Property TV | Property Question Time - S1 Ep 43 - Nova

Property TV | Property Question Time – S1 Ep 43

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 Mortgages with Buy-to-Let properties, Mortgages for first-time buyers and Advice on Re-Mortgaging. Watch Property Question Time on Property TV – Sky Channel 198. Click above to watch this week’s episode.

Jemma Forte:

Hello. I’m Jemma Forte, and this is Property Question Time, the show where you get to put your queries, questions, and conundrums to our panel of expert guests. Let’s introduce you straightaway. We have, starting of here, Simon Law, who is Chairman of the Society of Licensed Conveyancers. Hello, welcome along. Next up, we have Mary-Anne Bowring, who is Founding Director of the Ringley Group. Hello, Mary-Anne. Last, but not least, we’ve got Paul Mahoney, who is the MD of Nova Financial.

Without further ado, let’s get into some questions that we’ve had sent in. I’m going to start with you, Mary-Anne, if that’s all right. I found this one quite shocking. Somebody wrote to us and said, “Yesterday, a friend of mine found out, purely by accident, that the house that she’s lived in for six years is up for sale. By accident I mean her friend was scouring on Rightmove, stumbled across her house, and there’s been no notification from the landlord whatsoever, and didn’t even know they were thinking of selling. So she’s really upset, and she feels quite sort of violated, especially because the pictures on Rightmove are so recent. It definitely means an agent has entered her home without warning or permission. So she thinks the agent should take the pictures down, and she wants to know is she within her rights to ask this?”

Mary-Anne B.:

Okay, interesting question. I mean, the concept for tenancy is it does give you possession of the property, and that possession shouldn’t be disturbed unnecessarily or without permission or notification by the landlord or their agent, except in case of emergency. If there’s been no fire or flood, then they should have had notification at least 24 hours that access was going to be given. You may not be there during that time or may need to rearrange it, but nobody should be coming into the property unannounced.

In terms of the second part of the question, selling the property, that will depend on what type of tenancy or contract the lady has, because most tenancies, assured shorthold tenancies, are quite easy for a landlord to end if he serves two-months’ notice. The question is has he served notice? Can he serve notice? Do you have that type of tenancy, or what rights to stay there will you have? There’s a little bit of a question around that, but certainly, unauthorized access is a no, and kicking you out without going through proper due process is also a no.

To ask the agent to remove the pictures, I think it’s surely undecent of them to have done what they’ve done and, yes, I would think, morally, they should. The question, then, is could they serve notice on you the next day and come in in 24 hours’ time and take the same pictures? Just taking the pictures down might not solve the problem. What really needs to happen is to find out what the landlord’s real intentions are, how soon, and what you can do about that for your future.

Jemma Forte:

Absolutely, and I don’t think there’s can be much about the fact she felt so violated. It must be a horrible feeling, actually. Also, going in with no permission, who knows what they might have found. That person could have been there, could have been ill in bed or whatever, so not great. Okay, well thank you for that. Do you think that if they take it up, go to the estate agent? Because they’re clearly not getting communication from the landlord, who should the approach?

Mary-Anne B.:

Well, the landlord, in theory, has delegated this to his estate agent, so it’s the estate agent, in theory, who have committed the violation. They may or may not be regulated. There will be codes of practice, so there will be, hopefully, a body that you can vent against. Solving the problem might only be a short-term fix if the landlord’s intending to sell and if you don’t have a tenancy which gives you a long-term right to possession.

Jemma Forte:

Okay, all right. Thank you so much. Right. Let’s go to you now, Paul. This person says, “I currently own a house in Cambridge with no mortgage on it, but I’m due to change job, and for that, I’ll have to move to London. So I’m going to be working in London for at least two years, so I’ve got various options: rent out and remortgage the current house to release cash for deposit for buying another house in London, or rent out the current house, rent in London, sell the current house and buy in London, but I’m not sure about that. What do you think is the most viable option or any pros and cons?”

Paul Mahoney:

Right. Well, there’s a few considerations there. We’ll cover each of the options individually. The first option, so far as renting out, remortgaging, and buying in London, I suppose, firstly, I assume they … Did they say they have a mortgage on the property?

Jemma Forte:

No mortgage.

Paul Mahoney:

No. Okay, fine. Well, that’s straightforward. They can rent it out. As far as remortgaging it to buy a property in London, they would probably, or they would incur the 3% stamp duty premium on the purchase in London. It’s probably quite likely the property in London’s going to be more expensive than the one in Cambridge, not necessarily, but probably. That might be a barrier to doing that option.

One thing that you can do there to avoid that, which especially works if it’s a very low-value property that you currently have and buying a higher-value property and you want to keep that lower-value property, you could sell that lower-value property to a limited company that you own. The limited company would pay the 3% stamp duty premium, but then you wouldn’t pay it on the higher-value property, which would save you quite a lot of money. Because that’s a home, an owner-occupied home, you also wouldn’t pay any capital gains tax on the sale to the company. That’s a little trick. Obviously, seek advice for doing that, but it works if it’s a lower-value property and if you’re upgrading to a higher-value property. Little bit of a consideration on the first option.

The second option, if I was renting out and then renting in London, fairly straightforward. That’s more of a personal decision than a financial decision, I think, so far as what they want to do there. Of course, there’d be tax payable on the rent that’s being generated from the Cambridge property, but that’s fairly straightforward, I suppose.

Then the third option, as far as selling and then buying in London, I suppose that would depend on how much time … whether they’re planning on staying in London, whether they’re not planning on staying.

Jemma Forte:

Yeah, and I don’t think they know, so-

Paul Mahoney:

I think a sale of a property should always be the last resort, in my opinion because, as we know, property prices tend to trend up, especially in places like London and Cambridge, and you’ll incur sales costs, all those sorts of things that go along with that. I suppose consider whether you actually are done with the property in Cambridge. Also consider whether it might be a good buy-to-let property to hold onto before sort of going ahead with that option.

Jemma Forte:

Yeah. Nice to kind of have options, though, isn’t it?

Paul Mahoney:

Yeah.

Jemma Forte:

Quite a good position to be in, I suppose.

Paul Mahoney:

I’d say it’s probably fairly important for them to sit down with someone and go through all their options, go through the specific numbers of the outcomes of each. Then, I suppose, balance that against their personal preferences as well.

Jemma Forte:

Yeah. Okay, excellent advice there. Thanks very much. Hope that’s given you food for thought. Okay. Simon, hello. Here’s your first question. It’s quite simple, but it’s a good one. What are the legal issues that most people are completely unaware of when moving home? Funny enough, sitting here at Property Question Time, obviously, for you guys, you’re like, well … but some people only move one in their life, don’t they?

Simon Law:

Yes, definitely. Yeah.

Jemma Forte:

Not everybody moves all over the place. I guess there probably are sort of things that you might not consider.

Simon Law:

Definitely. Also, people tend not to move now as often as what they did.

Jemma Forte:

Ever.

Simon Law:

Once in every sort of seven years.

Jemma Forte:

Let’s just stay here for like 10 years so we know what’s going on. Yeah.

Simon Law:

Yeah, once in every seven years, and they tend to forget what’s happened in the last time because it’s a one-time event and, generally, fairly quite stressful as well. This could take forever, but it’ll keep it fairly short and stuff. Most properties will be subject to some form of a restrictive covenant, and that is a covenant that says what you can’t do, basically, to the property. They can encompass things from extensions without consent of the original developer to even putting up a satellite dish at the front of the property. When you, obviously, view the property and go around it with the estate agents, you’re not going to be aware of those. Most sellers aren’t aware of them because they don’t actually impact on their day-to-day life, and at the time when they’ve bought the property, they may or may not have read everything that their conveyancer sent to them.

Jemma Forte:

Probably not.

Simon Law:

Probably not. They’re generally the issues that happen after you’ve put the offer in, that you then find that, potentially, you may want to run a business from there, and there’s a covenant against running a business from there. There are ways to either get the covenant released, or get consent, or if there’s a previous breach from the current owner, to put indemnity insurance in place to cover that breach and ongoing breaches. They’re generally around the issues that we find after the offer’s been accepted.

Jemma Forte:

I could totally understand that. I think when anybody’s going to view a property, just when you’re buying it for yourself and you’re not as a business person, there’s so much to think about, isn’t it? It’s like how far’s the station? How do I get to work? Is this a nice living room? Can I fit all my shoes in here, et cetera? All these pressing things. Then to then think how your lifestyle might change. There’s so many different things to think about aren’t there? Hence why we need legal people like you. Anybody want to chip in on that one, or would you say that’s covered? That’s all covered.

Paul Mahoney:

Yeah, that’s pretty well covered.

Jemma Forte:

Okay. In that case then, Paul, I’m going to get a golden nugget from you. Have you got one up your sleeve?

Paul Mahoney:

Yeah, I do. I think something I’ve been noticing lately in speaking with people about mortgages associated with buy-to-let property, a lot of people are of the mindset that it’s a necessary evil, as opposed to a benefit. I think it’s important for people to understand the difference there and the fact that buy-to-let mortgages can actually help you much better utilize your money. Rather than thinking about it as an unnecessary expense that you need because you can’t afford to buy the place with cash, think about it as the utilization of somebody else’s money and, at the moment, very cheap money. The fact that you can take a 25% deposit and buy the total value of that property and achieve the returns on the total value of that property helps you accelerate your returns as well. I suppose just around the mindset associated with mortgages and considering the fact that investment mortgages or buy-to-let mortgages is really good debt as compared to personal debt being bad debt.

Jemma Forte:

Yes. Yeah, absolutely. I think there’s just been so much press at the moment when they changed the taxation on buy-to-let.

Paul Mahoney:

There’s been lots of changes recently, and it’s making everything a lot more complex. A lot of people have a lot of questions, and I suppose that really reinforces the value of advice, especially in the current market. Property investment was previously very much a DIY-type activity. You see a property on Zoopla, you go and buy it and hope for the best. There’s more involved now. There’s a big difference between making a good investment or a bad investment and, I suppose, using the right structuring and things as well, so that’s very important.

Jemma Forte:

As you say, there’s still some great investments to be made, and once your money’s in something … That’s why us Brits like our bricks and mortar, isn’t it?

Paul Mahoney:

Exactly.

Jemma Forte:

Excellent. Well, that is just Part One of Property Question Time. Please join me after the break, where we’ll have more golden nuggets and more answers to questions that you’ve asked.

Hello, and welcome back to Part Two of Property Question Time with me, Jemma Forte, and my guests Simon Law, Mary-Anne Bowring, and Paul Mahoney. Okay, so we had one golden nugget before the break. These are our little nuggets of amazing wisdom or information that we extract from our guests. Mary-Anne, it’s your turn. Have you got one for me?

Mary-Anne B.:

Yeah, something that crept up this week, a question about freehold purchase. A lady lived in a house with 10 flats. You need 5 or 50% to be able to actually buy the freehold collectively. She was worried that her neighbors were not getting their act together quick enough, and so her question was is whether she should extend her lease anyway and whether that would make the price of her contribution to the freehold cheaper or the same in due course.

The good answer was that, when you buy the freehold, part of the valuation’s based on the ground rent that you pay and part of it’s based on the length of the lease. By her extending her lease now and getting the extra 90 years and her ground rent going down to a peppercorn, the proportion of the valuation for the freehold, if her neighbors get their act together later, would be significantly reduced. There’s no disadvantage in extending your lease now whilst you try to negotiate with everybody else to commit.

Jemma Forte:

Okay, real interesting, because that’s something … I certainly would never have known that. That’s very interesting. Thank you, good nugget. Right. Paul, ready for a question?

Paul Mahoney:

I am.

Jemma Forte:

Okay. This person says, “I’ve been accepted for a mortgage, and I’ve found a property. The listing online is offers over 30K.” Hmm. “When I went to view the property, I asked the vendor if they could tell me what they’re realistically looking for, and they stated 40K. I’m not going to lie, I was a bit shocked. I am a first-time buyer, so I’ve got no experience in this sort of thing, and I only went to view it because of the 30K price. So, you know, okay, someone might offer a bit more, but I didn’t expect 10K of a difference. Is this regular practice for vendors to advertise a certain amount but want way more?”

Paul Mahoney:

Well, I’d say it probably is regular practice. Of course, vendors are going to want as much as they can possibly get, and so is the agent. Maybe the agent’s just trying his arm, or maybe the vendor does want that. It seems odd that they want 40 if they’ve listed at 30 and over.

Jemma Forte:

Yeah, because the percentage on that is massive, isn’t it?

Paul Mahoney:

It’s quite big, yeah. I suppose they will sell it for as much as they possibly can, and that will depend on the demand for the property, I suppose. If there’s demand over 30 or if there’s demand at 40, then they’ll sell it at that. I suppose, as a buyer, you can only compete with the market. It does seem a bit odd, but-

Jemma Forte:

It’s not. Yeah.

Paul Mahoney:

It’s not necessarily out of the ordinary.

Jemma Forte:

I don’t know whether you’d agree with this, as the experts, but in my experience of buying and selling homes, I don’t think the price that you put [inaudible 00:14:36] means anything, really, does it? It’s a guide.

Mary-Anne B.:

Or an enticement. Perhaps there’s more viewings if you say 30 and a bit more pressure to bid it up.

Jemma Forte:

Right. There you go. Yeah, yeah.

Paul Mahoney:

You’re right, though. The listing price doesn’t really mean anything. It’s all determined by how many buyers there are and what they’re buying at and what the vendor’s willing to sell at. It’s supply and demand, isn’t it?

Jemma Forte:

I’ve seen so many people get sort of very insulted when they’ve taken the highest valuation, and then they’re really cross when people put a lower thing, and they think, “Well, you know …” because they’re like, “But I love this home.” It’s not emotion, is it?

Paul Mahoney:

Yeah.

Jemma Forte:

It’s a money.

Simon Law:

Yes. I think the thing that people need to remember is that as they get, maybe, more than one agent around that is vying to put their property on the market is that they’re going to give them a higher valuation to entice them into putting the property on the market with them.

Jemma Forte:

Yeah, of course. I’m always a bit suspicious of the highest valuation and try and go somewhere in the middle. Right. A question for you, Simon. This person says, “My son’s house has been repossessed. I lent him 18,000 as a deposit to purchase it, no formal paperwork. 12K is being held by solicitors to settle outstanding debts and charges. Can I put in a formal claim for this money as if I have a second charge?”

Simon Law:

The short answer would be no to that one.

Jemma Forte:

Oh, no.

Simon Law:

The question’s a little bit difficult because it actually sounds like it might be more of a bankruptcy sale than a repossession because, normally with a repossession, the lender’s solicitors would take the money, pay off the first charge, any subsequent charges, any arrears of ground rent and service charge if it’s subject to that. Then the balance, if there is any, which generally there isn’t on repossessions, would go back to the owner of the property. They wouldn’t hold onto it. So it almost sounds as if that actually might be a bankruptcy sale rather than a repossession because of them holding onto the money to pay out any other debts and people making claims about that debt. As I said, with a repossession, you wouldn’t normally … In terms of the loan, not having any paperwork is an issue.

Jemma Forte:

I know.

Simon Law:

If it was declared as a loan when they purchased the property, I would have expected either a charge or, at the very least, a declaration of trust where the property’s then held in trust for the parent that’s given the loan to be repaid on any sale. However, that can cause an issue with lenders because they generally don’t like further borrowing when you purchase a property. It may have been that they’ve actually declared it as a gift, and then again, that’s not going to help. I don’t really think they’ll be able to claim against the money that’s held.

Jemma Forte:

If they had had formal paperwork, they could have got-

Simon Law:

They could have tried.

Jemma Forte:

They could have tried.

Simon Law:

But with it not being a charge and registered, they’re not protected in any way.

Jemma Forte:

No. Okay. Oh, dear. Thank you. Well, that’s the truth of it, isn’t it? I suppose one of the lessons to be learnt there are just always get formal paperwork if you’re lending money and want it back one day. Okay. You haven’t given us a golden nugget today, have you? I mean, you have, in some ways, but not an official one. Do you have one for me?

Simon Law:

Yeah. Mine’s around surveys. It still amazes me, and I’ve being doing this job a little while now, that buyers don’t go out and get their own survey. There’s a little bit of a feeling with borrowers that they pay the … sometimes they pay the lender a valuation fee and they can rely on that valuation. They can’t. It’s purely for the lender.

Jemma Forte:

Yeah, they don’t do much with the … I mean, they sort of look at it, don’t they?

Simon Law:

Sometimes they don’t even look at it. They can do desktop valuation. Some lenders still do desktop valuations. It depends on the lend-to-value that’s being offered. A short lend-to-value will probably mean they [inaudible 00:18:31] you to a desktop. That means a surveyor doesn’t even go round to the property. If you want to know about the property, if you want to know about the condition, if it’s got a flat roof, and if there’s been extensions and alterations, and potential boundary issues and things like that, then a home buyer’s report is the way to go. It does cost a little bit of money, but when you’re talking of an average of £280,000 purchase-

Jemma Forte:

So important, yeah.

Simon Law:

… a £400 survey to know what you’re getting yourself into … We see so many people that buy houses that, three or four weeks later, come back to us and go, “The boiler’s broken. The electrics aren’t up to standard. The flat roof-“

Jemma Forte:

There’s no bathroom.

Simon Law:

Yeah. The flat roof is about to leak. It’s come to the end of the term, and they don’t know these things because they haven’t had a home buyer’s report.

Jemma Forte:

Oh, gosh. Never dare not get one. Out of interest, this is a slightly different from me. If you have got a property and it’s in sort of terrible condition … You can look and you can see what people have paid for things now online. For instance, so I bought a house and renovated it, and so I got it very cheaply, and then I’ve completely done it up. A desktop valuation could be done on what it was bought for, and they don’t know that you’ve done it up. Is that correct?

Simon Law:

It could be, yes. I mean, they will take the agent’s listing, as well, into account, so they’d be able to see that. That would probably lead the lender to send around and actual surveyor to look at-

Jemma Forte:

Actually have a look.

Simon Law:

Yeah.

Jemma Forte:

Yeah, okay. Excellent. Anybody want to join in on that one? I suppose it’s just a given, isn’t it, that the advice should be get a survey. Have you ever, in the past, not done a survey on a property?

Paul Mahoney:

I think when it comes to property, in general, whether it be with surveys or with the loans that we’ve been talking about, just do everything by the book. Don’t skimp on anything, because a few hundred quid here and there might save you a few thousand or a few hundred thousand down the line.

Mary-Anne B.:

Well, having done about 500 home buyer surveys in my career, I suppose what’s quite useful about that type of survey is it’s actually written jointly by the RICS and Which? Magazine and, therefore, is designed to be understandable by the consumer and puts all of the issues to be investigated into two categories. One is urgent, i.e. something you should get a price on so, you know, buying aware. That could be the flat roof that doesn’t look to good. One is significant, and that’s something that your legal guy should research for you before you make a commitment to purchase. The whole survey’s sort of full of commentary plus actions points as to what you should do. For a few hundred pounds, it’s probably good value.

Jemma Forte:

Okay. Last question for you, Mary-Anne. This person says, “My niece, who’s 25, saw a flat while staying with me this weekend and is interested in renting it, but she wants to go home and talk to her bank manager, her parents, partner, et cetera. It’s also closer to her work. The question is, she’s never rented before, and she’s not sure whether she can offer up her documents to the agency so that they can assess her suitability. Is this usual or is she giving the estate agent the runaround? She only wants to do it if it’s normal and acceptable.”

Mary-Anne B.:

The interesting bit about your question is should. It’s more to do with, if she doesn’t, she won’t get the property.

Jemma Forte:

Right. Okay, yeah.

Mary-Anne B.:

Much like applying for a mortgage, a landlord won’t let a property unless he knows that you’ve got financial means. That could be a reference from your employer, it could be bank statements that your employment appears to be stable, that you haven’t got any adverse debts and judgements against you. These days, it’s normally done via one of three or four credit referencing agencies. Whether you actually have to give all of those documents to the estate agent or, perhaps, sit at home, do it through the credit referencing agency online, depends on who you’re actually dealing with. But notwithstanding that, there’s a legal right for them to see your passport and check that you have the right to rent in the UK. That’s reasonably new legislation. Yes, you’re going to have to disclose a lot of personal details to rent a property.

Jemma Forte:

Yeah. It seems odd to me that she’s so resistant. If I was the landlord, I would be like, “Why don’t you want me to check your documents?” In itself, that would make me a little worried. Thing is, it’s such a sort of a landlords’ market. The last time I rented a property, not that long ago, I remember going, and it was day one, and it was like [inaudible 00:22:45], and people were just saying on the spot, “I want it.” Yeah, if you then said, “Oh, you’re not seeing my documents,” you’re not going to get it are you?

Mary-Anne B.:

I guess it’s just the first time she’s been asked, and living at home, you don’t have these worries.

Jemma Forte:

Yeah, true. Yeah, welcome to the big, wide world and, yes, they’ll want to scrutinize you, and bank statements, and everything. Okay. Thank you so much. Right. That is all that we’ve got time for on this episode of Property Question Time, but thank you so much for watching, and thank you to my panel of experts, Simon Law, Mary-Anne Bowring, and Paul Mahoney.

If you’ve got any questions, property-related of course, that you would like to have answered here at Property Question Time, please get in touch. You can go to our website, which is all the Ws.property-tv.co.uk or email us, info@property-tv.co.uk, and we’ll get them sorted. Thank you so much. I’m Jemma Forte. See you soon.

 

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