The London Help To Buy Scheme, is an underused scheme. It was introduced in February 2016, off the back of the wider already existing Help to Buy Scheme. The government recognised the biggest obstacle for new buyers to purchase their homes is the deposit. The scheme aims to bridge this gap by providing a loan of up to 40% of the purchase price; this means a new buyer can purchase a property with only 5% of their own deposit.
This scheme is valid for first time buyers and home movers. It is restricted to a maximum purchase price of £600k and valid for new builds only. This is the interesting part, there is ZERO interest on the loan for five years. After which it attracts an interest rate of only 1.5% + base, currently this come to only 1.75%.
Given that the buyer will be putting down a larger deposit, this means they will qualify for a more favourable interest rate from the lender. Higher rates of interest tend to be applied for mortgages of 95%, as the risk is higher for the lender.
This is as good as it gets in this environment. Pre credit crunch, deals were done with no money in the property, if structured in the right way. At times if the purchase price was low enough you could even get a cash back on purchase. Yet the take up was relatively poor. There was a lack of belief this was even possible.
This is very interesting, not only from the view point of an end user purchaser, but also a developer. The headline in the Evening Standard, dated 16th January 2017, read: End of the £300,000 London home is in sight. The article went on to explain that last year there were 104 wards where you could purchase a home for less than £300,000 in the beginning of the year, by the end there were only 40. There are more homes priced over £1m than there are for £300,000 and less.
Why is this figure important? Because the average household income is £50k, which enables a borrowing of £250k, assuming they can save up a deposit of £50k, therefore their purchasing power is £300k.
Homes at this value disappearing is very problematic; it means you will have hollow communities where homes will be owned mostly by investors, owners who don’t live in what they own.
On the flip side this is a very important point to note for developers, given the acute lack of shortage of homes in general, and specifically homes at this level. If new developments can be designed with the criteria of the Help to Buy Scheme in mind, they will fly off the shelves even before they are built; even at a premium to other similar properties outside of the criteria, because of the acute shortage.
It is with this backdrop we are investing into an office to residential scheme in West London. The majority of the units will be designed to fit the criteria of the government scheme and we anticipate a quick off plan sell out of the whole development, for the reasons given above and due to the high demand given the location.
The deal is fresh, and requires an investment of circa £1.35m, with an anticipated return of investment within a year. Get in touch now, if you are interested in this deal.
Agony Agent
Each week, we answer a reader’s rental property question, from first-time landlords to experienced owners. Agony Agent, is here to help!
This week’s question seems to be a common issue, as this question has come up a few times.
Q. Please can you give me some advice regarding my tenants who are withholding rent for maintenance. The tenants have taken it upon themselves to withhold a full month’s rent after apparently being told this was ok by the Citizens’ Advice Bureau!
A. What does give a tenant the right to withhold rent? So far as the deduction is concerned, it depends on what it is for. Tenants are entitled to get work done themselves and deduct the cost from their rent, so long as they do it the proper way and have your consent. However, you are right, they are not entitled to make a deduction for compensation for their inconvenience.
Q. What costs can be ‘set off’?
A. It is important to note that only the cost of repairs required under Section 11 of the Landlord and Tenant Act 1985 can be withheld from the rent. Any other deductions, such as compensation, should either be agreed between the parties or be awarded by the court (and I’m sure you don’t want them bringing a court claim against you!). Deductions for works not being carried out in a timely fashion, that do not fall under the Act, must be mutually agreed between the parties (preferably in writing).
Personally, I feel that you should offer an ex gratia payment to them to compensate them for the problems they have suffered. You need to get these tenants back on your side, otherwise you are going to have a rocky ride with them.
For example, if, when the problems first occurred, you had apologised profusely, given them a couple of bottles of wine and agreed a modest reduction to the rent that month, I am sure they would have felt quite differently about things and it would in the long run have cost you less.
They may be wrong in deducting a full month’s rent from you, but it sounds as if they have had a pretty ropey experience in your property so far.
Q. What steps must the tenants take?
A. The procedure has several steps which the tenant must follow in order to fully comply with the rule of ‘set off’.
It may be no-one’s fault precisely, but they are the ones paying for the service. A fundamental part of any tenancy agreement is the tenant’s obligation to pay rent to live in the property. In return, the tenant can enjoy a private and peaceful residency without interference and have the peace of mind that the property is maintained by the landlord and kept in a habitable condition.
The rule of ‘set off’ explained
A landlord must make repairs to the interior and exterior structure, and make any installations when required to do so. If the landlord fails to make the repairs within a ‘reasonable’ time after the tenant has reported them, then the landlord could be in breach of their repairing obligations.
This type of situation cannot always be avoided but it is the way you handle this type of situation that matters, build the relationship and come through the other side as better landlords or tenants.
For more help and advice contact me at our office.
