Month: June 2019

Making rental deposits easier to transfer

Lesley Davis Leave a comment

Good news for tenants today. In future it could be made easier to free-up rental deposits when moving from one property to another via “deposit passporting”. Speaking at a major housing conference in Manchester, Communities Secretary James Brokenshire said this was one of  the ways that the housing market could be made fairer.

Deposit passporting sounds like good news for tenants but what about landlords?

“Ministers are inviting proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next,” he said.

This is because some tenants find it a struggle to provide a second deposit to their new landlord. Until their original deposit – on the home they are moving out of – is returned by their current landlord, many renters find themselves in danger of getting into debt or becoming trapped in their current home. With more than 4 million people living in the private rented sector, the government want to understand the scale of this problem.

Shelter welcomed the news. “A deposit passporting scheme would help the country’s hard-pressed renters avoid having to stump up a fresh deposit before they’ve got the old one back, ” said the housing charity in The Times.

But what about landlords? There is a reason why deposits are withheld until the check-out process has been completed – and that’s because not all renters leave properties in good order.  It may not always be possible to inspect a property until after the tenant has left. And any damage may not be immediately obvious. If the deposit has already been “passported” that could leave the previous landlord high and dry.

The suggested solution set out by James Brokenshire today is that the previous landlord should still be able to claim part of the deposit for any damages, and the tenant could top up the deposit if necessary. So could it work? Maybe.

The next step is a Call for Evidence. The industry will be asked to consider whether the scheme should be government-backed, or whether existing deposit schemes could be tweaked to take passporting on board. The Secretary of State told the press today: “We need to do this thoughtfully”. Let’s hope he means it.

Landlords in the firing line – again!

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Landlords are under fire again today. This time for not giving renters enough information about their tenancies. In a new survey by the National Landlords Association, reported in Landlord Today, more than two thirds (67%) of tenants say they don’t get enough information about their rights and responsibilities. This is hard to believe. Landlords have to give new tenants a copy of the government’s How To Rent guide when they sign their rental agreement.  If they don’t, they can’t use the section 21 (no fault) eviction procedure if they need to – although this may not be an option for much longer.

It would help landlords if the Ministry for Housing, Communities and Local Government (MHCLG) which issues the guide and updates it on a regular basis – could get new versions out in a timely manner. When the tenant fees ban came in on 1 June, a new version was released but the MHCLG didn’t update it until the last minute. This is important because the new form includes changes to form 6a. This stipulates that landlords and letting agents cannot use a Section 21 eviction procedure if they have taken a ‘prohibited payment’ from a tenant and it has not been refunded in full.

Any landlord signing a rental contract with a new tenant that week, could have been forgiven for not handing over the correct version of the guide but would still have found any Section 21 notice invalidated by using the wrong version.

That aside, despite an apparent lack of knowledge of the How to Rent guide, there is a positive message from the NLA survey. Most tenants have a good relationship with their landlords. More than two thirds (68%) say they have never had any cause for complaint. And another 12% say any complaints they do have are dealt with properly.

So the majority of landlords are clearly doing the right thing and most tenants are happy. If the landlord or agent has handed over the How to Rent guide at the outset of the tenancy, surely they have fulfilled their side of the bargain. Many do a lot more and spend time talking tenants through what they can expect.

But as several readers point out in Landlord Today, although it is important for tenants to know their rights and responsibilities, you can’t force people to read the small print.

Fire safety – do you know the drill?

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A devastating fire wrecked a block of flats in Barking at the beginning of June. No one died but the fire spread so fast that it could easily have led to loss of life, particularly as the residents reported that no alarms had sounded. Fire safety systems should always be regularly inspected and tested and – unless a stay put policy is in place – residents should evacuate the building immediately they hear the alarm.

Unfortunately, as fire risk specialists Lawrence Webster Forrest says in a recent blog, although the need for immediate evacuation may seem to be something of a ‘no-brainer’, studies have shown that people are reluctant to evacuate and are inclined to assume the fire alarm is a test or a false alarm. Clearly this is dangerous, so fire training in residential blocks is a must – and should be taken as seriously as regular inspections of fire safety equipment.

Thankfully most of us have no experience of fire developing inside a building. But what this means, according to LWF, is that they are likely to base their idea of how fire spreads on their experience of bonfires or other outdoor fires. But fire inside a building represents an imminent threat to life. So in an emergency situation, evacuation must be completed as quickly as possible.

It is the responsibility of property managers to make sure that, in an emergency, residents know what to do and when to do it. This means helping them to:

  • familiarise themselves with escape routes, which may not be used on a daily basis.
  • Understand how to use exit devices on fire doors. These should be demonstrated and residents given the opportunity to operate one themselves.

It is important that residents know not to use lifts when the fire alarm has sounded. Also, everyone should be familiar with plans to evacuate neighbours with disabilities or who are particularly vulnerable. Knowing who is responsible for helping particular fellow residents could mean the difference between someone evacuating the block safely or being trapped in their flat.

So if you’re a property manager, make sure this is at the top of your list for your next residents meeting. And if you’re a leaseholder or tenant and don’t know what the evacuation procedure is in your block – ask. Don’t take the risk.

The focus is now on property management – but make sure you get it right!

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Letting agents have been told today, that by not including property management in their services, they could be losing out on “thousands of pounds of potential income”. New research from outsourcing supplier ARPM, reported in Letting Agent Today, shows that many agents typically offer let-only. By offering a full management service too, ARPM calculates they could boost average annual income by up to 80% per tenancy. That’s big money.

The report reveals an untapped market of almost one million landlords in London alone who just use letting agents to find them tenants – or don’t use one at all. With private rentals expanding across the country year-on-year and many landlords living remotely from their investment property, there is huge potential for growth. And a chance to claw back the estimated £400 per letting that agents are expected to lose as a result of the tenant fees ban.

Property management is a business that shouldn’t be entered into lightly

But – and this is a big but – property management is a serious business. The government has property agents in its sights right now and poor service in our sector is soon to be outlawed by the advent of stronger regulation and the need for recognised qualifications. So, like marriage, this isn’t a client relationship to be entered into lightly.

As chartered surveyors and professional managing agents, we have long-standing experience in this market. Our lettings division Life by Ringley, based in Manchester and servicing clients across the region, has a clear understanding of the wide-ranging needs of landlords and tenants. We provide both basic and full management services, with fees clearly stated from the start. Click here to find out more. o.uk/

As well as managing rental property, Ringley specialises in leasehold blocks. Rather than a one-size-fits-all approach, our Blockcare offer has something for everyone, from a basic service to fully managed options. Fees are charged according to the level of management you require. Sign-up is easy and almost everything from site reports, minutes, invoicing and accounts can be done online. We can take us much or as little of the hassle out of your management requirements as you want us to.

We even have a tailor-made package for you to use if you can’t afford a managing agent! So click here to find a package that suits your needs.

How can letting agents add value?

Lesley Davis Leave a comment

The tenant fees ban means a massive loss of income for letting agents. Landlord website Goodlord estimates the loss at around £200 million in turnover each year. That’s a big blow. UK landlords are already reeling from a series of tax and regulation blows. So letting agents trying to offset their loss of income by simply charging clients more for delivering the same service won’t work. Instead agencies will have to reinvent themselves and develop new income streams.

Adding property management to the mix is an obvious one – it’s a service that agents can still charge for but it’s one that could easily backfire. So be prepared to do it well or not at all.

Ensuring you’re charging your full management fee every time is a good place to start, says Goodlord. Agents should make sure to spell out every single service they provide, from compliance to inventories, and let landlords know what they would be missing out on for a discounted fee.

Proptech expert Neil Cobbold believes providing an appealing landlord proposition that is “transparent and tech-enabled” will be key while at the same time “reminding landlords at every opportunity why the rental market continues to be a good place for investors with the right agency partners”. Added value will be crucial for success in future. What about adding rent protection insurance or void period management to the service offer. What else would clients like to see?

Ask tenants too. How much agents can make from insurance or utility and media switching services is determined by tenant take-up, so understanding and managing expectations is crucial. That way agents can actively improve tenants moving experiences, develop brand loyalty and maybe even generate recommendations.

Property consultant Abi Hookway also puts a positive spin on the fees ban, telling the press this week in the wake of scare stories about landlords leaving the sector in droves, that there may even be an upside if landlords exit the private rental sector in larger volumes. They may create an over-supply of buy to let units on sale – thus making them cheaper for future investors, she says. Abi also suggests that offering longer term management options with a guaranteed rental income could be a winner. She believes many landlords would jump at the chance to avoid the hassle of having to find new tenants, manage rent arrears and deal with disruptive tenants for several years at a time. All part of the job for a professional letting agent.

Tenant fees ban – the unintended consequences

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The Tenant Fees Act came into effect in England on Saturday and there are already big question marks hanging over the new legislation. Both the government and the lettings industry want to make renting fair for tenants but agents are not convinced the new Act will work in the way that was intended.

Glynis Frew, the CEO of major letting agent Hunters, said this week that good intentions could easily result in unintended consequences. We agree that a small number of rogue agents and landlords have charged what she describes as “mind-boggling” fees, but this isn’t representative of the industry as a whole. Instead of opting to cap fees, they have been scrapped altogether. The likely results are rent increases, landlords leaving the sector in even greater numbers than they are already and letting agents shutting up shop – which as well as reducing consumer choice, also has a negative impact on our beleaguered high streets.

Our view is that the Act will mean agents looking closely at their all-inclusive management fees and having to pass on disbursements such as deposit registration costs to landlords. The industry will be looking to push extra products such as insurances, on which agents can take commissions to cover the shortfall in income. 

Local authorities, charged with enforcing the legislation, can fine landlords and agents up to £5,000 for levying a payment that is now prohibited (see yesterday’s blog for a list of allowable fees) and they can prosecute or impose a fine of up to £30,000 if an ‘offence’ under the Act has been committed. This is where a landlord or agent has been fined or convicted for a breach within the last five years and commits a further different breach.

Being a landlord has never been more precarious.  Reducing deposits from 6 weeks to 5 is no real protection against tenants not paying their last month’s rent and the Deposit Alternative products that are now springing up may offer landlords more protection but are of course optional, and cannot be forced on tenants.   Flexibility as to how tenants make payments is also diminishing as many landlords refuse to take rent or deposit payments by credit card as, understandably, they don’t want to pay the fees.

The challenge for agents will be to ensure they are providing an added-value service to landlords by having effective tenant referencing, contractual and deposit systems in place as well as ensuring compliance with the new Act.

Tenant Fees Act now in force

Lesley Davis Leave a comment

The Tenant Fees Act came into force in England on 1 June. This is a very important change in the law for everyone living and working in the private rented sector.

The key change is that landlords and letting agents can’t charge tenants a fee for anything that isn’t listed in the Act as a permitted payment. Allowable payments are:

  • Rent
  • Tenancy deposit
  • Holding deposit
  • Payment in the event of a default
  • Payment on variation, assignment or novation of a tenancy
  • Payment on termination of a tenancy

Also, landlords and letting agents can still take payments for council tax, utilities, TV licences and for communication services such as telephone and internet. Fees can’t be charged on anything that isn’t on the list above, including:

  • Credit checks
  • Inventories
  • Cleaning services/professional cleaning
  • Referencing
  • Admin charges
  • Gardening services

Landlords and agents do need to read the small print – or in this case, the Act – because there are some other changes you will need to know about. Go to https://www.gov.uk/government/collections/tenant-fees-act to see the Act in full.

There are now a number of limitations on the way rent is paid. Holding and tenancy deposits are capped at one week’s rent and five or six weeks’ rent accordingly and it is not acceptable to ask for an additional deposit to be paid by renters with pets. It is permissible though to charge a higher rent if a tenant moves in with their cat, dog or rabbit.

Fees are still allowed for replacing lost keys or electronic fobs but charges must now be evidenced in writing to demonstrate that they are reasonable. Landlords and agents are also still able to charge interest on overdue rent but the caveat here is that the fee only kicks in when the rent is more than 14 days late. Interest can only be charged at 3% above the Bank of England’s annual percentage rate for each day the rent is outstanding.

Tenants can no longer be charged a penalty for contractor call outs or missed appointments but deductions can be made from the tenancy deposit if there is a clause in the tenancy agreement that has been broken, such as not returning the property to the state it was in at the beginning of the tenancy.  Charges can also be made for work or repairs that are deemed necessary before the end of the tenancy if the damage is the fault of the tenant and the landlord or agent needs to provide accurate evidence of any costs incurred.

To be absolutely certain that landlords understand the new rules, ARLA has developed a toolkit that explains the new legislation in detail. Go to https://www.arla.co.uk/tenant-fees/ to download a copy.

Later in the week, we will take a look at the industry response to the new Act and asking what will be the likely impact on landlords and agents.