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Government Urgent to Clamp Down on Rogue Estate Agents

Ministers in the United Kingdom are once again under fire for failing to roll out important reforms outlined in 2018 by Lord Best, which afford greater protections to customers working with estate agents.

A recent episode of BBC Radio 4’s Money Box program highlighted the extent to which unsuspecting customers continue to be misled and misinformed by rogue agents, often finding themselves tied into binding long-term agreements.

The program focused on the case of 65-year old Su Francis from Buckinghamshire, who spoke of being stuck “in limbo” after being duped by a quick-sale estate agent.

High-Pressure Tactics

Interviewed by the BBC, Mrs Francis said that the quick-sale estate agent who visited her used high pressure tactics to coerce her into signing up.  Unfortunately, it wasn’t until she received a phone call a few days later that she was made aware of the full details of the contract.

“They were quite hard about [me] signing up. Subsequently I found out I was signed up to them for a year,” Mrs Francis told the BBC.

“They provided no service whatsoever, they provided no viewings, nobody came to see it [the house] and when I phoned them it was just recorded messages,”

“It’s also left me quite worried about who I should take on and whether or not I can trust people,”

“It’s left me in limbo because I haven’t been able to sell my house. As far as the financial implications, until I can sell my house, it’s impossible for me to plan for my financial future.”

Mrs Francis’ was not alone in her negative experience working with state agents, as a second homeowner contacted the show to report similarly underhand tactics. Julia Armstrong claimed that the estate agent reduced the asking price of her property by £50,000 without first seeking her authorisation.

“A year later we have put our house on the market again and every viewing has said it’s overpriced now because it was listed at £50,000 less last year,” she told the BBC.

“It was a shock to us and our new agents advised us to drop the price this year immediately by £30,000 [to try to get people to even consider it].”

Evidence suggests that homeowners looking to close quick sales on their properties are facing the growing risk of losing money, or being dangerously misinformed by quick-sale estate agents.

Overdue Reforms

When the government approached Lord Best in 2018 with a request for proposed reforms to improve estate agent operations in the UK, he responded with a series of urgent recommendations. One of which involved the creation of a new independent regulator for the industry, which would ensure all sales and letting agents were sufficiently licensed and qualified to offer such services.

Those found to be operating without appropriate licensing would subsequently be guilty of a criminal offence:

Lord Best says acting as a property agent without a licence should be a criminal offence.

“At the moment anybody can set up shop and the next morning be operating as an agent,” said Lord Best.

“They can take quite a lot of money off you… and they aren’t regulated,”

“Lawyers or accountants have proper qualifications and are properly regulated but not property agents,”

“We need you to get your head around these recommendations and get on with it.”

In response, the Ministry of Housing simply reaffirmed its commitment “to raising professionalism amongst property agents and welcomes the work of the independent Regulation of Property Agents working group, chaired by Lord Best.”

The government also promised a formal response to Lord Best’s proposals following full consideration, though refused to offer a timetable of any kind.

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Are Developers Deliberately Misleading Leasehold Property Buyers?

A worrying report published by the Competition and Markets Authority (CMA) suggests that a growing number of leasehold property buyers are being deliberately misled by developers. Many buyers are being subjected to unfair treatment, while being charged excessive fees without reasonable justification.

No specific developers or housing companies were named, but the CMA has insisted it intends to take action against those ‘trapping’ unsuspecting buyers with misleading information and false promises.

Specifically, the report from the CMA accuses housing developers of failing to explain what purchasing a leasehold property entails, or that the properties they are selling are in fact on leasehold contracts.

Stealth Fees, Hidden Costs

Many of those affected reportedly were not informed ahead of time of additional fees and costs like regular ground rent payments. By the time the true terms and conditions of the sale became clear, it was too late to pull out without losing vast sums of money.

The CMA investigation found that some property developers doubled their ground rent charges every 10 years, making it difficult or even impossible for the leasehold property owners to sell their homes at a later date for an acceptable price.

In an interview with BBC Radio Five Live, CMA representative George Lusty stated that those affected could be entitled to refunds.

“If we can attack and challenge these unfair ground rent terms, then they’re invalid – all the money that was collected on them isn’t valid and that has to be paid back,” he said.

“We’re going to do everything we can to get people out of these really serious traps they find themselves in,”

“People aren’t able to take mortgages on these properties. They can’t sell them, that’s a terrible outcome and absolutely devastating for the people affected.”

Ultimately, the CMA is pushing for a change in the law, which will make it a legal requirement for property developers to provide clear, complete and consistent disclosures of the terms and conditions attached to all leasehold contracts.

In addition, ground rents should be reduced to zero and heavy restrictions should be placed on the sale of new leasehold properties across the board, so states the CMA.

Growing Government Support

Echoing the concerns of the Competition and Markets Authority, the Ministry of Housing, Communities and Local Government reaffirmed its commitment to swift and extensive reform for the benefit of buyers.

“In the past two years, the government has taken more action to stop unfair leasehold practices than ever before – including reducing ground rents to a peppercorn and banning the sale of new leasehold houses,” it said in a statement.

“But we know more needs to be done to support leaseholders and the CMA report echoes our commitment to bring forward legislation to reduce ground rents to zero for future leases.”

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Section 21 Controversy Continues as Government Promises Reform

You would be forgiven for thinking that in this day and age, private landlords would have to have a good reason to evict tenants. For an alarming number of private tenants across the UK, this sadly isn’t the case.

Recently highlighted by a BBC report published following a nationwide survey, landlords across the UK continue to use the controversial ‘section 21’ allowance to evict tenants from their homes.

Specifically, section 21 of the 1988 Housing Act provides private landlords with the right to evict tenants at the end of their current contract, without any specific reason for doing so. They must simply provide two months’ notice of their “intention to evict” – the tenants being given no say in the matter.

Section 21 exists primarily to provide landlords with the opportunity to evict problematic tenants, or those that have fallen behind on their rent payments.  Increasingly, landlords are using the section 21 clause to evict tenants to subsequently sell or let out their properties at a higher price.

Lives in Landlords’ Hands

The report from the BBC clearly illustrated the effects section 21 is having on those affected by the controversial clause. One of which being a young family from Weston-Super-Mare, which after 12 years of tenancy with a private landlord were handed their two months’ notice.

Despite having never missed a rent payment, the Palmers were informed they would have to leave their home.

Having run into multiple hardships over the past few years, the family now fears it will be left homeless. Redundancy and serious illness took a severe toll on the family’s credit rating, resulting in potential private landlords demanding several months’ rent upfront as security. This is money the family simply doesn’t have, putting them at immediate risk of homelessness when their current landlord’s section 21 notice is enforced.

Like many other families facing similar scenarios, the Palmers expressed their shock at the extent to which so many lives are in the hands of the landlords across the UK.

Promised Reforms

It’s estimated that last year alone, the so called “accelerated procedure” for evicting tenants resulted in more than 8,100 repossessions. In all instances, no court hearing was necessary, and the case of the tenants evicted was not heard at a formal legal level.

While some are calling for the rules to be changed to ensure private tenants are given at least six months’ notice prior to no-fault eviction, others believe the system as it exists should be scrapped in its entirety.

Speaking on behalf of the Law Society, Simon Davis directly cited the section 21 clause as “one of the leading causes of family homelessness in the UK”.

Subsequently, the government has outlined plans to ban no-fault evictions in their entirety in England and Wales. There is currently no specific date as to when the new policy will come into force, or the extent of the exclusions which will allow landlords to continue evicting tenants at relatively short notice.

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Revealed: The True Extent of the UK Housing Gap

The figures are in and are once again painting an unfortunate picture for potential first-time buyers across the UK. Already in the grips of a full-blown housing crisis, research suggests that the scale of the housing shortage in the UK will continue to grow indefinitely as the population swells.

The housing gap – calculated by way of the difference between the number of homes needed to satisfy demand and available housing inventory – has now surpassed a million homes.

That’s according to a new study carried out by the BBC, which suggests that the UK’s lucrative private property lettings market is at least partially to blame for the deficit.

An Escalating Housing Crisis

Analysts and economists had been predicting for some time that the UK was on the verge of becoming a ‘nation of renters’. Now, with an affordable housing deficit in the region of 1.2 million homes, the extent of the gap is taking a serious toll on both the finances and the wellbeing of an entire nation.

Having recently polled approximately 2,000 adults across the UK, the Affordable Housing Commission concluded that around 13% of people are experiencing mental health issues due to their housing situation. Within the demographic considered to be living in unaffordable housing – accommodation costing at least a third of their total income – more than 25% said their psychological health was suffering.

This amounts to millions of people across the UK, for whom everyday life and wellbeing are being adversely affected by the housing crisis.

No Easy Answer

Once again, the shortage of affordable housing in the UK is playing directly into the hands of private landlords across the country. The sparser the inventory, the easier it becomes for private landlords to charge elevated rents and grow their revenues.

Even so, the fact that the UK needs at least 1.2 million more homes to bridge the gap means there is no quick or easy answer to the issue.

In fact, experts believe that based on current home building initiatives and annual targets, it will take a minimum of 15 years to bridge the current gap. Though this does not necessarily take into account inflation and total population growth during this time.

Meanwhile, the latest figures from the Affordable Housing Association suggest that at least 50% of 18 to 24 year olds still live with their families. More alarmingly, almost 20% of 25 to 34 year olds still live at home, primarily due to the inability to afford their own accommodation. Work out the costs of purchasing a home using our UK mortgage calculator.

Pressure is building on the government, though the Ministry of Housing, Communities and Local Government remains adamant that improvements are being made.

“Since 2010 this government has delivered over 464,000 new affordable homes, including 114,000 social homes. In addition to this, the social housing waiting list has decreased by 40% since 2012,” a spokesperson commented.

“Last year we delivered more homes than any year in the last 30 years and have committed to delivering a million more in this parliament,”

“We have also abolished the council borrowing cap so local authorities are able to continue to build more social homes, giving families the chance to find somewhere that is safe and secure.”

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Mortgages

What is Right to Buy?

If you live in a council house or a housing association property of any kind, now could be the perfect time to purchase your home. The government’s Right to Buy scheme provides qualifying tenants with the opportunity to purchase the properties they live in at a significantly discounted rate.

As of April 6, 2019, the maximum discount available under the Right to Buy scheme was increased to £82,800, or up to £110,500 for qualifying properties in London.

For more information or to get your application underway, contact a member of the team at UK Property Finance today.

Why Should You Buy Your Home?

Eligibility under the Right to Buy scheme qualifies you for a once-in-a-lifetime price reduction on the property you live in. As much as £82,800 (or £110,500 in London) could be subtracted from the market value of your home, making it a far more affordable purchase. If buying a property through conventional channels isn’t an option, home ownership through the Right to Buy scheme could be well within reach.

Your home has the potential to be the single most valuable asset you will ever own. Right to Buy provides the opportunity to step on to the property ladder for the first time, while also providing the freedom to alter and improve your home in any way you like.

While there are significant responsibilities to home ownership, it nonetheless proves enormously beneficial for the vast majority of tenants who use their Right to Buy privileges. Eligibility for Right to Buy was recently relaxed from five years’ tenancy to just three years, resulting in tens of thousands of new tenants becoming eligible for the scheme.

There is currently no housing purchase program in the UK that provides anything close to these kinds of discounts. The price reduction of up to £82,800 (or £110,500 in London) could make your home more affordable than you think.

If you believe you may be eligible for the Right to Buy or have any questions on how the program works, reach out to a member of the team at UK Property finance today or use our UK mortgage calculator to work out exactly how much a mortgage would cost you. 

Right to Buy Scheme History

Far from a new programme, the UK government introduced to the Right to Buy scheme in 1980. However, significant changes have been implemented over the years, relaxing eligibility requirements and significantly increasing maximum discounts.

Previously, the maximum discount available on a property was just £16,000. Now increased every April to compensate for inflation, the maximum discount now stands at £82,800 across England (£110,500 in London). Lower discounts of £24,000 and £8,000 are available in Northern Ireland and Wales respectively.

Whether you’re ready to go ahead or simply considering the option of buying your property, we’d be delighted to hear from you. Contact a member of the team at UK Property Finance anytime for an obligation-free consultation.

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