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Accidental landlords face increased tax bills

The private rental sector looks set to be hit with yet more changes to taxation.

This time it will be at the expense of those who have become landlords by chance rather than as a commercial venture.

Some may have inherited property or found themselves in a position where they have had to relocate, but were unable to, or decided not to sell their current property.

Keeping the property as a safety net might not have been such a good decision under new government plans to scrap two kinds of tax relief from 6 April 2020.

Where you sell an investment property (one bought as a buy-to-let) you will pay capital gains tax on any profit you make from the sale above the annual threshold (currently £12,000). This equates to between 18-28 per cent, depending on your tax bracket.

However, if the property was once your main home you only have to pay tax on the amount the property value increased between you leaving the property and selling it.

At the moment, landlords are able to add 18 months on to the length of time they lived at the property. For example, if you owned the property for two years, living in it for the first year and renting it out for the second, the tax calculation is based on you having lived there for two-and-a-half years.

Under the new government proposals, this benefit, which is part of the relief known as principal private residence relief, will be cut to nine months.

A further blow will come in the form of reduced lettings relief.

If you sell your former home after renting it out, currently you can protect £40,000 or £80,000 for couples, from capital gains tax.

From next April only landlords that lived in the property with their tenants will be able to claim this benefit.

There could also be a further headache in store if you are tied into a fixed-term mortgage that ends after April next year. If you decide to sell the property to avoid the impact of the tax changes, you could be hit by hefty early repayment charges.

Property solicitor, Michael Steele, advises: “If you have become a landlord by circumstance, you should take advice from both your solicitor and financial advisor as soon as possible so that you are fully aware of the legal and financial requirements and implications of being a landlord.”

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Landlords guide to recovering abandoned property

Author: Tracie Croft

Once a tenant occupies a property as their only home, they have what is called ‘security of tenure’. This means that the landlord can only recover possession of that property lawfully through a court order or if the tenant surrenders the tenancy in writing and/or returns all the keys to the property.

So what happens if the tenant has not surrendered the lease but has left the property unattended for weeks or even months?

Prior to the introduction of the Housing and Planning Act 2016, the only way in which a landlord could take back possession of the property legally was by obtaining a Possession order. If he did anything other than that he could be guilty of breaching the tenancy agreement and / or unlawfully evicting the tenant, which is a criminal offence.

However, since the introduction of this Act landlords of abandoned property let under an assured shorthold tenancy, can seek possession without a Court order if:

The tenant is in either 8 weeks, 2 months or 1 quarter rental arrears ( dependent upon the term of the tenancy) and;
The landlord has issued 3 warning notices and the tenant, occupier or deposit payer has failed to respond to the notice in writing.

Warning notices

Each of the notices must include certain information and give the tenants a prescribed period of time in which to respond in writing.

The landlord must give the tenant at least 8 weeks from the date the first notice was issued in which to respond in writing so although a court order is not necessary, relying on abandonment is not always going to be quicker or cheaper than applying for a Possession order especially if the accelerated procedure can be used.

Also, within 6 months of service of the final notice ending the tenancy, the tenant can apply for the court to reinstate the tenancy agreement if they can show a good reason for not responding to the notices. This could apply in situations where the tenant has been imprisoned and therefore could not respond to the notices.

Abandonment can be a tricky situation many landlords find themselves in because no matter how empty the property appears to be, if you take back possession without following due process the tenant can argue unlawful eviction.

Atherton Godfrey has a specialist landlord team to assist with all aspects of eviction and abandonment and can advise which situations would benefit from relying on this new law. If you have questions or require any assistance relating to this please contact the team on 01302 320621 or email landlords@athertongodfrey.co.uk

 

 

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Doncaster council’s selective licensing consultation

Author: Tracie Croft

On 18 April 2017, Doncaster Council opened consultation on the introduction of a Selective Licensing Scheme for privately rented properties in parts of Edlington; likely to be predominantly the Royal Estate.

The purpose of the scheme is to help tackle anti-social behaviour in the area.

What is Selective Licensing?

The Council has the authority to implement a specific licensing scheme for privately rented properties within areas where there are high levels of anti-social behaviour. This is normally done if they believe that Landlords are failing to play their part in preventing or tackling tenant’s anti-social behaviour. The schemes are applied to selective areas and normally last 5 years.

Hexthorpe currently has a selective licensing scheme operating throughout the whole area and according to Doncaster Council this has reduced anti-social behaviour in that area.

What does this mean for landlords with properties in Edlington?

Landlords will need to apply for a licence to allow them to let the property to tenants.
Landlords will also be required to pass a ‘fit and proper persons’ test. This means landlords who have been prosecuted for illegal eviction or harassment of tenants may not be granted a licence and therefore cannot let out their property within Edlington.
Landlords will also need to abide by certain obligations imposed on them by the Council, for example; obtaining tenant references, signing anti-social behaviour agreements, maintaining the property to a required standard and ensuring the property is not overcrowded. This list is not exhaustive and a full list of requirements can be found by visiting www.doncastercouncil/selectivelicensing.gov.uk.
How much is the licence?

The licence fee will be set at a one -off cost of £515.00 when purchased directly from the Council for both single and multiple properties or £80.00 if purchased from an Approved Partner Accreditation Scheme which is currently Home Safe Scheme Limited.

Exemptions

Some properties such as HMOs will be exempt from the scheme. This should be checked directly with the Council.

What happens if I don’t apply for a licence?

If the scheme is implemented and you do not apply for the licence within 3 months, you will be charged an additional £80.00. If the licence is not applied for within 6 months, an unlimited fine and/or a civil penalty of up to £30,000 may be issued.

The Council will be conducting searches and inspections to ensure that all properties have a licence and that both Landlords and Tenants are abiding by the conditions of the licence.

What do I need to do now?

Doncaster Council will be holding two information days specifically for Landlords within the area:

Monday 23 May 2017 10am -1pm  Civic Office, Waterdale, Doncaster

Thursday 8 June 2017 2pm – 5pm  Civic Office, Waterdale, Doncaster

Should the scheme be approved it will start in December 2017. This means that all Landlords within the selective area must have a licence by March 2018.

If you are Landlord and would like advice regarding the implications this proposed Selective Licensing Scheme may have on you and your properties, we have a dedicated Landlord team on hand to answer any questions or concerns you may have.  You can contact us on 01302 320621 or alternatively email us at landlords@athertongodfrey.co.uk.