Tag Archives: Property Legislation

12Jan 2012

Current Property News: Mortgage arrears climb as Tenants struggle.

⋅ Leave a Comment

By Mike Edwards

Arrears are set to rise in the buy-to-let market, as more landlords face having to deal with tenants who cannot keep up their rent payments. According to research by Templeton LPA, a specialist practice of LPA Receivers, the number of court orders to evict tenants is up by 11%. In the last quarter, 24,966 tenants faced eviction notices – an increase of 11% on 22,558 a year ago. The number of tenants in severe financial difficulty has also shot up in the last three months, says the firm and during the last quarter of 2011, there were nearly 11,400 more tenants over two months in arrears than in the same period of 2010 – a rise of 18%.             

At the end Q4 2011, nationally there were 78,970 tenants in England and Wales in severe arrears.              

It is clear that a growing minority of renters are falling deeper and deeper into payment difficulties, and the number of severe arrears cases is rising. While the wider tenant mix has changed since the mortgage market downturn – with a greater number of financially sound yet frustrated first-time buyers – a growing number of tenants are seeing their job prospects affected by the UK’s economic malaise. Arrears levels on buy-to-let mortgages have not yet felt the impact of growing severe tenant arrears and evictions, but this would change this year. In the last quarter of 2011, the number of buy-to-let mortgages more than three months in arrears fell by 7% compared to the previous quarter, representing an annual decline of 17%.
However, at 26,300, there are still more than five times as many buy-to-let mortgages in severe arrears compared with Q3 2006.       
 
Mortgage rates have kept monthly payments low, but there has also been a change in landlords’ behaviour. With capital gains falling by the wayside in the past six months on higher loan to value BTL properties as their values fall  rental income has become the most important component in an investor’s annual return – but it also pays a landlord’s mortgage cheque. As a result, many landlords are being less lenient with tenants facing initial payment problems, and are looking to use court orders to replace tenants quickly in expectation of finding a financially sound substitute – and potentially an increased rent. However it is highly likely that mortgage arrears will climb this year and that both overall arrears and severe arrears will rise. This in turn will feed into increased tenant evictions and hamper a growing number of landlords’ ability to meet their monthly mortgage costs.

27Dec 2011

Current property News: Longhold tenancies and Licensing getting closer.

⋅ Leave a Comment

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.

19Dec 2011

Current Property News: FSA Mortgage rules, are we all mad?

⋅ Leave a Comment

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?

09Dec 2011

Current Property News: Resolution Foundation Renting in the dark leaves GOOD Agents crying for the law!

⋅ Leave a Comment

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.

 

06Dec 2011

Current Property News: George Clark campaign for Housing.

⋅ 4 Comments

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!

02Dec 2011

Current Property News: TDP Changes in Localism Bill for next year.

⋅ Leave a Comment

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.

24Nov 2011

Property Landlord advice: Government Housing Policy energy standards picking at the wrong sector!

⋅ Leave a Comment

By Steve Roulstone

The new Housing Policy released earlier this week, makes specific reference to two areas that I feel are linked, in the standards being set in one and the Government requirements for the other. I am referring to Decent Home Standards and Energy Performance levels.

Walking away from business.

This week alone, as a Letting Agent, we have walked away from two properties where the standard of accommodation that the Landlord was offering, we felt, dropped below what should be offered in our market place. As I pointed out in my Blog earlier this week, self policing, because we are professional Agents. The fact that other Agents (Estate Agents) were prepared to market the properties, in one instance without basic instruction which could result in the Landlord being the result of a financial claim against him, is both alarming and a subject that I repeatedly Blog about until blue in the face, if you do not legislate for fitter and proper Agents, the market will continue to suffer from bad Management!!

Market protection.

So with the knowledge that professional Agents will advise Landlords what should be done before they will market property, let’s just confirm, we now have a situation where we are raising standards automatically – just what the Government are asking for!! But wait, what do we have here? A comment in the same release, stating that Rented properties that do NOT reach certain energy standards will, by 2016, NOT be allowed to be offered to the market!

Is it the financial link?

So why are the Government targeting the rental market and not the sales market? There appears to be reference to review Building Regulations, which ensures new properties reach these energy standards, but nothing to address property sales, so why not? To me it is purely because they can and for no other reason. I would guess that the reason given would be that if Landlords are to make profit from renting property, then the profit must be gauged against the standard of the property. A good argument and I am not saying I disagree, but if that is the case, why not apply the same regulations to Mortgage Companies who profit from providing a Mortgage to the ‘House buyer’?

Too radical?

This to me is not a level playing field and we as an industry have five years to address it. The facts are quite clear in both statements included in the Government release on the rental market, the best standards of properties can be found in the rental market and the best energy efficient housing can be found in the rental sector. And yet in this report they further target (an easy target?) our sector for improvement. My point has to be, that under a heading of a thriving market sector, rules are being introduced which will place further unbalanced costs on the Landlord, when set against any decision against selling.

 

Action Needed.

We have plenty of time between now and 2016 to ensure this is not the case, so I ask our Industry representatives to ensure that our market will not be given a disadvantage at such a critical time in its popularity and development. If I am right and if this is left unattended we could be left with a problem, the time to act is now!

28Oct 2011

Property Landlord advice: DPS sister Company applies to run the TDP scheme for Scotland

⋅ Leave a Comment

By Mike Edwards

The Letting Protection Service Scotland the sister company to the Deposit Protection Service in England and Wales) has applied to run a tenancy protection scheme in Scotland. Though part of a tender process the DPS rightly emphasises it will be the only contender in Scotland to have had any experience of protecting deposits.

In its activities for England and Wales the DPS has protected more than 1.7 million to date, amounting to more than £1.3bn in value. Its application is fully expected to be approved and will trigger implementation of compulsory tenancy deposit protection in Scotland where, unlike England and Wales and argued by many very sensibly, insurance-backed schemes will not be authorised.

Instead, landlords and agents who take deposits must put the money in a banking or ‘custodial’ scheme and from the date the Scottish scheme launches from that date they will have 30 days (not the 14 as in England and Wales) to protect deposits for all new tenancies. Landlords holding deposits for existing tenancies will have nine months’ from the launch of the first scheme to protect their tenants’ deposits.

Under the Tenancy Deposit Schemes (Scotland) Regulations 2011, which came into force in March 2011, landlords and letting agents will have a duty to protect tenants’ deposits as soon as the first approved scheme launches. This is thought likely to be from April 2012 or if not soon after.     
               
There has been constant criticism of the English decision to allow three schemes, two of them insurance backed and in effect promoted by vested interests. In reality The Dispute Service in effect is for agents and Mydeposits.com is for Landlords enabling both to hold onto the deposit monies.

This was seen by many objective commentators as rather defeating the object of TDP which is to keep the tenant’s money – and all too often it is forgotten just whose money the deposit actually is – 100% safe and protected from abuse by others.

21Oct 2011

Property Landlord advice: Utility providers recognize rental growth.

⋅ Leave a Comment

By Steve Roulstone

For years the biggest issue Letting agents had with Utility providers was that they did not understand how the rental system works and that whilst a Landlord has Tenants in the property, any costs generated were not Landlords responsibility.  The end result was invoices sent willy nilly to all and sundry in an attempt to get somebody to pay for supplies. From day one we have always sent faxes at both the start and end of tenancies confirming changes, names and forwarding addresses.

Too busy.

This was always reliant upon utility providers supplying fax numbers where this information could be sent, but on one classic occasion the manner in which they addressed rental properties shone through, when I was faxing British Gas and because the phone was on a speaker rest, I quite clearly heard the BG employee at the other end say ‘we have had enough fax’s today I am going to turn this machine off’!! Sure enough, it took three days before we could get through again.

Change in approach.

It is hard enough sometimes to find out who Tenants have changes suppliers too, but typical of utility providers, who along with the practice of firing invoices right left and centre never mind how many times we sent them clear information (including on many occasions in the name of the Letting Agent, who of course can never be responsible for costs generated at any property) and sending highly inflated invoices for periods between Tenants (this is a particularly popular practice with the water companies, who when multiplying the cost out charged at up to twice the annual rate for one or two week periods) they have now managed to get legislation introduced which means they may now charge the property owner if they do not have sufficient Tenant details.

A justified approach?

Of course if the services are not contacted and it is the responsibility of the outgoing and incoming person who pays bills to advise of the change, then one can understand their motivation. But if a Tenant does not advise of a forwarding address when they leave, then Landlords could find themselves responsible for the Tenants failure to advise correctly. Because this is part of what we always do as Letting Agents, we should never fall fowl of this new legislation, but Landlords who manage property themselves can no longer hide behind the excuse that it is not their fault. They must now ensure that they supply the information at the end of a Tenancy, even if a property is abandoned, doing nothing is no excuse and contact and information known should be supplied.

Only for water.

The legislation is contained in section 45 of the Flood and Water Management act of 2010 and is therefore at present only available for water utility companies, but I am sure that once the electric and gas providers realize (if they have not already done so) that this is possible, they will quickly lobby for the same powers. For me the biggest problem is that for years they treated the rental industry as a nuisance and now that the figures are obviously much bigger, seek legislation to protect themselves. A pity they could not just be efficient in how they go about dealing with changes at property and adapt themselves to the market, because by using legislation they are implying that they are protecting themselves from people who wish to defraud them through the law, when I believe that the reality is that the legislation has been smuggled through the back door to save them money in coping with what is a major change in trend in this country through efficiency and having to introduce workable but time consuming solutions. How much easier just to invoice the registered property owner!

18Oct 2011

Property Landlord Advice: PAT testing for all!

⋅ Leave a Comment

By Steve Roulstone

The ‘all’ in the title above is referring to all portable electrical goods in any rented accommodation which is a House of Multiple Occupation and in particular the Tenants goods as well as any electrical items supplied  by the Landlord which is not something that would automatically come to mind, but the principals are just the same as the reasons why goods are tested in the first place.

Portable Appliance Testing

It is one of those sayings which gets accepted as an acronym and slips in to our language so easily that the proper meaning can easily be forgotten.  But the reason for testing all appliances supplied by the Landlord, is lost if the appliances supplied by the Tenants are not tested as well. This means any heating device, television or even fridge that they supply, will need to be tested as well, otherwise the whole point of carrying any test out is lost.

Enforcing the rules.

Of course it is how you manage this and of course why it should be done in the first place that needs to be explained. In our case at Stafford, we manage two blocks of rooms (over 60 in each) which are run by Wardens that we supply and the recommendation came about as a result of a Health and Safety and Fire Inspection, on behalf of the insurers, who naturally want to know that everything is being done to minimize the risks involved, especially where foreign students or workers are concerned with electrical items that run on a different current to our own electrical system. (Rice cookers are a prime example) What we do is to advertise the day we have our own test carried out and then allow goods to be tested free of charge.

Contractually bound.

The difficulty is enforcing the rule, which we also add to our contract for the accommodation, because if this opportunity is ignored, then it is almost impossible to enforce the test, so it is very much about communications and taking advantage of every opportunity to have the work carried out, which is why testing for free along with the Landlords property is, we feel, such a good idea.

Computers.

Of course the biggest area is lap tops and computers as virtually every student and indeed worker would now have their own computer, which still needs to be tested and despite the obvious reaction that any test would ‘blow’ the computer, there are set standards and methods (of course!) to follow. Such information is vital when assuring your Tenant that the test needs to be carried out and you are faced with the inevitable statement to do so would destroy the computer.