Welcome to the latest departmental newsletter from Davis Blank Furniss. Our focus this time is on our Property department.
Jennifer Smith – solicitor in our Property department – discusses things to consider before purchasing a buy to let property.
Manchester has long been championed as being in the top ten locations in the UK for rental returns on buy to let properties. This is attributed to the relatively low house prices compared to cities in the south of England together with the large student population and increasing numbers of young professionals seeking rental properties in or close to the city centre. Furthermore, since 6th April 2015 it has become possible for over 55’s to withdraw part of their pension as a lump sum leading to some wanting to invest in property rather than keep the money tied up in pension schemes. As a result, we are continuing to see a rise in the number of buy to let instructions we are receiving, particularly for city centre flats.
If you are considering a buy to let purchase, there are a number of things you should take into account before proceeding. Here are some of the main points you should think about:
• Make sure you will be able to pay the mortgage in the event that the property is vacant or if your tenant fails to make payments on time;
• Will the rent charged cover your mortgage payments or will you need to supplement the payment;
• Make sure you are comfortable with all the associated costs of owning the property including ground rent, service charges, insurance, ongoing maintenance and repairs and managing agent fees;
• Ensure you understand the tax implications of buying and selling buy to let properties including the effect it would have on your income tax, capital gains tax and inheritance tax liabilities;
• Ensure you understand your responsibility to protect the tenant’s deposit in one of the approved tenancy deposit schemes;
• Will you be furnishing the property? If so, you should consider how much you will be including, what standard you want to furnish to and how much this will cost both at the outset and for ongoing repairs and replacements;and
• Do you have the time to manage the property yourself and deal with any repairs etc or will you employ a managing agent? If so, this is an additional cost for you to factor in.
As with all properties, prices can increase or decrease depending on the market so you should make sure you are comfortable with the risks of property investment and perhaps of taking on an additional mortgage before going ahead.
If you have any questions or queries regarding a possible buy to let purchase, please contact Jennifer Smith at email@example.com.
Joshua Bragg – a trainee solicitor in our Property department – discusses auction sales.
As the property market grows, property auctions are proving to be an increasingly popular means of selling or buying a property. Although auction sales are not always the favoured means for a standard residential sale, they are particularly useful for properties that might not sell as well via estate agents.
Auction sales have proved to be particularly beneficial in widening the market and facilitating sales of properties with unusual characteristics that are difficult to value or require a quick sale. For example, this medium is often used for properties that require a lot of renovation work or planning consent, or that are being sold by a mortgagee following repossession.
Advantages of Auction Sales
There are certain advantages of auction sales that make them preferable to selling properties on the open market, such as:
• Legal certainty – the sale contract is binding as soon as the auctioneer’s hammer falls and the purchaser is required to complete on a fixed date stated in the contract;
• Speed – the completion date is fixed and there is little or no opportunity for the purchaser to negotiate terms or raise enquiries;
• Price – the competition within the auction could potentially lead to a higher sale price being achieved compared to the open market; and
• Recoverability of legal costs – it is possible to include conditions in the sale contract that enable a seller to recover the cost of legal fees and disbursements (such as search fees).
However, these advantages should be weighed up against the cost of utilising property auctions; the auctioneer will often charge commission on the sale price and, if the property does not sell, the seller is usually liable for the legal costs involved. Also, the seller needs to be flexible as the sale price will be uncertain and the property will need to be open for viewings by any potential purchasers and their surveyors.
Things to Consider
There are a few things a seller should consider when putting a property up for sale at auction, namely:
• The other types of property included in the auction or generally sold by that specific auctioneer. It is important that an auctioneer is chosen that often sells similar types of property or an auction is chosen including similar properties so that appropriate purchasers can be located;
• Whether a reserve price should be fixed;
• Whether the seller wants to retain a right to bid for the property; and
• Whether the time limits involved are practicable. For example, it needs to be ensured that the property will be vacant on completion (which might be complicated if there are tenants in the property) and that there is enough time to prepare the legal documents.
Where We Can Help You
In addition to the auctioneer preparing an auction catalogue, detailing the particulars of the property, an auction seller will instruct a solicitor to prepare the legal pack of documents that are required for the auction. This pack usually includes searches of the property, an investigation into its title and any leases that it is subject to, a copy of the auctioneer’s standard general conditions of sale, and the Energy Performance Certificate.
Also, your legal advisor will prepare the sale contract. This will include certain special conditions that are particular to the property being sold. For example, it will detail any rights being granted or reserved by the seller and any restrictive covenant (i.e. obligations) that the seller wishes to impose over the land following the sale. Importantly, as explained above, it is also possible to include special conditions recovering the legal fees and disbursements incurred in preparing the pack.
We have considerable experience in acting for sellers of properties at auction and a bank of precedent legal packs to enable us to work efficiently to assist in a quick sale. We also have links with several local auctioneers who we can put you in touch with if you are interested in selling a property at auction.
DeBrieF TEAM SPOTLIGHT:
Susan Bann, partner…
What does your role at Davis Blank Furniss involve?
I deal with all aspects of property transactions, mainly domestic, but also commercial property. I also deal with other associated matters such as wills.
What is the best thing about your job?
Clients – job satisfaction when working with clients.
If you were not a lawyer, what would you be doing/where would you be?
I would probably be in my motorhome on the side of a beach or at Lindisfarne (The Holy Island of Lindisfarne).
What’s the best thing about doing business in Glossop?
The people, it is very personable. You’re able to develop really good relationships with clients.
If someone was visiting Glossop what would be your top tip for them to do?
Visit and explore. There is so much to see and do in Glossop: lots of shops, pub and walks. Glossop is a very diverse town.
For more information on Susan and her work, please visit:
Charlotte Fielding – solicitor in our Dispute Resolution department – provides tips for a landlord when letting a residential property.
Being the landlord of a residential property can be difficult if you end up with a troublesome tenant. This article gives some tips about how to try to minimise the risks in letting your property and what you should do if you do end up having problems with a tenant. There are three stages which need to be considered:
1) Before the tenancy
Prevention is better than a cure. In order to minimise the risk of letting your property to a bad tenant there are steps which you should take before you enter into the tenancy.
Ask the tenant to provide references. You should ask for a previous landlord’s reference (to give you an idea of whether the person is a good tenant) and a work reference (to check whether the person can afford to pay the rent).
b) Inventory and Schedule of condition
Just before the tenant moves into the property you should draw up a detailed inventory of the contents of the property and a schedule referring to its condition and attach plenty of photographs (date stamped). You should ask the tenant to sign this document.
c) Seek a deposit but adequately protect it
Ask the tenant to provide a deposit. If the tenant causes damage to the property then you may be able to recover some or all of the repairs costs from the deposit. If a dispute arises then holding a sum of the tenant’s money can be a helpful negotiation tool. However, we must issue a word of warning; if you take a deposit then you must protect it in a specified deposit protection scheme. If you fail to do so then you may have to pay compensation to the tenant.
2) Entering into a tenancy
When entering into a tenancy you should take steps to protect your property and financial interests.
a) The tenancy agreement
You need to make sure that the tenancy agreement adequately protects you as a landlord: for example, by keeping your repairing obligations (and, therefore, repairing costs) to a minimum and assisting you in removing the tenant if they do not pay the rent.
b) Regular inspections
It is important to make sure that the tenancy agreement provides you with a right to inspect the property. If you make an inspection and find that the tenant is damaging the property or is otherwise in breach of the terms of the tenancy agreement then you can act quickly to rectify the issue and so minimise any damage caused.
c) Keep rent arrears under control
One of the most common reasons for disputes between landlords and tenants is that the tenant goes into rent arrears. As soon as this happens, the landlord should immediately contact the tenant to establish the reason for the failure to pay and try to resolve the issue. In our experience, if matters are not resolved quickly (and rent arrears are allowed to escalate) then the relationship with the tenant can breakdown irretrievably.
3) Serving notice and removing tenants
If a tenant is in breach of the terms of the tenancy then you may want to remove the tenant. There are specific procedures to do this. If you evict a tenant without following these procedures then there may be civil and criminal consequences.
a) Get the notice right
The first step to remove a tenant is to serve him/her with a notice requiring possession of the property. There are several different types of notices which can be served in relation to residential tenancies. Which notice you need and how much notice you need to give will depend upon the circumstances and the type of tenancy agreement in place. If you serve the wrong notice and then you may not be able to rely on it and will face difficulties if the tenant fails to leave when the notice expires. It is important to note that you should serve any notice in accordance with the terms of the tenancy agreement and, if you serve by post, obtain proof of postage.
b) Issuing possession proceedings
If you have served a notice, allowed the notice to expire and the tenant has still not left the property then the next step is to issue possession proceedings at court. The court possession procedure is intended to allow these claims to be resolved quickly and without many of the steps involved in bringing a normal claim. The tenant may choose to defend the proceedings but most straightforward possession claims are decided at the first hearing. If you are successful at the hearing then the court will order that the tenant leaves the property within a certain period of time (usually 14 days).
c) Enforcing the possession order
If you obtain the possession order and the tenant does not leave the property then you may need to take steps to enforce the possession order. In order to do this you will have to seek a warrant from the court and instruct bailiffs to take possession of the property. Once you obtain the warrant then the bailiffs will attend the property and remove the tenant.
If you are having problems with a troublesome tenant and would like some advice then please call one of our dispute resolution solicitors on 0161 832 3304.
If you have any queries or require any further information, please do not hesitate to contact our team of specialist solicitors on 0161 832 3304.