  It is impossible to make increases like that in one go, unless there is a change of tenants, so I have started the process now and many of my tenants are now feeling the first effects of Osborne’s indirect Tax On Tenants.  This is intended to be a snapshot of where I am with rent increases due to Clause 24 of the 2015 Finance Act, and also to show that many of my tenants are not in a position to buy.

First, I must say that 3 or 4 years ago I took the decision to start handing the tenant management over to letting agents though I generally look after the properties myself.  This handover has usually taken place at a change of tenant and means that for a lot of properties I do not have in-depth knowledge of the tenant’s circumstances, so I have not included them in this summary.

HMO 1

I manage two tenants that have been with me a long time, the other 3 are managed by the agent.

Adam – Ex army and in his late 50’s and been with me for nearly 7 years.  Adam is on his own and moved to the area to be close to his daughter and grand-daughter.  He works as a cook and is on a low income.  He enjoys the low-cost lifestyle and has no aspiration for his own place whether rented or purchased.  His double room is part ensuite with its own shower and basin.  His rent has been £72 pw ever since he moved in but has now increased to £77 (7% increase) with further annual increases planned.  The rent covers all utilities, broadband, council tax and a cleaner for the shared areas.  These facilities apply to all my HMO’s.

Trevor – Trevor has been with me about 5 years and is in his twenties.  He works as a journalist for a railway magazine and whilst I can’t say for sure, he also doesn’t seem to want to get his own place.  His rent has always been £65 pw for his double room but has now been increased to £70 pw (7.7% increase), with further rises planned on an annual basis.

HMO 2

Ella – She is a young Polish woman who has her own cleaning business and also works evenings at a local restaurant.  Ella would love her own home but does not have a long enough credit history in this country.  Her rent has just been increased from £65 to £70 pw due to clause 24 (7.7% increase).  Ela is a great tenant and very cost conscious so whilst I am concerned that after the next rent rise, she may well move on, I have little choice but to increase rents due to C24.

Thomas – Thomas is a nice Polish guy and is managed by a letting agent.  He has the biggest bedroom and currently pays £75 pw.  I will be talking with the letting agent with a view to increase it to £80pw.  He works shift at a salad packing company.  He again cannot buy his own house due to lack of credit history, and doesn’t want the extra cost of renting a house because he is on a low income.

Neil – A divorcee in his 50’s that wants to live locally to be close to his 4 sons, all of which still live with their mother.  He’s been with me 8 years and works on building sites but has no real aspirations to get his own place.  There was a recent exception to that when his ex-wife threw his oldest son out and Neil was trying to get Council accommodation for them both.  However the situation resolved itself.  The rent on his room has just been increased from £70 to £75 due to C24 (7% increase) and there will be further annual rises.

Gordon – He is a really nice fellow, in his early forties and works as a hospital porter.  Gordon had his own house but decided it was too expensive to run on his income.  He sold it and rented it back for a short while but then moved in to my house where he’s been for over 5 years.  His rent has been increased from £70 pw to £75 pw (7% increase).

This house offers exceptional value for money with 4 double bedrooms, and huge shared areas along with two bathrooms.  There is high speed broadband laid on to this property.

House 1

Gemma – This lady has been with me in this house for 5 years and another one of mine before that for a while.  She is a single mother of 5 and the wear and tear on the property is excessive.  There have been other difficulties, such as rent arrears, but she has an excellent guarantor and I also feel sorry for the kids who have not had the best of starts in life.  I have therefore persevered with the tenancy.  Her rent has always been £700pcm but I have just raised it to £735 (5% increase), with more annual rises planned.  Frankly I do not think she will be able to pay them as she relies on benefits, so I can see that I will have to evict the family to either upgrade the tenant to one that can afford the rise, convert to HMO, or sell.  If I sell the lady is very unlikely to find a suitable house within the Housing Benefit limits set but will hopefully qualify for some sort of discretionary payment, otherwise there are few options open to her.  I would add that this would most likely be the second property I’d sell, the first being one that houses a low-paid care worker and her family.

House 2

Sonia and David –  This house is a SARB (sale and rent back) that I acquired 9 years ago.  They are an elderly couple that were going through severe financial difficulties, despite their quite frugal lives.  Derek had been irresponsible with their money and had to actually declare bankruptcy at a later date.  I purchased the house at a small discount but I made it a condition that I would replace the bathroom as it was well by its ‘sell-by date’.  They pay about 70% of market rent at present and it’s the same figure as we agreed 9 years ago, and whilst I haven’t increased it yet, I fear I may have to.  C24 will put great stress on the rents I charge so I will have to pass it on.  If they can’t pay then I’ll have to evict this lovely old couple who have lived in that house for nearly 40 years.

House 3

Chris –  This is another SARB and the gentleman had also got into a financial problem.  I bought the place over 8 years ago and he has enjoyed the same rental figure of £550 pcm since that date.  I have now increased it to £580 due to C24 (5.5% increase).

House 4

This house is managed by agents. I bought it in 2003 and it was on an estate which had been wrecked by gypsies resulting in making it like a ghost town with most houses boarded up.  This one was partly boarded.  I completely refurbished it and let it out at £600 pcm.  It has had a few tenants over the years and the rent has always been set at the same figure but due to C24 we just increased it to £675 and it was still snapped up (12.5% increase).  The estate has slowly come back into use and is now a decent place to live, but I was amongst the first few people to take a chance in buying one of the houses.

House 5

This is managed by an agent and whilst the tenant has been there for a couple of years on £550 pcm, we have just increased it to £600 due to C24 (9% increase).  There will be another rent rise next year.

House 6

Again managed by agents but had been empty for 14 years.  I spent a great deal of money to renovate it as it was a ‘real state’, and it is now let to a young family.  The rent has not increased since they moved in 4 years ago and I would have been happy to let it stay as it is.  I cannot do that due to C24 and we will be imposing a 5% rise soon.

House 7

This was my own home for 27 years and now houses a single mother of 2, handled by an agent.  The market rent would be around £1050pcm (according to a surveyor) but she has paid £825 since she moved in two and a half years ago.  She is a great tenant but I am now feeling pressure to increase the rent due to C24, which I would not do otherwise.  The lady is on a relatively good income but way below what she would need to earn to buy a house, unless she has about £150k to put down as a deposit.  If I am forced to sell this property she will struggle greatly to find a similar property on the rent I am charging, unless she moves out of town and further away from Cambridge where she works.  This will make it difficult for her children, they can walk to school from where they now live, and will vastly increase her travelling costs.

Like many ‘professional’ landlords I have always taken the view that I do not increase rents on a tenant in situ, and I think that is illustrated by just how long some of my tenants have been with me on the same rent as the day they moved in.  C24 has turned that upside down and I now must put them up.

Not one of my tenants has given notice since I increased their rents.

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Comments

Richard Player

18:08 PM, 7th March 2016, About 6 years ago

Using the model tenancy agreement! Not me.
Why would anyone in their right mind use a tenancy agreement drawn up by the same government that introduced the Tenant Tax?
I will not be using anything written by the government unless it is mandated by law.

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