Monthly Archives: December 2011

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By Mike Edwards

Asking rents have dipped for the first time in ten months, according to a November rent index. The drop is only a tiny 0.4% and so hardly means upgrading the Xmas dinner from turkey to a leg of beef, and means that on average so far this year rents have gone up by 3.5%. This means the average UK rent is now £717 a month but this of course masks massive regional variations, especially in London where the average rent is now 1,033 a month in London. In the index from LSL there appears to be a slight improvement in tenant finances, with 9.3% of all rent late or unpaid at the end of November, compared with 10.1% at the end of October.  Again welcome though this improvement is it is a very small change.              

Interestingly the survey estimates average yields for landlords at 5.3% but warns that landlords stand to make a loss on their properties. The average total annual return per property in November was 2.2%, compared to 1.4% in October. In cash terms, this was an average of £3,726 – equivalent to £7,700 in rent with a capital loss of £3,974. More worryingly despite these times of apparently insatiable tenant demand as would be buyers find themselves frozen out of that market, if property prices maintain the same trend as the last three months, an investor could expect to make a total annual loss of 0.7% over the next 12 months – equivalent to £1,144 per property. In terms of the arrears position although there are fewer tenants actually behind with their payments in some shape or form this in part is almost certainly down to a tougher line being taken by Landlords who themselves are finding their finances under pressure, so they are taking action sooner to ensure any new arrears cases are dealt with promptly.   

But again the picture looks bleak with a deteriorating labour market and unemployment at a 17-year high and likely to rise further. As it climbs, a growing number of tenants’ household finances (and Landlords?!) will come under strain, and overall tenant arrears are likely to climb in the coming year. 

There is no doubt that life for landlords is not as sweet as it looks and although not as hard for buy-to-let investors to secure mortgages as it is for first-time buyers, it is still very difficult. Indeed the apparent increased readiness of lenders to fund BTL again with higher LTV mortgages only make that market look healthy when compared to the residential mortgage market which in historic terms is all but flat lining. But even allowing for a slightly healthier look on the BTL front lending to property investors is still very low by historic standards. There were 34,500 buy-to-let loans in the last quarter this year compared to the same three months in 2011.

By Mike Edwards

Last week, both mayoral candidates, Ken Livingstone and the incumbent Boris Johnson, stirred up the debate on the private rented sector. Livingstone will set up a non-profit lettings agency, covering the whole of London, if elected, and would impose a rent cap of no more than one-third of the tenant’s wage. In polite terms these proposals have generally been received as coming from another planet, and totally unworkable and in fact a retrograde step. Boris Johnson on the other hand, so often considered lightweight and with his own zany comments and ideas, has confirmed his own plans to accredit private landlords and the publication of a rents map to give tenants information about rents in their area.  These proposals have been received much more warmly. 

Longer tenancies, accreditation of landlords, and incentives for landlords to use accredited agents are among new proposals being made by the London Assembly.  In its report, ‘Bleak House – Improving London’s Private Rented Housing’, it  is also calling for landlords to be given tax incentives to improve their housing stock, thought to amount to some 850,000 homes across the capital and which are lived in by one in four London households. The report, from the all-party housing and planning committee, says that a surprisingly high one-third of the properties are below standard, and estimates that one in three private landlords is a ‘rogue’ operator. This problem has always been exacerbated inside the M25 and especially in London itself by the increased numbers of Landlords who manage property themselves instead of using a regulated agent. Several years ago ARLA estimated that 40% of property within the M25 is not let through managing agents. Hence tenants also suffer, as many of the subsequent problems stay below the radar. Indeed so severe is the problem that the Assembly estimates over £1bn is needed as investment into the sector.

The report calls for the Mayor of London to develop a kitemark or accreditation ‘badge’ which sets out minimum standards of private rental housing, together with a publicity campaign to raise awareness of the scheme among tenants. It suggests that there should be standards in the private rented sector that are similar to the decent homes standard for social housing. Naturally and logically the report then urges councils to only place tenants in properties belonging to landlords who meet the standards. It also calls for agents to ensure that the properties they deal with also come up to the standards. Acknowledging that rogue landlords will never be swayed by any amount of incentives or encouragement, the report calls for the Mayor to consider greater use of selective licensing. Licensing requirements could be relaxed, it suggests, where the properties are managed by an accredited agent.      

But it is the call for longer tenancies which, if adopted, could have the greatest impact on the industry, with Assured Shorthold Tenancies a strong focus of the report. It criticises ASTs as not offering tenants sufficient security, with landlords having the right to give tenants two months’ notice to quit after four months, without needing to give a reason. The ‘Assured Longhold Tenancy’ has long been under consideration by The Law Commission and one wonders where they are while all this comment is being made on a subject they were specifically asked to look into. It says families, particularly those with school-age children, need longer security of tenure and it calls on the Mayor to lobby the Government for changes, including giving tenants protection from ‘retaliatory eviction’, possibly via the Localism Act.

The report says £400m is paid to private landlords in London annually by local authorities using the sector to house homeless people. In fact in many ways, London’s private rented sector can be regarded as a success story. The problem lies in the fact that private rented housing is increasingly acting as social housing, but without any of the standards and security. One thing is certain in these uncertain times, and that is families need certainty about where they will be living so that they can settle their children in schools and forge community links.  The London Assembly considers that in exchange for the hundreds of millions of pounds of public money they are receiving, private landlords must be compelled to provide certainty in the form of longer tenancies. They could have a point.

By Mike Edwards

Mortgages could become harder to get, with one in ten borrowers currently eligible for a mortgage being turned down in future. The Financial Services Authority has now published its long-awaited Mortgage Market Review. Its own impact assessment says that the proposed reforms could strip £2.9bn out of the economy because it would mean fewer people buying and selling homes, and lead to a dramatic drop in mortgage lending, affecting one million borrowers. The FSA’s final consultation paper is designed to put a permanent end to the lending excesses that were prevalent pre-credit crunch. But the crackdown could have a severe impact on the already ailing housing market. Among its many recommendations is a new ‘affordability’ regime, which will include looking at a borrower’s household spending plus a ‘stress test’ for how a borrower would cope if interest rates went up.

The incomes of older people, those aged 50-plus and coming up for retirement, would be particularly put under the spotlight. In effect the responsibility for checking affordability passes from mortgage adviser to lender, and most mortgage sales will have to be advised rather than simply executed.
The FSA’s proposals also stipulate that borrowers will not be able to factor in the possibility of future house price rises, but must be able to show other, more robust ways of being able to pay back their mortgage. In an environment where lenders are already being extremely cautious with their lending criteria and indeed cherry picking there is a danger that by placing all affordability assessments at the doors of lenders’ risk teams, this could create an even stricter lending environment.
For mortgage prisoners in negative equity, there is a ray of hope in the proposals, which suggest that the usual affordability tests are waived for such home-movers provided they have a solid track record of repayments.

However it is not just first time buyers who are suffering, next-time buyers are having it even tougher than first-time buyers, says a startling new report from Lloyds TSB.  It says that the housing market has become the most unaffordable for ‘second-steppers’ in 24 years. Many bought at the peak of the housing market in 2007 but are now unable to move on, having seen the value of their home fall by an average of 23%, leaving them £10,000 in negative equity. The second-steppers, typically aged between 25 and 34, also need to earn more than first-time buyers in order to make their move – and persuade someone to give them a mortgage. In the South-East, the average price of a second-time home means  a second-stepper would have to borrow nearly seven times average earnings – which of course the SA proposals above would not allow even if a lender was foolish enough to offer such a loan..   

Even in the Midlands – the most affordable region for second-time homes – someone trying to move up the property ladder would have to borrow four times their average salary. The home affordability ratio has risen to 5:2 for second-time buyers – the highest level since records began in 1987. The ratio for first-time buyers is 4:1. In 2007, the reverse was the case. The issue of second-stepper affordability is a key one in trying to get the housing market moving again, with the current difficulties in this segment of the market restricting the supply of starter properties for first-time buyers as well as preventing many of those who need to move from doing so.

By Steve Roulstone

This will not be a long blog, but I just could not believe the news today about the new Mortgage rules being discussed by the FSA. My immediate thought (after – is it me?) was where have they been for the last two years? Are they seriously saying that this change is going to be the answer to a problem which happened three years ago? What was the industry supposed to do for the last three years wait?

Answers in the reporting.

And then I read and watched on the news, Paul Smee, the Director General of the Council of Mortgage Lenders stating that these changes have actually been adopted and made by the mortgage companies themselves for some time. A fact the rest of us (especially people in the industry) are already aware of because we can see on a day to day basis the problems people have in getting a mortgage! Therefore the problem here is not what the FSA are saying it is how long it has taken them to say anything at all!

Even the FSA are aware!

Lord Turner, chairman of the FSA is actually quoted as stating ‘While the excesses of the pre-crisis period have largely disappeared from the current market’ in the actual report itself, so the problem, by their own admission, has virtually gone, and now they react? As I said, is it me?

Look at the track record.

The BBC reported recently that the FSA had been the major cause of the failure to control the banks in creating the boom and bust in the first place along with the rest of the press at the time and I can certainly remember more than one comment that the FSA failure in this regard was given as one of the main reasons for the organisations pending demise. In my opinion, if this is the best that they can achieve at the moment, then the sooner the day comes the better!

Polite response.

Mr Smee spoke gently (and it is very much to his credit) about the fact that this idea was nothing new, indeed an improvement on an earlier statement on the issue by the FSA but the fact you cannot get away from is that it is of no use whatsoever in dealing with either the problem or the solution, because it is far too late! The questions that spring to mind are numerous, but one of the most important ones is why this organisation is so distant from the real world?  And are we all mad for listening to them? Or are they losing so much credibility that actually nobody actually does listen anymore?

By Steve Roulstone

If a Leaseholder of a site managed by an RMC has a complaint about costs and services, the traditional route for that complaint, if the Leaseholder feels the Management Company has failed to address the issues concerned, is the Leasehold Valuation Tribunal (LVT) whose job, as stated in the title, is to ensure that Leaseholders are receiving value for money in both the charges levied, money spent and services provided.

On behalf of the Leaseholder.

Therefore, when a Management Company is the subject of a tribunal bought by a Leaseholder, you would assume that the process is there to protect Leaseholders and ensure they ARE getting value for money and that their interests are being taken care of. Especially for investment Landlords, who have of course utilised property as their chosen route of investment, probably of their pension or main asset to be realised upon retirement. But this has proven not to be the case for a tribunal that has just reached determination by the LVT for all of the leaseholders of the site concerned.

Initial problem.

When the paperwork arrived at our office the first thought that entered our heads was why this action was being bought against the RMC concerned (we received it as the Managing agent of the site in question) and upon investigation, realised that the case the Leaseholder had bought was not only wrong in our opinion, but that it was going to take a lot of time and effort and professional advice to fight it on behalf of the RMC. Indeed specialist knowledge was most important and must be required for nearly every Agent in our position, because such matters whilst not rare are not common occurrences and as the LVT Chairman stated in this instance, rarely reach such complicated levels as was produced by the Leaseholder concerned.

Long story short.

The case itself and the detail surrounding it are not central to my main point here, but midway through the process, having answered in a way that we felt was relevant and confirmed what we believed to be the truth behind the case, we were clearly instructed by the LVT to give more information against every point raised in this complicated claim and in much more detail. This we did, but the outcome was that the amount of time and therefore cost that we were generating to fight the case was rising by the week. Indeed, to put together the response requested by the LVT took a total of 65 hours in one week alone. Add the cost of the professional advice, which required two trips to London by three people on two occasions and the time spent writing, processing and gathering data prior to the week spent compiling the reply and the eventual bill would amount to several thousand pounds. On top of this, the three day tribunal, again for three people just kept the cost mounting up.

To fight or not to fight.

Of course, we could have left the case alone and allowed the tribunal to make a decision based upon what they managed to gather from the Leaseholder alone, but the risk, considering the claim was for over £150,000 was just too great. Then there is the position of the RMC Directors to be considered. I know why such people take up the role of Director and one requirement they should not expect to have is the kind of specialist knowledge needed to fight a case such as ours. An argument of mine during the case was that if all Directors were supposed to be as knowledgeable as the Leaseholder who bought the case against them obviously was, then 90% of the sites in this Country would never attract a Director at all!

To the outcome!

Now here is my point in all this. We won the tribunal on all counts and were given permission to claim full costs through the collection of fees from the whole site. Now the Directors are left having to explain why the Leaseholders will all face an increase of nearly 25% on next year’s Management fee and all because of the actions of one Leaseholder. But if the LVT is duty bound to listen to such cases, then the Management Company must have the ability to claim the cost of fighting the case and their only route is through Management fees as they have no other source of income. So the obvious point is in what way does this outcome protect the interest of the Leaseholders on this site? The answer unless somebody can tell me differently, is that it does not and I know full well, that the costs generated were very reasonable, having pulled in favours and attracted the support of specialists in Block Management for at least one full day for nothing (purely because of the subject matter itself)

Better way.

For me the Management Company should have a better route for recourse and if the LVT can demand such a high level of input from the respondent then they should have more powers in determining where the responsibility of the costs generated should lie. Perhaps if that were the case then those bringing such actions in the first place would take in to consideration the possible implication of their actions before bringing a case, which unless we find out otherwise, will have no more impact on them than the rest of the property owners on the same site!

By Steve Roulstone


One recurring issue when problems occur with a Tenant who has failed to keep up to date with their rental payments, when a Guarantor is in place, is the sudden realisation that despite having had the situation explained at the beginning of the Tenancy and in our case at Castle Estates having signed a confirmation letter that clearly confirms the Guarantors role, that they may become liable themselves for the arrears and any additional costs generated by the departing Tenant at the house concerned.

Increasing requirement.


This is a problem which is not going to go away, in fact most reference Companies (with a mind to the current financial situation) are requesting a Guarantor to assist the Tenant being referenced in achieving a successful application, in probably twice as many cases as they were five years ago. This means that it is even more important that the Guarantor understands that should debt arise as the result of the Tenants actions, then they could be asked to make good the shortfall if the Tenant fails to do so after every reasonable effort has been made to achieve success with the Tenant, in a court of law.

For the lifetime of the agreement.


It is therefore important that the Guarantor is advised about any possible liability as soon as possible after it becomes clear that a problem exists. This is when we normally get asked for the Guarantor to be released from the agreement and of course without a replacement waiting in the wings who would also need to pass reference (and if a problem has occurred this is not a likely scenario) they cannot and should not be released. Signing your name to a legal document has implications and therefore should not be entered in too lightly. Indeed Guarantors need to understand fully their role, which is why we have a separate letter which we ask to be signed and wherever possible, have the Guarantor present at the check in to ensure they understand their responsibility.

End of Tenancy problems.


Of course most problems where a Guarantor has to be advised occur at the end of the Tenancy and just recently we have had a very serious abandonment, where the Guarantor was a close relative of the Tenant who seemed to be fully aware that the relative would have to face the consequences of the Tenants actions, of course such malicious actions are very rare, but it does serve as a timely reminder to ensure, as a Guarantor, you will still want to support the Tenant in possibly two or even three years time (average length of Tenancy is now close to two years) As Agents we have to be sympathetic, and make every effort to seek recourse with the Tenant, but legally the Guarantor will be required to stand in the Tenants shoes if the Tenant does fail and the reality of this should always be considered before the agreement is signed.

By Craig Smith

If you’ve looked back through some of our recent posts, you might think that all we do is bang on about is deposits, deposits and deposits. Well, maybe not but here’s some more important information that you might find useful.

A recent court ruling has changed the way in which information should be provided to tenants paying a deposit that would be protected under the Housing Act 2004. Since 6th April 2007 any deposit taken for an Assured Shorthold Tenancy must be protected by one of the 3 deposit schemes (see my earlier post on deposit protection) but now additional information needs to be provided to tenants.

Prescribed Information

It is already stated in the legislation that tenants must be provided with certain Prescribed Information for the deposit. This information includes where the deposit will be held and the Landlords & Tenants rights to the deposit at the end of the tenancy. If this information has not been given correctly, or not provided at all, Landlords could be forced to pay 3x the deposit amount, plus the deposit back to the tenants.

This is the same for deposits that have not been registered in the timeline set out by the scheme rules, currently 14 days. Landlords cannot ‘get around’ the legislation by suddenly registering a deposit later in the tenancy if the tenancy turns sour. However, new rules are looking set to be published some time in 2012 which will extend the time to register a deposit to 30 days but we’ll wait and see when this happens!

Recent Court Case

The recent case which looks set to have changed the way in which information is given to tenants is the case of Suurpere V Nice. The full details of the case can be found using that link but the very basics of the case are: a deposit that was taken in January 2009 was not registered until July 2009. So, quite clearly not within the 14 day rule! Despite the fact that the tenant had left the property in rent arrears and goods still at the property that would need to be removed at the Landlrod expense, the Landlord was ordered to pay the deposit back to the tenant in full plus 3x the deposit amount.

Now reading this right now, this might seem unfair on the Landlord and to a certain point, I have to agree. But, the rules of deposit protection are very clear and Landlords cannot use the excuse of having a bad tenant to get out of any fines imposed by a court.

Rogue Landlords

A little bit of advice now to tenants. When you are looking to rent a property how much attention do you pay to the Landlord or Agent? Sometimes stickers on an office window might just get in the way of the property your trying to look at through the glass but do you know what they mean? It’s a tough world out there at the moment so make sure that the deposit you have paid is looked after! 

By Steve Roulstone

I have now listened and watched the reporting of the new report from the Resolution Foundation about the rental market and have to object once again to the broad brush approach of in this case both the BBC on Radio 4’s ‘You and Yours’ programme and the ITV ‘Daybreak’ news report both from Thursday’s editions. Only this time, because any professional Agent would agree with the main push of the report, that regulation of our Industry is needed, yet again, to many generalisations were made about the problems of heavy Tenant charges being widespread across the whole Industry.

Proper processes.

Firstly, the Lady from the Resolution Foundation complained to Ian Potter (who once again represented ARLA members very well) by saying that very few Agents carry their charges on the Web, well no surprise there, because most Tenants would not understand what the charges were for and whether they apply to them and when, because we cover so many different scenarios, but what we do (Castle Estates) is list all possible charges on a document which we ask Tenants to sign after explaining what charges would apply to them in their individual circumstances. By ensuring they have read and understood them before we ask for a signature, we ensure we comply with ARLA recommendations.

Other issues

There are of course many issues raised by the actual report, but this is not the media to address them individually, but suffice to say, the rent levels quoted raise serious questions as to where the survey was carried out, they totally ignore the Law of Agency and our role (in law) on behalf of the Landlord, that local Government schemes introduce a third party to argue about costs and would further delay the deposit returning process, because actual cash is not involved, the amount required to move cannot include the actual rent, because if a Tenant cannot afford the rent, we cannot accept the Tenant (common sense for me!) and many more, but to get back to the media reporting:

Not all the same!

The second screamingly obvious point that struck me, was there was no clarification of whether the ‘Letting Agents’ contacted or referred to, where Estate Agents who offer a Lettings service ( because as I have stated so many times they can no longer afford to ignore our market having grown so significantly during the house price drop) or stand alone Letting Agents and I think this is a clarification which needs to be addressed, because the only true judge of our industry is to look at Letting Agents alone. The rate at which Estate Agents have turned to the rental market clearly dictates that the level of service for both Landlords and Tenants will have dropped. By judging the performance of both side by side, professional Letting Agents and ARLA members especially, will I am sure shine!

Government now damaging the whole!

Another implication for me is the harm that is done to all Letting Agents by such news reporting, which, whilst I do not question the content, is done in the normal dramatis style (especially by ITV) so as to catch the viewers attention.  The issue being because the Government continually states that it does not have the stomach to address the legislation required to regulate the industry, when publications and comments from respected bodies are released in this way, the whole industry suffers from the subsequent fallout and bad press.

PLEASE regulate our Industry.

If only the necessary regulations and licensing were introduced, bad practises from Agents, overcharging from Agents (which from my own experience is normally the realm of the Estate Agent who are used to generating large fees) and rouge Landlords who rent property in poor conditions would ALL be addressed. Once again you get the same tune from me – it is a pity the Government cannot change their tune!

Professional representation.

 Ian potter (ARLA secretary) quite rightly said that we were nearly their under the last administration and this one has stated there are more important matters to address. Well for me as each report and complaint is made and heard our case grows stronger because every report always requires the same solution and as we approach 20% of the UK housing stock under the banner of the private rental sector, the only remaining question is how long before it becomes important enough for the Government to take the right action.


By Steve Roulstone

I sat and watched George Clark last night in his new programme designed to get us all up in arms about the number of properties that have been boarded up and have been left standing unused during a period when we have without doubt a massive housing shortage, but affordable housing is what the market needs and Mr Clarkes programme is designed to embarrass the powers that be into working with him and allow his Company to make the properties habitable once again.

Non Political statement.

In the main Mr Clarke managed to put a programme together which did not have a political edge and in saying what I want to say about the programme, it is my intention to do the same, because my comments are purely factual and based upon both the law as it currently stands and what I believe to be the powers that are needed to assist in raising quality of housing in the UK.

DIY I really don’t think so!

The first issue barely given time in this programme was the ability that people will have to affect changes themselves as a method of keeping the cost of renovating these houses down. But in every property visited or discussed, Electrical issues mainly with re-wiring were highlighted.  This of course is a job which just cannot be carried out by anybody who is not qualified (currently to Edition 17 of the IEE regulations) under Part P covering electrical installations in the home. Please Mr Clark, let’s get the facts right,  and let’s also be honest, electrical, heating including Gas and window replacement are the major jobs required when renovating a house, so without consideration being given to any possible structural work, there are regulations protecting people for all such services and they cannot be ignored!

Poor quality housing.

He then went on to take us around a rented property in poor condition (Could not help but wonder if the problems were the result of a failed DIY attempt?) and a property owned by people who had left it empty because they could not afford to rent it out (despite pointing out that the major problem with both properties was bad wiring!!) Sorry but I did not understand the point of this, because both houses on the face of it appeared to be in poor condition, so other than an appeal for cheap funding any point missed me by.

Proper controls needed.

What did strike me was here was yet another issue surrounding poor quality housing which would be addressed if licensed Agents were in a position to approve the property for the market prior to anybody being allowed to either let or rent the property. You cannot disagree, again from what we were shown, that both of these houses needed work, Surely this is a role that letting Agents would both wish to adopt and are in a position to carry out with ease and professionalism.

Large concern.                                                

Now far be it from me to throw a dampener on what Mr Clarke is trying to achieve here (Castle Estates joined forces with an attempt made by Prince Charles some seven years ago to resolve the same issue, which unfortunately failed) even though his own feelings about the subject seem to be the driving force, rather than any co-ordinated practical financial plan. But from the look of his web page, his own Business will be heavily involved in any solution, but the real source of the problem, which the area he covered in the first programme was created by the drive to build better housing in communities where property was emptied and or demolished, is much deeper and needs to be addressed on a much bigger format than this amicable gent will achieve, in the meantime I wish him well, providing he is realistic about what can be done under the label of DIY!

By Mike Edwards

From next year, agents and landlords will have 30 days in which to protect a tenant’s deposit, rather than the current 14.The change is part of ‘tweaks’ made to tenancy deposit protection in the new Localism Act 2011. These were made following court cases over the rights of a tenant to sue for a breach of the deposit protection legislation or when deposit money was not protected within 14 days, but by the time of a court hearing.   
The revised legislation also does away with mandatory penalties of three times the deposit if the deposit is not correctly registered and the ‘prescribed information’ not properly given.  Instead, courts will be allowed to use their discretion to hand out penalties worth between one and three times the value of an unprotected deposit. The current legislation has had a number of challenges within the courts, which have issued varying rulings – some in favour of tenants and others in favour of landlords.              

The Housing Minister Grant Shapps managed to find the parliamentary time to get these amendments to the legislation through deemed necessary because recent Court decisions were causing confusion about tenancy deposit protection regulations. Some of these decisions drove a cart and horses through the provisions especially in respect of the three month mandatory fine provisions and effectively made the provisions toothless and ineffective as a Landlord could delay protecting the deposit right up until the moment the tenant instituted Court proceedings.

However these amendments make it very clear that tenancy deposit protection is here to stay. Full details of the changes are available in new guidance notes issued by the Tenancy Deposit Scheme which can be seen on this link.  Commencement Order has yet to be published and the start date for these new rules is not yet known, but it will probably be April 2012 at the latest and possibly much sooner.