Tag Archives: buy-to-let

Our new Housing Minister is keen to stress the positive role of the PRS

Pity the minister re-shuffled in July.  While you or I spent our summer holiday reading for pleasure, they resign themselves to packing a stack of briefing papers next to the must-read political biography and the highly recommended literary novel that they told the Sunday heavyweights were on their summer booklists.

CEO Richard Lambert on the NLA's meeting with the Housing Minister

CEO Richard Lambert on the NLA’s meeting with the Housing Minister

The new Minister for Housing and Planning Brandon Lewis doesn’t appear to have been tempted to slip a couple of thrillers surreptitiously into his suitcase.  When NLA Chairman, Carolyn Uphill and I met him yesterday, he was well on top of the subject – interested, engaged and keen to stress to us the positive role he saw the private rented sector playing in the provision of housing.

This was very much an introductory meeting.  We wanted to ensure Mr Lewis could put faces and names to the NLA when it came up in future, and that he had a sense of who we represent and what we are trying to achieve. Equally, we wanted to get a feel for how Mr Lewis was approaching the issues and to put some thoughts into his mind for the future.

Retaliatory eviction

We hoped that we would get some pointers on the Government’s attitude towards Sarah Teather’s private member’s bill on retaliatory eviction.  However, the Minister was carefully non-committal, saying that the Government was “not yet ready” to declare its position on the Bill.  Questioning whether there was the evidence that retaliatory eviction was as widespread as is often perceived, Carolyn Uphill stressed the importance the NLA and landlords in general attached to the no-fault possession procedure, and expressed our concerns over any call to reduce the flexibility section 21 gave to the market without good reason and sound evidence.

Model tenancies

We’ve been waiting through the summer for the launch of several initiatives which emerged from the Government’s response to last year’s Select Committee report, and he confirmed that we should see these shortly.  One of these will be a model tenancy agreement.  The Government’s aim was not to trump all existing tenancy agreements, but rather to change tenants’ understanding of how tenancies work, and raise awareness that longer tenancies are possible, and that they can ask for them.  This gave us the opportunity to outline the NLA’s recent campaigns which have highlighted the business benefits of long-term relationships between landlord and tenant.

Licensing

More generally, we wanted to stress our concerns over the way local authorities are using the power to introduce discretionary licensing schemes.   Over the past year or so, we’ve seen more and more councils propose selective or additional licensing schemes, and some worrying trends have emerged:

  • The growing number of proposals for blanket borough-wide licensing
  • Poorly drafted consultations, based on flimsy evidence, which do not demonstrate how the case for licensing meets the specific criteria of problems caused by low demand or anti-social behaviour
  • The imposition of additional property or management requirements as conditions of licences
  • The absence of an independent check on whether local authorities have made their case and properly justified their licensing proposals, which means that there is no scrutiny of or check on how the powers are used – or in many cases, abused.

Brandon Lewis was very sympathetic to these points and said that he was “very aware of blanket licensing as an issue, especially in London”.  We pointed out that in reality licensing is a burden on the law-abiding, as they are the ones who accept the obligation, and pressed the case for accreditation as a method to filter out the responsible landlords from those who do not comply with the law or standards, who should be subject to more rigorous enforcement.

Further reading

All in all, it was a very useful conversation.  And I’m afraid we are going to add to his reading pile: we promised a couple of recent issues of UK Landlord for his red box.

Are you having abandonment issues?

Lucy Regan, London Representative for the NLA advises landlords on the issue of tenant abandonment.

Abandonment isn’t something that happens often in the private rented sector but when it does it can be distressing and confusing. But how do you know if your proREGAN Lperty has been abandoned and what are the steps you need to take?

Things you need to consider

Has the property been abandoned?

First of all a landlord must decide if the property has been abandoned. If a tenant has given notice or handed back the keys this is then termed ‘surrender of tenancy’. Secondly a landlord must establish the reason: there may be a valid reason as to why a property is left unattended, for instance a hospital stay, an extended holiday or the tenant has gone to prison.

Insurance

Your insurance may not be valid if the property has been left unattended for more that the stipulated period. This could prove costly as empty properties are susceptible to squatters and vandals.

How to check that property has been abandoned

  • Contact – A landlord should first attempt to contact the tenant. If they do not respond to calls, voicemails, text messages or emails, it could be the first bit of evidence that the property has been abandoned?
  • Is the tenant still making rent payments? – When did they stop? Is that normal or have they been late with payments before?
  • Are the tenant’s possessions still at the property? If they have been removed, it could be another tick in the box of abandonment. Checking for possessions can be difficult. In some cases a landlord may be able to see through a window, but if this is not possible, they must then seek permission from the tenant to access the property. But with the suspicion of abandonment this may not be possible. However if a landlord thinks the property is in an unsafe state they may enter, but they must be cautious and make sure there is a clear reason for entering. It would also be a good idea to have a witness come along.
  • Is the tenant claiming housing benefits? If so, then a landlord can contact the Housing Department. They may even be in contact with the tenant and could shed some light on the situation.

Where do you stand legally?
A landlord needs to be aware that the tenant is legally entitled to return and take up residence again, and that the landlord is responsible for the tenant’s possessions.

If a landlord takes over the property and re-lets it, there could be serious trouble as it is a civil offence relating to the breach of the existing tenancy contract. It is also a criminal offence to prevent the continuation of the tenancy.
There have been cases where landlords have been fined up to £20,000 for re-letting their properties when then tenant is clearly not coming back.

The safest way to deal with abandonment is to get a court possession order before taking over the property.

What to do next

If a landlord has established significant evidence that the property has potentially been abandoned they should follow these steps:

  • Remember to ensure that all communications and actions are documented.
  • Make sure that there is a witness available and willing to give a statement at any time when at or dealing with the property and tenant. A local authority’s Tenant Relations Officer can help with this.
  • Serve an Abandonment Notice. This note must be placed on the tenant’s door. However, be aware that this may attract squatters, so do it as discreetly as possible. It is advisable to take a picture of this with a newspaper to show the date. To be safe, post a copy through the door. After five days, the locks may then be changed (unless already done so to secure the property or see to any present dangers).
  • Any possessions remaining in the property must be stored for a reasonable amount of time.
  • Under no circumstance must you deprive the tenant of their rights to access.
  • Inform the local authority rent officer of your actions in writing.
  • Seek expert advice: the NLA advice line is on hand for NLA members.
  • Always obtain a court possession order before taking over the property or re-letting if there is any doubt.

To avoid getting into this kind of situation it is best practice to get a thorough reference on the tenant at the start of the tenancy. Check for rent payments, and visit the property regularly. If you are on good terms with a neighbour, you could ask them to keep an eye on any suspicious movements, or provide a weekly cleaning service.

Finally, it is a good idea to build up a relationship with the tenant and make them aware that if they do go away for an extended period of time that they can let you know.

Stop landlord licensing in Liverpool

Tom Reynolds, NLA Representative for Merseyside, outlines how landlords and tenants can help halt proposals to introduce citywide licensing in Liverpool.Tom Reynolds, NLA representative in Merseyside

Plans published by Liverpool City Council threaten further regulations and cost for landlords in the area. The Council is consulting on its wish to introduce Selective Licensing across the whole city, giving landlords and tenants living and working in the private-rented sector in Liverpool until 16th June to have their say.

There are approximately 5000 landlords with 50,000 properties in the City area and the proposed cost of a licence has been set at £500.00 per property. Over the course of a license’s five-year lifespan, this would raise a very healthy £25 million from law abiding landlords and tenants.

If approved, anyone found to be letting property without a valid license would be subject to a fine of £20,000. Any landlord with a license found to have breached relevant conditions could also find themselves faced with a lower, but still substantial, £5,000 penalty.

According to the Housing Act 2004, the Council has the option to introduce a licensing scheme if they can prove it is necessary to combat anti social behaviour (ASB) or that conditions of low-demand exist in the area. In the case of Liverpool, the Council has opted to hang their case on the view that declining population in the City has resulted in low-demand. In fact they have based their entire business case on the need to demonstrate that low-demand exists.

I am sorry to say that as landlords we have little opportunity to argue against licensing at this stage, the necessary burden of proof is low and stacked in favour of local authorities determined to license their respective areas.

However, all is not lost and there are still ways in which we can shape the form of licensing, its scope and spread. What we need to do now is prove that there is a healthy demand for rental properties across most of the wards within the City boundary. It would seem to me to be difficult to say that there was a low demand from tenants for properties in; City Centre properties, the Dock Apartments, Childwall, Woolton, Aigburth, Allerton, any of the Queens Drive wards. Living and working in Liverpool I certainly see plenty of demand for property in much of the City.

We need to tell the council about the true state of the private-rented sector in Liverpool. There will be areas of low- demand, of course, but there are also vibrant and desirable areas where people want to live and landlords want to go about their business without the burden of further regulation.

This is why we also need to look to our tenants to strengthen the case against arbitrary licensing. It is they who will ultimately carry the cost, by way of rents, of the licence fees. This will likely be worsened by a marked reduction in available properties in the private rented sector as landlords leave the area in search of better investment opportunities.

Tenants are invited to take part in the consultation and their voices will be listened to, the NLA has produced a fact sheet to advise to landlords regarding the consultation and a sample letter to encourage tenants to participate. You can receive a copy of these free of charge by calling   Liverpool Representative Tom Reynolds on 07771734128.

Remember this licensing scheme is going to affect every landlord in the Liverpool City Council area and will probably spread across neighbouring towns in future. Do not ignore this. Act now!

Housing market recovery

Richard Blanco, London Representative for the National Landlords Association (NLA)

Richard Blanco, London Representative for the National Landlords Association (NLA)

Guest blog by NLA London Representative Richard Blanco.

If you’ve spent any time in auction rooms recently or spoke to local agents, you’ll know that the market is becoming quite lively. 

There are a number of hot spots in London, where pent up demand is being frustrated by lack of supply. It has become a vendor’s market and as more people are encouraged to sell, we are likely to see a further increase in activity in the near future.  Don’t just take my word for it; last week’s round of statistics provides compelling evidence.  Buy-to-let lending in July 2013 peaked at £5bn, which is the highest level since 2008.  According to the Council of Mortgage Lenders (CML), 40,000 buy-to-let mortgages and re-mortgages were completed between April and June 2013, up 19% on the previous quarter.  It’s not just the buy-to-let sector that is buoyant; the surveyor e.surv says that July 2013 was the strongest month for house purchases since 2007 with mortgage approvals in July 2013 up 21% compared to July 2012.  Interestingly there was a surge in purchases by buyers with small deposits of less that 15% – typically first time buyers.  Approvals for this group were up by 56% compared with the same month last year and a significant proportion of these were in the North of England which could point to a recovery not just in the wealthier south, but across the UK. The CML also reports that arrears have fallen and repossessions are down from 8,000 last quarter to 7,700 this quarter.

Concerns about the market softening in central London seem to be in retreat.  This is important because market gains here often ripple out into the rest of London and the south east, stoking activity across the UK.  According to Savills, the average price of a prime central London property, typically in Belgravia, has topped £3.2m, up by £500,000 this year. Domestic buyers have increased from 30% to 40% and the agent says that many are looking in near prime areas such as Fulham, Richmond, Wandsworth, Battersea and Wimbledon where they can get better value. 

 In an interview for The Times, Richard Sexton , Director of e.surv says that there is renewed confidence in the market and that mortgage applicants are finding it easier to secure loans, even at higher loans to value.  He cautions that weak annual wage growth – at about 1% – and high inflation with RPI at 3.1% still present a barrier for first time buyers.

The big question is how sustainable is this recovery?  There are three factors that could be creating a false sense of well-being.  Firstly, Funding for Lending has helped to nudge lenders into reducing rates and increased lending volumes, whilst Help to Buy has allowed first time buyers to acquire 75% loan to value mortgages for new build properties with up to 20% help from the government.   Thirdly, the Bank of England’s announcement last week that it will keep base rate at 0.5% until unemployment falls below 7% may also create enough certainty for nervous buyers to take a punt.

According to developer, Bellway, Help To Buy is not creating a bubble because valuers are being prudent and the scheme has increased their sales by a notable but not excessive 25%.  The real test will come when the second phase of Help To Buy allows all buyers to obtain 75% loan to value mortgages with just a 5% deposit and a 20% guarantee from the government.  According to the Director General of the CML, Paul Smee, who spoke recently at the NLA London Regional Seminar which I chair, the scheme will last three years and it is inevitable there will be a downturn in demand when it ends. 

It’s difficult to know whether to rejoice at the headlines of a return to 2007 prices and activity or to reach for the anxiety pills.  How should we as landlords and developers be responding?  Looking on the bright side, price rises increase our equity and a loosening of mortgage finance allows us to remortgage, release equity and develop our businesses.  But then the property that we add to our portfolio is going to cost more and we’re going to be competing with more owner occupiers.  This makes the chance of purchasing a bargain less likely.  A vendor’s market also means haggling with agents, who can be as cheeky and economical with the truth as the market will allow.  Busy auction rooms mean we are pitted against the competition and bid to the highest price, with little prospect of a good deal. 

My instinct is that it is important to keep buying at the beginning of a cyclical upturn; the challenge is to spot when the market is going to peak.  In the last cycle there were about 12 years form trough to peak, so the next downturn should begin around 2025, shouldn’t it?

 

Rent Arrears: In the ‘normal course of business’ or ‘way too high’?


Carolyn Uphill, NLA Director and Local Representative for Manchester, questions whether any other business would accept their customers failing to pay.

All businesses have bad debts and Buy to Let is, after all, a business. Albeit one the Government doesn’t truly recognises through the tax system. A ‘normal’ allowance for this is in the region of 5% of turnover but rent arrears are running at more than twice that figure.

According to one set of figures recently published 10.7% of all UK rent was either unpaid or late by the end of August. This is an increase from the July figure for unpaid or late rent, which stood at 9%. Another source found that tenant finances took a “turn for the worse” in October with 10.1% of all rent late or unpaid at the end of the month, compared to 8.6% by the end of September (LSL Buy-to-Let Index Oct 2011).

Which ever way you look at it, this is still a huge slice of income to write-off. As rents rise, benefits reduce, and unemployment grows things may only get worse. So is Buy to Let a viable business?

For the answer we need to look back to the business model. All businesses need to factor in the possibility of bad debts but take every possible step to avoid them.

Just as a business takes up trade references you should not let anyone into your property without fully referencing them and establishing that the property is affordable to them within their income bracket.

Never let a debt accumulate. Rent is in arrears the day after it is due; so monitor your payment receipts and contact the tenant as soon as a payment is overdue.

Whilst landlords must never harass a tenant it is always the case, just as in business, that he who ‘shouts loudest’ is more likely to be paid. So be firm but polite, enquire if there is a problem, offer to discuss and/or help with this as appropriate, perhaps they have changed job and have a different pay-day, and try to agree a definite date by which matters will be resolved.

Good communications, built right from the start of the relationship with your tenant, may help to resolve any problem which arises.

Taking the matter to court should always be a last resort. This will take time, indeed the closure of some county courts will make this slow process take even longer, and involve the landlord in extra costs whilst rent remains unpaid.

Statistics also show that an increasing number of tenants are raising a defence, at the last minute, which delays a possession order. Just as a business must get their paperwork right and provide no grounds for a counterclaim when seeking payment on a contract, landlords must make sure that they have met their maintenance and repair obligations towards the tenant.

Rent arrears will continue to be a problem but the wise landlord will take a very businesslike approach to his selection of tenants, and his relationship with them throughout the tenancy, to maximise the possibility of being paid on time and in full for the service he is providing.

 

The property scandal’s other dimension…

On a night when it would be very easy for the NLA to bury its head in the sand and try to pretend that there were not problems in the private-rented sector, it is even more important for those responsible providers of accommodation to recognise our role in finding solutions.

Professional trade bodies, like the NLA, spend a lot of time talking about the need for local authorities and other enforcement bodies to be more proactive in their approach to tackling the very worst offenders.

These criminal operators all too often get away with the provision of poor quality and often dangerous housing by  targeting those households with limited access to alternative accommodation. These households, often made up of vulnerable individuals, sometimes don’t know how to access better property,  but far too often there simply isn’t enough available.

The obvious fact is that demand for good quality, good value, accommodation has not kept pace with supply.

One of the outcomes of this situation, the one which gets all of the media attention, is that rents rise. In certain areas of the country this is true, no-body can deny that in certain parts of London and the South East rent levels have followed a striking upward path.

However, for many other less glamorous areas of the country (usually those less popular with journalists) the result has been a lack of good housing providers, the responsible landlords able to compete with the rogues and demonstrate what private rented property should look like in twenty-first century Britain.

Today’s estimates project a need for more than 3 million new homes by 2020. At todays rates fewer than 150,000 are being completed annually.

Unless these figures changes drastically we will not build our way out of this situation any time soon, meaning that we have to look at how we put the stock we have to better use.

As the campaign on Channel 4 tonight has shown, a good start would be to get empty homes back into use. According to the Empty Homes Agency thee are around 350,000  (AKA 3 years of new building) long-term empty properties in England at the moment.

However;

At an even more basic level, more good quality homes can be created simply by allowing decent landlords to provide them. Throughout the country dozens of local authorities are currently using planning rules to prevent landlords offering new affordable homes (Article Four Directions). Likewise many councils are designating new areas of landlord licensing.

These authorities are doing this, for the most part, for all the right reasons. They want to ‘improve’ their locality. Unfortunately what these schemes actually do, when used too liberally, is prevent the law abiding from challenging and competing with the rogues.

The responsible landlord, who invests in his or her properties, takes note of restrictions on shared housing or chooses to move elsewhere because of the cost of compliance makes business unviable. The criminal operator, working under the radar, takes no notice and quickly becomes the only option for those in the most need.

Today’s campaign is called  ‘The Great British Property Scandal’ and much of what has been highlighted is truly scandalous. But some of the ‘solutions’ can prove just as harmful when they’re not thought through.

There are real ways that we can all help improve matters – with some common sense and a little more co-operation.

Above all we must make sure there is always an alternative to renting from a rogue landlord.

Mortgage matters…

Paul Rockett, Managing Director of NLA Mortgages, gives advice on choosing the right buy-to-let mortgage.

The buy-to-let mortgage market has improved significantly during 2011 with an increase in the number of lenders and products available to landlords. In fact, the number of products available via NLA Mortgages has increased by almost 25% since the beginning of April this year. This is great news for those of you looking to expand your portfolios as there is now a wider choice and some excellent deals on offer.

However, with the increase in the number of products available it can be quite challenging to find the right deal to meet your individual requirements, and each buy-to-let lender has different criteria which may or may not be suitable to your needs.

In order to help narrow down your search, there are a number of important questions to answer, for example:

• Are you purchasing or remortgaging the buy-to-let property?
• What is the value of the property you are purchasing/remortgaging?
• How much would you like to borrow and what is your deposit?
• What is the expected rental income for the property?
• What type of property is it e.g. house, flat?
• Are you already a landlord with existing buy-to-let properties?
• Would you like a fixed or variable rate mortgage?

The answers to these questions will help to determine which lenders and products are available to you. For example, only certain lenders will lend over 75% loan-to-value or to landlords with larger property portfolios.

The good news is that with more lenders in the buy-to-let market, products are becoming more competitive and the average tracker and fixed rate have decreased over the last year. This means that buy-to-let finance can be more affordable, and with increased tenant demand and rents, now could be a good time to invest.

If you are thinking of arranging a buy-to-let mortgage, NLA Mortgages could be a good place to start. It provides you with a free online buy-to-let mortgage finder, enabling you to search an extensive range of buy-to-let mortgages from the whole market, including some products that are not available in the general marketplace.

You can enter your own specific loan requirements and other search criteria to find a product to suit your needs. You can also sort the search results by lender, initial rate, product type, loan-to-value etc according to what is important to you. Once you have found a suitable mortgage you can either apply online or if you would like to discuss your options, our team of buy-to-let mortgage experts is available to help you.

It’s important you choose the right mortgage for your needs.

Visit the www.nlamortgages.co.uk or telephone 029 2069 5555.