Increasing numbers of tenants appear to be struggling to make rental payments, according to letting agents.
According to latest research from the Association of Residential Letting Agents (ARLA) in the fourth quarter 2010, 40 per cent of ARLA members reported an increase in tenants struggling to meet rental payments in the preceding six months – a rise from 35.9 per cent in Q3 2010.
This is the first time the number has increased in 18 months, suggesting that job losses and pay cuts are beginning to take hold, causing tenants to have difficulties.
The situation was least noticeable in central London, where just under a third (27.9%) of members reported an increase, compared with the rest of the UK (46.4%).
Ian Potter, Operations Manager at ARLA, said: “At the beginning of last year we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.
“It is a situation which can have serious repercussions throughout the PRS as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.
“While it is difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants – and to consider the benefits of rental protection insurance.
RLA News Service reports that residential landlords across much of the country are worried about the number of tenants falling into arrears, according to statistics and a poll released by Upad, a rental website. Upad found that while confidence among landlords was quite high, monthly rental arrears were among the top concerns for those in the buy-to-let sector.
Six out of ten landlords in Britain feel a higher level of confidence now than they did just one month ago, when this figure stood at just 54 percent. The key factor behind this significant increase in confidence is the strong demand for buy-to-let properties among tenants, including young professionals seeking to rent over the long term.
But confidence among landlords is also related to low interest rates on buy-to-let loans, as well as relatively low property prices in much of the country. Many of the landlords who indicated that their confidence boiled down to these two reasons may be inclined to expand their portfolios at a time when rates remain at near historic lows and property values are also stagnant.
James Davis serves as Upad’s chief executive officer and he noted that his company’s own experience in the buy-to-let sectors suggests that there is good reason for optimism among landlords. Davis suggested that Upad has seen an almost 200 percent rise in the volume of inquiries among tenants seeking assistance in their search for a flat or house to rent over the past six months. But arrears do pose a risk to landlords and Davis predicts that with high unemployment and government cuts, the number of tenants who will be unable to pay their rent on time may increase in the coming year.
Landlords hoping to maximise rental yields and returns in London may be well advised to limit the size of any increase in rents from existing tenants, an expert has said.Mark Garner, founder and director of LettingZone, said that landlords may find a better option to rent increases is ensuring that existing tenants remain in a property and stay happy.
If rents are currently below full market price, then keeping them at this level may help to ensure a tenant stays in a property, negating the risk of having an empty home, the expert suggested.
“Obviously put it up to the full market rate if the tenant moves out, but to keep the same tenant there, it is worth just increasing it by half the increase in the market [rate],” he said.
Doing this can make tenants believe they are receiving a good deal, Mr Garner added.
He suggested that the risk of losing a tenant would be greater if the rent on a property increased from a discounted rate to full market rate in one move.
His comments follow research from Paragon which found that around 40 per cent of landlords saw an increase in tenant demand during the third quarter of the year.
Landlord and Tenant News
As a Landlord you must be aware of the Landlords and Tenants Rental Deposit Scheme.
You will be breaking the law if your tenant/’s deposit/s are not protected, and you will be unable to regain possession of your property using notice-only grounds for possession under Section 21 of the Housing Act 1988.
Your tenant can apply for a court order requiring their deposit to be protected if it isn’t, or is entitled to request information to find out where it is being held.If the court decides that you have failed to comply with the new rule or is not satisfied that the deposit is being held with an authorised scheme, the court can enforce the following:
- Order you to repay the deposit within 14 days of the issuing of the court order.
- Order you to pay the deposit into an authorised scheme.
- Order you pay the tenant three times the deposit amount within 14 days of the making of the order the tenant.
For further information follow the link
The RLA report on a new guide published online by MyDeposits.co.uk aims to ensure that both landlords and tenants are on the same page when it comes to determining what constitutes fair wear and tear of a rental property. Many of the disputes surrounding tenant deposits have to do with the state in which the rental unit is returned to the landlord and disagreements over possible damage. According to Eddie Hooker, MyDeposits’ managing director, many deposit disputes stem from poor or sporadic communication between landlords and tenants. It is important to survey a rental property’s condition before handing over the keys to a tenant and to ensure that the renter understands the state in which the landlord expects the rental unit to be in at the end of the tenancy.
Hooker added that the guide was compiled using the expertise of both residential landlords, as well as a special conflict resolution team employed by the organization. The guide provides tips on how to recognize relatively minor damage caused by regular wear and tear, rather than by negligence on the part of the tenant. One of the factors to keep in mind when determining what actually comprises normal wear and tear is the length of the tenancy agreement. A tenant staying for a shorter period should return the flat or house with less minor damage, while more wear and tear may be acceptable if the tenant stays in the property for an extended period of time.
A home’s carpets or flooring may appear to be worn after a lengthy tenancy and while this would normally constitute regular wear and tear, anything that has to be completely replaced due to negligence on the part of the tenant—such as spills on carpets—constitutes damage and they may lose their deposit.
People considering looking for property to rent in London are being told that tenants sharing letted accommodation are an important part of economic prosperity in the UK.
Housing minister Grant Shapps announced that Local councils are to be given greater power over the governance of such abodes in their area, while helping landlords avoid bureaucratic obstacles.
“Shared homes ensure people who want to live and work in towns and cities can do so and are vital to the economy,” he said.
According to the Department for Communities and Local Government, an estimated 8,500 planning applications for places of multiple occupancy that would normally be put in by landlords will be reduced by the new scheme.
Mr Shapps statement might confuse some people looking for property to rent in the London borough of Barnet, as he recently suggested that home ownership would be the government’s priority.
Last week, he announced the scrapping of plans to introduce new regulations on private landlords.
The Residential Landlords Association reports that Britain is introducing so-called “Green Leases” in April and while the new scheme will at first only impact the largest commercial landlords and tenants, the programme’s success will determine whether or not it is introduced for the residential property sector as well at a later date. When a landlord and tenant sign a green lease, they agree to take measures that may reduce a given building’s carbon emissions, make the residential property more energy efficient and control waste.
The programme is seen as the first in a series of steps to impact the rental sector, which the government hopes will help it meet its ambitious target of reducing carbon emissions by 80 percent within the next 40 years. The Energy Efficiency Scheme amounts to a carbon trading programme, where landlords with properties that used more than 6,000 megawatt hours of energy in 2008 participate by lowering emissions. According to the plan, the largest landlords and organizations will have to buy allowances, in order to cover their carbon emissions.
Government officials, however, promise that the scheme will be revenue neutral, in that the money collected will be redistributed each year, based in part on how much a given landlord or organization has done to reduce its carbon emissions. But there are concerns among landlords that it may be difficult to ensure that tenants are also actively trying to be more energy-efficient, especially if they are not the ones required to pay extra for non-compliance.
This is why some landlords will turn to green leases, with some going as far as to stipulate financial penalties for tenants who sign, but do not make an effort to remain energy efficient. But some suggest that so-called “light green leases” will become more common, and these will encourage a concern for sustainability among tenants and will ask them to sign a memorandum of understanding, but will shy away from imposing financial penalties.
RLA reports that the Office of Fair Trading (OFT) has reportedly followed up on concerns raised last year regarding unfair commissions that some letting agents charged landlords by sending firms written warnings. Concerns over unfairly high commissions that thousands of residential landlords had to pay to letting agents made headlines last summer, when the OFT determined that Foxtons, one of the largest of these agencies, could not justify charging its clients 11 percent for lease renewals. Additionally, there were concerns that Foxtons had expected some landlords to pay a 2.5 percent fee, even if they sold the given rental unit to the tenant. A High Court ruling issued earlier today confirmed that OFT’s concerns over these commissions were entirely justified.
This ruling may have a substantial impact on the buy-to-let sector, as a large number of residential landlords might be able to claim a refund for the commissions they paid. Many London landlords, for example, paid as much as 16 percent whenever their tenant renewed their lease. A report in The Times estimates that landlords across the UK may be eligible to claim as much as £26 million in refunds, following the High Court ruling and the OFT’s letter.
The OFT’s action against unfair commissions has already led to important changes at Foxtons. The firm has agreed to lower its fees, it has limited the collection of commissions to two lease renewals and also aims to ensure that the firm gathers these payments from landlords in a more transparent manner.
Categories: Buy to Let, Foxtons, Landlord and tenant, Landlord Association, landlords, Landlords Annual License Fee, landlords insurance, Landlords licences, London Landlords, London Property Investments
Tags: letting agents, London, Property management, Residential Property Management, West London
According to data from Abbey mortgages, the number of homeowners taking in a lodger to help pay the bills has increased considerably since the credit crunch began.
In the last 12 months, the number of homeowners renting out a room has tripled.
Under the governments “rent a room scheme”, either a homeowner or tenant (check with your landlord first) is allowed to rent out a furnished room and receive up to £4,250 a year in rent tax free.
This is a great incentive for anyone who is struggling with mortgage payments and who also has a spare room available in their home. Abbey’s research also estimated that there are potentially 16 million unused rooms in British households.
Scores of residential landlords in the United Kingdom may be eligible to receive compensation after a High Court ruling which struck down the hefty fees that Foxtons charged thousands of its clients in the buy-to-let sector. Foxtons, a prominent estate agent in London, will no longer be able to charge landlords up to 11 percent in commissions when tenants decide to extend their initial rental lease, or 2.5 percent when a given tenant chooses to buy a rental unit from the landlord. Yet buy-to-let sector experts point out that Foxtons was hardly the only estate agent overcharging landlords and as such, thousands of rental investors may be eligible to claim back these amounts paid out to a wide range of companies throughout the UK.
In many cases, landlords may be eligible for thousands of pounds in compensation. For example, the Landlord Expert website calculated that a landlord who rented out a flat with two bedrooms for £15,000 per annum over a period of 14 years may be eligible to claim as much as £23,000 from the estate agent, seeing that annual commissions would have reached £1,650. The estimated number of private sector residential landlords in the UK now stands at 1.5 million, which means that those in the buy-to-let sector may be able to collectively claim back millions of pounds in commission from estate agents. John Spence provided legal counsel during the case against renewal commissions and noted that landlords may be in a good position to seek refunds, even if they were signed up with other estate agents.
