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.

What makes a good letting agent?

Earlier this week the ‘eviction notice’ pictured above was doing the rounds on Twitter. Hard to know if this is real or just fake news but if this is a genuine notice from a letting agent to their tenant – pink felt tip aside – there are so many reasons why this is completely unacceptable that it’s hard to know where to begin.

So we asked Sam Hay who heads up LifebyRingley, our Manchester-based Lettings division, for her tips to help landlords – and tenants – find a professional letting agent who will work hard on your behalf – and who can be relied on not to deliver notices like this one!

It is easy to get a feel for an agent simply by doing some research of your own online. Sam says a good starting to point is to look at their marketing material. How do they currently advertise their properties? Are the pictures professional and the descriptions well written?

Find out what others say about them. Take a look at their online reviews – which cut through the marketing blurb companies send out – to get a feel for the level of service they offer.

Where are they located and are they members of a professional body such as ARLA? – This is important as it not only gives you an idea of the standards they are expected to maintain but means they will also have a complaints system in place if things go wrong.

Once you’ve shortlisted a handful of agents, here are some questions to ask them individually:

  • How long have they been in business? A firm that is well established and has a solid client base is generally a better bet.
  • How do they deal with their maintenance ie, how does the process work? If it isn’t dealt with quickly and professionally it can cost you a good tenant.
  • What is their accounting process?
  • How do they train their team and how often does training occur?
  • Check what their fully managed service includes and what it doesn’t, so you are fully aware of the charges
  • How proactive are they when it comes to finding tenants?
  • What technology do they use? It is important that you can access all documentation easily

At Ringley we aim to tick all these boxes. We’re confident we offer value for money and a great service for our clients – and we’re here to answer your questions, so give us a call or contact us at https://lifebyringley.co.uk/ .

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.

Renting for life – what’s the problem?

Letting Agent Today claims that a third of millennials will never own their own home. The report quotes new research from interiors firm Thomas Sanderson showing why the rental market is seeing such strong demand: it reveals that 28% of people under the age of 35 have no money set aside for a deposit on a house. Of the remaining 72%, the average amount people had saved was just over £6000 – that’s under a fifth of the average deposit for a house in the UK. And 30% of Britons aged 18 to 35 years old say they have given up on the idea of owning their own home completely.

What all this adds up to, is that large numbers of us will be living in the rented sector, not only while we are young and single but once we’re married and start a family, into middle-age and beyond. Research from the Resolution Foundation and Shelter predicts that by 2025, 33% of families with children living in London will be renting.

So given that more of us will be renting for longer – or for our whole lives – should we be moving to a regime more like the European model. In Germany for example, tenants have extensive rights including security of tenure, assured rental rates and protection from hardship caused by unfair practices.

These aspects of a highly-regulated rental market are great for tenants but may be viewed less favourably by landlords the majority of whom, understandably, want to be in control of their own property. They want to be able to decide who lives in it and for how long. If tenants prove troublesome they want to be able to evict them. Conversely, if tenants are happy in their home, easy to deal with and pay their rent on time, most landlords will let them stay for as long as both parties are happy.

Getting the balance right by ensuring legislation works for both sides of the renting equation is the job of government – but it’s not an easy task. New legislation coming forward aims to tackle some of these issues and stronger regulation around property agency will undoubtedly help too. Dealing with the fall-out when landlords and tenants clash is part and parcel of our role as property managers. Alongside our technical and professional role as agents we often feel we should win prizes for diplomacy too!

Vidhya Alakeson, director of research at the Resolution Foundation, said recently that families who rent need security in a regulated market. “With children attached to schools and parents to work, it is critical for households – and for society – that families can find stable and secure rented accommodation to raise their children in.” That sounds about right to us. What do you think?

Take-aways from National Residential Investment Conference

 

Today I have been talking about the rental market at this year’s sold out National Residential Investment Conference, held each year in London.

Among other topics, in the spotlight during the course of the day was JLL’s recent research on the institutional (non-Housing Association) sector.  Having analysed seven residential developments comprising 911 units with an average scheme size of 130 homes, JLL reveals that average gross to net is 26.6% with an average rent premium of 9% for high quality build-to-rent developments and 3% rental growth.

The average tenant across these schemes is 31 years old, achieving circa 30% more than the mean UK salary.  Tenants are prepared to pay to be in a BTR or multi -family scheme and are not over extending themselves with rent to income at 28%, compared to the UK over-burdened rate of 40%.

JLL also identified these net initial yields:

  • London Zones 1-2 suggested yields 3.5%
  • London Zones 3-6 suggested yields 3.75%
  • Regions 4.15 to 5%
  • Glasgow the highest at 5%

Urbanisation remains the trend, with 4bn of world’s 7.5bn now living in cities.

The conference also threw up some interesting statistics on the changing nature of UK households. The number of people getting married is on a downward trend. In tandem with this, the average number of children per couple is reducing and people continue to start their families later than previous generations.  The knock-on effect of all this is that two thirds (or 17 million) of UK households do not contain children.

In terms of future property provision, this means that what the  UK needs are more homes suited to couples with no children, retirees and single sharers.   As a result, we anticipate that micro-living solutions and co-living will get more air space going forward.

The Collective at Old Oak is one of the first purpose-built co-living developments in the UK.

So what is micro-living, I hear you say. Isn’t that just an HMO?  Rightly or wrongly, for most of us HMOs tend to conjure up visions of badly converted, poorly maintained housing stock – not the purpose-built, thoughtfully designed new spaces now coming on line.  The Collective at Old Oak is a good example, although arguably it could be termed student accommodation for grown-ups!

So the answer is surely not more HMOs, but well-designed spaces concerned largely with common, outside-the-apartment space.   This puts me in mind of 1930s mansion blocks with their own restaurant and no individual kitchens to speak of.

At Ringley we manage some of these, which – without all the original amenities that have gradually been lost over time – are often now just cramped flats.  I trust in future these shared spaces will be better designed and the ‘outside-the-home’ spaces will be more about living than eating.

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!