24Jan 2012

Tenant issues: Tenants resort to payday loans to pay rent.

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By Mike Edwards.

 

During 2011 when in theory the latest credit crunch has still really to hit home, data shows that almost one million people have had to take out a payday loan at 4,000% within the last year to pay their rent or mortgage. In total, seven million borrowers and tenants are relying on some form of credit to pay their housing costs.

As well as payday loans, struggling borrowers and tenants are taking out unauthorised overdrafts and other loans, or using credit cards. A survey carried out by YouGov for Shelter asked 4,014 people if they had used these forms of credit to help pay their rent or mortgage in the last 12 months.

One in seven respondents (15%) said yes.

These shocking findings which show the extent to which millions of households across the country are desperately struggling to keep their home. Turning to short-term payday loans to help pay for the cost of housing is a totally unsustainable form of financial existence.

Unfortunately following hot on the heels of lax banking regulation it appears the UK offers easy pickings and slow retribution for the world’s payday lenders who have been regulated out of other countries and find a far more relaxed regime given our lax supervision.

That is why these 4,000% APR lenders are exploding across British high streets. Yet the astronomical APRs aren’t the real danger – that comes from the rollover penalties where people cannot repay at the end of the month. Then what was intended only to be a short term emergency provision allows the compound interest rates to kick in.

There is now strong evidence now of people using payday loans to meet every day needs too not just to pay housing costs. Many households struggling with core rent or mortgage commitments will of course struggle to repay payday loans on time too.

17Jan 2012

Property Landlord advice: Self Management leaves Agents unprotected.

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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!

17Jan 2012

Landlord Advice: When Tenants Run Away From a Property

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By Craig Smith

Managing around 300 properties throws up a wide range of different tribulations from time to time but one that keeps appearing every now and then is a tenant that ‘does a runner’ from a tenancy. There are a number of causes as to why they may do this but usually this is due to financial problems on the tenants part.

Scared of the Unknown?

Perhaps one reason that a tenant may run from the responsibilities is that they don’t know how the Landlord will react to overdue or unpaid rent. From experience, a lot of Landlords are willing to work with tenants to reach an outcome that will suit all parties. For example, if the tenant is in rent arrears the Landlord may agree some sort of payment plan so that the tenant can pay the outstanding rent in smaller payments but, eventually, the Landlord still gets his rent.

Of course, not all Landlord are as reasonable as others but communication from the tenant is key. Again, most Landlords will be more willing to resolve any such matters with a tenant is they keep in regular contact and update the Landlord as to when payments may be made.

Extra Costs for Landlords

Another big problem with tenants leaving in a rush is the state in which the property is usually left. A recent case that we had of this included furniture, boxes if items and even childrens’ toys being left in a house! This is without mentioning any cleaning or redecorating that needs to be carried out due to tenant neglect.

If a deposit is held then a Landlord can take steps to use this either for rent arrears or for damages, or, depending on how much is held and how much reinstatement work is needed, perhaps towards both. Using the deposit towards the costs will help but initially, at least, the cost is usually borne by the Landlord.

Property Downtime Increases

Reading this now you might think that things aren’t too bad, get the decorators and the cleaners in and away you go again looking for another tenant. But think of this, how many tenants would be willing to take on a run down property? Fair enough the work may already be in progress but it is hard to see potential in a property that has been neglected. This could result in the property being empty for a longer period than it may usually do.

With an increase in the amount of time that the property is empty, coupled with the initial costs of any works could all add up to a rather large bill for the Landlord!

Can we Prevent the Tenant form Doing This Again?

The simplest answer to this is, unfortunately, no. A tenant will do whatever a tenant wants to do, whether it is right or not. There are ways of chasing tenants for rent arrears or dilapidations through the courts which could result in a tenant having a CCJ or some sort of judgement made against them. This could affect their credit rating and would almost certainly hinder their progress on any future tenant referencing. 

13Jan 2012

Tenant issues: Notice to leave must be correct.

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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!!

12Jan 2012

Current Property News: Mortgage arrears climb as Tenants struggle.

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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.

10Jan 2012

Property Landlord advice: Utility Warehouse still getting it wrong.

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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!!

 

09Jan 2012

Rental Property Advice: What is the Role of a Guarantor?

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By Craig Smith

The majority of letting agents in England, including ourselves, usually insist that a tenant is referenced before proceeding with a tenancy. This usually includes a credit check and background checks on the prospective tenant in order to confirm their identity and credit history.

Who are the Referencing Company?

Different agents use different referencing companies to carry out the checks and some are more in depth than others. This doesn’t necessarily mean that, by having a tenant referenced, you are guaranteed a good tenant. Everybody’s circumstances are different and can change at almost any time, whether that is 10 years down the line or 10 days into the tenancy!

Poor Credit Equals Bad Tenant?

Similarly, it is not always the case that if someone may have poor credit that they won’t be good tenants and look after the home. With the aid of a guarantor, a tenant can proceed with an application for a tenancy with the Landlord knowing they have an additional ‘safeguard’ should the tenancy go wrong.

What Does a Guarantor do?

Provided the tenant pays the rent on time (and in full!) and looks after the property, the answer is nothing! But perhaps the best way of describing the responsibilities of a guarantor is that they have the same responsibilities as the tenant but without being able to actually live at the home. This does not just include and rent arrears but also and damages or costs should the tenant fail to cover them. For example, if a tenant is not contactable at the end of a tenancy but with damages to the property. The guarantor can also be used during the tenancy if a tenant fails to pay the rent on time.

A common misconception if the length of time that a guarantor is in place for. Most Assured Shorthold Tenancy Agreements are for 6 or 12 months or maybe more and guarantors can often believe that they would only be responsible for the initial term of the tenancy. However, unless agreed otherwise with a Landlord, the guarantor could remain in place for the full length of the tenancy, whether it lasted 6 months or 6 years!

If you are about to stand as guarantor for a tenancy you should be absolutely certain that you are in a position to do so. You should also seek advice if you are unsure of any of your responsibilities before signing any agreements! 

04Jan 2012

Current Property News: New Year wish list for Letting Agents

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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.   

 

29Dec 2011

Tenant advice Rents falling?

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By Mike Edwards

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

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

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

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

27Dec 2011

Current property News: Longhold tenancies and Licensing getting closer.

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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.