Although analysts of the London property scene believe rents have reached their peak in central parts of the capital, evidence that investors are still looking to purchase property insurance on homes they intend to rent out is plentiful.
A report by Business Development Research Consultants, Continental (BDRC), shows that the number of landlords who own their properties outright is growing by 10% according to BDRC Director Mark Long. He emphasised the point when speaking at the industry sponsored Mortgage Event. A survey by BDRC found that almost 3 in 10 of those questioned said they had no mortgage on their portfolio including 1 in 10 of those with the largest stock.
Mr Long told delegates: “What we are seeing is a new or returning community of property investors, those making an active decision to take funds from another investment vehicle and put it in property. Nothing discriminates more in our survey than the size of your portfolio. Intermediary advice is much more important for the smaller, less experienced landlord whereas lending criteria assumes a much greater importance for the portfolio landlord when they are trying to source a product.”
The BDRC survey showed a remarkable preference by landlords who did have outstanding loans on their property empires to use an assortment of lenders. The report showed that the average lender used five different loan companies to facilitate an average eight buy-to-let loans. Interestingly enough a high proportion of landlords were unaware of the different lenders who they got funds from as they tended to use just one intermediary who they saw as their mortgage provider.
The local authority of a Lancashire seaside resort is on a mission to root out rogue landlords and hit them hard.
Blackpool Council believe they have more than their fair share of landlords giving their tenants a bad deal and are determined to force private landlords into upgrading their properties. However, not everyone is happy with the council’s tough stance including some landlords who claim the Selective Licensing Scheme, which costs them around £1,000 per property, is nothing more than a bid to raise cash. The great majority of the town’s landlords comply with all regulatory requirements and regard property insurance as a necessity. It is true that since the policy began earlier this year, ten properties, described as “dangerous and filthy”, have been shut down, but it is only a small fraction of the number of residential lets in the town. Council chiefs claim rogue landlords are finally being brought to book for allowing undesirable people to rent cheap accommodation with no questions asked. The situation has seen some law-abiding landlords claiming they are being made to pay for the errors of others.
John Clarke, owner of Metcalf Estate Agents, which manages 400 units in Blackpool, says Selective Licensing isn’t necessary. He said: “It is a very emotive subject among landlords because there is just no need for Selective Licensing – the council already had the power to do what it wanted. In my opinion the only reason it was brought in was to generate new funds which would keep council officials in jobs. The council is correct in that there are rogue landlords in Blackpool and they need to be targeted. But unfortunately this scheme won’t work with the majority of them.”
Some private landlords feel the council are using this as a device to threaten landlords into a position where they feel they no longer want to invest in Blackpool. They also believe the council are wrong to put the majority of the town’s anti-social behaviour problems down to the private rented sector. The local authority wants to clamp down on bad behaviour and believe private landlords should take responsibility for who they rent their property
Vulnerable tenants in Ireland who are happily living in rented properties are being evicted by sheriffs when their landlords fall into arrears.
Housing charity Threshold has revealed that they are receiving two or three calls each week from desperate renters who are in the middle of crossfire between private landlords and financial institutions. The charity warns that with one in three buy-to-let properties in mortgage default a large number of tenants are at serious risk of losing their home. It is becoming a huge issue that has to be addressed.
Bob Jordan, charity director, said “Financial institutions can sometimes ignore the rights of tenants in their pursuit of the landlord’s assets. A worrying new phenomenon is the appointment of rent receivers by lending institutions, to bypass landlords and collect the rent directly from tenants. The first time the tenant hears about it is when a sheriff knocks on the door to repossess the property. In the past 12 months, we have dealt with an increasing number of cases where tenants have been threatened with eviction by both their landlord and a rent receiver if they do not hand over the rent to either party. This places the tenant in an impossible position.”
More and more queries related to the illegal retention of tenants’ deposits by landlords are also being made by renters in Northern Ireland and now deposit retention has become one of the greatest barriers to the smooth operation of the private rented sector. While landlords are entitled to keep deposits in certain circumstances, such as having to claim on landlord insurance because of damage caused to the property, almost 83% of deposit disputes that go before the Private Residential Tenancies Board result in either some or all of the money being returned to the tenant. Housing charities claim this proves that most landlord claims are not legitimate and that they are just trying to deny tenants their rightful return of cash deposited in good faith.
The AIIC (Association of Independent Inventory Clerks) has warned all novice landlords that they are at risk of deposit disputes if they fail to prepare all the correct paperwork.
There has been a massive increase in the number of accidental landlords over the last couple of years as many home owners are forced into renting their property due to various circumstances that range from negative equity to the depressed housing market and even couples getting divorced. It is this sort of landlord, who often moves into the sector without any background knowledge, that struggles to manage the basic legal requirements demanded of landlords today.
The AIIC feel that many new landlords have unrealistic expectations on wear and tear damage, which ultimately leads to tenant disputes. New landlords have to remember that reasonable wear and tear damage to a property needs to be accepted as part of the rental agreement. It is vital for every private landlord to have a detailed and accurate inventory to show the condition of the property at the start of the tenancy, this makes it easy to assess whether the condition of the property is consistent. An independent inventory means both parties will be treated fairly and disputes can be resolved quicker and without the hassle that is often experienced at the end of a tenancy period.
Pat Barber, Chair of the AIIC, said “In addition to having a tenancy agreement, it’s important that accidental landlords ensure all formal agreements and procedures are in place, such as a professional inventory and schedule of condition. Landlords and tenants have different expectations when it comes to fair wear and tear issues, so it is no wonder that so many tenancies end in dispute. Landlords cannot expect ‘new for old’ when something is damaged, as everything has an expectancy of useful life and will need to be replaced periodically at the landlord’s expense.”
The AIIC is offering a new one-day workshop for all landlords on Monday 26 November from 9.30am to 4.30pm at The Hilton, Bracknell and topics include handling tenants in difficult situations, how to avoid disputes, landlord insurance and finding hidden damage at the end of a tenancy.
A report by Her Majesty’s Revenue and Customs Office (HMRC) suggests that property investors who typically cover their properties with landlord insurance are responsible for evading taxes on a massive scale.
Earlier this year HMRC set up a task force to investigate the financial affairs of landlords in Leeds, York, London and East Anglia and if the investigative website Exaro’s information is correct then there is little wonder why. According to Exaro a report by HMRC estimates that landlords evaded paying over half a billion pounds in tax in 2009/10. The figure is quite amazing and when compared to the amount collected from the sector, £1.8 billion, it shows just how big a problem tax evasion is.
In fact the figure may be much higher as the projected data only covered landlords who do not file under self assessment, the final figures could easily be double and maybe more; it certainly puts the target of a £17 million claw back from the task force teams into miniscule proportions. John Whiting, director of tax policy at the Chartered Institute of Taxation, said “Widespread tax evasion by landlords was very significant which might normally only be expected in the worst cash businesses. Clearly, rental income is an area where HMRC needs to pay more attention. On this scale, it is serious tax evasion.”
The problem for HMRC is the massive growth in the letting sector over the last few years with people who cannot afford to live in their own home renting out a part of it, or all of it, reluctantly. They are not likely to divulge the extra amount of money they need to bring in to the taxman and some will not even be aware that they should.
It is likely that HMRC teams will turn to Land Registry records to track down the culprits but a spokesman for the department did say that a crackdown next year was likely to set out a ‘tax amnesty’, which offers reduced penalties for people who come forward willingly to settle unpaid liabilities.
Research released has shown that basic checks are not giving private landlords enough background information on the tenant to protect them from rent arrears, tenancy issues and possible claims on their landlord insurance policy.
Landlords purchasing a basic tenant check often only receive information that will just verify that the tenant is who they say they are as well as highlighting any previous problems on the tenant’s history. However, research shows this is not always enough and rogue tenants find slipping the net quite easy. For example, 7.1% of tenants in October were found to have one or more County Court Judgement recorded at an undisclosed address. Checks also found that 27% of self-employed tenants were not able to provide tax returns or acceptable proof of income and 8% had provided false employment details on the application form. Because of this landlords need to undertake more scrupulous checking of their tenants to protect both their investment and income streams.
Paul Sessford, an insurance expert, said “In much the same way mortgage lenders have become more stringent with their lending to ensure borrowers are able to meet repayments, landlords should act in a similar fashion to ensure that the tenant can meet their obligations. High unemployment and stagnant wages are making conditions particularly tough on those having to rent. With rent in many areas at peak levels it makes no business sense for a landlord to rely on an income from someone who is not financially stable.”
There is no guarantee that thoroughly screening a potential tenant will mean there will never be any problems but it should be the starting point for all private landlords. Tenant arrears and unexpected maintenance charges are just two of the many things that are costing UK landlords over 2 billion each year and 86% of landlords receive less money than they thought from their monthly rental income due to these unwanted costs.
The owner of a lettings company that specialises in finding tenancies for pensioners has pleaded with private landlords not to turn their backs on tenants who are on benefit. Peter Girling feels it is wrong to stigmatise those who are on benefits for various reasons.
The latest research from the NHF (National Housing Federation) shows there has been a massive 484,000 rise in the number of social housing tenants during the past three years. This huge increase has coincided with the number of private landlords with buy-to-let insurance not willing to take in tenants receiving housing benefit. Both the NLA (National Landlords Association) and the RLA (Residential Landlords Association) have confirmed that many landlords have either plans to withdraw from the Local Housing Allowance market or have already done so.
Letting agent and landlord, Aki Ellahi, wrote an open letter to landlords in the Guardian newspaper where he spoke of the appalling stigma and stereotyping amongst UK landlords with regards to accepting tenants on benefits.
Peter Girling said: “I wholeheartedly agree with Aki Ellahi, over 70% of our tenants who are aged over 55 receive some form of entitlements including housing benefit. Many of these people have paid into the system over their working lives and now need some support in their retirement, as do a number of home owners who may be entitled to social and housing support. Whilst I understand their commercial concerns, my view is that landlords are being short-sighted in their knee-jerk reactions.”
There are many benefits to the landlord from letting property to a tenant on benefits. Whilst undoubtedly there are some unscrupulous people who will abuse the system, it is wrong to stereotype everyone in this category. Mr Girling is urging landlords to reconsider their attitude towards tenants on benefits and not to just automatically turn their backs on them because of the new coalition policies.
The number of Members of Parliament (MPs) with an interest in landlord insurance is the main talking point at Westminster today, as the Speaker of the House of Commons, John Bercow, becomes embroiled in a debate about disclosing private rental arrangements.
The story revolves around a Freedom of Information (FOI) request made to the Independent Parliamentary Standards Authority (IPSA) asking for details of MP landlords. IPSA is better known as the expenses watchdog brought in to curb the excessive claims made by some MPs in the expenses scandal of just a few years ago; and it was about to release the names yesterday. However, a group of MPs approached the Speaker of the House saying they feared release of the details would compromise their security.
While many members said it was a cynical attempt to stop the public discovering how some MPs are still milking the system, others vehemently denied this was the case. In fact sources at the organisation said the data revealed that ‘some MPs’ were renting their second homes to each other for profit. Although the practice is not banned under the more stringent new expenses regime, publication of details showing MPs are finding a way round IPSA rules could prove acutely embarrassing for the MPs involved.
Speaker Bercow supported the MPs worried about details being disclosed and wrote to IPSA saying: “The processing of the data… could involve causing unwarranted damage and distress. I should be grateful if you and your colleagues would reconsider such a plan.” However, Labour MP John Mann said the FOI should be respected explaining: “If MPs are renting from past or current MPs it is right and proper the public is able to know that. There is nothing wrong with that, and there is nothing wrong in it being out there in the open. I have no problem in MPs renting it (a flat) out but the public is entitled to know that.”
It is thought a decision will be made quite soon with most MPs believing the details will be released to the public.
As the UK’s leading power suppliers announce they are putting up their prices, a national landlords association is asking its members to help out its tenants by bringing their fuel bills down.
In the last few days npower have announced price hikes of 9% for gas and electricity customers and British Gas have followed suit and upped their prices by about 6%. The increases will affect millions of customers and will include many tenants who live in homes covered by landlord insurance.
David Salusbury, leader of the National Landlords Association, is now asking landlords to help their tenants out by taking advantage of the Government’s Green Deal to upgrade the energy efficiency of their properties. The Green Deal allows landlords in certain properties to take advantage of loans that will allow them to install energy efficiency measures such as central heating, loft insulation and cavity wall insulation. The loans are repaid via the fuel bills paid by tenants living at the property. Crucially tenants do not find themselves paying out more than before because the Green Deal stipulates that the energy saved by the home improvements means the energy bill will never be higher than it would have been if the work had not been carried out.
Mr. Salusbury said: “We hope that the Green Deal will help tenants reduce their energy consumption, in turn easing the impact of any energy price rises.” Of course landlords and tenants alike should always consider changing their utility provider when then their current supplier puts prices up. It is quite easy to get an online quote on savings that could be made by changing provider, and in many cases they can be quite substantial. Uswitch, one of the leading price comparison websites, say that savings of up to £200 a year are not unusual.
There is no doubt that more and more property investors regard student tenants as an attractive business proposition. A company in the Midlands are offering property owners, who are thinking of organising landlord insurance on a student let, an insight into what they should offer to get students running to their door.
Simon Thomson is a Director of Accommodation for Students (AFS) and has been an integral part of the company since he started it up 12 years ago with a friend while at university. The company offer students an online search engine where they can look for accommodation that suits their needs as well as their pocket. In the last few months AFS have been conducting focus groups to find out just exactly what a student looks for in a home and have come up with one or two answers.
Simon said: “Students have got it tough at the moment, it seems that students have been hit-hard with the introduction of higher tuition fees, tougher A-level standards and increased accommodation costs and the aim of these focus groups is to try and help improve one important element of university: accommodation.” The research showed that natural daylight and big windows were important for the majority, as they accepted that space would be at a premium. Most students no longer want to be shut up in their room for long periods and expressed a desire for more open plan living with rooms where they could study and interact together.
Wi-fi and plenty of plug points were seen as a must have for most students and en-suites or multiple bathrooms were a luxury that students said they would be prepared to pay more for. Girl students said a home with a shoe rack would impress them, as would extra wardrobes but the deal clincher for many would be a landlord who took them out for a pint!