Category Archives: Lettings

By Steve Roulstone

We have had an interesting experience this week, where a property which was fully managed, has changed to self Management where we only provide the Tenant. The issue here was that the Landlord, having visited the Tenant, was left with the feeling that we had failed to protect them when under full management and had given poor service to the new Tenants because we were no longer instructed to manage.

Tenants advised the Landlord.

The main issue is relating to what the Landlord had been told by the Tenant, which left the Landlord needing confirmation that we had looked after them, no matter what service we were offering. Without repeating the details in full, suffice to say, that by confirming our normal processes, which included signatures confirming the receipt of information and the ability to prove timings through photographic evidence taken at the check in, the Landlord was left understanding that we had done the right thing and carried out our role professionally. The interesting point for me, is that had there not had been other issues, the Landlord may not have had cause to contact us at all and the only result may have been our dis-instruction, without even knowing why!

The bigger picture.

The reason for us being able to prove our case surrounded what had happened with the previous Tenant, as an extension had been built, without the Landlords knowledge at the next door property. The reason the Landlord phoned and mentioned the suggested lack of service to the new Tenants, was to see how this had happened without their knowledge. The answer was really straight forward, the past Tenants had failed to forward mail that was intended for the owners advising them of the neighbours plans and therefore failed to give the Landlord the opportunity to have their feelings taken in too account.

All points covered.

We were able to prove that our agreement included a clause confirming that the Tenant was supposed to forward all mail intended for the Landlord, especially that of an important nature and this is what they failed to do. We were also able to confirm that the agreement banned Tenants from interfering with the supply of services to the property, which was another issue that had been raised. The result of this event, confirms just how important it is to have an agreement whose basis is centred around the protection of the Landlord (and in our case is based upon 30 years of experience) and that ’of the shelf’ agreements have their rightful place – on the shelf!

Consequences.

The serious side is that because of adhering to processes, we were able to confirm our service had been proper and correct and that the Landlord, who of course had gone to self management because there had been no problems over the previous seven years, had received the services that had been paid for. In doing so we were also able to demonstrate that the agreement we use is there to protect the Landlord and clauses do have a purpose.  The Landlord left with the knowledge that they could pursue the previous Tenant for actions that had left them disadvantaged, but this time, because of self Management, the letter would have to be written by themselves, rather than by us!

By Steve Roulstone

One issue which happens again and again is the need for a Tenants notice, to be in line with the rental payment period and time and again, we receive notices which do not reflect the correct timescale. The problem that has arisen in our offices this month, highlights another way in which this occurs and despite the fact that I have written about this before, I feel that there is an additional point here which could help to both clarify and assist in enabling Tenants to get this right.

Last person to hear.

The problem this week, in both cases, was that we ended up being the last person to hear what the Tenant was planning, and it has struck me that the reason is because it is highly likely (confirmed in one of the cases I am referring to) that the Tenant feels that when notice is given, it is not what we wish to hear and will be looked on as bad news. This is of course, not the case. In fact, when available property stocks for marketing are low, exactly the opposite!

Minds at rest.

The issue for the Tenant is to be assured that when they advise us of their intention to leave, it will not be bad news and that by being involved from day one we may be able to assist the timing and circumstances surrounding the move to the benefit of all concerned. Certainly advance notice as far as the Landlord is concerned is always good news and should we be able to allow the existing Tenant to leave early (only of course when a new Tenant is moving in to replace them) nobody is disadvantaged.

Keeping people informed.

The media is quick to jump on any situation where Tenants are ill informed and rightfully so, but if we can re-assure our Tenants from day one that any news, including the desire to move on, is welcome, then perhaps we can save ourselves and all involved the problems that occur when we have to point out that the notice, which normally coincides with the date they have already arranged to move, is not actually in line with the payment dates and (at times) still has a further three weeks to run for which they remain liable!

Communication.

So, not so much Location, Location , location – more Communication – well you can see where I am going. At Stafford we will be introducing notification which tries to assure the Tenants that any news will be treated equally by our office, no matter what and try to encourage them to advise us as soon as they are able when they are considering moving, so at the very least, they understand the existing liability and need to serve notice in the correct manner. But the issue here is not what we say to Tenants, rather what Tenants say to us, because it is they who need to improve their communications and all we can do is encourage them to speak to us.

Point of contact.

How we deal with this, because we have a busy office where any tenant may find themselves speaking with any of our different Agents, is ensure that the person who originally moved them in to the property, deals with them through to and including the Check in and out. Therefore they will be referred to somebody they already know and that, hopefully, makes it easier for Tenants to speak with us!!

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.

By Steve Roulstone

Last year I had cause to write a Blog about the manner in which Utility Warehouse try to invoice Landlords when they have closed their account and the Tenant has not sorted the new supply out to their satisfaction. Not because they had not been contacted, not even because they had no contact details for the Tenant, no, purely because they were not satisfied with the manner in which the new account had been opened.

12 Months on?

No change, even though at the time, I had several long involved conversations with them about the letters I was receiving, even though the Tenant was doing everything possible to pay for their own account, Utility Warehouse continued to write to me as if the outstanding invoice was my responsibility. I can assure you the resulting phone calls were many and heated, but it took something like six weeks to straightened matters out and confirm the new Tenant was in deed, responsible for their own costs!

Time for another letter.

It was not that they had written again or even the consequences of the content of the letter that has dismayed me this time, but the fact that they had failed to close my account, even though their operatives tried to tell me they had (strange because the letter had my name and the same old account number on it!) Well, I say my name; they had managed to change the spelling and actually written to my next door neighbour therefore having the wrong address.

Unbelievable arrogance.

The letter was a request to set up a Direct Debit because mine had just been closed and whilst I have to admit that when I first called, my temper was not at its best, I did not take kindly to the UW representative trying to tell me they must be correct and that I was wrong in my assumptions, even when I asked what dates they had on the account and she confirmed it had closed in August 2010, the penny did not drop. I left her to work out that if the account had been closed in 2010 there was no longer any need for a DD to be set up!

Human error or system.

I called again! The excuse for the error, for error it obviously was, was what really gets to me about such organisations, because they tried to tell me that the letter with the old account number on it, with the change of spelling of my name and my next door neighbours address, must have been a technical error. Now is it me? Or is it blindingly difficult for a computer to randomly contact me a year after our last contact, with the name spelt wrong and at the wrong address? No, to me this must be human error and it just raises huge questions about the manner in which they operate.

Do they care?

The reaction that you receive from UW confirms without doubt that the answer is no, they really don’t, I laughed sarcastically at their representative when he said it was computer error and he indignantly asked me why I was laughing. Well the actual answer is the frustration of dealing with them, what he got was me asking if he wanted to know the full story of my dealings with them because then he might just understand! No they do not care and I would love somebody to convince me differently, because as all Letting Agents are aware, the most difficult and unorganised companies we have to deal within our day to day dealings would be confirmed by everybody as Utility Companies!!

 

By Steve Roulstone

Happy New Year everybody and I hope that 2012 delivers what you wish for especially in these difficult financial times. If you like me you do believe in the New Year bringing in a wave of optimism with it (always have been an optimist, even though some would have you believe I am just another grumpy old man!) then you too will have a wish list of what you hope the year will deliver. For what it is worth, here is mine:

Continued growth

In the last few years of financial difficulties the one thing that has shone through as a person working in the property industry is that the uncertainty in housing prices has only added to the instability we are suffering. I believe that the figures for the last three quarters of the year are stabilizing (told you I was an optimist) and I wish for continued growth and stability in house prices. Small growth (with seasonal fluctuations that a slow growth market gives us and is what I believe we are now seeing) will help confidence come back to our market and is something all markets will benefit from.

Safe Agent achieves the recognition it deserves

The new ‘Kite Mark’ for professional standards in our industry deserves support from every Letting Agent who has the same standards and wishes to see professionalism receive its due reward (Should be the same in any industry) Too often the reason given for not joining professional bodies or schemes is because it means nothing to the customer – no it never will do until everybody joins in!! Why membership is not used as a reason for customers choosing your Company above non members is something I have never understood!

Professional status enters the world of politic debate again!

But what our Industry needs more than anything else is that Politicians realise how important professional qualification IS needed. The reasoning given for the present Government dropping the plans of the last are cost based alone and would re-introduce much needed credence to a sector of the housing market which is growing in unprecedented numbers year upon year at present. Rented property is not only here to stay, but has to be considered as a major player in the housing market and as such deserves the professional recognition that the numbers demand.

Professional bodies push for recognition

But in order for us to get the best out of any legislation introduced or changes made, we need our professional bodies to sing from the same hymn sheet and as loud and as often as possible. I understand Gareth Malone is looking for a new challenge, well here’s one for him, because until the bodies present a stabilized and combined front, the Government will continue to have an excuse not to listen. We are very capable of self policing any qualification and we need the Government to recognise this more than ever, right now!

Market recognition of the difference between Letting Agents and Estate Agents who run Letting departments.

All and sundry have now joined in the massive increase in numbers enjoyed in property renting over the last three years, either out of necessity, or recognition that our market can no longer be ignored. What we need to do is continually point out that professional qualified (Professional body recognition and membership) Letting Agents are as different from unqualified Agents as Beetroot and Radish (we may be the same colour but the taste will never be the same)! and it is only because anybody can open as a Letting agent without qualification that this has happened. Quality should always rise to the top and unless as an industry we continue to point this out, the difference will not be seen. Normally, it is only when problems arise, that the problems are spotted by which time the problem has already damaged the industry as another horror story hits the press.   

 

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!