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.
Showing posts with label Newham Council. Show all posts
Showing posts with label Newham Council. Show all posts
Tuesday, 1 March 2011
Wednesday, 5 November 2008
Property in the UK 12: Capital Gains Tax Shock
My ongoing saga that started in December 2006 with trying to find somewhere to live has filled many blog postings here. To recap, back at the end of 2006 I was forced to leave one house by my landlord wanting the house back. Then in May 2007 (though I did not leave until December) I was forced by the harrassment of the landlord and his defaulting on the mortgage to leave another house. Then there was the aspect of trying to sell my London flat, which I had left behind when I had found work in other areas and being charged £16,500 (€20460; US$26,070) by Newham Council for the privilege of owning a flat in their borough.
Back in June 2008 I embarked on what I hoped to be the final stage: finding out what the capital gains tax was on the sale of my flat. I had to pay capital gains tax as I had left the flat in 2001 to find work in Milton Keynes and so my flat stopped being a home and apparently became business premises. I was making good rent from it about £6-7000, before tax, per year (€7,440-8,680; US$9,840-11,060) though obviously the last couple of years' rent were entirely wiped out by paying off Newham Council's charges. The advice I had always received from bankers, estate agents, etc. was to keep hold of the property because it would rise in value and make me a good profit. No-one ever said to me that I would be hit by a huge capital gains tax bill when I sold it. As it was, I sold the flat at £131,000, probably £9,000 less than it was worth because I used David Daniels, the most conniving estate agents in East London. They tried to get me to sell it at £115,000 whereas similar flats were going for £155,000. I accepted a lower price, because, due to the pressure from the landlords mentioned above I needed to move fast and get out of the rental sector.
Anyway, when I became aware in June 2007, six months before I sold the flat, that I would be liable for capital gains tax (something I had never dealt with before), I contacted the Inland Revenue & Customs (as the tax office is now known in the UK) and they advised me that the charge would be around £6,600. I budgeted for that amount. I did, again encouraged by bankers, estate agents and family, buy into a house which was too expensive for me and had to borrow to the maximum. With hindsight that was a grave error. I should have abandoned the town I was living in as being too expensive and gone somewhere cheaper. However, staying in the area kept the 6-year old boy in the house at the school he had been at since starting aged 4, so there was a sentimental element there which mucked up the economic aspect. Yet, all along, the advice has been completely the opposite to what it should have been. I should have sold the flat back in 2001 and I should have budgeted for far higher capital gains tax.
After having been sent three incorrect forms I completed my capital gains tax form in July 2008 and sent it in. I telephoned every month to find out what the bill was. However, as I have noted before the Manchester office was backlogged because of the stupid policy of the tax office to cut the deadlines for self-assessed tax submissions from 31st January to 31st October leading to overload. This time I found out that all the phone conversations I had were wrong. The officials had assumed I was talking about the assessment of my income not of the capital gains and it was only this time that I finally got through to a specialist, more than three months since I started trying. I thought I had filled the form in correctly. I followed it very carefully, but apparently I had left some relevant boxes empty and so it had been put on one side and forgotten. This is my fault and is a warning to anyone who has not done a particular form before, do not rely on the guidance booklet, take it to the tax office and ask for step-by-step guidance, unless, unlike me, you can afford an accountant. Anyway today they filled in the bits which I had thought irrelevant and told me my bill which is £16,800, just less than double what my worst fears were. I have to pay this by 31st January 2009. I would put the house up for sale, but the market is always slow this time of year in the UK especially with the credit crunch so it is unlikely I can raise the money in time. The house has lost £25,000 anyway. I am going to have to beg around family and the banks otherwise I will be a tax defaulter and someone will end up with the house anyway.
The lessons I have learnt from this ongoing process is, ignore promises you receive about property, it is far less of a safe investment than people think, especially in some local authority areas which are poor where they will squeeze as much as they can from you. Do not rent out a property especially if you do not have another one to live in, sell it as quickly as you can. When you sell it, hold back about 15% of the sale price to pay off the taxes, do not put this into another property. Do not trust the tax office to give you the correct assessment of your tax until they send through the final bill. Do not bother talking to the tax office on the telephone, go into the physical office and ask to speak to specialists, not the frontline tax staff who know very little. I know that I hit all of this at the worst time, but I would have been in little better state three years ago. It seems apparent that from the moment I arrived in Milton Keynes in 2001 I was locked on a bad path towards losing lots of money and my house. No guidance I received through that time ever reduced the impact, in fact it made it far worse. Rental housing with its fixed-term contracts and minimal rights for tenants makes it very hard to control your life anyway, but it is depressing to think that for the past 7 years I have been on this path, seemingly unable to take a step off it. It is astounding how much little decisions impact on me. If I had been faster and got one or another flat in a different borough, if I had picked on a different house when I left Milton Keynes, then a lot of this could have been avoided. The woman in my house says I should not feel blighted or destined to fail, but with my inability to shake off demand after demand for money how can I feel any other way?
Back in June 2008 I embarked on what I hoped to be the final stage: finding out what the capital gains tax was on the sale of my flat. I had to pay capital gains tax as I had left the flat in 2001 to find work in Milton Keynes and so my flat stopped being a home and apparently became business premises. I was making good rent from it about £6-7000, before tax, per year (€7,440-8,680; US$9,840-11,060) though obviously the last couple of years' rent were entirely wiped out by paying off Newham Council's charges. The advice I had always received from bankers, estate agents, etc. was to keep hold of the property because it would rise in value and make me a good profit. No-one ever said to me that I would be hit by a huge capital gains tax bill when I sold it. As it was, I sold the flat at £131,000, probably £9,000 less than it was worth because I used David Daniels, the most conniving estate agents in East London. They tried to get me to sell it at £115,000 whereas similar flats were going for £155,000. I accepted a lower price, because, due to the pressure from the landlords mentioned above I needed to move fast and get out of the rental sector.
Anyway, when I became aware in June 2007, six months before I sold the flat, that I would be liable for capital gains tax (something I had never dealt with before), I contacted the Inland Revenue & Customs (as the tax office is now known in the UK) and they advised me that the charge would be around £6,600. I budgeted for that amount. I did, again encouraged by bankers, estate agents and family, buy into a house which was too expensive for me and had to borrow to the maximum. With hindsight that was a grave error. I should have abandoned the town I was living in as being too expensive and gone somewhere cheaper. However, staying in the area kept the 6-year old boy in the house at the school he had been at since starting aged 4, so there was a sentimental element there which mucked up the economic aspect. Yet, all along, the advice has been completely the opposite to what it should have been. I should have sold the flat back in 2001 and I should have budgeted for far higher capital gains tax.
After having been sent three incorrect forms I completed my capital gains tax form in July 2008 and sent it in. I telephoned every month to find out what the bill was. However, as I have noted before the Manchester office was backlogged because of the stupid policy of the tax office to cut the deadlines for self-assessed tax submissions from 31st January to 31st October leading to overload. This time I found out that all the phone conversations I had were wrong. The officials had assumed I was talking about the assessment of my income not of the capital gains and it was only this time that I finally got through to a specialist, more than three months since I started trying. I thought I had filled the form in correctly. I followed it very carefully, but apparently I had left some relevant boxes empty and so it had been put on one side and forgotten. This is my fault and is a warning to anyone who has not done a particular form before, do not rely on the guidance booklet, take it to the tax office and ask for step-by-step guidance, unless, unlike me, you can afford an accountant. Anyway today they filled in the bits which I had thought irrelevant and told me my bill which is £16,800, just less than double what my worst fears were. I have to pay this by 31st January 2009. I would put the house up for sale, but the market is always slow this time of year in the UK especially with the credit crunch so it is unlikely I can raise the money in time. The house has lost £25,000 anyway. I am going to have to beg around family and the banks otherwise I will be a tax defaulter and someone will end up with the house anyway.
The lessons I have learnt from this ongoing process is, ignore promises you receive about property, it is far less of a safe investment than people think, especially in some local authority areas which are poor where they will squeeze as much as they can from you. Do not rent out a property especially if you do not have another one to live in, sell it as quickly as you can. When you sell it, hold back about 15% of the sale price to pay off the taxes, do not put this into another property. Do not trust the tax office to give you the correct assessment of your tax until they send through the final bill. Do not bother talking to the tax office on the telephone, go into the physical office and ask to speak to specialists, not the frontline tax staff who know very little. I know that I hit all of this at the worst time, but I would have been in little better state three years ago. It seems apparent that from the moment I arrived in Milton Keynes in 2001 I was locked on a bad path towards losing lots of money and my house. No guidance I received through that time ever reduced the impact, in fact it made it far worse. Rental housing with its fixed-term contracts and minimal rights for tenants makes it very hard to control your life anyway, but it is depressing to think that for the past 7 years I have been on this path, seemingly unable to take a step off it. It is astounding how much little decisions impact on me. If I had been faster and got one or another flat in a different borough, if I had picked on a different house when I left Milton Keynes, then a lot of this could have been avoided. The woman in my house says I should not feel blighted or destined to fail, but with my inability to shake off demand after demand for money how can I feel any other way?
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.
Thursday, 8 November 2007
Property in the UK 6: My Personal Housing Saga Drags On
I started making postings about housing and all the difficulties I have got into with being charged heavy charges by Newham Council for the flat I own in London and how the house I am currently renting is in line to be repossessed. Since the start of July I have been trying to sell the flat and buy a house close to where I now live. Four months have passed and still no progress. Newham Council took over a month to respond to a request from the potential buyer of my flat and the buyer (I am now on to my second as the first one's mortgage lender changed its mind about lending him money) is now trying to squeeze more money out of me, the seller. The first buyer tried this too. I will call this one Mr. A to avoid confusion. Well, after making an offer which was £5000 (€7150; US$10,500) less than the asking price but which I accepted as I was keen to be rid of the flat, Mr. A then started demanding that I totally refitted the bathroom, even though that had only been done two years before. Mr. B, the current buyer knew that the flat came with furniture and in the 3 months since he put in his offer, has not said anything about it, then suddenly this week just as the exchange of contracts seemed ready to happen, he demanded it was all removed and that I pay him £545 (€779; US$1145) to him so that he could do this. What has become apparent is that in East London (where Newham is located) not only do the council try to squeeze as much money out of home owners as they can, but anyone buying your property is going to prevaricate and demand extra bonuses as if you were trading in some Third World market.
Taking four months to sell a house makes it almost impossible to move for work. The only people who benefit are the lawyers who pick up fees on everything. Local authorities also seem eager to tap into the money swilling around in Britain's overheated property market (though for the past two months it has begum to cool, though not as much as the 40% that the International Monetary Fund claims British houses are over-priced by; the average house now costs 9 times the average salary in the UK, meaning most average people cannot afford anywhere big enough for them), that new charges are appearing. Many people in older towns are now being charged for the upkeep of medieval churches in their town no matter whether they are Christian or not. The government finally introduced the HIP (Home Information Pack) after one failed attempt because they had failed to train sufficient people to produce them. You have to buy one of these in order to sell any property with 3 or more bedrooms. They take a month to produce and cost another £3-400. However, many local authorities, are insisting that buyers (in some places sellers) also have to pay for a locally created pack on all properties (my buyer had to get one for my two-bedroomed flat) which again costs hundreds of pounds, the exact charge depending on where the property is. All of these things slow up the UK housing market even more and in fact bump up prices further to cover these costs.
You may say the UK housing market needs to slow down a bit. However, that hampers people trying to move to where work is (something the government usually encourages) and trying to get their children set up well in school (some schools now refuse to take pupils who arrive mid-year and they have to commute back to their old school, hardly beneficial for their education). Thus, soon it will be incredibly difficult to move house in less than half-a-year, something that is reinforced by the fixed 6- and 12-month contracts so many landlords/ladies are insisting on which make the rented sector as inflexible as the purchase one. The lawyers, the landlords and the local authorities all simply gain more money and the average person has to put their life on hold for months. The UK housing market needs adjustment and not simply in terms of prices. I curse the day I ever thought it was a good idea to buy a flat, I should have purchased a caravan instead.
Taking four months to sell a house makes it almost impossible to move for work. The only people who benefit are the lawyers who pick up fees on everything. Local authorities also seem eager to tap into the money swilling around in Britain's overheated property market (though for the past two months it has begum to cool, though not as much as the 40% that the International Monetary Fund claims British houses are over-priced by; the average house now costs 9 times the average salary in the UK, meaning most average people cannot afford anywhere big enough for them), that new charges are appearing. Many people in older towns are now being charged for the upkeep of medieval churches in their town no matter whether they are Christian or not. The government finally introduced the HIP (Home Information Pack) after one failed attempt because they had failed to train sufficient people to produce them. You have to buy one of these in order to sell any property with 3 or more bedrooms. They take a month to produce and cost another £3-400. However, many local authorities, are insisting that buyers (in some places sellers) also have to pay for a locally created pack on all properties (my buyer had to get one for my two-bedroomed flat) which again costs hundreds of pounds, the exact charge depending on where the property is. All of these things slow up the UK housing market even more and in fact bump up prices further to cover these costs.
You may say the UK housing market needs to slow down a bit. However, that hampers people trying to move to where work is (something the government usually encourages) and trying to get their children set up well in school (some schools now refuse to take pupils who arrive mid-year and they have to commute back to their old school, hardly beneficial for their education). Thus, soon it will be incredibly difficult to move house in less than half-a-year, something that is reinforced by the fixed 6- and 12-month contracts so many landlords/ladies are insisting on which make the rented sector as inflexible as the purchase one. The lawyers, the landlords and the local authorities all simply gain more money and the average person has to put their life on hold for months. The UK housing market needs adjustment and not simply in terms of prices. I curse the day I ever thought it was a good idea to buy a flat, I should have purchased a caravan instead.
Thursday, 3 May 2007
Property in the UK 3: A Landlord's Tale
I am in the peculiar position of being a landlord and a tenant at the same time. This partly reflects what I have been going on about property in the UK. In 2001 I was fortunate to get help from my family to buy a flat in East London. I was working in London at the time and with all that I have said about property prices rising, it seemed a sensible investment. The flat is close to the West Ham football ground, in the London borough of Newham. For a long time Newham council has been a one-party council, run by the Labour Party, and they had to have an ombudsman to represent the 'opposition' on decisions.
Anyway, months after moving into the flat a job came up outside London at 50% above what I was earning in London. So I left for the work. Everyone said, 'do not sell your flat, it's an investment; rent it out'. This is very common practice in the UK and that is what I did. I charged £100 per month less than the average rent for the area as I was not aiming to make a profit, just to keep it ticking over until I got work back in London. All well and good. I could pay my mortgage, the tenants, as I expected they would be, were neat and tidy and did not damage the flat. Sounds like a happy story.
Now, one thing I neglected to mention, was that the block in which the flat sits is owned by Newham Council itself. The flat was sold off to the tenant in 1990, an old woman who died in 2000. Now, I had qualms about buying property that should belong to the council, but given with the amount of money I could get and prices rising quickly, I had few options, I snapped it up. The borough of Newham is a poor area of London and many people are on benefits so its council tax revenue is low so they have to seek other means of raising money; this is something I should have been aware of. Neighbouring boroughs such as Tower Hamlets have done things like introduce parking licences. Anyway as with all blocks of flats you have to pay fees to the building owner, but they were fine, and tax deductible. I was in regular contact with four different parts of the council covering things like council tax, estates, keys, etc. and visited the flat with the letting agents every once in a while.
Four years pass and a debt collector arrives at where I am now living saying I owe £2500 (€3650; US$5000) for unpaid fees. Apparently despite 4 parts of the council having my details a fifth section which raised these charges did not and because of the Data Protection Act they were not allowed to share my details even between offices in the same corridor (most people in authority do not understand the terms of the Data Protection Act and just use it as a handy phrase to hide behind). Whilst the debt collectors found me in a few days that particular section of the council had been unable to do it in five years, despite their colleagues knowing where I lived and meeting with me every few months or so.
Anyway, that was resolved, I cancelled my holiday plans and used it to pay off the council. Then a sixth section of the council said I had not paid a registration fee for being a landlord, another £100 that no-one had told me about (if you ever think of becoming a landlord do not believe any of the television programmes, it is much harder than it appears, there are so many things no-one will tell you) not the agency, not my solicitor, not the council. This demand comes in a poorly worded email lacking grammar, looking like a poor example of a 'phishing' email. I finally determine it is genuine and pay up but they refuse to issue a receipt, so I cannot claim it back on tax or even prove to them in the future that I have paid the sum.
Now I am having doubts about whether it was the right idea to have bought the flat in the first place and certainly not one on council land. This March a bill arrives for £14,000 (€22,400; US$28,000). At first I think it must be a misprint, and that it is £1,400, no, it is the fourteen thousand pounds. Now, I find a seventh part of the council, well in fact now an 'arms length agency', Newham Homes is charging me for work done to the whole estate. I get legal advice immediately and unfortunately they have done it by the book. The work improving the area: anti-pigeon provisions, new doors, CCTV, was done in 2004, but because of the lack of communication between the multiple sections of the council the bill did not reach me until 3 years later and 14 months after I thought I had already resolved the address issue. So where do you get £14,000 from? Initially they gave me to the end of May, but they then cut that to end of April. Fortunately I was able to break it into 24 month payments, but then they added £300 to the first payment and brought it forward a month. I have extended my mortgage to raise the money but that is delayed because my local doctor is so inefficient that she cannot be bothered to complete the medical form for the lenders.
Now, I accept my problems are not major. I am better off than the bulk of people who still live in Newham and I still have a flat, which of course I am now going to sell as fast as I can. However, despite playing fair I have been treated like scum once again, someone who can be tapped for money whenever the council needs it. I accept that the estate needed work, but how rich do they think I am to be able to afford half my annual salary in payments? Anyone thinking of buying a flat or house that you may rent out immediately or sometime in the future, beware. I had additional charges because it was on council land, but they still sting you for a whole slew of fees, they set the rules and expect to be free of being brought to book themselves. All the rent I have received since 2004 has now gone and I am pushed into further debt. I have to sell the flat and I imagine my successor will charge higher rent than I ever did. I suppose this is the price you pay for being naive in the property jungle of the UK.
Anyway, months after moving into the flat a job came up outside London at 50% above what I was earning in London. So I left for the work. Everyone said, 'do not sell your flat, it's an investment; rent it out'. This is very common practice in the UK and that is what I did. I charged £100 per month less than the average rent for the area as I was not aiming to make a profit, just to keep it ticking over until I got work back in London. All well and good. I could pay my mortgage, the tenants, as I expected they would be, were neat and tidy and did not damage the flat. Sounds like a happy story.
Now, one thing I neglected to mention, was that the block in which the flat sits is owned by Newham Council itself. The flat was sold off to the tenant in 1990, an old woman who died in 2000. Now, I had qualms about buying property that should belong to the council, but given with the amount of money I could get and prices rising quickly, I had few options, I snapped it up. The borough of Newham is a poor area of London and many people are on benefits so its council tax revenue is low so they have to seek other means of raising money; this is something I should have been aware of. Neighbouring boroughs such as Tower Hamlets have done things like introduce parking licences. Anyway as with all blocks of flats you have to pay fees to the building owner, but they were fine, and tax deductible. I was in regular contact with four different parts of the council covering things like council tax, estates, keys, etc. and visited the flat with the letting agents every once in a while.
Four years pass and a debt collector arrives at where I am now living saying I owe £2500 (€3650; US$5000) for unpaid fees. Apparently despite 4 parts of the council having my details a fifth section which raised these charges did not and because of the Data Protection Act they were not allowed to share my details even between offices in the same corridor (most people in authority do not understand the terms of the Data Protection Act and just use it as a handy phrase to hide behind). Whilst the debt collectors found me in a few days that particular section of the council had been unable to do it in five years, despite their colleagues knowing where I lived and meeting with me every few months or so.
Anyway, that was resolved, I cancelled my holiday plans and used it to pay off the council. Then a sixth section of the council said I had not paid a registration fee for being a landlord, another £100 that no-one had told me about (if you ever think of becoming a landlord do not believe any of the television programmes, it is much harder than it appears, there are so many things no-one will tell you) not the agency, not my solicitor, not the council. This demand comes in a poorly worded email lacking grammar, looking like a poor example of a 'phishing' email. I finally determine it is genuine and pay up but they refuse to issue a receipt, so I cannot claim it back on tax or even prove to them in the future that I have paid the sum.
Now I am having doubts about whether it was the right idea to have bought the flat in the first place and certainly not one on council land. This March a bill arrives for £14,000 (€22,400; US$28,000). At first I think it must be a misprint, and that it is £1,400, no, it is the fourteen thousand pounds. Now, I find a seventh part of the council, well in fact now an 'arms length agency', Newham Homes is charging me for work done to the whole estate. I get legal advice immediately and unfortunately they have done it by the book. The work improving the area: anti-pigeon provisions, new doors, CCTV, was done in 2004, but because of the lack of communication between the multiple sections of the council the bill did not reach me until 3 years later and 14 months after I thought I had already resolved the address issue. So where do you get £14,000 from? Initially they gave me to the end of May, but they then cut that to end of April. Fortunately I was able to break it into 24 month payments, but then they added £300 to the first payment and brought it forward a month. I have extended my mortgage to raise the money but that is delayed because my local doctor is so inefficient that she cannot be bothered to complete the medical form for the lenders.
Now, I accept my problems are not major. I am better off than the bulk of people who still live in Newham and I still have a flat, which of course I am now going to sell as fast as I can. However, despite playing fair I have been treated like scum once again, someone who can be tapped for money whenever the council needs it. I accept that the estate needed work, but how rich do they think I am to be able to afford half my annual salary in payments? Anyone thinking of buying a flat or house that you may rent out immediately or sometime in the future, beware. I had additional charges because it was on council land, but they still sting you for a whole slew of fees, they set the rules and expect to be free of being brought to book themselves. All the rent I have received since 2004 has now gone and I am pushed into further debt. I have to sell the flat and I imagine my successor will charge higher rent than I ever did. I suppose this is the price you pay for being naive in the property jungle of the UK.
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