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

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.

Tenant Fees Act now in force

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.

Right to rent update

Earlier this month, the Government issued new guidance on right to rent checks post-Brexit. Like most things Brexit-related, there has been a lot of uncertainty about what will happen next and landlords and letting agents have been rightly confused as to what their rights and responsibilities will be once the UK leaves the EU later this year. In response, the Home Office has now confirmed that there will be no changes made to existing legislation until 1 January 2021.

Under the law as it stands, anyone letting a property must check that prospective tenants have the legal right to rent a home before a new tenancy agreement is signed.

Until 1 January 2021 EU, EEA and Swiss citizens will continue to be able to prove their right to rent in the UK as they do now, for example by showing their passport or national identity card.

There will be no change to the way EU, EEA and Swiss citizens prove their right to rent until 1 January 2021. This remains the same if the UK leaves the EU with or without a deal. Letting agents and landlords do not need to check if new EEA and Swiss tenants arrived before or after the UK left the EU, or if they have status under the EU Settlement Scheme or European temporary leave to remain. Nor will they need to retrospectively check the status of EU, EEA or Swiss tenants or their family members who entered into a tenancy agreement before 1 January 2021.

Irish citizens will continue to have the right to rent in the UK and will continue to prove their right to rent as they do now, for example by using their passport.

However, the Home Office states that letting agents and landlords should continue to conduct right to rent checks on all prospective tenants to comply with the Code of practice on illegal immigrants and private rented accommodation and the Code of practice for landlords: avoiding unlawful discrimination.

As is now the case, in order for a landlord to obtain a statutory excuse from a civil penalty when letting to the non-EEA family member of an EU, EEA or Swiss citizen, the prospective tenant will need to show Home Office issued documentation as set out in the legislation and guidance.

So watch out for new guidance on how to carry out right to rent checks from 1 January 2021 and in the meantime, if you’re still confused, go to the government website at gov.uk which has plenty of useful links and more information on right to rent checks.

Section 21: Finding the right balance

With the introduction of more regulation, reductions in tax relief on mortgage interest and 3% Stamp Duty on buy-to-let properties, landlords are really under pressure. Add Section 21 changes into the mix and there is a real risk that, having lit the touch paper, all the government has to do is stand well back and watch the rental market go down in flames.

This may be an exaggeration but according to a recent survey carried out by Landlord Action and reported in yesterday’s Landlord Today, more than a third (38%) of buy-to-let landlords will consider offloading properties if the government axes Section 21 ‘no fault’ evictions. A further 33% said they would only continue being a landlord if “significant changes” are made  to Section 8.

The study also found that 70% of landlords would be less willing to consider a longer-term tenancy if Section 21 was no longer available to them, while 85% said they would be more selective with their choice of tenant. 

This is serious. The government is attempting to reform the private rental sector in order to help tenants but is running the risk of alienating the very landlords that people rely on to provide their homes.

In response, today there has been a new call on the government to rethink its plans to change the Section 21 eviction process. The founder of Landlord Action, Paul Shamplina, has written to housing minister Heather Wheeler, inviting her to gain a greater understanding of the possession process before making drastic reforms, by attending an eviction with him.  In formulating policy and new legislation it is vitally important that any reforms present equal opportunity for everyone operating and living in the private rental sector.

With 85% of landlords telling the National Landlords Association in a recent poll that they would be unlikely to vote for any party proposing to remove Section 21, for the minister’s sake let’s hope she is in listening mode.

Section 21 changes: what’s the problem?

On 16 April this blog flagged up government plans to scrap “no-fault” evictions. The change proposed to the Housing Act 1988 means landlords will always need to give tenants a reason for ending a tenancy, such as breach of contract or wanting to sell the property. We also drew attention to the fact that the government needs to show caution if this decision, by putting tenants’ interests first, is not to have unforeseen consequences.

In fact, the results of scrapping Section 21 are not ‘unforeseen’ at all. If the proposed change is not carefully thought through and properly managed, we predict smaller landlords leaving the rental market in favour of less troublesome investments, shrinking the available rental stock as a result.

So why has the government chosen not to introduce three- year tenancies but now seeks to introduce never-ending agreements or contracts that can only end using protracted court eviction processes and proving fault? Many landlords feel more secure in renting their properties knowing that they can get to know their tenants during the first year of their tenancy and have a straightforward way out using Section 21 (a non-adversarial, no-fault process) should any kind of nuisance, behaviour or problem with late payment start to rear its head.  Housing Associations also use a one year contract before they grant long term tenancies for the very same reasons. 

Richard Lambert urges the government to look to Scotland, which scrapped no fault evictions in 2017.

The National Landlord’s Association (NLA) has been quick to slam the proposal, arguing that Section 21 “has become a backstop to overcome the ineffective Section 8 process”. Richard Lambert, CEO of the NLA, talking to Landlord Today earlier this month, said: “Landlords currently have little choice but to use Section 21. They have no confidence in the ability or the capacity of the courts to deal with possession claims quickly and surely, regardless of the strength of the landlord’s case”.

Lambert suggests that before making any major decisions, the government should look to Scotland, which outlawed Section 33 notices (equivalent to Section 21) in December 2017. Scottish landlords were just as resistant to the change as their English counterparts but the predictions of disaster have not materialised, probably due in large part to the fact that the court process was reformed in advance of the Section 33 changes. With Wales also expected to following Scotland’s lead, it is vital that the law makers tread carefully. As Richard Lambert says:  “If the government introduces yet another piece of badly thought-out legislation, we guarantee there will be chaos.” We wholeheartedly agree with that.

Tomorrow’s blog will take a closer look at what could be done to make any new proposals work for tenants AND landlords.

Right to Rent: unfair to landlords and tenants?

Should landlords be expected to act as border control officials when renting to a new tenant? This is the question that a Judicial Review of the government’s controversial Right to Rent policy, which obliges landlords to undertake immigration checks on prospective tenants, will be asking as it gets underway today.
The Right to Rent scheme was rolled out nationwide in 2016, meaning that landlords must now check the immigration status of would-be tenants. Understandably, this initiative has proved really unpopular. Landlords are already under pressure from the government (see my blog Landlords under fire, posted on 11 December) and certainly don’t want to take on responsibility for ensuring that tenants have a legitimate right to rent a home.
When the scheme came into effect, the Joint Council for the Welfare of Immigrants (JCWI) thought it was so potentially discriminatory that it put forward – and won – a legal challenge, gaining the right to launch a High Court case against the Home Office. As I write this blog, a full hearing is taking place before the High Court today and tomorrow.
The JCWI’s legal challenge is being supported by the Residential Landlords Association (RLA), which has carried out research to find out how landlords feel about the scheme. The RLA found that, as a result of the Right to Rent policy, 44% of landlords are now less likely to rent to someone without a British passport, mainly because they are scared they may be prosecuted if they get something wrong. Landlords also say that, as a result of Brexit and the continuing uncertainty around the future status of EU nationals in Britain, they are now less likely to rent their property to anyone from the EU or the European Economic Area.
According to Landlord Today, the RLA is calling for Right to Rent to be scrapped, arguing that it discriminates against those unable to easily prove their identity and foreign-born nationals who have documents unfamiliar to landlords. It is also calling for urgent guidance for landlords to be issued by the government, explaining clearly the rights of EU citizens to rent property, especially in the case of a no-deal Brexit.
The whole situation is reminiscent of the Windrush scandal that came to light earlier this year. Landlords are not government officials and shouldn’t be expected to act on behalf of the Home Office or to make a judgment call around who is and isn’t legally entitled to rent a property. Landlords are under enough pressure from excessive taxation and a new raft of regulations without being expected to act as immigration officers too.

Landlords beware – Don’t believe everything you read!

 

A property management company that promised a guaranteed rental income to landlords, even if tenants failed to pay, has come under scrutiny from the Advertising Standards Authority (ASA). An advertisement running on the company website has been judged to be misleading following a complaint and has been banned from future use.

Always read the small print may be an overused phrase but it continues to be good advice, particularly when money is involved. Where this advertisement was concerned, the ASA judged that there was a particular problem with what wasn’t included in the small print.

Letting Agent Today reported this week that, in February, the website www.reliancepropertymanagement.co.uk carried a banner stating: Relax while your rental income is guaranteed! Receive your rent on time, every month, even if your tenant fails to pay. That’s a guarantee that would make any landlord sit up and take notice. None of us wants to miss out on a good deal but was this promise really one that could be relied on?

In fact someone did query whether or not rent really would be guaranteed in all circumstances and asked the ASA to investigate the claims. The advert in question stated that landlords would be paid each month whether or not the property was tenanted and claimed to be “taking away the risk” for landlords. The key phrase used was “giving you confidence in your rental income so you can rely on it, whatever happens”. Landlords were referred to the Ts & Cs for further explanation of the service but on investigation the ASA ruled that the company did not make clear each significant limitation that applied to the promise of guaranteed rent.

Nor was it made clear to landlords that the guaranteed rent was based on an agreement through which the property manager became the tenant and then sub-let the landlord’s property to other tenants. The ASA determined that this information was likely to be critical to any decision whether or not to sign a contract and the advert was therefore in breach of the ASA’s advertising code.

There are important lessons to be learned here. First, when advertising a product or service, any limitations must be made absolutely clear in marketing communications otherwise they will be in breach of the ASA code. Second – and this is a lesson for life, not just for property – if something sounds too good to be true, it probably is!

Ensuring your home is fit to live in

Here’s an interesting situation. In a recent case that ended up in the High Court, a tenant had signed a two year tenancy on a house and paid £34,000 in rent for the full term of the contract. After the tenant moved in, part of the front garden wall collapsed, blocking a side passage. This caused internal damage to the house and as a result the tenant complained that the property was not habitable. A structural engineer’s report, obtained by the tenant, showed that part of the retaining wall could collapse at any time, posing a risk to the house. He concluded the property wasn’t safe to live in.

Most of us would assume that this would be enough to entitle the tenant to at least part of his rent back and for the landlord to immediately carry out the repairs needed to make the house safe. But under the law as it stands this isn’t necessarily the case. What is known as ‘significant disrepair’ is enough to make a case against your freeholder under section 11 of the Landlord and Tenant Act 1985, but – shocking though it sounds –  if a property is ‘not safe to live in’ that is not, at the moment, a basis for a claim.

In this particular case the tenant was lucky. The tenancy agreement contained a clause headed Premises uninhabitable, which stated,

“The rent or a fair proportion of the rent shall be suspended if the Premises or any part thereof shall, at any time during the tenancy, be destroyed or damaged by any risk insured by the landlord so as to be unfit for occupation and use…

After an appeal by the landlord, which was judged unreasonable, the tenant won. And rightly so but it was only the clause in the tenancy agreement that kept the law on the tenant’s side. In future we hope that tenants won’t have to rely on a clause like this to be treated fairly and to be reassured that their home is safe. The Homes (Fitness for Human Habitation) Bill is due for its second reading in the House of Lords on 23 November. If enacted, this new legislation will give tenants the right to take landlords to court if their home is unsafe. A recent report in The Guardian quoted figures from Shelter, revealing that more than a million homes are thought to pose a serious threat to the health or safety of the people living there. That’s a staggering one in six of the privately rented homes in the country.

This is nothing short of scandalous and change is badly needed. With cash-strapped local  councils responsible for chasing up any requests for repairs that are ignored by landlords, inspections by environmental health officers to investigate problems such as mould, damp and fire risk take far too long.

The changes set out in the Bill will make no difference to landlords’ existing obligations but will simply make it quite clear that rented property must meet certain standards. Let’s hope Parliament lends its support to a change in the law that is long overdue.

Stamp duty abolished for some first time buyers – and rates relief for retail

 

Yesterday’s Budget speech didn’t include many dramatic new measures to boost the property sector  but we certainly welcome the Chancellor’s first time buyers’ stamp duty abolition on shared ownership homes valued at up to £500,000. This is a good way to get normal working families into secure accommodation as an alternative to rent.  With the huge increase in numbers of homes for sale and/or part ownership developed by housing associations, we see HAs very much as the developers of the future. With a red tape, tick-box-based planning system and some developers guilty of land banking sites to maintain prices – stimulus for social housing must be the answer to the housing crisis.

With the London property market cooling we also welcome the extension of the government’s ‘help to buy’ initiative, which supports many developers and ensures that UK purchasers can buy  UK property – without that ability there is a serious risk of the remote or overseas landlord problem getting out of control.  It is absolutely vital that we don’t alienate young buyers by pushing them out of our cities in favour of yields-driven landlords who overcrowd properties that were originally designed as family homes.   The good news for renters and sharers is that increasingly there are quality, purposefully designed build-to-rent homes coming onto the market in pure rent environments.  But accidental landlords – those who, say, rent out their batchelor pad – got no comfort yesterday as tax relief and claimable allowances continue to be phased out.

We hope that the promised £400M for schools will be in part directed into ‘fit for work’ measures. On a day-to-day basis at Ringley we remain challenged by the lack of employability skills in many of the youngsters we support. We estimate the employer burden on filling those gaps is costing us up to £3,500 per employee.

Having been an Ambassador for Apprenticeships from the start, we welcome the £695M to develop apprenticeships.  However, we remain concerned and are working with training providers on a number of challenges, in particular the fact that we cannot truly offer to take apprentices through to degree level in some disciplines such as IT and that, for example, IT apprenticeships often reflect old technologies and need updating fast.

The budget did provide much-needed help for the retail property sector. Landlords of our beleaguered high streets and retail centres should be able to hold their rents and reduce the uncertainty of void units with the announcement that rates for small business are to be cut by 1/3rd over the next two years. This is a much-needed reduction and some relief from the pressures of a changing landscape and digitalisation, which falls particularly unequally on break-even small businesses.  Not sure we are ready to open our lavatories to the entire general public quite yet though!

We hope that the money local councils will receive to revive their high streets will inspire creative thinking as the reason for having a town centre continues to shift.    More on that soon…..

 

 

 

 

Will your job be safe in an AI world?

 

There’s a lot of noise around artificial intelligence at the moment. Automated supermarket check-outs are commonplace and driverless cars will soon be taking over our streets. However, according to AI expert and former president of Google Kai-Fu Lee, property managers can rest easy because, alongside therapists and fiction writers, management professionals are likely to remain irreplaceable – at least for the foreseeable future!

The reason these jobs are safe says Lee, is that AI can’t yet conceptualize or plan and lacks any sense of caring or empathy – all skills that professional property managers use on a daily basis.

Good property managers not only understand the ins and outs of the blocks they manage and the legal and regulatory framework within which they operate, but they also have essential human interaction and communication skills. They are able to motivate, negotiate, and persuade; effectively connecting with residents on behalf of landlords and freeholders. According to Lee, the best managers are also able to establish a strong workplace culture and value system within their own organisations through their actions and words.

Routine maintenance, cleaning, gardening and even reporting service charge expenditure to the annual AGM may all be carried out by robots in the future but, says Lee, “While AI may be used to manage performance, managerial work will continue to be carried out by humans”.  Good news all round for both residents and their property advisers we hope you’ll agree!