Inside Letting eMagazine

Inside Letting

EDINBURGH'S LINK WITH LANDLORDS

ISSUE 42

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Available online at: http://www.insideletting.org.uk

Front Page

HMO 3 year licence

House in Multiple Occupation (HMO) - Proposed change to licence

A report was sent to the Regulatory Committee on Monday 19 September 2016 which proposes the following changes to the HMO licence: 

  • Edinburgh Council logo3 year HMO licenses
  • a new fee structure
  • consultation arrangements.

Landlords should take advantage of the opportunity to give their opinion of the proposed changes to HMO licences. Details of the consultation period for the proposed changes to HMO licences, is shown below.

Landlord feedback required

City of Edinburgh Council would like your thoughts and feedback about the suggested changes to the HMO licence process. If you require further information about the proposed changes or are interested in participating in this consultation process please read the full report.

For feedback contact City of Edinburgh Council direct by email.

The last date for submitting your feedback is 30 November 2016.

 

 


 

 

 


News

Electrical safety - final deadline

The Housing (Scotland) Act 2014 made changes to the Repairing Standard in respect of electrical safety, explains John Blackwood, Chief Executive of the Scottish Association of Landlords (SAL).

It requires landlords have to have fixed wiring Electrical Installation Condition Report  (EICR) checks carried out at least every five years.


This applies from the following dates: -

  • 1 December 2015 – this was the deadline for any new tenancies entered into on or after this date (this included current tenants signing a new lease)
  • 1 December 2016 - for existing tenancies

The EICR report must include an appliance check report a Portable Appliance Test (PAT). PAT checks are required on appliances provided by the landlord, but not those belonging to the tenant.

EICR checks carried out between 1st January 2012 and 30th November 2015 by a competent electrician are acceptable, even if they do not include an appliance check. For example, an EICR carried out on 30th November 2015 without PAT checks would still be valid for up to 5 years, to end November 2020.

Anything that is movable and fitted with a plug should be on the PAT report. Everything in the property which uses the electrical supply must be on either EICR or PAT, unless it belongs to the tenant.

It is advisable to have the checks carried out more frequently than five yearly, if recommended by an electrician.

It is a requirement that landlords ensure that the electricians they use are competent. Electricians should be a member of SELECT, NAPIT or NICEIC or be able to complete the checklist in Annex A of the guidance. (check PRHP link below)

The PAT test can be carried out by a landlord/ letting agent provided they have undergone relevant training, such as that provided by Landlord Accreditation Scotland (see Annex C of the guidance for details). The PAT check can also be carried out at a different time to the EICR check, provided both are carried out at least every 5 years.

EICRs and PATs carried out from 1 December 2015 must be documented on the forms specified on pages 14 and 21 of the guidance in order to be acceptable under the regulations.

In addition, all appliances checked must have test labels placed on them.

For more information on required forms and competency see the SAL factsheet entitled Electrical Safety Check Forms & Competency.

New build/newly rewired properties meet the standard, provided an in-date Electrical Installation Certificate (EIC) is in place. An appliance that was purchased new less than one year before the date of the PAT check does not require to be tested, but it should be listed on the PAT report and the date that its first test is due clearly recorded.

All landlords and letting agents are advised to read the guidance in full to familiarise themselves with the detail of the requirements. Landlords and letting agents are invited to join the Scottish Association of Landlords for access to advice and resources to assist them with private sector letting in Scotland.

PRHP logo

 

Statutory guidance on the requirement can be downloaded via the Private Rented Housing Panel (PRHP) website.

 

Opportunity for landlords to have their voice heard

SAL 2015Landlords and letting agents are used to being unfairly demonised by politicians and the media, but it is important that they resist the urge to retreat into a shell or stop speaking to opponents, says John Blackwood, Chief Executive of the Scottish Association of Landlords (SAL).

Over the past few years, negative rhetoric against the private rented sector (PRS) has been followed through by politicians bringing in a number of policy changes. Some of these changes will be positive, but some may have a negative impact on the ability of landlords to provide flexible accommodation in high quality homes. Here at SAL, we know that the private sector is part of the solution to the housing crisis, not the cause of it.
Impact of change in Scotland The Private Housing (Tenancies) (Scotland) Act 2016 will simplify the rental regime and reduce some bureaucracy but with the high price of ending the “no fault” ground for eviction. At the same time, the Scottish Government chose to follow the UK Government lead and imposed a tax on second home purchases, hitting the buy-to-let sector particularly hard.

The impact of these changes is already being felt and will only increase in the coming months. It is important, however, that if things go wrong, the sector resists the urge to simply call for the clock to be wound back or shout “I told you so” from the sidelines. The new ministerial team (Kevin Stewart MSP as housing minister with Angela Constance MSP responsible at cabinet level) is new to its brief.

That’s why they need to hear from SAL and its Council of Letting Agents (CLA), which together represent responsible landlords and agents who provide safe and well managed homes to tenants. What ministers want most is both to achieve improvements and to be seen to achieve improvements. What they definitely dislike is being told something is wrong without a solution being proposed. Naysayers get nowhere.

A new political impetus

John BlackwoodAny thoughts that there might be no change to the new arrangements in the next few years will also be mistaken. There appears to be a political will for action with a sense that “something must be done” to tackle Scotland’s housing crisis. As a result, the PRS has become a convenient punch bag, with politicians imagining a group of Victorian slum landlords wilfully providing poor-quality housing.  Such landlords do exist, mostly operating outside mandatory as well as voluntary standards. Because of this, we at SAL call for stricter enforcement of existing regulations to give them a chance to work before new measures are considered. This can surprise politicians who misunderstand the PRS.  But driving these criminal landlords out of the market can only be good, protecting the majority of responsible landlords who not only provide high quality housing in an increasingly difficult market and with very small margins, but who also have a strong social conscience.
The new political impetus and focus on housing should be welcomed, but the PRS must ensure it is coming up with constructive solutions to achieve government objectives in a way that does not damage and could even support growth for landlords. At the same time, it must be acknowledged that some landlords are damaging the reputation of the industry and steps should be taken to drive these people out to help stop the vilification of the sector.

Shaping public opinion

So, how do we go about doing this? Well, first, the PRS must have the confidence, data and case studies to demonstrate where changes have failed and come forward with practical solutions. Failure to do this will result in our opponents simply saying measures didn’t go far enough and pressing for more extreme action.

Second, we need to engage with those businesses and individuals who rely on the PRS. These include those suppliers who are employed to help landlords meet the multiple safety standards and thus are providing extensive local employment.

Third, we must look to the broader societal need for the PRS. For example, a large number of businesses in urban and rural areas, such as in tourism and agriculture, have high levels of seasonal employment so rely on flexible accommodation for their workers. Without the PRS, these businesses couldn’t exist and workers wouldn’t have jobs.

Together we can build a broader picture of the need for the PRS and show politicians that the sector is capable of listening to and working with a range of organisations to find innovative practical solutions to address housing issues in Scotland.

Be part of the solution – contact your local MSP with your suggestions or join a landlord association, such as SAL and make your voice heard.


Spotlight on Lettings

Don't Panic

Aberdein Considine LogoAdrian Sangster, Leasing Director, Aberdein Considine, discusses the result of the European Union (EU) referendum and the possible impact it could have on the private rented market.

Landlords in Edinburgh, the Lothians and across the country will be wondering what they should do, if anything, after the UK voted to leave the EU. 

This result and a change in Governement, coupled with Nicola Sturgeon’s statement that another referendum on Scottish independence is back on the table has created turmoil in the financial markets and uncertainty around what will happen next. 

Scottish landlords are still recovering from a triple whammy of changes to the taxation regulations brought about by John Swinney increasing the Land and Buildings Transaction Tax for second homes and George Osborne’s decision to cut mortgage tax relief and replaceing the 10% wear and tear allowance with tax relief for costs they incur for replacing furnishings.

In addition to the changes to Tax, landlords are also having to deal with lenders who are (and were already doing so prior to the vote) setting tighter lending criteria for buy-to-let mortgages.

However, I do not necessarily believe that the recent vote should result in considerable and lasting damage to landlords in the private rented sector.  

There is no doubt that Brexit has created a feeling of uneasiness and the immediate impact of the result was tumultuous. However, in my 26 years working in Scotland’s lettings industry I’ve seen difficult and uncertain times before. 

SangsterFrom the UK leaving the Exchange Rate Mechanism (ERM) in 1992, the banking crisis and global recession in 2008 to the independence referendum in 2014, the Scottish private rented sector has proved time and again to be resilient, able to adapt, evolve and often thrive in challenging times. 

Ironically, it’s during these previous periods of uncertainly that I’ve witnessed first hand lettings business increase as investors grow nervous of financial markets and turn to bricks and mortar, viewing it as a less risky haven for their hard earned cash.  I’ve also found that tenant enquiries tend to increase as people look to make short term arrangements rather than commit themselves to a 20+ year mortgage etc.

Therefore, my message to Edinburgh and Lothian landlords is, as Corporal Jones would say, don’t panic!

The steadying and reassuring words from the Governor of the Bank of England that they have extensive contingency plans in place coupled with more positive news that UK shares and the Pound are regaining some of the ground lost in the wake of the vote should encourage landlords not to make any knee-jerk decisions. 

Yes, there is change and yes, the outcome is still uncertain, but I am confident the Scottish private rented sector will do what it has done before and ride the storm to come out just as strong, if not stronger, on the other side – how long that storm may last, however, is the great unknown.

Steady growth for Edinburgh's private rented sector

Citylets logoRental trends observed in the Q2 2016 Citylets Quarterly Report have been amongst the most consistent ever recorded. The Scottish Private Rented Sector (PRS) on the whole continued to rise at its current rate of 2% year on year (YOY) growth to stand at £777 per month on average. Strong competing forces inScotland's main cities continue to battle it out with the net result of modest growth at national level.

The Edinburgh market, however, edges ever upwards towards the £1000 average mark at the same rate recorded over the last few quarters of around 6%. The average rental in the capital is now £986 per month with 70% of stock let within a month.

It has been the ever popular one bed properties rising fastest at a full 8.7% YOY to stand at £686 on average and with 34% coming off the market within 1 week.

Whilst there may be uncertainty all about, this is not the case for trends in the Edinburgh rental market which is good news for landlords but increasingly bad news for tenants. Rents in Edinburgh have risen just under 7% per year over the last 3 years and c5.5% over the last 5.

Citylets continues to expect upward pressure on rents in Edinburgh to surpass the £1000 per month average by the end of 2016.


Law & Legislation

Tenant deposit victory


Lindsays logoJane Rattray, Lindsays, writes for Inside Letting about recent cases, in relation to Tenancy Deposit Schemes (Scotland) Regulations 2011.

The Tenancy Deposit Schemes (Scotland) Regulations 2011 have had legal effect since 7 March 2011 and landlords should now be familiar with their duties under the Regulations. In summary, Regulation 3(1) provides that landlords must:

  • pay tenancy deposits into an approved scheme. All deposits received prior to the introduction of the Regulations should now be protected in a Tenancy Deposit Scheme. All tenancy deposits for new tenancies require to be paid into the relevant scheme within 30 working days of the beginning of the tenancy
  • provide tenant with the information in relation to tenancy deposits as prescribed by Regulation 42

The issue of tenancy deposits and penalties for failure to comply with the Regulations has been revisited in the recent case of Cooper v Marriott at Edinburgh Sheriff Court.  

The Facts

In Cooper, reported March 2016, the tenancy commenced on 15 June 2013 and continued until termination on 17 July 2015. A deposit of £550 was paid to the landlord but was never placed in an approved tenancy deposit scheme.  Mr Cooper raised a claim by way of Summary Application for payment of three times the tenancy deposit, being the maximum sanction for breach of Regulation 3(1) of the Tenancy Deposit Schemes (Scotland) Regulations 2011.

Sheriff Welsh found the landlord in breach of the Regulations and granted an order for payment of £1,050 representing approximately twice the tenancy deposit. 

Discussion

Jane RattrayInterestingly, the Sheriff commented that “the regulations do not recognise the status of amateur landlord" and appeared to suggest that the courts should not treat ‘single property, buy to let landlords’ with greater leniency than commercial landlords.

This may signal a departure from the reasoning of Sheriff Welsh in his earlier reported decision, Jenson v Fappiano.                                                                                                                                                                                                                                                                                                                                                                                                                             

In Jenson, the Defender was a first time landlord. A deposit of £1,000 was paid to the landlord but this was not paid into an approved scheme until 27 January 2014 rather than August 2013 as required under the Regulations. The landlord admitted the breach, however, defended the action on the issue of quantum, submitting that he was a first time landlord and he had remedied the breach as soon as it became apparent. The landlord’s solicitor accordingly invited the Sheriff to exercise his discretion and award a token penalty of £1. In his decision of 28 January 2015, Sheriff Welsh accepted the defender was an ‘amateur landlord’ and awarded a modest penalty of £333.33 being one third of the original tenancy deposit.

The facts of this case should be distinguished from Cooper, as the landlord in Jenson rectified his breach as soon as he became aware of it and placed the deposit in an approved scheme, albeit late. This is likely to have had a bearing on the Sheriff’s decision when considering the extent of the breach and the monetary sum to be awarded to the tenant.

However, the recent decision in Cooper could suggest that the Courts are now reverting to a robust approach towards the Regulations as seen in the earliest reported cases. In Fraser v Meehan (2013) and Tenzin v Russell (2014), both landlords were ordered to pay their tenants three times their respective deposits for failure to place the deposit in an approved scheme and provide their tenants with the prescribed information.    

In summary, all of the above cases demonstrate that there is probably no defence to a landlord’s failure to place a deposit in an approved Tenancy Deposit Scheme. The situation is easily avoidable by paying the deposit into a registered Scheme and providing the prescribed information.

Scope of the duties

Until recently, it was widely understood that the duties under the Regulations lay predominantly with landlords, not their agents. However, in a recent case at Kilmarnock Sheriff Court, a letting agent in Largs was successfully prosecuted and fined for failure to secure deposits held on behalf of tenants.

Colvin Houston Ltd was fined £500 for failure to place two tenancy deposits, amounting to £925, in an approved scheme. Interestingly, the action was raised by North Ayrshire Council’s Trading Standards Team and framed under the Consumer Protection from Unfair Trading Regulations 2008 as opposed to a Summary Application by a tenant under the Tenancy Deposit Regulations. Nonetheless, this represents a strong legal precedent and letting agents should exercise diligence when confirming obligations under an agency agreement. Agents should consider refining their terms of business to specify exactly what services they will execute on behalf of the landlord in respect of tenancy deposits, what costs (if any) there will be and who will be responsible for those costs.

For further details of Tenancy Deposit Schemes and contact details check the Scottish Government website.

 


Registration Matters

Amendments to housing benefits and advice for landlords

Parents and adult son completing paperworkThe Department of Work and Pensions (DWP) has announced several changes to benefits that could have a direct affect on landlords and tenants within the private sector.  The changes are shown below.

Universal Credit (UC) changes

An overview of UC can be found on the Scottish Government website . The following points are the main changes to UC.

Work Allowance

The work allowance in UC, the amount the claimant can earn without benefit being affected, was reduced in April 2016. For disabled people and people with children, it was reduced to £192 per month if there are housing costs (previously housing benefit) and £397 per month if no housing costs. The work allowance was abolished altogether in April 2016 for non-disabled, childless claimants, meaning benefit is reduced as soon as you start earning. Check DWP for further information.

Benefit cap reduced

There is currently a benefit cap in place in England, Scotland and Wales, which restricts the amount of certain benefits that a working age household can receive. Any household receiving more than the cap has their Housing Benefit reduced to bring them back within the limit.

From Autumn 2016, the cap, which is currently £26,000 per year, is to be reduced to £23,000 for households living in London and to £20,000 for those outside London. The exact date from which you will be affected will depend on where you live. Check DWP for further information.

Digital Roll out for East Lothian

East Lothian is the first local authority in Scotland to have UC Full Service.

From 23 March 2016, East Lothian has offered  the UC Full Service for all new benefit claims, which include those who are in and out of work, on low incomes, those with disabilities, couples and families.

UC Toolkit:

A reminder that a UC toolkit is available for landlords which provides more information about UC and provides assistance when dealing with vulnerable tenants, for issues such as:

  • how to arrange direct payment of UC to landlords
  • how to access budgeting advice for tenants

 


Events & Training

Landlord Accreditation Scotland (LAS) Training

LAS 2015The dates for Landlord Accreditation Scotland (LAS) training courses taking place in the Lothians between November and December 2016.

 

Becoming accredited with LAS, along with regular attendance at courses and information events, provides landlords with knowledge on key issues and how to implement change when required, ensuring they have the confidence to conduct their business in a professional manner.

The range of training courses provided by LAS covers both legislation and best practice in the private rented sector.  It can be very difficult to keep track of the changes to legislation which affect our responsibilities as landlords and agents.  The courses that are available to you cover all of these responsibilities and are updated in line with ever changing legislation. 

 

Courses held locally November - December 2016 

 

Core Standard Level 1

Tenancy Agreements and Notices

 

29 November 2016

John Muir House

Haddington

 

1.00pm – 4.00pm

This course looks at what information should be included in a short assured tenancy agreement or lease document to ensure that the landlord is providing a relevant document for the tenant whilst protecting their interests as a private landlord.  The course also provides guidance on preparing and serving notice documents.

 

Core Standard Training Level 1

Tenancy Management in partnership with Letting Protection Service Scotland

 

1 December 2016

Braid Hills Hotel

Edinburgh

 

1.30pm - 4.30pm

This course looks at a number of topics from starting a tenancy to communication with tenants throughout a tenancy.

The course is suitable for landlords and letting agents regardless of the number of properties managed and length of time in the industry and covers:

  • communication with tenants
  • pre-letting procedures
  • tenancy deposit administration
  • equality issues, complaints and disputes
  • dealing with antisocial behaviour

How to Book

All courses run by LAS can be found listed on the LAS website and can be booked on-line at:

 

 

 

 

 

 

  

 

 

 

National Landlord Day

SAL 2015National Landlord Day, the major conference and exhibition from the Scottish Association of Landlords, is the largest gathering of landlords in the UK. The 2016 event will be the ninth year running for this popular event, bigger and better than ever and taking place at Dynamic Earth, Edinburgh on the 8 November.


Feedback from private landlords and agents for previous years has been excellent, including from those who travelled long distances to attend. There are great public transport links to the event and onsite parking for those choosing to drive.

It’s an ideal opportunity for anyone involved in the private rented sector to hear from leading experts in the field, network with colleagues and find out the latest news in Scottish letting. Our guest chair for the day will be BBC Reporting Scotland presenter Sally Magnusson who will introduce our speakers and ensure all the hot topics are fully debated. Speakers will present all the crucial topical updates and information needed by everyone involved in Scottish private rented sector lettings.

The conference team looks forward to hearing from anyone wishing to book for the event. Please visit SAL's website to book online  or just let us know via email or call 0131 564 0100 if you would like us to send an invoice for your place.


Features

What students look for in accommodation. Advice/links for Landlords

students moving into hallsEdinburgh University Students' Association (EUSA) writes for Inside Letting about the advice they provide to tenants looking for accommodation and useful links for landlords.

We, at The Advice Place at EUSA, provide free and impartial advice on a range of topis, including housing, to students at the University. Most of our members let properties within the private rented sector, so providing them with clarification on their rights and responsibilities as tenants constitutes a key component of our work. Last academic year, we dealt with 3697 housing enquiries, including over 1200 enquiries about searching for accommodation and large numbers of enquiries on deposits, guarantors, repairs and letting agent fees.

We deal with large numbers of enquiries from students searching for accommodation. Such enquiries come from a diverse range of members, including international students who are unfamiliar with Scottish tenancy law and students who are renting for the first time. In the process of dealing with these enquiries, we always seek to provide information that pre-empts future difficulties.

In February 2016, we delivered a series of outreach events providing housing information and advice to students across five different locations. In the course of these, we distributed over 400 copies of our flat-hunting checklist (see link below). This checklist includes a series of questions designed to encourage students to check on the condition of a property (and the landlord’s responsiveness to requests for repairs) before they decide whether to commit to a tenancy or not. The checklist also prompts students to check whether a property has an HMO license where relevant. It also serves to increase students’ awareness of landlords’ responsibilities in terms of ensuring that fire safety and carbon monoxide detection devices are in place ans that a tenant information pack is provided.

Students often ask us to check through their tenancy agreement prior to committing to a tenancy. In this process, we take care to highlight their key contractual responsibilities and to provide clarification on aspects of the contract that may not be immediately obvious to persons who have no prior knowledge of Scottish tenancy law. Many of the students we work with require further clarification on issues such as:

  • the meaning and implications of joint and several liability
  • inventories and their importance in resolving disputes over deposits at the end of a tenancy
  • understanding their obligation to provide notice prior to ending a tenancy
  • their responsibilities concerning upkeep of communal areas.

Time spent ensuring that all tenants possess a clear and accurate understanding of their rights and responsibilities prior to entering into a tenancy can go a long way towards preventing future difficulties.

Sometimes, of course, unforeseeable circumstances prevent tenants from fulfilling their contractual obligations. We occasionally encounter students who have amassed significant rent arrears. The reasons for this are many and varied, but can include delays in student funding, fluctuations in  international exchange rates, difficulties in securing holiday work and change in circumstances (e.g. redundancy). We have a team of experienced money advisers who can help students to resolve any funding issues and support them in exploring their options in terms of maximising their income, minimising their expenditure and dealing with any debts they have accrued. If you encounter any student tenants (from University of Edinburgh) in this situation, please make them aware of our service.

 

Useful links for landlords:

EUSA

City of Edinburgh Council - landlord responsibilities

Scottish Government - HMO advice/information

Landlord Registration

Scottish Government  - Tenancy Deposit Schemes

EUSA  - Flat hunting checklist

Are you a contractor?

symington mackellYou might not consider yourself a contractor, but HM Revenue and Customs (HMRC) could. Richard Montgomery, Symington Mackell writes for Inside Letting about exisiting taxation rules affecting landlords.

Over recent years, landlords and letting agents have become used to the ever-increasing obligations placed upon them by HMRC. Whilst much has been written about the recent tax changes affecting residential letting, it’s worth considering some existing areas of taxation which might catch out the unwary.  One such area is the Construction Industry Scheme (CIS).

CIS was introduced by HMRC to tackle the issue of cash payments in the construction industry and the consequential lost tax resulting from such transactions.  Whilst one might assume construction concerns larger commercial projects, from HMRC’s perspective it covers any area of construction work.  This includes site preparation, decoration, alteration, repair and refurbishment, however there are some exclusions, such as carpet fitting and delivering materials to site, amongst others.  CIS applies to you if you are a builder or property developer and also if your business is not in the construction industry but spends an average of more than £1 million annually in any three-year period.  If you fall into any of these categories and you pay subcontractors to carry out construction work, you are a contractor and subject to CIS. 

Richard MontgomeryIn practice, this means you are required to register as a contractor with HMRC and must deduct tax at source from payments to a subcontractor and pass it on to HMRC.  Subcontractors don’t have to register for CIS, but by not doing so, deductions made by the main contractor are subject to a higher rate deduction of 30%.  It is more sensible for subcontractors to be registered so they may be able to benefit from a lower rate of tax deduction or no deduction at all, depending on their circumstances.

Many landlords and some letting agents regard themselves as being property developers as well, so care should be taken when considering construction related work that it doesn’t push them into the category of ‘contractor’.  We keep hearing that HMRC are taking a tougher line on the collection of tax, so it makes sense be well informed about which taxes apply in order to protect your business.

More information can be found on the government website

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