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Holiday Homes loophole leaves renting almost impossible in some cities

The HMRC views holiday lets as a trade rather than investments. This means mortgage interest costs can be offset against any income for tax purposes. If you have used a mortgage or loan to pay for a holiday let, you can claim the interest of repayments back against your tax.

Holiday lets count as a business which means the expenses from your rental income can be deducted before you are taxed. This includes the interest you pay on your mortgage. For buy-to-let properties, on the other hand, the law has changed, and this is no longer the case.

It means letting holiday homes has become a relatively cheaper expense and is therefore more profitable if you are occupied for most of the year.

This is leading to quite a few cases where long term tenants are being evicted from their homes, so the landlord can do it up – as one requirement is that it is adequately furnished – and rent to tourists looking for a home, away from home. Plymouth has become a city of holiday lets and in fact so much so, they have an ongoing petition to slow it down.

Cornwall has 62 homes to rent on Rightmove but 10,290 Airbnb listings. In one village in Wales, three quarters of the houses are holiday homes.

Anything that reduces cost will look attractive, particularly in this climate where the three-month temporary solace of mortgage holidays offered a preview to an advantage that could be experienced permanently (for now anyhow), as a landlord, if you just made the switch.

Ruthless Impact

Tenants become vulnerable to eviction, through no fault of their own, when regular landlords aspire to become holiday let landlords.

This becomes even more real during these uncertain times of Covid. As we are being asked to holiday at home the opportunity for these holiday lets arises with the threat of eviction rising too. The eviction ban lifted from protecting tenants in May 2021. Tenants could find themselves on the street with no roof over their head. 

This generation, looking to buy a home in their childhood neighbourhood stand no chance with fewer residential properties to purchase and the ceiling prices unreachable. Renting too will be impossible with higher demand and higher rent. Young people will be unlikely to afford.

Ironically, local business owners who require a workforce to keep their businesses running to cater for tourists, will struggle finding the workforce who have nowhere to live locally.

Should the loophole be closed?

Removing the holiday let mortgage relief would return the incentive to prioritise people looking for a home, not a holiday.

It would open up a more competitive rental market for those wanting to live in these sought-after holiday towns where many grew up/want to return to.

It’s tricky because the nation has become more accustomed to Air BnB or, as opposed to the traditional hotel establishments. We increasingly opt for a more ‘authentic’ travel, where you can experience the city, the way the locals do, including living like they live. A home away from home.

Maybe the answer is to incentivise regular landlords who simply rent to those that need a home to level out the playing field.

HM Land Registry goes digital transforming the property market

HM Land Registry- a transformation to look forward to?

The latest report released this month from an organisation enmeshed in most property transactions across England and Wales, discusses what needed to change due to the pandemic and why things won’t be going back to the way it was, pre-pandemic.

Transaction processing has been made easier:

1. Paperless transactions

2. Electronic signatures

3. Digital mortgages

4. Digital registration services

5. An Application portal

Paperless transactions

The advantage is undisputed. Automating many of the services used allowed property transactions to continue through the various phases of lockdown experienced in the UK.

The government has responded by increasing the pace of switch to digital, to support the creation of a true digital property market.

Electronic signatures

Probably the most dramatic pivot was removing the need for in-person signature to complete property dealings.

Electronic signatures and digital identity checking are a thing of the present. Two important, permanent pieces of the digital conveyancing picture, sanctioning complete online and paperless transactions.

Stephen Ward of the Council for Licensed Conveyancers stated: “HM Land Registry’s policy statement of electronic signatures was a big milestone. The plans for physical witnesses to be replaced by technology that digitally verifies the signature will be something that we expect to see early next year.”

Digital mortgages

A digital mortgage service called ‘Sign your mortgage deed’, allows users to add information to the register without caseworker intervention. A first for HM Land Registry.

Digital registration service

This automates error checking. Customers can ensure the correct information is provided, before submitting applications, thus reducing delays.

The service was awarded the Real IT Awards 2021: Delivering Excellent Customer Experience.

An applications portal

A portal called ‘View My Applications’ which allows customers to speedily view the status of their current applications on one screen.

Clearly HM Registry are preparing for the increasingly digital future. Are you?

How do you see this making your life easier?

Government’s Removal of Renter Protection

There are more people who rent privately than own homes with a mortgage. Almost a third of Londoners. Considering the UK as a whole it’s 13 million people, according to the office of National Statistics, who rent.

The Coronavirus Act 2020, passed March 25th, enforced the government’s protection plan for tenants, covering the increase of notice periods, pausing of evictions and stopping of possession. A much needed relief by many. However, the dial has been reset, or is at least turning back gradually to resume pre-pandemic rules.

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Initially the notice period extension before eviction proceedings was three months, before being extended further to six months between August 29th 2020 to May 31st 2021. From June 1st this will be decreased to four months. Two months, come August 1st.

While it may seem like a huge hurray for landlords, they have not come out of these reforms unscathed. Remember mortgage payment holidays? Not anymore. Although the Pay as You Grow repayment holiday is still available to commercial properties.

So, what does support look like right now? Conversation seems to be the preferred approach. Renter to landlord. Landlord to bank. The government would like tenants who are still struggling with payments to talk to landlords about creating a plan that would probably lead to reduced or suspended payments for an agreed period. Landlords should discuss support measures with their bank, probably reduced interest or an extended mortgage. It is expected that the government will legislate that landlords cannot take tenants to court before they have sought arbitration on rents.

On the odd chance you have not checked if you qualify for financial support, do so. Housing allowance and Universal credit have been increased to help better cover costs. Emphasis on the word ‘help’ not ‘cover’. Don’t forget to check with what your local council can do.

Can more be done? Yes. Suggestions include discarding ‘no fault’ Section 21 evictions altogether, which allows eviction at the end of a fixed-term tenancy agreement, or during a tenancy with no fixed end date.

As the Government, only yesterday, is back under pressure to address this Landlord and Tenant Covid rent row, I see this issue running and running.