Monthly Archives: May 2011

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By Steve Roulstone

At Castle Estates we have regular Network Days where all of our Franchise offices get together and discuss our Industry at length. They give Franchisees the chance to discuss various issues with their compatriots, talking over problems that have occurred, sharing successful ventures and opportunities and trading methods and trends with each other. When we put these days together, we always try to have a central theme running through them, so that our offices can review what they have seen and review an area of trading all in one day. In the past these themes have been Web awareness, Property Insurance and associated products, Changes in legislation and Advertising.

Making the most from contacts.

This was the theme from this week’s get together and the success of the day has prompted me to put ‘finger to typepad’ and comment in this way. The contact and support that flow through these days mean that they become a seminal part of being a Franchisee. This, I believe is one of the major reasons that Franchising offers such a popular route to business success. Every Franchisee appreciated just how important it was for their colleagues to purchase a Franchise and respect is automatically granted. This is then shown through the discussions and ideas that flow through the day. They need to be seen to be understood, but I have never witnessed a similar scenario in any other type of Business meeting and I have attended many conferences and seminars over the years.

Property Portals

We had two portals represented on the day and both offer a different view to the market place. Gumtree only offer the Lettings Market on their site and are therefore important both as a lettings portal and by the way in which they attract the best type of prospective Tenant, whilst Rightmove as the market leader are a site that any self-respecting Letting Agent has to be seen on! As a result of the presentations, all of our offices now understand the options and services each portal offer, for as a punter you would only see the front end of the sites, whereas as a customer, there is a whole sea of reports and functionality available to us to help us understand where and why our prospective Landlords and Tenants visit us. The problem being just how difficult it is for everybody to understand the nature and power of the services these functions provide. It is safe to say that this style of day ensured that everybody left with much enhanced knowledge and will now utilise the functions to their benefit.

Landlord Insurance

Specialist Insurance is something that I have spoken about and something I recommend all Landlords to use, but again, following a procedure that has lasted a full 18 months and as a result of a Rental Industry  supplier that has listened to what we have told them and offices that have taken on board what their peers have recommended (length of service and experience being paramount) we now have a situation where the whole group is moving forward in an innovative way, using this crucial Landlord requirement.

The future.                                                                                                                 

Add the specialist software designed to ensure we make the most from website visitors that we discussed and the meeting was heralded by all to be a great day and this is the point. Only with Franchising are such progressive steps made so easily, because of the willingness from all present to share, assist and develop everybody’s business, not just their own. It is in the interest of every Franchisee to see progress for all offices in the network and there, in finishing this article, is that word again:

 Network: only truly available through Franchising!

By Steve Roulstone

There have been reports in the press recently about the recent judgement in the Court of Appeal on the Gladehurst Properties Ltd v Hashemi. This case will undoubtedly have an effect on the Tenancy Deposit protection legislation, but rather than being a decision that will drive a nail in the coffin of the intended protection for Tenants, I believe that it will leave the door open for the matter to be addressed by the Government in the upcoming  Localism Bill and indeed this decision may encourage further legislation which could impose further requirements on the Industry as it is highly possible that such ‘holes’ will attempt to be plugged as well as any perceived problems brought to light by this judgement are considered as well.

Joint action required.

The case failed in the full award of the penalty as prescribed in the bill (Three times value of deposit as a fine) because of two problems the first being that this was a joint Tenancy and the action was bought by one Tenant (Hashemi) without the knowledge of the second (Johnston) (For clarity Gladehurst Properties Ltd were the Landlords) The implications of this are that Tenancies involving more than one person, such as Student or any joint Tenant situation, especially for example if one Tenant is not accessible (left the area, left with debt to the other parties) as it would become impossible for the second / remaining Tenant/s to take any action to recover the deposit. This is the kind of area I mean the Government may want to get involved in addressing. Then if the Tenants disagree? Well let’s just leave that one hanging!

Part returned Deposit.

Another area that could invite further legislation is the situation where some of the deposit has been returned, but not the whole. This is of course a common occurrence, especially for Private Landlords, as agents we should be aware of the implications, which will be clear no matter which scheme is used for Deposit protection. So the Landlord does not register, returns half the deposit and leaves the Tenants with no comeback or protection. This is where the main ‘hole’ will need to be fixed, but there is no doubt again that the Government will look at other areas where legislation could further protect the Tenants rights as intended under the initial legislation.

Further appeal.

I have also heard that many feel the case should be referred to the Supreme Court because of the long term implications to the TDS legislation but because of the sums involved this could be a none starter. But I think it is important to state and for Tenants and Landlords to understand that the implications are not yet fully known but it is not a case of the legislation being filed in the draw marked bin just yet! There is no doubt that it will be addressed and re-enforced by the Government 

There have been reports in the press recently about the recent judgement in the Court of Appeal on the Gladehurst Properties Ltd v Hashemi. This case will undoubtedly have an effect on the Tenancy Deposit protection legislation, but rather than being a decision that will drive a nail in the coffin of the intended protection for Tenants, I believe that it will leave the door open for the matter to be addressed by the Government in the upcoming  Localism Bill and indeed this decision may encourage further legislation which could impose further requirements on the Industry as it is highly possible that such ‘holes’ will attempt to be plugged as well as any perceived problems brought to light by this judgement are considered as well.

Joint action required.

The case failed in the full award as prescribed in the bill (Three times value of deposit as a fine) because of two problems the first being that this was a joint Tenancy and the action was bought by one Tenant (Hashemi) without the knowledge of the second (Johnston) (For clarity Gladehurst Properties Ltd were the Landlords) The implications of this are that Tenancies involving more than one person, such as Student or any joint Tenant situation, especially for example if one Tenant is not accessible (left the area, left with debt to the other parties) as it would become impossible for the second / remaining Tenant/s to take any action to recover the deposit. This is the kind of area I mean the Government may want to get involved in addressing. Then if the Tenants disagree? Well let’s just leave that one hanging!

Part returned Deposit.

Another area that could invite further legislation is the situation where some of the deposit has been returned, but not the whole. This is of course a common occurrence, especially for Private Landlords, as agents we should be aware of the implications, which will be clear no matter which scheme is used for Deposit protection. So the Landlord does not register, returns half the deposit and leaves the Tenants with no comeback or protection. This is where the main ‘hole’ will need to be fixed, but there is no doubt again that the Government will look at other areas where legislation could further protect the Tenants rights as intended under the initial legislation.

Further appeal.

I have also heard that many feel the case should be referred to the Supreme Court because of the long term implications to the TDS legislation but because of the sums involved this could be a none starter. But I think it is important to state and for Tenants and Landlords to understand that the implications are not yet fully known but it is not a case of the legislation being filed in the draw marked bin just yet! There is no doubt that it will be addressed and re-enforced by the Government

By Craig Smith

In a recent ARLA publication, the property ombudsman (Christopher Hamer) has written an article relating to a tenant decorating a property. The story goes that, following the tenants request prior to signing the tenancy agreement, the Landlord would not decorate the property. The agent had then given permission for the tenant to carry out the works themselves. However, the Landlord had no knowledge of this and as such tried to claim for the costs of returning the property to its original condition from the deposit.

Tenants Decorating Permission

In this case, it appears that the Landlords agent had given permission for the tenant to redecorate, which could have cost the tenant a substantial amount of money, without first gaining the permission of the Landlord.  There really can be no excuse for this, even if the Landlord was away or unable to be contacted the agents should not have given the permission to the tenants.

Payback Time

As the Landlord had claimed for recompense from the deposit, the tenant then complained to the property ombudsman due to the distress caused by the lapse in communication. If an agent is a member of the ombudsman, it will deal with any complaints made in the most suitable manner.

The article states that the ombudsman awarded £200 in compensation to the tenant for the stress.

Lessons to be Learned

Although the tenant had quite rightly sought permission from the agent to carry out the decorating, the agent had not contacted the Landlord for their advice. Ultimately, it should have been the Landlords decision whether or not to allow the decorating to be carried out.

Best practice dictates that permissions should be in writing and a record kept of and do’s and don’t given to the tenant by the Landlord. The agent in question was at fault for not fulfilling their obligations to their Landlord, which goes to show the importance of having trust in your agent. 

By Steve Roulstone

Recent reports indicate that the Buy To Let market is, as I have been reporting for some time, growing in strength and therefore returning despite all the gloom and doom reports that the Financial Crisis would see an end to Private Landlords investing in property using this specialist mortgage.

Misrepresentation of Landlords.

This report raises several issues for me, the most glaring being the overall suggestion that Landlords buy property to get rich quick and that they will not do so ‘Under current circumstances’. Well excuse me for pointing out that this is obvious and the error in the unstated indication that ‘Getting rich quickly’ is why Landlords purchased property in the past. Well as one of these Landlords and as somebody who speaks to and knows many others, can I point out that by far the majority of Landlords chose and indeed choose property as an investment, because it has traditionally given a conservative return, but never actually lost money!

Markets will always dictate.

I have pointed out on these pages recently, that it is the market itself which will dictate both the number of properties available and the need for Landlords to supply that demand. We have seen Tenant demand rise steadily over the last three years and the % of rented UK housing stock confirms both the need and the ability for Property owners to supply the demand. What has happened however is that droves of new Landlords are being created by the inability of the Sales market to provide purchasers and the realisation that by renting property instead, they have been able to move on with their lives and plans. I myself now rent and have rented my main home for the next five years for the same reasons.

Rising rents, really?                     

The main push of this article is to concentrate on the amount of income generated from the rent and I find the statement that Landlords are being enticed because of the possibility of rising rents to be a little thin! Firstly, this totally ignores the more down to earth reasoning given above that owners are renting simply because they can, when they are finding it very difficult to sell, allowing them to get on with their lives, but the assumption still ignores the main reason for Landlords to buy or invest in bricks and mortar, which is historical, because property in the long term always gains in value and this is very much linked with the conservative expectation, set against the risk of either Currency or Stocks and Shares.

Tarred with the same brush.

It seems to me that the writer has looked at Property Landlords in a ‘one view take all’ approach, where the reality is so much different and far less simplistic. Is it my view alone that people who invest in property are more conservative than those who invest in more traditional methods? Either way, the market is driving this increase in new Landlords and what is not my belief alone is that it is both sustainable and shows no sign of decline for the foreseeable future!

By Craig Smith

Since the coalition government came in to power in May 2010, a number of cuts have been announced as part of their plan to reduce the deficit. One of these cuts is to the LHA (Local Housing Allowance) which is paid to the unemployed or those with lower incomes who are living in rented accommodation.

The Affect to Tenants

The amount of LHA paid to tenants will be reduced, typically around £30 per month on a 3 bedroom house (see the handy table which has been produced on the DirectGov website). This might not sound like a lot to lose, but this could be an extra £360 a year to find, and when your already struggling to make ends meet this can be a lot of money. Put this together with the ever increasing cost of living and things only seem to look worse!

The cuts come into place either on the renewal of a claim (12 monthly anniversary) or when there is a significant change to the claim, such as a new baby or moving from one property to another.

Landlords Reactions

A member of staff from Castle Estates recently attended a local Council Private Sector Landlord Forum which was to discuss the changes and keep Landlords informed of what is going to happen. The meeting itself was perhaps aimed more at private Landlords (as the title suggests!) although a lot of useful information was provided to everyone who attended regarding the cuts.

As the amount paid to Tenants is to be reduced, the extra money needs to come from somewhere. And if the money can’t be found then the council’s answer was simple… reduce the rent. At this moment the room fell silent for a second or two, until a few Landlords began to chuckle. They seemed to have forgotten that Landlords still have mortgages to pay, insurance to cover and repairs to be made.

The Route Forward?

Perhaps the first thing to come into a Landlords mind is to steer clear of any Tenants who may be in receipt of LHA payments. However, in the long run this would mean less and less housing available to those Tenants. This doesn’t necessarily mean that some Tenants may not be claiming in the future, for example, someone who has recently been made redundant and is unable to find new employment?

The other way of looking at the situation is that although the payments would be a lesser amount than would have been expected before, the payments would be made regularly to the Tenant. This doesn’t always guarantee that the Tenant will pay the money to the Landlord, but some good tenant referencing would also help in the selection of a suitable tenant. 

By Steve Roulstone

Rental Issues: Reserving a rented property whilst a Sale completes.

This is one of those issues that whilst rare does occur now and then and always causes confusion. I think clarity would help so that potential Tenants understand where Letting Agents are positioned and why we have to do what we do. It has happened at our office in Stafford again recently and it is the matter of how long we are prepared to hold a property before Tenants accept responsibility (sign a Tenancy agreement) that is nearly always at question. Under normal circumstances and with so many Tenants in the market at present, this problem does not and need not occur.

Legal position.

Tenants are only legally bound to pay for a property from the day they actually sign the agreement and of course Tenants do not wish to do so if they are subject to a sale which has not completed or could indeed collapse which seems to happen more often in recent years. Nobody would want to accept a minimum of six months liability for a property that should the sale collapse, you could neither afford or equally wish to use as your home. This is why Agents will quite often ask for payment from a date in time without signing the agreement as a payment in good faith but without committing the Tenant to legal documents which have far more lengthy implications.

Holding a property.

What needs to be realised is that Letting Agents have a legal responsibility to provide the best service and advise to the Landlord because of our legal position (as Agent of the Landlord) What also needs to be considered is that the Landlord will need to earn income from the property for as many days possible. Agents will do whatever they can to avoid void periods for Landlords, it is easy to see why anybody who owns a property as an investment, which is of course exactly what rental property is wants to earn rental income for every week possible. This is why once we have found a Tenant we will (in most cases?) confirm that we allow a four week period under normal circumstances for the move to be completed.

No similarity with sales.

This of course is the rub, there is nothing in the two processes which are alike, indeed the only comparison would be to expect Building Societies to allow payments to be suspended during the same period, so you can see how one sided the effect of waiting for a sale to complete now sits! Therefore we have to proceed in the best way possible for our Landlords and during a period where the rental market continues to improve, people who are renting after selling are not necessarily so attractive as prospective Tenants. I have known situations where sales collapsed after a seven week wait and resulted in the Landlord having a three month void period. Position this with our legal responsibility to give best service and advice to our Landlords and perhaps the situation becomes more understandable!

Co-operation required.

It is of course an emotive subject as anybody who has gone through a house sale nowadays would know. So we have to ask for co-operation from prospective Tenants under these circumstances and interim payments to reserve the property without asking for a legal commitment by signing the Tenancy agreement are a half way house which I believe offers both parties the ability to proceed and still deal with whatever the legal process of house selling throws at us, what we ask is that Tenants understand our liabilities and can co-operate in the same way.

By Steve Roulstone.

Shelter have produced a video in support of their call for action for the licensing of Landlords. It is an over the top production in the picture that it purveys, but there is no doubt that it does get the message across very well.

Dodgy practises.

It manages to cover several dodgy practises in a very short time, including illegal eviction, lack of proper procedure, unfit housing to name but a few, I would recommend all to watch it not just because of the content, but because as an industry we should think how Shelter feel they need to promote this issue to highlight the trend they report to have witnessed in recent times. Please note carefully, that during the video, Agents are added to the situation as being part of the problem!

Several messages.

At times it feels like those of us who are constantly calling for legislation to support us in our professional aims are knocking against closed doors, so I am grateful of any action that highlights the need for Registration of both Landlords and Agents. But it is a pity that it is not our own Industry professional bodies that are not the ones shouting the loudest! We need to recognise that many would see this video as a true representation of our Industry and not that farfetched. Agents, Landlords and bodies that truly care should be joining the call for the Government to take up the recommendations of the Rugg review of 2009. Otherwise, whilst rogue Landlords still exist and the evidence is still present for all to see, this tardy image will never go away.

Hard Times.

We should all be aware that during harder financial times for us all, the temptation to cut costs and corners is high, so whilst I feel Cambell Robb’s (Shelter CE) comment that ‘Landlords are cashing in’ a bit too simplistic and an easy jibe to make, we cannot hide from the fact that Shelter’s Campaign casts a very poor shadow across the whole of the rental market and it’s effect will touch us all one way or another. Follow the link above and you will not find one shred of comfort in the headlines, comment or follow up added to the page.

Join the call.

So yet again I find myself singing the same song, but this time my comments are directed towards the bodies that govern our Industry, the very same bodies that should such legislation be introduced, would want to be the people who oversaw its introduction, have a large say in how it was put together, would probably wish to police it and most importantly want to set the standard by which Landlords and Agents could be approved! I feel that the fact that organisations such as Shelter should be the party to start a Campaign and petition to promote professional standards reflects badly on your own efforts, efforts which we fund through our fees. Think and reflect on why your thunder has been well and truly stolen – this should be an Initiative that we should control within our own walls!

By Steve Roulstone

One of the roles of my position as Franchisor is to hold regular update meetings with other Castle Estate Franchisees. At a meeting held this week with a relatively new Franchisee an issue was raised that every agent has to deal with at one time or another and no matter which way a landlord wishes to get round the problem, leaving white goods and some furniture at a property will always remain a Landlords responsibility and my advise has always been simple – don’t!

White goods.

Once left at the start of a Tenancy, there is no clever way to stop white goods being either the responsibility of the Landlord or the subject of a dispute if and when it breaks down! I have spoken to so many Landlords who believe that by leaving a fridge their property will be more attractive to any potential Tenant. The truth is it is not and in simplistic terms, why worry? If an incoming Tenant cannot afford a fridge themselves, then they are probably not the Tenant the Landlord would wish for their house in the first place (Not including a cooker of course, which should always be supplied!)Plus what happens to the fridge they already own? Better remove both the goods and the responsibility in the first place.

Fitted white goods.

Now we have a situation where there is no simple answer, as fitted goods need to be maintained (and that does include the Dishwasher!) and when removed the property becomes less attractive. We need to think what our own reaction would be to being told we need to find our own washing machine for that hole in the cupboard? Of course this will be white goods we would probably never be able to use again, as fitted white goods are either smaller in depth or may not look pretty when installed without the cupboard surrounding it! Now be honest, would we seriously purchase our own in these circumstances?

Part Furnished.

Now we come to the worst of all scenarios, as I can absolutely guarantee, that should we find a Tenant who does need a three piece suite and a double and single bed first time round (providing of course that it meets safety requirements) we will not second time. Eventually you will end up removing all furniture as Tenants come along with their own bed and three piece, so rather than reduce the market to whom the house is acceptable, my advice is always remove all furniture now, for unless it is fully furnished (which is still a very small percentage of the overall market ) the furniture you do wish to leave will end up being a problem earlier or later in the lifetime of the rented property.  

Simple solution

In the end the advice to the Franchisee has not changed since I carried out the role myself, where possible remove white goods and furniture. Where it is to the detriment of the property, leave them but accept responsibility for maintenance. As far as furniture is concerned, unless fully furnished, remove all furniture from day one and make the property more acceptable to more of the market. All said with one rider – where the Landlord insists, we carry out our customers wishes!

By Steve Roulstone

Once in a while, and thankfully such occurrences’ are less common, a story comes along which encapsulates the problems that exist in our Industry all together. A story reported on in Letting Agent Today does just that. It is to the credit of the party concerned that they have viewed the incident in such a way that they are able to offer up the story to others as a lesson to be learnt.

Constant vigilance.

Within our own group, we have always ensured that our paperwork is constantly reviewed, even when problems occur and we can see we have done everything possible to carry out our responsibilities to the full, we still review processes and make changes if we believe we can further improve our service in carrying out our duty of Agency to the Landlord.  In this case it seems several essential services were not carried out correctly.

Referencing.

For me there is only one form of referencing and that is to use a professional referencing agency. So often we hear of Letting Agents who ask for references and proof of employment from Tenants and check them out themselves. The problem is clear for me, unless you have access to the information that a professional referencing agency does, there is no way you are able to investigate in full a Tenants history when problems would soon be found out. This is why Tenants with a poor history use independent Landlords fearing that referencing will find them out, so it is doubly disappointing in this case that the Landlord should suffer poor referencing.

Insurance.

Of course once a Tenant has passed professional referencing then Rent and Legal expenses insurance can be taken. It does not take a brain surgeon to understand why such Insurances are only available against Tenants that have passed such referencing in the first place. It has long been a recommendation of mine and I have written about the need for Landlords to take out Insurance recently.

Property visits.

As a Tenant I have just spent the last two months encouraging my Landlord (Privately Managed) to visit my Wife and I in our rented house, purely because of how important it is for Landlords to be confident that their property is in good hands. In the case of a managed property, the agent should carry out this work and when done correctly, and early enough, Tenants can be assessed in their property at a very early date, ensuring action can be taken earlier rather than later if they are failing to honour the agreement. Enabling notice to be issued at an early date if needed and always on an initial six month agreement, unless negotiated earlier, as for all practical reasons, a break clause after six months is the same as a six month agreement.

Professional management summed up!

It rather sounds as if this problem could have been dealt with cleaner and earlier on the Landlords behalf if all of the above had been followed correctly. At the end of the day you need to understand what the implications are of standing in the Landlord shoes, then and only then can you ensure you offer the best advice and service to your customer. After all, to do so is to carry out the role of agent in the correct manner, what other manner is their?

By Joel Caws

Selecting a franchise business as a route to starting up a business can be a great choice. Like anything, there will always be two sides to the coin, but lets look at five important characteristics that a franchise can offer in contrast to a non-franchised business venture:-

1. The Franchise Business Formula

The heart of any franchise business is its franchise formula. This is primarily comprised of the business structures and processes that make the business happen and that make it a potentially profitable venture. These elements make up a core part of the franchise manual that becomes a new franchisees ‘bible’ to read and follow, in order to reproduce the achievement of the original franchise pilot businesses.

2. Proven Track Record

The good thing about a franchise is that you can often talk to other aspiring business people, just like yourself, who are already running the franchise opportunity you are considering as a business. The franchisor will usually be able to provide a list of franchisees that they are happy for you to contact which can act as references for the franchise venture. It can give you extra peace of mind to speak to people who have already travelled the road you are on and have already taken on, and are actually running day-by-day, the franchise business.

3. Training & Support

Unlike starting up business by yourself, franchise opportunities are usually provided with a level of training and on-going support. This is to enable you to run the business effectively and successfully by understanding the franchise formula and how to apply it to the day-to-day business activities.

4. Financing

The majority of high street banks have franchise sections that specialise in funding franchise business start-ups. You will still need to prepare your business plan, but having the weight of a franchise system behind you can give the bank some extra assurance that you are working with an already established and proven business concept. This may give you an edge in getting any funding you might need.

5. Franchise Association Support

There is plenty of help and support offered to those considering franchising as a route to starting a business. In the UK, the British Franchise Association (bfa) is an organisation of which many franchise businesses are members.  The Association helps to promote ethical franchising in the UK and it can therefore give some extra peace of mind if the franchise system you select is a member. Additionally, the bfa can be a resource for any other help you might need such as pointing you in the right direction for professional support such as for legal and financial issues. Other countries have similar franchise organisations in place to hope promote franchising in their respective countries.

Finally, its worth bearing in mind that, a franchise is a business like any other. A willingness to work hard, be determined and dedicated to the franchise system, are all essential to give you the best possible chance of success. A franchise in itself is no guarantee of success, but it does give you the chance to get out of the starting blocks running.