Tag Archives: renting

Laying the foundations for private renting?

Alex Marsh, Professor of Public Policy at the University of Bristol, talks about the Government's Housing Strategy, published last month.

The long-awaited Housing Strategy for England Laying the foundations – has now arrived. The headlines were dominated by the mortgage indemnity guarantee, restarting “shovel ready” developments, and revitalising the Right to Buy. But what does the strategy have to say about private renting?

The chapter focusing on private renting opens with a statement of support for the sector, which the Government identifies as playing a key and increasingly important role in the housing market. The sector has witnessed significant recent growth, but high levels of demand mean affordability is deteriorating in some areas. The Government’s strategy has a dual focus: boosting overall supply by encouraging investment and tackling the minority of rogue landlords. In fact, rather more space is devoted to discussing investment.

Private renting in Britain is increasingly dominated by landlords operating on a small scale. So the Government continues to pursue the Holy Grail that has eluded housing policy for the last 30 years – greater institutional investment. We’ve had the BES, which gave the sector a short-term boost. We’ve had HITs, which sank without a trace. We’ve had the recent arrival of REITs, but largely to the benefit of commercial property investors. The Government is going back to the idea of REITs to see if it can be tweaked to entice investment into residential property.

It may be that this time things are different. The Chancellor’s Autumn Statement raised the possibility of new financial vehicles to encourage pension funds to invest in infrastructure. The broader investment environment is currently hostile. The risks associated with more exotic investment strategies are considerable. Residential property may be looking like an increasingly plausible option for a dependable income stream, especially as the Government strategy explicitly acknowledges the need to ensure that welfare reform does not unduly disrupt investors’ income expectations.

There are already some interesting developments occurring – such as the Build to Let Fund created by Bouygues and Grainger – in the search for appropriate vehicles for investing in private renting. The boundaries between tenures are blurring in other ways: for example, Sovereign, one of the largest housing associations in the country, have just announced an expansion of its operations in the market rental sector.

There is the potential for some large organisations to enter private renting, bringing with them professional property management expertise and the scope for brand recognition and reputation. This could alter the competitive climate in interesting ways.

The strategy reaffirms the Government’s commitment to avoid unnecessary regulation on landlords, but then goes on to state that:

we are … looking at measures to deal with rogue landlords and encouraging local authorities to make full use of the robust powers they already have to tackle dangerous and poorly maintained homes.

It says little more than that.

Pressure on the Government to act here is undoubtedly building. The Localism Act will mean more homeless people being housed in the private rented sector. Welfare Reform will mean those people are likely to have less money to pay the rent. Yet, budget cuts mean local authorities have less money available to take enforcement action. Any reputable landlord watching Channel 4’s Dispatches programme last Monday will no doubt be concerned that the action – or inaction – of rogue landlords puts the sector under the spotlight and damages its reputation.

We await further details of the Government’s thinking.

Alex Marsh is Professor of Public Policy at the University of Bristol

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.

 

Why hast thou Article Four-saken me?

Ken Staunton, NLA Head of Regions discusses the spread of Article Four Directions

Unless you’re an avid member of the National Trust (or happen to live in a conservation area) Article Four of the Town and Country Planning Act was probably not a major topic of conversation up until a year or two ago.

All of that has changed, thanks to some of the last actions of the previous Government in the Spring of 2010.

Up until April 2010 private homes housing fewer than six unrelated individuals, irrespective of their tenure or occupiers, were classed by planning regulations as ‘dwelling houses’. This was based on the notion that it does not make a great deal of difference to local infrastructure whether a household accommodates three unrelated sharers or an average sized family.

So far so good. Or so you would think….

Despite their own evidence to the contrary (see the 2008 Rugg Review of the Private Rented Sector anyone who is interested), the last Government decided that the over- concentration of Houses in Multiple Occupation (HMOs) was a problem of national significance. They then introduced legislation creating a whole new ‘use class’ for planning purposes. From that point onwards, a property could be either a ‘dwelling house’ or an ‘HMO’ dependent on who lives there.

Long story short, the Government changed colours and amended this legislation to remove the automatic need to obtain permission to change a house from definition to another, but allowed local authorities to require such an application in their area if they so choose.

The problem is that this is a little more than just a labelling exercise. Increasingly local authorities in England are using this new found option to arbitrarily limit new shared homes within their boundaries. So far, more than 30 have started down this path, with a few opting to forego the usual notice period and jump straight to implementing ‘Article Four’ notices (as the regulation is known) with immediate effect.

Some argue that this is social engineering of the worst kind; others describe it as nimbyism of the worst sort. Whatever the label the net impact is that the availability of shared housing is to drop at a time when demand is high and getting ever higher thanks to Government policy.

In January, single Local Housing Allowance recipients under the age of 35 will only be able to claim for a single room in a shared house (currently the threshold is 25.) This combined with other welfare reforms and an overall housing shortage is predicted to increase demand for shared accommodation by more than 60,000 individual units.

My question to Government, both local and central, is where are these homes supposed to come from? This at a time when so many local authorities simply want to push those on the lowest incomes and with the greatest need elsewhere.

Landlords around the country cannot afford to ignore this issue. To see if you’re affected, or to let us know that your area is considering an Article Four Direction, please visit the NLA’s website and help us to ‘Save Shared Housing’.

Crime and Punishment?

The NLA engages with the powers-that-be on a wide array of issues which impact in one way or another upon a landlords ability to carry out his business. This also means that on occasion we have to look at very emotive issues which carry with them a significant political element.

One of the most important, and emotionally charged debates which the NLA takes part in is that of possession i.e. why, when and how should a landlord be able to legitimately obtain vacant possession of his property and on what basis he may not.

Where tenancies are concerned, we’re quite lucky in the UK. Thanks to decades of hard work by the NLA and others, the statutory frameworks in the British Isles represent a pretty good balance between sufficient security to make the PRS attractive to tenants and adequate protection for landlords’ investment to make letting a viable business. Frustrating and time-consuming as it can be, ending a tenancy in an orderly fashion when things go wrong is possible and (relatively) straightforward.

But…what about when the person occupying your property is not a tenant? What about when there are people living in your property without permission, removing your, extremely valuable, asset from circulation and endangering your business?

This has been the question underpinning a great deal of debate recently as the Government in Westminster decided that the time was right to revisit the issue of squatting in South of the Border.

This is also where the heavily politicised element appears.

The Government demonstrated a belief some months ago that squatting should be criminalised in England and Wales (as it is in Scotland by the way). As is expected of it, the Ministry of Justice (MoJ) issued a consultation paper over the summer inviting comment on a number of proposals for dealing with the matter of squatting.

By virtue of their ownership of property, landlords tend to have greater exposure to squatting than most of the population, so you’d expect the NLA to be involved in discussions with Government about this – as we were and continue to be. The NLA was one of more than 2,000 stakeholders to submit comments on the consultation.

The sheer volume of responses led us to believe that it would be some time, possibly the New Year, before a response would be issued by the MoJ. Hence our surprise this week when Secretary of State for Justice Ken Clarke published the following amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill:

To move the following Clause:—

 ‘(1)    A person commits an offence if—                   

(a)    the person is in a residential building as a trespasser having entered it as a trespasser,                    

(b)    the person knows or ought to know that he or she is a trespasser, an              

(c)    the person is living in the building or intends to live there for any period.       

(2)    The offence is not committed by a person holding over after the end of a lease or  licence (even if the person leaves and re-enters the building).                     

(3)    For the purposes of this section

  (a)    “building” includes any structure or part of a structure (including a temporary or moveable structure), and  

(b)    a building is “residential” if it is designed or adapted, before the time of entry, for use as a place to live.                      

(4)    For the purposes of this section the fact that a person derives title from a trespasser, or has the permission of a trespasser, does not prevent the person from being a trespasser.       

(5)    A person convicted of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding 51 weeks or a fine not exceeding level 5 on the standard scale (or both)

(6)    In relation to an offence committed before the commencement of section 281(5) of the Criminal Justice Act 2003, the reference in subsection (5) to 51 weeks is to be read as a reference to 6 months        

(7)    For the purposes of subsection (1)(a) it is irrelevant whether the person entered the building as a trespasser before or after the commencement of this section.’.

This creates the offence of squatting – which I am sure many landlords who have suffered at the hands of trespassers in the past will welcome.

The question which still remains though, is how does this move help to regain possession of a property?

If an arrest for suspicion of squatting is made, will a landlord be able to simply take his property back on the presumption of guilt?

As criminal cases tend to take precedence over civil cases will landlords have to wait for the outcome of a prosecution before re-letting property?

The NLA is certainly not opposed to the idea of criminalising squatters – but surely the priority must be returning property to its rightful owners. Crime and punishment can follow once justice has been served.

For more information about squatting and the its potential criminalisation please visit the NLA Website here: http://www.landlords.org.uk/news-campaigns/campaigns/squatting

Getting off to a good start!

Julie Woolfenden, NLA Local Representative for Shropshire and North Wales, explains how to set up the perfect tenancy; the property, the law, the rent and the little perks!

Renting is becoming the preferred choice of tenure for more and more people. Even Prince William and Catherine, Duchess of Cambridge, having tied the knot in a spectacular ceremony at Westminster Abbey are now renting a cottage on Anglesey where William is serving 3 years as a Search and Rescue Helicopter Pilot at RAF Valley.

However, Royal or not, there are still certain things that a Landlord/Tenant relationship needs for the successful creation of a new tenancy.

During my years as a landlord renting properties to families, I have developed a set of procedures for starting a tenancy – from when my new prospective tenant(s) first views the house to the day when (s)he finally moves in and I hand over the keys.

Firstly, the property needs to be ready; everything spick and span and in full working order together with the Gas Safety Certificate, the EPC to hand and a robust inventory.

If the prospective tenant views and is interested in my property I give them the EPC and an explanation of what it is, as in my experience, tenants rarely know about them.

We then discuss:-

a)      The rent – Working tenant versus benefit tenant and how / when the rent will be paid.

b)      Deposit – A quick explanation about protecting it.

c)       References – Absolutely vital and if a Guarantor is involved they need to be credit referenced as well.

If everything is OK, I issue the tenancy agreement (in duplicate) usually a few days in advance of the agreed start date of the tenancy, giving the tenant an opportunity to read it. If they are claiming benefits the Housing Benefit Office will need a copy prior to the beginning of the tenancy.

As for paperwork when the tenant moves in: Two signed copies of the tenancy agreement, key receipts, utility meter readings, receipts for the Gas Certificate and EPC and the signed inventory. To safeguard myself and supplement the inventory I usually take an audio video, with the tenant in shot, showing the house and the garden. I make two CD copies – the tenant keeps one and signs for it. The tenant also has one copy of all the paperwork and I keep the other.

I also demonstrate how things work; especially the heating and hot water. I tell them where the cold water stop cock is and leave instruction manuals for all appliances. Other useful information I pass on to my tenants is when bin day is and if the electricity / gas is on a card meter where they can go to get the card topped up.

Finally, a card welcoming them to their new home (or even a bottle of wine) is a nice gesture and I find tenants really appreciate it.

I give the tenant my contact details and explain the deposit will be protected and that I will let them have all the relevant paperwork shortly.

About a week into their tenancy I give them a quick ring just to check they are settling in OK.

www.landlords.org.uk

Time these rogues were dispatched once and for all

Channel Four’s long running ‘Dispatches’ programme took an in-depth look at a subject very close to the NLA’s heart this week, the private-rented sector.

Entitled ‘Landlords from Hell’ and presented by veteran journalist Jon Snow, the programme sought to expose the sorry state of the private-rented sector and the shocking actions of those operating below the water-line at the murky bottom of the PRS.

The two cases highlighted were indeed shocking examples of how poorly one human being can treat his fellows in the name of business.  The two individuals showed no respect for their responsibilities as landlords and displayed utter contempt for their unfortunate tenants –seemingly without facing any considerable sanctions in return.

Above all these people showed that they do not deserve to be described as landlords.

The term ‘landlord’ may not necessarily conjure up an image of noble ideals for the majority, but so far as we are concerned it does mean something.

Being a landlord means that you have agreed to:

  • provide your tenants with a home in exchange for regular rental payments,
  • repair and maintain your tenant’s home for the duration of their tenancy,
  • to allow your tenants to live in a property free from harassment,
  • forfeit possession of a property until such time that a tenancy legally  ends,
  • show your tenants the same degree of respect that you expect to receive.

These ‘landlords from hell’ appeared to display none of the above, choosing instead, to flout the law.

In any other walk of life these people would be considered criminals and dealt with appropriately. The private-rented sector should be no different, the continued existence of these criminal rogue operators makes us all look bad.

There is no defence for these offenders, but it does beg the question; Why so few prosecutions?

There will, no doubt, be much debate following this programme about the need for more regulation of the PRS. However, is more the right response? This is not a new problem, and successive governments have introduced legislation, extended local powers, and modified the various standards regimes.

The problem is that regulation only works when it is implemented and enforced appropriately. The NLA works with such organisations to give guidance on this.

Far from being powerless, enforcement agencies have quite an arsenal at their disposal to target rogue, criminal landlords for example:

  • Environmental health officers are able to serve prohibition or improvement notices in respect of poorly maintained, or dangerous property under the Housing Health and Safety Rating System (HHSRS) requiring emergency repairs or even closing down sufficiently poor properties.  In severe cases emergency repairs can even be carried out without the landlord’s involvement (although at his expense).
  • HHSRS allows agencies to inspect any property – regardless of tenure – allowing them to identify those landlords known to operate below the radar.
  • A local housing authority may use a management order to take control of the management of a poorly managed property, either temporarily or permanently, in circumstances where a landlord has neglected his responsibilities.
  •  Landlords who fail to appropriately license their properties can also be fined up to £20,000 and find themselves subject to a rent repayment order of many thousands more.

Not to mention the many criminal sanctions which a landlord may face if there is any allegation of harassment or illegal eviction, up to and including a custodial sentence.

The real discussion must surely be about why there is such limited enforcement of these existing powers and why instead there is an ongoing clamour for more licensing and arbitrary restrictions of accommodation when demand has never been higher.

No doubt the answer lies in funding.

We all know that enforcement against the bad guys is more expensive than blanket restrictions, but surely it would make sense for everyone if local authorities were able to used the extensive powers they already have to make an example of the very worst criminals masquerading as landlords, abusing their position, their tenants, and devaluing the term ‘landlord’.

www.landlords.org.uk

Landlords to struggle with benefit cuts

We’ve released the results of two surveys of landlords over the past month, which have found some interesting attitudes towards housing benefit cuts, and a large number of tenants failing to pay the rent on time.

Firstly, our Local Housing Allowance (LHA) survey questioned 455 landlords about their attitudes towards the benefit cuts. Not surprisingly, many landlords say they’ll struggle to able to afford to run their lettings business when they cuts take full effect.

The cuts will see a cap on the amount of housing benefit paid, depending on the size of the property, while LHA rates are now determined based on the bottom 30th percentile of rents in an area, rather than the 50th percentile. The £15 excess payment is also being scrapped.

Of the landlords we surveyed, 58% said they would have to cut the number of properties they let to benefit recipients. Of these landlords, 90% plan to do so in the next 18 months while about one third say they’ll be reducing the number of properties rented to LHA recipients immediately.

A closer look at the figures found more than 80 per cent of landlords expressed concern about the reduction of LHA rates from the average market rent to the bottom 30 per cent. The same number were also worried about future LHA increases being linked to the Consumer Price Index (CPI) rather than true market rents.

More than 90 per cent of landlords say they simply can’t afford to cut their rents to absorb the changes in LHA. Many are already facing high mortgage repayments and rising running costs and doing so would make their business unviable.

Meanwhile, our quarterly survey of landlords conducted with specialist researchers BDRC on all landlord issues has found many are still receiving rent payments late.

Nearly 600 landlords were questioned, with 52 percent reporting rent arrears in the past 12 months. The average late paying tenant is £730 in arrears.

And many landlords also believe running a lettings business is becoming more difficult. 62% say it has become harder recently.

But it’s not all bad news. The survey also found that 78% of landlords feel positive about being a landlord and they are becoming more optimistic about their business.

For more information on how the NLA can help support landlords through these changes, or how you might be able to benefit from membership, visit www.landlords.org.uk

This makes us all look bad…

Don't let a frustrating tenant drive you to crime


Having suffered through an arguably ‘slow news week’ you could be forgiven for thinking that ‘quiet enjoyment’ has more to do with celebrity super injunctions than rented property.

In fact it is one of the core concepts that underpin tenure legislation in the UK – and in particular allows the PRS to function as well that it does. It is the virtue which makes the PRS an attractive place to live, as tenants can be reassured of their right to privacy and a home life throughout their tenancy.

In fact, It is so basic a concept that most landlords and tenants rarely give it s a moment’s conscious thought.

However, over the course of the last week two stories have come to the attention of the media which highlight members of the letting community demonstrating a worrying degree of disregard for tenants’ rights to quiet enjoyment.

Both stories focussed on the perennial issue of how to handle non-paying tenants – and offer a master-class in what not to do.

At the beginning of the week it seemed that every national newspaper ran extensive stories about the landlord near Harrogate who effectively barricaded his tenants in his property when they attempted to terminate their tenancy early. The landlord in question was pictured having skips placed at the entrance to the property in order to prevent removal of the his tenants’ possessions.

The second story, which rounded off the week on Friday, looked at the latest in a string of letting agents who has started erecting advertising boards which ‘name and shame’ those in arrears.

Obviously, press coverage tends to simplify and exaggerate reality but taking the published details on face value it is hard to imagine that any judge would fail to conclude that tenants were being harassed in both cases.

The NLA – as you would expect – shares the frustration of landlords and agents who are losing significant amounts of money to errant householders. We can certainly sympathise with the thousands of landlords every year that have to pursue their losses through the courts while their businesses suffer.

But…

Press coverage like this reflects badly on us all.

Being a landlord is both an investment and a business, and with any venture such as this there are risks which must be considered and laws which must be observed.

Once a tenancy is entered into, every tenant has a right to treat that property as his or her home – and as distasteful as it sometimes seems – this applies even if they fail to pay the rent.

Only once the tenancy has been lawfully ended, by mutual agreement or court order, do a landlords’ obligations end.

Any attempt to ‘make life difficult’ for a tenant, or to prevent them going about their daily life may fall foul of a number of laws – and could even result in a custodial sentence.

We all know that letting property can be frustrating and rent arrears can destroy a business – but is a short cut really worth a criminal record?

The new world of LHA starts today

Today the Government’s major changes to Local Housing Allowance come into force.

These changes, previously announced in last year’s Emergency Budget and the Government’s Spending Review, form part of a programme of 11 separate changes to Housing Benefit designed to cut around £2bn a year from Housing Benefit by 2015/16.

These changes will have a massive impact on the private-rented sector and the 1.1 million-and-growing LHA tenants who rely on landlords for their homes.

Throughout this period the NLA has been actively engaging with civil servants, MPs and Ministers to argue against changes that might make LHA tenancies financially unsustainable and significantly increase rent arrears.

The Changes coming into force today

As NLA members will be well aware, the changes that come into force today are:

  • The removal of the up to £15-excess payment to claimants whose rent is less than the available maximum LHA rate
  • The removal of the 5-bedroom rate of LHA;
  • The introduction of a national cap on maximum LHA rates:
    • £250 a week for a one bedroom property (including shared accommodation)
    • £290 a week for a two bedroom property
    • £340 a week for a three bedroom property
    • £400 a week for a four bedroom property
  • LHA rates will now be based on the 30th percentile of local market rents, rather than the median (50th percentile) as before. Example LHA rates for March can be found here. [N.B landlords and tenants can now use the new LHA Direct service on Direct Gov to find out the LHA rate accessible for a particular household here.]

These changes will immediately affect all new LHA tenancies and those tenancies where there is a change of circumstances or are up for renewal. Existing LHA tenants will have access to 9 months transitional protection from these changes, so long as there are not any change in their circumstances.

Direct Payments

Whilst most landlords can accept that the removal or the £15-excess and the introduction of national caps are ultimately fair and necessary, the rest of the programme of changes will damage the ability of private-rented sector to deliver housing to LHA tenants.

One of the greatest worries landlords have is the danger of increasing rent arrears as tenants struggle to manage their drop in finances.

To help combat these concerns, local authorities have been given the power to allow direct payment to landlords where landlords reduce the rent to an affordable level for the tenant. The Department for Works and Pensions (DWP) has issued new guidance for local authorities on this issue and landlords should speak with their local benefits office for how it affects their tenants.

More changes to come

With the Welfare Reform Bill currently before Parliament (you can see the NLA give evidence to the Bill Committee here), more changes to LHA are on the way.

And sooner than you might think, DWP Ministers have already announced that they are bringing forward the change that will see under-35 year olds only eligible for the shared housing rate of LHA to January 2012.

Keep up-to-date with the developments by checking out the NLA website’s Welfare Campaign section.

If at first you don’t succeed – try, try, try again…

It is often said that lobbying the Treasury prior to Budget day is like trying to change direction in an oil tanker.

It’s possible, but you need to start well in advance and be prepared for it to take a long time.

Well it has certainly taken a long time, but in his Budget Statement for 2011 Chancellor George Osborne announced a change which the NLA has been asking for year after year.

By means of an easily missed comment about half way into his address – or 70 pages into the infamous ‘Red Book’ for the literary minded – Mr Osborne announced that in the future landlords or investors making bulk property purchases (i.e. buying a portfolio) will be able to choose to pay Stamp Duty Land Tax (SDLT) on the average property value rather than the aggregate portfolio price. Provided that the relevant rate is at least one percent.

This is a major step in the right direction by Treasury, and a very welcome one from a landlord’s perspective.

Put into context, this represents significant potential savings for investor landlords.

For Example:

A landlord buying five properties valued at £200,000 each would currently face a tax bill of five percent i.e. £50,000.

Being able to choose to pay SDLT in relation to the average property value means that the one percent rate applies, and therefore the final bill is reduced to £10,000.

This is obviously good news for landlords, but it is also good news for the housing industry as it will reduce barriers to entry for new and existing investors.

It is also good for the PRS in general as thanks to reduced entry costs more cash is potentially available for investment in refurbishment, renovation and raising standards across the board.

However, there is still a great deal to do in respect of SDLT as the system still distorts property valuations and we hope that this is only the first step towards the ultimate goal of wholesale reform of the system.
For more information about the budget and the NLA’s suggestions for reform please visit the NLA website at:
http://www.landlords.org.uk/news-campaigns/news/budget-2011-first-impressions