Tuesday, 24 February 2015

Private Rented Sector Energy Efficiency Regulations

Fears that many rural properties may be adversely affected by the “Private Rented Sector Energy Efficiency Regulations” appear to be misplaced.

When the Department of Energy and Climate Change (DECC) published the regulations, this led to immediate reports that properties with an EPC rating in Bands F and G would become un-lettable from 1st April 2018.

The basic premise of the regulations is that from 1st April 2016 domestic tenants will have the right to request consent to make energy efficiency improvements under the regulations that have been laid before Parliament. Landlords would need to provide a response to the tenant’s request within one month.

The minimum energy efficiency standard applied will be set at E and from 1st April 2018, the regulations will apply upon the granting of a new tenancy to a new tenant or new tenancy to an existing tenant. The regulations will then be extended to apply to all privately rented property from 1st April 2020. In effect this appears to mean that any property that cannot achieve an EPC rating of A-E could no longer be let.

The concern for farms and rural estates was that very many farm and estate cottages would struggle to achieve and EPC rating of A-E. This is because they are often old and built using traditional construction methods, which may make them attractive country cottages but it is often difficult to bring them up to modern energy efficiency standards without very significant expenditure.

If these properties were to become un-lettable this would put real pressure of the availability of housing in the countryside which in turn would have serious implications for rural communities where affordable housing is already a serious problem.

But, crucially, there is the ability for landlords to seek exemptions. Essentially, where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard the landlord will need to provide such evidence to a centralised register, the “PRS Exemption Register.” Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.

Thus it appears that if the cost of upgrading a property is greater than the financial benefit to be gained from the upgrade the landlord may be able to apply for an exemption. The regulations will detail specific circumstances under which a landlord can refuse consent for the tenant to implement energy efficiency measures. Landlords can also claim exemption where a tenant refuses their proposals to improve efficiency.

There will be an appeals tribunal system. The regulations will include a number of safeguards to ensure that only appropriate, permissible and cost effective improvements are required under the regulations.

In time it seems these regulations will bite as energy prices rise in the long term, but in the short term it appears band F and G properties which cannot be cost effectively upgraded to band E or above will not be relegated to the scrap heap immediately although we will wait to see if the rental value of such properties will be impacted.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

Friday, 20 February 2015

UK landlords should take care in reporting rental incomes

With the January 31 deadline for submitting self assessment tax returns to HMRC and paying any income tax due now passed there’s a temptation to put all thought of tax affairs to the back of your mind.

Some time ago, HMRC announced it would be looking into under declarations of rental income by landlords in its Let Property Campaign, giving buy to let and other private landlords the opportunity to make a full and voluntary declaration of any tax owing on relatively favourable terms.

HMRC has widened its sweep and has the power, through issuing statutory notices, to force lettings agents to provide details of rents collected on behalf of all landlords. It estimates up to 1.5 million landlords may be under declaring every year and has sophisticated data gathering abilities to check figures.

Already, it has announced that almost £8 million has been collected from landlords who under declared so make sure your house is in order, so to speak, and voluntarily contact HMRC if you suspect there may be anomalies.

Tenant deposit loans

In the last issue of Clearer View I outlined the new tenant deposit loan scheme launched by the Government into both the public and private employment sectors.

It’s worth pointing out that if a deposit is being paid by a third party on a tenant's behalf by way of an agreement with that tenant then the s213(10) of the Housing Act 2004 definition applies to those paying deposits on behalf of tenants as "relevant persons" and they must be served the information prescribed by the Housing (Tenancy Deposits)(Prescribed Information) Regulations 2007 covering key information about the tenant deposit and where it is protected.

Failure to do so could mean it is not possible to serve a valid notice under s21 of the Housing Act 1988 on any tenant when the prescribed information has not been served on them and on any relevant person. In addition either the tenant or the relevant person (or possibly both of them) can make a claim for the usual financial penalties.

Landlords and agents must convey the necessary information to employers in good time.

Lisa Simon, 
Partner Head of Residential Lettings
T: 020 7518 3234 

Thursday, 19 February 2015

The ESTAS 2016

We pride ourselves on the customer service we provide to all our clients and for this reason we have entered our lettings teams into “The ESTAS 2016”, the most prestigious award scheme in the UK property industry.

The ESTAS is a completely independent award scheme which highlights Estate & Letting agents providing high quality service based on research conducted with sellers, buyers, tenants and landlords in the UK. Voting has commenced and we would therefore appreciate it if you could spend just a few moments to complete a questionnaire on line via a link which your local branch can provide. You can find out your local branch by clicking here.

Please note your responses are anonymous and we do appreciate your honest feedback!

Lisa Simon, 
Partner Head of Residential Lettings
T: 020 7518 3234 

Monday, 16 February 2015

Easier to qualify for the ‘sporting exemption’ from VAT

In recent times some shoots have been unexpectedly caught by HMRC where they have failed to charge their “members” VAT. This has come as a very nasty surprise and often makes an already unprofitable exercise in to something which is totally unaffordable.

VAT is charged on a “taxable supply”, and in this context, the right to shoot and take game, as well as making land available for shooting are considered taxable supplies. This latter point is important to understand from the landowner’s perspective, in that even if a landowner has not “opted to tax” his land and therefore does not have to charge VAT on rent, he will still have to charge VAT on the shooting rights leased to the shoot if the landowner is VAT registered.

VAT registration only becomes compulsory when the taxable turnover of a business, which may include a shoot, exceeds £81,000. Clearly this will only be relevant to larger enterprises but it is surprising how much running a shoot can cost. Up until 1st January this year, any shoot with a turnover in excess of the threshold which charged fees would need to register for VAT, unless it fell within a narrow exemption.

The exemption applies to supplies made by an ‘eligible body’ of sport-related services, but only where supplies are made to members of that eligible body. A shoot can fulfil the requirements of being an eligible body, provided it is non-profit making, and not subject to commercial influence.  

In this respect a syndicate whose members simply share the cost of running the shoot should fall within the exemption, but the water becomes muddy where the syndicate lets one or two days to guns who are not members of the shoot. This is common practice where the syndicate is looking to increase its income so as to reduce the cost of running the shoot, but the benefits of doing so will backfire if as a result the members have to be charged VAT on their membership fee at the rate of 20%.

If a shoot is being run on a commercial basis, letting days to corporate clients for example, charging VAT is understandable but it seems harsh that members of a syndicate of individuals, who are simply trying to cover the costs of their shooting activities, may also have to pay VAT.

However, from the 1st January it seems the rules have been simplified so as to make it easier to qualify for the ‘sporting exemption’ from VAT which now applies to all VAT-able supplies made by eligible bodies that enable participation in a sport, whether supplies are made to members or non members.

Having said that VAT is a complicated area of tax, particularly for Landed Estates where opting to tax land and the resultant partial exemption rules require careful consideration but at least in the context of a shooting syndicate, matters appear to have become a little more straightforward.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

Monday, 9 February 2015

Tenant deposit loans to uplift lifestyles, reduce travel, & invigorate lettings market

Government-wide support for a new scheme with potential to help thousands of tenants is great news for the private rented sector (PRS).

Housing Minister Brandon Lewis yesterday announced Government-wide support for a new scheme for tax-free deposit loans that will become available to thousands of potential tenants.

All of Whitehall has now agreed to offer deposit loans to staff looking to take up new tenancies in the PRS, following initial action by the Department for Communities and Local Government.

The scheme works in the same way as a staff season ticket loan, with employees borrowing some of their salary in advance in order to pay for rental deposits. The loan is then repaid from salary over up to a year – the scheme is available to be taken up in both the public and private sectors and not limited to Civil Service employees.

The Department for Communities and Local Government is working with the Department for Business Innovation and Skills to increase availability across the private sector. It will help landlords access a significant pool of tenants, those joining graduate schemes for instance, and essential workers at present struggling to find accommodation as they try to match deposit requirements even though they have sufficient salary to meet the rents themselves.

Living closer to work is the ambition of many people employed in London but often the need for a high deposit is more of a deterrent than the rent itself, which could be afforded especially as it would eliminate much of the cost of commuting.

Instead of season ticket loans, which this new scheme effectively mirrors, employees will be able to rent the home of their choice, use their savings on travel costs to contribute to rents, and enjoy a better lifestyle through the diminished need for daily travel.

Generally employees are offered interest-free loans to pay their deposits when they move into a privately-rented home, paid back through their salary over the course of up to a year. The loan is conditional on the deposit being secured through a tenancy deposit protection scheme and staff pay back the loan through deductions from their monthly salary across no more than the following 12 months.

The department has worked with Civil Service employee policy colleagues to produce guidance that can be adapted by organisations looking to implement deposit loan schemes.

This is far from limited to the capital, however, and should help the PRS in other regions where both deposits and travel costs are high. Young professionals especially, who stay in an area for a year or two before moving to develop their career, will now find moving more flexible and so, too, will employees regarded as essential staff. Carter Jonas will investigate how employers can be encouraged to adopt the scheme to widen its take-up beyond the public sector.

Lisa Simon, 
Partner Head of Residential Lettings
T: 020 7518 3234 

Farmland remains an above inflation investment

According to Carter Jonas’ recent assessment of the rural property market, farmland remains an above inflation investment with prices increasing by 2.5 per cent in the second half of 2014 alone.

However this national figure disguises a growing regional variation, with values in the south and east of England achieving as much as £14,000 per acre while the South West witnessed sales averaging about £9,000 per acre.

The supply of land remains restricted, with a total of only 120,000 acres being openly marketed across the UK in 2014, a 15 per cent decrease from the previous year.

However, in contrast the volume of off-market sales rose significantly during 2014, accounting for a third of all Carter Jonas transactions across the country as buyers and sellers of large blocks of land are increasingly seeking private deals.

This trend is expected to continue and will help to sustain the growth in capital values which is forecast for 2015.

But, the picture is not an even one across or within regions because local demand and land quality are becoming increasingly important.

Isolated blocks of poor quality land in areas of little demand are not experiencing capital growth and in flood hit areas for example, capital values may be less than half of the average price in the region.

In contrast large blocks of land of 1,000 acres or more are proving most attractive, with this market being driven by cash rich investors in particular, where the inheritance tax relief available on agricultural land often makes it an attractive investment.

Despite this, farmers represented for the highest proportion of buyers on transactions completed by Carter Jonas during 2014 at 28 per cent, closely followed by “lifestyle” buyers (24 per cent) and investors (20 per cent).

The “halo effect” surrounding London remained significant and is expected to build momentum during 2015 as capital continues to flow from high earning individuals working in the City or even from abroad.

This effect is particularly prevalent in the country house market with properties up to about 50 acres, although holdings with larger parcels of land continue to benefit, albeit to a lesser extent.

The RICS/RAU Rural Land Market Survey for the second half of last year also shows demand for farmland continues to outpace supply and drive up prices.

However with land prices rising and rent for farm business tenancies remaining broadly stable, the investment yield on agricultural land has fallen to match its all time low of 1.6%.

Anecdotal evidence from RICS surveyors suggests that the recent fall in commodity prices may be tempering the pace of demand, particularly for smaller blocks, in all parts of the country.

However, with demand for land from outside the farming community still strong and the supply of land tight, it seems that despite the fall in farming profitability, the price of farmland will on average remain firm during 2015.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk