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Support from letting agents will be crucial for landlords affected by rent arrears

Landlords will need the support of letting agencies to ensure they have a comprehensive record of all arrears and communications with tenants, according to rental platform PayProp.

Four in five agencies have seen the share of tenants in arrears grow since March.

Following a big jump in April, the percentage of tenants in arrears has climbed to over 15%.

The average amount owed by tenants in arrears has also grown in relation to their monthly rent, although around a third of agencies actually saw arrears reduce as tenants began repaying the amount owed by them.

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Neil Cobbold, chief sales officer at PayProp, said: “After an initial surge in March when Covid-19 started to spread rapidly across the UK, heightened levels of rent arrears could persist for many months to come, despite many tenants settling some of their debt.

“Measures like the furlough scheme and Universal Credit increases have helped tenants to continue paying their rent, but payments are still less predictable than usual, and the furlough scheme is almost at an end.

“It’s therefore hugely important that letting agencies are on hand to help their landlords deal with rent arrears and associated issues.”

Digital record-keeping provided by letting agencies can help landlords to stay on top of rent arrears, allowing them to see how much is owed and by which tenants.

Agencies can also help landlords to create payment plans for tenants to pay back arrears over a manageable period of time.

BY RYAN BEMBRIDGE

Source: Property Wire

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Government extends eviction ban

The government has extended the ban on evictions by two months until 23rd August.

Where tenants experience financial difficulties as a result of the pandemic, the government said landlords and tenants should work together and exhaust all possible options – such as flexible payment plans which take into account a tenant’s individual circumstances – to ensure cases only end up in court as an absolute last resort.

Robert Jenrick MP, housing secretary, said: “We have provided an unprecedented package of support for renters during this pandemic. Today, I am announcing that the government’s ban on evictions will be extended for another 2 months. That takes the moratorium on evictions to a total of 5 months.

“Eviction hearings will not be heard in courts until the end of August and no-one will be evicted from their home this summer due to coronavirus.

“We are also working with the judiciary on proposals to ensure that when evictions proceedings do recommence, arrangements, including rules, are in place to assist the court in giving appropriate protections for those who have been particularly affected by coronavirus – including those tenants who have been shielding.”

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The ban will run for five months in total, following the announcement.

Mary-Anne Bowring, group managing director at Ringley and creator of automated lettings platform, PlanetRent, said: “There’s no doubt that thousands of renters that are suffering financial difficulty will be happy to hear the news from the government this afternoon and will now feel more secure in their homes.

“With all of the uncertainty going on at the moment, tenants deserve to be protected by the government from evictions that could be through no fault of their own, and could well be down to financial hardship brought on by being furloughed or losing their job altogether, but this needs to be balanced by proving that their income has gone down. The worry is that many landlords are retired, according to the English Private Landlord Survey, as many as 33% are. These landlords may well not have a mortgage to claim a repayment holiday on, rely on property income and without rent or furlough monies may struggle to survive.

“However, it should be noted as recent research by the National Residential Landlords Association pointed out that the majority of landlords are trying to work with their tenants to resolve any issues such as rent arrears.

“Looking at the long term, the government may need to consider other ways of financially supporting households post-crisis. For example, through higher housing benefit payments as clearly the high cost of the furlough scheme means it cannot last indefinitely.

“Tenants and landlords should be working together in what is a difficult time for everybody, and should not use the eviction ban as an excuse to mistreat the property they live in or withhold rent if they are not in a genuinely financially difficult situation.

“Some renters may need more financial assistance from the government but cancelling rents as some have suggested or getting the government to pay would be hugely damaging.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Landlords on payment holidays denied buy to let mortgages

Landlords who have taken a payment holiday because tenants are unable to pay their rent are being rejected for mortgages to buy new properties.

Buy-to-let borrowers are urged to think carefully before taking a break in repayments, especially if they are planning on adding to their portfolio in the near future.

As with residential mortgages, landlords have been able to access a break in mortgage repayments for three months since March.

Recent guidance from the Financial Conduct Authority (FCA) means extensions of a further three months are available, with applications for a pause open until the end of October.

Payment breaks do not negatively affect credit files and this appears to be giving the impression that the ability to borrow is not impacted.

The regulator warned that “credit files aren’t the only source of information which lenders can use to assess creditworthiness”.

And lenders are now turning down purchase applications if repayments are not being made on one of the properties in the portfolio.

‘Use as a last resort’
A number of advisers told our sister title, Mortgage Solutions, they have seen this happen in recent weeks.

Edward Peters, buy-to-let specialist broker at Mortgage 1st, said he had several instances where payment holidays were “interfering with mortgage applications” across different lenders.

He added: “People are aware these don’t show as mortgage arrears on credit reports, but this has been extrapolated to a belief that coronavirus holidays have no effect.

“Lenders will often ask if any holidays have been taken on any properties in the portfolio, and this may well affect their lending decision.

“So far, most holidays I’ve come across have been requested only as a precaution against rental defaults, and not to offset an actual reduction in income.

“Landlords need to think carefully when requesting a holiday, especially if other applications are imminent or in progress.

“It’s easy to understand the lenders’ mentality on this. A payment holiday is effectively an admission of not being able to cover the mortgage payment, and so should be used only as a last resort.”

As part of measures to ease financial pressures on households, possessions and evictions are also currently barred.

Landlords have in some cases arguably been encouraged to take payment breaks if tenants cannot pay rents.

For example, Nationwide said it is contacting all its landlord borrowers to let them know holidays are available where rent is not being paid.

Not ‘in the spirit’ of situation
The National Residential Landlords Association said turning down borrowing applications was “not in the spirit” of the special coronavirus measures implemented by the FCA and the government.

John Stewart, deputy policy director for the trade body, said: “The Financial Conduct Authority has been clear that where mortgage holidays are secured in response to coronavirus they should not have a negative impact on the applicant’s credit file.

“It is therefore deeply disappointing that there are lenders not abiding by the spirit of these guidelines, and are failing to support otherwise reliable customers.

“It should not be right that landlords seeking to support tenants genuinely struggling due to the pandemic are being penalised in this way.”

Emergency break
Chris Sykes, mortgage consultant at Private Finance said he could see it from the perspective of both lenders and landlords.

Landlords who are not repaying debt on one property do not appear to be a good lending risk.

Sykes said he also understood why landlords were taking a holiday even if they do have savings and could maybe want to grow their portfolio to spread risk.

He added: “This is a short-term measure and I don’t expect we will see it being an issue in six months’ time as it leaves no lasting negative on the credit file as confirmed by Experian and Equifax.

“We are all aware it isn’t a great situation right now for a lot of people and hopefully these things are only short-term.

“However, I do not think people realise the affect it can have, maybe they should be called an emergency payment break rather than a holiday.”

Written by: Lana Clements

Source: Your Money

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Most landlords have been contacted by tenants about rent payments

Three quarters (74%) of landlords have been contacted by tenants saying they will struggle to pay their rent since the government’s COVID-19 measures were introduced on 23 March.

Renters’ unions are calling on the government to suspend rents for the duration of the coronavirus crisis.

However Paul Shamplina, founder of Landlord Action, says there is no ‘one size fits all’ approach, as landlords too have bills to pay and families to feed.

He said: “This is a nightmare scenario for everyone – landlords and tenants alike. It is really important that landlords do what they can to sustain the tenancy if possible, bearing in mind the court system is suspended and if a tenant vacates, there is a worry the property could be empty for a while.

“It is about working together in a practical way, understanding each other’s limits and supporting one another as best we can to get through this. I know of landlords who are in a privileged enough position to hold their tenants’ rent and have done so.

“However, the vast majority of private landlords own one or two properties, many with mortgages, and they too will be facing the same challenges of job losses.”

Over a third (36%) of landlords said they would struggle to pay their mortgage if their tenant did not pay rent this month.

Landlords can apply for up to a three-month payment holiday on their mortgage if their tenant’s income has been affected by this crisis, though some are worried about asking for fear of affecting their credit rating.

Landlords who have already fallen behind with mortgage payments due to rent arrears prior to the crisis may also struggle to access a mortgage holiday.

Shamplina added: “We’ve been inundated with phone calls from landlords concerned about rent payments and our advice is this: Speak to your tenants. Understand how they are financially impacted; explain how you will be financially impacted.

“Where possible try and come to an arrangement with them, understand what government support they are asking for. Having something to help cover the mortgage is better than nothing.”

Landlord Action has drawn up Rent Repayment Agreements for landlords providing a template which enables them to set out agreed terms of the repayment with their tenant.

BY RYAN BEMBRIDGE

Source: Property Wire

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Only a handful of landlords applying for a payment holiday need one

Mortgages for Business says only “a handful” of landlords contacting its switchboard about mortgage repayment holidays are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.

The commercial and residential mortgage broker acknowledged there are landlords in geniune difficulty. But said most of the landlords it has been talking to since the scheme was opened do have sufficient means to get them through a difficult period.

Steve Olejnik, managing director of Mortgages for Business, commented: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.

“Quite apart from the moral implications of abusing an emergency mortgage repayment scheme brought in at a time of national crisis, it could play out badly for the landlord.”

Landlords need to think long and hard before submitting a request for a payment holiday to their mortgage lender. They shouldn’t ask for a payment holiday unless they need it, if only because it could affect current and future applications. Lenders are reconsidering applications when a landlord has asked for a payment holiday on their existing loans.

Olejnik said: “Landlords must be aware that any requests could potentially damage any approaches to that lender. Lenders expect landlords to be able to cover void periods under normal circumstances – where a property is empty, and a landlord isn’t getting any rent – so they won’t take kindly to landlords trying to take advantage of them just to build up some cash reserves.

“One borrower with three live cases with their lender approached them for repayment holidays on another, existing loan. The lender immediately cancelled all three.

“Smart landlords, who want to capitalise on short-term house price falls and expand their portfolios when the lockdown is lifted, should think long and hard before approaching their lender.”

Additionally, Mortgages for Business points out that most buy-to-let lenders will ask landlords to prove they are in financial hardship before granting any holiday request. While a landlord’s ultimate tenant may be in distress and unable to make rental payments – to benefit from the scheme, landlords also need to unable to meet their mortgage repayments.

Olejnik added: “The message is simple. Do not approach lenders for payment holidays without first taking advice and thinking about the longer-term consequences. Don’t jump on the repayment holiday bandwagon.

“Any deferred payments will have to be made at some stage and it could create problems down the line – especially when you come to refinance or grow the portfolio.”

Landlords facing genuine financial hardship, who cannot afford to meet a mortgage repayment, should not cancel their direct debit payment to lenders, assuming a repayment holiday will be granted. Lenders will class this as a ‘missed payment’ and it will affect a landlord’s credit profile.

By Joanne Atkin

Source: Mortgage Finance Gazette

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Landlords warned to still make urgent repairs

The government has warned landlords that they are still legally obligated to carry out urgent health and safety repairs.

However, it clarified that non-urgent repairs should be done at a later date, as agreed between tenants and landlords.

The government issued the following the guidance: “Landlords remain legally obligated to ensure properties meet the required standard – urgent, essential health and safety repairs should be made.

“An agreement for non-urgent repairs to be done later should be made between tenants and landlords.

“Local authorities are also encouraged to take a pragmatic, risk-based approach to enforcement.”

The government said it is committed to supporting landlords as well as tenants.

The statement added: “We have also agreed with lenders that they will ensure support is available where it is needed for landlords.

“Landlords will also be protected by a three-month mortgage payment holiday where they have buy-to-let mortgages.”

Source: Property Wire

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Calls on govt to support landlords during coronavirus

Two landlord organisations are calling for government and mortgage lenders to introduce a package of measures to support tenants and landlords hit by the coronavirus.

Both the Residential Landlords Association and the National Landlords Association are lobbying for the government and mortgage providers to give landlords a period of grace with certain payments so they can deal with the effects of coronavirus on their finances.

In particular, the groups want a temporary scrap of the five-week wait before universal credit claimants get their first payment and for lenders to “look sympathetically” on requests by landlords for mortgage payment holidays where their income is being affected through reduced or non-payment of rent.

They have also called for the government to pause the final phase of restricting mortgage interest relief to the basic rate of income tax.

Since April 2017 tax relief on mortgage interest has been gradually phased out so that from April 2020, mortgage expenses will not be able to be deducted from rental income to reduce tax bills.

Instead, landlords will receive a tax-credit, based on 20 per cent of their mortgage interest payments.

This is less generous for higher-rate taxpayers, who effectively received 40 per cent tax relief on mortgage payments under the old rules.

In a joint statement, the RLA and the NLA said: “We are encouraging all landlords to work positively with tenants to provide support where needed throughout this difficult period.

“Landlords should be as flexible as they can to help tenants facing payment difficulties resulting from the impact of the coronavirus.”

FTAdviser reported last week (March 10) that a number of high-street lenders are allowing borrowers to defer their mortgage payments if they are affected by coronavirus.

The Royal Bank of Scotland is allowing mortgage and loan repayments to be deferred for up to three months, alongside temporary increased credit and cash withdrawal limits.

But these measures are not a blanket provision and will only apply to customers in financial difficulty.

Santander will also offer support to customers on a case-by-case basis, which includes the option to defer or reduce payments that are due.

The spreading crisis surrounding coronavirus has wiped billions off the stock markets, with the FTSE 100 dropping nearly 11 per cent on Friday (March 13) — the worst daily dip in more than 30 years.

Stock markets have been dropping across the globe since the coronavirus started to become a major issue as countries closed borders and introduced lockdowns to curb the crisis.

Prime minister Boris Johnson has urged everyone to avoid unnecessary social contacts, to work from home where possible, and to stay away from pubs and restaurants.

People in at-risk groups will be asked within days to stay home for 12 weeks.

This afternoon the chancellor is expected to announce new measures to curb the impact of the crisis on businesses.

By Amy Austin

Source: FT Adviser

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Coronavirus to increase pain for already ‘squeezed’ landlords

The coronavirus outbreak will add to the pain for landlords who already have a raft of unpleasant rule changes coming their way next month.

With many people expected to experience a drop in income because of the pandemic, it’s highly likely tenants could struggle to pay their rent.

The Residential Landlords’ Association has recommended landlords work with their tenants and allow them to delay rent payments.

It told members: “A dip in income could mean a risk of rent arrears.

“Discuss this with your tenant and be flexible where you can – whilst a minority of tenants may use the outbreak as an excuse to avoid paying rent, most will be genuine and suffering stress.

“If there hasn’t been a history of arrears or delayed payment, then it’s better to accept the situation and work with the tenant to repay any arrears when things return to normal.”

Some banks such as RBS, NatWest, TSB and HSBC have allowed customers affected by coronavirus to defer mortgage payments, however the situation for buy-to-let investors is less clear cut.

Banks have said landlords struggling to pay their mortgage because of tenants falling into arrears will be dealt with on a case-by-case basis.

This will put a squeeze on landlords just as the taxman is poised to make life even more uncomfortable for them, says Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“Property was already one of the least tax efficient ways to invest your money, and cuts to tax relief from 6 April are set to make it even less rewarding.

“From the moment you pay stamp duty on your purchase, through the years of paying income tax on rent and until the day you finally pay capital gains tax on the sale, your property investments are making plenty of cash for the taxman.

“In recent years, landlords have been increasingly squeezed by tax changes, and from April, three different tax reliefs will be slashed – making life even more expensive.”

What’s changing on 6 April?

Sarah Coles explains…

Mortgage interest tax relief for higher rate taxpayers will finally reduce to the basic rate.

This has been gradually shifting since 6 April 2017. Before then, a higher rate taxpayer could have subtracted all their finance costs from the rental income before calculating the tax due.

Assuming they had no other costs they could have received rent of £10,000 and paid mortgage interest of £6,000, so would only pay tax on £4,000 – £1,600

From 6 April 2020, they’ll only get 20% relief on the £6,000, so will pay 20% on £6,000 and 40% on the remaining £4,000 – £2,800

Capital gains tax (paid at 18% for basic rate taxpayers and 28% for higher rate taxpayers on property) will have to be paid within 30 days of completion of the property sale.

It’s currently paid by self-assessment at the next available opportunity, so tax on a sale in May 2018 would have been paid in January 2020.

Landlords who previously lived in the property currently get private residence relief on the final 18 months they own the property: this will fall to nine months.

Let’s assume you bought in January 2010, lived in the property until January 2013, then rented it out and sold in January 2020. If you made a chargeable gain of £150,000, you’d pay tax on £82,500 – which for a higher rate taxpayer at 28% would be £23,100.

However, if you bought in May 2010, lived in the property until May 2013, then rented and sold in May 2020, with a chargeable gain of £150,000, you’d pay tax on £93,750 – which for a higher rate taxpayer at 28% would be £26,250.

Is property investment worth it?

Coles says: “If you’re considering property investment this crisis is a salutary lesson that interruptions in rent aren’t just a theoretical possibility –at the moment they seem to be a racing certainty.

“It’s also a reminder that it’s essential to factor tax into your considerations. The taxman’s take can make a big difference as to whether your investment will actually end up making you any money. And it can start to look even less appealing when you compare it to the fact you can invest in stocks and share.”

Written by: Joanna Faith

Source: Your Money

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Foundation: Landlords expect further government intervention

A majority of landlords (70%) expect further government intervention in the private rental and buy-to-let sectors during 2020 according to the latest research by Foundation Home Loans.

Of those who anticipate further government action, 73% believe it is either quite, or very likely that this will mean the introduction of minimum tenancy terms.

The same number believe action is likely in the HMO and multi-unit block sector.

In addition, 72% of landlords believe individual licencing for all landlords and their properties is likely whilst 38% can envisage a rental cap for private rental properties being introduced.

The research was undertaken by BVA BDRC and carried out in January 2020, with results based on 791 online interviews.

A further 77% of landlords were not in favour of a rental cap, 12% said they may be in favour, 2% definitely supported such a measure and 9% were unsure.

When asked what action they would take should any cap on rents be introduced in the PRS, 35% said they would immediately increase all rents to the maximum rent allowable, 33% said they would consider selling some of their portfolio, 20% didn’t know, while 19% would either look at leaving the PRS or at other assets for their investment.

A tenth (10%) said they would do nothing.

Overall respondents were neutral on whether December’s general election result would be either positive or negative for them.

Over a quarter (26%) thought positive, 28% thought negative, whilst 38% thought neither.

Landlords who held more properties within their portfolios were more likely to be positive about the impact.

The issue of abolishing S21 evictions was a major concern for over half (53%) of landlords, who stated they would feel much less confident about their portfolios if this was introduced, while 30% said it would make them feel slightly less confident.

Overall, there is however a greater degree of landlord optimism than in previous iterations of the research, with the metric used to show this is up for the first time in over a year.

Jeff Knight, director of marketing at Foundation Home Loans, said: “While many landlords look like they’re taking a ‘wait and see’ approach to this government and any anticipated intervention in the PRS and/or buy-to-let market, it’s also noticeable that many believe the status quo is unlikely to hold and there will be action of some kind.

“Interestingly, landlords appear resigned to the introduction of minimum tenancy terms, further action with regards to HMOs and MUBs and individual licensing.

And while 38% think a rental cap might be likely, there is very little support for such a measure being introduced, and it will result in landlords having to take action around the rents they charge and whether they can hold onto all their properties.

“There is definitely a degree of uncertainty around what might be coming next, and I suspect many landlords are waiting for this month’s Budget before they make up their minds more fully on whether this is a government which will be more ‘friendly’ to landlords.

“Of those who think there will be intervention, 32% think stamp duty for landlords is just as likely to go up from its 3% extra charge level, as opposed to the 7% who think a cut is likely.

“In that sense, landlords appear to be bracing themselves for a Budget which may not be in their favour, rather than one which seeks to roll-back on the measures which have undoubtedly impacted on their profitability over the last few years.

“Clearly landlords do not want to see S21 evictions removed as an option for them, but at the same time there appears to be a growing level of confidence in their own businesses, especially for those who own larger numbers of properties.

“This perhaps taps into the move towards portfolio operators in the sector who can certainly benefit from strong lending options and a highly competitive mortgage market to help them meet their aims and ambitions for their businesses.”

By Jessica Nangle

Source: Mortgage Introducer

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Landlords in the midlands most likely to increase portfolio

Landlords based in the midlands were recorded as the most likely to increase their portfolio size, a study conducted by BVA BDRC shows.

The research outlines that 24% of landlords in the East Midlands and 22% in the West Midlands plan to purchase more properties in the next 12-months.

Meanwhile, 8% of landlords in South West and 9% in Central London intend to purchase more properties within the same timeframe.

The data shows that overall, only 14% of landlords intend to purchase property, with the average preparing to buy three.

Looking at property type, 52% of those looking to expand their portfolio intend to do so by purchasing a terraced house.

This was followed by semi-detached properties at 32% and flats at 26%.

Furthermore one in four landlords are targeting HMOs, according to the research.

Nearly two thirds, 63% of landlords plan to fund their next purchase with a buy-to-let mortgage, while 17% intend to do so through releasing equity on existing properties, and 18% said they would purchase a property outright.

Richard Rowntree, managing director of mortgages of Paragon, said: “The proportion of landlords looking to purchase new property has been largely consistent over the past two years, but we are seeing regional variations and also a greater propensity for portfolio landlords to invest in property.

“Portfolio landlords have adopted a number of strategies to adapt to the tax and regulatory changes of recent years and we’re seeing trends such as these landlords buying stock from smaller-scale participants as they exit the market, or targeting higher yielding properties, such as HMOs.”

By Jake Carter

Source: Mortgage Introducer