National Rent Rise Day 5 April 2017

Whilst I agree in principle with this idea I also share concerns that this may be looked upon by many as just another negative landlord ploy to extort more money out of innocent tenants, which may backfire on us with future rent capping.

The fact is though, like many others, in response to the imminent tax changes I started raising my rents last year and have just notified my tenants of this year's increase so many of us wouldn't be in a position to implement rises again to coincide with the suggested date next April.

Reply to the comment left by "Robert Mellors" at "11/10/2016 - 12:07":

The relevance is that the FSA fought fir the unbundling of charges so that not only ciuld the end consumer see wgat tgey were paying for but could avoid those charges by selecting the service provuder or specificcharges for the services they required. The banning of agent's fees, as extant in Scotland abd promoted by CaseHub, does not mean that agents work for free but that higher charges are passed to landlords which may or may not pass them on. Why should the tenant end user not see with clarity what they are paying for when the financial services consumer now does?

I won't be waiting until April.

Rents in my area have already gone up, presumably because of S24 in many cases, and most of my rents are now a fair way below market value. I have been waiting for the results of the JR hearing, but now that has gone against us I won't be waiting any longer. Some of my tenants are about to get the first rent rise they have ever had.

I too do not think it is a good idea for a small subset of landlords to announce they are increasing their rents because they are being hit by the new tax: it looks like sour grapes and is poor marketing.

Also the majority of landlords, who own their properties outright or hold them within a corporate structure, are not affected by the the reduction in tax relief for mortgage interest, so they are only going to benefit if mortgaged landlords start pushing hard for rent increases, either because their properties become more affordable or by increasing their own rents (assuming the increased rents can actually stick).

Given the number of variables for each landlord's individual position, I would say the best response for most of us with mortgages will be to tighten our belts and increase our rental income, though without pricing ourselves out of the market. We could, for example, conduct regular rent reviews during a tenancy, not just set the rent at the start and keep it in the same for potentially many years. Or we could switch to a cheaper letting agent or a self-managed approach.

Or there may be numerous options in terms of income distribution, for example by having a proportion or all of the rent paid to a third party who is in a lower tax bracket. If a higher-rate taxpayer has a number of individually-owned rental properties but also has a spouse or retired parents or grandparents who are 20% taxpayers, it makes perfect sense for the rent to be paid to them instead, after deducting mortgage interest costs in full; the money would then find its way back to the higher-rate taxpayer in the form of regular gifts made between relatives.

In other words, just pushing up rents in a fit of pique is not a sensible strategy, especially if you then lose perfectly good tenants or make your houses unaffordable. Cutting costs is an equally effective way of protecting your bottom line, and there are plenty of tax planning options available.

Reply to the comment left by "Tony Atkins" at "11/10/2016 - 14:02":

Quite, we are likely to a) form a partnership to split rental income on a variable percentage basis and b) charge the partnership property and tenant management costs into an incorporated entity. As that resultant income is now longer "from a lettings business" it will be pensionable etc; plenty of ways to skin the cat.

Reply to the comment left by "money manager" at "11/10/2016 - 14:15":

Money Manager, From what I've read on other posts and on AccountingWeb, you may be on a sticky wicket if your incorporated entity's only client is yourselves. You may need to be able to demonstrate to HMRC that the company is more than just a mechanism for shuffling money around and is a genuine lettings business with real trading activity. Have you discussed this with a professional like an accountant, and if so, what was the outcome?

Reply to the comment left by "Tony Atkins" at "11/10/2016 - 14:02":

That's right (more regular rent reviews). I introduced fixed rent increases (greater of X% or CPI) into all my contracts since September last year. To be honest, no one has batted an eyelid because the increases are modest compared to what tenants have been encouraged to believe landlords will try to raise rents by. And because I only very rarely raised rents in the course of a tenancy, it is all additional income (although not enough to offest the cost of the new rules when they bite - hence starting early).

Reply to the comment left by "Robert Mellors" at "11/10/2016 - 09:37":

"Hi Paul

It is HB that thought it may be illegal, my comment was that it is not illegal. To my mind it is completely legal AND FAIR to increase rents by the amount of tenant tax that landlords will have to pay to the government. The problem is that this amount is different for everyone. Yes, it all comes in on the same day, so it is reasonable to all increase the rents on the same day, but the problem is how much to increase the rent by (without being accused of profiteering from the tenant tax)."

Hi Robert,

I agree that rents will be heading up, but what I think would be illegal would be any co-ordinated campaign to increase rents on a particular days. If we return to official guidance on the matter:

"Price fixing

You must not discuss the prices you’re going to charge your customers with your competitors.

You’ll be breaking the law if you agree with another business:

to charge the same prices to your customers
to offer discounts or increase your prices at the same time
to charge the same fees to intermediaries, eg retailers selling your products

You can be fined or sent to prison for up to 5 years if you’re found guilty of being involved in cartel activity.

Company directors can be disqualified from being a director for up to 15 years."

https://www.gov.uk/cartels-price-fixing/overview

The key words above are to "increase your prices at the same time". A campaign organised through a popular landlord website with a hashtag about raising rents on a particular day, would on balance, fall into this category IMO. You may argue that it is about passing on a tax like VAT, but it is not in a purely technical sense. OK, I do not think that many (or even any) would be prosecuted. If any, it would only be the ring-leaders, but I would not want to knowingly commit an offence that would attract at maximum a 5-year prison sentence. So for that reason, "I'm out".

But I will be happy to raise rents as appropriate, taking into account my costs. I will put the rents up, but not on a day organised by others.

Hi

I do not think this is a good idea as it is Landlords are hated and when we all put up the rent on the same day it is just going to annoy people/tenants more. Another debate will start "how to help tenants?" Answer would be rent will be capped/rent control. Let's not invite trouble for ourselves.

I'm completely perplexed by this whole thing! We have been renting properties for over 40 years and every year the tenant has an increase to their rent. About 3%, although in the past couple of years this has gone up to about 4%. I can't imagine how a tenant would react, never mind cope, with an increase after several years at a rate related back to the year they moved in! (That is to say, making up for all the years they did not get an increase and to now pull them in to line in one fell swoop!). The property wouldn't seem like it was value for money anymore if they suddenly had to pay all that extra money for what is basically the same thing but older and probably more shabby (!) than when they moved in.
Perhaps a simple change to a new lease that states an increase will become due each year, would solve everyone's problems regarding this.