Property Question Time – S1 Ep 61

Our MD Paul Mahoney is on the Expert Panel for Property Question Time which features on Property TV – Sky Channel 198. In this show, the public asks property related questions to the panel of industry experts. The experts also provide “Golden Nuggets” or Pearls of Wisdom from their experience on what viewers should be aware of. In this episode, they discuss changes in Changes Stamp Duty Premium, Assets and Advice on Bridging. Watch Property Question Time on Property TV – Sky Channel 198. Click above to watch this week’s episode.

Gemma Forte:

Hello. You’re watching Property Question Time, the show where you get to put your queries, your questions, your conundrums to our trio of expert panelists. My name is Gemma Forte, but let’s meet who’s going to be answering all your questions today. First up, we have Paul Mahoney, the MD of Nova Financial. Then we have Mary-Anne Bowring who is the founding director of the Ringley Group. Last, but not least, we have Tomer Aboody who is the MD of MT Finance. Welcome one and all.

Paul, I’m going to kick off with you ’cause we’ve got so many questions. Here’s the first one. “My partner and I are unmarried and bought a house a few years together.” Living in sin. “We’re now looking to … ” So old fashioned. “We’re now looking to move, but our plan was always to buy a second property and rent out our first. With the new rules on stamp duty, we wonder if we could transfer the first property so that it’s just owned by one of us and then buy the new house in the other name so that we each own property. Would there be any stamp duty owed due to the change in ownership on the first property?”

That could be not being married could be a massive advantage, two individuals.

Paul Mahoney:

It could be a massive advantage, but the disadvantage is the fact that they’re not married, there likely would be stamp duty payable on the transfer of ownership. It’s obviously important to seek tax advice there, but if they were married, they’d likely be able to avoid that. The fact that they’re not, there would likely be stamp duty payable.

Gemma Forte:

Oh, I see. Okay.

Paul Mahoney:

Of course, there’d be cost involved as well, legal costs and things involved for them. There probably wouldn’t be any capital gains tax because it’s their primary place of residence. Another option to kind of throw in the mix there, which is a neat little trick given the recent stamp duty premium introduction is, if they really want to keep that property, and depending on the value of the new property they’re buying, they could transfer the current one that they own into a limited company that they owned. That could potentially save them money on the stamp duty, perhaps. It’s worth assessing all options really, sitting down with someone, going through what all the options are, all the figures and then they can balance that against what they want to do personally.

Gemma Forte:

We’re obviously trying to think out of the box and make it the best possible deal for them. Okay, thank you. Hope that’s helped.

Now Mary-Anne, somebody here is just saying is there a legal basis for a right to light that may be blocked by adjacent trees?

Mary-Anne B.:

Right to light in terms of buildings for sure, yes. Right to light in terms of trees, no law that I’m aware of. If you can imagine every large council of tree, I’m sure it would bankrupt the council if the right to light for trees was suddenly brought in. Generally, it’s based on planning law, and planning law would suggest the overlooking should be resisted, and there’s often an 18-meter rule between some parts of buildings or direct windows. Other than that, a right to light would be based on a daylight study, which will depend on where the sun is at different parts of the day to meet certain criteria as to how much light you should have. In simple terms, you draw a 45 degree line from the window and look at the sun path.

In terms of trees, no, I’m not aware of any. You do have the right to cut down the branches that overhang your land and that might be enough to deal with it. The landowner where the tree sits on has a duty to make sure that tree doesn’t damage your property. They may well need to pull at it to try to restrict root growth from affecting your structure.

Gemma Forte:

Okay. Alright. Very thorough answer there. If for, just hypothetically, you move into a place and then trees in somebody else’s garden are really making things pretty dark, would a first point of action be just to go knock politely on that neighbor’s door and say, “Could you cut your trees?”

Mary-Anne B.:

I’m a firm believer that if you bring someone into your property and show them the problem and it wouldn’t make any difference to them because it’s your side of the tree, then hopefully, they would share your point of view to a certain degree and possibly do something about it. If it’s overhanging your side, then you can cut that anyway.

Gemma Forte:

Right.

Mary-Anne B.:

It depends. If it was touring in their land, and there are some horrible court cases about the very fast growing fir trees that can change a landscape by growing huge and-

Gemma Forte:

I think it happened to one of my old bosses. I think that’s what I’m thinking about. He used to say, “All my light’s gone.” Yeah. He was even saying he’d be prepared to pay for the tree to be trimmed down, whatever, but tricky. They do grow fast, those ones.

Okay, Tomer, so let’s go to you now. This person says, “I’m trying to get a mortgage on the house that I bought using a bridging loan. The mainstream lenders say they can’t provide a mortgage to cover a bridging loan. Why?”

Tomer Aboody:

It’s very confusing one actually. I have never-

Gemma Forte:

You’ve never come across that before.

Tomer Aboody:

No, never. I’ve never heard of something like that at all. Typically, a lot of borrowers that we deal with are in the bridging space. We’ll take a bridging loan, and a lot of the time we’ll exit with a refinance from a bank, mainstream lender, your High Street lender. I’ve never come across a situation where a lender refused to take out a bridging lender. That’s something very unique. I think it’s worthwhile definitely discussing this with a financial advisor or doing a bit more research on this through … There’s so many means out there nowadays with the internet, but that’s something which completely is unique. I’ve never heard of something similar to that at all.

Gemma Forte:

There might be more to the story that perhaps we haven’t got.

Tomer Aboody:

Correct. Yeah, I don’t think from that particular question, that particular, the way it’s asked, I don’t think that gives us the whole story. If it does, it’s a very unique one.

Paul Mahoney:

Might be looking … Might not be looking at the factors. For example, if they haven’t had the bridging loan for more than six months, that’s a reason that some High Street lenders won’t do it. They want you to have loaned the property for more than six months before you then exit out or remortgage, if you like. Or it might be something to do with the property. I think maybe they might be confused about the bridging loan being the reason. Perhaps there’s another reason.

Gemma Forte:

Okay. Alright. Fair enough, thank you. Okay, is anybody got a golden nugget for me. This is what we do in this show. We get a golden nugget from each expert, and it’s just lovely. A piece of wisdom.

Mary-Anne B.:

I’ve got a possible warning for landlords.

Gemma Forte:

Okay.

Mary-Anne B.:

Just something to be aware of. In April 2018, the government’s proposed to change a minimum energy performance certificate rating that you can rent your property to E. That means it will become illegal to rent a property that’s certificate of F or G. However, don’t rush to make huge energy improvements, because the governments also recalibrating the scale by which they calculate the rating. But if you’ve got a solid brick building with single glazed windows, you may need to be thinking about the types of energy improvements that you could make in the property because potentially there’s a threat waiting for it in April.

Gemma Forte:

Okay. Yes. If that comes in, which you think it’s looking likely, and for obviously reasons. I guess they’re good reasons just to make everybody green and the environment, et cetera, but that would probably affect a lot of properties, wouldn’t it?

Mary-Anne B.:

It will affect a lot of the older stock of properties for sure, but it’s not just all about the bricks and the windows. It is about the appliances within the property, the efficiency of your boiler, so there’s a holistic view that needs to be taken. Certainly a landlord with a property rated F or G needs to be thinking about it now.

Loft insulation’s another simple one. That’s not expensive and could probably be installed in a couple of hours after buying a role from B&Q. So you need to start thinking.

Gemma Forte:

Start thinking.

Mary-Anne B.:

There are possible going to be some changes to the way it’s calculated, which hopefully will be in your favor. But, ultimately, the government is committed to huge energy reduction targets with the world leaders, as it were. Landlords are soft prey to go and get some improvements from.

Gemma Forte:

Yeah. Well, that’s good, and actually especially the appliances actually as well, because, obviously, as we know now, it can be very dangerous to have old appliances. I found once when I was renting, the fridge freezer genuinely broke. It was about 7,000 years old. The first one that was very made, and I just lost a whole load of groceries. I remember she replaced it. It came, and the fridge she replaced it with was literally the cheapest fridge you could get on the market. I remember thinking, “She owns that.” Anyways, yes, it’s good to get good-

Mary-Anne B.:

Well, look for A grade appliances. But with appliances, even more scary is, on fridges particularly, because they’re the largest cause of fire, ones with the plastic back will overcome the room with smoke and fumes in less than a few minutes, where ones with the metal back will burn themselves out.

Gemma Forte:

Right. Okay. I’d imagine, in light of recent circumstances, that might be a legislation that changes again.

Mary-Anne B.:

One would hope so, because why would one sell a plastic backed fridge that’s going to cause-

Gemma Forte:

Well, exactly.

Mary-Anne B.:

… almost definite smoke inhalation problems?

Gemma Forte:

Just stop making them.

Mary-Anne B.:

Well, I don’t understand it, but that’s the world we live in.

Gemma Forte:

As for insulation, you’re right. ‘Cause I know that they’ve changed the boundaries because I had a loft done recently. There is so much insulation on there you literally don’t need a radiator in the … It’s extraordinary. I mean half the house is insulation, which is a good thing obviously. So yes, thank you very much for that.

Anybody want to pitch in on that?

Tomer Aboody:

Let the expert speak about it.

Gemma Forte:

Let the expert speak about it, exactly.

Okay, so we’ve had one golden nugget, but if you join us for part two at Property Question Time, we’re going to have two more and more questions as well. Don’t move a muscle, and we’ll be back after this short break.

Welcome back to part two of Property Questions Time with me, Gemma Forte and my guests Paul Mahoney, Mary-Anne Bowring, and Tomer Aboody. So, without further ado, I’m going to extract another golden nugget. Gentlemen, it’s your turn, so Tomer, have you got one for me, please.

Tomer Aboody:

Yeah, I think a lot of finance available nowadays on the British Finance Market is on second charges, which if, obviously, used for business purposes, people can borrow funds either on their home or a second charge against their buy it elect in order to release equity to be able to invest into their business, which is helped recently quite a lot of SMEs. Within the market, we see a big increase in that within the last year or so. I think, if you have good equity within your buy it elect property or your current home, I think that’s a viable way to be able to raise funds. Obviously, I think you always have to get an [inaudible 00:11:41] advisor in order to do that. But there is a lot of options out there to be able to invest money into your business currently or starting off a new business-

Gemma Forte:

Mm-hmm (affirmative). Okay.

Tomer Aboody:

… on a second charge bases, which are available up to two years, three years sometimes.

Gemma Forte:

Excellent. Thank you for that.

Right, Paul, we’ve got a question for you. This person says, “I am married, and I’m a first time buyer looking to buy my first property. I will be contributing 100% to the deposit amount as my spouse has been in the UK for less than a year and doesn’t have any savings. The mortgage will be fully based on my finances alone. However, when I look to remortgage in two years time, her finances will have improved. Can someone advise me if there’s any advantage or disadvantage of me buying the property jointly or in sole name?

Looks like we’re going to start some maritals here.

Paul Mahoney:

Yeah. My understanding is from asset protection, especially if there’s different really given they’re married, unless there’s other arrangements in place. From the mortgage perspective, potentially having the wife involved could be useful in the future. For example, if the value of the property were to increase, or even if the male partner of the couple were to lose his job or something, having the wife’s income could be quite useful, given that residential mortgages are quite closely based upon a multiple of income.

Gemma Forte:

Yeah.

Paul Mahoney:

And generally, it’s four to five times would be the maximum you can borrow. Having the two involved could be quite useful in the future.

Gemma Forte:

Down the line, yeah.

Paul Mahoney:

Whether it be borrowing what you currently owe, or whether it be wanting to remortgage and release an equity in the future. That’s one potential benefit of the wife being involved.

I suppose the rest is personal considerations, really. I’d prefer just to talk about the financial side of things.

Gemma Forte:

I think it’s for the best, isn’t it? We don’t say, “Do you love her? Are you going to be together? Is she a keeper?” Because then it just gets a bit personal, doesn’t it? Yeah, that sounds like good advice, but there is a good point. You never know how your situation might change, and she may end up being the bread winner, or you might want to remortgage.

Paul Mahoney:

I think that’s the important consideration with all financial advice, investment advice, is advisors can really only advise on the financial side of things. There’s always a personal side to that. There’s always something you might want to do, or a personal preference, and making sure that you’re balancing those two things is important.

Gemma Forte:

Yes. Okay. Excellent. Thank you very much.

Mary-Anne, this person says, “We’ve got two blocks on our estate, and the leases provide that we collect service charges as a whole, not block by block. At a previous AGM, it was minuted that each block should have its own reserve towards its own repairs. This has been the convention since, but now this has been objected to by some, and we need to basically understand how sound our decision was.”

This sounds like a lot of people. It’s an estate. Two blocks is a lot of opinions and might have got a bit heated at the old AGM.

Mary-Anne B.:

Tricky question because you’re trying to use two different part of legislation to compete against each other. One is landlord and tenant legislation, which affects your lease. The other is company legislation, which affects your company. The most important question to find out first is are the objectors members of the company. If it was freehold company, possible, I don’t know, 50 or 60% bought into the freehold, and the other people didn’t. If they’re not actually members of the freehold company, it doesn’t matter what resolution you pass, you can’t force it upon them.

Generally speaking, the tribunal is a [inaudible 00:15:35] restriction for service charge, and if two parties haven’t agreed to change their lease, which is a contract, by mutual agreement, then the contract still stands as it was. The question suggests that originally the contract or the lease said that everybody pays into the same reserve fund.

There’ll be reasons for that. If the building are similar, are built around the same time, it’s to try to average out what money will be available to spend at whatever time.

There is law, however. Well, the case law. The [Moore-Ship 00:16:07] Mansion’s case does say that if there isn’t a reserve fund, the lease is defunct. You could actually collect reserve funds using your company in lieu of the lease. I’m not sure whether it actually overrides the lease, but as a service charge payer, if they’re demanding service charge from you, then the governing legislation is your lease. Okay. And if your lease says one fund, then two funds is null and void, and you wouldn’t have to pay.

However, if the demanding members contributions from or lean under the company’s act, then that is not a demand that is anything to do with your lease. That is a voluntary … It’s a call on the members of that company. You’ve got to look very closely at how they’re demanding what they’re demanding because it may be fundamentally flawed. If there’s not had proper legal advice before they structured what they’re doing, it’s pretty certain that they’ll be falling foul of doing it correctly.

Gemma Forte:

Okay. What strikes me is every time we ask you a question, it’s like you’ve obviously had cases similar and come across all these different types of situations in your work.

Mary-Anne B.:

Well, I’m always sad that they don’t send solicitors to property management school before they let them draft leases. Because whatever’s written is fine and a fee for them, but we get to live with the idiosyncrasies for the next 99 years.

Gemma Forte:

Yeah, yeah, yeah, yeah. Absolutely. Okay. Well, I really hope that that helps. Sounds like a bit of a complicated one, doesn’t it?

Mary-Anne B.:

You need more paperwork to analyze before you’re going to get a straight answer.

Gemma Forte:

Yeah. And they’re going to have to pay for that advice as well. It’s just complicated.

Mary-Anne B.:

They need to get proper advice, yeah.

Gemma Forte:

And you can just imagine all the people objecting.

So, Tomer, one for you. This person says, “I’m in the process of downsizing. I don’t have cash available to put down as a deposit on my new home, as it’s all tied up in my current property. I’ve been told that banks no longer provide bridging loans to help with deposits. Can anyone advise a reasonably cheap alternative to banks to help?”

Mary-Anne B.:

I think, I mean this is again, there’s always availability of advice through financial advisors of how you can be able to work with that. There are a lot of the alternative lenders out there in terms of lender space and challenger banks who work quite differently to the way the main stream lenders work. They’ve got different sets of criteria and different advantages to assist where others may not be able to. I’m not saying in this particular situation that’s the case, but it sounds like a scenario where, hopefully, there will be a lender out there able to assist you with your answer to being able to purchase a new property that you’re going to buy. Once again, get advice. Go speak to a financial advisor who might direct you in the right direction, because it doesn’t sound like it should just be a full stop no to your circumstances on that side.

Interesting to hear that because I think, if you’re looking to be able to buy another property, and if you have no equity against your current, or if your equity’s all tied up in your current asset, there should be able to be a way to be able to raise money against that.

Gemma Forte:

How would somebody make sure of that? Is there something to look for to make sure a firm is really legitimate?

Mary-Anne B.:

I mean, all circumstances, in any industry, you’re going to have some bodies which are going to be able to manage that. Before you approach, once again, go through a financial advisor who then advise you, but even then you can double check and triple checks. Speak to the bodies who are they’re members of, see if there’s been any complaints, do some research on the internet, look about any comments people have had against them. A lot of lenders out there will have comments about them and feedback from previous clients and brokers. If there’s been, some of them will be great comments and some of them will be bad. I think it’s a good mixture to actually see. Have a look at that. Do some research because, yes, of course, there will be some unfortunate bloke people out there, but on the whole, I think they’re very much institutional. They work well, and they work to the system. Definitely worthwhile doing the research. There are so many bodies and associations out there, their lenders should be members of, and you can ask the bodies themselves whether it’s advised to go to any particular lender who can help you.

Gemma Forte:

Alright. Okay. Thank you very much.

Paul Mahoney:

On that particular question, I think perhaps it might be the terminology that they’re using that is getting rejected. For example, going to a High Street lender and asking for a bridging loan, the likely response is we don’t do those. But that doesn’t mean that they can’t provide something that provides the same benefit or the same utility.

Gemma Forte:

Right. Does that same job. Yeah.

Paul Mahoney:

Exactly. They’re looking to release equity to allow them to buy elsewhere, which the terminology is generally bridging, but just a standard residential mortgage would allow them to do that.

Gemma Forte:

Okay.

Paul Mahoney:

If it’s a debt free property. I don’t think they said. Even if it’s not, whether it’s got a mortgage or not, taking mortgage for slightly more, remortgaging that, taking the equity and using that, that’s one way they could potentially fulfill what they want to do. Of course, bridging is the secondary option, and to do that they need to go to a bridging lender.

Gemma Forte:

It might just be you need to explain they’re situation and then say, “What could you do for me?”

Paul Mahoney:

Yeah. I think that’s often the case with High Street lenders. It’s often a bit of a tick box exercise.

Gemma Forte:

Yeah. Okay.

Tomer Aboody:

A lot of people get too … I think a lot of people are very much, we said before, I think, if you’ve been using the same bank for many years, or you see them on the High Street, you believe they’re going to be the best guys or people to advise you. There are so many options out there, and it’s about how, what Paul was saying, it’s how you actually describe the situation and describe your circumstances, and them being able to advise you. Sorry.

Paul Mahoney:

I don’t mean this in a rubbishy was, but bank managers aren’t what bank managers used to be.

Gemma Forte:

No.

Paul Mahoney:

A bank manager used to be able to make a call on things. That’s not necessarily the case anymore, especially with the High Street lenders. Often, therefore, you’re talking with somebody whose just looking at a computer screen and ticking boxes off. If you ask them the wrong thing, you’re likely to get the wrong answer. Again, I suppose that reverts back to the value of advise, ’cause if they actually explain what they need, then an advisor would be able to say, “Well, actually, this is a more suitable type of product for you to give you that outcome.”

Tomer Aboody:

Well, an advisor will speak to the banker. The advisor has a relationship with them, and they can speak, and this is actually the circumstances of the case, of a certain client. Is there anything available to be able to assist them?

Gemma Forte:

Alright. Great advice. I thank you so much.

Paul, a nugget from you, sir, to finish off with.

Paul Mahoney:

Yeah. When it comes to investing in property or purchasing advice and all that, I think it’s very important to determine what type of investor you are, whether you’re a landlord or whether you are an actual investor. I’d say the difference between those two things are whether you’re quite proactive or whether you’re passive.

Most of our clients tend to be passive. That’s people who are busy, they’ve got extra funds, or they want to provide for retirement. They don’t necessarily way to be too hands on, and therefor that’s really no different to investing in anything else. It might be shares or otherwise, that’s the way it should be looked at, solely based on the fundamentals. Property just so happens to be the vehicle for doing it.

The other side of that is if you’re looking to renovate or develop, or you’re a full time landlord, well, that’s a job. That is a business in itself. Completely different. Understanding the difference between those two things, and therefor, I suppose, from there reverse engineering and to determine what the best purchases might be for you. How you can achieve your goals through the right strategy, because they are two very different avenues.

Gemma Forte:

Yes. Okay, excellent, and totally true as someone who managed a renovation and was working at the same time. It’s a full time. Just about recovered.

Thank you so much. It’s been full of information. I hope you’ve enjoyed it. You’ve been watching Paul Mahoney, Mary-Anne Bowring, and Tomer Aboody. If you’ve got any questions that you’d like answered by an expert panel, then please get them to us, info@property-tv.co.uk, is the email, or you can have a look at the website, which is also property-tv.co.uk. I’m Gemma Forte. Thank you for watching.

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