Better protection for renters
Landlords will soon have to sign up to a national register, under new plans unveiled by the government designed to drive out rogue buy-to-let investors.
The scheme, which is based on recommendations made in an independent review of the rental sector, will see every private landlord sign a national register and provide this information on rental agreements. Tenants will also be able to complain about landlords who fail to carry out essential repairs or protect their deposits – with any guilty parties struck off the register.
In addition, the government says it will also change the law to offer tenants better protection if their landlords fail to pay their mortgages. Renters will now be given a minimum of two months’ notice if they have to leave a property because it is being repossessed by a bank or building society.
Housing minister Margaret Beckett says: "With almost three million private tenants in the country, the private rented sector plays a vital role in providing choice and flexibility in the housing market.
"That's why we need to ensure tenants have the protection they deserve, the many decent landlords receive the support they need, and those landlords whose performance is inadequate either improve or leave the sector.”
However, there are concerns that the new measures might not fully protect rental tenants. For example, if a landlord doesn’t have a buy-to-let mortgage, then the two months' notice period might not apply.
The Council of Mortgage Lenders (CML) says that many tenants might not even be aware of whether their landlords has a buy-to-let mortgage (which recognises their tenancy) or a ‘normal’ owner-occupier loan (where tenancy is not recognised).
Michael Coogan, director general of the CML, says this important legal distinction is complicated.
"Everyone sympathises with the position of good tenants who were unaware their landlord was not paying the mortgage,” he adds. “For the minority of tenants whose landlords should never have been renting out the property at all, we look forward to working with government towards a resolution that appropriately balances the outcomes for lender, borrower and tenant."
However, the CML says its members are committed to working to ensure all landlords facing repossession are given support, and that this help is extended to their tenants.
Leslie Morphy, chief executive of charity Crisis, says the new measures must be implemented quickly to ensure protection for renters to today’s harsh housing market.
"A strong and healthy private rented sector has a vital role to play in meeting our housing needs, particularly for those who do not qualify for social housing, but we have long argued that we need to raise standards across the sector,” Morphy adds.
But Keshav Thukaram, managing director of Smartlandlord.co.uk, warns tge new national register of landlords could lead to more red tape and increased costs to both buy-to-let investors and their tenants.
A homeowner’s worst nightmare; repossession is an action of last resort by mortgage lenders to recover money from borrowers that have failed to keep up with repayments on their mortgage or other loan secured on their home (see secured loan). Repossession is a legal procedure that has to go through several processes before the homeowner is evicted and the property reposed. These are: if a borrower keeps defaulting; the lender applies for a solicitor’s notice; the lender instigates possession proceedings through the court; at the court hearing a possession order is granted and sometimes a possession warrant; a bailiff is appointed and an eviction notice issued at which point the homeowner has two to three weeks to vacate the property.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.