NLA launches new campaign: Rent Risk Resolve – Part one: rent arrears

Marcomms_RRR_header
As the UK’s leading representative body for landlords, it is important that we confront the issues that are important to our members. Our latest campaign seeks to raise awareness of the potential risks involved for landlords when running a letting business.

Rent Risk Resolve aims to highlight four of the biggest risks facing landlords and help you to minimise the impact on your lettings business:

  1. Rent arrears
  2. Rising interest rates
  3. Local landlord licensing and regulation
  4. The introduction of rent controls

As part of the campaign, we’ve created new guides to highlight the importance of taking a best practice approach to help ensure happy, healthy tenancies for everyone involved. Adopting best practice at every stage of the letting cycle will reduce the likelihood of issues occurring. 

Rent arrears

Our campaign kicks off with a look at rent arrears.  Rent arrears are a real concern for many landlords across the UK. Our research shows a third of landlords (32 per cent) say they have experienced rent arrears in the last 12 months.

On average a typical landlord with rent arrears has two tenants in arrears, and faces £1,649 of outstanding rent, so the potential impact can be devastating on both the business and personal life. It can seriously impact your ability to pay the mortgage and if left unchecked can spiral out of control causing a great deal of stress. Remember, only a court may end a tenancy agreement on the basis of non-payment of rent and even then, vacant possession is only guaranteed following two months of accrued debt and the grant of a warrant for possession.

So what can you do? Prevention is the first step to coping with rent arrears. It is very difficult to predict whether a tenant will get into arrears, but there are a number of common-sense steps that can reduce the risk of encountering arrears or at least make it easier to spot the danger signs early on.

Prevention

The best way to mitigate the risk of rent arrears is to factor the potential cost into your planning as early as possible. A good rule of thumb is to plan for 10 out of 12 month rent to allow for a sufficient margin for the majority of unexpected costs or moderate non-payment.

Doing a thorough tenant check can mean the difference between being stuck in a nightmare situation where your investment is costing you money and a successful happy tenancy for everyone.

There are also a wide variety of landlord insurance products on the market, to help reduce your financial exposure to non-payment of rent. Another option may be to consider insisting upon a guarantor; i.e. a third party who agrees to cover any non-payment on behalf of your tenant. It is also essential to ensure that you are sufficiently covered at the end of the initial fixed term, as some guarantor agreements can be ambiguous about continued liability.

A strong working relationship is important at every stage of the landlord tenant relationship, but is absolutely essential if problems are beginning to surface. 

Action

Monitor receipt carefully, and as soon as a rent payment is late, speak with your tenant. Depending on the reason for the late or non-payment, it may be possible or advisable to negotiate a repayment plan, which brings the arrears back under control. If the problem looks likely to become long-term you may wish to discuss whether your tenant wishes to continue with the tenancy.

If the worst has happened then you will be reliant on the courts to grant possession and potentially make a financial award to help you recoup some of your losses. It is important to ensure that you observe proper process at all times and avoid mistakes when it comes to court action.

You must be very careful not to pressurise tenants into agreeing to end a tenancy, as this could be perceived as harassment and or illegal eviction, both of which carry criminal sanctions.

For a more in-depth look at the issue of rent arrears download: A landlord’s guide to rent arrears. It enables landlords to spot potential arrears early and provides strategies to put in place to mitigate the impact. To find out more about the campaign, or to download the free guide, visit www.landlords.org.uk/rentriskresolve

Stay safe this festive season – don’t let fire ruin your Christmas

christmas-tree-83121_640

While fire safety is important all year round, the festive period can increase the chances of fire due to a number of factors such the use of candles, Christmas lights and heaters. While they are great for creating the perfect festive atmosphere they do carry some risk.

Many will also be sitting back and relaxing, perhaps with a tipple or two, over the holidays but the fact is the risk of accidents is greater after drinking alcohol, so make sure you take the necessary precautions to ensure an accident free Christmas period.

According to research carried out by Lloyds TSB, fire damage increases by more than two thirds over Christmas. So to raise awareness of the extra hazards that are present around Christmas and to ensure you avoid any devastating effects, here are a few tips which you can share with your tenants to help guarantee a happy and healthy Christmas.

Always ensure that you have a working smoke alarm

  • Test your smoke alarm on a weekly basis, don’t neglect to do this over the busy festive season.
  • Never remove the batteries from your smoke alarm, even if you have new toys waiting to be charged. Many rental contracts will state that you should not remove the batteries from safety alarms and some contracts even state that bonds will not be returned if batteries are removed.

Secure decorative lights to ensure electrical safety

Fairy lights and Christmas tree lights don’t get used very often, so you should make sure they are in good working order before using them:

  • Renew old Christmas lights as newer lights meet much higher safety standards. Remember to check older lights for damages and check they have the correct fuse in place as well as replace any bulbs that blow. You want to avoid Christmas tree fires at all cost.
  • Don’t let the bulbs touch anything that can burn easily, like paper or fabrics and other Christmas tree decorations.
  • Always turn Christmas tree lights off when you leave the property and for at least half an hour before going to bed. And to save electricity, remove the plug from the socket too.
  • Be sure to keep trailing cables and wires tucked away neatly – knots in wires can cause surges in power and could cause items such as Christmas lights to fuse.
  • Never overload electrical sockets.

Avoid fire hazards

  • You should also take care to keep ribbons, festive decorations made of tissue paper or cardboard, and greetings cards away from heaters, lights, fireplaces and candles.
  • Never leave a candle unattended for long periods of time.
  • Never leave cooking unattended and try to avoid cooking while drunk.
  • If you are planning to have fireworks as part of your celebrations, always plan ahead and ensure the display is a fair distance from the property.
  • Plan an escape route and make sure your guests know too.

For more advice and guidance on health and safety, you’ll find chapters on fire safety, gas, electricity, furniture and personal safety in the NLA’s online library.

Why is buy to let finance problematic for so many landlords?

All landlords and agents in Scotland will now have to protect a tenant's deposit money.

Andy Young, NLA Mortgages expert, analyses recent data from the NLA which suggests landlords are having difficulty accessing finance.

A third of landlords want to expand

NLA research has revealed that a significant amount of landlords are being hampered in their efforts to expand due to difficulties accessing finance. The stats suggest over two thirds (67 per cent) of landlords rely on a buy to let mortgage to fund their portfolio, with 31 per cent declaring their interest in looking for additional buy to let lending or re-mortgaging.

This equates to approximately 300,000 landlords that want to expand their portfolio: good news for the housing sector as it is vital in meeting the ever increasing demand for housing. By providing more housing, it will give renters access to a larger variety of properties which can help to keep the cost of renting down.

Why are landlords struggling to obtain finance?

So why are lenders increasingly becoming too conservative with their criteria? The financial crisis has a lot to answer for how lending is handled now. More regulation has been introduced as a way to avoid another financial catastrophe from happening. For lenders to ensure that they are following the responsible lending rules, which were set out by the FCA in the mortgage market review, some may have gone over the top and issued a blanket set of criteria which everyone needs to meet regardless of their individual circumstances. This means that if you don’t tick all the boxes you could be denied finance. It is therefore not hard to see why 56% of landlords think that current buy to let lending criteria is too conservative.

So with lenders trying to cover themselves as well as their customers to ensure that people are less likely to get into financial difficulty it is becoming increasingly harder for landlords to get the necessary lending in order to expand. Landlord A shows the frustration many are feeling:

Landlord A

“Mortgage lenders are becoming increasingly difficult to work with. The requirement to produce further information on income is causing delays and becoming problematic…if your income does not fit their box on criteria they say no, which wastes time and slows the process.”

The landlords that were surveyed declared their frustrations at lenders for not considering their personal situation, with six in ten feeling that their situation had not been taken into account. From a lender’s perspective it is important to consider what the risk involved is, especially when regulation dictates responsible lending, but there also needs to be a sensible balance.

Here Landlord B points to what others are thinking:

Landlord B

“Mortgage lenders should consider each borrower on their own merits, and not impose a blanket ban on lending to individuals earning less than £25,000, regardless of their personal circumstances.  Someone who is lucky enough to have no outgoings, servicing a mortgage with personal income of £25,000 a year is more than adequate.”

There are two ways a landlord can obtain a buy-to-let mortgage, either by going direct to a lender or by using the services of a broker, and the NLA believes it is vital that landlords have access to a wide range of products in order to find the one most appropriate solution for them.

Find a mortgage that suits your circumstances

If you’re a landlord faced with this scenario then you’ll be pleased to know the NLA is one step ahead.  NLA Mortgages was set up with the understanding that landlords need access to a range of products that meet their specific individual circumstances and to provide a solution that’s simple, fast and adaptive to your needs.

We provide a free online search facility which sources from over 600 mortgage products and schemes that are not available in the general marketplace and provide access to buy to let mortgage specialists via a dedicated Helpline.

Don’t just take it from us either; landlords have submitted in excess of £56 million of buy to let mortgage applications to NLA Mortgages this year alone.

For more information on what the NLA can offer get in touch at www.landlords.org.uk/servicesnla-mortgages or call us on 029 2069 5555.

TOP TIPS: How to avoid weather related problems this winter

radiator

The Scottish Government launched the Ready for Winter? Campaign on Tuesday 21 October, which aims to encourage people to ‘think ahead’.  They provide some useful hits and tips for people in Scotland to ensure they have taken appropriate precautions this winter. 

With that in mind the NLA has selected some useful hints and tips which any landlord can benefit from, ensuring tenants stay warm and landlords avoid any unnecessary problems. 

For more useful hints and tips from the Read for Winter Campaign search for #ReadyWinter14 on twitter or have a look at their twitter page @readyscotland. 

Top tips to help landlords through the winter

 1)     Information packs 

Doing a few small things now could save a lot of trouble later. Preparing an information pack for your tenants detailing where things are located and what to do when it gets colder can help avoid any bigger issues such as burst pipes or higher energy bills. The NLA’s tenant information pack contains all the key things your tenants need to know. 

2)     Energy efficient homes

The minimum energy efficiency standard for all rented properties to reach an EPC rating of E or above will apply to all new tenancies from 1 April 2018. It is therefore best practice to get your properties up to standard as soon as possible. Things such as loft and floor insulation as well as filling wall cavities and draft proofing can help towards meeting the standards. Having an energy efficient home will not only help save on energy bills but also help towards problems such as mould.  You can contact your local council to see what help is available.

The NLA is currently developing a more comprehensive service, which will launch in the near future. We will inform all members once the service becomes available, so you can benefit from the services and make your homes more energy efficient.

3)     Looking after your pipes this winter

Having a burst pipe is an unnecessary cost which can be avoided providing preventative measures have been put in place. It is therefore a good idea to think about the various areas where a problem might occur. If for example your property is vacant over the winter months make sure you turn off the water supply and drain the system.  It is also worth considering fitting an automatic stop valve as it can reduce damage from a burst internal pipe. Water tanks should be fitted with an insulation jacket and pipes should have adequate insulation, at least 19mm thick. Finally repair any leaks or drips as soon as you discover them. 

For more information see:

4)     Flooding

If you are worried that your property might be at risk of flooding then make sure you have adequate insurance against flooding and it is also worth considering flood protection products that can be fitted to your property in case of a flood. Make sure your tenants familiarise themselves with how to shut-off gas, electricity, oil-fired heating and water supplies, even in the dark. This information should also go in an information pack for your tenants so that they have something to refer to and refresh their memories if need be. The information pack can also detail how to use the flood protection products. It is also a good idea to keep a list of useful contact numbers, including your area’s Floodline quick dial code.

For more information see:

TOP TIPS: The importance of tenant checks

approved_stampHave you found yourself with a nightmare tenant? Welcomed new tenants into your well maintained property only to find it destroyed by the end of the tenancy? Found yourself in a situation where your tenant just stopped paying the rent soon after moving in? If you have, then ask yourself did you do a thorough tenant check before signing the AST? 

It is best practice to carry out a thorough check on prospective tenants; especially now with the new requirements for landlords to carry out immigration checks coming (see here), as it means risking a £3000 fine otherwise. 

Tenant checks will highlight any abnormalities that should set alarm bells ringing. To make sure you don’t risk losing out, be it due to rent arrears or property damage, here are some top tips from the NLA on best practice when checking potential tenants:

1) Contact details

For starters you must make sure you have the personal and the next of kin contact details. Also asking for previous addresses for the past three years can help provide a picture of where and how long they have been at a previous property.

2) Confirming their identity

It is important to check people’s identity to make sure you don’t risk renting your property to criminals, fraudster or vandals, and especially to make sure you comply with the impending Immigration Act requirements.

3) Carrying out a credit check

If credit checks aren’t carried out you may be risking financial complications. By carrying out a credit check you will be able to find out if there are any CCJs against the tenant or if they are in receipt of housing allowances.

If you want to do a credit report, the prospective tenant must also sign to confirm that they understand a credit search will be done.

4) Written verification of employment/income

To make sure that the tenant is able to cover the rent it is important to check employment status and income.

5) Obtaining references from their previous landlords and employers

Referencing can help ascertain what sort of tenant you may be taking on, but bear in mind if you want to contact referees you must seek the tenant’s written consent in advance. 

There are a number of tenant referencing products that offer these services, such as NLA tenant check. www.nlatenantcheck.org.uk 

Renting out property is a business and it should be treated as such. As a landlord you need to make sure you put your investment first and don’t take the risk.

Protect yourself from risk 

Court fees going up

Carolyn Uphill a landlord and Chairman of the NLA on making sure you have the right insurance cover and the perils of not doing your research.
 

During my time as a landlord and as Chairman of the NLA I have come across many landlords who thought they had appropriate insurance cover but unfortunately found out the hard way that they in fact needed specialist landlord insurance. Landlords should treat their investment as a business, and as with all business operations there are rules and regulations, with stiff penalties for getting things wrong. Essential are things like making sure they have the right paperwork, establishing good relationships with their tenants and providing the necessary services for a comfortable tenancy. But what about all the other risks you face as a landlord?

One thing is for sure; standard building insurance will not do

Whatever size the portfolio, a landlord needs to make sure they are protected. I have lost count of the number of conversations in which a landlord has said they thought that their standard house building insurance policy ‘would do’. Sadly that is far from the case. Without notifying your insurer that you have let the property out, your insurance may not be valid at all and it will not cover you for the things which as a landlord you may be liable for.

Do you have the appropriate cover?

Loss of Rent
Did you know only 23 per cent of landlords have loss of rent cover? That’s nearly three in four landlords who underestimate the significance of specialised landlord insurance. If, for example, your property burns down, not only do you need to rebuild it, but you may also need to re-house your tenant, at your cost. Of course, this is not an everyday occurrence but it will prove to be a very difficult and costly situation if you don’t have the right cover in place. There will still be outgoings, such as the mortgage, which needs to be paid whilst the property is being rebuilt and without a specialised loss of rent cover, there will be no income to help mitigate these payments.

Public Liability
Public liability cover is another area of protection which landlords mustn’t overlook. Only a specialist landlord insurance policy will provide you with this cover and that’s why you need to ensure you have the right policy for the business you’re in.

Rent Protect
All businesses come across potential bad debts during their lifetime and these costs must be accounted for, otherwise it could destroy a business. It is no different for landlords; these debts are more commonly known as ‘rent arrears’ and are critical for those of you who may have a mortgage to pay, which is why investing in a ‘Rent Protect’ policy is a must.

You never know what might go wrong and all these eventualities can be insured against. With our business heads on we need to calculate the risk to us, the damage they would do to our finances and consider investing in an appropriate policy.

Where to look

The NLA exists to support the private sector landlord and one of the ways we do this is to offer specialist products and services that can be trusted to suit the needs of the landlord and you will find details of these on our web site at www.landlords.org.uk/services 

There are lots of other risks to consider, financial and political, and we can’t protect ourselves from all of them but we must wise up to those which are foreseeable and controllable if we want to reap the rewards of our investment.

Safety first

Richard Price, Director of Operations, NLA supports the Gas and Fire Door safety awareness week campaigns and would like to help spread the word of gas and fire safety.

Both the gas and the fire door safety week campaigns are upon us. It is a great time to promote the importance of providing a safe environment for tenants and the importance of safety in private rented accommodation cannot be under-stated.

Landlords must take their responsibility and duty of care to tenants seriously in order to avoid preventable injuries and fatalities caused by fire or gas in the home.

It is important to be aware of what you are legally required to do as well as what is expected of you.

Can you smell something?

When it comes to gas safety it is important that annual inspections of all gas appliances, including boilers, gas cookers, gas fires, pipework and flues are carried out only by a Gas Safe registered engineer.

The legal requirements around the installation of Carbon Monoxide alarms differ in different countries of the UK, but the NLA advice is simple: fit audible alarms in any property that has a gas supply. Suitable alarms can be found in the NLA online shop. Remember, you cannot smell or see Carbon Monoxide, it is known as “the silent killer”

Gas Safe Register has compiled a top tips list to stay gas safe, as well as an introduction video which covers the basics.

The NLA has also put together an informative video on gas safety and your responsibilities which we recommend all landlords watch.

Put wood in hole

When it comes to fire safety it is important that the residence has been assessed for potential risk. In keeping with the risk-based approach of the Housing Act 2004 and the Regulatory Reform (Fire Safety) Order 2005, landlords should (and for certain properties must) carry out or arrange for a fire risk assessment in order to identify what fire hazards exist, what the risks to occupants and visitors are, and the appropriate action to take to mitigate and control the risk of fire in their properties.

The NLA strongly recommends that all residential properties are fitted with fire detection and alarm systems and that an adequate means of escape is established in case of fire. Again specific requirements differ in different countries of the United Kingdom.

Wherever fire doors are required, we recommend that good quality certificated fire doors are fitted in order to keep a fire adequately contained and to minimise the risk to tenants and damage to the property.

We also recommend that landlords make their tenants aware of the importance of not obstructing or propping open fire doors for their own safety, especially in communal areas.

Our video informs landlords how to carry out a fire risk assessment and is essential viewing for landlords of all residential properties. If a landlord has larger HMOs this additional video will cover what to do.

Knowledge is power

The NLA library has a wealth of information which can guide anyone who isn’t sure what they need to do. The online library on the NLA website offers guidance to support landlords through the process.

Other useful resources:

NLA Library – Gas safety information

NLA Library – Fire safety information

Fire Door Safety Week

Gas Safety Week

NLA Property Insurance