Tag Archives: Landlord Advice

18May 2011

Current Property News: Buy to Let market grows in strength.

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By Steve Roulstone

Recent reports indicate that the Buy To Let market is, as I have been reporting for some time, growing in strength and therefore returning despite all the gloom and doom reports that the Financial Crisis would see an end to Private Landlords investing in property using this specialist mortgage.

Misrepresentation of Landlords.

This report raises several issues for me, the most glaring being the overall suggestion that Landlords buy property to get rich quick and that they will not do so ‘Under current circumstances’. Well excuse me for pointing out that this is obvious and the error in the unstated indication that ‘Getting rich quickly’ is why Landlords purchased property in the past. Well as one of these Landlords and as somebody who speaks to and knows many others, can I point out that by far the majority of Landlords chose and indeed choose property as an investment, because it has traditionally given a conservative return, but never actually lost money!

Markets will always dictate.

I have pointed out on these pages recently, that it is the market itself which will dictate both the number of properties available and the need for Landlords to supply that demand. We have seen Tenant demand rise steadily over the last three years and the % of rented UK housing stock confirms both the need and the ability for Property owners to supply the demand. What has happened however is that droves of new Landlords are being created by the inability of the Sales market to provide purchasers and the realisation that by renting property instead, they have been able to move on with their lives and plans. I myself now rent and have rented my main home for the next five years for the same reasons.

Rising rents, really?                     

The main push of this article is to concentrate on the amount of income generated from the rent and I find the statement that Landlords are being enticed because of the possibility of rising rents to be a little thin! Firstly, this totally ignores the more down to earth reasoning given above that owners are renting simply because they can, when they are finding it very difficult to sell, allowing them to get on with their lives, but the assumption still ignores the main reason for Landlords to buy or invest in bricks and mortar, which is historical, because property in the long term always gains in value and this is very much linked with the conservative expectation, set against the risk of either Currency or Stocks and Shares.

Tarred with the same brush.

It seems to me that the writer has looked at Property Landlords in a ‘one view take all’ approach, where the reality is so much different and far less simplistic. Is it my view alone that people who invest in property are more conservative than those who invest in more traditional methods? Either way, the market is driving this increase in new Landlords and what is not my belief alone is that it is both sustainable and shows no sign of decline for the foreseeable future!

17May 2011

Local Housing Allowance Changes to Affect Landlords & Tenants

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By Craig Smith

Since the coalition government came in to power in May 2010, a number of cuts have been announced as part of their plan to reduce the deficit. One of these cuts is to the LHA (Local Housing Allowance) which is paid to the unemployed or those with lower incomes who are living in rented accommodation.

The Affect to Tenants

The amount of LHA paid to tenants will be reduced, typically around £30 per month on a 3 bedroom house (see the handy table which has been produced on the DirectGov website). This might not sound like a lot to lose, but this could be an extra £360 a year to find, and when your already struggling to make ends meet this can be a lot of money. Put this together with the ever increasing cost of living and things only seem to look worse!

The cuts come into place either on the renewal of a claim (12 monthly anniversary) or when there is a significant change to the claim, such as a new baby or moving from one property to another.

Landlords Reactions

A member of staff from Castle Estates recently attended a local Council Private Sector Landlord Forum which was to discuss the changes and keep Landlords informed of what is going to happen. The meeting itself was perhaps aimed more at private Landlords (as the title suggests!) although a lot of useful information was provided to everyone who attended regarding the cuts.

As the amount paid to Tenants is to be reduced, the extra money needs to come from somewhere. And if the money can’t be found then the council’s answer was simple… reduce the rent. At this moment the room fell silent for a second or two, until a few Landlords began to chuckle. They seemed to have forgotten that Landlords still have mortgages to pay, insurance to cover and repairs to be made.

The Route Forward?

Perhaps the first thing to come into a Landlords mind is to steer clear of any Tenants who may be in receipt of LHA payments. However, in the long run this would mean less and less housing available to those Tenants. This doesn’t necessarily mean that some Tenants may not be claiming in the future, for example, someone who has recently been made redundant and is unable to find new employment?

The other way of looking at the situation is that although the payments would be a lesser amount than would have been expected before, the payments would be made regularly to the Tenant. This doesn’t always guarantee that the Tenant will pay the money to the Landlord, but some good tenant referencing would also help in the selection of a suitable tenant. 

10May 2011

Property Landlord advice: Renting with white goods and part furnished.

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By Steve Roulstone

One of the roles of my position as Franchisor is to hold regular update meetings with other Castle Estate Franchisees. At a meeting held this week with a relatively new Franchisee an issue was raised that every agent has to deal with at one time or another and no matter which way a landlord wishes to get round the problem, leaving white goods and some furniture at a property will always remain a Landlords responsibility and my advise has always been simple – don’t!

White goods.

Once left at the start of a Tenancy, there is no clever way to stop white goods being either the responsibility of the Landlord or the subject of a dispute if and when it breaks down! I have spoken to so many Landlords who believe that by leaving a fridge their property will be more attractive to any potential Tenant. The truth is it is not and in simplistic terms, why worry? If an incoming Tenant cannot afford a fridge themselves, then they are probably not the Tenant the Landlord would wish for their house in the first place (Not including a cooker of course, which should always be supplied!)Plus what happens to the fridge they already own? Better remove both the goods and the responsibility in the first place.

Fitted white goods.

Now we have a situation where there is no simple answer, as fitted goods need to be maintained (and that does include the Dishwasher!) and when removed the property becomes less attractive. We need to think what our own reaction would be to being told we need to find our own washing machine for that hole in the cupboard? Of course this will be white goods we would probably never be able to use again, as fitted white goods are either smaller in depth or may not look pretty when installed without the cupboard surrounding it! Now be honest, would we seriously purchase our own in these circumstances?

Part Furnished.

Now we come to the worst of all scenarios, as I can absolutely guarantee, that should we find a Tenant who does need a three piece suite and a double and single bed first time round (providing of course that it meets safety requirements) we will not second time. Eventually you will end up removing all furniture as Tenants come along with their own bed and three piece, so rather than reduce the market to whom the house is acceptable, my advice is always remove all furniture now, for unless it is fully furnished (which is still a very small percentage of the overall market ) the furniture you do wish to leave will end up being a problem earlier or later in the lifetime of the rented property.  

Simple solution

In the end the advice to the Franchisee has not changed since I carried out the role myself, where possible remove white goods and furniture. Where it is to the detriment of the property, leave them but accept responsibility for maintenance. As far as furniture is concerned, unless fully furnished, remove all furniture from day one and make the property more acceptable to more of the market. All said with one rider – where the Landlord insists, we carry out our customers wishes!

06May 2011

Property Landlord advice: Rental horror story holds lessons for us all.

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By Steve Roulstone

Once in a while, and thankfully such occurrences’ are less common, a story comes along which encapsulates the problems that exist in our Industry all together. A story reported on in Letting Agent Today does just that. It is to the credit of the party concerned that they have viewed the incident in such a way that they are able to offer up the story to others as a lesson to be learnt.

Constant vigilance.

Within our own group, we have always ensured that our paperwork is constantly reviewed, even when problems occur and we can see we have done everything possible to carry out our responsibilities to the full, we still review processes and make changes if we believe we can further improve our service in carrying out our duty of Agency to the Landlord.  In this case it seems several essential services were not carried out correctly.

Referencing.

For me there is only one form of referencing and that is to use a professional referencing agency. So often we hear of Letting Agents who ask for references and proof of employment from Tenants and check them out themselves. The problem is clear for me, unless you have access to the information that a professional referencing agency does, there is no way you are able to investigate in full a Tenants history when problems would soon be found out. This is why Tenants with a poor history use independent Landlords fearing that referencing will find them out, so it is doubly disappointing in this case that the Landlord should suffer poor referencing.

Insurance.

Of course once a Tenant has passed professional referencing then Rent and Legal expenses insurance can be taken. It does not take a brain surgeon to understand why such Insurances are only available against Tenants that have passed such referencing in the first place. It has long been a recommendation of mine and I have written about the need for Landlords to take out Insurance recently.

Property visits.

As a Tenant I have just spent the last two months encouraging my Landlord (Privately Managed) to visit my Wife and I in our rented house, purely because of how important it is for Landlords to be confident that their property is in good hands. In the case of a managed property, the agent should carry out this work and when done correctly, and early enough, Tenants can be assessed in their property at a very early date, ensuring action can be taken earlier rather than later if they are failing to honour the agreement. Enabling notice to be issued at an early date if needed and always on an initial six month agreement, unless negotiated earlier, as for all practical reasons, a break clause after six months is the same as a six month agreement.

Professional management summed up!

It rather sounds as if this problem could have been dealt with cleaner and earlier on the Landlords behalf if all of the above had been followed correctly. At the end of the day you need to understand what the implications are of standing in the Landlord shoes, then and only then can you ensure you offer the best advice and service to your customer. After all, to do so is to carry out the role of agent in the correct manner, what other manner is their?

29Apr 2011

Property Landlord advice: 'Local Housing Allowance cuts' interpretation still in the grey!

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By Mike Edwards

Many Landlords aware of the proposed cuts in Local Housing Allowance (LHA) formerly Housing Benefit understand that the cuts only apply to new tenancies commencing from the 1st of April onwards. But we have become aware of a case where the tenancy commenced on the 16th of March on a 12 month tenancy. The rent was £2300 a month on a London 5 bed house which the local LHA office had agreed to pay when the claim commenced on the 16th March.

However in early April the tenant received notification that as from the 1st April, LHA of £1500 only would be paid. Can this significant shortfall be right?

If the LHA prove to be in error and will in fact pay the agreed figure of £2300 for the 12 month duration (because the tenancy was created before the 1st of April deadline when the changes were introduced in London), this raises another question. What of existing tenancies created before the deadline which have gone periodic? My guess would be that a periodic has the same new rules applied. After all it could stay periodic forever and never be subjected to the changes which rather defeats the object of them. 

The danger here is how the new rules are interpreted, and local variations are not unknown as with Council Tax where, for example, when discounts applied on unoccupied properties some CB offices said a property had to be uninhabitable as opposed to what the rules said – uninhabited!! Similarly when the under 25’s rules on the then Housing Benefit came in many years ago they were only supposed to apply to new claimants not existing ones and not even on their annual reassessments.

In fact many HB offices (wrongly) reduced the payment down to the new room allowance for all under 25 year old existing claimants though admittedly from their next annual reassessment.

In terms of what an LHA office will allow and what they will not they are bound by the terms of the Regulations and the rules are clearly laid out in the guidance manual at http://www.dwp.gov.uk/docs/lha-guidance-manual.pdf  and scroll down to

8.030.  

But there are a number of possibilities in this particular case. Firstly, this could simply be a misunderstanding. The rate for that property is capped to a 4 bed rate from 1 April, but any existing tenants would enjoy 9 months transitional protection. It is possible that the letter from the LHA office is simply informing of the new benefit level, ignoring the protection that exists for any current tenant. So maybe the LHA office will honour the existing rent for one month only before applying the cut?

26Apr 2011

Property Landlord advice: Poor condition of Private Property to rent raises more causes for concern.

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By Steve Roulstone

 As this report shows, it is still not difficult to find evidence of poor standards in the Private Rental sector. Yet again the Industry as a whole suffers from the performance of one individual as we suffer by reflection, although I note there is no mention of an agent in this case. The frustration for me as a Letting Agent is that we are available to give the kind of advice that would ensure standards could be upheld should we be asked, and of course listened too!

Property shortages do not help.

As I am only too aware, during periods when available housing to rent is at a shortage the limited choice means that many will not have the options they would appreciate when choosing a property to live in. I have just experienced something similar when looking for a Country property and only because I happened to look very early one day and by an incredible piece of luck (the person I asked for directions was part of the family who owned the property; access gained no more than thirty minutes later!) did we manage to get first ‘dibs’ on a Farmhouse close to where we work. But for those who are not so lucky, they can be forced to take the best of what is left and of course conscious decisions cannot form part of the process.

Professional links.

Just like the new Kitemark being pushed by our industry at present, professional links for both Landlords and Agents would allow people to have a considered decision to make; lack of available property removes that decision in so many cases. Not that I would ever discourage anybody from forging such links, as the person reports from the local Landlords association, poor Landlords do exist and the more we bang the drum about professionalism the better we will be heard. So whenever possible Tenants should look for some kind of link with a body who promote good standards to give them some re-assurance about the lease they are entering in to and the future maintenance of the property they wish to call home for the next few years.

Advice is needed.

As the property programmes show, good advice is not always listened too, but when it comes to basic standards, unless a Landlord has asked, or been offered advice by somebody within the profession, then there remains nothing more that can be done to say if the Landlord then goes on to look after the property in question and therefore the Tenants who will presumably be paying the Landlords Mortgage or giving them a good living, or if they take the opposite view and look at the situation purely from a financial standpoint, which is surely what causes the majority of problems for Tenants and just will not spend on basic housing standards that most of us would view as second nature. (and of course is covered by Government legislation)

Another call for registration?    

The result (indeed the National picture) is more proof of the need for some form of legislation to put a stop to the ease with which people can become Landlords without even asking one simple basic question about the Tenants rights, even though they are going to have such an influence on the standard of the Tenants life for the duration of the agreement. At present the need is becoming greater as Landlords, being no different than anybody else protecting their income at the moment, look for ways of cutting expenditure where possible. But when that decision effects the life of others, that’s when we should be able to turn  to those who legislate the Country for support, but hopefully the comment from the Housing Minister Grant Sharps, that the situation was under review in the medium turn suggests that the banging is beginning to get through!

21Apr 2011

Current Property News: TDS Figures from DPS seem impressive but do not give the whole picture

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By Steve Roulstone

The Deposit Protection Scheme has recently had some figures released in a recent press article and on the face of what they state, they do look impressive. Indeed, I would say that the scheme has been vindicated as one of the best available to Agents and Landlords as they approach ¾ million active deposits. I could not help but notice though a couple of what I believe to be very pertinent facts behind the figures, which in no way reflect on DPS as an organisation, but what they do show is that the Industry is still far from committing itself 100% behind the legislation.

Where have they been?

Firstly and separated from the main section if facts and figures  in the report is the somewhat surprising fact that as a Company, DPS are still registering around 200 new Landlords a day. This is allowing for working days alone, a rate of around 10,000 a year. Now my mind immediately asked where they have been until now, because even allowing for cross registration when Landlords decide to change or indeed new Landlords coming to the system for the first time, this figure shows a large percentage of Landlords were outside of the legislation, which do not forget, is now four years old.

Time for teeth?

It would be interesting to see if companies such as DPS, who of course must accept the contact and register the deposit at face value, actually take data about the history of the Tenancy. For those of us who wholeheartedly accept and encompass such legislation, do so with the hope that the legislation will deal with those who do not. Of course I am fully aware of the costs and penalties associated with not registering a deposit, but surely there has to be a time when you have to ask Landlords to prove why deposits for the property concerned were not registered prior to this date and for me four years is long enough for such situations to be questioned!

Landlords found wanting.

The second and more important fact that most Agents would have picked up on will be that two in three adjudications where sole culpability was awarded was awarded against the Landlord. Now what I would like to know and I believe should know, is how many of these cases (3518 in number using the figures quoted) were tenancies in Management and how many were through Agents. I am aware through the cases involving Castle Estates that where the correct paperwork and procedures have been presented, that the Landlord is usually successful, because if we believe that he would not succeed, we would recommend settlement and negotiate with the Tenant rather than go through adjudication in the first case.

Proof is in the figures.

The figures that I believe should be included in this release are those confirming how many unsuccessful Landlords were self managed? And indeed it would be good to see what percentage was managed by unlicensed Agents who are not connected with Industry regulators. (NALS, ARLA, RICS) This is an age old problem and such numbers would indicate how successful the recent legislation introduced by Government has been at changing the face of the Industry. So conversely we would also need to know what percentage were Managed by what I have always referred to as Professional Agents who do believe in running their businesses to the standards set by such bodies. The second half of this request is probably impossible for DPS to judge, but I believe that we would start to see justification of our shout for professional registration for all Agents and Landlords if they were made available – anybody listening?

14Apr 2011

Property Landlord advice: Property Investment still stacks up.

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By Steve Roulstone

As a Landlord with several houses purchased through my time as a Letting Agent it is nice to know that my investment in bricks and mortar has been well spent and even taking the current down turn in sales and property value, the investment stands up well against other investment opportunities.

Presentation figures.

As part of a process that I undertake with potential Franchisees, I have put together figures from several sources to confirm how property has performed against its rivals. I chose figures from the last ten years; indeed the last decade 2000 through to 2010 inclusive. It is not that as agents we have to convince people to buy property in the first place, far from it, we enter the scene when owners are deciding if either the market is what they want for their property, or if having made the decision, they wish the property to be managed by Agents rather than themselves. As I point out, it does no harm to be aware of how much better bricks and mortar have performed against what some would perceive as the normal route for investment.

Property v Stocks

 Over the whole eleven year period, property produced 64% growth (National House price statistics) whilst stocks only gave a 6% return (Stock exchange growth figures) Now I am fully aware that the whole point of Stocks and Shares is to buy and sell but this is of course not needed for property so I believe it fair to directly compare one with the other. I am also aware that S&S pay dividends and the average return over the same period was an additional 20%, but then rent also counts and on average, Landlords make 10% of the rent after mortgages have been paid. When both are taken in too account property still looks ahead of the game by some way!

Not forgetting inflation.

I added inflation in (3% gain and 3% inflation = 0% growth) and then looked at information from the Barclays Capital Guilt study 2010 which did the same for Shares, Bonds and Cash. The outcome for property allowing inflation at 28.2% and after paying Tax at 25% gave property at a return of 38% and the best that either Bonds or Cash could offer after inflation was less than 3%, with shares actually losing money! Quite a result I am sure you would agree, as property outperforms its rivals to the power of 10 which all points to Money well invested!

13Apr 2011

Lettings Update: Change in EPC Rules to be Implemented

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By Craig Smith

From 1st October 2008, most residential properties need to have an EPC (Energy Performance Certificate) in place before they are able to be marketed. However, this looks set to change from 1st July 2011 due to new government rulings which have been announced to the energy assessors.

Current Regulations

At the moment, an EPC graph should be provided to prospective Tenants at a viewing and most certainly before they take tenure of a property. An EPC will last for 10 years for a rental property unless there are significant changes made to a property, such as the fitting of a new heating system, insulation being put in or new double glazed windows fitted.

Are EPC’s Useful?

If you asked us how many times a prospective Tenant has asked to view an EPC at a viewing since October 2008, you could probably count them on just one hand! This seems to be the general feedback from many Landlords and Agents. So that must mean that not many people even bother to look at them!

The certificates do good information on how to reduce the amount of energy used and improve efficiency. But again, if no-one looks at them what use are they?

The New Rulings

A government memo has been seen by one of the industry’s biggest publications which suggests that from July 2011, a full EPC report should be provided with ANY written details for a property. At the moment, the first page of the report is sufficient as this shows the performance graphs. So lets just get this straight, we should have to provide a complete document, usually around 7 pages, for most people to throw away. Why?!

Full EPC’s are available on request anyway (not that we ever seem to have requests for them) and if anybody does happen to be interested in the energy usage, it is usually only a quick glance at the graphs. Being perfectly honest, we cant remember having a single viewer say no to a property because of the results of the EPC!

Your Opinion?

We would like to hear your opinions on the subject, whether you are a Landlord or a Tenant. Maybe you have found an EPC to be useful when refurbishing a property or when choosing a property to move in to, please feel free to add a comment using the button below! 

05Apr 2011

Landlord Advice: Keeping on Top of Utility Bills

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By Craig Smith

A lot of Landlords may not realise that, even if a property is unoccupied, they could still be liable for utility bills at a rental property. Usually, unless a property has been let with bills included, the Tenant would be responsible for payments. But what happens during the periods that a property is empty?

Ensuring the Accounts are set up Correctly

During an empty period, the utility accounts need to be set up in the name of the Landlord. It is important to take meter readings at the start and end of a tenancy to ensure that Tenants and Landlords don’t pay for each others energy used. A lot of companies will automatically send an estimated bill so regular meter readings should help to keep costs down. Most utility companies will be happy to send billing to another address, such as the Landlords home or letting agent address, which helps to prevent any debt letters coming through the post.

Debt Chasing and Court Action

If a bill gets missed, the utility companies usually send reminders and letters threatening court action, regardless of whether or not they intend to take you to court. (See Steve Roulstone’s Blog here for more information.) The best action is to act quickly to resolve any issues, the majority of cases are where the companies haven’t taken note of meter readings or start/end dates of a tenancy.

Choose Your Suppliers Wisely!

Landlord cannot force a Tenant to take a particular supplier for gas & electricity, although there is usually no choice for water and Council Tax! However, different suppliers charge different amounts for energy used. If a property is going to be empty for a period of time, it is always worth looking into the prices charged by different suppliers. Some suppliers will charge a standing charge, so even if no energy is used at a property a daily charge could still be payable!

Whenever a Tenant leaves a property, the Landlord should always aim to obtain the gas and electricity providers. If the Tenants don’t give the information, the suppliers can be found by contacting National Grid for gas and MPAS for electricity.

Water Supply

Some water companies will also make a standing charge even if no water is used. This is to cover costs of drainage and maintenance to the pipe supply. If the stop cock is turned off in a property, inform the supplier! Usually, if the supplier has been informed that the stop cock is turned off then the standing charges are normally cancelled (from our experience with Severn Trent).

Council Tax

A property can have an exemption from council tax payments if it unoccupied & unfurnished, usually for up to 6 months in each financial year. After this, a 50% rate is applied and will become payable, although after 6 months you would certainly hope that the property has been relet!