National Landlords Association

Encouraging renting

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Top 5 reasons for financial loss

Top 5 reasons for financial loss

Chairman Carolyn UphillCarolyn Uphill, NLA Chairman takes us through recent figures which have revealed the top five reasons for a landlord making a loss.

Have you considered the costs that go into maintaining and running a letting business?

A recent National Landlords Association (NLA) survey confirmed that it is no easy feat being a landlord, and operational costs need to be considered as it can mean the difference between success and failure. The landlords surveyed revealed the top five reasons for their financial loss:

5.     Agency fees

12 per cent of those surveyed said that agency fees contributed to them making a loss. Varying levels of agent’s services are offered so make sure you know exactly what you’re being charged before signing on the dotted line. It is also best to check if there are any hidden extras too so that you don’t get hit with a hefty unexpected bill.

Agents will soon be required to state prominently in office and online whether or not they’re a member of a Client Money Protection (CMP) scheme so make sure they are a member of a reputable trade organisation such as UKALA.

4. Voids

14 per cent said they experienced void periods which resulted in financial loss. Being realistic about tenant turnover can save you from getting into financial difficulties. We recommend budgeting for 10 month’s income for a calendar year to cover any unexpected void periods.

3.     Rent arrears

One in five landlords (18 per cent) said they experienced loss due to rent arrears. It is so important that you address the issue of rent arrears as soon as possible. Talk to your tenant and try to ascertain why they haven’t paid on time, you can then put in place a payment plan if possible or offer them the option of ending the tenancy, so that both you and they don’t get into any further difficulties.  For more information here is a guide to rent arrears.

2.     Rental income

Two in five landlords (39 per cent) claimed that their rental income doesn’t cover their outgoing costs, which include things like agency fees, renovations, repairs, tenant checks, inventories, check in and out reports, just to name a few.

It’s understandable that you want to set a rent which is competitive and fair. However if it doesn’t cover your costs then you should look to see that, a) it is in-line with the current rental market, and b) that you have reserves which cover things such as repairs and maintenance as well as the bigger jobs of renovations and refurbishments. It could be that the property is just at a stage where there is a great deal of outgoings, which is why you should always put money away for a rainy day and budget appropriately for any unexpected costs.

1.     Renovating and refurbishing

The foremost reason given for financial loss was money spent on renovating and refurbishing properties between tenancies (53 per cent). Renovations are essential in order to keep your property looking and feeling desirable and for achieving competitive rental returns, and putting renovations off can become costly if associated problems keep adding up. 

You’ve been warned

This is a wakeup call to anyone thinking of investing in buy to let; make sure you go in with your eyes open. There will be considerable outgoings at times which can lead to serious losses unless you’ve planned ahead. This is why having a financial plan in place is so important.

Take it from those who’ve already taken the leap into buy to let. These landlord testimonials highlight the issues you might come up against when in the business:

Landlord A:

“Set up costs are extremely high, especially refurbishments e.g. kitchen, bathroom heating and subsequent marketing. Also, management fees are rising and securing extension of leasehold is difficult.”

Landlord B:

“My last tenant caused a lot of damage and the guarantor absconded, setting me back severely.”

The NLA provides a wealth of information and help to landlords, both to those just starting out and those who have been in the business for a while. Our ongoing support can help keep things on track.

Find out exactly what the NLA can do for you and how we can support you to help make a success of your letting business.


The impact of rent control


Past attempts

For many years, rent control was considered an out-dated practice from a bygone age, with a history of failure and complications around the world.

In the UK specifically, the various Acts which introduced rent control in the private-rented sector had a dramatic effect on the proportion of households renting from a private landlord. As the chart below illustrates, the sector shrank dramatically after the introduction of controls in the Rent and Mortgage Interest Restrictions Act 1939, and continued to decline as the legislation was tightened through the 1950s, 60s and 70s.   It was not until the reforms of the 1980s that the private-rented sector turned the corner.

Even so, the initial pace of change was slow.  The modern rented sector only really developed after the enactment of the Housing Act 1996 when the Assured Shorthold Tenancy became the default tenancy and lenders felt secure enough to expand mainstream lending to individuals.


Political agenda

Yet, despite the wealth of evidence to suggest that statutory price capping does far more harm than good to the supply and quality of rentals, it is back on the agenda for some politicians.

The appeal of price controls to politicians is simple. It is a basic concept, easy to understand and able to appeal to a certain group of voters with whom it is often difficult to engage. Unfortunately, while the concept is simple, the practical and economic consequences are incredibly complicated and difficult to model.

The impact

Those proposing rent control tend not to consider its impact on the wider society. The use of rent ceilings has been shown, time and time again, to reduce the quality and quantity of property available to rent legitimately, while fuelling the growth of a black market. It wasn’t difficult to find somewhere to rent in the 1980s, but few renters were ever offered a full tenancy, with all the protections that entailed.  For good or ill, many properties were let on a “licence to occupy”.

Were a future government to introduce such a policy after the May General Election, the impact would undoubtedly be a reduction in the the number of properties available to rent and the exit from the market of a large number of responsible landlords who simply are not prepared to deal with inevitable reduced income or the higher costs that will follow as service providers, such as mortgage lenders and insurance providers, seek to off-set their risk.

Rents will be held down as politicians – looking to gain votes – will be unwilling to face the wrath of five million private renters. As the cost of renting to the consumer sinks below the natural market rate, artificially kept below the level needed to ensure that the landlord can maintain it properly, and inevitably squeezing profitability out of the equation, people will vote with their feet. Investment will move away towards other markets and assets better able to provide a reasonable return.

Shortage of housing

The impact of this will be felt more widely than simply by those who rent or let. The issue we face in many parts of the country is a shortage of all types of property for people to live in. Rent control will not increase the number of properties; indeed, it will have the opposite effect, driving investment away from these areas and further reinforcing the divide between high and low demand areas, as developers will no longer be able to cover the risk of new projects by selling off-plan to landlords keen to invest in residential property. Unless there is an increase in first-time buyers willing, and – perhaps more crucially – able to buy to compensate, housing development will fall away, further restricting supply and making it even more difficult for those seeking housing, both to rent and to buy.

The policy of rent control has failed whenever it has been introduced; the re-introduction of rent control in the UK will fail and will cause more damage to the housing sector, and to those that need to be housed.

Be heard

If you’re concerned about the impact this could have on you, enter your question via the survey. The NLA is holding a hustings event, on Monday 2 March, where there will be an opportunity to question policy leaders from all parties. The most popular questions, collected from our survey, will be presented at the event.

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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.


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.

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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.


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.

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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!

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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.



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