By:
Madalena Penny

Landlords acting faster when dealing with defaulting tenants have contributed to the improvement in tenant arrears, according to LSL Property Services.

As the largest lettings agent network in the UK, LSL’s research showed that 84% landlords reported that tenant arrears had remained stable or declined in the past 12 months, despite the economic pressure of the recession.

Industry spokesman, Steven Moss of  legal network, ‘Legal 4 Landlords’, added,

“As a company, we have proven to landlords that acting fast when dealing with tenant arrears and none-payment of rent is crucial.  Our aim is to provide relevant solutions to landlords who are faced with tenant problems.  The current research produced by LSL is a significant pointer as to the change in landlord response when dealing with rent arrears.  As our own data indicates a stark increase in tenant reference requests, we feel that the noted decline in tenant arrears can also be attributed to rent-savvy landlords who are employing thorough tenant reference checks.”

David Brown, commercial director of LSL Property Services said,

“The hike in tenant arrears hasn’t materialised in the last 12 months as many feared.  With the labour market remaining relatively strong, most tenant finances have been in better shape than expected – keeping the overall arrears across the UK down.”

Yesterday, the Bank of England’s Monetary Policy Committee announced that interest rates were to remain unchanged for another month.  As many landlords, struggling with BTL repayments and defaulting tenants, will no doubt be relieved by the news after fears that it was rumoured to rise.

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By: Madalena Penny,
“Legal 4 Landlords”

T.S. Elliot may not have been a landlord, a government housing minister or a property investor, but he understood the fundamental value of the security a home provides to its occupants.

Combining philosophy with the lettings industry may seem an odd mix, but as the current trends evidently express, the private rented sector has taken up the slack, providing house and home to those who have been let down by social housing and home-ownership.

The industrial and consumer world we now live in is based on a method of demand and supply.  In no other industry is the importance greater, than supplying home and shelter.  Without it we cannot class ourselves as a civilised nation.  Our aspirations as Brits has always been an overwhelming progression to home-ownership, seen as a rite of passage into independent adult-hood coupled with a sense of identity and achievement.  For many first time buyers now, home-ownership is a distant hope.  As a result of this shift, more and more people are turning to the private rented sector in search of affordable available housing.

What data and statistics sometimes fails to express, is that landlords don’t simply let properties to tenants, they offer people a home, a place of security, when other housing avenues have been closed to them.  An amazing two thirds of households established in 2009 were able to because of the PRS. Unlike its social sector cousins, the private rented sector does not receive on-going grants for repairs and maintenance and private landlords are responsible for their own investments, tenants and mortgage lending.  Like many other business’s, letting a property has its negative points and landlords can face rent arrears, damage and even abuse.  Control is driven by government legislation.

For a sector that has created a further 1.1 million households in the last ten years and offers security to 14.2% of all households in England alone, standing above other British industries with a value of £500bn, some reflection and reconsideration of current and impending legislation from the government would offer the PRS and the tenants it provides for, a little more respect and recognition.

By:
Madalena Penny

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As all data presented recently points to a strong demand for private rented properties, on the surface it may appear landlords are faring better than most in these unstable economic times.

However, digging a little deeper, there are some serious and significant flaws that landlords are facing, which could cause major issues, especially next year.  While the up to date research in the sector clearly shows that rents are increasing for the landlord, statistics published by the NLA (National Landlords Association), indicates that nearly half of possessions by landlords are a direct result of the tenant’s failure to pay the rent.

It can take anywhere from 3 – 5 months for an eviction process and for a landlord to finally gain possession, which can cause extensive problems on BTL payments.  Compounded with the trouble of lengthy eviction procedures, landlords also face legal costs, loss of rent and repair and maintenance to damage.  For landlords with small portfolios, this could mean all the difference, resulting in BTL repossessions.  As an industry leader, Legal 4 Landlords have addressed these issues, resulting in a 96% success rate with just a notice 8 administered.

Sample research captured by Legal 4 Landlords in-house data, shows that it’s not just LHA tenants who dominate the eviction rankings, but possessions are now closing pace on white and blue collar workers, implying that private and public sector workers are feeling the pinch amid government cuts as they struggle to meet their rental commitments on properties.

The recent 13% increase in buy-to-let mortgages shows clearly as to where housing trends are leading.  The concern, however in next years LHA cuts and the government’s impending switch to measure inflation through the consumer price index (CPI) from the current Retail Price Index (RPI) is a worrying issue for landlords.

By:
Madalena Penny

Problems in obtaining mortgages, worries over double dip price falls, large deposits insisted upon by mortgage lenders and a shortage of properties have been named as contributing factors for a surge in tenant demand and rental values being pushed higher, suggested the latest survey from RICS, (The Royal Institute of Chartered Surveyors).

The results from the survey concerning Q2 of this year show that 27% more surveyors reported a rise in rents, compared to 29% who reported a decline in rents a year ago.  A 33% increase of surveyors are expecting rents to continue increasing throughout the quarter.  Data from the survey captured a decline in available rental properties, which contributed to propelling higher rents.  BTL restricted lending conditions were also viewed as a hindrance for landlords seeking to increase to their portfolios to facilitate the on-going demand for rental properties.  However, as home-owners struggle to sell their own homes due to the current property market trends, many are choosing to put them on the rental market, which will alleviate present tenant demand.

Commenting on the RICS Survey, David Salisbury, chairman of the National Landlords Association (NLA) said,

“We welcome the latest RICS survey findings, which point to strong demand for rented property.  The growing need for private-rented accommodation demonstrates the importance of the role played by residential landlords.

‘However it is not all good news.  One in five landlords are experiencing rent arrears and many are concerned about the increase in capital gains tax.  Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.”

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By: Madalena Penny

This week the RLA (Residential Lettings Association) called for all landlords to support their campaign concerning the proposed changes to the Local Housing Allowance.  In a bid to make the coalition government understand that their alterations to housing benefit rates will have a serious impact and result in negative consequences not only to tenants but also to landlords and social sector housing.

The proposed cuts, which will take effect in April and October next year will no doubt see thousands homeless as a result of the governments decision.  Presently, the UK has a population of approximately 61,113205.  According to government national statistics, the population is forecast to increase by 4.3 million by 2018 and if current trends continue, we should expect this figure to increase to 71.6 million by 2033.

As new builds are at their lowest since the 1940s, social housing waiting lists are at a record high of 4.5 million, lending on both mortgages and buy-to-lets are severely constrained, over-crowding is on the increase and unemployment is rising.  If the coalition government continue to enforce LHA cuts, the UK will no doubt see a housing crisis of serious magnitude as landlords are forced to evict tenants due to the government’s proposals.

The only bias landlords have against tenants in receipt of LHA is from the government’s policies enforced through payment legislation. Because of LHA payment rules, which insists payment is paid direct to the tenant, landlords are left paying the cost, as payments are not always received from LHA tenants, leaving landlords shunning tenants on benefits in favour of working tenants.  Further cuts in LHA rates will no doubt result in the final nail in the prospective tenant’s coffin.

Pre-election, the conservative party announced that should they become the next government, they would re-instate the tenant’s right to have LHA payments made direct to the landlord.  As of yet this has not transpired.

Up to the end of 2009, there were 675,000 LHA tenancies and rent arrears in this sector were considered to be in excess of £220 million, however the true extent of rent arrears to date is as yet unknown.

Legal 4 Landlords are backing the RLA’s campaign and are asking all their members to do the same.  You can register your opinion by clicking on the following RLA link.

Click here if you have Housing Benefit tenants and receive Local Housing Allowance.

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Banks have dominated the financial and popular news of late.  With calls from the government, campaigns by the media and angry consumer groups calling for banks to ease up on lending and to pass on some of their profits to ease their customers financial burdens imposed by the high street financial institutions.

In a survey by ‘Which’ published earlier this week, all banks were rated in four separate areas, mortgages, savings, current accounts and credit card services.  The customer satisfaction survey undertaken in January 2010 and June – July 2009 singled out 4,224 members of the ‘Which’ Consumer Group, asking for their opinion and to rate banks on a 1-5 customer satisfaction poll asking for feedback on: interest rates; overall cost of deal; clarity of statements; customer service and keeping up-to-date with rate changes.

Strangely enough it was the smaller banks that came out on top with First Direct (owned by HSBC) leading with 89%, while the larger high street banks, as those which are backed by the taxpayer fared low on the table, with the Bank of Scotland trailing at the bottom with just 41%, (the overall average of the survey was 61%) as the table below indicates.

As other news this week suggested that fixed-rate mortgages are now costing the customer 4.55%, banks are being accused of profiteering from customers on fixed-rate deals.  The ‘Which’ survey strongly suggests that the larger banks are found lacking in most of their key areas including customer care and could be seeing a mass exodus of customers who have become unsatisfied with their present service.

‘Which’ Mortgage Lender Satisfaction Survey

1.   First Direct                            89%

2.   Co-Operative Bank               78%

3.   One Account                         77%

4.   Coventry BS                         73%

5.   Britannia BS                         72%

6.   Nationwide BS                     68%

7.   Intelligent Finance               67%

8.   HSBC                                   66%

9.   Skipton BS                           62%

10. Cheltenham & Gloucester    61%

11. Yorkshire BS                        61%

12. Woolwich                             60%

13. Natwest                                 55%

14. Alliance & Leicester             54%

(Santander)

15. Royal Bank of Scotland        54%

16. Standard Life Bank               53%

17. Barclays                                53%

18. Abbey (Santander)                49%

19. Lloyds TSB                           48%

20. Northern Rock                       45%

21. Halifax                                   44%

22. Bank of Scotland                   41%

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As the UK sees tenant demand increase, tenant referencing has become an essential and intrinsic necessity employed by landlords and letting agents alike.

Whether you rely on data or just plain common sense, it becomes obvious that when enforced, correct tenant referencing saves time, cost and a heap load of trouble in the long-term.  The press and other media at times are known to paint a rather bleak picture of landlords, focusing on the minority of rogues in the industry that give an unpleasant image to all landlords in general.  As everyone involved in the private rented sector can testify, there are far more bad tenants than troublesome landlords.

One landlord last week in Derbyshire filed for a possession hearing after issuing a notice 8 and 21 after learning that not only did they owe 12 weeks rent but they had also caused significant damage to the property.  After a torrent of abuse from the tenants he was left shaken and worried.  To add insult to injury, he will also have the cost of repairing the damage if he is expecting to re-let the property again.

While most of us become desensitised to events of this nature, for this landlord it has caused him untold stress.  After buying the property last year as way of offering him and his wife a pensionable income for their retirement, not only has he already seen a 10% hike in capital gains tax on his investment, but now has suffered the true cost of letting a property without conducting proper tenant referencing.

As more ‘accidental landlords’ enter the private rented sector without understanding correct procedures to protect their incomes, their investments and their peace of mind, more cases similar to the one above will become evident.  As it stands, there are 3.3 million households in England & Wales supported by the PRS.  Because of poor performance of present property sales, the market is seeing a lot more home-owners putting their houses up for rent as a source to allow them to move to another property of their choice.

Without being aware of the industry’s pros and cons, they leave themselves vulnerable and ultimately cause themselves to become victim to a false economy.  First time landlords should seek the services of a good letting agent or landlord Service and Support Company.  Letting agents will charge an estimate of 10%-15% of the rental income and are invaluable to a first time landlord.  Landlord Support and Service Companies administer just one off charges for tenant referencing, evictions etc and are great value to landlords who don’t want the full service of a letting agent.

Any would-be landlord should understand certain issues.

Firstly, that tenant referencing is a must.

That evictions result in cost, some times up to 4 months loss of rental income.

Costly damages can be caused.

Deposits must be placed in a government deposit scheme, with no guarantee that they will be issued to the landlord should the tenant cause damage to the property,

That LHA payments are paid direct to the tenant and are not always passed onto landlords.

That lenders do not respond to excuses for failure to make payments on BTL mortgages if tenants miss or fail to pay rent.

By
Madalena Penny

The HCA Initiative

The UK government’s national housing body, the Homes and Communities Agency (HCA) announced in May its aim to attract institutional investment for private rented affordable housing.

Sixty-four business’s responded to the HCA’s offer including Aviva Investors, who currently manage £316bn of investments.

Andrew Appleyard, head of specialist funds at Aviva Investors said,

“We are a strong advocate of the private rented sector and are encouraged by the HCA initiative.  Given the current market circumstances, we believe that we now have a genuine opportunity to acquire institutional quality investment assets in key locations.”

Other players in the arena that expressed interest included CB Richard Ellis, property consultants and Ageon, the insurance and pension provider.  The £1bn investment raised by the consortium to be ploughed into the ‘build-to-let’ private rented industry comes at a time when present housing trends rely heavily on the private rented sector caused by short supply of social housing, failure of mortgage lending and lack of new builds.

Unlike the present players in the PRS, (73% of properties are owned by individual landlords) the HCA initiative will see institutional investors tread on virgin territory as they enter the sector for the first time.  While current data estimates the private rented sector to be worth a cool £500bn, it is yet unclear how an investment of this nature will affect rents.

By
Madalena Penny

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An Englishman’s home is his castle.  These are the fine, noble sentiments us Brits grew up with.  Any child of the 80’s will have grown up with Thatcher’s aspirations of home-ownership for the masses, thus conceiving the home-ownership trend that has revolutionised the property industry and dominated a social and cultural mindset for the last 30 years.  That is until now.

In comparison to average family salaries, paying the large deposits lenders now insist upon to validate in securing mortgages, home-ownership has become a mere pipe dream for anyone trying to step on that property ladder.  The recession has not only resulted in financial consequences, but an end of an era. Social changes, values and aspirations will reach a turning point that will no doubt alter our views on housing needs, putting us on the similar lines with the rest of Europe.

The emerging trend from all this has been the growth of the private rented sector, which data indicates is now worth a formidable £500bn in the UK of which 73% of properties are owned by individual landlords.  While social housing and new builds are suffering, forecasting a housing crisis, it becomes evident that the future lies in the PRS.

While once viewed as housing the poor and the vulnerable members of the population, the private rented sector is now supporting the housing needs of people from every class in the spectrum. Landlords are experiencing a decline in rental arrears as tenant demand increases creating 5.5 tenants to each available vacant property allowing more choice of tenant for the landlord.  Evictions and notices are also declining suggesting a ‘settling in’ and acceptance of the recent shift in tenanted accommodation trends.

Sim Sekhon, industry spokesman and senior partner for Legal 4 Landlords said,

“June saw our highest number of tenant reference requests and our regional franchise opportunities are selling faster than originally anticipated.  It’s clear that the increasing tenant demand is having a tremendous effect on all sectors operating within and around the private rented sector.”

Whether we like it or not, the UK is set to follow our European cousins, where countries like Germany, France and Italy who consider renting privately as the norm without any stigma or prejudice.

By
Madalena Penny

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A 3.3% rise in rents in Q2 2010 gives optimism to the estimated 100,000 private landlords in Scotland.  Following similar suit to England & Wales, tenant demand is increasing.

Edinburgh recorded the highest rise with an increase of 4.3% up on 2009 with Glasgow showing a rise of 2.6%.  It appears the similar trend to England & Wales is a result of un-available social housing and difficulty in obtaining consumer mortgages.

The Register of Scotland (ROS) reported an increase of 5.3% during the first half of the year of house prices compared to last years values.  Again Edinburgh took the lead with a 17.3% rise in the number of house sales and an impressive 7.8% house prise increase with Glasgow reporting a modest but acceptable 11.2% in sales.

In stark contrast to the increase in house prices and sales, the latest data for Q2 2010 suggests an increase in the number of construction companies entering liquidation in Scotland, compared to England & Wales, where data suggests a decline in liquidations indicating a possibility that Scotland may have entered the recession later than England & Wales.

While the rise in house values and rents is welcome news for landlords, the social sector is faring less better and suffering the same fate as the rest of the UK.  Scottish response has resulted in a new tenant incentive scheme, which is being piloted in Edinburgh.  In a bid to relieve over-crowded council accommodation, the council are offering a maximum of £1000 to cover the costs of moving and will be offered to tenants who are living in houses larger than their needs require in hope that they move to more suitable accommodation.  Edinburgh council estimate that over 1000 homes are under-occupied.  If the pilot scheme is successful, other councils across Scotland may adopt the initiative in answer to the housing shortage.

By
Madalena Penny