GOVERNMENT OPENS A NEW FRONT IN THE WAR ON LANDLORDS

“It has become axiomatic that all landlords are bastards – selfish, greedy bastards who should be content with owning one property but, determined to spite the sainted poor, gobble up loads of properties to make themselves even more money.”

So said the columnist Rod Liddle  the other week when considering the clobbering that landlords are facing from the UK Government.  Sadly, it seems that our own Government here in Jersey is intent on following Angela Rayner’s policies without proper consideration of the consequences, nor indeed the very different micro economic climate that Jersey represents.

In the last year or so, we have seen stamp duty rates for buy to let purchases sky rocket.  In addition, Landlords are now required to be bestowed a licence by Government to let their property out.  The justification for the licencing process was so that the Government could enforce standards in respect of rental properties, even though those standards have not yet been set or published.  

Yet more clobbering is coming.  Shortly, the requirement for energy performance certificates (EPCs) for rental properties will come into force.  From 1 January 2026 all properties sold or starting new lease agreements will require an EPC and from January 2028, minimum energy performance standards will be applied.  Many homes presently let and occupied by tenants who are entirely content with the present condition of their homes, will simply be unable to fulfil those requirements, particularly older properties which are subject to heritage planning restrictions.

Also coming down the line is the restriction on no fault evictions.  That will make it impossible for landlords to sling out a tenant who does not pay their rent on time, treats the property or their neighbours with contempt, or even runs a cannabis farm in the attic.  

As a consequence, new landlords have disappeared from the market in the last two years.  The eyewatering stamp duty on acquisition of a new rental unit means that the figures simply do not stack up.

Those landlords already in the market are now faced with a decision to run for the door or face the crippling cost of compliance with the regulations, the risk of rental gaps and non-payment of rental, or, in due course, the inability to get rid of dodgy tenants.

One would have thought then that our Government had deployed all of the weapons that it had in its war on landlords.  Not so.  Last week Deputy Andrews lodged a proposition proposing that from 1 January 2028, Capital Gains Tax of 20% should be applied on the sale of residential property purchased after that date where it was purchased as a buy to let property.

Deputy Andrews expressly says in his proposition that he intends to disincentivise rental investors from entering the housing market.  He thinks this will create ‘more opportunities for first time buyers to buy a home on the open market’.  He is right on the first point.  He is completely wrong on the second.

The increase in stamp duty has significantly reduced new investment in rental properties – there is no evidence whatsoever however to support a conclusion that this has benefited first time buyers.

Landlords have seen the direction of travel.  Increases in regulation started a flow of Landlords to the exit door.  The prospect of licencing requirements increased that flow and when the regulations are, finally, delivered and EPCs become a requirement that flow will only increase.  Add the prospect of the closure of the path to exit a property investment by way of punitive tax on sales or the requirement to retain a generally unacceptable tenant because of a ban on unforced evictions, then the problem for the rental market is at large.

As the supply of the private rented sector shrinks, then inevitably rents will rise.  Inevitably, that will hit the lowest earners in our community as well as contributing to inflation.  

Deputy Andrews’ proposition in the midst of this might politely be said to be unhelpful.  Those less polite than me might suggest that it is daft.  Jersey’s reputation as a stable low tax environment is important.  A challenge to the imposition of the buy to let stamp duty remains before the Courts because of the Government’s failure to implement that properly.  The proposed new tax will be fraught with all the usual difficulties that attach to calculation of a Capital Gains Levy.

The proposed tax is wholly inconsistent with Jersey’s longstanding tax regime which has always eschewed a tax on Capital Gains.  That approach has nurtured long term investments by local entrepreneurs and the arrival of wealthy individuals who rely on the consistent and stable approach to tax which Jersey has provided.  In addition, selecting one type of investment for a Capital Gains attack is grossly unfair.

Our housing crisis is one of affordability, not one of supply.  If our Ministers are intent on solving that, they should be nurturing private landlords not waging war on them.  A moderate programme of regulation of standards is acceptable but the repeated brick bats being thrown at landlords will mean a reduction in private rental supply, with the consequence of greater reliance on Government funded housing units and rental subsidy.  

Whilst bashing those who appear to be greedy capitalist bastards might seem like a good idea for the immediate popular vote, the current assaults on landlords need to be substantially rethought.  

Philip Syvret is a Solicitor at Benest & Syvret.  He heads up the property team and has advised in the acquisition, construction and disposal of some of the Island’s largest residential developments.  

Contact philip.syvret@benestsyvret.com or via 706670.

Eligibility

To be eligible, applicants must;

• be genuine first-time buyers
• provide a minimum of 5% deposit
• select properties that are on the open market
• not select new builds
• select properties that have been previously occupied
• do not exceed specific maximum purchase prices, which vary based on the property type

The program will roll out in three tranches in 2024, each offering around £3 million in loans, requiring applicants to reapply with up-to-date financial information for each tranche.

Supported by major Jersey mortgage lenders and brokers, the scheme requires applicants to submit various financial documents for application, with the process including a review against eligibility criteria and prioritization for loan awards.

As Jersey continues the clearing from all the damage that Storm Ciaran caused, Philip Syvret considers the impact of climate change for homebuyers, which may be more than just the risk of further storm damage.

I’ll wager that the effects of climate change are not at the top of the list of concerns for many looking to purchase a home in Jersey. Increasing intensity of climate events around the world are, however, a reminder of the potential difficulties to be faced in years to come.

What is presently a peripheral concern to homebuyers is, however, a matter on which our Government is heavily focussed. We are all now signed up to a carbon neutral strategy with a view to the whole Island being carbon neutral in a little over 25 years. 

To get to that position there will have to be some serious adjustments in all aspects of our lives. The way we own and occupy our homes will be part of that. Everyone involved in buying or selling property will have to adjust their viewpoints accordingly.

As a property lawyer, I need to advise my clients in all aspects of a commercial or residential purchase. I consider title deeds, regulations imposed by government and physical aspects of the property. Increasingly, alongside selling agents, surveyors and lending banks, I have to consider the wider impact of global change. 

It’s an area which all involved in real estate work are focused on. At the recent PWC Channel Islands Real Estate Conference nearly half of 150 industry professions indicated in their response to a survey that ESG (Environmental, Social and Governance) issues were the area that would have the biggest impact on the real estate industry in the medium (3 to 5 year) term.

An example of the carbon neutral strategy is the imposition of energy performance certificates (EPCs). That certificate tells you how energy efficient a building is. These certificates have been used in the UK for some years but will be new to Jersey. Legislation is awaited but it may well be that by 2025 you will not be able to sell a house unless you provide the buyer with an EPC. In the future it may not even be possible to sell or rent property at all unless the EPC shows that the Property is above a minimum standard.

It’s not just regulatory impact that we need to consider. Climate change brings a risk of weather extremes. In Jersey, that can mean violent storms, headland gorse fires or rising sea levels. We have seen in recent months the risk that storms can have for coastal properties. Flooding in Grands Vaux and other areas have hit the headlines in the last year. Sea wall enhancements at Beaumont and other areas have had to be implemented. Those physical risks need to be considered by any buyer.

An increased risk of physical damage leads to the secondary risk of an inability to insure. The wildfires in Australia seem a distant threat to these shores, but as a consequence of climate change, insurance costs in New South Wales have sky rocketed and some 11% of properties are uninsured because of those driven rates. 

If it becomes impossible or unaffordable to insure a property which lies on the coast next to a rising sea or in a valley at risk of flooding, the property will also become unmortgageable. 

The ability of a buyer to secure a mortgage on a property of course underwrites its value. High street lending institutions are looking very carefully at the impact of climate change on the real estate market. They are, after all, making loans on a daily basis which will last for 30 to 40 years, underwritten by expectations of the sustained value of the property that they are funding. 

In a lending market that is already constrained by strict financial stress testing, I have little doubt that increasingly we are going to see lenders taking a view on climate change impacts. The impacts that they will consider will be wide-ranging. Is the Property at risk of physical damage if storm, flood or fire risks increase in decades to come? Will the Property become uninsurable as a consequence? Will the owner be able to afford to insure? If EPCs or other directives are issued by government for energy efficiency, will the owner be able to afford to meet the costs of retro-fitting to meet requirements? 

If these are factors that the bank will consider and then they are factors which any buyer will necessarily need to consider also.

As I drive past the tree surgeons clearing the roads and the roofing contractors patching the tiles after Storm Ciaran, I am particularly conscious therefore that we are in a period of significant change. Whilst we must all do what we can to contribute to the carbon neutral policy, any property investment now will need to take a long term view as to how the climate and consequential regulatory framework might change over the years. 

Philip Syvret is one of the Island’s most experienced Property lawyers. He advises on all types of residential and commercial purchases, as well as private and commercial lenders.
He can be contacted via philip.syvret@benestsyvret.com or on 706670.

Almost certainly your mortgage will be the largest financial commitment you take on during your lifetime. It is a commitment that will last for many years. It will affect the home you can live in and the lifestyle you can lead. It is important to get the arrangements right.

Given that most people will only take one or two mortgages during their entire lifetime, here’s some of the questions you should ask your mortgage adviser when looking to take out a loan.

What is the maximum amount I can borrow?

The way in which the maximum amount of a loan is calculated varies between different banks and lenders. All lenders will however use a formula combining income multiples together with an assessment of your income and outgoings so as to determine your borrowing capacity.

In recent years, and in particular since the financial crisis in 2008, banks have applied a stress-testing process. They look not only the affordability of the mortgage for you in your present circumstances, but also if income was diminished in some way or the interest rate went up during the term of the loan. 

When asking how much you can borrow, you should also ask how that amount is calculated so you can ensure you maximise your borrowing capacity.

What different types of mortgages are available?

There are numerous different mortgage types, (sometimes called mortgage products), from which you can choose depending on your circumstances. The most common is a repayment mortgage whereby you make monthly payments, part of which discharges the interest on the mortgage and part of which repays the capital. At the end of the period of the mortgage, the whole capital amount would be repaid.

Some lenders offer interest-only mortgages. As the name suggests you only pay interest due on the capital amount each month, but no capital repayment is made. At the end of the mortgage term, the whole of the capital remains due. This kind of mortgage is really only suitable for short-term ownership, where for example, the property is to be renovated and sold on.

The manner in which interest is charged differs from product to product. A variable mortgage will have an interest rate which is fixed by the lending bank from time to time during the loan. The rate can charge upwards or downwards at any time of the bank’s choosing.

Alternatively, the interest rate can be fixed, usually for a period of two, five or even ten years. You will have certainty as to the rate that you will be paying, protected from any upward change, but you would not be able to take advantage of any downward change in market interest rates from time to time.

A Tracker Mortgage has an interest rate which is generally at a fixed percentage above the Bank of England base lending rate and will track that rate from time to time. The rate can therefore go up or down.

The quantum of the interest rate and the type of mortgage product available to you will vary depending on the amount of the deposit that you are putting down to purchase the property. In general terms, the bigger the deposit, the wider range of products available to you and the cheaper the interest rate.

A good mortgage adviser will ask detailed questions about your plans so that the product best suited to your needs can be chosen.

What are the penalties for paying off a loan early?

If you take out a mortgage with a fixed or tracker rate or a discounted interest rate, then you will undoubtedly be subject to an early repayment charge. Usually these charges are calculated by reference to a formula referring to a percentage of the capital amount to be repaid and the years left in the mortgage.

You should get a clear understanding of any early repayment charge or similar penalty as the amounts due can be very significant indeed. Whilst you may plan to live in the house for many years to come, life does not always run in a straight line. A forced sale of the house and repayment of the mortgage before the fixed term of the interest rate has expired could give rise to a hefty penalty.

As you discuss different types of mortgage products you should enquiry as to any penalties that apply.

Is it possible to over-pay the mortgage?

Over-paying a mortgage means paying an additional capital amount so as to reduce the time it takes to pay the mortgage off. While many mortgages include early repayment penalties, many will allow you to make a minor over-payment without paying any additional fee or penalty.

This could be important if, for example, your income is irregular or you have bonus payments which you would like to apply to the mortgage. A discussion in relation to that aspect will make sure that you have the right product available to you.

Do I need life insurance?

It might be appropriate to take life insurance in the amount of the mortgage. A straight life cover on the life of yourself and your partner will mean that you have a lump sum to pay the mortgage off if either of you passed away.

Again, there are different types of products which might be suitable. Decreasing term cover will reduce the amount of the lump sum you have on the death of either party to the mortgage in correlation with the reduction of the mortgage as you pay capital down over the years. 

Equally, you might combine life insurance with critical illness cover. If you or your partner suffer a critical illness as defined under the policy, the lump sum will be payable meaning the mortgage can be paid off. That would be important for example if one of the breadwinners in the family was unable to work and therefore the mortgage repayments could not otherwise be met. A mortgage adviser will usually be allied to an insurance broker who would be able to advise you what kind of insurance would be appropriate.

What documents are required?

The application for a mortgage is invariably a heavily documented process. All banks will require proof of your name and identity so as to comply with money laundering regulations.

You will also need to demonstrate your income. More than likely you will be asked to provide copies of your bank statements and credit card bills for at least the last three months, together with pay slips and income tax assessments.

Early enquiry of your mortgage adviser as to what will be required will allow you to get a head start on gathering the necessary information.

What are the costs of arranging the mortgage?

The mortgage will have some up-front costs which you will need to discharge. The costs will include:

• Arrangement fee covering the bank’s administration costs of arranging the mortgage
• A rate booking fee, if you are selecting a fixed interest rate or similar
• Valuation survey fee, repaying the bank for the cost of the surveyor to assess the value of the property
• Bank’s lawyers’ fees to reimburse the bank for the cost of engaging lawyers to draw up the documents to secure the mortgage against the property

You should ask the mortgage adviser for a clear statement of the costs relating to the particular product that you are choosing.

Remember also that on registration of the loan when you buy the house, stamp duty of ½% of the amount borrowed plus £90 registration fee will be deducted from the amount of the loan that is advanced to you.

Key takeaways

Take these lists of questions with you as you go to your first meeting with your mortgage adviser. These will help to make sure that the biggest financial commitment you will make is set up on the right terms for you and your family.

______________________________

Abigail Watkins is a solicitor in the property team at Benest & Syvret, one of the busiest conveyancing teams in the Island. She advises home-buyers and people taking a mortgage on a daily basis and has over 30 years’ experience in the legal world. If you wish to discuss any aspect of mortgage arrangements, contact Abigail on 875875.

As part of any mortgage approval for a property purchase, the bank will require the property to be valued. The purpose of this is to clarify the proportion that the bank is lending as against the open market value of the property. This is known as the loan to value ratio (LTV).

The LTV dictates rate of interest on which the bank will lend. If the amount of the loan is small as against the overall value of the property, the bank’s risk of loss if there is a failure to repay the loan is less. As a consequence, the lower the LTV, generally the lower the interest rate that will be charged on the loan.

How is a mortgage valuation survey undertaken?

In all cases a mortgage valuation will undertaken by a qualified surveyor, that is to say a member of the Royal Institute of Chartered Surveyors (RICS). The valuation of an estate agent is different and will not be relied upon by a bank. An estate agent’s valuation provides a guide at which the property might be sold and advice as to marketing. A mortgage valuation survey will inevitably be more cautious, in effect assessing a bottom line value at which the bank might be able to sell the property if it had to foreclose on the mortgage.

Each bank has a panel of surveyors that it uses for mortgage valuation reports. The bank will nominate a surveyor from that panel. If, however you are aware of another surveyor on the panel who already knows the property, it might be advantageous to recommend that the bank appoints that particular surveyor in the hope that a speedier valuation can be achieved.

The surveyor will inspect the property and then review the proposed sale price against values achieved for similar properties in recent months. Those other comparison properties will give a guide to the surveyor as to the market value. 

The surveyor will also identify whether the property is suitable as security for the loan that you have applied for. If there are significant defects, the surveyor will highlight those in his report and the bank may ask you to get quotations for repairs and give an undertaking that those repairs will be completed within a fixed time scale after purchase.

If you are taking a mortgage on a buy-to-let basis, the valuation survey will also include an estimated potential rental value.

It is only once a satisfactory mortgage valuation report has been provided to the bank, that they will formally issue to you the offer letter setting out the terms of the loan. It is important therefore that the valuation process is moved forward promptly.

You will be required to discharge the costs of the valuation report. Costs vary considerably depending on the nature and the value of the property. You should ask the bank to provide you with a fee quote.

What information beside a valuation could a mortgage lender ask from you?

If the property is a new-build then the mortgage lender might ask for copies of a structural defects warranty. These are warranties given by the builder backed by an insurance company to cover the cost of any defects that might arise over a ten-year period from completion. Because of the usual ten-year period, these are sometimes known as decennial insurance policies.

Cladding systems to blocks of flats have been much in the news in the U.K., but less so in Jersey. If, however there is a known potential defect or similar problem which needs to be addressed, then the lender may well ask for a detailed report from a structural engineer and quotes for repairs.

Jersey has a system requiring fire certificates to be issued for homes that are in multiple occupation and blocks of flats. All banks will require confirmation that a valid fire certificate is in place for any property where that applies.

What happens if the valuation is less than the agreed sale price?

The assessment of a property’s value by an estate agent, or you as buyer, may well be different from the value that a qualified survey or will ascribe to the property. In those situations, a reduced valuation will mean that you either cannot borrow the full amount originally requested, or the loan to value ratio will change, therefore impacting the interest rate at which you can borrow.

Alternatively, armed with the report of the reduced valuation, you can seek to renegotiate a lower sale price with the seller so that the loan to value ratio can be maintained.

What’s the difference between a mortgage valuation and a property survey?

The mortgage valuation has as its sole purposes, an assessment as to the market value, the suitability of the property for lending generally and an indication of any material defects that might affect saleability.

The valuation report is addressed solely to the bank and you as buyer cannot rely on its findings. Thus, when buying a home, it is always good to have your own property survey for your own purposes to identify any potential issues.

Depending on the age and condition of the property, there are different types of surveys that you can obtain. The most basic survey is a RICS condition report. Alternatively, a RICS home-buyer report provides a more thorough examination. Finally, the most comprehensive (but therefore the most expensive) report would be a full structural survey identifying all issues in all parts of the property.

It might also be appropriate to get reports on selected areas relating to the property where there are known issues, for example, drainage condition, electrical installations or wet or dry rot.

Key points to take away

The mortgage valuation report is critical to the purchase and borrowing process. Have in mind: -

• The purpose of the survey is principally to identify the value of the property and accordingly the appropriate LTV ratio.
• The report is addressed to the bank and not to you as buyer and you cannot rely on it.
• If the valuation is less than the price agreed, you may have to renegotiate the sale price or your mortgage arrangements.
• It is important therefore to move quickly on the valuation report so that delays do not arise.
• It is always important to get your own assessment of any property that is likely to need repair or upgrading.

Abigail Watkins is a Solicitor in the property team at Benest & Syvret, one of the busiest conveyancing law firms in Jersey. She has over 30 years of experience in the legal world and regularly advises clients securing residential mortgages, buy to let mortgages and equity release loans. If you are taking a mortgage for any purpose, contact Abigail on 875875 for in-depth advice.

There will be many reasons why a landlord will, from time to time, want to ask a tenant to leave a property.  If rent isn’t paid, damage is caused to the property, or if the landlord simply wants to recover the property for his own purposes, the process to evict a tenant if they refuse to go can seem daunting.

The process required under Jersey law is however relatively straightforward, providing a balance between landlord and tenants’ rights.  This short guide will help you understand the processes.

Giving Notice

An eviction order cannot be made by the Court unless the term of tenancy has been terminated.  There are two main ways of terminating the tenancy namely: -

• Giving three months’ written notice to the tenant, or
• An application to the court to cancel the tenancy on the basis that the tenants have seriously breached the terms of the agreement.

The first notice (a termination notice) is straightforward but it is important to ensure that three clear months’ notice is given and the writing is clear so the tenant has a clear understanding that notice has been given.

Of course, terminating in this way can only be done where there is no fixed term lease in place. If there is a lease, notice should be given at least three months before the end of the lease.

The second type of notice (a fault notice) must give the tenant an opportunity to remedy the defect, for example to bring rental payments up to date or repair damage to the property.  Sometimes this can be a source of frustration; if a tenant persistently pays rent late but remedies the default in payment at the last he can avoid an eviction order. The Court does have a discretion however where there are persistent repeated breaches of tenancy terms to grant an eviction. In those circumstances specific, legal advice would be necessary.

Serving a Summons

Once the notice period has expired or if the tenant has failed to remedy a default you are entitled to issue a summons seeking an order for eviction. Eviction orders are normally dealt with in the Petty Debts Court.

A summons should be drafted with care. If there are arrears of rental those should be claimed together with any interest which the tenant may be obliged to pay under the terms of the tenancy. If an unremedied breach of the tenancy agreement is alleged that should be set out in detail in the summons, although it is not necessary to set out the evidence of the breaches at this stage.

It is important to get the summons right. If it omits relevant information the landlord could find himself going back to square one having to give fresh notice to the tenant with all the delay that that causes. Specific legal advice is recommended.

Service of the Summons

The summons for an eviction order must be served personally on the tenant through the Viscount’s Department. Whilst a summons for a simple debt can be served in the post, a matter significant as a person being asked to leave their home requires the clarity and certainty of a service by the Viscount’s Department which is the executive department of the Jersey courts.

Once the summons has been served, the Viscount’s Department will provide a record of service. That record of service together with a summary of the claim must be be filed with the Petty Debts Court Greffier (that is to say the court clerk) so the proceedings can be listed for hearing.

Stamp duty will be payable to the Viscount for service of the proceedings and for the filing of the summons with the Petty Debts Court, presently measured in the sum of a few hundred pounds.

Getting a Court Order

On the return date, the landlord and tenant are required to appear before the Magistrate in the Petty Debts Court. The usual order the Court can make includes: -

• A judgment in respect of any arrears of rental.
• Authorisation to the Viscount to remove the tenant and their belongings from the property after a given date.
• Permission to the Viscount to use reasonable force, if necessary, to enter the premises and carry out removals.
• Provision for costs, including who will be liable for the Viscount’s expenses of eviction.
• An authority to the Viscount to seize assets to discharge costs and rental.

As a starting point the Magistrate may refer matters to a mediation to see if discussion could resolve the matter. Otherwise the Magistrate will hear submissions and evidence of both the landlord and tenant before making a decision. If the application is to terminate the tenancy because of a breach by the tenant, the Magistrate will need to consider that a suitable opportunity has been given to remedy default and that the default is sufficiently serious to justify termination.

Whether the tenancy has been terminated by notice or by the Magistrate’s decision because of a breach, the court then has a wide discretion to delay putting any eviction into force. In particular the Magistrate will look to balance relative hardship of putting the tenant out of the property immediately, as against the hardship the landlord will face not having immediate possession. 

Whilst the Petty Debts Court is very much a user-friendly court, facing up to and cross-examining a tenant can be challenging both technically and emotionally. If matters have got to this stage then the assistance of an experienced lawyer is undoubtedly needed.

Putting the Eviction Order into Effect

Once the court has determined the matter, an order will be issued giving a date by which the tenant must leave and remove all of his/her belongings.

More often than not with the potential of an enforced eviction on a fixed date in mind, the tenant makes arrangements to move on. If they don’t, the Viscount has the power to physically remove the tenant and his belongings.

Under the usual order the Viscount will also have the power to seize belongings to discharge rental arrears if that applies.

The enforcement of an order is invariably difficult. In practice it is better, via an agent or a lawyer to encourage the tenant to take all steps to move on without the anguish that the enforcement of an order will cause.

Costs

The Petty Debts Court has a regime of fixed costs. A fixed costs award against the tenant for the bringing of eviction proceedings is presently in the order of £330. In addition, the court can order the payment of the court stamps on the filing of the summons and the Viscount’s record of service. That will invariably leave a shortfall between the cost paid to a lawyer to advance proceedings and the amount that can be recovered.

There are however many pitfalls for the unwary or inexperienced in the eviction process. By recovering possession of the property swiftly a landlord can stop any further damage arising and re-let the property to a paying tenant. Often the cost of engaging an experienced lawyer to move matters on promptly brings an early benefit in avoiding repairs and getting a stream of rental flowing again.

How can we assist?

The property team at Benest & Syvret represent a significant number of residential landlords and have in-depth experience of a very wide range of circumstances that can give rise to eviction proceedings. Regular appearances before the Petty Debts Court in relation to eviction matters has brought an almost unrivalled strength in depth in this area.

If you need advice or assistance in any residential eviction process, please contact Philip Syvret on 706670 or Abigail Watkins on 706631.

This guide is intended for information purposes only and should not be relied upon as formal legal advice. Specific legal guidance should be sought in relation to any eviction or tenancy matter.

It’s that time of year when end of term reports are being prepared. As the year draws to a close, does the Government’s response to changes in the Jersey property market during 2023 warrant a gold star or remain in the “could do better” territory?

Back in September 2022 the turnover of residential properties in Jersey was spinning along with all the momentum that had gathered during lockdown. Then Liz Truss got her hands on the levers of power. Her ill-advised mini budget collapsed trust in the UK’s reputation for budgetary control. With inflationary pressures adding to the problem, the effect was repeated increases of base lending rate over the first three quarters of 2023.  

As a consequence mortgage products disappeared, with new products and rates significantly higher than we’ve seen over the last ten years coming in replacement.  

The UK however was not alone in making ill-advised political decisions.  At the beginning of the year, the Government imposed a 3% stamp duty uplift on landlords looking to buy. Landlord purchases disappeared and chains of transactions could not be completed.

The way in which that tax was implemented without proper consultation has been the subject of legal proceedings against the Government in recent weeks. The Royal Court agreed that the Government’s failure to properly consult meant that the tax can be challenged and recommended that the Treasury Minister give urgent consideration to possible changes.

Jersey’s politicians have continued to impose significant regulation on landlords, further reducing the appetite of buy to let purchasers. Only this week a licencing process for landlords has been adopted without any indication of the regulations the landlords will be required to follow. That has rightly been compared to a procedure for issuing driving licences, whilst not telling drivers what the speed limit is.

As a consequence of these combined factors and others, there has been a significant reduction in the number of houses being bought and sold. In the last quarter only 155 properties were bought or sold.

Despite a downturn in turnover however, the mixed adjusted price index shows only a marginal decrease in house prices of 2% over the last quarter. Prices are relatively resilient right now. It simply seems things have hit a hard pause. 

A significant pause, however, is not good. The ability to buy a home brings commitment by owners to the Island. House building, sales and refurbishment generate taxable economic activity. Property turnover produces large revenues in stamp duty. A buoyant and functioning property market brings wide ranging benefits to the community. If the Government is not oiling the wheels of the property market it is failing its electorate.

Given all of that, it seems that the “could do better” report is inevitable. How then might the Government have assisted in improving the situation? I suggested in a social media post earlier this year ten proposals on which Government could act. Time for a report on how they are doing on those ten proposals. The proposals were as follows: -

Implement assisted buyer schemes in the wider market place, with careful price monitoring so that it doesn’t simply cause more price inflation

We already had Help to Buy schemes for purchases from Andium and other publicly backed housing providers, but not for the properties being bought in the private sector. The Housing Minister has started to fix this by way of the First Steps Scheme with a fund of £10 million offering a deferred loan of up to 40% as a second charge on a property being bought by a first-time buyer. It is a small scheme starting in the new year, but is being viewed as a pilot. It’s a welcome addition to assist first-time buyers.  A good start.

Make a correction to first-time buyer stamp duty thresholds and a commitment to a yearly update

Again, the Government wants to deliver here. The Government Plan proposes an increase in the threshold for reduced stamp duty for first time buyers on homes valued up to £700,000. The tapering relief proposed, however, is not perfect with the benefit of the relief being quite small for buyers close to the £700,000 value. Announcing this stamp duty relief to be implemented sometime in the future might also have contributed to the pause in the market. 

Overall, however, a good start.

Fix delays encountered in Planning, not by recruiting Planners in large numbers, but by appointing key experienced additional officers

A tricky area. The planners work hard, but one has the sensation that they are totally under-resourced. I am acutely conscious of the already high headcount and cost of public sector employment, but this area needs fixing.  No improvement showing yet.

Make quick decisions about new sites and re-zoning, then tell the planners to get on and deliver without interference  

The planning application “Validation Checklist” issued by the Planning Authority this year runs to no less than 21 pages setting out which different drawings and reports are needed with any planning application. Quite simply the red tape has snarled up the delivery process in construction and needs significant improvement. 

The rejection earlier this year of a development in Broad Street, approved by an independent inspector and providing 23 homes, an apart hotel and £120 million inward investment left the property and construction industry speechless. A bizarre decision which needs to be corrected.  In summary, unnecessary complications which need to be reduced.

If you are going to put a levy on re-zoned sites, consult quickly on terms and get on with it or not at all

To add to the Planners’ difficulties, this year the Government has debated and recommended the adoption of a re-zoning levy. Any new sites will be subject to an as yet unquantifiable zoning fee. Developers and land owners cannot negotiate deals without knowing what the costs will be. Consultation and legislation drafting needs to be moved on to prevent delay in delivery of new housing. The consultation and drafting have yet to materialise.  More unnecessary delay.

Get to work on the sites you already own

St Saviour’s Hospital comes to mind, but so many others can be realised. The embarrassing delays in approving our new Hospital continue, whilst build costs escalate because of inflation and increasing professional cost. It does not inspire an electorate to believe that Government can manage its existing property resources.  A lack of application, needs improvement.

Ignore media hype about high net worth buyers impacting the market

Big houses are not the issue.  The lack of affordable units is.  A distracted approach in this area is regrettable.

Back off on the landlords or be ready to fund Andium and the Housing Trusts to build additional rental units for subsidised rents

I have seen landlords drift away from residential property investment over the last few years as regulations are imposed. It is not a question of bad landlords exiting the market in the face of rules which will catch them out. Instead its potentially good landlords being worried about cost and being caught out by a slip in the observance of so many regulations. 

Ironically therefore, the consequence of over regulation is a reduction in supply of rental units, with an inflationary effect on rentals. Despite that, the licencing of landlords was approved this week without any detailed assessment as to the economic consequences of that legislation. We will wait to see where rental rates have got to this time next year.

To cap it all, Reform has proposed this week an amendment to the Government Plan seeking the removal of mortgage interest relief for landlords. It is little wonder there is a queue for the exit door in the buy to let market.  A poor set of circumstances.

Play with a straight bat with your Islanders

The Royal Court’s decision in recent weeks, that the uplift on the buy-to-let stamp duty was implemented without proper consultation, did not get significant media coverage. It does however highlight a failure in basic communication that needs to be improved. 

In turn, if the Government is going to impose regulation on landlords then it has to both set out its regulations with clarity and have the mechanisms to enforce the new rules.  Otherwise those seeking to observe the rules will rightly complain that others are profiteering by avoiding the regulations without fear of sanction.  Needs improvement.

Work as a cohesive Government within agreed strategy

The irony of repeating this last item in a week when the squabbling between Ministers has become so public is not wasted on me. The housing crisis remains.  The demographic of our community is changing because of affordability of house prices and rental.  Squabbling across the ministerial table or political gesture resignations are not going to solve the problems our Island needs to address.  Needs much improvement.

Of course, an end of term report should always finish with a positive note so as to encourage improvement for the next year. As we survey the global news we can only remind ourselves that Jersey is essentially a peaceful and beautiful place to live. Adjustments in property prices are part of a global economic cycle over which we only have a modicum of control, but there is relative stability in property values and no significant falling in the desire to live and work in the Island. 

That relative house price stability, despite all of the changes in the last year, is a good thing. Government’s focus next year must be to ensure that there are enough houses for those who want to buy or rent, and commit to our Island community, and that those houses are, within reason, affordable to those wanting to make that commitment.

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Philip Syvret is a Partner at Benest & Syvret and one of the Island’s most experienced property lawyers.  He has advised on the acquisition, development and disposal of some of the Island’s largest first-time buyer developments and is a regular commentator on housing policy.

The phrase ‘let life surprise you’ might be valid from time to time, but it certainly does not apply when you are buying a property!

In acting for young clients recently in a purchase of a flat, I sent onto them, shortly after instructions, a copy of the Declaration of Co-Ownership which set out the rules relating to occupation of their flat, as well as a set of regulations which had been adopted by the co-owners association imposing restrictions on occupancy such as use for Airbnb and owning pets.

The clients were delighted to receive the information. They had asked the estate agent for details but the agent’s response was, “it is part of the conveyancing process and your solicitor will tell you the restrictions”. The agent could not be persuaded to obtain details. The problem is, of course, that by the time the information came through from the solicitor, my clients had already spent a considerable amount of money on a survey, legal fees and a booking fee for a mortgage rate.

I see this problem regularly. Often the buyer finds the property of their dreams and falls in love with it. All they really want to know is how quickly they can collect the keys and move in. 

On the other hand, the agent works for the seller and there is a disincentive to reveal information that might put a buyer off, leaving any bombshells to be revealed when the buyer is already heavily committed in terms of their passion for the property and costs incurred.

The potential bombshells are wide ranging: there may be restrictions on parking commercial vehicles or running a business from the premises. The long garden wall that is about to collapse may be a party wall to which the neighbour can force the buyer to complete expensive repairs. The service charges may be beyond the buyer’s budget.

Different things will be important to different people so determining the information that should be provided to a prospective buyer before or at the time of viewing the property is always going to be difficult. 

Those who have bought and sold recently will be familiar with the Law Society Standard Questionnaire (SSQ). That provides a limited set of warranties confirming the seller’s knowledge as to any known defects in, say, the electrical system, drainage system or items such as disputes with neighbours. It cannot possibly, however, cover all aspects of disclosure that would be of interest to a particular buyer. Equally, disclosure of the SSQ often comes at the end of the process given the need to circulate between seller, buyer and their respective solicitors. 

The consequence of a lack of early disclosure causes, at least, delay, or worst, the collapse of a transaction (and any related chains of transactions) causing costs and anguish to all involved. 

How then do we resolve the problem to ensure that a last-minute bombshell of disclosure does not arise? 

First, buyers need to get clued up. Questions asked of the agent or the sellers should be directed to the buyer’s particular needs. Ask about relations with the neighbours, restrictions on occupation, difficulties encountered with the property. If answers are not immediately available, indicate that you are prepared to make an offer but only when those questions are answered. In the present sluggish market, that will induce very quick answers indeed. 

Equally, the estate agents need to be on their game. They need to quiz the seller in advance on all aspects of the property so they can be ready with immediate and accurate answers to any questions that a buyer will put. 

Propertymark, the leading Estate Agents association in the UK, now produces a property information questionnaire known as a ‘PIQ’. This is completed by the seller to give to a potential buyer detailed information about the property being sold. This was brought in as part of the English Law Society Conveyancing Protocol with the intent of streamlining the procedures used in residential conveyancing. Its questions are more wide-ranging than the limited matters presently adopted in our SSQ.

I would suggest that the time has come for local estate agents to work hand in hand with Jersey property lawyers to produce a preliminary PIQ that could be handed to purchasers, answering a standard set of advance disclosure items. Those would include the Energy Performance Certificates which are to come in next year for residential properties. 

I would not suggest that a PIQ would constitute binding warranties, but instead a statement which the vendor declares to be fair and accurate for guidance purposes pre-completion. Whilst matters would remain for surveyors and solicitors to verify as part of the standard due diligence, the risk of a late disclosure bombshell arising would be considerably reduced.

Perhaps then, at least in terms of property purchases, we will be able to swap out the phrase ‘life is full of surprises’ to the more worldly-wise ‘nothing surprises me anymore’!

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Philip Syvret is a Jersey property lawyer with 30 years’ experience in dealing with residential and commercial property purchases. He sits as a Member of the Law Society Conveyancing Sub- Committee advising on improvement and amendments to the conveyancing process in Jersey and was instrumental in the introduction of the Law Society’s Standard Seller’s Questionnaire (SSQ).

To contact Philip, telephone Benest & Syvret on 875875 or email via philip.syvret@benestsyvret.com 

Another week, and yet another set of proposals impacting on rental property in Jersey.

In addition to proposals in recent weeks, the Minister for Environment has lodged draft legislation which will require any residential property that is to be let out in Jersey to be licenced.  The proposals, which come under the catchy title of “Public Health & Safety (Rented Dwellings) (Licensing) (Jersey) Regulations” are relatively simple in their terms.  From the 1st January 2024 when the regulations are intended to come in, a landlord will need to apply for a licence for each individual dwelling that he or she lets out.  The owner of a block of flats will need to apply for a licence for each individual flat.  The regulations will extend to all of the Social Housing Trusts and Andium.

Before issuing a licence, the Minister can decide whether the flat should be inspected.  He has a power to withhold or revoke a licence when the dwelling does not meet the minimum standards covering aspects such as health, fire, gas and electrical safety, which standards are already set out in existing legislation.

The rationale for licensing is straightforward – the Minister wants to avoid the cumbersome criminal process that is involved in prosecuting a landlord for failing to meet the minimum safety standards.  Criminal prosecution is an expensive and relatively clumsy way of dealing with non-compliance, in particular requiring tenants to come forward as witnesses to evidence the complaints in Court.

Instead, under the new licensing scheme, if a landlord fails to bring a property up to scratch within a fixed time period then the licence to let the property will be revoked meaning the landlord has to challenge that revocation in Court.

The Minister says that the licencing of a property could be compared to the requirement for car drivers to have a driving licence.  All drivers need a licence, including good and bad drivers.  The licensing process means it’s easy to find and punish the bad ones.

There is validity in that argument.  Equally, few could object to a simple mechanism for ensuring that the minimum standards as to condition and safety are readily and cost-effectively enforceable.

In turn however, there are downsides.  First there are some costs.  These are set in the proposition as £60 per dwelling.  It is said that that cost would fund the six full-time equivalent inspectors who would be required to administer the scheme.  With respect, that seems unrealistic.  I sense that the relatively low fee proposed is to minimise initial objection from landlords.  Instead the wider tax payers (including the vast majority who are not landlords) will be funding the scheme.  Alternatively, the costs of licensing will substantially increase in years to come.

As with so many of these things, the principle sounds simple but the operation will be laden with red tape.  Licences for each unit will need to be renewed every two years.  The licence registration will need to be adjusted on each transfer of a property or any significant alteration.  Administration will burgeon, more civil servants will be required.  Is this a proportionate approach to dealing with the bad landlords who are in a vanishingly small minority within the private sector?

Finally, but perhaps most importantly, this comes at a remarkably bad time.  The imposition of 3% uplift on purchase of buy-to-let properties has significantly dampened the enthusiasm of landlords buying new units.  Some in Government may say in a self-congratulatory way that that has resulted in a downturn in prices.  I rather think however that the new tax has just slowed the market and the downturn in prices is due to wider factors.  Either way, we are seeing less homes becoming available for rental.

In addition, the recent proposals (presently out to consultation) for restrictions on residential rent increases and prevention of no-fault evictions have so concerned many existing landlords that we are seeing them peel away from the landlord role and putting their properties up for sale.

Whilst these latest proposals may seem at first blush a sensible small step, when one steps back and surveys the whole raft of legislation and regulations imposed on landlords, this might be the final item that encourages many to sell up.

I shall therefore keep a close eye on statistics of private rental units available and any raise in rental rates in the short to medium term.  I would recommend that the Minister does the same.