Date: 29 July 2006

PROPERTY OWNERS AND INVESTORS COME UNDER FIRE

Property ownership used to be a sure fire way of achieving a good return on investment and combating the consequences of failing pension schemes.  But increasing government regulation is threatening to spoil the party.

A new licensing regime for houses in multiple occupation (HMOs) – any property of three or more stories occupied by five or more tenants in two or more households – is in force. 

Whilst the government insists that rules will improve safety and the quality of accommodation for thousands of tenants (many of them students) the jury is still out on the financial consequences for landlords – furthermore those who missed the 5 July deadline for a licence application will now face a fine of up to £20,000.00.

Private landlords will soon lose unilateral control of tenant’s deposits (although, after a second shock government U-turn last week, the implementation of this new scheme has been put back from 1 October to next April following huge concern from landlords).  Deposits will have to be protected under tenancy deposit schemes (TDSs) with disputes resolved by alternative dispute resolution or as smalls claims in the county court.  Non-compliance will mean severe default penalties.

An Englishman’s home used to be considered his castle but the government has recently encouraged local housing authorities to use powers to take control and secure occupation of empty properties under an Empty Dwelling Management Order (EDMO).  Properties vacant for more than six months are at risk, although, there are exemptions eg holiday homes, properties for sale, where the owner is ill or in care etc.

Finally, despite the first U-turn, house sellers are still going to be hit by the expense – £250.00 or so – of having to provide a home information pack (HIP) when marketing their properties from 1 June 2007. HIPs will revolutionise residential property sales “front loading” information provided by the seller for the buyer in order to speed up the legal transfer process, although, the requirement for trained home inspectors to write house condition reports for the pack has now been abolished.

There is still much opposition to the scheme and concern about the need for an energy report, as well as the shelf life of a pack where a property does not sell for months.  Despite these fears, sensible property professionals are doing their best to prepare for the new regime.