Many landlords may be worried following recent reports that banks (EBS, AIB & Bank of Ireland), may attempt to collect rental income directly from tenants for those properties where the landlord is in arrears on mortgage repayments. A report in today’s Irish Times points out that there may be some legal difficulty in this regard. Also, the banks appear to be to be keen to stress that this will not apply to small investors. It seems that the bank is targeting those landlords, some who have moved abroad, who use their rental income for other purposes and have allowed arrears to build on their buy-to-let mortgages.
At SCK Group we have been helping landlords maximise their rental income through Rent-Monitoring and where properties are difficult to let because they are in bad repair, through our Property Refurbishment Scheme. We also negotiate with lenders on behalf of landlords.
Further to Mr Patrick Honohan’s comments that the “banks will have to be more aggressive in repossessing properties in the buy-to-let sector” a couple of points should be noted. Firstly, as a company working closely with buy-to-let investors, we are unaware that the banks were ‘holding off’ on being aggressive with landlords. In our experience working with our clients, we have found that the banks have already been taking an aggressive approach with borrowers, and it has taken considerable effort on our part to get the banks to agree to any arrangement with the borrower. In addition, many landlords have cross-secured their buy-to-let investment with their home, so if the bank seek repossession, this will place the landlords home at risk.
Since the downturn landlords have seen their rental income drop, increases in variable mortgage interest, the introduction of NPPR, USC on rental income, the reduction of mortgage interest that is tax allowable to 75% and the recent introduction of the household charge. Take a landlord who has rental income of €12,000 pa . If is mortgage is on a variable rate, his interest repayments will typically also be €12,000 pa, of which he can only allow €9000 against his rental income, so he will be liable for tax, USC etc on €3000. He will also pay €300 in property taxes and will have other bills for service charges, maintenance costs etc. Unless the landlord has losses forward from previous years or unused capital allowances, he will be paying income tax on a negative income.
If the banks insist on repossessing buy-to-let properties, they will either sell them at a vastly reduced price, leaving the landlord with the remaining debt leveraged against his home, or the bank will attempt to manage the properties themselves. Managing buy-to-let properties is not the banks area of expertise. The bank would be better coming to an arrangement with the landlord with regards to his loan repayments and allow the landlord to manage his property himself, or with the help of a property management company, who have experience in the area and can maximise rental income and therefore enable the loan to be paid off over time.
At SCK Group, we have been working with our clients to help them navigate what has been a difficult time for landlords. We have been negotiating with the banks on their behalf and have had some success in this. Many landlords have not been utilising all the capital allowances available to them and we have been able to reduce their tax bill by advising them in this area. Some properties have fallen into disrepair because landlords have not had the money to pay for ongoing maintenance. When we realised that this was preventing landlords getting tenants for their properties, we set up our Property Refurbishment Scheme, whereby we will carry out the repairs, pay the up-front costs and then the landlord can repay us overtime from the rental income. This year, because we recognise the extra burden placed on landlords, we are going to pay the NPPR (second home tax), for all new properties let and managed by us.
Owner-occupiers, Landlords and Tenants of Aras Na Cluaine, Yellow Meadows, Clondalkin are concerned following recent newspaper articles re High Court Proceedings against the Developer in relation to issues raised by the fire officer.
At SCK Group we have been liaising with Aras Na Cluaine Management Company Ltd to ensure that the issues are satisfactorily resolved.
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Many landlords will be relieved to read in today’s Irish Times of the Daft report which shows that Rent Costs have levelled out in Ireland.
THE COST of renting residential property in Ireland appears to be levelling out, according to a report by property website Daft.ie.
Rents fell by just over half a per cent last year compared to a 15 per cent drop in 2009 and 10 per cent in 2008. The largest drop, of over 7 per cent, was recorded in Leitrim, which also had the cheapest rentals in the country at an average of €467 a month.
Rents for Kerry dropped 7 per cent to an average of €617 and, while rents in Wicklow dropped by 3 per cent last year, it remained the most expensive place to rent outside the capital, with an average monthly charge of €922.
Dublin city centre saw the largest increase last year going up by almost 3 per cent. The average rent there was €1,134, but it did not top south Co Dublin where the average rent was the most expensive in the country at €1,303. It increased 2.2 per cent last year on 2009.
Rents in north Dublin city fell by more than 2 per cent to an average of €985.
Rents in Offaly were unchanged at an average of €604 a month and in Galway and Cork cities there was very little change, with average rents at €804 and €824, respectively.
The availability of properties also dropped; the total number available to rent nationwide fell from a high of over 23,000 in mid-2009 to less than 16,000 at the beginning of this month.
Read the full Daft report on: