Some of you may be wondering what an HMO is? Put simply, your home is a standard HMO if both of the following points apply:
Furthermore, your home will be classed as a large HMO if all of the following elements apply:
For clarity, a household is either a single person or members of the same family who live together. A family includes people who are:
HMOs are an attractive proposition for residential landlords as the yield is generally higher than that which can be realised on properties in single occupation. However, there is additional administration which must be adhered to fully.
If you do let an HMO, under current rules and regulations there is a mandatory need for a licence for large HMOs. As of 1 March 2018, there will also be an additional licensing requirement for standard HMOs. This additional licence will only apply in the following Havering wards: Brooklands, Elm Park, Gooshays, Harold Wood, Havering Park, Heaton, Mawneys, Pettits, Rainham and Wennington, Romford Town, South Hornchurch and Squirrels Heath.
The Standard Commercial Property Conditions (SCPC) are incorporated into the majority of commercial property contracts for sale. Historically, the SCPC required parties to opt to apply Part 2 of the conditions if the seller had exercised the option to tax the property. This was reflective of the VAT treatment of most commercial property transactions at the time the second edition of the SCPC were published.
The Law Society has now reversed this default position. In the new third edition of the SCPC, the sale of commercial property will be a standard rated taxable supply and the sale not being a standard rated supply is now the optional part of the conditions.
Sellers who opt into the VAT system generally do so in order to recover any VAT associated with maintaining and developing their commercial property during their ownership. Not all commercial property owners will opt into the VAT system if they are looking to attract SME tenants who may not be registered for VAT themselves and would find the additional charge for VAT in addition to their rent prohibitive.
When purchasing a commercial property over which a seller has exercised their option to tax, the buyer must fund the 20% charge for VAT in addition to the purchase price. After completion of the sale, the buyer will include the input tax on their next VAT return, giving rise to a VAT recovery. However, they could wait anywhere between 28 and 150 days for that rebate.
Buyers of property elected for VAT have to pay stamp duty calculated on the total consideration paid for the property – the VAT element on a commercial property can sometimes push the price over £150,000. Buyers are not able to recover Stamp Duty Land Tax attributable to the part paid due to VAT being charged on the purchase price.
Ever since the UK voted to leave Europe, the majority of commercial property professionals have been bracing themselves for a substantial slump in the commercial property sector; it was certainly noted that immediately after the vote the London market came to a standstill overnight. However, the month after the Brexit vote over a million square feet of commercial property was let in the city – confidence was truly restored.
This nod of assurance appears to have continued into 2017 as purchases by investors hit a nine-year high of 127,280 in 2016/17, up six percent from 119,920 in 2015/16 according to Lendy, Europe’s leading peer-to-peer secured lending platform.
The significant rise in commercial property transactions demonstrates the continuing attractiveness of UK commercial property to both domestic and overseas investors.
Lendy explains that the UK property market is the most fluid in Europe and has a number of features - such as upward-only rent reviews and long leases - that are absent in other overseas commercial property markets.
The fall in the value of sterling since the Brexit vote in June 2016 has made the UK property market more attractive to foreign property buyers who are hungry for yield in a low-interest-rate environment.