Monthly Archives: August 2012

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By Steve Roulstone

In looking at the second part of the Review of the Barriers to Institutional Investment in private Rented Homes, I have read and will comment on the sections headlined; The Barriers and Conclusion and The Recommendations.

 The Barriers.

 Most of these sections concentrate on the land and planning permission needs, but do refer to some rather confusing detail. Such as that Management costs are as high as 30% for Residential property. Now I know that National Companies specialise in offering services for Companies with large property portfolios, but when you consider the normal cost for Management on a local level would average at 10%, I find it difficult to see how this rises to 30% when managing from afar.

 Total Costs.

 I may of course be wrong, but it rather looks as though it is the cost of maintaining the property that has been added to the running costs, however, as the report confirms that it is normally Capitol growth that is considered to be the income from residential and not the rental income, whereas with Commercial investment it is the opposite way round. Surely then, if Commercial values drop over time, the cost of maintenance should be offset against Capitol growth and it is both that should be considered, as they are real income, when comparing residential to Commercial? Is this where encouraging Tax breaks can be made?

 Local market.

 Otherwise, once again, local Management will answer the cost issue, rather than distance Management having to find a local Agent to carry out the role of providing a Tenant, let the Local agent be the sole property Manager. Costs halved? – probably!

Lack of Experience.

The report then states that there is a lack of experience in knowing how any scheme would operate. But this does not exist in the market place; rather this confirms that in compiling the report, the Property Management Industry has not been approached. A fact confirmed by the later statement in Recommendation Five: that the market would benefit from; the professionalism of the management service. Had the Industry been spoken with (also confirmed in the Terms of Reference) then Sir Adrian Montague would have been aware that one already exists.

Right Model.

I also believe that the right model already exists as well. There are numerous professional Letting agents, who also operate as Property Managers as well, looking after leasehold sites (Block Management) throughout the UK. Providing that any incentives in profitability and land availability are made available Nationwide and providing there exists Agents with the ability to run both, then costs can be controlled, the whole Industry will benefit and progress can be made throughout the UK.

Professional Management.

But I believe that this is another opportunity for the Government to change their attitudes towards the rental sector, which is growing at the same speed home ownership for individuals is declining giving a thriving rental sector the opportunity to be part of the growth if not the very reason for it, that this country desperately needs. Tied with ensuring the Industry moves forward in a professional self managed, or Government managed (although I believe this is where the lack of motivation currently exists) manner, ensuring the scheme meets all the requirements listed in this report and that the properties concerned will continue to give the profitable long term return institutional investors require.

By Craig Smith

As one of the largest agents in Staffordshire, we get to see a wide range of properties in different areas around the county. It is always nice to see something different and how different owners have designed their homes to suit their needs and, particularly in smaller homes, how they have made best use of the space they have. But one of the issues we have is marketing a property that is not presented at its best.

General Cleanliness

One property that I showed to a couple earlier this week is a prime example. The current occupiers were still in the process of moving out so there were a few dismantled beds and pieces of furniture still to be taken away. Usually this wouldn’t put any viewers off as people who are about to moves themselves can appreciate the amount of work it entails.

The main issue for this property was the amount of cleaning that was needed. There were bags of rubbish piled in the back garden and the house really just needed a good going over with a damp cloth. If a viewer sees a property in this kind of condition it is hard for them to imagine how it will look when they are ready to move in. It also puts doubt into their minds about whether the Landlord would be proactive with any future issues during the tenancy.

Does the Paintwork Need Touching Up?

Another issue the viewers had with this particular property was the condition of the walls and paintwork throughout the house. Again, most people can look past a wall or two that is yet to be made good but when the majority of the walls need filling in and completely repainting, it can be hard to visualise the end product.

It is easy to tell someone what work is going to be carried out before they move in but it is hard for them to actually believe you without any actual evidence. For example, if one room had been started and the viewers could see tools or paintbrushes etc then they might have believed me a little more!

Keen to Get the Property Let

We understand from a Landlord’s point of view that it is best to get the property let as soon as possible to avoid any prolonged empty periods for their property. But when a property is poorly presented it can sometimes make us agents feel like we are wasting our time. Sometimes it is best to hold off on any marketing and wait until the majority of any work is completed.

Needless to say we have spoken with our Landlord since who has welcomed our advice, even if it is sometimes a little hard to put it across in a polite way!

By Steve Roulstone

The Montague report which reviews the manner in which the Private Rented Section is viewed by the Institutional Investment market has been released and is available for download from the Department for Communities and Local Government. The basic idea of the report was to look at why Investors do not look upon the Private Rental sector in the same way that they do Commercial property investment.

 The report is a weighty 28 pages of Summary and evaluation, but holds many good ideas and could just see the way forward for our sector as we struggle to meet the demands of a modern mobile work force. It is in three sections and is going to take at least two posts to comment upon, in this first post, I have selected highlights from the Background and Evidence sections in this post. I will follow this up by looking at the Barriers, Conclusions and Recommendations.

 Growth.

 I am a total advocate for the building industry (Housing) being the vehicle for leading the way out of recession. This is why I am always looking at new build and activity and look to the property sales figures of a guidance for where financially we currently sit. It is therefore nice to see clear figures quoted to support my theory. For every £1m spent, 12 jobs are created or supported and for every £1 invested in construction, £2.60 is generated elsewhere in the supply chain. The supporting sources are listed in the report.

 Local or distant Management.

 It struck me quickly when looking at the Evidence that a market exists, that there was a need to build in assured maintenance. I agree whole heartedly, that any long term scheme should include an organised plan for both maintaining of and maintenance on the property concerned. My immediate thought was to ensure the properties are managed locally and not by some distant organisation, to ensure both a distribution of the Management structure and workload through local contractors rather than the majority of the expenditure remaining in London.

 Across the Country.

 To do this, as the report recognises, there needs to be many differing schemes, which, in order to maximise the effect across the Country, as highlighted above, needs to be spread across the country and not concentrating again in the area that generates ever increasing rent levels; London. It is important in arriving at any conclusion that promotes and encourages Investor growth in Private rented property, that the whole Country sees the benefits.

 Wardens.

 Unsurprisingly, the wish to see Wardens or a Management presence in specific developments is a nice idea, but one that is only reflected for affordability, through the size of the initial development. As an Agent who Manages whole sites on behalf of one owner, exactly the type of site referred to in the report or that would be developed as a result of Investors becoming involved, there is a recognisable limit to the size of what are acceptable sizes of development so as not to have to large an impact on the local market, both by type of property available and by long term effect on local suburbs. In short, there are places that high rise buildings fit in and areas where they do not! Wardens suit large buildings but would cost too much for more localised schemes offering between 20 and 40 units.

 Long Term Agreements.

 I think it is a good idea to generate an agreement that sits well for longer than the current popular Assured Short Term agreement, but by the same token, I see no need to do this by changing the AST. As case of ‘It ain’t broke, don’t fix it!’ But a document built around the normal lease as exists for purchasing leasehold property would be ideal. This could still give the Tenant of this shorter term lease the protection afforded to the leaseholder, whilst reflecting the short term usage and the interests of the Freeholder as well.

 Block Management.

 It is suggested that Management of such buildings would tie in nicely with the current Block Management style and again as this is one of the services we offer I can comment and could not agree more. This would be ideal providing that local Companies were sought for provision of services, instead of the properties being managed from afar. Why do I feel this is important? Because we have grown our business on the dissatisfaction of leaseholders whose representative never visit sites or more importantly, cannot be visited because their offices are in London, Birmingham or Manchester.

 There are some great ideas in this report and I look forward to commenting on the conclusions but if there is one point of caution it is that consideration has to be made as to the spread of housing, which is needed throughout the Country as well as provision of service, which, to avoid complaints about schemes failing to deliver and being unapproachable, need to be sourced close to the buildings concerned.

 More to follow!

By Steve Roulstone

It is a short on news week this week and time, as my daily work in the Lettings office has stripped me of the opportunity to research the market for current news or write a more informative post before the week ends, so instead:

Happy Birthday to us!

This week marks our two year anniversary of posting regular weekly comments through our Blog. This is now a total of 230 posts on our ever changing and informative Industry.

It is no real surprise that their is never a shortage of topics to write about, as matters arise in the National press and daily workings of a Letting agency on subject of Law, good practise, professionalism and ever changing Legislation and many many more on a dialy basis.

So another opportunity to say thank-you to those who bother to read our posts and an even bigger thank-you for those who bother to comment. I am always happy to respond and answer further questions through communication, so please, carry on asking.

Well here is to the next 230 and next two years, Thanks again!

 

By Steve Roulstone

A short topic today, but a situation that has left me somewhat surprised by what I found last week when helping a Family member move in to a new rented home through a social housing organisation.

The Lady checking the Tenant in and I, with a common interest in renting, chatted about the differences between what they do in the social sector and what we do in the private sector and it was noticeable that despite the obvious difference being the nature of the Tenant, and their circumstances, the trappings of how we do our business remains the same, I pad and agreements in hand!

What we did not speak about and what I found the most dramatic difference was the standard of the house concerned and what Tenants are supposed to put up with in the social sector. Actually, it was not so much the house as the fittings or lack of them!

The property itself was fairly modern, being no older than twenty years or so, but downstairs only had laminate in the kitchen and bare concrete floors elsewhere. Upstairs the picture was the same with bare wooden floorboards and throughout, not a curtain at any window.

I can just imagine the reaction of any private Tenant should I carry out a viewing at a house and inform them they would have to carpet throughout and find curtains for every window themselves! I can assure you we would let very few houses!

There was also the question of the state and condition. The Kitchen had three walls painted red and one wall half painted (and not in a its finished type of half) the main bedroom was painted in union flag shades of red blue and white, in blocks some two feet wide, in stripes! The second bedroom in cerise pink on one wall only! Now when we check Tenants out of a property we ensure the decoration is both as it was when the Tenancy started and therefore in good order for the new Tenant and start of Tenancy. It seems clear that when people leave social housing they are not checked, or if they are nothing is done to correct or put right the type of decorating schemes that would strike us in the private sector speechless.

The obvious smack in the mouth opinion that I am left with, is that those who have little choice of where they are able to live because of their financial position ensuring they do not have choice, have to accept whatever house becomes available when it is offered and are therefore also left with the bill of being able to live with the very basics of comforts by having to purchase both carpets and curtains themselves!

This when they are where they are because of financial difficulties is a situation which does not sit well with me. Perhaps I am naive in my outlook, but it is clear the Housing authorities and Social Housing providers are happy to rely upon the charity of the wider family to enable those in dire straits to be provided with such basic comforts as curtains and carpets!

At least if the Government do manage to find a way of attracting the Private sector to social Tenants, another much wider subject of discussion, at least they will enjoy a far better standard of accommodation without the fear of how much such a move could cost them or their relatives!

By Craig Smith

The BBC has produced an article today showing that house prices continue to rise and that families are being forced out of their homes due to ever increasing costs.

Facts & Figures

Before we all start getting scared and wondering just where will we all live in the next few years, lets look at some of the facts.

Yes, rent amounts have increased in the last few years in particular. But if we look at the amount they have risen in comparison with house prices, which have risen by around 59% in the last 10 years or so, the average rent amount has increased by around 44%. This means that Landlords are getting less return for their property than they would have done 10 years ago.

Current Rents Increasing

With this is mind and the huge amount of rental property that is now available, Landlords are finding it more difficult to increase the rent on a current tenancy. It is better to keep a good tenant in place rather than risk pushing them out with higher rents and having an empty period at the property. Most tenants who find their rent going up will notice that it might only increase by a small amount.

People Still on the Move

In the BBC report is suggests that it is now harder than ever to purchase a property. With lenders being very careful about the amount borrowed, buyers are finding themselves shaving to find bigger and bigger deposits. Although, all things considered, over the last 12 months we have generally seen a rise in the number of our tenants who are leaving their rental accommodation and who have purchased their own home. So the property market is still active, albeit slower than we might be used to.

More Homes Still Required

Many people comment on how many new homes might be appearing in their local area but the facts show that the amount of new homes being built has decreased. The Office of National Statistics shows us that the population ofBritain is ever increasing. Couple this with relationship break ups and more & more people wanting their own home, demand is ever increasing. 

The End Result? 

As buyers struggle to find deposits, the demand for rental property increases. In order to get the property market bump started again, lenders need to lower the deposit rates for mortgages!

By Steve Roulstone

A report by the RICS in to rents paid dated July 2012 show an increase of 4.3% for the past year in rent levels across the Country. This confirms that the Industry is still healthy and demand continues to be strong. At the same time, house prices are predicted to start to rise again as the Country comes out of recession. This is probably not too much of a surprise given the drop in prices seen over the last few years, but does point to the current trends being a good time to buy property and develop portfolios as with continuing demand and climbing rents the investment, currently forecast at producing over a 5% return, should continue to rise.

Last Ten Years.

However, before there is too much clamour about greedy Landlords and long suffering Tenants some facts behind the figures should be given, for what happens year on year should, I feel, be balanced over a longer period of time, so that a more realistic figure can be arrived at. If we look at data for the last ten years the picture between Rents and House prices show quite different results.

Playing catch up.

In 2000 at a time when the rental market was less than 10% of UK housing stock, rent for an average 3 bed property in Stafford was £400.00 This is now £575.00 An average house in the UK cost £101500 and at present that price is £161777. Compare the two sets of figures and a quite different picture appears.

Renting still good value.

Because house prices rose so heavily (Ironically largely on the back of a rush for Buy to Let mortgages!) that average rent in 2000 was just under 4% of the house value. Now it is just over 3.5% The gap is still some £60.00 per month less than is currently being achieved and just shows how far behind house prices when considered as a percentage return, rental prices had fallen.

Predictions correct.

What this also confirms is that it is in line with the market levelling out for rents to continue to increase, and they are predicted to do so at 2% higher than house prices will rise. It is also of note that the period before 2000 was very stable and rents were indeed calculated against the value of the property. This obviously reflected the local market rather than national averages, but the comparison still stands up and I am more than aware that the rent locally is far behind that achievable in other Towns and Cities.                                                                                                                             

Statistics and Statistics!                                                                                                                                                        

Once again what appears on the face to be unreasonable increases can be explained when looked at over a wider period of time or against something which gives a broader context. I am also fully aware that others may be able to give a differing picture using their own parameters. So I will just go back to the more reliable method mentioned above, common when I started Castle Estates.

£400 rent against a house valued at £100000 gave £4800 per year, a return of 4.8%

£570 rent now against the same house valued at £159500 gives £6840 per year, a return of 4.2%

Therefore rents still have some way to go to seek parity with prices in 2000.

By Steve Roulstone

It would seem that a further little known section (or at least commented upon section) in the Localism Act has come to light covering the requirement of Local Councils to change the manner in which they deal with people who are becoming homeless under a standard notice to quit (Section 21) if they are unable to source alternative accommodation.

Normal circumstances.

This normally applies to Tenants with problems during a Tenancy anyway and would normally mean notice had been served because of rent arrears, hence the difficulty in finding alternative accommodation. But this is the very situation that the Council is supposed to step in and protect those unable to move and the very area where current advice can lead to an eviction order being served by the Courts.

Illegal Act.

The problem is caused by the advice currently given by Social Housing teams to stay put until such time as the eviction notice has been served. As if by doing so the courts are confirming the Notice is correct. At this stage most Council’s will provide accommodation. At first glance the change appears to make the Tenant ‘labelled as homeless’ with 21 days of the section 21 notice still to serve. Removing the need to rely upon the courts at all and ensuring the Tenant does not perform an illegal act by staying after the end of notice date and having to be evicted and all of the stress and discomfort this procedure produces.

Not so!

On taking advice and checking the legislation thoroughly, it now appears this is not the case and that this rule only applied in certain cases, where the Council placed the Tenant in the Private Rented section in the first place. But as someone who has always questioned the need to subject Tenants to such an uncomfortable and stressful course of action I cannot help but ask the question why not?

Simple.

It strikes me that a process whereby the Council can investigate and ratify a Notice three weeks before the end of the notice period, would in the long run save time and money for all concerned. Surely it is better not to place the Tenant in a position where they are in effect breaking the law and offer a solution which is based upon freedom of information and open for all parties to be present in a simple meeting. To me this is a no brainer and having spoken to our local Housing department about this very subject they do wish to involve and engage with Tenants at an earlier date, resulting they hope, in being able to provide accommodation at an earlier date.

Positive steps.

This is an action we will adopt as an agency as I only see better resolution of problems and a cheaper less stressful situation for all concerned. It is good to speak to a Housing department more concerned with solutions than problems. The only area I still felt uncomfortable about is that they still advice Tenants to stay until eviction notice is served, which I believe is tantamount to inviting them to break the law.

Keep talking.

But by ensuring Councils are aware of problem scenarios at an earlier date, hopefully this will happen less and we will do everything we can, with the knowledge that we must always have our Landlords interests first and foremost at the head of what we do. Even so, this stance can only help and hopefully sometime soon, somebody will see exactly what Tenants are being asked to be put through at a time when they are already suffering.

By Steve Roulstone

The question of Tenants being able to trust their Agent, or knowing that the Agent they are about to do business through is one that can be trusted has shown itself in differing ways this week. There is a great difference between the two and again, as happens so often in our relationships with Tenants, it is the need for Tenants to understand why decisions are made that matters.

Firstly, from a professional viewpoint, in a Blog that I penned earlier this week, it is clear that as an industry we need to keep banging the drum about the standards that we as professional Agents sign up to. By being a member of a professional body, in our case ARLA we are showing the standards that we operate to and confirming that monies are protected both in the manner in which we run our business and the audit checks we are subject to, in order to retain our membership. SafeAgent, the kite mark adopted and marketed to further give proof of client money protection and standards should go hand in hand.

In short, if an Agent does not belong to either (Other professional bodies such as NALS and of course RICS are of course acceptable) especially SafeAgent, then as a Tenant or Landlord I would ask why not?

Then there is the day to day life of being an Agent where we are subject to the wrath of the Tenants and prospective Tenants if matters do not develop how they wish.  These so often include either being turned down for property because of being in receipt of Housing Benefit payments and the most common one, having a pet. Not forgetting of course, retention of deposits!

The detail behind the reasons when housing Benefit payments are involved are of course individual in every case, but what is always common, is that payments are made in arrears and in 13 four weekly instalments. Set this against normal monthly payments in advance and then add the difficulty created by the Council stopping payments without any consultation with us as Agents and knowing just how long it can take for payments to start again and it is not difficult to see why we do not need to recommend this situation to our Landlords.

Again in short, legally, we have to give best advice to our Landlords at all times!

Pets in houses are another long topic. Again, each situation is different, but the standards set by some pet owners damage the hopes of so many others that we cannot ignore them. Even without bad management, pets can leave an unwanted legacy, we have had too many instances of fleas up to a year after cats have vacated a property not to ignore the possibility! It is difficult to get an x Tenant to pay for carpet cleaning after they have left, so carpet cleaning becomes a must if any pet is involved.

The point I wish to make is what I have written is not unusual, and any potential Tenant affected by either scenario will have heard this and more. But those with qualifications and affiliations with professional bodies probably, by nature of how they prepare their staff, will have a better understanding of how to manage the situation and can therefore be better relied upon to look after Tenants interests and give them the ‘Duty of Care’ they deserve!

Deposits are an altogether more complicated process now, but in dealing with issues left by Tenants and confirming the payments required to correct those issues, the excuses given at times scream that the Tenants involved have no faith whatsoever in how we go about our business when, if affiliated, as discussed above, we have been trained, have years of experience and know exactly what we can and cannot claim for.

In all cases, if we are wrong, the decision is made through arbitration. We prove our case and judgement is made. If an Agent loses a case through arbitration (and here I can only speak for the Castle Estates offices) it is usually because the case was badly prepared and paperwork let them down, rather than because they were making a false claim. Membership of organisations such as ARLA and schemes such as SafeAgent should enforce this view with Tenants.

The fact they do not means more needs to be done to gain trust as an industry, more needs to be done to further the name of professional bodies (Here comes the drum) and the Government needs to get involved and introduce the legislation confirming the fact and introducing the correct level of penalty for those who operate outside of legislation. In the meantime, look for the symbols of professional membership they all have back up, but more importantly, what they stand for is professional intent!

By Steve Roulstone

One of the most difficult jobs that we have to do as Letting Agents is to convince a Landlord that no matter how badly treated he may feel by the Tenant neither we nor he can just turn up at the property and demand recompense!  Harassment and all the actions that surround it are a serious matter and a case has recently come to my attention which highlights exactly why we give the warnings that we do.

Extreme case.

The case I am talking about surrounds a Landlords efforts to remove a Tenant because they wanted to sell the property concerned and went about it in a way that was far from normal by any standards which does mean that the efforts the Landlord went to are extreme, but the penalties  are also high and what should be considered is that the Landlord was wrong in every way, before we even get to the legal steps to avoid action, but that does not change that he was found guilty in virtually every step he took.

Notice served.

Even though the notice was served and indeed not questioned by the courts, the very fact that the Landlord applied pressure on the day the notice came to its due date is significant. The courts only have one view and that is that the law must be seen to take its view. Even if the Tenant does not leave on the due date, the courts are the only vehicle through which a Tenant can be evicted.

Landlords rights.

The law sees itself protecting both the rights of the Landlord and the Tenant, but just because a Tenant does not leave does not mean that anybody can take matters in too their own hands. This is why even calling without notice can be considered as harassment! There is one simple rule here, do nothing without notice, even a visit to discuss matters should be done by appointment.  Let the courts do their work, under no circumstances should a Landlord take any form of direct action themselves.

Extreme scenario.

Yes the detail of this case is extreme, but the consequences do show just how this can get out of hand. The damages which could amount to £30000 (along with not unsubstantial costs) are the proof of just how costly getting this wrong could be.

Private Landlord.

It is also worthy of note that the Agent concerned, having served notice, was contacted by the Tenants solicitors, but from that moment on, the action was all against the Landlord and the Agent, obviously unable to fulfil its role, arrears (correctly) to have disassociated themselves. They have no choice when matters are taken out of their hands. But if it was an Agent that was being blamed for this action no doubt ‘rogue agents’ would have appeared in the report! But as it was a Landlord taking his own actions, it would be nice to know that he was banned from being a Landlord again!

Registration.

If all Landlords were registered as was recommended in the Rugg review of 2008 then there would be no doubt and action would have been taken. But that is not the case and as far as I am aware, without a specific case resulting in a Court ban, Landlords cannot be stopped renting property again! Who knows, that may still happen, but what is sure is that there is no legislation in place at present to rely upon.