Regulation & Law
News articles looking at national legislation and local regulation and the application of law to the residential property industry.
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Budget 2016: Housing reaction
George Osborne’s eighth Budget was another intriguing one for the property market, particularly the residential market. He confirmed that the 3 per cent higher rate of stamp duty for those acquiring a second home or buy-to-let property will come into force at the start of April 2016, but he sprung an almighty surprise by announcing that larger investors will not be exempt from the higher stamp duty, as previously thought, which will apply equally for purchases by individuals and corporate investors. Although the Government’s reversal on the exemption for large-scale investors is surprising, it is unlikely to lead to a significant dampening of interest in the build-to-rent sector, according Gráinne Gilmore, Head of UK residential research at Knight Frank. She commented, “Bulk purchases of residential units at the lower value end of the scale will be most affected by the Chancellor’s move, which seems counter to the government’s pledge to provide more affordable housing. But the rental market is an entrenched and growing part of the UK housing market, and as such, institutional investment in this asset class will likely continue to grow.” It was also announced that home movers who have a period that overlaps between buying one property…
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Landlords aim to beat tax rises
A growing number of property investors are choosing to acquire buy-to-let homes through corporate vehicles to get around paying an extra 3 per cent above existing stamp duty rates on second homes, mortgage brokers report. There has been a surge in demand for buy-to-let properties in recent months from investor landlords keen to beat the 1st April deadline for the stamp duty surcharge. But to avoid the hit, it has been reported that a growing number of landlords are setting up company structures to manage their rental properties. Mortgages for Business report that it has seen the proportion of applications acquiring property within a corporate vehicle surge from 18 per cent to more than 50 per cent in the past six months. Forming company structures to manage their rental properties will also enable many landlords to continue to deduct mortgage interest from their tax bill as it will be viewed as a business expense. This will allow higher rate taxpayers to more than halve their tax bill because they will pay corporation tax, rather than income tax, which will be 19 per cent from 2017, and will fall to 18 per cent by 2020. Similarly, the ability to take income…
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Zac Goldsmith targets ‘rogue agents’
Zac Goldsmith has pledged to tackle the mounting housing crisis in the Capital in order to curb soaring house prices and rental values, as well as clampdown on high letting fees. Figures released by Goldsmith’s opponent, Labour’s Sadiq Khan, show that the average letting fee in the Capital has surged by 48 per cent since the last London Mayoral Election in 2012, reflecting a sharp rise in rents. The Tory mayoral candidate said the problem has been compounded by letting agents asking for a deposit equivalent to six weeks of rent, or at least one month’s rent in advance. While accepting that tenancy deposits are a necessity to protect landlords, the Richmond Park MP questions whether the fees being charged by letting agents are justifiable. “The agency fees are still very high – on average across London I think it’s around £330 and I don’t think people get £330-worth from their agents – it’s almost like a scam,” he said. “There are a lot of new businesses emerging where apps are being developed which I think very soon will effectively render the agents redundant.” London’s PRS has grown significantly over recent years. A decade ago private renting was 17 per…
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Introduce CGT on homes, says thinktank
The Government is being urged to consider introducing capital gains tax (CGT) to help prevent house prices from spiralling out of control. The National Institute of Economic and Social Research (Niesr) believes that the levy would help deter people from investing in property, helping to restrict overall demand from buyers and keep property prices at bay. Angus Armstrong, a Senior Economist at Niesr, told the press, “A first priority must be to improve the taxation of housing. An efficient tax system would be consistent across assets and leave the decision about how much to consume today versus save and consume tomorrow unaffected. “If a capital gains tax were introduced, this would reduce the gains in an upturn and losses in a downturn, so dampening house price cycles. These ideas are unfortunately in the opposite direction to recent policies.” The thinktank also urged the Government to stop relying so heavily on the private housebuilding sector to help solve the widening supply-demand imbalance in the market, as it could never meet the demands for housing.” The latest figures show that the number of new homes registered across the UK hit an eight year high of 156,140 in 2015, up 7 per cent…
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Right to Rent slammed
The vast majority of landlords have not received any information from the Government about the new Right to Rent scheme which was rolled out across England this week, new research shows. From Monday 1st February 2016 it became compulsory for all private landlords in England to check that new tenants have the right to be in the UK before renting out their property. Under the new rules, landlords, including those who sub-let or take in lodgers, who fail to check a potential tenant’s ‘Right to Rent’ will face penalties of up to £3,000 per tenant. But Right to Rent, which was introduced in the Immigration Act 2014 as part of the Government’s reforms ‘to build a fairer and more effective immigration system’, has been criticised after it was revealed that most landlords are still not prepared for the new legislation. “There has been an influx of new legislation relating to the rental market made in recent years and we know that UK landlords are struggling to keep on top of these changes. Despite knowing many of the basics, many find it difficult to navigate the minefield of changing renting rights and wrongs and this is particularly so for accidental landlords,”…
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Fresh cash boost to tackle rogue landlords
The Government’s approach towards private landlords risks hurting tenants, a major property consultancy has warned, after the Housing Minister Brandon Lewis last week announced a £5 million cash boost for local authorities to tackle rogue landlords in their area. Forty-eight councils will share the funding so they can take on the irresponsible landlords that force tenants to live in squalid and dangerous properties. It is hoped that the cash will also allow councils to root out more ‘beds in sheds’. Since 2011 almost 40,000 inspections have taken place in properties with over 3,000 landlords facing further enforcement action or prosecution. The funding will allow local authorities to carry out more raids, increase inspections of property, issue more statutory notices, survey more streets and to demolish sheds and prohibited buildings. The Housing Minister said last week that the funding is part of a package of measures that will ensure millions of tenants get a better deal when they rent a home. Mr Lewis (left) said, “Many private rental tenants are happy with their home and the service they receive, but there are still rogue landlords that exploit vulnerable people and force their tenants to live in overcrowded and squalid accommodation. “We…
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Stamp Duty: the hidden issues
The new surcharge on properties purchased as second homes or as a buy-to-let has caused disbelief and fury – but there is more to it than meets the eye. David Gibbs (left), Taxation Partner at London based Alliotts accountants has the informed view, “The consultation paper makes clear that the proposed Stamp Duty charge is an additional three per cent on the whole of the purchase price. For example under the current rules, Stamp Duty on a second property costing £200,000 is £1,500. From 1st April 2016 this will rise to £7,500 – a 500 per cent hike. The draft rules are very tightly drawn so that the additional rate applies if ‘at the end of the day of the transaction’ an individual owns more than one property. “There are exceptions. If you are replacing your main home you are exempt from the charge. So if for example, you own a second property and purchase a new ‘main home’ then the additional charge won’t apply. Buyer beware – the old home must have been sold by the end of the same day that the new home is purchased. The additional rate will apply if it is. There is a proposal…
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Hairdresser gets a whole new look
Nottingham-based consultants GraceMachin Planning & Property has given a former hairdressers in the village of Farnsfield a new look, converting the property into a one-bedroom home. Bracken Cottage, located in Main Street, was marketed at auction before being snapped up by planning and property duo Nick Grace and George Machin who spotted its renovation potential. The pair, partners at their own planning and property firm GraceMachin Planning & Property, has transformed the former village salon into a smart single-storey detached property which is being marketed by Richard Watkinson & Partners in Southwell. George said, “We spotted the property coming at auction and immediately saw its potential as a residential dwelling and were delighted to have put in the winning bid. “Since purchasing the property in May we have undertaken a really comprehensive refurbishment to transform it from a hairdressers into a lovely one-bedroom bungalow, which would be perfect for anyone looking for low maintenance living from young professionals to the older generation.” Rachael Grange, director at Richard Watkinson & Partners, has just placed the property onto the market – and says that interest has already been significant, “George and Nick have done a really lovely job in converting Bracken Cottage…
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Tory Peer rebels against the Chancellor’s buy-to-let plans
Lord Flight (left), Chairman of Flight & Partners Recovery Fund, and a former Shadow Chief Secretary to the Treasury, joined a chorus of disapproval today as he spoke out against the Government’s plans to raise taxes and limit allowances for buy-to-let investors. He wrote, “I hope the Government will re-think its sudden attack on Buy-to-let this summer and autumn. Otherwise, it risks the very crisis in the buy-to-let housing and lending markets of which the Governor of the Bank of England has recently warned. “Buy-to-let has been an entirely sensible market economy development, in most cases as an alternative to saving for old age via pension schemes. Up to World War II, investing in rented property was the main method of providing for an income in old age. Given the poor performance of the stock market over the last 20 years, it is hardly surprising that many people have opted for Buy-to-let investment as an alternative, and more successful, retirement provisioning investment. Buy-to-let has, moreover, provided some three million homes for those not able yet to afford to buy their homes – especially in London. “Buy-to-let does not enjoy any of the major tax advantages of pension saving: i.e. tax…
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Landlords in Scotland to be hit by tax crackdown
Scotland’s Finance Secretary John Swinney (pictured) has announced that a 3 per cent levy will be charged for people acquiring second homes and buy-to-let landlords in addition to the existing Land and Buildings Transaction Tax (LBTT), which replaced UK stamp duty in April. The Scottish Fiscal Commission, the official watchdog of the Scottish Government’s tax and spending plans, estimates that the supplement on LBTT, which will be introduced in April 2016, will affect between 8,500 and 12,500 transactions annually, and could raise up to £27 million. The LBTT system, which raised £218 million in its first seven months, uses a graduated tax rate, working in a similar way to income tax. Swinney commented, “We need to ensure that the opportunities for first-time buyers to enter the market in Scotland are as strong as they possibly can be and we need to make certain that tax changes elsewhere in the United Kingdom do not make it harder for people to get on the property ladder. “That is why I today announce my intention to introduce a supplement to LBTT for those purchasing an additional home for £40,000 or more.” The announcement regarding the introduction of a 3 per cent surcharge on…
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