LESA, The Landlords Energy Saving Allowance. The Buy to Let Tax Regime is Unkind to the Environment says Lawrenson of LettingFocus.com

Come to Our Next Evening Property Event in London Seminar Evening on 4th November
Confused about tax - you ought to be
The current tax regime for landlords is confusing and makes landlords continue to use energy inefficient boilers.
In a recent press release I pointed out how the current tax regime in the UK is vague and does little to encourage landlords to replace old boilers.
Many landlords will keep an old boiler going for longer than might be best from an environmental point of view.

WEAR AND TEAR ALLOWANCE OR RENEWAL
Tax wise, most landlords letting furnished property have a choice. They can either opt to deduct 10% of the net rents as an annual wear and tear allowance or they can choose to wait for years until the item needs to be replaced to claim the alternative renewals deduction.
No surprise, then, that most go for the wear and tear allowance.
But what many landlords don’t realise is that the 10% deduction is given to cover the sort of assets that a tenant or owner-occupier would normally provide in unfurnished accommodation such as living room suites, fridges, cookers and washing machines.
Non moveable items like boilers don’t seem to count under this definition and so a landlord letting furnished property and claiming the 10% wear and tear deduction could replace an old boiler with a modern new efficient one and still claim the cost as a valid expense.
However, most landlords reading the standard notes on the property pages of HMRC’s Tax Return Guide would not come away with that impression.

MORE CONFUSION STILL
But it gets more complex still because the current rules are unclear.
Why?
Well, HMRC will not allow a deduction for the replacement of fixtures that constitute an IMPROVEMENT.
My old mate Helen Demuth, a tax expert at prestigious city firm Smith & Williamson adds, “HMRC did not used to allow a deduction for double glazed windows since they were an improvement on single glazed windows. They now allow double glazing as a deduction.”
So, on the same basis, condensing boilers are an improvement, and like thermal insulation requirements for most windows, they are mandatory.
It would be helpful if HMRC could confirm that the costs ARE deductible because the current confusion means that when a landlord is faced with the cost of replacing an old boiler, he is more likely to try to keep it going than to replace it, especially as repair costs can also be claimed as a valid running cost. This is bad for the environment and bad for the UK’s carbon footprint.
It would be even better if HMRC could announce that they will always allow condensing boilers as a deduction when replacing existing boilers.
And even better than that would be if condensing boilers were included in the Energy Allowance (LESA) where the property has not had central heating before.
This is a guide only and should not be used as individual tax advice which will vary depending on an individual's unique circumstances. Always take tax advice from an expert tax adviser familiar with property tax issues.
Come to Our Next Evening Property Event in London Evening of 18th March
BECOME AN AFFILIATE OR ADVERTISE ON OUR SITE
We will soon be taking advertising at our site.
If you would like to advertise here or have a product to offer our readers on an affiliate basis, please Contact Us button at our main site http://www.lettingfocus.com/
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts. Read More Articles on Property by David Lawrenson.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker - and I run the well known property investment blog that you are reading now.
Come to Our Next Evening Property Event in London Evening of 18th March
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for a fee to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members

Sale and Rent Back in the Dock says Lawrenson of LettingFocus.com. Also, Local Housing Allowance and Rents.

I see that the OFT has asked eight firms in the, er, Sale and Rent Back “industry” to come to see them for coffee and biscuits and while they are there, try to justify the advertising claims they made to try to get hapless home owners to sell them their property at knock down prices.
Of course, this is all part of an overdue investigation into that industry which is now ongoing.
I’d like to have been at that meeting to see some of the less straight of these firms struggle to explain the quite outrageous advertising claims they had been making in the past.
Another meeting I’d like to be at is the one today where Sir Fred Goodwin of RBS and his pals try to explain how they just about destroyed a bank and helped b****r up the UK economy in the process.
I trust they will entering the building by the back door and well away from angry protestors.

WHY ARE RENTS FALLING?
Lots of people (well five this week actually) keep asking me why rents are falling and how much longer and further they have to fall.
Well, there are various reasons for the fall in rents.
First, there is a lot more property about which is available for rent.
Many would be house sellers cannot bear to take 15 or 20% less on their property than they would have got 18 months ago and so they opt to rent the house out instead.
With lots of stock about tenants can be choosy. In London and the South East, which have seen the local economy hit hardest due to the large number of financial services firms, rents are down about 10% on last year overall.
Second, as many landlords’ mortgage payments have fallen in line with the falls in the base rate, they can afford to cut the rents a bit.
Some people think rents will keep falling slowly as long as this situation persists.
But I am not so sure because there are a few things that will underpin rents.
First of all, at the lower end of the market, the Local Housing Allowance (LHA) rent levels provide a sort of buffer below which private rents will not fall much. OK, I know LHA is supposed to reflect private rents but the process by which the government adjusts them is slow. Think of the big Afghan family in the large house in Hampstead that recently made the news as a good example of this!
Second, mortgage lending is only going to unfreeze very slowly. Heck those bankers have still got bonuses to pay so they need to keep up both high mortgage margins over base rate and high product fees for quite a while.
Add in all the doom and gloom in the news plus the fear over jobs and I think we can see a scenario in which an increasing number of would-be first time buyers will opt to be tenants for some time yet.
And with this increased demand for renting, rents will not fall too far.
BECOME AN AFFILIATE OR ADVERTISE ON OUR SITE
We will soon be taking advertising at our site.
If you would like to advertise here or have a product to offer our readers on an affiliate basis, please Contact Us button at our main site http://www.lettingfocus.com/
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts. Read More Articles on Property by David Lawrenson.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker - and I run the well known property investment blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for a fee to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.

How the buy to let mortgage frauds were carried out - Part 2 - by David Lawrenson of Letting Focus

In part one last week I showed how the property market environment in the early noughties was right for buy to let mortgage fraud to flourish.
I explained how big discounts were negotiated between property companies and builders to shift new build boxes onto mostly novice property investors.
Now let’s look at what happens next.

The sales contract that the builder and the property investment company sign would show the full price but the builder hands back that discount at the time of exchange of contracts to the property company.
When the flats are built, the property company will simultaneously sell on the flat to their own buyers and keep all or some of that discunt, making a nice little earner for them. They may also charge a “finders fee” too.
Now, it must be said, SOME of these buyers will be real ones – very often people whose credit score would normally preclude them from buying conventionally. (And it is worth noting that some of the builder’s discount would often be paid back to buyers which was often used as a way for stretched buyers to buy with “no money down” using the discount as their deposit.)
OTHER buyers could be completely bogus ones who applied for a mortgage using false IDs and fabricated documentation. Some blocks in Thamesmead suffered particularly badly with this latter kind of buyer and in these types of cases the property company would be complicit in the fraud.
The key to all these frauds is that until September 2008, there was no obligation for the builder and property investment company to share information on the discount to the mortgage lender. The lender had to rely on the buyer to do this which, of course, makes the fraud relative easy to commit.

WHO WAS DUPED IN THESE MORTGAGE FRAUDS
To make this fraud work, the properly fraudster needed at least some of the following ingredients.
First, they needed a conveyancer. Whilst the conveyancing company would see the sale price on the contract they would not see the hidden discount between property company and builder. This changed last September. But one wonders how many conveyancers really knew what was going on.
Second, you need valuers who were too lazy to accurately value these new builds. Or maybe it was a case of more than just laziness -which is of course going to be up to the courts to decide.
Third, in the worst cases, the fraudster needed to set up a shell property company and get a load of fraudulent applications going in. This may also involve using REAL people with false IDs who then go and live in the flats until such time as they get evicted.
Fourth, you need dumb banks that were too ready to lend money to “people” - either real or imagined people - to buy these properties at far too high a price.
DAVID LAWRENSON AND LETTINGFOCUS.COM IN THE PRESS
Click here to read a selection of articles featuring my comments in the national papers during 2008: http://www.lettingfocus.com/pages/myarticles.html

We are having a break from blogs next week. We’ll be back on 22nd January with a new one.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker and I run this well known property letting and investment blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008 and 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.

Immigration flow may reverse says David Lawrenson of Letting Focus

One of the big threats to buy to let is the risk that the big flow of immigration may one day start to reverse.
New migrants generally rent and the huge numbers coming to the UK – we are talking millions but the fact is no one really knows least of the all the government – have pushed up demand for rented property.
However, the tide could be turning as the economies of the new EU member states strengthen. The numbers of east European immigrants approved to work in Britain dropped from 227,875 in 2006 to 206,905 last year, a fall of nearly 10 per cent, and the trend is expected to accelerate over the next decade. According to the Independent, “Poles, who make up two-thirds of the newcomers, are understood to be returning home in greater numbers, drawn by higher salaries, job shortages and the fall in the value of the pound against the Zloty”

Mortgage Rates
Also, in yesterdays papers was the threat that mortgages could get more pricey. The Head of the City Regulator the FSA said banks may be forced to keep loans on their own books in future rather than packaging them up and selling them off. This could have the affect of raising the cost of money. My view is that this fear is a bit overblown as there are still plenty of other sources of finance available like the building societies.
Meanwhile, in a separate move, Nationwide has raised the amount of deposit required for access to its best loans to 25%. I feel that this news is more significant for the housing market because this tightening of credit, if followed by other lenders, could lead to a bit of a donwturn in housing prices as borrowers find it harder to get funds. Possibly as much as 5 to 7% over the next year if others lenders follow suit.

Buy to Let Mortgage Rates
What about buy to let mortgages? As far as we can see lenders have now stuck another 20 basis points onto the cost of these loans relative to bank base rate than was the case pre-credit crunch days. However, buy to let loans are still available at 80% loan to value. So, if your credit rating is good, and you have access to money, the effect of all this will be that more property should be available to buy (to let) at lower prices than was available before.
Finally, I was quoted extensively in yesterdays Independent. Here is the link to copy into your broswer: http://www.independent.co.uk/life-style/house-and-home/property/investment-get-the-best-deals-ndash-now-787640.html
If you need more advice on property investment or buy to let investment in general please ask me.
I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website http://www.lettingfocus.com/
My next London landlords networking meeting is on March 12th. Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Dangers in Buy to Let says Panorama programme by Lawrenson of LettingFocus

A must see last week was the BBC Panorama investigation ‘Bursting the house price bubble’.
It showed how novice buy-to-let investors, attracted to new city-centre flats, were being stung by developers who were accused in the programme of encouraging mortgage fraud by inflating values. This was often done by using incentives, such as cash-back offers, free holidays or payment of legal fees and stamp duty, as part of the asking price.
It’s clear that the regulations in place have been broken by rogue valuers and solicitors who seemed to be working in the best interests of the rogue elements among developers and property syndicates - rather than their clients’ the property buyers.

Avoid Being Done
How do you avoid getting stung?
Well, it’s quite easy. Firstly, you need to seek independent research into the claimed value of a property and its rental return. So go and look for yourself – look on the net and go and visit the property and the area. Second, make sure that the value of any incentives comes off the inflated price so the true property value can be seen more readily.
Sadly, where lazy, greedy and sometimes gullible and green investors meet cleaver marketing men, there will always be one winner -and it won’t be the investor.
If you need more advice on where to buy investment property ask me. I’m David Lawrenson from independent property investment experts www.lettingfocus.com
I’m the author of the landlords bible “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property letting and a well known writer on buy to let and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlord and tenant advice service .
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my landlord blog and details of my networking, advice, property investors seminar programme at my website www.lettingfocus.com
What’s unique about lettingfocus.com is that we offer independent property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.