Category Archives: Lettings

14Dec 2011

Tenant advice: Guarantor roll in property Letting.

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By Steve Roulstone

 

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

Increasing requirement.

 

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

For the lifetime of the agreement.

 

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

End of Tenancy problems.

 

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

09Dec 2011

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

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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.

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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.

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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.

29Nov 2011

Current Property News: BBC report House prices Falling and Rising – Honest!

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By Steve Roulstone

I am not a lover of the way the BBC report most issues, far too much political bias for my liking, but yet again this week one of my old chestnuts has risen its weary little head again, as the BBC news stated that house prices have dropped this year in total 2.6% according to the Land Registry and that the average price for a house is now around £162,347. I heard this report on the news as well as being able to read about it on the BBC web site.

House prices in dramatic rise.

The BBC have reported that average house prices are now at an average of £241, 461! Wow that’s good, when you consider the first report was dated September 2011 and the second November 2011, that’s a rise of just under 50% which gets even better when you see that the period reported upon was also September 2011!! But wait, what is this I hear?

House prices rise by 1.6%!

According to the BBC in a report dated today! House Prices have risen by 1.6% in the last year, now I know that these reports are all from differing institutions and organisations, but please somebody explain what is the truth? Are prices falling? Is the average price rising? When will we ever know? What are we supposed to believe?

When will the BBC explain?

This to me is exactly the style of reporting which the BBC (this organisation that was once trusted to be the eyes and ears of the nation) now use in all areas of news reporting, in trying to compete in TV world, that proves just how far they have dumbed down to the extent that they are only interested in sound bites with no depth what so ever. No doubt other markets are treated with the same scant regard. Proof for me for our industry, is that whenever they have an ‘In house representative’( to discuss this important issue in less than 30 seconds) it is never the same person, proving that they do not have an ‘in House’ expert when it comes to housing issues!

There to report the news.

I know this is not all their fault, because they did not publish the figures in the first place, but it is a fact they like bad news (which is why I probably only heard about the average price drop) and they never give an argued or reasoned debate about what the figures represent and why such figures differ. To me this is the crux of the matter, because if Mr and Mrs Average are ever to understand what the BBC is telling us, then if they quote so many figures, they should explain so many figures and why they use them all, because they SHOULD be the organisation we rely upon to explain matters to us! That surely is what we pay our license for, is it not?

24Nov 2011

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

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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!

21Nov 2011

Current Property News: A housing strategy for England. But is it for the rental Industry?

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By Steve Roulstone

Today the Government have released their Housing Strategy for England, which is designed to give a kick start to housing sales across the UK, which most would agree is something that is badly needed and a view point that I totally agree with and have commented so in these pages on many occasions over the last eighteen months. But Housing Sales are not the only consideration nowadays and for once the Government have acknowledged this, with a section and strategy purely designed to encourage Landlords to start buying more property for the rental market.

Rounding a square peg.

I recognise that one problem the Government had to address was how to encourage growth in an area that had come under such criticism (Profit from rising property prices) for the perceived effect profit on Property values had had on the current financial situation and current property price de-valuation. What I did not expect but can perfectly understand is the decision to encourage growth through Business organisations rather than individuals. This very comfortably  delivers possibility of growth, which according to conversations I have recently had with Management at one of the larger National Property houses, whose clients include the organisations targeted by this policy, who are actively buying property in numbers at the moment, will be well received.

Using Council powers.

What I still cannot understand and accept, is that Local Government will be the answer to what is described as the ‘rouge Landlords’ who still flaunt such legislation as the Tenants Deposit Scheme and Houses of Multiple Occupation standards or as mentioned, the Decent Housing standards, for certainly where we are based in the Midlands, all Councils that I have come in too contact with have confirmed that they do not have either the man power or time (ability) to pursue Landlords and therefore deliver a local deterrent.

Working with the Industry.

It is very encouraging to see a whole section giving information about what the Industry can deliver and I am sure the ringing endorsement of the ‘Safe Agent scheme’ has been well received by the Industry in general, but I cannot make comment about this situation without pointing out that if the Government really wanted to get rid of rouge Landlords at the same time as increasing standards, then the Industry is here with open arms! Surely the fact behind the figures quoted that more property in the rented sector is of better quality than in the hands of owner occupiers says it all. I know that all of the properties in our Management would pass with flying colours, because we would not manage property that failed these standards.

Where does the problem lie?

I am also well aware that the figures state that some of the worst quality housing is in the private rental sector as well. Now with the information that we do not manage them and with the firm belief that neither do other professional Letting Agencies, it does not take such a massive leap of imagination to realise where these properties do actually lie! So what is the answer? Simple, involve us in managing or looking at these properties, so that all Landlords have to be connected with some professional licensed Agent. There are further issues raised for the rental sector by this statement especially surrounding Green policies, which I will address through these pages later this week.

19Nov 2011

Current Property News: Rents rise in September.

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By Mike Edwards

There is no relief for tenants as rents rise in all regions for the first time on record, according to the latest buy-to-let index from LSL Property Services plc. September figures show the average monthly rent in England and Wales rose by 0.7% to £718, surpassing the previous record high of £713 in August. With annual rental inflation at 4.3%, the average rent is now £29 per month higher than September 2010.

Rents rose in all regions of England and Wales for the first time on record and as a result rents hit record highs in six regions. Not surprisingly rents increased the fastest in the South East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August. The smallest increases were in the West Midlands (0.2%) and the North East (0.3%). However, over the course of last year, London’s rents have risen at a faster rate than any other region, increasing by 5.8%. However the appetite for UK property investment outside of the capital also remains subdued, with 12.5% of investors looking to acquire over the coming year.

LSL also report that annual returns on rental property dropped back in September after property prices fell annually. The average total annual return in September was 1.8%, the equivalent of £2,995 being £7,661 in rent, with a capital loss of £4,666. However, property prices in the last quarter have held up better than in the previous twelve months, and if this is maintained, a property investor could expect to make a total annual return of 8% over the next year.

Rising rents may prove to be a headache for tenants, but they are improving the outlook for investors – which may in turn encourage further investment in the private rented sector. Despite capital losses after house prices fell annually, growing rental incomes means returns are still in the black. The average yield rose from 5.2% to 5.3% in September, the highest level since the housing downturn, and outstripping many investments. So with house prices yet to resume their upwards climb, there are opportunities for prospective investors to secure profitable bargains.

Figures this week from Hamptons show that investors in the shape of cash buyers are being enticed back to the market. They have reported a yearly increase in cash buyer applicants (from 11.86% in September 2010 to 12.46% in September 2011) emphasizing the perceived strength of residential property as an investment asset. Marc Goldberg, head of sales at Hamptons International says: “Due to the long-term nature of property as investment class, many of our buyers prefer to invest their cash in bricks and mortar rather than more uncertain assets such as stocks and shares. Although the current economic downturn may have caused uncertainty, vendors can take heart that we’re seeing an encouraging increase in cash buyers ready to complete quickly.”

However, this picture of positivity jars with the appetite for investment seen in the latest Young Index figures, which appear to more accurately reflect the wider sentiment of continuing economic uncertainty. This quarter’s figures show a fall in the proportion of investors seeking to acquire property in London over the coming 12 months to 33.3% (from 46.3% in the previous quarter and 59.3% in Q4 2009).

17Nov 2011

Tenant advice: Notice period and final days.

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By Steve Roulstone

It is a real advantage to be able to comment on situations which arise through the daily activity in our office as letting Agents, because it means that the Blogs are always relevant. This week is no different. Once again a theme which crops up on a regular basis has been discussed and I felt would make a good subject to advice Tenants about what to expect at the end of a Tenancy.

A full month’s rent?

It is rare for a Tenant to pay a full month’s rent for both the first month or the last month of their Tenancy and this would only happen, if for example, the Tenancy started on the 1st day of the month and ended on the last day of the month! There are two ways of dealing with rent payments and at Castle Estates Stafford, we opted for the system of taking a payment for the first month for the days remaining in that month and from then on rent is due on the 1st of the month for each calendar month in full. The other is to always take a full month’s rent due on the date that the Tenant moves in and the due date remains as that day throughout the Tenancy.

Matter of choice.

The problems are present for both systems, for example having the date a Tenant moves in as a due date, causes problems for any move after the 28th, because of February and months that only have 30 days. With our system, it is explaining why they do not just pay for a full month on the day the Tenancy commences. But as it is our job to look after Landlords first and foremost, we find that arrears are easier to control if all rents are due on the same day, then all arrears are of the same length and letters are all sent at the same time.

Monies due at the end of Tenancy.

The issue that does arrive though is not when Tenants leave at the end of a month, in line with the required length of notice, but when they leave at any other day in the month and for some reason feel that for example, if they leave on the same date they move in, the rent paid at the beginning of the Tenancy covers the extra days – is does not!

Best solution.

Has got to be good communications! It is important that Agents make it clear to Tenants what is due when and why, and of course systems in place to cover this ensure all Tenancies are treated the same. With the Tenants Deposit Scheme ensuring both parties to a deposit are happy prior to any return, it is doubly important to get this right. Bad communication in my experience leads to people digging their heels in and unless we as Agents can show clear instruction and reasoning, our customers, our Landlords, may lose out.

Proper dues.

Of course it is only what is legally due that Agents will collect and the best solution when all else fails, is to add up in total the number of days associated with any part months (only ever the first and last months) and with a daily rate to hand, calculate the rent due for both periods. Of course the daily rate has to be in line with the manner in which the courts approve daily rates to be calculated which should be confirmed as well, hopefully then as is the case with most Tenants the calculation is both understood and accepted. Unlike the Tenancy that ended badly because the Tenant expected a full month’s rent to be returned as well as the deposit, because he paid his rent in advance, even though his last payment was at the start of the month and he left on the last day!

10Nov 2011

Current Property News: Buyers feeling the freeze!

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By Mike Edwards

Banks approved 6% fewer house purchase mortgages in September than in August, with 17,000 would-be first-time buyers left out in the cold.          The figure of 33,130 house purchase approvals was, however, 8% higher than in September last year though the comparison is with a very flat month from 2010. To compound this figures from the British Bankers Association show the number of remortgage approvals in September was also down on the August figure, by 8%, although about the same as in September 2010. There are some commentators who may suggest this lessening of remortgage money is not such a bad thing in terms of how over borrowed the country and individuals are.       

The BBA reports that growth in gross mortgage activity is being driven by the buy-to-let market and it is clear that a modest stimulus to gross mortgage lending is coming from the buy-to-let sector as rental yields continue to improve as we commented on recently. Indeed any recent improvement in gross lending can almost certainly be put down entirely to buy-to-let landlords taking advantage of the current rental market than a much-needed surge in lending to first-time buyers. Strict lending criteria and absurdly high deposit requirements are continuing to keep mortgage finance out of the hands of the average first-timer, and this is flooding the private rented sector with demand.    

The only problem on the horizon though for Landlords is given the additional supply and even allowing for increased rental demand, the likely sluggish future growth in the capital value of their properties may continue for some time. And if they decide to sell their portfolio what sort of market may they be selling into? Latest calculations indicate that each month there are 17,000 more frustrated buyers than before the downturn having to rely on rental accommodation because they are unable to buy. This is driving up competition for accommodation in both the flatshare sector and the wider rental market. For many investors, these conditions are too attractive to ignore, hence the growing investment in buy-to-let.         

While this continued buy-to-let interest may well alleviate some of the pressure on the current stock of rental homes, the supply will have to increase at a much faster rate to match growing demand and limit further rent rises. The CML says that in the 12 months to August an average of 15,800 first-time buyers a month secured mortgages, compared to an average of 33,100 a year between 2002 and 2007. These are staggering figures and do not bode well for the future of the housing market for several years to come. Without first time buyers the market is eventually bound to seize up – or see spectacular price falls. 

Whilst the mortgage market is doing its best to stagger on the ailing economy is entering a state of rigor mortis, and the crisis afflicting Europe makes any resurrection of growth look unlikely.   The temptation for lenders to pull further back from an unsure market and recoup equity over the winter is becoming overwhelming. Supply of credit remains painfully restricted, meaning there is almost no margin for lenders to grow their loan books, so they are being understandably cautious and focusing on targeting borrowers with big deposits.