The house I live in has been on the market since September 2010. Not a good time to be selling a house, but as regular readers know, I have never been lucky with property. If it were not for HM Revenue & Customs admitting to overcharging me £16,000 worth of tax in 2008 and refunding it (with no apology) then, by now the house would have been repossessed. I have been unemployed for 11 months, bar six weeks' of a few days of work (some weeks one day, some two days per week) and despite still having regular interviews I seem no closer to getting back into employment. Consequently, because of the woman who lives in my house running a business I am not entitled to any benefit to pay the mortgage. The mortgage lender, Nationwide Building Society, has repeatedly refused to discuss my inability to pay, saying that if I have enough to pay at least one month's mortgage payments, then it is too early to discuss me defaulting or going on to interest only payments. With unemployment rising and despite 27 interviews now, no sign of work, the only option is to sell the house. Of course, that is easier said than done.
I acknowledge that I am very bad at selecting companies to provide me a service. I always pick the worst company available (though on a number of occasions, recommended to me) for the particular job. Consequently I have been ripped off by letting agents, removal companies, electrical repair companies and now estate agents. Within a five-minute walk of my house there are at least five estate agents, though the best decided to morph instead into a financial advice company, much to my frustration and the company they recommended nearby only lets, not sells properties. Consequently I picked a large company close to my house that was tied into national networks so as to get the coverage. However, the staff turned out to be clueless, making no effort to learn about the neighbourhood (even though you can see their office from my house) or the potential buyers coming round and what they were looking for (buy-to-let, buy-for-family, buy-for-self; elderly, middle aged, young; with/out children; local, from London, etc.) and said nothing bar 'this is the living room'. They had the cheek to say they would no longer do accompanied viewings because I simply took over the sales role. I said that was insulting as I had only taken that role because their staff made no effort to address the viewers or sell the property. Anyway, we got one buyer from them, but it took him three months and he had not even sent round a surveyor. We abandoned both him and the estate agent.
The next company we went for, is tiny, but works incredibly hard and within a week of transferring to them we have another buyer, offering £2000 more than the first. I live in a town with still high demand for property, very close to a good range of shops and good primary schools. Despite paying £240,000 for the house in 2007 it is now worth £230,000; to be expected with the downturn in the market. Offers have come in starting at £205,000, not leaving enough to clear the debts on the house and have enough to put down a deposit on a rented property. We have managed to get offers now up to £217,000 helped by the move from Winter to Spring, but still in line for a heavy loss. Given the location and the benefits of the property, once the economy recovers, the value is likely to rise fast, especially with the revival of buy-to-let mortgages reported this week. Thus, the person is getting a good deal on the property, £13,000 less than the valuation given even now by the estate agents.
These days, it is apparent, that a good deal is not enough for house buyers, they constantly want to squeeze out more from the seller. I have experienced this even back in 2007 selling my flat in London, a time when the housing market was much healthier. Due to being bullied by the landlord's representative, I effectively sold a two-bedroomed flat for the price of a one-bedroomed flat in the area of Newham. It was clean and modern and I had replaced the bathroom and the windows and made other improvements in the six years I had owned it, primarily for my own benefit when living there, but clearly improving it over some of the neighbouring flats. In my hurry, the buyer got a very good bargain. However, this was not enough. Living in rented accommodation I had no desire to move the furniture and white goods from it. This was initially not an issue, but then suddenly the buyer wanted them gone at my expense. Then he wanted the flat to be cleaned, by him even before he owned it, at a cost of £500 (€565; US$805). The flat was not unclean and it took £40 to employ a woman to clean it thoroughly. However, it was clear the buyer was using it as an excuse to squeeze more money for me, even though he was paying about £30,000 (€33,900; US$48,300) less than an equivalent flat in the same area would have cost him. Once the front door lock had been destroyed by the estate agents' carelessness on the day before the contract exchange occurred, I took the opportunity while it was being replaced to ensure that the buyer would receive a welcoming gift of rotten milk, a mouldy fridge and faeces when he arrived. Any waste paper and other rubbish I could find, was distributed over the flat so he could really see what an untidied flat looked like. As you can understand, I was angered, by the attempt to squeeze more and more from me, even when I was selling the place at a bargain price.
A very similar thing occurred with the current house. The second buyer we accepted first sent around three inspectors. The surveyor spent three hours at the property and people came to check the central heating and electricity too. This dragged out over a couple of weeks. The buyer did not take efforts to conceal her contempt for us and I overheard her ridiculing myself and the woman who lives in our house as stupid. Clearly she, like the buyer of my flat, believed that we were so desperate that she could humiliate us and we would have to swallow it. I have no idea why humiliation is now seen to be a necessary part of buying a house. Certainly getting an extra £500 from the buyer now seems to be part of a fashion. In this case she did not demand cleaning, she asked instead that we paid £500 towards the £1000 it would cost to build an additional wall around the kitchen; a wall that we would gain no benefit from. We naturally refused. The estate agent felt the demand was ridiculous, which suggests that it may not be as common behaviour as I have experienced, but he did offer to take £500 off his commission instead. The woman, disgruntled with our refusal to comply with us immediately withdrew her offer, over two months since she had made it, and like the first buyer, during that time, had effectively blocked other potential buyers.
These may be isolated incidents, but to me there does seem to be a trend that, as a buyer you see what you can squeeze out of the sellers. Getting a good price is not enough. There has to be some specific demand imposed on the sellers to make it clear to them that you hold the power. To me this does not seem to be a healthy way to do business. Either you want the property or you do not. Either you can afford to buy the property or you cannot. There is obviously room for discussion over the price and we have engaged with that, all the buyers (we are now on to the third, who rather worryingly has requested a third viewing of the house as I have been writing this) have got a price well below the asking price. When seeing Niall Ferguson talking about the success of Western capitalism and how now it is not thriving so well as it is in China, he noted the fact that honesty in business is one trait highly valued in Chinese commerce. This element seems to have gone from buying and selling in the UK and slows down exchange and discourages commerce. This applies to selling on eBay in the UK as it does to selling houses. Sometime in the previous decade, perhaps prompted by television programmes, buyers have been encouraged to move from simply getting a good deal, to squeezing unnecessary extras. After all, on a £217,000 sale, the commission to the estate agent is usually £4880 and unless the buyer if a first-time buyer the Stamp Duty Land Tax (SDLT) is £2,170, so what is the fuss over £500? It seems to be a principle that Ferguson missed that is damaging to capitalism in the UK today. It is not enough simply to make a profitable deal, now you have to 'win a victory' too and rub the face of your 'opponent' in the mud by asserting how much more economically powerful you are than them. This is one thing which harms sales and business in the UK and seems to be increasing as the recession widens the gap between people who previously would have been on the same economic level. Selling your house should not require you to kow-tow to someone who explicitly holds you in contempt.
P.P. 28/05/2011
This aspect of the house sale has taken on an additional unpleasant twist. It is clear that I have a sign on my forehead that I cannot see but which instructs everyone else: 'patronise and exploit this man as much as you can'. Last week I was fortunate enough to get work. This means there is no longer a need to sell the house, though we will struggle with paying the mortgage until my first salary arrives at the end of July. However, given that the house is worth tens of thousands of pounds less than when we bought it and we own 1/300th of it more, every month of the mortgage we pay, if we can hold on to it until prices have at least returned to their 2007 level, then we will at least be a little better off.
Once the job had been confirmed, I telephoned the estate agent to tell him we were taking the house off the market. I said I expected an invoice for services rendered in the four months they had been selling our house for us. I assumed he would inform all the relevant parties. Today, however, I received a very snotty letter from the solicitors' office, asking why they had not been informed as well. It was clear they had found out in two days of me telling the estate agent anyway, but that I did not crawl round to them and kiss their feet and apologise for not continuing with the sale, was clearly sufficient to leave them indignant. They were not our choice of solicitors anyway, we only took them as they are the ones the estate agent uses. All our communications, bar one visit, have been through the estate agent. Given their attitude now, I am actually glad I did not call them.
It gets worse. When our second buyer decided that because we were unwilling to pay her £500 and have a wall built to no benefit of us, she would break off the sale, we were left with the solicitor's charge for the work they had done already, a sum of £300 [€318; US$483]. We contacted the buyer to see if she would reimburse us this money. She did not say no, she simply refused to respond to any attempts to contact her. We accepted that with no written contract we could not get the money out of her. Now, however, this time we have broken the sale and now this latest buyer is trying to get his solicitor's fees back out of us. Despite being employed by us, our solicitor seems always to be working on behalf of other people. In the first case she did nothing to help us recoup the money from the buyer who broke off. In this second case, however, she has forwarded a bill from the buyer's solicitor, at a cost of £8 to us, and written to tell us it is 'only fair' that we reimburse the buyer. Why is it 'fair' that we have to pay the fees for everyone? The solicitor seems to have no interest in aiding us, despite being paid by us, at fees £66 higher than those levied by the latest buyer's solicitor.
Part of the problem seems to be that we are too honest and treat people politely. In contrast the two buyers have behaved in a 'chav-plus' manner. They behave as if thuggish, self-centred people from a housing estate, terse and rude in their manners, expecting always to get that bit extra, and yet, they have the money to speculate in property. I could be terse and aggressive in my business dealings, put on the accent and behaviour I learnt in Mile End and it is apparent in not doing so I somehow signal that I am open to being exploited by all and sundry. My advice is: the only way to go into buying or selling a house in the UK in 2011 is to behave as if you are some small-time gangster who has retired from the Ocean Estate in Stepney to Chigwell. In addition, avoid Aldridge Brownlee solicitors.
Showing posts with label selling property. Show all posts
Showing posts with label selling property. Show all posts
Tuesday, 26 April 2011
Tuesday, 1 March 2011
Capital Gains Tax Delight
This posting will be interesting for anyone who encounters difficulties with the HM Revenue & Customs brought on by the fact that they have to move away from their home that they own for work in another area but given the slow housing market are not in a position to sell the property and buy in the new area, so are compelled to rent there. Regular readers of this blog, may remember back to 2007-8 when I had such difficulties. Back in 2001 living in East London I had bought a flat in Newham. I was unable to find work in the area and was offered a job in Milton Keynes, a distance a way which proved too difficult to commute. I rented a flat in Milton Keynes and rented out my flat in London. The job was initially only a 2-year contract but I was fortunate to get a second 2-year contract with the same company, in a different post, so remained in Milton Keynes, continuing to rent out the property in London, though living there between one contract ending and the new one starting. When this job finished I got a 2-year contract in Hampshire and again rented there, unable to afford to buy even a flat in this high cost area. The contract was renewed but then I was made redundant. In the meantime, in December 2006 I and the woman and boy I had been sharing a rented house with were told to leave as the landlord wanted the place back as he was separating from his wife. In the next house we rented, the landlord defaulted on the mortgage and he harassed us only to move at his convenience, refusing to let us leave early and yet insisting when the time came he would want us out in 2 weeks. Our unwilling to comply led him to keep phoning (50 times in one 24-hour period) and photographing us as well as demanding additional money. His friends in the local police meant our complaints of harrassment were dismissed.
At this stage me and the woman were sick of renting property and realised that if I sold my London flat and combined our earnings we could buy a house to live in, even in southern England. Due to the bullying of the landlord we had no time to waste and moved in December 2007, just at the peak of house prices, but we had no option. The shock came when I sold my London flat. The estate agents, David Daniels, were worse than useless setting up dubious deals which heavily under-valued the property. While I was able to push the price a little higher, as a 2-bedroomed flat it was sold for the same price as a 1-bedroomed flat and the estate agents' staff managed to break the front door lock on the day contracts were supposed to be exchanged, leading to a dash to London to get someone to secure the flat and allow the sale. The problems did not end there. I had already been charged £16,500 by Newham Council, one of their periodic levies on private property that is in council-owned buildings. I have subsequently been told that I should have contested that charge, but handling everything from 190 Km away and with the council insisting on payment and even refusing to give a receipt, I was in a weak position.
Then came an additional shock, that I was charged capital gains tax on the sale of the flat. I detailed this back in November 2008: http://rooksmoor.blogspot.com/2008/11/property-in-uk-12-capital-gains-tax.html Bascially I was told that because I had not been living in my flat consistently throughout the six years I had owned it, and had rented it out, then it had become a business and I was liable for capital gains tax once I sold it. I was sent the wrong forms three times and was giving conflicting figures, but the final bill came in at £16,800 (now worth €19,990; US$26,700). I explained the circumstances at the time and how that the flat had not been bought as a 'buy-to-let' property but as a place to live. However, finding work elsewhere had made it seem the best idea to rent the property out especially when in the mid-2000s councils started charging 50% council tax on empty furnished properties as mine would have been and this, of course, put pressure on to rent out the property. The last 2.5 years worth of rent, which I had paid tax on was wiped out by Newham Council's charges, so it would have hardly been a profitable business. I accept the value of the property had risen and I took it that that was effectively what I was being taxed on. I could see no alternative but to pay this bill. By this time I had jointly bought a house and with the agreement of my co-owner, I got another advance on the mortgage (I had had one already to pay off Newham Council) and paid the bill.
That was how things stood, I paid each month to the mortgage which had been taken out to cover the tax and imagined it would be brought to an end now that the house we live in has had to be sold, as long as we could get a price higher than what we owed on it. However, with all the furore in 2009 over the exaggerated expense claims of MPs, there was discussion of them 'flipping' between their so-called first and second homes so as to avoid paying capital gains tax when they sold the second home. I did not really see a connection with my own situation and saw it simply as some kind of sophisticated business scam that these people pay accountants large sums of money to work out for them. I thought it had no more relevance to me than an off-shore bank account in the Cayman Islands did. Fortunately, my father pointed out the application to my own situation. The reason why these MPs were making their second home appear as their first home was because that brought them exemption from capital gains tax. Then he started asking, why had I been liable from capital gains tax when I had only ever had one property (I have only ever completely owned one property and part-owned another in my life and not at the same time).
Following his guidance, back in September 2010, I wrote to the HM Revenue & Customs outlining the issue and pointing out that I had sold my only property, the flat and put all the money (and more) into the house I now lived in (and was trying to sell). I told them that not only had I made this clear at the time, but surely with their powers they could tell what mortgages I had had and what property they had been raised on. I did remember at the time when I was telephoned with the bill, this must have been March 2008, the woman from the tax office seemed surprised that I said I might have to sell the house I lived in, in order to raise the money. At the time it had not been clear if the lender would extend my mortgage any further, me having already advanced it once, so reducing how much equity we had in the house. She seemed to believe I owned a number of properties and could simply sell one of them. I counter-acted her view, but that conversation never seemed to penetrate into my tax file and so the tax demand was made. Part of the problem was the timing. I sold the flat in December 2007 but by the time the bill was sent in April 2008, I was living in the house I had jointly bought. It seems that the tax office had believed that I had owned the flat and the house simultaneously, which would have been impossible as I could only pay into the house by selling the flat.
After having explained my situation in September 2010, I heard nothing from the tax office until December when I received a very old-fashioned form which stated that using a law from 1970, I should state why I felt that I had over-paid my capital gains tax. I wrote out the details that I have given here. I pointed out that I had tried to make this clear at the time, but due to the confusion of wrong forms and people telling me different things, I guessed that the information had not got through correctly. Staff at the tax office had made false assumptions and so charged me on that basis rather than the reality I was trying to tell them. Anyway, I sent the form in, expecting that I would have a response that told me why I had been liable and rejecting my request for repayment of the tax. As I have noted, cut-backs at HM Revenue & Customs mean they are pretty short-staffed already, one reason why it was taking months for them to produce a response. See my posting: http://rooksmoor.blogspot.com/2010/11/collapse-of-british-tax-system.html for other issues that I and many other people have encountered as a result.
To my shock, last week, I went to my bank account and found the entire sum of the capital gains tax I had been charged in 2008, had been refunded. As yet, I have received no letter from HM Revenue & Customs saying that I was getting the money back or explaining what actually happened back in 2008 for such a large error to occur. Given the fact that late last year I was sent two different tax codes on the same day and was told I should inform the employer who had made me redundant five months earlier, I guess that there is chaos in the tax offices and I should not be surprised that errors creapt in. I guess I was simply labelled 'serial landlord, selling off one of his many buy-to-let properties' rather than 'man finding work wherever he can in the country selling his home in order to buy another one'. Basically if you own just one house or flat, even if because of circumstances you cannot live there for long periods and rent it out, it is not going to be liable for capital gains tax, especially if you use the money from the sale to buy your next 'dwelling house', or, I imagine, use it to pay nursing home fees. Of course, as some people have pointed out, I am still out of pocket. I have not received the interest that I could have earned if that money had been in an account or invested. I will not get back the money that I have paid in interest to the building society for this addition to my mortgage. However, at this time when I lacked the money even to put down a deposit to rent a 1-bedroomed flat, I am just grateful to have the funds returned to me.
The lesson seems to be, that we are going to face greater difficulties in having a consistent application of tax as HM Revenue & Customs crumbles even further with the cuts introduced by the Cameron regime. This is most likely going to hit ordinary people trying to go about quite ordinary day-to-day stuff and in many cases, being compelled to move around the country for work. With the property market so slow, it is very unlikely that you can quickly sell your home and buy a new property in the place where the work is and to do so, especially with the short-term contracts that are so common, can be a great cost in itself. Of course, the business people with personal accountants will always be able to squirm their way out of most liability much as the MPs did for so long. Thus, my recommendation is, if you end up in the circumstances that I did, to avoid being charged tax that you are not, in fact liable for, is to make a fuss. Keep telephoning, keep writing to them until you are certain that they have not shoved you into some convenient box designating you as something based on easy assumptions rather than the truth. The fear, has to be, as the civil service across all its branches is pressed and cut even more, many such errors will occur. They will not make a huge difference to the national budget but they can hit very hard on ordinary people.
At this stage me and the woman were sick of renting property and realised that if I sold my London flat and combined our earnings we could buy a house to live in, even in southern England. Due to the bullying of the landlord we had no time to waste and moved in December 2007, just at the peak of house prices, but we had no option. The shock came when I sold my London flat. The estate agents, David Daniels, were worse than useless setting up dubious deals which heavily under-valued the property. While I was able to push the price a little higher, as a 2-bedroomed flat it was sold for the same price as a 1-bedroomed flat and the estate agents' staff managed to break the front door lock on the day contracts were supposed to be exchanged, leading to a dash to London to get someone to secure the flat and allow the sale. The problems did not end there. I had already been charged £16,500 by Newham Council, one of their periodic levies on private property that is in council-owned buildings. I have subsequently been told that I should have contested that charge, but handling everything from 190 Km away and with the council insisting on payment and even refusing to give a receipt, I was in a weak position.
Then came an additional shock, that I was charged capital gains tax on the sale of the flat. I detailed this back in November 2008: http://rooksmoor.blogspot.com/2008/11/property-in-uk-12-capital-gains-tax.html Bascially I was told that because I had not been living in my flat consistently throughout the six years I had owned it, and had rented it out, then it had become a business and I was liable for capital gains tax once I sold it. I was sent the wrong forms three times and was giving conflicting figures, but the final bill came in at £16,800 (now worth €19,990; US$26,700). I explained the circumstances at the time and how that the flat had not been bought as a 'buy-to-let' property but as a place to live. However, finding work elsewhere had made it seem the best idea to rent the property out especially when in the mid-2000s councils started charging 50% council tax on empty furnished properties as mine would have been and this, of course, put pressure on to rent out the property. The last 2.5 years worth of rent, which I had paid tax on was wiped out by Newham Council's charges, so it would have hardly been a profitable business. I accept the value of the property had risen and I took it that that was effectively what I was being taxed on. I could see no alternative but to pay this bill. By this time I had jointly bought a house and with the agreement of my co-owner, I got another advance on the mortgage (I had had one already to pay off Newham Council) and paid the bill.
That was how things stood, I paid each month to the mortgage which had been taken out to cover the tax and imagined it would be brought to an end now that the house we live in has had to be sold, as long as we could get a price higher than what we owed on it. However, with all the furore in 2009 over the exaggerated expense claims of MPs, there was discussion of them 'flipping' between their so-called first and second homes so as to avoid paying capital gains tax when they sold the second home. I did not really see a connection with my own situation and saw it simply as some kind of sophisticated business scam that these people pay accountants large sums of money to work out for them. I thought it had no more relevance to me than an off-shore bank account in the Cayman Islands did. Fortunately, my father pointed out the application to my own situation. The reason why these MPs were making their second home appear as their first home was because that brought them exemption from capital gains tax. Then he started asking, why had I been liable from capital gains tax when I had only ever had one property (I have only ever completely owned one property and part-owned another in my life and not at the same time).
Following his guidance, back in September 2010, I wrote to the HM Revenue & Customs outlining the issue and pointing out that I had sold my only property, the flat and put all the money (and more) into the house I now lived in (and was trying to sell). I told them that not only had I made this clear at the time, but surely with their powers they could tell what mortgages I had had and what property they had been raised on. I did remember at the time when I was telephoned with the bill, this must have been March 2008, the woman from the tax office seemed surprised that I said I might have to sell the house I lived in, in order to raise the money. At the time it had not been clear if the lender would extend my mortgage any further, me having already advanced it once, so reducing how much equity we had in the house. She seemed to believe I owned a number of properties and could simply sell one of them. I counter-acted her view, but that conversation never seemed to penetrate into my tax file and so the tax demand was made. Part of the problem was the timing. I sold the flat in December 2007 but by the time the bill was sent in April 2008, I was living in the house I had jointly bought. It seems that the tax office had believed that I had owned the flat and the house simultaneously, which would have been impossible as I could only pay into the house by selling the flat.
After having explained my situation in September 2010, I heard nothing from the tax office until December when I received a very old-fashioned form which stated that using a law from 1970, I should state why I felt that I had over-paid my capital gains tax. I wrote out the details that I have given here. I pointed out that I had tried to make this clear at the time, but due to the confusion of wrong forms and people telling me different things, I guessed that the information had not got through correctly. Staff at the tax office had made false assumptions and so charged me on that basis rather than the reality I was trying to tell them. Anyway, I sent the form in, expecting that I would have a response that told me why I had been liable and rejecting my request for repayment of the tax. As I have noted, cut-backs at HM Revenue & Customs mean they are pretty short-staffed already, one reason why it was taking months for them to produce a response. See my posting: http://rooksmoor.blogspot.com/2010/11/collapse-of-british-tax-system.html for other issues that I and many other people have encountered as a result.
To my shock, last week, I went to my bank account and found the entire sum of the capital gains tax I had been charged in 2008, had been refunded. As yet, I have received no letter from HM Revenue & Customs saying that I was getting the money back or explaining what actually happened back in 2008 for such a large error to occur. Given the fact that late last year I was sent two different tax codes on the same day and was told I should inform the employer who had made me redundant five months earlier, I guess that there is chaos in the tax offices and I should not be surprised that errors creapt in. I guess I was simply labelled 'serial landlord, selling off one of his many buy-to-let properties' rather than 'man finding work wherever he can in the country selling his home in order to buy another one'. Basically if you own just one house or flat, even if because of circumstances you cannot live there for long periods and rent it out, it is not going to be liable for capital gains tax, especially if you use the money from the sale to buy your next 'dwelling house', or, I imagine, use it to pay nursing home fees. Of course, as some people have pointed out, I am still out of pocket. I have not received the interest that I could have earned if that money had been in an account or invested. I will not get back the money that I have paid in interest to the building society for this addition to my mortgage. However, at this time when I lacked the money even to put down a deposit to rent a 1-bedroomed flat, I am just grateful to have the funds returned to me.
The lesson seems to be, that we are going to face greater difficulties in having a consistent application of tax as HM Revenue & Customs crumbles even further with the cuts introduced by the Cameron regime. This is most likely going to hit ordinary people trying to go about quite ordinary day-to-day stuff and in many cases, being compelled to move around the country for work. With the property market so slow, it is very unlikely that you can quickly sell your home and buy a new property in the place where the work is and to do so, especially with the short-term contracts that are so common, can be a great cost in itself. Of course, the business people with personal accountants will always be able to squirm their way out of most liability much as the MPs did for so long. Thus, my recommendation is, if you end up in the circumstances that I did, to avoid being charged tax that you are not, in fact liable for, is to make a fuss. Keep telephoning, keep writing to them until you are certain that they have not shoved you into some convenient box designating you as something based on easy assumptions rather than the truth. The fear, has to be, as the civil service across all its branches is pressed and cut even more, many such errors will occur. They will not make a huge difference to the national budget but they can hit very hard on ordinary people.
Tuesday, 4 January 2011
The End Of My Property-Owning Dream
Back in 2000 when I was buying my first (and only) flat, a Japanese friend of mine emailed to say that now I was entering the property owning class that he anticipated that I would not wish to communicate with him being simply an employee, at the time working in a record shop, subsequently when laid off for being too old for that work (at the age of 30) he became a carer. I know there has always been snobbery in the UK around owning property, but no-one has ever said to me here that I should or should not talk to them because I was or was not an owner of property at the time. I note this now because finally we have had an offer on the house, probably just in time because I am running out of money to pay the mortgage. Of course, the offer is less than we paid for the house, by £25,000 (€28,750; US$39,500) and is £15,000 less than the asking price we insisted on (which itself was £15,000 higher than the price the estate agent recommended). Aside from the slump of 1990-3 the UK, especially southern England, has been used to constantly rising house prices and in general property has been the best investment if you want a decent return on your money. In fact as I have often noted, house prices have been an obsession in the UK and I can think of no other country where just a simple slowing in the rise of house prices, not even a fall, makes the news broadcasts. With mass unemployment reappearing and a depression in full bloom, this has already begun coming to an end.
For me, of course, the profitability of owning houses never really turned into a reality. I owned a flat in London for seven years. It rose from £80,000 to £130,000 in that time, so I did very well out of it. The only trouble was, with work taking me away from London on a series of short-term contracts in the Midlands and on the South coast, I was deemed to be running it as a business (I let it out so that I could cover the council tax charged on empty furnished properties) and so I ended up with a £16,000 capital gains tax bill and then, of course, Newham Council, which makes up charges for all kinds of things at a whim, charged me £16,000 as well for work done in the street and to the building which held my flat. I was compelled to sell the flat far cheaper than the going rate. It was a two-bedroomed flat but was sold at the price of a one-bedroomed flat, about £20,000 less, partly because the estate agents were in on some deal with buyers (often landlords in the area) and because I was being hassled by my own landlord to move very quickly. Always remember that however nice estate agents appear to be, they are always playing off the buyers against the sellers. As a seller, they will never even get you the price that they recommended, expect to lose many £10,000s on that price. Buyers are also getting very greedy. When I sold my flat, the buyer, who was being granted constant access to the flat by the estate agent, began demanding various £500 sums for things such as cleaning the flat, something I could get done for less than a tenth of that price. Clearly informed by the estate agent that I was desperate to move the buyer felt he could twist lots of little bonuses out of me. The estate agent actually broke the lock to the front door something I had to pay over the odds to have replaced hours before the contracts were exchanged. I was angered by the buyer's arrogant behaviour and in the end did not pay for the flat to be cleaned; I left the toilet unflushed and a range of food items for the buyer's delectation when he arrived. It was a small victory, but you can see I was desperate to get something back for all the hassle and lost money.
I suppose I should not complain that I came away with £20,000 profit from the flat. What was worse was that with the landlord compelling me to move so fast, I had to buy a house (the woman who shared the house with me was sick of renting, but maybe with hindsight we should have done that for a period more) when prices and interest rates were at their highest; more time could have made a huge difference, but I am never lucky that way. Consequently, of the £20,000 I made on my flat, I will take away about £12,500. I suppose I should not complain. I could be facing negative equity meaning that I would still be paying off a loan on a house that I no longer owned. At least with this deal, I do not get the black mark of repossession against me and all my debts will be cleared. A lot of people will be far worse off than me. Of course, I will never own property ever again. I am now 43 which means that even with the raised retirement age I could not pay off a 25-year mortgage before I retired.
So, after a decade of owning a flat/house, though only a total of four years of actually living in the property I owned, I am back into the rental sector. Of course, it has worsened since even the bad landlord I experienced back in 2007. Now you can pay £600 per month to rent a single room in a house. In addition, you have to go through the humiliation of an extensive selection process. I am not glamorous, I look peculiar and am told I taught too much. Like a lot of people looking for a room, I am going to find myself going through fruitless beauty contests. Landlords/ladies know that people are desperate for housing and so can use this against you. People renting out property generally think their tenants are slovenly and filthy, no matter how hard they work to keep the place clean. Rights to be informed of a landlord's inspection are often ignored and you get levied charges like £40 for dust in a drawer or £60 for soap residue in a sink or £400 for the lawn having grown. I should go into business as one of these cleaners/handypeople who charges such high prices for rectifying these things.
In addition to being once again a tenant, I have also dropped down the social scale even further. Now, I am a man who has been unemployed for 7 months and will be dependent on housing benefit. This rules me out from even applying for the bulk of rental property in my area and I am restricted to only those offering 'social housing'. Housing benefit is falling and will quickly be below the rate necessary for the region in which I live in. Consequently I will be compelled to move into one of the 'benefit ghettos' that are liable to harden once the new rules of housing benefits really begin to bite. It seems incredible that twelve months ago that my career seemed to be advancing and I had a house and a stable situation and now that has been stripped of me. At 43 I am cast on the scrap heap. My career has halted and I cannot even get manual work because there are too many younger people with the right NVQ to step into those roles. I suppose pride comes before a fall, but I do feel, that rather than much to do with my efforts, this has been inflicted on me by a government which loves pushing people down the social scale so as to enhance the standing of its people. I am harangued by the Job Centre to be positive and see some future, but, despite all my efforts, there is no work even in a 250 Km radius, that will take me, I am apparently too much of everything for these employers, too high, too low, too practical, too strategic, too involved, too detached and so on. Before Christmas I was interviewed for a job and came in as first reserve. Given unemployment levels it seems unlikely that the winning candidate will turn the post down. However, I then found out that the funding for the post has not even been approved yet, they were just building up a clutch of potential employees. I was not even applying for a real job, just simply the opportunity that if a job does appear then I will have a chance to get it. How much more like disposable batteries can workers become? 'Keep some in the drawer if we need them; chuck those ones out: they're past their use-by date.'
Anyway, I suppose returning to the rental sector will give me issues to post on here, assuming, that is, that I can get internet connection in whatever cramped flat I can get and hear myself think over the noise of screaming neighbours. What about the woman and nine-year-old boy who have shared my house through the past few years? Well, with the little money derived from the house sale, they are emigrating to Germany. With the EU and online sales, small business have a lot more ability to relocate. Apparently Berlin is desperate for people to rent there and is offering particular breaks. There are a string of bilingual English-speaking schools there too. Being an entrepreneur relocating is one thing; an unemployed office manager who does not speak German is something different.
I am glad that they are getting out of the UK because the future here is going to be incredibly nasty. As I have noted before people these days often ask: 'why did people not flee from Nazi Germany sooner?' and seem to think that they were naive or foolish. For my views on this see: http://rooksmoor.blogspot.com/2008/05/respect-difficulties-of-escaping.html Sitting here in the UK with a new regime, which I trust will never come close to the horrors of Nazi Germany, but certainly seems well on the path to something like the Francoist regime in Spain (1939-75), I can see how hard it is to flee. You need lots of money and know how you are going to access it in the new country. You need to be able to speak a foreign language, very well, and to be able to handle all the bureaucracy of the destination country. You have to try to get some of your belongings out with you. You have to think about the welfare of your children and how they will be educated when you arrive. You have to think about what you will do for work. You have to learn a new set of not only laws, but also customs and expectations. If you think how challenging a lot of this is, even when you move from town to town in the UK (supplement accent for language in that case), think how many more times it is moving abroad. I wish I had the ability to go. Given the damage to UK education that is already beginning, I am glad the boy is getting out. His mother seems to have paid heed to the warnings I have given about going abroad, see: http://rooksmoor.blogspot.com/2008/09/british-people-dont-be-foolish-in.html and finding a school that was English-speaking, was her first task. Berlin is very different from the rest of Germany, more international and at the moment welcoming to immigrants from western Europe. The EU makes things a lot easier for moving around than was the case in the 1930s, but it is still a challenge.
A couple of years ago I wrote on this blog that life does not 'begin at 40' as many have claimed, instead it 'begins to end', see: http://rooksmoor.blogspot.com/2007/09/life-begins-to-end-at-40.html It is clear now that through bad luck, probably not being assertive enough, and living in particular times, my future is going to be a lot worse than the life I have lived so far. I have had a brief period owning a house and having a kind of family, the type of lifestyle that the Conservatives are supposed not only to support but to foster. That period of my life is over. My one shot at establishing myself in the middle class has gone and now I am an over-aged, over-educated something that will be pushed around by bullying landlords and officials simply because I failed to scrape together enough money to keep a house or said the wrong thing to a question at one of my interviews.
If you have the means to get out of the UK, I advise you to do it now.
For me, of course, the profitability of owning houses never really turned into a reality. I owned a flat in London for seven years. It rose from £80,000 to £130,000 in that time, so I did very well out of it. The only trouble was, with work taking me away from London on a series of short-term contracts in the Midlands and on the South coast, I was deemed to be running it as a business (I let it out so that I could cover the council tax charged on empty furnished properties) and so I ended up with a £16,000 capital gains tax bill and then, of course, Newham Council, which makes up charges for all kinds of things at a whim, charged me £16,000 as well for work done in the street and to the building which held my flat. I was compelled to sell the flat far cheaper than the going rate. It was a two-bedroomed flat but was sold at the price of a one-bedroomed flat, about £20,000 less, partly because the estate agents were in on some deal with buyers (often landlords in the area) and because I was being hassled by my own landlord to move very quickly. Always remember that however nice estate agents appear to be, they are always playing off the buyers against the sellers. As a seller, they will never even get you the price that they recommended, expect to lose many £10,000s on that price. Buyers are also getting very greedy. When I sold my flat, the buyer, who was being granted constant access to the flat by the estate agent, began demanding various £500 sums for things such as cleaning the flat, something I could get done for less than a tenth of that price. Clearly informed by the estate agent that I was desperate to move the buyer felt he could twist lots of little bonuses out of me. The estate agent actually broke the lock to the front door something I had to pay over the odds to have replaced hours before the contracts were exchanged. I was angered by the buyer's arrogant behaviour and in the end did not pay for the flat to be cleaned; I left the toilet unflushed and a range of food items for the buyer's delectation when he arrived. It was a small victory, but you can see I was desperate to get something back for all the hassle and lost money.
I suppose I should not complain that I came away with £20,000 profit from the flat. What was worse was that with the landlord compelling me to move so fast, I had to buy a house (the woman who shared the house with me was sick of renting, but maybe with hindsight we should have done that for a period more) when prices and interest rates were at their highest; more time could have made a huge difference, but I am never lucky that way. Consequently, of the £20,000 I made on my flat, I will take away about £12,500. I suppose I should not complain. I could be facing negative equity meaning that I would still be paying off a loan on a house that I no longer owned. At least with this deal, I do not get the black mark of repossession against me and all my debts will be cleared. A lot of people will be far worse off than me. Of course, I will never own property ever again. I am now 43 which means that even with the raised retirement age I could not pay off a 25-year mortgage before I retired.
So, after a decade of owning a flat/house, though only a total of four years of actually living in the property I owned, I am back into the rental sector. Of course, it has worsened since even the bad landlord I experienced back in 2007. Now you can pay £600 per month to rent a single room in a house. In addition, you have to go through the humiliation of an extensive selection process. I am not glamorous, I look peculiar and am told I taught too much. Like a lot of people looking for a room, I am going to find myself going through fruitless beauty contests. Landlords/ladies know that people are desperate for housing and so can use this against you. People renting out property generally think their tenants are slovenly and filthy, no matter how hard they work to keep the place clean. Rights to be informed of a landlord's inspection are often ignored and you get levied charges like £40 for dust in a drawer or £60 for soap residue in a sink or £400 for the lawn having grown. I should go into business as one of these cleaners/handypeople who charges such high prices for rectifying these things.
In addition to being once again a tenant, I have also dropped down the social scale even further. Now, I am a man who has been unemployed for 7 months and will be dependent on housing benefit. This rules me out from even applying for the bulk of rental property in my area and I am restricted to only those offering 'social housing'. Housing benefit is falling and will quickly be below the rate necessary for the region in which I live in. Consequently I will be compelled to move into one of the 'benefit ghettos' that are liable to harden once the new rules of housing benefits really begin to bite. It seems incredible that twelve months ago that my career seemed to be advancing and I had a house and a stable situation and now that has been stripped of me. At 43 I am cast on the scrap heap. My career has halted and I cannot even get manual work because there are too many younger people with the right NVQ to step into those roles. I suppose pride comes before a fall, but I do feel, that rather than much to do with my efforts, this has been inflicted on me by a government which loves pushing people down the social scale so as to enhance the standing of its people. I am harangued by the Job Centre to be positive and see some future, but, despite all my efforts, there is no work even in a 250 Km radius, that will take me, I am apparently too much of everything for these employers, too high, too low, too practical, too strategic, too involved, too detached and so on. Before Christmas I was interviewed for a job and came in as first reserve. Given unemployment levels it seems unlikely that the winning candidate will turn the post down. However, I then found out that the funding for the post has not even been approved yet, they were just building up a clutch of potential employees. I was not even applying for a real job, just simply the opportunity that if a job does appear then I will have a chance to get it. How much more like disposable batteries can workers become? 'Keep some in the drawer if we need them; chuck those ones out: they're past their use-by date.'
Anyway, I suppose returning to the rental sector will give me issues to post on here, assuming, that is, that I can get internet connection in whatever cramped flat I can get and hear myself think over the noise of screaming neighbours. What about the woman and nine-year-old boy who have shared my house through the past few years? Well, with the little money derived from the house sale, they are emigrating to Germany. With the EU and online sales, small business have a lot more ability to relocate. Apparently Berlin is desperate for people to rent there and is offering particular breaks. There are a string of bilingual English-speaking schools there too. Being an entrepreneur relocating is one thing; an unemployed office manager who does not speak German is something different.
I am glad that they are getting out of the UK because the future here is going to be incredibly nasty. As I have noted before people these days often ask: 'why did people not flee from Nazi Germany sooner?' and seem to think that they were naive or foolish. For my views on this see: http://rooksmoor.blogspot.com/2008/05/respect-difficulties-of-escaping.html Sitting here in the UK with a new regime, which I trust will never come close to the horrors of Nazi Germany, but certainly seems well on the path to something like the Francoist regime in Spain (1939-75), I can see how hard it is to flee. You need lots of money and know how you are going to access it in the new country. You need to be able to speak a foreign language, very well, and to be able to handle all the bureaucracy of the destination country. You have to try to get some of your belongings out with you. You have to think about the welfare of your children and how they will be educated when you arrive. You have to think about what you will do for work. You have to learn a new set of not only laws, but also customs and expectations. If you think how challenging a lot of this is, even when you move from town to town in the UK (supplement accent for language in that case), think how many more times it is moving abroad. I wish I had the ability to go. Given the damage to UK education that is already beginning, I am glad the boy is getting out. His mother seems to have paid heed to the warnings I have given about going abroad, see: http://rooksmoor.blogspot.com/2008/09/british-people-dont-be-foolish-in.html and finding a school that was English-speaking, was her first task. Berlin is very different from the rest of Germany, more international and at the moment welcoming to immigrants from western Europe. The EU makes things a lot easier for moving around than was the case in the 1930s, but it is still a challenge.
A couple of years ago I wrote on this blog that life does not 'begin at 40' as many have claimed, instead it 'begins to end', see: http://rooksmoor.blogspot.com/2007/09/life-begins-to-end-at-40.html It is clear now that through bad luck, probably not being assertive enough, and living in particular times, my future is going to be a lot worse than the life I have lived so far. I have had a brief period owning a house and having a kind of family, the type of lifestyle that the Conservatives are supposed not only to support but to foster. That period of my life is over. My one shot at establishing myself in the middle class has gone and now I am an over-aged, over-educated something that will be pushed around by bullying landlords and officials simply because I failed to scrape together enough money to keep a house or said the wrong thing to a question at one of my interviews.
If you have the means to get out of the UK, I advise you to do it now.
Tuesday, 1 July 2008
Property in the UK 10: Watch Out! Capital Gains Tax
As regular readers of this blog will know last year I had to move twice, had a £16,500 bill from Newham Council in London for owning a flat in their borough, got ripped off by my estate agent selling the flat and overcharged on the house I was trying to buy. After all that, I thought this year in terms of housing (despite the landlord from the last place still trying to get a further £1400 off me) things would settle down. Like the bulk of the population in the UK and across the world, I have been finding it hard to get by with rising food and fuel prices and have had to cut back severely right across everything I buy. I have now had no new items of clothing for 3 years. However, my problems are just beginning and that is because of capital gains tax.
Now, most people do not have to pay capital gains tax when they sell their house. However, I made a huge mistake when I left my flat in Newham and went to Milton Keynes for a far better job. Everyone told me that I would be foolish to sell the London flat as the value of property in London rises far faster than anywhere else in the UK and also I could get a good income from letting it out. That all turned out to be fantasy, I should have sold the flat as soon as I knew I would be working beyond commuting distance. The flat was worth more than when I bought it, but almost any property I bought in the UK would have been worth more after a few years and I lost out on at least £10-12,000 (€12,200; US$19,900 - €14,600; U$23,800) because of using such a bad estate agents. I was overcharged £5000 on the house I bought and in the recent slide in prices it has lost £20,000 on what I paid on it. Every choice I made basically cost me money. The £16,500 bill from Newham Council wiped out all the rent I had ever earnt on the property, so the only gain was in value and I had had a lot of hassle being a landlord at a distance too, costing me at least £2000 (€2,400; US$3,900) in upkeep of the property each year and some years as much as £4,600.
The reason why I should have sold my flat immediately when I left London is because I would have been free of yet another charge, capital gains tax. This is aimed at you when you sell up a business and really should cover things like factories and machinery. As such you cannot set any loss in income (I made a huge loss in the final year of renting out the property due to all the charges) against this tax. I am now liable for at least £6,600 (€8000; US$13,100) and possibly as much as £8,000. I cannot get the final figure as Her Majesty's Revenue and Customs (the name now for the tax office) sent me two sets of the wrong form and another partial form covering the tax year 2006/07 rather than the one we are dealing with at present 2007/08. I telephoned to ask them if I could pay instalments on the tax and was told that because it is over £2000 that is not possible. They offered to allow me to start paying it now rather than on the deadline of 31st January, but given that I have no money that is no benefit.
What made the whole experience of talking to the tax office was not the fact that again the advice I had received (that you could pay in instalments) was wrong, but their whole manner. The woman said I had been foolish to put all the money I had earnt from the flat sale into buying my new house and should have held back enough money to pay the tax. I am no tax expert and usually selling a property you only get stamp duty. How much should I have held back? If I had kept back £4000 then it would have seemed a lot but would have been insufficient. As it was I bought too expensive a house, I listened to those people who said it was a good investment, but now, just six months later it looks like it will have to be sold to cover my capital gains tax. I asked if I could go bankrupt and the woman said it was possible but sneered at me accusing me of trying to dodge my taxes by going bankrupt. I accept I have made mistakes, I accept that all the financial I have received for the past ten years has been utterly wrong and has cost me thousands of pounds, but I do not need some official rubbing it in, goading me and portraying me as if I am trying to defraud the country.
Like so many people I was pressurised to buy a house, by the fact that it is the only way to get any kind of investment growing in the UK, the fact that I was pushed around by landlords/ladies and that you have no standing in this country if you are not a property owner. Like so many people I am going to have to give up that house now, if I can sell it that is or face as the woman told me with glee (she seemed eager to get proceedings started immediately) I will face legal proceedings. I just dream of a day when I can just go to work, come home and go to sleep without people coming after me for money. I am happy to pay tax but cannot keep conjuring up thousands of pounds on demand. We are not all rational business thinkers, we are pushed by other pressures than pure economics. I keep wishing I had killed myself last August and got away from all these sleepless nights (exacerbated by the prospect of losing my job in August 2009). No wonder people are angry. I was once comfortably off and seemed to have a future, many people have had it far worse than me. If I am angry and disheartened no wonder the one-in-six British people who envisage losing their home to creditors in the next year are furious and suicidal. We played the Thatcherite game of becoming property owners not realising that we had lost even before we had started and only the super-rich can win in this system.
Now, most people do not have to pay capital gains tax when they sell their house. However, I made a huge mistake when I left my flat in Newham and went to Milton Keynes for a far better job. Everyone told me that I would be foolish to sell the London flat as the value of property in London rises far faster than anywhere else in the UK and also I could get a good income from letting it out. That all turned out to be fantasy, I should have sold the flat as soon as I knew I would be working beyond commuting distance. The flat was worth more than when I bought it, but almost any property I bought in the UK would have been worth more after a few years and I lost out on at least £10-12,000 (€12,200; US$19,900 - €14,600; U$23,800) because of using such a bad estate agents. I was overcharged £5000 on the house I bought and in the recent slide in prices it has lost £20,000 on what I paid on it. Every choice I made basically cost me money. The £16,500 bill from Newham Council wiped out all the rent I had ever earnt on the property, so the only gain was in value and I had had a lot of hassle being a landlord at a distance too, costing me at least £2000 (€2,400; US$3,900) in upkeep of the property each year and some years as much as £4,600.
The reason why I should have sold my flat immediately when I left London is because I would have been free of yet another charge, capital gains tax. This is aimed at you when you sell up a business and really should cover things like factories and machinery. As such you cannot set any loss in income (I made a huge loss in the final year of renting out the property due to all the charges) against this tax. I am now liable for at least £6,600 (€8000; US$13,100) and possibly as much as £8,000. I cannot get the final figure as Her Majesty's Revenue and Customs (the name now for the tax office) sent me two sets of the wrong form and another partial form covering the tax year 2006/07 rather than the one we are dealing with at present 2007/08. I telephoned to ask them if I could pay instalments on the tax and was told that because it is over £2000 that is not possible. They offered to allow me to start paying it now rather than on the deadline of 31st January, but given that I have no money that is no benefit.
What made the whole experience of talking to the tax office was not the fact that again the advice I had received (that you could pay in instalments) was wrong, but their whole manner. The woman said I had been foolish to put all the money I had earnt from the flat sale into buying my new house and should have held back enough money to pay the tax. I am no tax expert and usually selling a property you only get stamp duty. How much should I have held back? If I had kept back £4000 then it would have seemed a lot but would have been insufficient. As it was I bought too expensive a house, I listened to those people who said it was a good investment, but now, just six months later it looks like it will have to be sold to cover my capital gains tax. I asked if I could go bankrupt and the woman said it was possible but sneered at me accusing me of trying to dodge my taxes by going bankrupt. I accept I have made mistakes, I accept that all the financial I have received for the past ten years has been utterly wrong and has cost me thousands of pounds, but I do not need some official rubbing it in, goading me and portraying me as if I am trying to defraud the country.
Like so many people I was pressurised to buy a house, by the fact that it is the only way to get any kind of investment growing in the UK, the fact that I was pushed around by landlords/ladies and that you have no standing in this country if you are not a property owner. Like so many people I am going to have to give up that house now, if I can sell it that is or face as the woman told me with glee (she seemed eager to get proceedings started immediately) I will face legal proceedings. I just dream of a day when I can just go to work, come home and go to sleep without people coming after me for money. I am happy to pay tax but cannot keep conjuring up thousands of pounds on demand. We are not all rational business thinkers, we are pushed by other pressures than pure economics. I keep wishing I had killed myself last August and got away from all these sleepless nights (exacerbated by the prospect of losing my job in August 2009). No wonder people are angry. I was once comfortably off and seemed to have a future, many people have had it far worse than me. If I am angry and disheartened no wonder the one-in-six British people who envisage losing their home to creditors in the next year are furious and suicidal. We played the Thatcherite game of becoming property owners not realising that we had lost even before we had started and only the super-rich can win in this system.
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