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A commercial radio advert which suggested that people would be better off putting their money into property rather than keeping it in the bank has sparked a furore and landed an estate agent in trouble with the authorities.

The radio advert, approved by the Commercial Radio Companies Association prior to broadcast, was pulled following complaints.

Three complaints to the Advertising Standards Authority, (ASA), claimed that the advert was misleading because it did not make it clear that there were risks associated with investments. Two of the complainants believed the advert misleadingly presented buy-to-let as a low-risk investment.

Two of the complainants also challenged whether the advertiser was regulated by the Financial Services Authority (FSA) and, if not, whether the ad was suitable to be broadcast on radio.

The company responsible for the advert, Aldermartin Baines & Cuthbert (ABC), told the ASA that they offered many properties that reflected yields of between 7% and 12% but had been guided to suggest a 5% yield, which was very conservative and definitely deliverable. They claimed that they had also been very careful to ensure the ad spoke in very general terms and did not guarantee any return or yield. ABC also said that accountants and financial advisers had contacted them and commended them on the advert.

The company did not accept that the ad misleadingly presented Buy-To-Let as a low risk investment. They said that whilst the radio ad did not mention ‘low risk’, it focused on the issues of inflation eroding the value of money, either on deposit or as the debt of a mortgage, and that if a deal was considered risky, banks would not lend on it particularly in the current economic climate.

The Commercial Radio Companies Association said they were happy with the content of the advert as, in their view, it had been carefully worded so as not to misleadingly imply that investing in a buy-to-let property was low risk or risk-free.

They said the advert was for buy-to-let property promoted as a buy-to-let ‘investment’. They understood that buy-to-let property was outside the FSA’s remit because it was an ‘investment’ not felt to be in need of FSA regulation. They did not feel that banning such adverts from radio would be fair or proportionate.

The ASA considered the advert misleadingly presented buy-to-let investment as low risk and did not make clear the potential risks associated with such an investment. It stated that the risks involved were not limited to tenants not paying their rent and felt that the overall impression was that the advert presented buy-to-let investment as an alternative, or a preferable option, to saving.

The ASA noted that buy-to-let property was not regulated by the FSA and considered the advert to be promoting an investment and despite the CRCA’s comments, it upheld the public’s complaints and subsequently banned the broadcast of the radio advert .

The Financial Services Authority (FSA), are urging people seeking mortgage advice to ensure they obtain the correct type of mortgage product for their residential property purchase.

The FSA have said that Buy to Let Mortgage applications are rising, but a growing number of applications are fraudulent.

Would be homeowners and borrowers who, for whatever reason are unable to meet the strict lending criteria now demanded for a UK residential mortgage, are attempting to fraudulently use Buy To Let (BTL) mortgages as a means to purchase property, despite having no intention of being a landlord or ever renting the property out to tenants.

Buy to let mortgages are not regulated in the same way as residential mortgages and the borrowing criteria are more relaxed.

This means that buyers who fail to meet the income and credit check requirements of a residential mortgage can still get approval for a similar sized buy to let mortgage.

The FSA believe that intermediaries and financial advisors are involved in the fraudulent applications.

When asked about the rising levels of deception an FSA spokesman commented: “We are seeing anecdotal evidence of unregulated buy-to-let mortgages being used fraudulently as a replacement for regulated residential mortgage contracts, as borrowers and intermediaries seek to circumvent more stringent income and affordability checks.”

Two Executives have been suspended at the UK’s largest tenant referencing firm, HomeLet, while an investigation into the selling of tenants’ insurance policies is under way.

The investigation follows a crackdown by the Financial Services Authority on the selling of contents insurance policies by HomeLet, which is one of the brands owned by insurance giant Barbon, (the company formed from the former insurance wing of the collapsed property services firm Erinaceous).

The probe revolves around a clause in lettings agents contracts, making it a mandatory requirement for tenants to take out tenants’ content insurance.

It is understood that the clause – which was apparently a long-standing one and not objected to by the FSA during earlier inspections – was originally inserted by agents on the advice of HomeLet.

HomeLet sells its policies to landlords and tenants through letting agents, and claims to sell one in five of all tenants’ references. It has a network of 3,000 lettings agents, all of whom have apparently been contacted and told to remove the clause.

It is understood that the FSA, which requires HomeLet to make sure the agents do not breach the regulator’s rules, has been concerned on two fronts: first, the possibility that making purchase of insurance a condition of tenancy could be an unfair term; and secondly, because the clause breached FSA and OFT guidelines which state that a tenant cannot be asked to buy their own contents insurance – although, confusingly, a tenant can be asked to buy insurance that covers their landlord’s possessions.

The HomeLet spokesperson said: “HomeLet is involved in a review process which may lead to policyholders with tenants contents policies being contacted about how such contracts were purchased. This is a thorough process to ensure it meets the company’s required standards. HomeLet continues to provide insurance products and services to existing and new customers. HomeLet is committed to best practice in the service it offers to landlords and tenants via agents.”

The next step in the investigation will be for HomeLet to contact tenants who were sold the HomeLet contents insurance. HomeLet says the tenants will be contacted ‘shortly’.

It is thought the FSA could have other lettings insurance firms in its sights.

Source: Estate Agent Today

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UK Bailiffs Christmas Holidays

UK Bailiff Seasonal Amnesty

A seasonal reminder to landlords and letting agents that Bailiff Amnesty’s will begin around 12th December 2011 to the 9th January 2011. Please check your local County Court for more details.

 The amnesty, which is not widely publicised, is implemented due to local authority offices, solicitors, courts and housing welfare organisations festive holiday closures.

Unfortunately for landlords, the festive season of good cheer can be one of the costliest periods due to an increase in rent arrears, especially from LHA tenants.

 Up to the end of 2010, there were 995,000 LHA tenancies and rent arrears in this sector were thought to be in excess of £290 Million (GBP).

This year research indicates that there are now over 1Million LHA tenancies and with more changes to the Government’s Welfare Reform Bill due to be implemented on 1st January 2012, rent arrears are expected to increase further.

 Landlords are urged to act fast when dealing with defaulting tenants, especially at Christmas as courts experience backlogs of paperwork and hearings in the New Year.

Speak to your local office now or call our free phone help line – 0800 840 7133

 Legal 4 Landlords Eviction and Rent Recovery Services

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Two landlords have paid a heavy price in separate cases for failing to comply with HMO regulations.

Sikander Hayat has been fined £9,500 after being prosecuted for blocking escape routes, failing to ensure that the fire alarm system was working, and failing to ensure a constant supply of electricity at one of his rental properties.

Hayat pleaded guilty to seven charges of failing to comply with HMO regulations in respect of a property in Banbury, Oxfordshire.

Banbury Magistrates’ Court heard he also failed to make appropriate arrangements for disposal of refuse.

Hayat was prosecuted by Cherwell District Council and also had to pay the authority’s costs of £300.

In a second case, Graham Snowdon has been fined £10,000 by York magistrates for renting out an HMO without a licence.

The case was brought after a licensing enforcement officer visited the premises in April for an unannounced inspection and found eight tenants living over four floors.

The council said that the premises did not have an HMO licence and was lacking in fire detection and prevention equipment. Other amenities were below the legal standard.

As well as a £10,000 fine, Snowdon was also ordered to pay costs of £1,216.50 and a £15 victim surcharge.

 

Source: RLA News Service

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