With so many favourable articles of late proclaiming the positive merits of investing in buy to let properties, a novice landlord might be forgiven for thinking that owning a rental property is an easy way to make cash. But the reality is somewhat different—the potential for earning a healthy profit is almost certainly there, but there are also many pitfalls on the road to becoming a successful landlord. So before you acquire a massive headache, learn how to avoid common landlord mistakes: 1. If you know nothing about letting property, consider paying a professional letting agency to manage your property. The fees will bite into your profit margin but in the event of any problems, they are first in the firing line. 2. Never make the mistake of assuming a bad tenant is better than no tenant—an empty property might be highly undesirable, especially if rental payments are required to cover a mortgage, but a bad tenant could end up costing you thousands in damages, plus they may run up huge rent arrears and then abscond. 3. On a similar note, ALWAYS check references thoroughly. Just because a tenant appears to be nice and respectable, it does not automatically mean they ARE nice and respectable! 4. If your property is subject to a mortgage, ensure the lender is aware you are letting it—this is a common mistake people make when letting their home for periods of time. A failure to do so could invalidate any insurance policy you have on the property. 5. Do not be tempted to cut corners on landlord insurance—a good policy might prove to be essential if you fall victim to #2 on our list. 6. Always ask for a decent deposit to cover the cost of potential damage to the property—expensive cleaning and repair bills at the end of a tenancy are a big problem for many landlords. 7. Overdue rent is a very common issue faced by landlords, so make sure you have a clear tenancy agreement drawn up with the rent due date highlighted to avoid confusion. If a rent payment is late, take immediate action to resolve the problem. This article has been provided by Amer Siddiq from PropertyPortfolioSoftware.co.uk They provide award winning property management software to help landlords get better organised.
7 Common Landlord Mistakes
Landlords working with Local Authorities
A leading company in building links between the private-rented sector and local government are launching a range of new products which change the way landlords, tenants and local authorities work together. “Our aim is create a framework that prevents homelessness, builds sustainable tenancies, and reduces the financial burden carried by government, both locally and nationally”, said Alan Elborough, Co-Director and Founder of Settled Housing Solutions. “At the moment we see homelessness up by 14% according to the latest Department of Communities and Local Government figures. The use of bed and breakfast accommodation by local authorities has grown by 37% over the previous year. The government has allocated £400 million for homelessness in the current Spending Review period. The private-rented sector is providing more and more accommodation and local authorities are straining under the growing number of people who find themselves without a home or on housing benefit. What we have set out to do is to bring all the various elements together, landlords, tenants, and local authorities so as to produce a system that is coherent and works well at the front-line of housing need”. The first product is Settled Sure. This is a unique insurance scheme to cover housing benefit. Its aim is to tackle the growing concerns of landlords have on providing accommodation for housing benefit tenants by providing an insurance safety net for landlords which protects their income. That helps tenants by releasing properties in the private-rented sector that might not otherwise be available to them. It assists local authorities in tackling homelessness by helping potential tenants into accommodation. A key element is that the insurance premiums would be based on local rental market levels. Settled Tenant addresses those barriers that hamper landlords working with local authorities on housing tenants on lower incomes. Using an interactive workshop format, it helps and trains tenants to consider and recognise their responsibilities within a tenancy and as part of their local community. It encourages them to plan and budget and thus can be used as a form of tenant accreditation. This should help create an environment where landlords have the confidence to negotiate longer tenancies which give security both to them and their tenants. Local authorities gain as fears about the growth of transient populations in some of their areas should be eased and the cost of intervention in tenant-related matters should fall. Settled Agency is a scheme that works to professionalise local authority lettings-services by training, advice and IT software in conjunction with the Guild of Letting and Management Ltd and IT PROz. This should lead to the development of a ‘Social Letting Agency’ Model that brings local authorities and their local landlords into a more professional relationship. By going this route, rather than the traditional regulatory path, standards could be raised across the sector. Alan Elborough went on to say, “We believe that these new products could iron out a number of the problems that bedevil the private-rented sector. Taken as a whole package they could build longer and more stable tenancies which is in the interest of both landlord and tenant. For local authorities they will save money by removing some people from the revolving door they face now, going from homelessness to hostel to short-term tenancy and then possibly round again. It helps change the role of local authorities from being enforcers into partners engaging with their local landlord which chimes in the Government’s Localism Act and welfare reforms. We believe that this package offers practical solutions for the problems facing the private-rented sector now”. Settled Housing Solutions are the leading practitioners in building successful partnerships between the private rented sector and front-line local government services. The primary aim of their service is to harness the potential of the private rented sector market so it can play an important role in providing affordable housing for those on low incomes.
UK Economy has Stalled
No sign of improvement in the UK economy as slow or zero growth, the Euro crisis and falling house prices add to the woes. In most parts of the UK, London and the South East being the main exception, unemployment is set to continue rising for the next 5 years. That’s according to forecasting group The Centre for Economics and Business Research (CEBR) that predicts the overall jobless rate could hit 10.7% by 2016, the highest for more than a decade. Although the government says that this view is pessimistic and does not coincide with the views of other economic forecasters, especially as UK unemployment fell by 35,000 to 2.65m between last December and February, CEBR says it could ultimately rise to levels not seen since the early 1990s. Bond traders are warning Tuesday 8th May that the euro could go into freefall over the next few weeks as investors compare it to the sub-prime mortgage crisis. European voters have given austerity measures a clear “nulls points” and now currency experts are predicting a grim future for the euro, even if some of the countries in the euro can manage their way though the crisis. Early trading has seen the GB pound and US dollar soar against the Euro which will boost the UK pound and the US dollar – good for our “safe-haven” status, but bad for exports which might otherwise boost UK growth. The early January and February 2012 rebound in the housing market has run out of steam according to a Royal Institution of Chartered Surveyor’s (RICS) survey. The records price declines and falling sales across the UK in April, still more evidence of a broader economic slowdown. The RICS report said that 19% more surveyors have reported price falls than price rises, while the number of properties on the books of Estate Agent surveyors rose again. Only London it seems is defying the downturn. Surveyors in the capital report a different picture from the rest of the UK. 86% of London surveyors report prices the same or rising.
Choosing a letting agent in an unregulated industry: What every landlord should know
Not all landlords feel the need to use a letting agent, preferring to handle all aspects of the letting and management of their property and tenancy themselves. But for some landlords a letting agent is a must – to save time, reduce effort and stress, and provide them with expertise and peace of mind. A good letting agent can be worth its weight in gold for landlords who do not want the hassle of taking care of their properties and tenants; for those who live a distance away from their property; and for those who are inexperienced in letting and need a helping hand with the practicalities and legal complexities. Or all of the above! However, the quality of service delivered by letting agents varies drastically and – unless you choose your agent carefully – you cannot assume that you will receive a high quality, trustworthy service that protects your interests at all times. Beware – letting agents remain unregulated! Shockingly, despite the plethora or regulations surrounding residential letting, letting agents themselves remain unregulated, which means that anyone can set up as a letting agent, with no experience, qualifications or understanding of the lettings process, law or lettings market in which they are operating. With rental demand continuing to grow – and the sales market continuing to struggle – many inexperienced agents are branching into lettings to keep their businesses going. Landlords therefore need to take great care when choosing a letting agent. Every landlord knows the importance of vetting tenants carefully before letting their property to them; just as crucial – but often overlooked – is vetting the agent to whom you are entrusting your investment. Choosing a letting agent can be a minefield for landlords and it is often tempting to simply go for the one offering the lowest fees. Particularly in the current market – in which agents are crying out for more properties and are therefore slashing their fees to attract landlords. Some will also resort to over-inflating rental valuations simply to gain instructions from landlords. This means that the uniformed landlord is at risk of choosing an agent for the wrong reasons – i.e very low fees or an inaccurate rental valuation – which could put their investment in jeopardy. Unfortunately, choosing the wrong agent can have dire consequences for landlords, including huge legal expenses, loss of rent, long void periods, loss of tenant’s deposit and penalties for not complying with legislation. Not so mention a great deal of stress! By contrast, the right letting agent can maximise your chances of enjoying a trouble-free and profitable investment, and give you the confidence of knowing that everything is being looked after legally and reliably on your behalf. So, how do you choose the right letting agent? Take a little time to do your homework on any letting agent you are considering entrusting your property to. The following are the most important points to consider: Professional membership and client money protection With no formal regulation of letting agents – and the government having confirmed it has no plans to introduce any during this parliament – the only way to protect yourself from unscrupulous or incompetent letting agents is to use an agent that is a member of a professional organisation such as the Association of Residential Letting Agents (ARLA). That way you can be sure they will be qualified to give trustworthy advice; hold professional indemnity insurance; have a minimum of two years lettings experience; and above all, comply with strict rules on holding deposits and rent safely on your behalf. There has been a lot of coverage in the media over the years about agents without client money protection schemes in place. A frightening number have either gone bust or disappeared with their clients’ money, leaving many hundreds of landlords and tenants badly out of pocket, with no means of redress. The new SAFEagent scheme has been set up to make the public aware of the importance of only using an agent that protects its clients’ money. Whilst client money protection is an absolute must, landlords should be aware that being a member of SAFEagent does not necessarily mean that the agent is qualified, experienced or competent to let and manage property. Nor does it demonstrate that they have a thorough understanding of the complex legislation surrounding letting. Reputation and experience Independent specialist Although many agents do both sales and lettings, it makes sense to choose an agent that specialises in lettings only, so you know that their sole focus is letting and property management, with no distractions. They should also be independent and completely impartial; never take the advice of an agent who is also selling you a property or who may have a vested interest in whether you buy a specific property or not. It is crucial to be able to trust the advice you are given, particularly at the start of your investment. The value of specialist knowledge should not be underestimated; nor should the damage that inaccurate advice can inflict on a landlords’ investment. Trustworthy advice on the local market, rental values, how to present your property, where to invest and in which property type are all fundamental. Be wary of letting agents who exaggerate the rental value of a property simply to win an instruction; this could cause you to lose out on rental income whilst your property remains vacant because it is too highly priced. Calibre of staff With letting and property management being a service delivered by people, the staff of the letting agent will play a key role in the service you receive. Find out whether they are qualified, with a thorough knowledge of the lettings process and the local market. Does the letting agent invest in its staff and do they undergo thorough training? Have a significant number of the staff been with the letting agent a long time or are they mainly new to the business? These are all important indicators of whether or not you are likely to receive a good quality service from professional, well-trained, experienced people. It is also important that they are friendly, enthusiastic and happy to help; after all you may be working with them for some time! Marketing and online presence Look closely at the letting agent’s office, website, company literature and the way in which they market themselves and their landlords’ properties. All of these should make a positive impression and look professional. With tenants now mainly looking for rented properties online (more than 80% of our tenant enquiries at Leaders come from the internet), the agent should have a strong online presence. Use Google to search for the agent and check out which property portals and websites – in addition to their own – your property would appear on if you were to instruct them. Consider also the agent’s presence in the local newspaper. Tenant vetting Tenancy Agreements Property Management Legal compliance With the plethora of regulation relating to residential letting that landlords must abide by – and ongoing updates and changes – it is vital that your letting agent stays up to date with legislation affecting residential letting, and keeps you informed at all times. Your chosen agent must have the resources in place to stay ahead of legislative changes – and the appropriate procedures in place to incorporate these changes into their letting and management practice in good time – in order to protect your interests and the safety of your tenants. As a landlord, it is you that is liable for the actions or inactions of your letting agent. Should they break the law, you could face hefty fines and even imprisonment, so you need to be able to completely trust them to know the law and let your property legally and safely! Fees Each agent has their own scale of charges, usually based on a percentage of the annual rent. But be warned, the cheapest option is not always the best; you get what you pay for in terms of service and discounted fees should always be treated with caution. When making comparisons between agents, ask for a list of all charges, what they relate to, and the total amount payable for your specific tenancy. Make sure you are comparing like for like and that there are no hidden charges. Prompt payment of rent Your rent should be paid to you promptly (within 48 hours) so that you – rather than your letting agent – can benefit from any interest on it. Your agent should have robust, legally compliant procedures in place to ensure that any late rent payments from your tenant are chased up appropriately and the relevant legal notices served at the correct time to protect your interests. If you are satisfied that your chosen agent ticks all the boxes described above you can be confident of receiving the type of service that all landlords deserve and letting agents should strive for. It is well worth the time and effort to carry out these checks, not only to avoid the sub-standard agents taking advantage of an unregulated industry, but to find one with whom you can enjoy a good, long-term working relationship. Long-term relationship Landlords should not underestimate the importance of the relationship between themselves and their letting agent, which will ideally be a long-term one if their investment is to enjoy maximum success. As highlighted above, when you choose a letting agent to let and look after your property, you rely on them to take care of a number of critical issues, including ensuring your tenants’ safety in the property; legal compliance; care and maintenance of the property; protection of yours and your and tenants’ rights; smooth-running of the tenancy; and reliable provision of accurate, up-to-date and impartial advice on the many aspects of letting. With all this in mind, you need to be 100% certain that your chosen agent is qualified and experienced, and knows everything there is to know about lettings. Of course landlords will naturally want to keep their costs down and will be looking for a competitive fee. However, when choosing a letting agent, you should never base your decision on price alone, but also bear in mind that you could be working with your chosen agent for many years to come. You should choose a firm you can trust to deliver a consistently good service and high level of expertise to help you make the most of your investment over the long-term. Some agents who offer very low fees to attract landlords claim they are able to do so because they have low overheads. However, it is clear that these fee levels are not sustainable – if they attract more landlords through low fees their client base will grow and their overheads will inevitably increase. They will then be forced to either put their fees up or drop their service level, neither of which will be good news for their landlords. To deliver a consistently high standard of letting and property management service, a letting agent must have well trained, qualified staff; tried and tested systems and procedures which keep them up to date and able to comply with legislation; excellent marketing exposure for their clients; organised client accounting and experienced property managers. It is self-evident that all this is not achievable on low overheads whilst still maintaining a high level of service for all clients on a long-term basis. By taking note of the criteria outlined above, you will be able to choose a letting agent for the right reasons and be confident in your choice for the success of both the immediate and long-term future of your investment.
Look for a well known, well established agent with a good reputation – they will not have achieved their good name by default. Make sure they have been letting for many years so you know they are experienced and knowledgeable, with the right systems and procedures in place to deliver a professional service to their clients. Don’t hesitate to seek recommendations from other landlord clients. Look particularly at whether the letting agent has landlords who have been with them for many years – that in itself speaks volumes. Also consider whether they have strong relationships with large local employers who are often a key source of tenants.
Make sure the agent has the resources in place to carry out rigorous checks on all prospective tenants, including a careful interview process, checking their ID, credit history, previous address details; salary details; an employer’s reference, and previous landlord’s reference, if applicable.
Check that the agent’s Tenancy Agreements comply with the Housing Act (or contract law if it is a company let and/or a let with a rental value of over £100,000) and with the Office of Fair Trading recommendations. An experienced agent will incorporate clauses to cover any potential problem areas that have been encountered in the past to protect the landlords’ interests, for example when renting to a tenant with a pet.
Your chosen agent should have an in-house, locally based property management department with experienced property managers and property inspectors dedicated to looking after your property and tenant throughout the tenancy. They should have arrangements in place to deal with emergencies out of standard office hours and should have access to a wide range of fully vetted professional and reasonably priced local contractors who you can be confident will carry out any necessary work at your property to a high standard. The staff who draw up the inventory and schedule of condition and carry out mid-tenancy inspections and the check out at the end of the tenancy should be thoroughly trained and competent.
Choosing a letting agent in an unregulated industry: What every landlord should know
Not all landlords feel the need to use a letting agent, preferring to handle all aspects of the letting and management of their property and tenancy themselves. But for some landlords a letting agent is a must – to save time, reduce effort and stress, and provide them with expertise and peace of mind. A good letting agent can be worth its weight in gold for landlords who do not want the hassle of taking care of their properties and tenants; for those who live a distance away from their property; and for those who are inexperienced in letting and need a helping hand with the practicalities and legal complexities. Or all of the above! However, the quality of service delivered by letting agents varies drastically and – unless you choose your agent carefully – you cannot assume that you will receive a high quality, trustworthy service that protects your interests at all times. Beware – letting agents remain unregulated! Shockingly, despite the plethora or regulations surrounding residential letting, letting agents themselves remain unregulated, which means that anyone can set up as a letting agent, with no experience, qualifications or understanding of the lettings process, law or lettings market in which they are operating. With rental demand continuing to grow – and the sales market continuing to struggle – many inexperienced agents are branching into lettings to keep their businesses going. Landlords therefore need to take great care when choosing a letting agent. Every landlord knows the importance of vetting tenants carefully before letting their property to them; just as crucial – but often overlooked – is vetting the agent to whom you are entrusting your investment. Choosing a letting agent can be a minefield for landlords and it is often tempting to simply go for the one offering the lowest fees. Particularly in the current market – in which agents are crying out for more properties and are therefore slashing their fees to attract landlords. Some will also resort to over-inflating rental valuations simply to gain instructions from landlords. This means that the uniformed landlord is at risk of choosing an agent for the wrong reasons – i.e very low fees or an inaccurate rental valuation – which could put their investment in jeopardy. Unfortunately, choosing the wrong agent can have dire consequences for landlords, including huge legal expenses, loss of rent, long void periods, loss of tenant’s deposit and penalties for not complying with legislation. Not so mention a great deal of stress! By contrast, the right letting agent can maximise your chances of enjoying a trouble-free and profitable investment, and give you the confidence of knowing that everything is being looked after legally and reliably on your behalf. So, how do you choose the right letting agent? Take a little time to do your homework on any letting agent you are considering entrusting your property to. The following are the most important points to consider: Professional membership and client money protection With no formal regulation of letting agents – and the government having confirmed it has no plans to introduce any during this parliament – the only way to protect yourself from unscrupulous or incompetent letting agents is to use an agent that is a member of a professional organisation such as the Association of Residential Letting Agents (ARLA). That way you can be sure they will be qualified to give trustworthy advice; hold professional indemnity insurance; have a minimum of two years lettings experience; and above all, comply with strict rules on holding deposits and rent safely on your behalf. There has been a lot of coverage in the media over the years about agents without client money protection schemes in place. A frightening number have either gone bust or disappeared with their clients’ money, leaving many hundreds of landlords and tenants badly out of pocket, with no means of redress. The new SAFEagent scheme has been set up to make the public aware of the importance of only using an agent that protects its clients’ money. Whilst client money protection is an absolute must, landlords should be aware that being a member of SAFEagent does not necessarily mean that the agent is qualified, experienced or competent to let and manage property. Nor does it demonstrate that they have a thorough understanding of the complex legislation surrounding letting. Reputation and experience Independent specialist Although many agents do both sales and lettings, it makes sense to choose an agent that specialises in lettings only, so you know that their sole focus is letting and property management, with no distractions. They should also be independent and completely impartial; never take the advice of an agent who is also selling you a property or who may have a vested interest in whether you buy a specific property or not. It is crucial to be able to trust the advice you are given, particularly at the start of your investment. The value of specialist knowledge should not be underestimated; nor should the damage that inaccurate advice can inflict on a landlords’ investment. Trustworthy advice on the local market, rental values, how to present your property, where to invest and in which property type are all fundamental. Be wary of letting agents who exaggerate the rental value of a property simply to win an instruction; this could cause you to lose out on rental income whilst your property remains vacant because it is too highly priced. Calibre of staff With letting and property management being a service delivered by people, the staff of the letting agent will play a key role in the service you receive. Find out whether they are qualified, with a thorough knowledge of the lettings process and the local market. Does the letting agent invest in its staff and do they undergo thorough training? Have a significant number of the staff been with the letting agent a long time or are they mainly new to the business? These are all important indicators of whether or not you are likely to receive a good quality service from professional, well-trained, experienced people. It is also important that they are friendly, enthusiastic and happy to help; after all you may be working with them for some time! Marketing and online presence Look closely at the letting agent’s office, website, company literature and the way in which they market themselves and their landlords’ properties. All of these should make a positive impression and look professional. With tenants now mainly looking for rented properties online (more than 80% of our tenant enquiries at Leaders come from the internet), the agent should have a strong online presence. Use Google to search for the agent and check out which property portals and websites – in addition to their own – your property would appear on if you were to instruct them. Consider also the agent’s presence in the local newspaper. Tenant vetting Tenancy Agreements Property Management Legal compliance With the plethora of regulation relating to residential letting that landlords must abide by – and ongoing updates and changes – it is vital that your letting agent stays up to date with legislation affecting residential letting, and keeps you informed at all times. Your chosen agent must have the resources in place to stay ahead of legislative changes – and the appropriate procedures in place to incorporate these changes into their letting and management practice in good time – in order to protect your interests and the safety of your tenants. As a landlord, it is you that is liable for the actions or inactions of your letting agent. Should they break the law, you could face hefty fines and even imprisonment, so you need to be able to completely trust them to know the law and let your property legally and safely! Fees Each agent has their own scale of charges, usually based on a percentage of the annual rent. But be warned, the cheapest option is not always the best; you get what you pay for in terms of service and discounted fees should always be treated with caution. When making comparisons between agents, ask for a list of all charges, what they relate to, and the total amount payable for your specific tenancy. Make sure you are comparing like for like and that there are no hidden charges. Prompt payment of rent Your rent should be paid to you promptly (within 48 hours) so that you – rather than your letting agent – can benefit from any interest on it. Your agent should have robust, legally compliant procedures in place to ensure that any late rent payments from your tenant are chased up appropriately and the relevant legal notices served at the correct time to protect your interests. If you are satisfied that your chosen agent ticks all the boxes described above you can be confident of receiving the type of service that all landlords deserve and letting agents should strive for. It is well worth the time and effort to carry out these checks, not only to avoid the sub-standard agents taking advantage of an unregulated industry, but to find one with whom you can enjoy a good, long-term working relationship. Long-term relationship Landlords should not underestimate the importance of the relationship between themselves and their letting agent, which will ideally be a long-term one if their investment is to enjoy maximum success. As highlighted above, when you choose a letting agent to let and look after your property, you rely on them to take care of a number of critical issues, including ensuring your tenants’ safety in the property; legal compliance; care and maintenance of the property; protection of yours and your and tenants’ rights; smooth-running of the tenancy; and reliable provision of accurate, up-to-date and impartial advice on the many aspects of letting. With all this in mind, you need to be 100% certain that your chosen agent is qualified and experienced, and knows everything there is to know about lettings. Of course landlords will naturally want to keep their costs down and will be looking for a competitive fee. However, when choosing a letting agent, you should never base your decision on price alone, but also bear in mind that you could be working with your chosen agent for many years to come. You should choose a firm you can trust to deliver a consistently good service and high level of expertise to help you make the most of your investment over the long-term. Some agents who offer very low fees to attract landlords claim they are able to do so because they have low overheads. However, it is clear that these fee levels are not sustainable – if they attract more landlords through low fees their client base will grow and their overheads will inevitably increase. They will then be forced to either put their fees up or drop their service level, neither of which will be good news for their landlords. To deliver a consistently high standard of letting and property management service, a letting agent must have well trained, qualified staff; tried and tested systems and procedures which keep them up to date and able to comply with legislation; excellent marketing exposure for their clients; organised client accounting and experienced property managers. It is self-evident that all this is not achievable on low overheads whilst still maintaining a high level of service for all clients on a long-term basis. By taking note of the criteria outlined above, you will be able to choose a letting agent for the right reasons and be confident in your choice for the success of both the immediate and long-term future of your investment.
Look for a well known, well established agent with a good reputation – they will not have achieved their good name by default. Make sure they have been letting for many years so you know they are experienced and knowledgeable, with the right systems and procedures in place to deliver a professional service to their clients. Don’t hesitate to seek recommendations from other landlord clients. Look particularly at whether the letting agent has landlords who have been with them for many years – that in itself speaks volumes. Also consider whether they have strong relationships with large local employers who are often a key source of tenants.
Make sure the agent has the resources in place to carry out rigorous checks on all prospective tenants, including a careful interview process, checking their ID, credit history, previous address details; salary details; an employer’s reference, and previous landlord’s reference, if applicable.
Check that the agent’s Tenancy Agreements comply with the Housing Act (or contract law if it is a company let and/or a let with a rental value of over £100,000) and with the Office of Fair Trading recommendations. An experienced agent will incorporate clauses to cover any potential problem areas that have been encountered in the past to protect the landlords’ interests, for example when renting to a tenant with a pet.
Your chosen agent should have an in-house, locally based property management department with experienced property managers and property inspectors dedicated to looking after your property and tenant throughout the tenancy. They should have arrangements in place to deal with emergencies out of standard office hours and should have access to a wide range of fully vetted professional and reasonably priced local contractors who you can be confident will carry out any necessary work at your property to a high standard. The staff who draw up the inventory and schedule of condition and carry out mid-tenancy inspections and the check out at the end of the tenancy should be thoroughly trained and competent.
Long-term relationship
Landlords should not underestimate the importance of the relationship between themselves and their letting agent, which will ideally be a long-term one if their investment is to enjoy maximum success. As highlighted above, when you choose a letting agent to let and look after your property, you rely on them to take care of a number of critical issues, including ensuring your tenants’ safety in the property; legal compliance; care and maintenance of the property; protection of yours and your and tenants’ rights; smooth-running of the tenancy; and reliable provision of accurate, up-to-date and impartial advice on the many aspects of letting. With all this in mind, you need to be 100% certain that your chosen agent is qualified and experienced, and knows everything there is to know about lettings. Of course landlords will naturally want to keep their costs down and will be looking for a competitive fee. However, when choosing a letting agent, you should never base your decision on price alone, but also bear in mind that you could be working with your chosen agent for many years to come. You should choose a firm you can trust to deliver a consistently good service and high level of expertise to help you make the most of your investment over the long-term. Some agents who offer very low fees to attract landlords claim they are able to do so because they have low overheads. However, it is clear that these fee levels are not sustainable – if they attract more landlords through low fees their client base will grow and their overheads will inevitably increase. They will then be forced to either put their fees up or drop their service level, neither of which will be good news for their landlords. To deliver a consistently high standard of letting and property management service, a letting agent must have well trained, qualified staff; tried and tested systems and procedures which keep them up to date and able to comply with legislation; excellent marketing exposure for their clients; organised client accounting and experienced property managers. It is self-evident that all this is not achievable on low overheads whilst still maintaining a high level of service for all clients on a long-term basis. By taking note of the criteria outlined above, you will be able to choose a letting agent for the right reasons and be confident in your choice for the success of both the immediate and long-term future of your investment.
Long-term relationship
Landlords should not underestimate the importance of the relationship between themselves and their letting agent, which will ideally be a long-term one if their investment is to enjoy maximum success. As highlighted above, when you choose a letting agent to let and look after your property, you rely on them to take care of a number of critical issues, including ensuring your tenants’ safety in the property; legal compliance; care and maintenance of the property; protection of yours and your and tenants’ rights; smooth-running of the tenancy; and reliable provision of accurate, up-to-date and impartial advice on the many aspects of letting. With all this in mind, you need to be 100% certain that your chosen agent is qualified and experienced, and knows everything there is to know about lettings. Of course landlords will naturally want to keep their costs down and will be looking for a competitive fee. However, when choosing a letting agent, you should never base your decision on price alone, but also bear in mind that you could be working with your chosen agent for many years to come. You should choose a firm you can trust to deliver a consistently good service and high level of expertise to help you make the most of your investment over the long-term. Some agents who offer very low fees to attract landlords claim they are able to do so because they have low overheads. However, it is clear that these fee levels are not sustainable – if they attract more landlords through low fees their client base will grow and their overheads will inevitably increase. They will then be forced to either put their fees up or drop their service level, neither of which will be good news for their landlords. To deliver a consistently high standard of letting and property management service, a letting agent must have well trained, qualified staff; tried and tested systems and procedures which keep them up to date and able to comply with legislation; excellent marketing exposure for their clients; organised client accounting and experienced property managers. It is self-evident that all this is not achievable on low overheads whilst still maintaining a high level of service for all clients on a long-term basis. By taking note of the criteria outlined above, you will be able to choose a letting agent for the right reasons and be confident in your choice for the success of both the immediate and long-term future of your investment.
Prompt payment of rent
Your rent should be paid to you promptly (within 48 hours) so that you – rather than your letting agent – can benefit from any interest on it. Your agent should have robust, legally compliant procedures in place to ensure that any late rent payments from your tenant are chased up appropriately and the relevant legal notices served at the correct time to protect your interests. If you are satisfied that your chosen agent ticks all the boxes described above you can be confident of receiving the type of service that all landlords deserve and letting agents should strive for. It is well worth the time and effort to carry out these checks, not only to avoid the sub-standard agents taking advantage of an unregulated industry, but to find one with whom you can enjoy a good, long-term working relationship.
Prompt payment of rent
Your rent should be paid to you promptly (within 48 hours) so that you – rather than your letting agent – can benefit from any interest on it. Your agent should have robust, legally compliant procedures in place to ensure that any late rent payments from your tenant are chased up appropriately and the relevant legal notices served at the correct time to protect your interests. If you are satisfied that your chosen agent ticks all the boxes described above you can be confident of receiving the type of service that all landlords deserve and letting agents should strive for. It is well worth the time and effort to carry out these checks, not only to avoid the sub-standard agents taking advantage of an unregulated industry, but to find one with whom you can enjoy a good, long-term working relationship.
Marketing and online presence
Look closely at the letting agent’s office, website, company literature and the way in which they market themselves and their landlords’ properties. All of these should make a positive impression and look professional. With tenants now mainly looking for rented properties online (more than 80% of our tenant enquiries at Leaders come from the internet), the agent should have a strong online presence. Use Google to search for the agent and check out which property portals and websites – in addition to their own – your property would appear on if you were to instruct them. Consider also the agent’s presence in the local newspaper. Tenant vetting Make sure the agent has the resources in place to carry out rigorous checks on all prospective tenants, including a careful interview process, checking their ID, credit history, previous address details; salary details; an employer’s reference, and previous landlord’s reference, if applicable. Tenancy Agreements Check that the agent’s Tenancy Agreements comply with the Housing Act (or contract law if it is a company let and/or a let with a rental value of over £100,000) and with the Office of Fair Trading recommendations. An experienced agent will incorporate clauses to cover any potential problem areas that have been encountered in the past to protect the landlords’ interests, for example when renting to a tenant with a pet. Property Management Your chosen agent should have an in-house, locally based property management department with experienced property managers and property inspectors dedicated to looking after your property and tenant throughout the tenancy. They should have arrangements in place to deal with emergencies out of standard office hours and should have access to a wide range of fully vetted professional and reasonably priced local contractors who you can be confident will carry out any necessary work at your property to a high standard. The staff who draw up the inventory and schedule of condition and carry out mid-tenancy inspections and the check out at the end of the tenancy should be thoroughly trained and competent. Legal compliance With the plethora of regulation relating to residential letting that landlords must abide by – and ongoing updates and changes – it is vital that your letting agent stays up to date with legislation affecting residential letting, and keeps you informed at all times. Your chosen agent must have the resources in place to stay ahead of legislative changes – and the appropriate procedures in place to incorporate these changes into their letting and management practice in good time – in order to protect your interests and the safety of your tenants. As a landlord, it is you that is liable for the actions or inactions of your letting agent. Should they break the law, you could face hefty fines and even imprisonment, so you need to be able to completely trust them to know the law and let your property legally and safely! Fees Each agent has their own scale of charges, usually based on a percentage of the annual rent. But be warned, the cheapest option is not always the best; you get what you pay for in terms of service and discounted fees should always be treated with caution. When making comparisons between agents, ask for a list of all charges, what they relate to, and the total amount payable for your specific tenancy. Make sure you are comparing like for like and that there are no hidden charges.
Marketing and online presence
Look closely at the letting agent’s office, website, company literature and the way in which they market themselves and their landlords’ properties. All of these should make a positive impression and look professional. With tenants now mainly looking for rented properties online (more than 80% of our tenant enquiries at Leaders come from the internet), the agent should have a strong online presence. Use Google to search for the agent and check out which property portals and websites – in addition to their own – your property would appear on if you were to instruct them. Consider also the agent’s presence in the local newspaper. Tenant vetting Make sure the agent has the resources in place to carry out rigorous checks on all prospective tenants, including a careful interview process, checking their ID, credit history, previous address details; salary details; an employer’s reference, and previous landlord’s reference, if applicable. Tenancy Agreements Check that the agent’s Tenancy Agreements comply with the Housing Act (or contract law if it is a company let and/or a let with a rental value of over £100,000) and with the Office of Fair Trading recommendations. An experienced agent will incorporate clauses to cover any potential problem areas that have been encountered in the past to protect the landlords’ interests, for example when renting to a tenant with a pet. Property Management Your chosen agent should have an in-house, locally based property management department with experienced property managers and property inspectors dedicated to looking after your property and tenant throughout the tenancy. They should have arrangements in place to deal with emergencies out of standard office hours and should have access to a wide range of fully vetted professional and reasonably priced local contractors who you can be confident will carry out any necessary work at your property to a high standard. The staff who draw up the inventory and schedule of condition and carry out mid-tenancy inspections and the check out at the end of the tenancy should be thoroughly trained and competent. Legal compliance With the plethora of regulation relating to residential letting that landlords must abide by – and ongoing updates and changes – it is vital that your letting agent stays up to date with legislation affecting residential letting, and keeps you informed at all times. Your chosen agent must have the resources in place to stay ahead of legislative changes – and the appropriate procedures in place to incorporate these changes into their letting and management practice in good time – in order to protect your interests and the safety of your tenants. As a landlord, it is you that is liable for the actions or inactions of your letting agent. Should they break the law, you could face hefty fines and even imprisonment, so you need to be able to completely trust them to know the law and let your property legally and safely! Fees Each agent has their own scale of charges, usually based on a percentage of the annual rent. But be warned, the cheapest option is not always the best; you get what you pay for in terms of service and discounted fees should always be treated with caution. When making comparisons between agents, ask for a list of all charges, what they relate to, and the total amount payable for your specific tenancy. Make sure you are comparing like for like and that there are no hidden charges.
Independent specialist
Although many agents do both sales and lettings, it makes sense to choose an agent that specialises in lettings only, so you know that their sole focus is letting and property management, with no distractions. They should also be independent and completely impartial; never take the advice of an agent who is also selling you a property or who may have a vested interest in whether you buy a specific property or not. It is crucial to be able to trust the advice you are given, particularly at the start of your investment. The value of specialist knowledge should not be underestimated; nor should the damage that inaccurate advice can inflict on a landlords’ investment. Trustworthy advice on the local market, rental values, how to present your property, where to invest and in which property type are all fundamental. Be wary of letting agents who exaggerate the rental value of a property simply to win an instruction; this could cause you to lose out on rental income whilst your property remains vacant because it is too highly priced. Calibre of staff With letting and property management being a service delivered by people, the staff of the letting agent will play a key role in the service you receive. Find out whether they are qualified, with a thorough knowledge of the lettings process and the local market. Does the letting agent invest in its staff and do they undergo thorough training? Have a significant number of the staff been with the letting agent a long time or are they mainly new to the business? These are all important indicators of whether or not you are likely to receive a good quality service from professional, well-trained, experienced people. It is also important that they are friendly, enthusiastic and happy to help; after all you may be working with them for some time!
Independent specialist
Although many agents do both sales and lettings, it makes sense to choose an agent that specialises in lettings only, so you know that their sole focus is letting and property management, with no distractions. They should also be independent and completely impartial; never take the advice of an agent who is also selling you a property or who may have a vested interest in whether you buy a specific property or not. It is crucial to be able to trust the advice you are given, particularly at the start of your investment. The value of specialist knowledge should not be underestimated; nor should the damage that inaccurate advice can inflict on a landlords’ investment. Trustworthy advice on the local market, rental values, how to present your property, where to invest and in which property type are all fundamental. Be wary of letting agents who exaggerate the rental value of a property simply to win an instruction; this could cause you to lose out on rental income whilst your property remains vacant because it is too highly priced. Calibre of staff With letting and property management being a service delivered by people, the staff of the letting agent will play a key role in the service you receive. Find out whether they are qualified, with a thorough knowledge of the lettings process and the local market. Does the letting agent invest in its staff and do they undergo thorough training? Have a significant number of the staff been with the letting agent a long time or are they mainly new to the business? These are all important indicators of whether or not you are likely to receive a good quality service from professional, well-trained, experienced people. It is also important that they are friendly, enthusiastic and happy to help; after all you may be working with them for some time!
So, how do you choose the right letting agent?
Take a little time to do your homework on any letting agent you are considering entrusting your property to. The following are the most important points to consider: Professional membership and client money protection With no formal regulation of letting agents – and the government having confirmed it has no plans to introduce any during this parliament – the only way to protect yourself from unscrupulous or incompetent letting agents is to use an agent that is a member of a professional organisation such as the Association of Residential Letting Agents (ARLA). That way you can be sure they will be qualified to give trustworthy advice; hold professional indemnity insurance; have a minimum of two years lettings experience; and above all, comply with strict rules on holding deposits and rent safely on your behalf. There has been a lot of coverage in the media over the years about agents without client money protection schemes in place. A frightening number have either gone bust or disappeared with their clients’ money, leaving many hundreds of landlords and tenants badly out of pocket, with no means of redress. The new SAFEagent scheme has been set up to make the public aware of the importance of only using an agent that protects its clients’ money. Whilst client money protection is an absolute must, landlords should be aware that being a member of SAFEagent does not necessarily mean that the agent is qualified, experienced or competent to let and manage property. Nor does it demonstrate that they have a thorough understanding of the complex legislation surrounding letting. Reputation and experience Look for a well known, well established agent with a good reputation – they will not have achieved their good name by default. Make sure they have been letting for many years so you know they are experienced and knowledgeable, with the right systems and procedures in place to deliver a professional service to their clients. Don’t hesitate to seek recommendations from other landlord clients. Look particularly at whether the letting agent has landlords who have been with them for many years – that in itself speaks volumes. Also consider whether they have strong relationships with large local employers who are often a key source of tenants.
Beware – letting agents remain unregulated!
Shockingly, despite the plethora or regulations surrounding residential letting, letting agents themselves remain unregulated, which means that anyone can set up as a letting agent, with no experience, qualifications or understanding of the lettings process, law or lettings market in which they are operating. With rental demand continuing to grow – and the sales market continuing to struggle – many inexperienced agents are branching into lettings to keep their businesses going. Landlords therefore need to take great care when choosing a letting agent. Every landlord knows the importance of vetting tenants carefully before letting their property to them; just as crucial – but often overlooked – is vetting the agent to whom you are entrusting your investment. Choosing a letting agent can be a minefield for landlords and it is often tempting to simply go for the one offering the lowest fees. Particularly in the current market – in which agents are crying out for more properties and are therefore slashing their fees to attract landlords. Some will also resort to over-inflating rental valuations simply to gain instructions from landlords. This means that the uniformed landlord is at risk of choosing an agent for the wrong reasons – i.e very low fees or an inaccurate rental valuation – which could put their investment in jeopardy. Unfortunately, choosing the wrong agent can have dire consequences for landlords, including huge legal expenses, loss of rent, long void periods, loss of tenant’s deposit and penalties for not complying with legislation. Not so mention a great deal of stress! By contrast, the right letting agent can maximise your chances of enjoying a trouble-free and profitable investment, and give you the confidence of knowing that everything is being looked after legally and reliably on your behalf.
Choosing a letting agent in an unregulated industry: What every landlord should know
Not all landlords feel the need to use a letting agent, preferring to handle all aspects of the letting and management of their property and tenancy themselves. But for some landlords a letting agent is a must – to save time, reduce effort and stress, and provide them with expertise and peace of mind. A good letting agent can be worth its weight in gold for landlords who do not want the hassle of taking care of their properties and tenants; for those who live a distance away from their property; and for those who are inexperienced in letting and need a helping hand with the practicalities and legal complexities. Or all of the above! However, the quality of service delivered by letting agents varies drastically and – unless you choose your agent carefully – you cannot assume that you will receive a high quality, trustworthy service that protects your interests at all times.
Landlords could be Responsible for Tenant’s Water Bills?
Under the terms of the new Flood and Water Management Act, landlords could soon be liable for their tenants’ unpaid water bills. This change in policy has come about because of increasing numbers of people absconding from rental properties without settling their water bill and the government is proposing to make it compulsory for landlords to supply information about their tenants—or become liable for the account themselves. Unfortunately for the water companies, nothing is exactly stacked in their favour: if the occupier of the property fails to pay the water rates bill, there is very little the water company can do as their hands are tied. They have to provide water to the property, irrespective of whether the tenant or owner has signed a contract, and landlords are not obliged to pass on any information about their tenants, which makes it difficult to trace the debtor. Water companies are not even allowed to cut off water supply if the bill goes unpaid, so other than making threats, there is not a lot they can do. How is the government planning on changing things? Unpaid bills cost the water companies millions every year, which is costing the rest of us on average another £15 on our bills. But following numerous complaints to the government, changes in legislation are afoot to make it fairer for the water companies. At present, nothing has been agreed and two different options are currently under consideration: How can I protect myself from a tenant’s debts? The best way to cover your back is to take meter readings (where applicable) at the beginning and end of a tenancy and ask your tenant to sign a form agreeing the readings are correct. You should also inform all utility companies of any changes in tenant as a matter of course, as this makes it easier for the water companies to target the right debtors. This article has been supplied to LandlordZONE by Amer Siddiq from PropertyPortfolioSoftware.co.uk. They provide award winning property management software to help landlords get better organised.
Landlords could be Responsible for Tenant’s Water Bills?
Under the terms of the new Flood and Water Management Act, landlords could soon be liable for their tenants’ unpaid water bills. This change in policy has come about because of increasing numbers of people absconding from rental properties without settling their water bill and the government is proposing to make it compulsory for landlords to supply information about their tenants—or become liable for the account themselves. Unfortunately for the water companies, nothing is exactly stacked in their favour: if the occupier of the property fails to pay the water rates bill, there is very little the water company can do as their hands are tied. They have to provide water to the property, irrespective of whether the tenant or owner has signed a contract, and landlords are not obliged to pass on any information about their tenants, which makes it difficult to trace the debtor. Water companies are not even allowed to cut off water supply if the bill goes unpaid, so other than making threats, there is not a lot they can do. How is the government planning on changing things? Unpaid bills cost the water companies millions every year, which is costing the rest of us on average another £15 on our bills. But following numerous complaints to the government, changes in legislation are afoot to make it fairer for the water companies. At present, nothing has been agreed and two different options are currently under consideration: How can I protect myself from a tenant’s debts? The best way to cover your back is to take meter readings (where applicable) at the beginning and end of a tenancy and ask your tenant to sign a form agreeing the readings are correct. You should also inform all utility companies of any changes in tenant as a matter of course, as this makes it easier for the water companies to target the right debtors. This article has been supplied to LandlordZONE by Amer Siddiq from PropertyPortfolioSoftware.co.uk. They provide award winning property management software to help landlords get better organised.
Student Landlord Accreditation Roadshows
AFS AND UNIPOL Run to Landlord Accreditation Roadshow in 8 University Towns around the UK Landlords invited to hear about benefits of AFS/Unipol Code (London, 3/5/12) Accommodation for Students (AFS) (www.accommodationforstudents.com), the UK’s No 1 student accommodation website, and Unipol (www.unipol.org.uk), the charity devoted to educational advancement via the provision and improvement of student accommodation, are following up the launch in September last year of their student landlord accreditation scheme, the AFS/Unipol Code, with a roadshow inviting student landlords in 8 university towns to hear about the benefits of being accredited. The roadshow starts in York on May, 8th, followed by Liverpool two days later. Dates in May have also been set for Cardiff (18th), Exeter (23rd), Edinburgh (25th) and Hull (29th), with Bristol and Brighton still to be finalized. Representatives from both parties, AFS and Unipol, will give presentations to local student landlords and take questions about the Code. Simon Thompson, co-founder and director of AFS, said: “Since our launch last September we already have over 200 private student landlords seeking accreditation, and over 24,000 bed spaces in accredited accommodation. In addition, we want to take our message to the landlords in their own areas, hence this roadshow, initially in 8 cities across the UK. By providing service standards that cover all key areas of student accommodation the AFS/Unipol Code provides peace of mind to students and parents. Accredited landlords, identified by our ‘thumbs up’ logo on the website, will be preferred by our customers. The roadshow will also explain all the other elements of the scheme that are beneficial to them. Two recent landlord forums that we have run have shown a great enthusiasm for this initiative, 60% believing it a good idea.” Martin Blakey, Chief Executive of Unipol, said: “The Code sets a number of specific professional standards for rented student properties and their management. It covers all the key areas of student accommodation: comfort, facilities, safety, security and service and is designed to help students (and their parents) make a more informed choice about accommodation and its quality. Most importantly and uniquely, these standards are physically checked by visits from our team of independent professional assessors, as part of the initial application, and three-yearly thereafter, when membership comes up for renewal. We have chosen to partner AFS because, as the No 1 student accommodation website, they will provide the widest access to landlords across the UK.” Blakey and Thompson were both guest speakers at the recent ANUK (Accreditation Network UK, the body for accreditation schemes in the UK) Conference in London on 17th April, where the Office of the Mayor of London was represented, Boris Johnson, having recently stated his intention to introduce a London Rental Standard, to accredit private landlords in London. The AFS/Unipol Scheme is also partnered by the NUS who will promote the scheme to its student members.
A Guide to Letting your Property for the Olympics
With the Olympics fast approaching many individuals have decided to rent out their property and take advantage of what has been termed the “Olympic gold rush”. Those thinking about renting out their homes have two options: pay an agent specialising in short term lets and pay the 10-15% commission charge or do it yourself. For those who decide to go it alone this fact sheet is a must read, going through all the factors you will have to think about. INVENTORY LOCK UP VALUABLES MORTGAGE AGREEMENT LIVING IN A BLOCK LETTING CONTRACT GAS & ELECTRIC CHECKS INSURANCE Our Property department at Osbornes Solicitors would be happy to provide you with more assistance in making sure you have taken all appropriate measures to ensure you are ready for the games. We can also draw up a short-term letting contract on your behalf. For more advice please contact us. OSBORNES SOLICITORS | LIVERY HOUSE | 9 PRATT STEET | CAMDEN | NW1 0AE This article is provided for information only and should not in any way be regarded as the giving of legal advice. Guy Osborn, Partner Shilpa Mathuradas, Partner
An inventory detailing a list of furniture and equipment provided with the property and recording the condition of the property should be drawn up. For extra security take pictures to verify condition. Having an inventory can help resolve any disputes at the end of the let if you consider a property has been damaged or items are missing.
It would be a good idea to place all items of value and sentiment in a lockable cupboard or put them into storage.
Most likely you will not have a buy-to-let mortgage. If you are planning to rent out your property (even for a short term let) be sure to check with your bank that your mortgage agreement allows you to do this without incurring a charge.
If your property is on a complex or in a block you would do well to check that your lease allows short term lets. You may need to notify the landlord/managing agents to get written consent.
This may seem obvious but it is important that such agreements are put in writing setting out the dates, price agreed, payment dates, deposit amount and in what circumstances the deposit will be retained.
You will need to ensure that your home is safe and complies with all gas and electric regulations. It would be a good idea to have a gas safety check before your tenants arrive, just to make sure everything is in good working order. You should also go round making sure that all appliances are in good working order.
You should check with your insurers that you do not need any additional cover for the duration of the letting period. Most household policies do not cover commercial rents.
www.osbornes.net | 020 7485 8811 | enquiries@osbornes.net
guyosborn@osbornes.net
shilpamathuradas@osbornes.net
A Guide to Letting your Property for the Olympics
With the Olympics fast approaching many individuals have decided to rent out their property and take advantage of what has been termed the “Olympic gold rush”. Those thinking about renting out their homes have two options: pay an agent specialising in short term lets and pay the 10-15% commission charge or do it yourself. For those who decide to go it alone this fact sheet is a must read, going through all the factors you will have to think about. INVENTORY LOCK UP VALUABLES MORTGAGE AGREEMENT LIVING IN A BLOCK LETTING CONTRACT GAS & ELECTRIC CHECKS INSURANCE Our Property department at Osbornes Solicitors would be happy to provide you with more assistance in making sure you have taken all appropriate measures to ensure you are ready for the games. We can also draw up a short-term letting contract on your behalf. For more advice please contact us. OSBORNES SOLICITORS | LIVERY HOUSE | 9 PRATT STEET | CAMDEN | NW1 0AE This article is provided for information only and should not in any way be regarded as the giving of legal advice. Guy Osborn, Partner Shilpa Mathuradas, Partner
An inventory detailing a list of furniture and equipment provided with the property and recording the condition of the property should be drawn up. For extra security take pictures to verify condition. Having an inventory can help resolve any disputes at the end of the let if you consider a property has been damaged or items are missing.
It would be a good idea to place all items of value and sentiment in a lockable cupboard or put them into storage.
Most likely you will not have a buy-to-let mortgage. If you are planning to rent out your property (even for a short term let) be sure to check with your bank that your mortgage agreement allows you to do this without incurring a charge.
If your property is on a complex or in a block you would do well to check that your lease allows short term lets. You may need to notify the landlord/managing agents to get written consent.
This may seem obvious but it is important that such agreements are put in writing setting out the dates, price agreed, payment dates, deposit amount and in what circumstances the deposit will be retained.
You will need to ensure that your home is safe and complies with all gas and electric regulations. It would be a good idea to have a gas safety check before your tenants arrive, just to make sure everything is in good working order. You should also go round making sure that all appliances are in good working order.
You should check with your insurers that you do not need any additional cover for the duration of the letting period. Most household policies do not cover commercial rents.
www.osbornes.net | 020 7485 8811 | enquiries@osbornes.net
guyosborn@osbornes.net
shilpamathuradas@osbornes.net
When Recession Blows off the Roof, Landlords May Help!
Business tenants and corporate landlords can find common ground, says Simon Murphy, property management partner at leading law firm Taylor Vinters Whether a retailer, an e-retailer or a MegaBox store – space has got to be rented somewhere and business is tough right now. If you are struggling to make the rent, orders are slipping and you’re not sure you are going to make your next payroll, then it’s time to ask: What kind of help can you get from your landlord? The landlord may be prepared to re-gear the lease, if rent levels have fallen. If done on the basis of an exchange of side letters (i.e. on a personal basis for the current tenant) so that there is no effect on rent review, then this is sometimes an easier pill to swallow for the landlord. Landlords can be more flexible with tenants concerning improvement works. Where there is an internal only lease with a service charge, significant capital works can be delayed so that payments required of the tenant can be kept to a minimum. Where underletting of part is prohibited by the lease, but the tenant does not require all of the space, landlords can be persuaded to be more flexible. This works provided that any underletting is excluded from the security of tenure provisions of the landlord and Tenant Act – so that the landlord doesn’t end up with an undesirable tenant at the end of the lease. If you’re having trouble persuading your landlord to agree to re-gear, it may be appropriate to offer personal guarantees or a rent deposit if you can stretch to it, so that the landlord has some security in relation to the reduced rent. There is simply no point in the Landlord agreeing to a reduced rent from a tenant who does not have the ability to even pay the reduced rent. The key to all negotiations, as one would expect, is reasonableness. Although landlords (but probably not landlords in Cambridge) are likely to be prepared to be flexible in order to keep their tenants, they are not likely to want to affect their investment value, unless there is some likelihood that the reduced rent will be paid, and that the tenant will remain solvent and will comply with the tenant’s covenants under the lease. What can the landlord do to maintain asset values? If you suspect that your tenant is insolvent, or is likely to become insolvent in the next couple of years, it is important that you make sure that the property is as re-lettable as possible. While tenants are likely to want you to put off major capital works during the hard times, it’s essential that premises are not allowed to get into disrepair and become harder to re-let. Make sure your leases contain the right to enter and carry out repairs, so that if the tenant is not complying with its repairing covenants, you can enter the property, undertake the work yourself, and charge the tenant the costs as a debt. If there is a strong likelihood that your tenant will become insolvent, it is important that you exercise this remedy as soon as possible, to give yourself the maximum chance of recovering the debt from the tenant. If you do re-gear, and you are unsure whether your tenant will have the ability to pay even a lower rent, make sure that you get a substantial rent deposit, to cover default. If your tenant does go into administration, make sure that if the administrator uses the premises for the purposes of the administration, and trades from the premises, they pay all of the passing rent due and owing. Even if the administrator vacates the premises, remember that while the tenant in administration is liable under the lease, the premises are nil-rated for business rates purposes. It is often better to obtain permission from the administrator to remarket the premises, and hold keys, without this amounting to a surrender and/or forfeiture of the lease, so that you are not liable for void business rates, on top of unpaid rent. The lease can then be surrendered with the consent of the administrator when and if a new tenant is found. If your premises is too large for the current market, take advice straight away on the sort of tenants likely to take on the capacity, and if it looks like there are no suitable tenants for the property, get planning advice from the local planning authority so that a strategy for redevelopment can be put in place sooner rather than later. Simon Murphy is a property management partner at Taylor Vinters. He manages a team of dedicated property management lawyers who advise on all aspects of commercial, residential and agricultural property management issues. Simon advises on a wide range of property issues from lease renewals, possession claims, service charge disputes and dilapidations claims, to advising on rights and liabilities affecting freehold land and adverse possession. Founded in Cambridge, and now with offices in London and Singapore, Taylor Vinters employs more than 220 highly qualified staff to offer a broad range of legal services to private, commercial and not-for-profit clients. Taylor Vinters is a progressive law firm headquartered in Cambridge, with offices in London and Singapore. Employing over 220 highly qualified staff who help businesses, individuals and not-for-profit organisations, across the UK and internationally, with a broad range of legal services. Clients range from high net worth individuals and university spin-out companies through to national charities, small to medium sized enterprises, FTSE listed businesses and Fortune 500 multinationals. www.taylorvinters.com
Many retailers are facing the pinch, with Game the latest in a long line of high street chains to go into administration. Landlords can sometimes help to prevent their tenants descending into administration if they are prepared to accommodate some realistic requests from the tenant, so as to keep their investment values and occupancy levels up.
In order to maintain investment values, it’s clearly important to retain tenants, especially those that the market perceives to have good covenant strengths. However, as indicated, there is no point in retaining a tenant whose covenant is very weak.
When Recession Blows off the Roof, Landlords May Help!
Business tenants and corporate landlords can find common ground, says Simon Murphy, property management partner at leading law firm Taylor Vinters Whether a retailer, an e-retailer or a MegaBox store – space has got to be rented somewhere and business is tough right now. If you are struggling to make the rent, orders are slipping and you’re not sure you are going to make your next payroll, then it’s time to ask: What kind of help can you get from your landlord? The landlord may be prepared to re-gear the lease, if rent levels have fallen. If done on the basis of an exchange of side letters (i.e. on a personal basis for the current tenant) so that there is no effect on rent review, then this is sometimes an easier pill to swallow for the landlord. Landlords can be more flexible with tenants concerning improvement works. Where there is an internal only lease with a service charge, significant capital works can be delayed so that payments required of the tenant can be kept to a minimum. Where underletting of part is prohibited by the lease, but the tenant does not require all of the space, landlords can be persuaded to be more flexible. This works provided that any underletting is excluded from the security of tenure provisions of the landlord and Tenant Act – so that the landlord doesn’t end up with an undesirable tenant at the end of the lease. If you’re having trouble persuading your landlord to agree to re-gear, it may be appropriate to offer personal guarantees or a rent deposit if you can stretch to it, so that the landlord has some security in relation to the reduced rent. There is simply no point in the Landlord agreeing to a reduced rent from a tenant who does not have the ability to even pay the reduced rent. The key to all negotiations, as one would expect, is reasonableness. Although landlords (but probably not landlords in Cambridge) are likely to be prepared to be flexible in order to keep their tenants, they are not likely to want to affect their investment value, unless there is some likelihood that the reduced rent will be paid, and that the tenant will remain solvent and will comply with the tenant’s covenants under the lease. What can the landlord do to maintain asset values? If you suspect that your tenant is insolvent, or is likely to become insolvent in the next couple of years, it is important that you make sure that the property is as re-lettable as possible. While tenants are likely to want you to put off major capital works during the hard times, it’s essential that premises are not allowed to get into disrepair and become harder to re-let. Make sure your leases contain the right to enter and carry out repairs, so that if the tenant is not complying with its repairing covenants, you can enter the property, undertake the work yourself, and charge the tenant the costs as a debt. If there is a strong likelihood that your tenant will become insolvent, it is important that you exercise this remedy as soon as possible, to give yourself the maximum chance of recovering the debt from the tenant. If you do re-gear, and you are unsure whether your tenant will have the ability to pay even a lower rent, make sure that you get a substantial rent deposit, to cover default. If your tenant does go into administration, make sure that if the administrator uses the premises for the purposes of the administration, and trades from the premises, they pay all of the passing rent due and owing. Even if the administrator vacates the premises, remember that while the tenant in administration is liable under the lease, the premises are nil-rated for business rates purposes. It is often better to obtain permission from the administrator to remarket the premises, and hold keys, without this amounting to a surrender and/or forfeiture of the lease, so that you are not liable for void business rates, on top of unpaid rent. The lease can then be surrendered with the consent of the administrator when and if a new tenant is found. If your premises is too large for the current market, take advice straight away on the sort of tenants likely to take on the capacity, and if it looks like there are no suitable tenants for the property, get planning advice from the local planning authority so that a strategy for redevelopment can be put in place sooner rather than later. Simon Murphy is a property management partner at Taylor Vinters. He manages a team of dedicated property management lawyers who advise on all aspects of commercial, residential and agricultural property management issues. Simon advises on a wide range of property issues from lease renewals, possession claims, service charge disputes and dilapidations claims, to advising on rights and liabilities affecting freehold land and adverse possession. Founded in Cambridge, and now with offices in London and Singapore, Taylor Vinters employs more than 220 highly qualified staff to offer a broad range of legal services to private, commercial and not-for-profit clients. Taylor Vinters is a progressive law firm headquartered in Cambridge, with offices in London and Singapore. Employing over 220 highly qualified staff who help businesses, individuals and not-for-profit organisations, across the UK and internationally, with a broad range of legal services. Clients range from high net worth individuals and university spin-out companies through to national charities, small to medium sized enterprises, FTSE listed businesses and Fortune 500 multinationals. www.taylorvinters.com
Many retailers are facing the pinch, with Game the latest in a long line of high street chains to go into administration. Landlords can sometimes help to prevent their tenants descending into administration if they are prepared to accommodate some realistic requests from the tenant, so as to keep their investment values and occupancy levels up.
In order to maintain investment values, it’s clearly important to retain tenants, especially those that the market perceives to have good covenant strengths. However, as indicated, there is no point in retaining a tenant whose covenant is very weak.
Belvoir Reports on the State of the Lettings Industry
Belvoir CEO Dorian Gonsalves reports on the impact of a double dip recession on the lettings industry As figures released by the Office for National Statistics confirm that the UK economy has returned to recession, Belvoir Lettings says the rental industry continues to buck the trend. “In financial terms Belvoir has not experienced a single dip recession in the lettings industry, let alone a double dip,” says Belvoir CEO Dorian Gonsalves, but warns landlords of the importance of a realistic approach to rental increases. “A double dip recession means that unemployment will continue to rise, which in turn may assist with the dampening of any rental increases seen in previous years,” he says. “As I predicted in December 2011 rents are likely to rise moderately, remaining more or less in line with inflation and salary increases. Rental fluctuation is likely to be very regional with some areas such as the South East likely to see a higher increase as rental prices force people out of London into the Home Counties. The current crisis is clearly making consumers nervous, affecting both the BTL and mortgage market “My predictions were completely accurate and our franchise owners continue to report increased tenant demand. However unlike reports in the national press, any rental increases are likely to be modest and occurring only in pockets of the UK, with some areas experiencing no increase at all. “In recent weeks there have been reports claiming that housing sales have increased, but the double dip recession is likely to have a negative impact on this. However, this then produces a market that is ripe for opportunist investment landlords who are able to secure property purchases that represent real value for money. Belvoir offices are already reporting increased activity from BTL landlords and investors. “As I also predicted last December there is a shift towards more people renting as a preferred lifestyle choice rather than from necessity. People who rent can plan their spending more accurately and have flexibility to follow job offers etc. This is becoming increasingly important in the current financial climate. “Feedback from franchised offices across the network shows that tenants are now staying longer in properties and there are various reasons for this. Even modest rental increases, which were heavily published in the national press, tend to give tenants the impression that without very good reason it makes no financial sense to move to a larger or different type of property. “Because of regional variations in rental yields it is vital for landlords to talk to specialists who understand the local market, as buying in the wrong area could be very costly. With 140+ offices spread across the UK Belvoir can provide an accurate picture of the rental market in different regions and from a property investment perspective this can be very helpful. There is no doubt that if potential investors seek the right advice the returns can be extremely lucrative.” Belvoir Lettings now have more than 140 offices nationwide. To find your nearest Belvoir office, visit www.belvoirlettings.com
Belvoir Reports on the State of the Lettings Industry
Belvoir CEO Dorian Gonsalves reports on the impact of a double dip recession on the lettings industry As figures released by the Office for National Statistics confirm that the UK economy has returned to recession, Belvoir Lettings says the rental industry continues to buck the trend. “In financial terms Belvoir has not experienced a single dip recession in the lettings industry, let alone a double dip,” says Belvoir CEO Dorian Gonsalves, but warns landlords of the importance of a realistic approach to rental increases. “A double dip recession means that unemployment will continue to rise, which in turn may assist with the dampening of any rental increases seen in previous years,” he says. “As I predicted in December 2011 rents are likely to rise moderately, remaining more or less in line with inflation and salary increases. Rental fluctuation is likely to be very regional with some areas such as the South East likely to see a higher increase as rental prices force people out of London into the Home Counties. The current crisis is clearly making consumers nervous, affecting both the BTL and mortgage market “My predictions were completely accurate and our franchise owners continue to report increased tenant demand. However unlike reports in the national press, any rental increases are likely to be modest and occurring only in pockets of the UK, with some areas experiencing no increase at all. “In recent weeks there have been reports claiming that housing sales have increased, but the double dip recession is likely to have a negative impact on this. However, this then produces a market that is ripe for opportunist investment landlords who are able to secure property purchases that represent real value for money. Belvoir offices are already reporting increased activity from BTL landlords and investors. “As I also predicted last December there is a shift towards more people renting as a preferred lifestyle choice rather than from necessity. People who rent can plan their spending more accurately and have flexibility to follow job offers etc. This is becoming increasingly important in the current financial climate. “Feedback from franchised offices across the network shows that tenants are now staying longer in properties and there are various reasons for this. Even modest rental increases, which were heavily published in the national press, tend to give tenants the impression that without very good reason it makes no financial sense to move to a larger or different type of property. “Because of regional variations in rental yields it is vital for landlords to talk to specialists who understand the local market, as buying in the wrong area could be very costly. With 140+ offices spread across the UK Belvoir can provide an accurate picture of the rental market in different regions and from a property investment perspective this can be very helpful. There is no doubt that if potential investors seek the right advice the returns can be extremely lucrative.” Belvoir Lettings now have more than 140 offices nationwide. To find your nearest Belvoir office, visit www.belvoirlettings.com
