Planning Article 1-the basics

Hello there

Our in-house planning team has a treat in store- a series of in-depth articles on the planning system and how to use it to generate profit.

The ultimate aim is to turn a single dwelling into as many smaller units as possible, whilst still making them attractive for potential occupiers. Conversion of a single dwelling into smaller units can require planning permission in some cases, and the situation has been made more complicated due to changes in legislation over the last couple of years that have created a new use class. Land is classified (for planning purposes) into different use classes, and in 2010 the Use Classes Order was amended (twice) to create 2 new land use classifications. The old C3 use class (dwellinghouses) was split into-

• C3(a): those living together as a single household as defined by the Housing Act

2004 (basically a ‘family’);

• C3(b): those living together as a single household and receiving care, and

• C3(c): those living together as a single household who do not fall within the C4

definition of a house in multiple occupation.

A new use class was created- C4. This is defined as Houses in multiple occupation- HMO’s- (3-6 occupants). In broad terms, the new C4 class covers small shared houses or flats occupied by between 3 and 6 unrelated individuals who share basic amenities. Large houses in multiple occupation (those with more than 6 people sharing) are unclassified by the Use Classes Order. In planning terms they are described as being sui generis (a class of their own).

As a result, a planning application will be required for a change of use from a dwelllinghouse (C3a, b and c) to a large house in multiple occupation or from a Class C4 house in multiple occupation to a large house in multiple occupation where a material change of use is considered to have taken place. Advice on the implications of the above changes was issued by the Department for Communities and Local Government in Circular 08/2010. Annex A of the Circular gives further guidance about the way the classifications are divided up, as there are potential areas of overlap. However, in simple terms, there is no limit on the number of members of a single household (C3a), provided that there is a familial connection, but this can include domestic employees (such as an au pair, nanny, chauffeur, gardener etc). Use class C3b requires an element of “professional” care provision. Class C3(c) allows up to 6 people to be living together as a single household, and the guidance refers to small religious communities and a homeowner living with lodgers as falling within this class.

Class C4 refers to small shared houses or flats occupied by between three and six unrelated individuals who share basic amenities. This includes small bed sits, although to classify as a house in multiple occupation, a property does not have to have been converted or adapted in any way. It is generally a matter of tenure rather than physical characteristics. More than six people sharing in a property falls outside the classes described above, and therefore that property would be in a class of its own (sui generis).

There are permitted changes that allow the change of use from C4 to C3 (small scale HMO’s to dwellinghouses) without needing planning permission. There are also permitted changes that allow the change from C3 (dwellinghouse) to C4 (small scale HMO’s). However, local planning authorities have the power (called an Article 4 Direction) to restrict these permitted changes. It is always best to contact the Council Planning Department to ask if any Article 4 Directions apply at the address being considered for development.

If planning permission is required (because an Article 4 Direction exists or because the change falls outside the permitted changes), different authorities have different policies, and some authorities have no policies at all. Some authorities positively encourage this type of low cost affordable accommodation as part of the housing supply, but generally in areas close to town and city centres and good public transport links. The main issues often relate to the increased intensity of the residential use resulting in the potential for increased noise and disturbance, and parking.

Increasing the intensity of the residential use can result in harm in some cases by way of increased noise and disturbance, but in town and city centres, where there is often more activity over a longer period of the day and night generally, this is not normally a reason for serious objection. In addition, if the property is close to public transport links, then there are strong arguments, on sustainability grounds, to limit car parking (or even have no car parking at all). Whilst the Government have recently allowed local authorities the choice to determine for themselves the levels of local parking provision, the political agenda continues to try to move away from the use of private car trips and to encourage the use of alternative modes of transport.

It is useful to see if more space can be achieved in the building being considered by using currently under utilised spaces within the building (i.e loft spaces and basements) or by extension, or both. There are some significant extensions and additions that can be made to a dwelling without needing planning permission particularly following the changes to legislation that occurred in 2008, which relaxed many of the rules relating to householder extensions and alterations. However, these categories of Permitted Development (PD) only apply to dwelling houses (use class C3)- not flats - and therefore the timing of when these extensions and alterations are made is critical. It can be beneficial to take advantage of these PD allowances as it means that the Council have no control over the development (as long as certain criteria are complied with) and this is important as it can speed up the process, and avoid protracted negotiations with the planning authority over small matters of detail.

In short, the main criteria are that it is possible to add a single storey extension to the original rear wall of a dwellinghouse with a depth of up to 4m (in the case of a detached house) or 3m (in other cases) as long as it is less than 4m in height. An extension of more than a single storey can be no more than 3m in depth, and must be more than 7m from the rear boundary of the property. Single storey side extensions can be added that are no more than 4m in height and no more than half the width of the original dwellinghouse.

Alterations to roofs are also allowed provided the works do not occur to a roof slope of a principal elevation that fronts a highway, and the cubic content of the addition is no more than 40 cubic metres (for a terraced house) and 50 cubic metres in other cases.

There are other criteria that apply, and it is important to check before doing any work. In particular, restrictions apply in Conservation Areas, Areas of Outstanding Natural Beauty, and for Listed Buildings.

At the start of the project it is essential to plan properly. In doing this it is prudent to seek professional planning and architectural advice in order to properly prepare a strategy for the implementation of the works and to identify the possible planning issues.

Doing this can save money in the long run by avoiding carrying out works which may be unlawful or unacceptable to the planning authority, and to present any planning application in a way that can deal with the main issues likely to arise.

Reform for speedier evictions on the agenda?

Could we finally have a Pro-Landlord Housing Minister?!!

It seems the rare quality of common sense in a government figure has reared its head with the increasingly impressive Grant Shapps talking about measures that could potentially speed the eviction process for Landlords with troublesome tenants.

http://www.telegraph.co.uk/news/politics/8250950/Evicting-anti-social-neighbours-from-council-homes-to-be-made-easier-Grant-Shapps-to-say.html

For those that read my earlier post about evictions- you would have noted that it takes a minimum of two months to evict a tenant if you serve an eviction notice.

However two months can be an eternity if you have a tenant-from-hell who has the intention to cause as many problems as possible. Indeed many Landlords find that such tenants can trash a property and cause £000's of damage during their notice period.

Lets see what these measures are and how effective that may be

Lies, Dammed Lies and Statistics, a property investors view

I had to chuckle when I read this article today about how house prices increased in the north (144%) more than the house prices in the south (107%) over the last decade.

http://www.guardian.co.uk/money/blog/2010/mar/19/north-leading-house-price-boom

While the figures may be true in percentage terms, I really don't believe they reveal the truth.

Ultimately the reason why people love their house price going up is because they feel wealthier and so can potentially remortgage part of this wealth to spend on consumer goods.

However house price values increase in percentage terms in these surveys while wealth is an absolute value.

let me explain

Average house prices in the north have a lower average base level e.g 100k while southern properties have a higher average base level e.g 200k.

If northern properties double they are now worth 200k - an increase of 100k of wealth.

If southern properties increase by only 75% they are worth 350k an increase of 150k.

Therefore those in the south have increased their absolute value of wealth by an extra 50k compared to those in the north, though their percentage increase in wealth is lower

Remember forget the headlines, look at the underlying story and the assumptions made.

Property Investment : The Has and Has Nots

Really interesting profile of a couple of successful investors in todays Guardian

http://www.guardian.co.uk/money/2011/jun/04/generation-rent-the-winners

I always enjoy reading the heated comments that the public write below the article.

The comments on this article are fairly civilized- if the article was published in The Times or the Daily Telegraph's then you might as well get ready for ww3!

The crux of these articles always come down to the same points with those that make these comments.

1) Do BTL investors distort the market by increasing the price of properties and therefore prevent 1st time buyers getting onto the ladder

2) Is that a bad thing.

I could write and essay on these and I'm sure I will at a later date, but for now I want to draw your attention to a couple of points

With reference to point one - It is assumed that because BTL investors buy more property than1st time buyers / single occupiers they drive up the price of property.

However that isn't really true given that owner occupiers make up a far greater proportion of the market than BTL investors

Secondly you will find that in the Boom times of the housing market- it is owner-occupiers who drive up the price of property as they are willing to pay a higher price than an investor for the same property (on the basis that its a home to live in etc). For an investor its always about the numbers, so if the price increases too much, the yield falls making the investment less attractive.

With reference to point 2) - the morality of BTL- Ultimately it comes to what your political beliefs are. If your a capitalist then ultimately your going to argue that the free market dictates what happens to an asset's price and that the profit motive benefits all of society.

If you don't have the capital to invest, then its highly likely that you won't approve of those who build BTL empires.

However I would also like to make one observation- its interesting that the government gives some of the biggest tax breaks to property investors compared to other asset classes.

Ultimately this is because they want to incentivise the property owner to provide the accomodation they can't provide.

Others may argue that the government has a number of vested to do otherwise......

Landlord Insurance Problems and Referencing

Why Landlord Insurance is not what you have been told

This is a real bugbear of mine. I talk to many landlords who feel they would be protected from a tenant failing to pay them, due to landlord insurance policies that they have been sold by their previous agent.

However they fail to read the short print (and their agents fails to tell them) which would show them that the in most cases, insurance companies will only start to pay out after a minimum of two months after the arrears have been reported. Given you would only know there is a problem after the 1^st month rent has not been paid, you would end up having to pay the mortgage yourself for three months. You will also pay an excess on the policy!!

Why Credit Checks and Reference Checks Don’t Provide as much protection as you think

A lot of landlords believe that passing a credit check means your tenant is of good financial standing. Unfortunately that is not the case.

It simply means that they are not in such a bad financial standing to have caused anyone to get a CCJ against them. We all know people that are struggling to pay bills but yet pass credit checks to get a credit card. It's the same situation potentially.

If a tenant fails to pay a prior landlord, it is unlikely that a claim would have been registered against them to have been highlighted on their record. This is because a tenant eviction under a S21 gives no right to missed rent compensation, only re-possession of the property.

Also , even though a prior landlords’s reference should be taken it quite easy to have a friend lie for them.

An Employer’s reference can provide better protection if it states the amount that an employee earns as it allows you to see the tenants disposable income and hence affordability for the rent.

However in this modern age where many organisations are seeking to reduce any exposure to potential litigation, most organisational references simply state that the employees works for the company.

Better Protection for a Landlord

The best protection that I find is checking the tenants bank statements for the last three months and asking them to prove they can afford the rent.

You’ll find that most tenants have no problem with this and those that do are inevitably the ones that cannot prove their incomes. Do you want these tenants?

Property Investment, data and predictions galore!!

Maybe June turns on the rent a property prediction/property data tap but the last few days have just been very very strange.

On one hand some very unnerving data came out from the US stating that prices in some areas such as Atlanta and Vegas are now down to their 2002 prices. Add in some consumer price inflation during that time then realistically you got some pretty serious property price issues.
http://www.guardian.co.uk/business/2011/may/31/us-economy-consumers-house-prices-fall

Not to be outdone- any press topic relating to the US economy but then get in a comparison with the great US deppression of the the 1920's
http://www.independent.co.uk/news/business/news/us-house-price-fall-beats-great-depression-slide-2291491.html

Then you have the front page of the express stating that house prices willl increase by "15-20% by 2015 - highly unlikely- but if it happens ill buy you all a glass of champers!

Then its back to the gloom with
http://ftalphaville.ft.com/blog/2011/06/01/581341/uk-house-price-gloom/

Then its back to how rich we property owners are if the properties are in the south!
http://www.guardian.co.uk/money/2011/may/31/home-ownership-expensive-london


The truth is that no one truly knows what is going to happen to the housing market. All we can do is look at the fundamentals and whenever you breaks that down, its really demand and supply.

If you look at the states, there is so much land available, that somebody has the alternative to go and build themselves a home ( as well as the financial products) if they dont like what they are being charged by the builder. The ease with which people can build out there is illustrated by greedy builders who kept on building in places like vegas and florida without asking themselves who was going to buy them.

That option isnt available in the uk to the same extent due to very old planning laws. Most of the time (and we'll discuss planning later) planning rules are a pain, but they serve home owners very well in times of distress as they prevent excess building to the same degree as we see in the states.

Secondly if people could get the finance, their are literally thousands of people that want to buy their own home but can't. Hence they have to rent which is increasing rental prices and hence yields. If prices fall which they have, buyer then move into the market (e.g BTL investors who can get finance) and prices rise reaching equilibrium.

I can assure everyone that although I'm very pro property- we always look at the downside for all our clients and investors before we make any comments or recommendations.

I always say the £million question you should ask any so called property seller is, would you buy it yourself.

And if I could afford to buy a million pound house in the south, particularly in Reigate, London or other parts of Surrey (safely without over-stretching myself) I would!

till the next time.

Tyler Ward Letting Agents View : What What Type of Property Is best for BTL and how to find out

Quite often clients in Reigate ask me as a letting agent, what type of property is best for letting and in particular, how many bedrooms should the property have.

In truth there isn't a single right answer for this, it all depends on demand and supply and every area is different.

For e.g some areas have such a shortage of 3-4 bed family homes that even though the cost of these are far greater than a 2 bed flat, they go immediately.

However it would be fair to say that family homes are in high demand in suburban areas that have good schools and good transport links to the main city centre's where the offices are situated.

As a generalisation, one and two bed flats are in most demand, particularly in high employment areas as many young people migrate to where the work is.

However some areas, particularly in the midlands and the north have suffered from an over saturation and over supply of new build one and two flats. This has had the effect of not only suppressing rents, but meant that in some cases rents have fallen.

Many BTL investors assume, as I did many years ago, that two bed properties are better to let than one beds, because intuitively, people prefer more space.

However in general, I have found the opposite to be the case because most tenants want the cheapest rental property available and are not willing to pay the extra premium for a two bedroom property.

This is, surprisingly the case in Reigate, which given the affluence of the local population, seems strange at first glance.

However when you realise that most people that rent one bed flats are young workers moving to the area or couples moving in together for the 1st time, then this fact is less surprising.

How To Test The Market

I would hope that before you purchase a property, you would take an in-depth look at the locality and do the usual review e.g amenities, transport, schools, large companies based in the area etc.

However I have found the best three ways to find the right type of property to buy is

a) talk to good local letting agents and ask them what will rent the quickest

b) Place test adverts in the local paper to see what the response rate is for different types of property assuming that the market price is being charged for each type of property.

c) old fashioned market research- stand near the station entrance and ask!

In reality a and b are normally sufficient!

Once you know this, you can follow on and stack the numbers. This is something that will be discussed in depth in a later post

The lesson to be learnt is to not rely on assumptions but test actual data

see you soon

Don't get caught out by cheap overseas property

Every few years there seems to be a new hot property international destination

In the late 90's - 2002 it was Florida, then from 2002-2005 it was Spain (and if you couldn't afford that then Bulgaria!) then 2005-2008 it was Dubai and then 2008-2010 it was Cape Verde.

Now it seems that its Brazil. All these trends were perpetuated by investors looking at glossy brochures and being shown graphs of 20% per yr price increases.

I have been asked by clients what I think of the latest property trend emerging over the last few months i.e heavily discounted overseas property.

Indeed the latest batch of emails that I receive on an almost daily basis from so called "property experts" aka salespeople (who I bet wouldn't invest their commissions on what they are selling) include 70% off market price valuations in Florida, Spain, Ireland, Cape Verde and properties for 15k in Detroit.

Now it would be wrong of me to state, without knowing all the facts for each development, that all of these properties are rip-offs. In fact I was following a round of auctions last month where you could pick up a genuine tenanted studio flat in the Temple Bar district of Dublin (equivalent to our Covent garden/Leicester sq) with a yield of 9.5%!,. The unit also wasn't a new build.

However I often wonder why they are at such high discounts. Quite often its in a development where nothing has been sold in the first place or whether most properties have been repossessed, so you might as well buy in a ghost town as the likelihood of getting tenants is very low.

A note of warning- quite often you'll see that the property has two year rental guarantee- these guarantees are paid from the commissions that the agent makes or from the income on the sale.

However thats not to say you can't get a bargain in that particular area, you just have to cover yourself. For example I'm potentially looking for a holiday home in Florida for an equi-distant meeting place to meet my brother and his family that live in Toronto.

So a property that used to be worth 90k but is doing going for 35k could be of interest. However instead of buying via the agent all I need to do is visit a local listings site e.g http://www.trulia.com/ and see what the real value of an equivalent property is ,with out the massive commission being paid to the selling agent.

Unlike the UK where finding a below market value is difficult, (hence finding an equivalent cheap property is difficult) these areas are flooded with them, so that the discounted price has in fact become the market price.

Then all you need to do is go out and visit these places for yourself!!

If you would like any further advice- please feel free to call in the office.

Life Changing Books - Rich Dad Poor Dad

Hi Readers- One thing you'll begin to see is how I love a good self improvement book!

At Tyler Ward Estate agents & Architecural and Building Services -one book stands head and shoulders above them all - the daddy of them all - and thats Rich Dad Poor Dad by Robert Kiyosaki- It simply is A MUST READ- not just to try and work out how to become financially free- but it really brings home how conditioned our minds become over time.

As somone who trained and qualified as a chartered accountant, its premise is quite basic i.e buy assets that produce income and that we are conditioned to go to school to get a job for life - however the style its written in really makes you realise how little we question the choices are parents conditioned us to make.

The title of the book loosely corresponds to a true story whereby the author has his own biological dad who believes in education and getting a professional job to do well in life, and his best friend's dad who is a entrepreneur and who believes in making money via businesses.

As someone who pursued the former and who how follows the latter path, the book has had a profound impact on my life and I know its had a smilar impact on my others I have met.

Howeve the book isn't just about getting rich, its about cash flow and lifestyle and that where its impact on property people is so important.

Most people chase equity growth i.e buy a property for 100k and hope it goes up and value.

What I focus is on cashflow. I.e buy a property thats worth 100k (hopefully buying it at discount for 75-85k - this will be discussed in a later blog ) and making sure that the rent i.e 650pm is greater than the mortgage i.e 400pm and buying multiple properties to produdce extra cash flow.

That way the extra cash flow pays for my expenses e.g running my car.

We all hope that the equity growth comes, but its dangerous to reply on it.

Quite simply - go and buy this book - I can't recommend it highly enough

Tyler Ward Property Services To Save The Masses at Retirement!!

Since the goverment outlined its initial intention a few years ago to increase the working age until retirement and having already implemented the first increase (of many no doubt) the need to plan for retirement is every more important.

And that's before we take into account the reduction in pension plan values due the stagnation of the stock market over the last decade in nominal value (and large reduction in value taking into account inflation) and the 15% reduction in average prices in the housing market over the last 3 years.

Nevertheless I wasn't surprised to read this article in the Telegraph, talking about the lack of real retirement planning, http://goo.gl/lFGlB , given I know many people in their late 40's that haven't planned for retirement, let alone those in their early 30's like myself. Inded when I used to teach property education, it always saddened me when i met those in the late 50's and early 60's with no pension pot at all.

At Tyler Ward Property Services, we've always believed that property should be part of a well thougt out retirement plan which is why everyone at the company owns property. Forgetting speculative property purchases for the moment and dreams of 200% growth in a decade like the 2000's, or clever strutured-finance property purchases of the last 5 years, lets just focus on basic fundamentals.

Even in a worst case scenario of property prices just matching the rate of inflation, we would expect prices to double in a 20 years, as would the rents.

Hence if a person working in their twenties could set aside enough deposit to buy two average houses on a capital repayment mortgage (assume 20% deposit buying 2 x 200k houses) by the time they were 40 yrs old i.e a total of 80k or 4k per year, then at the very least they would 2 houses worth 400k each with no mortgage by retirement, though one they would be living in.

Taking an average yield of 6% then the monthly income would be 2k a month on the investment property.

Given the vast reduction in final salary pension schemes (a topic to be discussed in a later blog) then at the very least someone would have a stable retirement pot to get by with. This is a far better position then many currently find themselves in.

Look out for future posts on how we can use clever strategies to make the above scenario seem incredibily dull!! Our minimum goal should be to get to 4 investment properties as this would provide a 8k a month retirement!

Listening to the Property Press - Is it a good thing

I've always been fascinated by the press and the power they have over the thoughts of other people.

No where is this more so than economics and property. If the press say that times are good then we think that they are good (even if there is evidence to the contrary) and vice versa. As a property services company covering multi-disciplines, Tyler Ward is in a unique position to look at how each one is performing e.g Sales, Lettings, Architectural services requested and Building jobs being worked on.

Taking this into account is there any merit in what they say. I was intrigued by this article in the mail which paints a familiar picture of doom and gloom http://goo.gl/wArHX. They suggest that property sales have fallen by 18% within one month. If that's the case then thats a staggering fall.

However unfortunately most people don't take the time to ask certain questions to validate the information they receive. In this example we would ask questions such as

a) Was the prior month exceptionally high (take a look at the same month's sales over the last few years

b) Was this months sales exceptionally low (take a look at the same month over the last few years

c) what were the regional variations

d) were there any variations in the types of property build and respective prices.

i.e 1 bed flat, 2 bed flat, 2 bed houses etc

It is the last question that intrigues me the most because thats the whole key to the market. Not only is there is a North South divide but there are massive differences in each area and for different types of property.

As Estate and Lettings with a branch in Reigate, we have 1st hand knowledge of the real shortage for family property and see for ourselves that homes in the £500k+ range go within weeks.

Likewise there has been no shortage of tenants enquiring about a luxury two bed flat we have on the market at £1200. Furthermore, any one bed flats priced realistically go within one week.

And if I told you about the number of large extensions being built, you really wouldn't believe me!!

However on the flip side, a one and two bed flat priced incorrectly for sale would happily sit on the market weeks and weeks on end.

I think the real lesson here is that you have to look beyond the headlines and look at the real variations in area and type of property. Only then can you really ascertain how good or bad the market really is for that specific locality.

Why We Are Different

Our Story

Tyler Ward is taking a fresh and innovative approach to the provision of property services. Overall the public perception of various elements of the property industry from estate agencies & investment property advisors through to building services is one of low regard - Tyler Ward's main focus is to bring trust, reliability & professionalism into the delivery of these services with customers needs as the key to what we do.

What we found from our own experience…

In general, we found that property knowledge on the high street was in all honesty poor (although the talk was good!). Also many people we met lacked a passion for property - it was just a job to them to earn commissions.

With some firms we have previously used over the years, we found there was a sales-like culture, often a frequent turnover of staff and people that didn't really care about our needs - whether that was for our own personal properties or in managing and growing our property investments. There was also a lack of joined-up property knowledge – some staff we met knew how to sell or rent a property, but would know nothing about how to renovate one or what would make a good investment.

What makes Tyler Ward really different…

TRUST OUR EXPERIENCE....THE PROPERTY EXPERTS

From our 30 years of personal property experience buying, renting, managing & developing our own properties, we have learnt many valuable lessons about what works well, what doesn't work and the risks & pitfalls to avoid. We want to share this experience with our customers.

SEEING THINGS FROM OUR CUSTOMERS' EYES....

Our own experience as a customer showed us that there was a clear need for a fresh approach to property services. We wanted to try and see things from our customers' eyes. From this we understand what matters to our customers – proactivity, reliability and experience all help to deliver what is important to them. Trust and integrity are at the heart of all we do. We are obsessed with giving our customers exceptional service focused on their needs - it is their genuine satisfaction that builds our reputation. Our team are our MOST important asset, they strongly believe in these values - we choose them carefully, they are the kind of people you would trust and would want working hard on your behalf.

OUR COMPLETE PROPERTY SERVICE....

We can offer you the complete solution for all your property needs using the same trusted, reliable and experienced team that we use ourselves for our own properties. Aside from our Estate Agency team, we also offer in-house services including Investment Properties and Architectural & Building Services. We do offer services across the M25 and the South East region, however we are a locally based, independent & ethical firm. We are not a large corporate name but a friendly and knowledgeable team. We believe in valuing and supporting our local community.

Jatinder Singh

Head of Tyler Ward Estate Agents & Investment Properties
• T: 01737 668669
• M: 07908 486991
• E: jatinder@tyler-ward.com