Guest Blog Post Written by the fantastic Kevin Lever, of KDL Law.

Following on from our December 2021 Legal Update on the progress of the Leasehold Reform (Ground Rent) Bill the Bill received Royal assent on Tuesday 8 February 2022 and is now law. That said, Regulations will now need to be made by the Secretary of State before most of the provisions of the Act come into force. The Act aims to make leasehold ownership more fair and affordable for leaseholders.

Who does the Act apply to?

All Landlords granting new residential leases in England and Wales will be bound by the terms of the Act.

What are the changes?

Ground rent payable on leasehold properties will be restricted to a peppercorn (i.e. non-monetary) in future leases and rent administration charges are banned in most residential leases with a term longer than 21 years.

Are there any exceptions?

Business leases, statutory lease extensions of both houses and flats, community housing leases and home finance plan leases will not be affected by the Act.

Any surprises?

It had been anticipated that retirement housing (dwellings that can only be occupied by people aged 55 years and older) would be exempt but this is not the case. However, there will be a slight delay in the Acts effect on such property with only retirement housing leases granted after 1 April 2023 being caught by the Act.

Can the Act be applied retrospectively?

No – the Act will not apply to current leases and thus there is no benefit to holders of existing leases with high or more reasonable ground rent obligations. Any agreements for lease entered into prior to the Act being passed will be unaffected and a monetary ground rent may be demanded.  However Landlords need to be careful not to inadvertently surrender and re-grant existing leases under which they may collect ground rents. Ground rent will not be payable under the re-granted lease once the provisions of the Act are in force and the penalties outlined below will apply in this situation.

Will there be a penalty for Landlords who demand ground rent?

Yes – Landlords who seek to demand ground rent after the Act has been passed will be liable to fines of between £500 and £30,000. Additionally, such Landlords will be required to repay any unlawfully collected ground rents plus interest. Leaseholders will be able to apply to the First Tier Tribunal in England or the Leasehold Valuation Tribunal in Wales for a declaration that a prohibited ground rent is replaced with a peppercorn rent.

Enforcement action can be taken against past and current Landlords, as well as people acting on their behalf.

Conclusion

The Act is good news for those purchasing new property or perhaps agreeing new terms with their current landlord but it will of course have absolutely no impact on anyone with an existing lease with a liability to pay ground rent. We have already seen holders of current leases excitedly, but wholly incorrectly, informing us, and our landlord clients, that ground rent demands after the passing of the Act will be “illegal” etc. and that they need not pay.  We assume that there will be, as there always is, a bit of time to pass before those to whom the Act does not assist getting to grips with the fact that they are still liable to pay the rent demanded of them.

 Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

Breaking news this morning following the leak last week – the government has published their Levelling Up White Paper – and the impact of matters contained within could shake up the private rented sector and have far reaching implications on landlords and tenants alike.

What is a White Paper?

A “White Paper” is a policy document published by the government which sets our their intentions for future legislation. White papers form the basis of discussion and consultation before the final bill(s) are put forward before government to be voted into law.

What is the purpose of the Levelling Up White Paper?

The purpose of this document is to bring about system change across both the Government and the country. The White Paper sets out the changes required, and how these will be implemented to “level up” the UK. The paper contains 12 national missions that are to be completed by 2030, and are quantifiable allowing them to be tested and measured.

How does this apply to landlords?

There are three main elements within the White Paper that will affect landlords: The introduction of a “Decent Homes Standard”, the introduction of a National Landlord Register and the abolition of the Section 21 Eviction Notice.

The Decent Homes Standard

Homes in the private rented sector will need a meet a mimumum standard known as the “Decent Homes Standard”. There is nothing new about this standard, and you can find information about it by clicking here. We are in support of this government move, as decent landlords will not be affected, only those who do not maintain their properties and protect their tenants.

The National Landlord Register

There is minimal information provided within the White Paper on this proposal so we will be tentatively waiting for further details to be released. There is likely to be a minimum standard or accreditation to join the register, or it may be that landlords can avoid registration by using a registered letting agent such as ourselves. If you would like more information about our services, please do get in touch.

The Abolition of the Section 21 Notice

The abolition of the Section 21 notice has been under discussion for a number of years, but its inclusion in the White Paper shows that the implementation is moving closer. The idea behind the abolition is to prevent landlords from evicting tenants with no formal reason – hence the Section 21 procedure is known as the “no fault eviction”.

Giving tenants more security should not be seen as a bad thing given the number of “rogue” landlords operating in the UK, however in our opinion, a sharp reform of the remaining eviction process “known as the “Section 8″ procedure” needs to be completed before the loss of the Section 21. At the very least, the process needs to be shortened and simplified, with additional grounds added and all grounds to be made mandatory. We simply cannot be placed in a position where landlords cannot regain possession of their property when there is a genuine requirement to do so.

What Happens Next?

According to Government officials, £4.8 billion has be commiteed to this project and its implementation although there are some doubts over the contents of the paper and the ambitiousness of the 12 national missions with regards to funding. The next step will be for the contents of the paper to be discussed and debated, until a draft bill is produced ready to be put forward before Government and eventually enacted into law.

Blog post written by Mortgage and Protection Broker, Adam Wells of Lloyd Wells Mortgages (pictured right).

For most people, buying their first home can be a bit of a struggle, with a good income, a healthy deposit, and a bit of luck needed. Without the help of Parents, the ability to purchase a property is unattainable for some people. What happens if you have a good income and a good deposit, but you simply can’t afford to purchase a property where you currently live, but you definitely could afford to purchase a rental property elsewhere?

The Evening Standard recently reported that the average house price in London has risen from £482,576 to £509,935. If we round that to a slightly nicer £510,000, you would need at least a 5% deposit of £25,500 and an income of roughly £110,000 per annum to purchase this property.

If we compare this with Manchester, Rightmove states “The majority of sales in Manchester during the last year were semi-detached properties, selling for an average price of £261,852. Terraced properties sold for an average of £203,696, with flats fetching £195,563.”

Using the above figures underlines that buying in London is unattainable for most, but you might be able to buy property elsewhere at a more affordable price.

To answer the main question, can I purchase a buy-to-let as a first-time buyer? Yes, and it’s relatively easy too!

The main barrier is the ability to put down a deposit of 25%. For the Manchester flat of £195,000, that would be £48,750. Some buy to let lenders do have products available at 80% Loan to Value, but as a first-time deposit, you will need the 25% deposit.

Once you have saved up the deposit, which can come from your immediate family as a gift, the next hurdle is affordability.

Usually, a buy-to-let application is assessed on the rental income. As a bit of a rule of thumb, £600 per month rent would allow you to borrow £100,000, £900 per month would allow £150,000 and £1,200 per month would allow £200,000, etc.

For first-time buyers, the application will be assessed in a similar way to a residential mortgage.

Using the £195,000 flat in Manchester as an example, the mortgage required would be £146,250. We can use a term of 25 years in this example making a monthly rental income of £900.

The letting agent will take around 12%, which is £108.

The lenders will want to know about your income and expenditure.

If we use a gross annual income of £30,000, assuming you are completely debt-free, your own rental payments are £1,500 per month, then you would be able to borrow the £146,250 that you need.

Should I Have the Mortgage on a Repayment or Interest Only Basis?

This is completely up to you, and we suggest that you seek some financial advice around this. If you would like us to refer you to someone who can provide financial advice, just let us know. 

SWR Landlords Bristol Services

With a repayment mortgage, you are repaying the capital and interest. If your mortgage is over 25 years, you can guarantee that the mortgage will be repaid at the end of the 25 years. As this is an investment property, there will be capital gains tax to be paid when you declare the rental income on your annual tax return.

Using the same figures we have used above, a 5 year fixed rate will come in around 2.18% with a £995 fee. You will likely receive a free basic survey on the purchase too. Over 25 years, £146,250 comes in at £632.78 per month.

If you decide to proceed on an interest-only basis, the mortgage will remain at £146,250 and you won’t repay any capital. The benefit to this is that the monthly payments will be lower, but in 25 years you will be expected to sell the property to repay the debt. Using the same figure of 2.18%, the monthly payment will be £265.69 per month.

Which Product Should I Pick?

Mortgage providers usually offer fixed rates and variable rates. Fixed rates stay the same for the fixed-rate period of 2, 3, 5 years, etc. This offers the ability to budget and protect yourself from interest rate fluctuations.

Variable rates are historically cheaper but can become more expensive if rates start to rise. The Bank of England base rate is currently at a record low of 0.1% and due to this, the variable rates aren’t particularly attractive and as a first-time buyer, the banks are more comfortable with you taking a fixed rate. They are generally more generous if you take a 5-year fixed rate over the shorter 2 or 3 year fixed rates. That being said, we would go through your situation in detail and recommend the best product to suit your needs. This can depend on your attitude to risk, what your plans are for the property and how long you intend to keep the property.

Next Steps

We are happy to talk through all the options with you, find the right lender, and manage the process for you all the way through.If you are thinking about buying then do give us a call on 01174 520 330. Our initial conversations usually last around 15 minutes. Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.

We will discuss:

  • How much you can borrow
  • What that will cost
  • What fees can you expect
  • How Lloyd Wells Mortgages work
  • What insurances you will need
  • What documentation you will need to provide
  • Next steps

Your home may be repossessed if you do not keep up repayments on your mortgage.

It has just been announced today, by the Chancellor Rishi Sunak, that the threshold for stamp duty land tax will temporarily be raised to £500,000 from today until 31 March 2021.

This means that when buying a property up to and including £499,999 you will not pay any stamp duty, regardless of whether you are a first time buyer or not.

There are no changes to properties above £500,000 – you would still pay stamp duty of any portion above the new temporary threshold.

This is great news for buy to let investors and it will hopefully mean a surge in investment into the sector and a boost to the rebound in the housing market.

Overall, it is projected that 89% of sales will be exempt with an overall saving of £3.8 billion.

Flats, Houses & Homes to rent in Bristol - South West Relo

SWR can help you find a property that is best for you - whether you are looking for Homes, houses, or flats to rent in Bristol.

For flats, houses &  homes to rent, Bristol has a great selection. SWR is a well-established, professional letting agency with the most extensive selection of quality properties to rent in Bristol.

Finding a place to live can be a stressful task, especially in a big city like Bristol. SWR can help you find out which property is the best for you whether you are looking for houses to rent Bristol or flats to rent Bristol we are here to offer the most comprehensive and personalised and “stress-free” services. SWR is here to listen to your requirements and we take pride in providing outstanding customer service. We want to help you find your next home and we’ll guide you through the process so that the experience is enjoyable and exciting.