Month: August 2019

Tenant demand – and rent – goes up as fees are dropped

Lesley Davis Leave a comment

According to the latest figures from Rightmove, demand from tenants looking for a new place increased 7% between May and June. This is an uplift seven times bigger than the previous four-year average of just 1% at this time of year. The online home finding specialist thinks this is a direct response to the Tenant Fees Ban that came into force on 1 June and we’re sure they’re right.

According to the report:

  • In London, there was a 13% increase in demand from May to June, compared to a four-year average of 4%
  • Agents are reporting an increase in enquiries from tenants looking to move now that the majority of tenant fees have been removed

Nationally (excluding London) asking rents are at a record high of £817 per month, and running at 2.7% up on a year ago, as the cost of renting continues to rise year-on-year.

According to new PRS data from ARLA, the number of tenants experiencing rent rises increased to the highest figure on record in July. A whopping 63% of agents witnessed at least some of their landlord clients increasing rents during July. And ARLA says this is a 15% increase from June -which already showed a record hike.

To put this in perspective, back in July 2018 the proportion of agents seeing rent rises was just 31%.

So as soon as the Tenant Fees Act came into force in June, rents started to rise faster and across the board. No surprises here for anyone working in the PRS. As ARLA spokesman David Smith said this week, the fees agents have been banned from charging are still being paid for by tenants – but it’s now through their rent, rather than in upfront costs. If the government’s aim here was really to help tenants, its backfired already.

Do we need an energy theft amnesty?

Lesley Davis Leave a comment
Don’t meddle with the meter.

Here’s an idea to ponder. According to Ofgem, tampered energy meters add £20 to every household bill each year. They also pose a life-threatening danger to personal and public safety. So the regulator is suggesting an energy theft amnesty. This would mean giving the public – including property professionals, landlords and tenants – the chance to own up (risk free) to breaking the law by stealing energy through a tampered meter. The meter would be made safe and no backdated charges applied.

Energy theft is a serious crime and it’s one which frequently goes under the radar. It is often committed by rogue landlords or tenants and injures or kills at least one person every fortnight in the UK.

During Ofgem’s proposed amnesty, energy thieves would neither be prosecuted, fined nor back-billed and would simply “get away with it.” The sentence is usually five years in prison.

Ofgem is so serious about this idea that it has done a survey to see what 1000 people round the country think. Over half would be in favour. So what are the pros and cons? Here’s what Ofgem has to say:

Benefits

  • Tampered meters are highly dangerous. They can cause fires, electric shocks and large gas explosions that can injure or even end lives. By making meters safe, an amnesty would help to make communities a safer place.
  • In the UK we all pay an extra £20 per year on our energy bills to pay for energy theft. Correcting tampered meters could help reduce the amount that everyone has to pay to fund stolen energy.

Drawbacks

  • An amnesty means that people who have previously broken the law by tampering with their energy meter will get away with it and won’t have to pay back what they have stolen. This could devalue the crime and make more people think they can get away with it – or other offences – in future.
  • If lots of people come forward, energy companies will need to visit thousands of homes to make their meter safe. This will be costly and does not guarantee these customers will not re-offend.

The research, which was carried out by UK-wide energy theft investigation companies, Echo Managed Services and Grosvenor Services Group doesn’t think the dangers of energy theft are well enough known.  The energy sector needs to work harder to educate people on the potentially-fatal risks that meter tampering can present, they say.

Ofgem will be weighing up the pros and cons of a possible amnesty in the coming months – so it will be interesting to see what happens. In the meantime, anyone thinking of tampering with an energy meter in a property they manage, let out or rent from a landlord should think again. It’s against the law and it’s dangerous.

Image courtesy of Caroline Ford [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0/)]

Help us campaign to save Section 21

Lesley Davis Leave a comment

We have written several blogs lately about the proposed abolition of Section 21 – the so-called ‘no fault’ eviction process. At Ringley we don’t believe that scrapping this system is good for landlords – or ultimately for tenants. Here’s why.

1)      Section 21 works. The system is widely understood by both landlords and tenants as it has been in place since the Housing Act 1988 was enacted.

2)      Many landlords find it cheaper and quicker to use Section 21 to get their property back rather than opting for a Section 8 eviction or breach action. Because the Section 8 route is so adversarial, as soon as they are served with a Section 8 notice (which may not be for rent arrears) the tenants simply stop paying rent. And because Section 8 procedures are adversarial the landlord ends up facing thousands in costs and huge voids, with cases sitting backed up in the court queues for months.

3)      There are already provisions to stop landlords using Section 21 wrongly. Before a landlord can even get as far as serving a Section 21 Notice, s/he must have complied with certain legal requirements for all tenancies entered into since 2015, including for example provision of:

  • An Energy Performance Certificate
  • The How to Rent Guide
  • Prescribed Information on the protection of a deposit (having also protected that deposit)

Landlords are also required to provide a valid gas safety certificate, not only before a Section 21 Notice, but before occupation. This was confirmed in the recent case of Caridon Property Limited v Shooltz (2018). So if a landlord has not provided a gas safety record at the start of the tenancy, s/he will not be able to rely on the no-fault basis for termination during that particular tenancy. Instead, s/he will have to rely on another ground for possession, such as rent arrears, where the process is longer and therefore more costly.


4)      Under the Housing Act 1988, a BTL landlord worried that he might need his property back can already protect himself if, not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on the basis of Ground 1 specified in Schedule 2 of the 1988 Act, or, if the court is of the opinion that it is just and equitable to dispense with the requirement of notice because:
(a)           at some time before the beginning of the tenancy, the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them occupied the dwelling house as his only principle home; or
(b)           the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them requires the dwelling house as his or his spouse’s only principal home and neither the landlord (or, in the case of joint landlords, any one of them) nor any other person who gave the notice mentioned above acquired the reversion on the tenancy for money or money’s worth. 

The government has claimed landlords’ use of Section 21 eviction notices is the leading cause of homelessness in the UK. The National Landlords Association (NLA) completely rejects this idea. Referring to data provided by the government that of 33,020 households assessed by local authorities between October and December 2018, the NLA points out that just 11.8% (3,890) faced homelessness as a result of being served with a Section 21 notice.

Nor does the NLA think that the Government has considered the impact of these new policies on the most vulnerable members of society.  We agree that the proposals are likely to deliver a whole range of unintended consequences. These include a lower supply of private rented housing alongside more risk-averse landlords. The NLA tells us landlords are now exiting the market at a faster rate. This further damages the already fragile supply of properties in the areas where they are desperately needed. Tenants on Universal Credit or benefits and anyone with a bad credit record, CCJs or pets will lose out, they say.  We agree. And the removal of Section 21 will make more landlords more susceptible to rogue tenants – they are out there and they cause endless heartache and a lot of money.

Above all, landlords must be able to evict bad tenants.   If they can’t, we will end up coming full circle: needing new legislation to encourage landlords into the rental market as we did all the way back in 1988.  The institutions are coming into the market and may cover the towns and cities but a healthy market needs a range of accommodation types across the spectrum. Continually trying to push buy-to-let landlords out of the market is nonsensical. We badly need our rental market to work – for everyone. Scrapping Section 21 isn’t the way forward.

So we are calling on anyone who agrees with us to use the four points we outline above to respond to the government consultation here before 12 October. Please join us and make our voices heard.

New advice on Right to Rent

Lesley Davis Leave a comment

After months of uncertainty for landlords, the Home Office has now released updated guidance on Right to Rent, to help anyone letting property in England ensure they are compliant with the law.

The new guidance provides advice for landlords with tenants from Australia, Canada, Hong Kong, Japan, Singapore, South Korea and the United States (B5JSSK nationals), who are in the UK for up to six months.

Since May B5JSSK nationals have been able to use electronic gates at UK airports, so they don’t have their passports stamped on arrival. This has caused difficulties for landlords because their passports didn’t visually prove their right to be in the UK.

Now, the latest Home Office advice confirms that landlords can use the following as acceptable evidence of entry to the UK:

  • An original or copy (hardcopy or an electronic copy) of a boarding pass or electronic boarding pass for air, rail or sea travel to the UK, establishing the date of arrival in the UK in the last six months
  • An original or copy of an airline, rail or boat ticket or e-ticket establishing the date of arrival in the UK in the last six months
  • Any type of booking confirmation (original or copy) for air, rail or sea travel to the UK establishing the date of arrival in the UK in the last six months
  • Any other documentary evidence which establishes the date of arrival in the UK in the last six months.

The requirement is waived for holiday lettings of less than three months.

If a potential tenant is unable to present any of the above evidence, a landlord can use the Landlord Checking Service to confirm Right to Rent eligibility. It’s important that landlords keep evidence of Right to Rent checks on file throughout the tenancy, and for 12 months after the tenancy ends, after which time data should be securely disposed of.

For more information and to read the new guidance in full, click here.

Rents up as landlords leave the market – but agents remain positive

Lesley Davis Leave a comment
Demand is up and so are rents

Two new reports out this week look at the lettings industry. Both are revealing.  The Association of Residential Letting Agents (ARLA) and digital referencing company Goodlord put the current state of the lettings industry under the spotlight, now that agents have started to adjust to the changes brought in by the Tenant Fees Act.

According to ARLA, rents rose to their highest-ever level in June, with demand also on the increase. Year-on-year, the number of tenants facing rent increases is up from 31% in June 2017, and 35% in June 2018. At the same time, the number of properties under management fell. ARLA chief executive David Cox expects this to be a continuing trend.

 “In addition to the repercussions of the Tenant Fees Act, the proposed abolition of Section 21 coupled with the Mayor of London’s recent call for rent controls, will only cause the sector to shrink further. In turn, this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.” He said.

Ever since the Government proposed the ban, ARLA has warned that tenants would continue to pay the same amount, but the cost would be passed onto tenants through increased rents, rather than via upfront costs.

Goodlord also surveyed letting agents around the country to take the pulse of the industry during the summer months. They reveal that agents are largely optimistic despite the issues raised by the ARLA survey. The agents surveyed admit they expect to lose revenue following the fees ban in June but they are taking a positive stance, with almost half (47%) of those polled planning to expand their managed portfolio in response.

But perhaps the most interesting feature of this survey is that while letting agents continue to deal with the familiar pain points of the rental business from carrying out referencing to sourcing tenants, more than 80% of them are increasingly looking to Proptech to make these processes easier. This is the trend to watch and we’ll be blogging on this again in the coming weeks.

Insurance: are you covered?

Lesley Davis Leave a comment
Your landlord should be insured for this kind of damage but what about the contents of your flat?

Insurance, like braces on your teeth or income tax, is a necessary evil. It’s a topic that needs be taken seriously. We’ve blogged before about the importance of ensuring you have the right cover in place. So we want to share some new research from Aviva with you.

According to the insurer, which provides cover for one in four UK households, a growing number of renters are putting themselves at risk by choosing to remain uninsured. Aviva polled 2,057 people in June, including 567 respondents living in rented accommodation and 585 respondents who own their house with a mortgage. The results are interesting.

First, the vast majority of renters taking part in the survey, don’t have any form of protection in place; life insurance, critical illness cover or income protection. This means they may have trouble paying their rent if they unexpectedly have a drop in income and compares badly to homeowners. Three out of five people with a mortgage told Aviva they have some kind of protection insurance in place.

The research also reveals that only two out of five households living in rented accommodation have contents insurance. This rises to nine out of ten homeowners with a mortgage. Aviva calculates that this means almost six million renting households could be without any insurance cover at all if their possessions are damaged by fire or flood or stolen.

The reality, of course, is that the responsibility of buying a house or flat often triggers the purchase of life insurance and contents cover. And buildings insurance is a standard requirement. This is not the case for tenants, who are also likely to spend a larger proportion of their income on housing costs and so have less spare cash. Aviva found that on average renters spend 35% of their income on rent, compared to the 25% spent on a mortgage. And people living in the private rental sector are paying the most, with figures averaging out at 40%; this is considerably higher for many people renting in London.

No surprise then that insurance is an expense too far. If you’re young and single, the need for life insurance may seem negligible but contents insurance is a different matter. People living in flats may feel they have added protection from theft due to block security, concierge staff or just knowing there are plenty of other people for thieves to choose from. However, fire, as we all know too well, is often devastating and can leave people literally with just the clothes they are standing up in. And leaks from neighbours’ flats can quickly destroy fixtures and fittings as well as personal possessions.

Never assume your landlord’s insurance will cover you. It may pay for redecoration if the bathroom upstairs floods but it won’t pay out for that damaged laptop or your book collection. So if you are renting your home, think again about contents cover. It’s cheap and quick to buy online. You may never need it – but is it worth taking the risk?

Want to make money from short-term lets? Check your lease first!

Lesley Davis Leave a comment
Thinking of sub-letting? Think again…

Many of us now use short-term lets to pay for our holidays or to make a regular income.  As we’re right in the middle of the holiday season you might be tempted to give it a go. But before you do – think again. Here’s a cautionary tale for renters or leaseholders thinking of using Airbnb or another online platform to make a bit of extra cash.

Toby Harman was taken to court in July and was hit with a whopping £100,000 fine for renting out his London flat on Airbnb. He had been renting out his ‘cosy studio apartment with a hot tub’ on the short-term lettings website since 2013. Sounds great if you fancy a bijou London base for a spot of sightseeing. Unfortunately for Toby, he was caught out when Westminster City Council discovered the host masquerading on Airbnb as ‘Lara’  was in fact one of their tenants. It turned out that Toby was sub-letting his flat in strict breach of his social housing tenancy agreement. After a failed appeal he was evicted and told to pay back £100,974 in unlawful profits.

This case revolves around the dos and don’ts of social housing but the same rules are likely to apply to any homeowner who doesn’t own their freehold. If you are renting, it goes without saying that your landlord may not be thrilled to find you are sub-letting his property. Eviction is the likely outcome if you’re caught out and you could end up in court. And if you are a leaseholder, don’t even think about going down the Airbnb route without first checking your lease. Read the small print – the devil is always in the detail.

Most leases state that a flat can only be used as a private dwelling and short-term lets are very unlikely to fit the bill. This is clear from the widely reported 2016 case of Nemcova v Fairfield Rents Ltd (now known as the Airbnb ruling). Well worth a closer look if you’re in any doubt.  

The other important point to note was highlighted earlier this year in the case of Bermondsey Exchange Freeholders Limited v Ninos Koumetto. This case draws attention to the fact that most residential leases don’t allow owners to share possession or occupation of their flat or to use it for a commercial purpose (which includes AirBnB lettings) without consent of the freeholder. By all means talk to your landlord but don’t be surprised if you get a negative reaction.

What all these court cases clearly show is that short term lets are a minefield if you live in a flat. So tread carefully!