Theoretical paper profit piled up. Everyone who warned of possible problems was a foolish Pollyanna: an unadventurous twerp who lacked the entrepreneurial skills to appreciate self certified liar loans, let alone the glorious operational freedom of 125% mortgages.

What’s more, equity withdrawal was a peach till recently, encouraging mounting pyramidal debt on pinpricks of initial ‘real money’. I was someone who challenged a bandwagon that’d made people paper rich. To climb aboard this lucrative gravy train, some landlords had been persuaded to borrow against the family home to raise deposits. Other ‘Seminars’ by ‘Experts’, insanely suggested raising initial capital to ‘climb this magical ladder’ against their credit cards at 20% p.a. interest!

No surprise that as the tide turned, these ‘advisory experts’ went bust quicker than the bubble. Their Golden Apple had rolled away, leaving nothing more than a fusty core for its victims to chew over.

The men with the Porsches were moving on to the next scam. (And might I now suggest as I did on BBC Radio last December, that anyone sold a 100% interest only mortgage on a BTL basis should try bringing a case before the Financial Ombudsman, or the FSA, unless their lender provided written warnings that, without any capital repayment provision, this ‘little ‘gem’ borrowing arrangement could only ever work in an endlessly rising property market).

Never forget – Banks do not LEND money….they RENT it.
And make a profit by doing so.
From you!

Of course, those of us with the odd wrinkle have seen it all before though never on such a scale and never involving so many honest, hard working people who saw final salary pension schemes collapsing all round them and did no more than try to protect their families from an uncertain financial future by widening their options. It was, in principle (and still could be), a great concept.

Applied as recklessly as it has been, it’s about to become a personal disaster for many…and not just for landlords. Every re-possessed property leaves good tenants who paid their rent on the nose, out on the street through no fault of their own.

However, leaving aside the recent ‘Smoke and Mirrors’ act. here’s a solid fact, conveniently forgotten for almost a decade.

There is NO SUCH THING as a PERMANENTLY RISING MARKET. NEVER was, NEVER will be. Markets endlessly adjust to prevailing conditions.

Builders, following BTL buyers like lemmings and turning most of our City Centres into replicas of East German housing projects are also going under. Deep in the Anglo Saxon DNA, the ideal dwelling is and always has been ‘Hearth and Home’. Anglo Saxons don’t take well to being stacked in crates – even crates with window boxes.

But ‘experts’ working in packs have created the nonsensical myth that the ideal property to buy was a 2 bed flat – it’s a nonsense (the rental sector’s incredibly diverse), which has permeated an entire ‘new’ rental sector.

From planning, through production, abetted by reckless lending and encouraged by inexperienced and often unregulated agents, the worst of all market conditions has been recently created – vast oversupply of a single commodity. A GLUT!

Eighteen months ago, I warned that Buy To Let was a new financial formula, dreamed up (alongside so many others, we now learn) to make long term money for everyone – brokers, finance houses, agents of every type- in fact, everyone but clients. As I pointed out then, Buy To Let Landlords were financial guinea pigs, testing an untried concept, encouraged by government as a way to keep building Council Houses off the Public Accounts.

Well that was then, and this is now. And the problems it raises are, frankly immense. I can only offer shavings in a short piece like this.

So, that’s the problem, you’re asking, where’s the solution? Unfortunately there’s no simple answer – just a complex blend of common sense and gritted teeth. Because, here’s another forgotten truth. Banks are NOT Property Companies.

They don’t WANT hundreds of repossessions, the hassle, the courts, the years of chasing borrowers for shortfalls. They want common sense solutions that keep their accounts looking healthy.

Top of my priority list would have to be DON’T SELL – not for the next few years. The only buyers out there now are Vulture Funds, big and small.

Auction experts who swoop in with small silver coins between their sharp claws, leaving you with years of backlog debt if your borrowings are large, because they rarely offer more than 50% of asking prices. Hammer Down! Done Deal! Next Property Please…..

Next would be CUT YOUR COSTS TO THE BONE. Drop expensive agents – they’re your largest saving – get yourself a DIY management book, roll up your sleeves and get cracking.

Now unfortunately, here comes the unfortunate sounding ‘plug’—- I’ve written the only practical DIY book that undoes the practicalities you’ll need to learn. Luckily, I don’t rely on royalties – my income comes from rentals in a family with hundreds of years’ expertise between us, and that’s before I even get to cousins!

But letting out property really is money for jam– why do you think there are so many top line cars parked outside agents who didn’t exist till the Nineties???? Blood and sand, before things were so easy, letting agents were like pearls in oysters. And always remember, what they can do, you can do BETTER. They live on a slice of YOUR RISK. Keep the slice and use it to help cover your own costs, not theirs.

Last comes the hardest tip of all. DROP YOUR RENT until your unit is occupied. Week on week, keep dropping until you find a suitable tenant. Forget what you were ‘promised’, rental property has no fixed value – it’s only worth what someone will pay you there and then – that very week. And we may well be talking about huge cuts here – sometimes of up to 50%.

But half of something is always better than 100% of nothing. Cut down on other living costs to subsidize the rent. Just hold out – whatever it takes – through the next few years shakeout. By then, the weakest will have gone to the wall and this wretched ‘glut’ should have resolved itself, leaving only the tough nuts – the real entrepreneurs who did what it took, standing. Nuts like you!!!

Finally good luck. There are a huge number of fab tenants out there. Go find yourself some, accept what you can get for your units, and then, talk to your lender and realistically negotiate either a longer term or possibly a better deal.

Good risks, those who always made their payments on time, always get a hearing. I repeat, banks don’t want the hassle of taking your building away, they do want the rent on their own capital repaid, and that’s fair enough. Hone your skills and join the independents who work out real ‘win win deals’.

Article supplied by Leslie Henderson. Leslie is a contributor to several BBC radio programmes on property and the Credit Crunch and author of “The Landlord’s Survival Guide” from www.HowtoBooks.co.uk Leslies is planning a series of half-day seminars to help landlords survive using tried and tested methods. You can contact her through LandlordZONE

Major reforms of the Private Rented Sector(PRS), including a drivers’ style licence for landlords and new tax breaks, have been recommended in a comprehensive review of the PRS. The independent, government commissioned review published by Julie Rugg and David Rhodes of the University of York has been welcomed by industry experts.

The National Landlords Association (NLA) said the review ‘marks a major watershed in attitudes to the PRS.’ The report recognised the positive role the vast majority of private landlords play and called for more support for landlords, compulsory light-touch licensing, tougher enforcement against rogue landlords and strong mandatory licensing for letting agents.

The Association of Residential Letting Agents(ARLA) welcomed the review. “The Private Rented Sector has been well served by the small landlord. Without this backbone, the sector would never have been revitalised and the housing market would be having even more problems,” commented Ian Potter, ARLA’s Head of Operations. “Professor Rugg’s comments are very welcome. Stimulating the sector will do much to help us through the difficult times ahead, and at very little cost to the exchequer.”

Agreeing with Rugg’s call for licensing, ARLA pointed out that the Association has been calling for the licensing of all letting agents for more than a decade and is pleased that this demand has now been backed up.

Whilst broadly supporting the review, the NLA called for more scrutiny of the licensing proposals and more work to see how the framework would work. David Salusbury, chairman of the NLA stated; “The Rugg Review offers Government a number of policy options based upon sound and independent evidence.

The rhetoric has gone and myths have been dispelled. “It demonstrates and encourages a commitment to ‘grow the business of letting’ for smaller landlords but also encourages largerscale investment, where appropriate. This means tax incentives to encourage investment in quality housing across the board.”

Rugg defended smaller landlords, who the government had been keen to displace with larger institutions, stating; “Smaller landlords can offer their tenants better deals, some tenants don’t get rent increases because small landlord want to keep them.

Smaller landlords have more flexible letting policies, they are more likely to take lone parents, people who are unemployed, or people who are sick or disabled. Whilst small landlords are castigated they are actually doing quite a lot of good work with vulnerable people.

Tax changes recommended included changes to stamp duty to favour portfolio landlords and a review of how tax affects renovation and repair of properties, Rugg said: “We would like to see changes to stamp duty regulations so that landlords buying portfolios are charged per property and not on the basis of the entire portfolio cost.”

Rugg also stressed the importance of recognising that most landlords are well intentioned, stating; “We know that we have some excellent landlords, some landlords that mean well but don’t quite understand the level of responsibility that goes with letting, and a very small proportion of landlords who are prepared to operate outside the law.”

The author recognised that landlords come under attack from tenants’ rights groups unjustly, “The data they produce tends to be unreliable, it’s usually gathered from their client base who are already presented with a difficulty. By the nature of their job welfare rights workers never come across the bits of the pipeline of the sector that work.”

According to the report it is not viable to leave market forces to weed out poor landlords and more effective policing is required. Rugg commented “Bad landlords will always find tenants, since at the bottom of the PRS there are more tenants than properties and the existing policing frameworks are simply inadequate, the regulations are there but the local authority performance is at best variable.”

The report dispelled the myth that letting agents provide better services, Rugg said: “Many tenants use managing agents because they think they will get a better level of service, but when it comes to property quality, it’s no different.”

Rugg also called for more help for recipients of Local Housing Allowance (LHA); “Tenants who can vote with their feet don’t choose to rent poor quality property, but tenants on LHA have very little choice. Universal assistance with rent in advance and deposits would go a long way to extending choice for these groups and go a long way towards knocking the bottom out of the slum rental market.”

Some commentators have been calling for changes to Assured Shorthold Tenancy regulations to give longer periods of occupation, however, the report called for caution, as the image of the PRS did not match reality. “Most tenancies end when the tenants are happy they should come to an end,” commented Rugg.

The report stated that there has been little policy intervention to support tenancies, particularly for tenants in receipt of LHA. “If we have homelessness stats that take ‘end of AST’ as the reason for loss of accommodation we are simply not asking the right questions.”

The report was critical of local authority attempts to use the PRS to discharge their homelessness duties. “The belief that the PRS will expand to meet this demand just because we want it to, indicates a poor understanding of the sector. “Landlords are reluctant to move into this market without some kind of incentive, so we have incentive inflation, ever more expensive and ever more complicated initiatives to persuade landlords to take benefit recipients.”

The lack of co-ordination between homelessness agencies is blamed for causing competition for property. Rugg calls for more thought for where the property comes from: “If this property comes from landlords who are already in the LHA market then we are offering incentives to displace what are probably even more marginalised households.”

According to Rugg, there are no systems in place to establish whether using the PRS is the best means of meeting the longer terms needs of homeless people. She also argues that lower income households can be vulnerable because LHA admin is poor, stating; “It’s harder to arrange tenancy support and because landlords are a business not a charity they can’t be expected to deal with tenants who have
complex needs.”

Rugg recommends a system of local social letting agents, who can work with landlords and co-ordinate local priorities efficiently whilst focusing on securing long term housing for tenants. According to Rugg the PRS needs more support, she said; “We need to grow the business of renting, we want an end to the notion that buying a house and letting it out is just an investment, it’s not an investment it’s a business and a business that needs to be managed.

“We have got to promote good business practice and get professional training opportunities in place to help small landlords in business planning and get them up to speed with the law.”

Mortgage providers are culpable for some of the problems in the sector and could do more, according to Rugg; “We want to see buy to let lending requiring sound business planning and packages to protect tenants if landlords fall into mortgage arrears and repossession.”

On the subject of landlord licensing, Rugg called for a light-touch; “We have to work with how the sector works and not keep putting into place cumbersome interventions that skew the market. “We need a system of landlord licensing, we need to ensure that when we find a bad landlord they will be kicked out of the sector.

What we suggest is light touch landlord licensing. Landlords can’t work without a licence but it will be easy to get one. “That sends a message to all landlords that good landlords can have a licence straight away with no qualifying criteria, but that when you contravene the law you lose your licence.”

The proposed license would cost in the region of £50 per year and a landlord would only need one licence regardless of how many properties they own. The licence could come with a number that would be used on tenancy agreements, tax and LHA forms. Everyone would have a right to a licence, however, the licence could be withdrawn using a driving licence style pointssystem for misdemeanours.

When we questioned Rugg on the practicalities to the tenants of a landlord being banned, Rugg responded; “If a landlord is in a position where they loose their licence and are no longer in a position to rent their property, then those properties can be managed by the social letting agent until those properties are either sold to another landlord so they stay in the sector or some other element happens.“Social letting agents could be a good agency to work with under those circumstances because they could take over interim management.”

Summary of the main recommendations from the report:

• Introducing a light touch licensing system for landlords and mandatory regulation for letting agencies, to increase protection for both vulnerable tenants and good landlords.

• Introducing a new independent complaints and redress procedure for consumers, to help end long drawn out disputes.

• Tax changes to encourage good landlords to grow, including changes to stamp duty to encourage them to buy more properties.

• Looking at ways for the PRS to be more accommodating towards households on lower incomes, including considering more support for landlords prepared to house more vulnerable people.

• Local authorities taking steps to better understand the sector and support good landlords whilst tackling poorly performing landlords and promoting tenants’ rights.

For letting and managing agents the report recommends a stronger approach including a system of mandatory independent regulation with agents required to meet strict criteria and more responsibility for ensuring the properties they manage are up to standard.

Rugg stated; “Managing agents have been letting down tenants for too long, and even their leading association believes that a stricter regulatory regime is required.”

Iain Wright MP, parliamentary under secretary of state for housing, attended the launch and welcomed the report, whilst calling for a considered response, stating; “Any reform can stifle the strengths of the sector, the flexibility, diversity and range of choice and with the present financial climate, having that flexible option is more important than ever before.

“We need to get the balance right so that more people can have reliable services and affordable housing in a sector that has high professional standards and is a sector they can trust.”

The minister was supportive of the concept of a landlord licensing regime, saying; “The idea of licensing landlords and fuller regulation for agents may be one way to support good landlords and offer tenants greater guarantees of quality alongside using current legislation. This would help drive out bad landlords from the sector.”

The NLA also supports the concept of effective regulation, however, it is calling for close involvement in the plans, Salusbury said: “The Review’s recommendations about licensing will need careful consideration but the NLA has a major role to play in the development of PRS policy and we look forward, in the coming weeks and months,to ensuring that landlords up and down the country are represented as the decisions which affect them are made.”.

Rugg concluded; “We hope the review will signal the governments intention to seek a better working relationship with the sector, we now have a much stronger evidence base and the opportunity to frame more informed policy.”

Oliver Romain is the founding editor of Landlord & Buy-to-Let Magazine and reported from the launch of the report at the University of York on 23rd October 2008.

The Landlord Magazine can be viewed at: http://www.landlordnet.com/ – subscription is free

To read the full report visit www.york.ac.uk/chp/Projects/PRSreview.htm

Ground Rents are often complex and can be quite confusing to the layperson and landlords alike. This article by Jeremy Davies, an investor in Ground Rents through Elmdon Real Estates LLP, should clarify matters somewhat.

What is a Ground Rent?

A ground rent is created when a freehold property is sold on a long lease, either divided as flats or as a single house. In the past the creation of a ground rent on land provided an income to the landowner, while the builder would lease the land to build the house and then sell it on completion. Unfortunately inflation has eroded the value of most ground rents with long leases and non-rising incomes, so the value of landowner freehold interest’s where there is no prospect of a reversion within 150 years is marginal.

Why do people create ground rents?

If you are converting a period house into flats and selling them individually, you will need to create a freehold/leasehold structure to handle property maintenance and collective block insurance. Some developers include a ‘Share of the Freehold’ in the purchase of a leasehold flat, often putting the ground rent at a nominal amount. Purchasers however, especially when they do not occupy it as their main residence, might prefer a third party to handle the management and administration of the block. This is also lucrative for the developer, as he can sell the ‘freehold ground rents’ for a high multiple of the passing income. Not for no reason is this often known as the ‘builders pension fund’.

Why do people sell ground rents?

Economies of Scale in Administration

The administration of ground rent collection and block administration benefits from economies of scale. As such while it is a hassle to collect rent from a few converted houses by writing to them individually each year, a ground rent investment company will have an automated database which will greatly reduce the time expended per property in collecting the rent.

Difficult to Raise Finance Against

Most High Street Banks will not lend against ground rent portfolios if the income is less than £100,000 per annum. This is because of the small individual lot sizes, the difficulty in valuing individual ground rents and the legal work involved in registering charges against hundreds of titles.

Realise Capital Sum for Other Purposes

Individuals are often surprised that there is an active market for ground rent investment. Many have previously tried to sell them locally, and received either little interest or derisory prices. Common uses of capital include home improvements , tax efficient pension fund contributions or in the case of developers the purchase of further land/ sites.

Search for Liquidity

As the residential market turns at the time of writing ( June 2008), individuals are keen to sell whatever part of their portfolio is the most ‘liquid’. While one would struggle to sell a flat to another investor which requires a high LTV loan at the moment of writing, purchasers of Ground Rents are rarely reliant on bank borrowing and take a ‘long term’ view which places little emphasis on falling capital values. In addition because a large component of the value of a ground rent is the income not the capital value of the property, they have more of a correlation to changes in income capitalisation rates than changes in residential property valuation.

I am building a block of flats , and want to sell the ground rents profitably at the end of the development to an investor. How can I maximise the ground rent value while not detracting from the value of the long leasehold properties I intend to sell?

Good management is key. Reputable ground rent investment companies will insist on the separation of management and ownership, to avoid conflicts of interest in administering the block’s maintenance. You could write a provision for this into the lease.

Rising ground rents with fixed or geared increases. The value of a ground rent has a strong correlation to the way in which the income grows in future years. At the time of writing RPI tracking at ten year intervals is our favourite.

Reasonable lease lengths are key. Initial leases in excess of 150 years are unattractive, because the resulting value of the reversion is minimal. A 125 year lease provides a nice compromise between the concerns of apartment purchasers and the desires of investors.

Sell prior to construction. Most ground rent investors are happy to purchase prior to construction starting and hand over a large deposit on exchange for the opportunity. Completion then occurs on the sale of the last flat. This also avoids the need for Section V notices to be served on lessees giving them the option of pre-emptive purchase, as long as the sale of the ground rents occurs prior to the sale of 50% of the flats.

I want to sell ground rents, who should I speak to?

The author of this article operates Elmdon Real Estate LLP, a ground rent investment company, and the website www.groundrentswanted.com. He would be happy to give indicative prices on ground rent portfolios or single ground rents and is available on 0800 756 6412 or by email to info@elmdonrealestate.com.

See Also: http://www.landlordzone.co.uk/dir/ground-rents.htm

Now that the cold snap has begun, homeowners and property tenants have begun to turn their boilers on; boilers that have been sitting dormant for months. Break downs inevitably occur, and, companies like Aspect Maintenance experience a 100% increase in emergency calls outs.

Trying to get a tradesmen in the winter months is not always an easy task. More often than not there is a backlog of similar calls the company needs to plough through before they get around to answering yours.

At Aspect Maintenance, our policy is to try to get someone out to look at the problem on the same day you call our switchboard, and to begin fixing it within 24 hours.

Landlords should seriously consider having the boilers across their properties checked now, or to look at upgrading their old system. You may think that the 10-year old boiler is still working, so why change it? Upgrading your systems will not only create cost savings, but will also help to avoid unnecessary call outs (particularly for landlords).

The Worcester Bosch boilers we now install offer a five-year guarantee, and the knowledge that if something goes wrong, an engineer will be out to fix it right away – offering real peace of mind.

Another way of providing increased longevity to the operation of a boiler and its associated controls is to undertake preventative measures such as boiler servicing and mechanical ‘Powerflushing’.

It is strongly recommended, and a condition of many manufacturers guarantees, that a boiler receives an annual service. In much the same way as servicing your car, you can expect real benefits in fuel savings and limiting breakdowns.

Powerflushing of the radiators and associated pipe work will break down and remove the scale build up within. This allows the system to reach temperature far more quickly, thereby reducing your fuel costs and putting less strain on the boiler function. Moreover, the boilers internal components are less likely to be affected by scale and see your tenants through the cold snaps.

Today’s energy efficient boilers also work towards helping households to become ‘greener’. At Aspect Maintenance, we also install solar renewable energy, and strongly encourage our clients to consider this option.

This type of system can be used in conjunction with a specially-integrated boiler, and means the property owner will be doing more to protect the environment. In an age where the government, and local councils are all encouraging us to ‘clean up the UK’, shouldn’t we all be considering this option?

Aspect Maintenance can help landlords to maintain their whole property, from their boliers to the electrics, the drains to the roof. By working with landlord, Aspect Maintenance can help to reduce the fees they are already paying to estate agents. The company can hold keys on the system, and can be contacted directly by the tenant (with Aspect Maintenance reporting into the landlord).

By dealing directly with Aspect Maintenance, landlords can rest assured that they will pay the real price for maintenance undertaken, and that one of one of the company’s engineers can be onsite at any time of the day or night, should an emergency arise.

www.aspect-maintenance.co.uk

International Property.ie is run and managed by Henry Davis MBA. He has been developing Liverpool property since 1989, as well as property in Manchester, London and Eastern Europe

Make life easy.

1. Make life easy, if buying an overseas property for letting, choose square or rectangular shaped rooms. Irregular or unusual shaped rooms make a room look smaller and cluttered.

A key selling point for tenants is an en-suite and a decent sized living room is important even if the bedrooms are a bit on the small size.

Choose the right overseas letting agent.

2. Choosing the right letting agent is vital for a quick rental. Establish which agent generates the most enquiries from potential tenants in the local area if you are targeting the local long term lets market.

Consider an agent with a high street location who may be getting the highest footfall or the agent with a strong online marketing presence. Also look at the local papers in your overseas location and establish which agents are advertising on a regular basis as they will have a constant stream of tenants.

If targeting the holiday lets market, then your letting agent should have a user friendly website with lots of quality pictures to promote your property.

Interior design is important.

3. Furniture and a slick sophisticated professional interior designed look is the key to securing higher rent and an immediate let. The right look will rent your property faster and also attract better quality tenants who will care about your property.

It’s surprising how many landlords spend hundreds of thousands buying a property to-let only to skimp on furnishing and fittings. Consider employing an interior designer or a interior design-lead furniture supplier who can offer a ‘’wow’’ factor. Pay particular attention to the three piece suite selection.

This is a key signature piece and the emphasis should to be on a high quality ‘’comfy’’ large suite. Stay away from overly contemporary furniture especially sofas with small narrow overly firm cushions with low backs, they look trendy, but can be very uncomfortable.

Once the property is furnished, take high quality pictures or consider a professional photographer who can make your property look truly amazing. These photos are an important selling tool and will set your property apart from the competition.

Parking.

4. Parking spaces make your property more rentable; especially in major cities and they can also be a great investment. However in some holiday resorts they may not be so important so be careful not to pay over the odds for a space that may never be used.

Too many overseas investor owners may reduce your rental returns.

5. If you are buying an overseas apartment, do not buy in a larger site exclusively sold to investors especially in developments with twenty five plus units.

When large amounts of properties become available for rent at the same time this will create a temporary over-supply, reduce your rent and increase the time required to find tenants.

If they are all sold to investors there will be no owner occupiers to take an interest and play an active role in the management company as all the owners will be based overseas. This is becoming an increasing problem for Irish investors who have purchased in Spain.

Be involved with your management company.

6. Take an active role in your management company. A well run Management Company ensures the common areas are clean and will ensure the building itself is well maintained and cared-for. This makes your property more desirable to perspective tenants.

If the managing agent is not performing well, be ruthless and seek to have them removed as soon as possible. Many owners play no active role in the running of their management company and this will impact on the level and standards of services provided by the managing agent.

Internet Marketing.

7. If targeting the holiday lets market, many potential tenants may be coming from different parts of the world. Ideally you need a basic, but user friendly website for your property with lots of large high quality pictures.

The website should be listed on holiday let websites and you need to establish which sites are the most popular. Research online to find the most popular sites which will give you the best chance of a fast let. Search engines play a key role and you need to choose holiday let listing websites appearing high on well known search engines.

You can search the typical key words perspective tenants might input. The search engine results of your own test search will establish which letting sites have a strong online presence as the websites you find online using keywords prospective tenants may use are the same sites your tenants will come across in their search for a holiday let.

Keep in regular contact with your overseas agent.

8. Keep in regular contact with your letting agent, ask about the number of viewings, if the property is slow to rent it is vital to ask for feedback to establish any problem quickly, preferably within days of the first few viewings.

If your property is slow to rent, act fast, lower the price or have a meeting with the agent to discuss any problems.

Don’t be greedy.

9. Don’t be greedy. Many landlords overprice trying to hold out for months greedily dreaming of a higher rent. This is a pointless exercise defeating itself based on the fact the property usually remains empty for months while the owner seeks an unrealistic rental figure.

If you’re renting in a more competitive market, then price point your property below the competition. This may hurt initially, but if you have to do it later, financially, it will hurt even more, if after many months you have to reduce the rent anyway, start lower, be realistic, don’t be greedy and get your property rented immediately.

Make sure the rent is paid on time!

10. Only accept payments on a standing order basis, if it’s a long term rent as the hassle factor with cheque or cash just isn’t worth the trouble.

Check your bank account every month and if tenants are late with a payment, advise them strongly in writing you’re unhappy about it, in effect try to make an issue of their lateness and ask them not to repeat.

Ask for six weeks deposit instead of the usual four as tenants often withhold the last months rent as a way of returning their deposit. This way there is some cash available if the property is damaged.

Henry Davis develops commercial & residential property in Britain.
Website: www.internationalproperty.ie  Tel: 077 6631 7744

But landlords should take note because some of the Guardian letter writers’ comments were fair and needed making. In particular, their attack on absentee landlords who fail to maintain their properties and let tenants dump rubbish outside, thus destroying the look of a community was very valid.

However, the fact is that this type of landlord will not survive because tenants will rightly shun properties that are substandard and which frankly, look a mess.

But these kinds of concerns are the legitimate concerns of communities and the landlord community should take note.

That said a lot of the anti-landlord culture is of course fuelled by some jealousy of the big capital gains some forward thinking landlords made in the last 10 years – or more specifically of those smart landlord / investors who bought in the right places and the right kind of property.

Not all did and some will have made losses!

Of course, the big rises in house prices has been driven by the huge drop in borrowing costs between 1997 and 2004 and by large scale immigration (which has also massively fuelled the available tenant market).

And its worth noting – as the Abbey and the A&L showed in previous surveys last year – that despite high house prices there are millions of people who could afford to buy but actually choose to rent.

Their choice to rent simply reflects the hire and fire work culture that exists today – they may need to move fast to find work. Renting gives them that option.

Both the immigration and low interest rates factors are “one offsâ€? and landlords are having it harder now – with net yields of 4% (about 2% below the best mortgage rate) being the norm – and yields are much less in many parts of the north where there is a huge oversupply of flats.

In conclusion, it is a shame that much of the stuff in the press on the buy to let issue has been misleading and landlords and their representative organisations need to respond positively and put the other side of the argument and explain the good that many landlords do.

I hope this is done forcefully – and fast.

Also, more landlords need to become members of landlords associations – the percentage of landlords who are members is woeful and continually surprises me.

David Lawrenson

Topic Expert

www.lettingfocus.com

I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let� the UK’s top selling buy to let book and Amazon.co.uk’s top selling property title.

I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market. You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website www.lettingfocus.com.

Whilst we must sympathise with those in financial difficulties, it’s often futile to prolong the agony; the banks and mortgage companies certainly don’t, so why should you? We cannot however, sympathise with those who should pay and can pay, but for one reason or another won’t pay.

Yes, we should try to investigate. Maybe your commercial tenant is going through a difficult trading period, or your residential tenant has been made redundant? You may be able to re-schedule rent payments and/or advise on Housing Benefit claims.

But in my experience tenants in difficulties, commercial and residential alike, don’t always communicate well: in fact they often fail to communicate at all, not responding to telephone calls, letters or even knocks on the door.

With commercial tenants we can use the short-sharp shock of bailiffs, or even the forfeiture procedure, but there are situations where it’s preferable not to force the issue. A wiser course may be to encourage your tenant to trade on and if necessary sell-up and assign the lease, thus releasing funds to pay the debt: this way you end up with no debt, a viable tenant, no void period and no letting expense!

The rent arrears claims procedure with residential tenants is fraught with difficulties. Sometimes it’s better to go for possession at the end of the 6-month fixed-term and chase the debt later.

Making a claim through the Small Claims Court can be a very effective way of doing this. The court system grinds along at a snail’s crawl pace but it can achieve the desired result in the end.

Very often, using a solicitor to handle the claim does not make commercial sense: fees are too big a proportion of the settlement – Small Claims Track – up to £5,000. With the Fast Track – up to £15,000 and the Multi-Track – above £15,000 you can still DIY, but a lawyer’s expertise may be more effective.

A DIY small claim is not rocket science and handling it yourself gives you a lot of flexibility. The system is designed for and is sympathetic to the lay person. Invest a little time and you can develop debt claims expertise the equal of any solicitor.

After statements and phone calls have failed, send a “Final Notice� headed in large red letters giving 14 days to pay, or court action to be commenced without further notice! Don’t forget to mention expenses, court fees and interest claimed in accordance with the late Payment of Commercial Debts (Interest) Act 1998, and that any judgments awarded will adversely affect future credit, tenancies or insurance. In my experience this is often enough to elicit payment.

Before moving to the court stage, ask yourself: am I dealing with a “man of straw�, or will payments be forthcoming eventually? Be patient, in extreme cases it may take time to recover fully. One recent case involved a debtor contacting his landlord years later to pay in full: he wanted a mortgage and the company would not comply until all debts had been cleared – a very satisfactory conclusion!

The Land Registry and Companies House on-line checks are extremely useful and inexpensive for ownership information. For limited companies, make sure they complied with section 351 of the Companies Act – failure to disclose company details in correspondence means you might advantageously go for the individual.

A clear and concise “statement of claim�, and “witness statement� with clearly referenced supporting evidence is then all you need to present your case. The hearings are informal and judges are usually very supportive of those who present a good case.

Get more information here: http://www.landlordzone.co.uk/small_claims_court.htm

Tom Entwistle is a property investor and editor of the rental property website – www.LandlordZONE.co.uk

This article originally appeared in Property Week, 15th December 2006.

Anyone contemplating a DIY calim is recommended to buy this excellent and inexpensive guide. Written by an experienced lawyer, it’s right up-to-date with the correct procedures and forms.

The LandlordZONE Journal – “LandlordLOG�
November 2005 – Issue 003

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The UK Housing Act 2004 involves one of the biggest changes for landlords for many years and most of its provisions will be enacted in April 2006. We continue this series on the Housing Act with a primer on the new Housing Health and Safety Rating System (HHSRS). This new system replaces both the housing fitness regime set out in the Housing Act 1985 and the Houses in Multiple Occupation (HMO) fitness test.

This issue is wholly sponsored by www.Coverlet.co.uk – one of the leading providers of insurance for the rental property market.

This issue addresses the HHSRS regime. The next two issues will address the implications of the new Tenancy Deposit Scheme

Current content includes:
• Housing Health and Safety Rating System (HHRS)
• Welcome—the Editor
• What Powers will Inspectors Have?
• Will it Affect Whether I Can Get an HMO or Other License?
• Won’t This All Be Confusing?
• What Should I Do Now?
• Book Review:
• Debt Recovery by Mark Fairweather and Rosie Border
• Insurance from www.CoverLet.co.uk
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Download LandlordLOG as a web page, or in Adobe .pdf format:

http://www.landlordzone.co.uk/BlogNews/newsletterNov05.htm or

http://www.landlordzone.co.uk/BlogNews/LandlordLOGNov05.pdf

The links to the journal are also posted at:

http://www.landlordzone.co.uk/BlogNews/newsletter-archive.htm and

www.LandlordLOG.com

Part 1 of the new Act replaces the housing fitness regime set out in the Housing Act 1985. The separate Houses in Multiple Occupation (HMO) fitness test will also be replaced by this.

The test of fitness is to be replaced with a new evidence-based risk assessment process, carried out using the Housing Health and Safety Rating System (HHSRS).

HHSRS is a new approach to the assessment of risks to health and safety in residential premises and is similar to processes used in industry.

Local authorities will in future base residential enforcement decisions on assessments under HHSRS.
The courses of action available to authorities are: serve an improvement notice requiring remedial works;make a prohibition order, which closes the whole or part of a dwelling or restricts the number of permitted occupants; suspend these types of notice; take emergency action; serve a hazard awareness notice; make a demolition order or declare a clearance area.

Landlords, as always, need to make sure they are exercising due diligence by applying careful management and they should always be adequately insured. Editor
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It’s increasingly difficult to ensure that you receive your Subscribed Newsletter due to personal and server based spam filters. When a new issue is ready links will be posted at www.LandlordLOG.com and in the newsletter archive on LandlordZONE (see link above) but another way is to Subscribe to our RSS Newsfeed.

Simply copy and paste the following link to your Newsfeed Reader:
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If you would like to know more about RSS News Feeds see: http://news.bbc.co.uk/1/hi/help/rss/default.stm
We recommend – www.feeddemon.com – by Bradbury Software

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Copyright (C) 2005 LandlordZONE.co.uk. All rights reserved.

It is important for landlords, and for tenants too, to “know the score”, in other words, to know about Credit Scores and to know how to check your own credit files.

Increasingly, landlords and agents do credit checks and referencing on their prospective tenants, moving away from the traditional “gut feel” selection methods to a more modern and scientific base. Credit Checks and Referencing is now so easy and quick on-line – see www.TenantVERIFY.co.uk

These days, when you apply for a bank account, a credit card, a personal loan, hire purchase, a mortgage, or any other forms of credit, including, increasingly, a tenancy, it is likely that the lender or landlord will seek permission to carry out a credit check on the application and your credit score will be obtained.

Anyone who has had any sore of credit will have a credit file. For a credit score to be calculated, based on your credit report, the report must contain at least one account that has been active for six months or longer.

The report must also contain at least one account that has been updated in the past six months. This will ensure that there is enough recent information, in your report to calculate an accurate score.

Your credit score will not be calculated if there is a fraud statement on your credit file or if you are in dispute with a lender over payments.

A credit score is a number (for example 180 out of a possible 300) used by lenders, as an indication of how likely an applicant is to pay regularly and on-time. The credit score is generated by a mathematical formula using data from the applicant’s credit report.

Credit scores have been in use as part of the lending decision making process for over 30 years and with all this experience agencies and lenders have become increasingly proficient at predicting an applicant’s reliability. The process therefore predicts how big a risk is being taken by allowing an applicant to borrow up to a certain limit or, in the case of lettings, to take on a tenancy with a certain monthly rent.

All this helps the lender or landlord/agent to decide whether to accept or reject the application and, where relevant, to help set a maximum credit limit. In the case of a tenancy, it is likely that a limit of 2.5 times the tenant’s salary, and for a guarantor, 3 times salary will be imposed.

To “pass” the credit score system the applicant’s score must reach a certain figure. In the case of a tenancy application and depending on the score obtained, the landlord or his agent may:
- Accept the application
- Fail the application, or
- Ask for a guarantor.

The guarantor will also need to have a “pass” level credit score.

The lender or landlord will carry out Credit Reference Checks using a Credit Reference Agency. The agency will examine the applicant’s credit history to see if the applicant has a good record of personal credit management and will produce a credit score.

In the case of a Comprehensive Check an employer’s and previous landlord’s reference will be sought.

What information will be provided by credit reference agencies?

There are two main categories of information provided by a credit reference agency: Public Information and personal Credit Account Information.

Public Information is obtained from the Electoral Register (provided by local authorities), which is used to help identification: county court judgments (from the Registry Trust Ltd, which is the official body that records county court judgments) and bankruptcies (from the official London and Scottish Gazettes).

Credit Account Information is held by credit reference agencies on behalf of lenders such as credit card companies and finance houses. Most of the UK’s credit-granting institutions share and store information about any credit agreements they may have with their customers, with a credit reference agency.

Also, many of these lenders have agreed to share this information with each other. When someone applies for credit, therefore, this lets the lenders check whether or not that person has repaid money to other lenders in the past – it’s a quick and reliable method of checking a person’s credit history.

Good information, such a loan that’s been regularly paid on time, should support a new application. On the other hand, information showing loans that have not been repaid on time will adversely affect an application.

Statistics show that people who have had past financial difficulties are far more likely to default on repayments in the future. Also, if someone is already having financial difficulties, it may not be in their own best interests to be given more credit.

If you are refused credit, you can get advice from your local Trading Standards Department, Citizen’s Advice Bureau or Consumer Advice Centre.

This could be due to a misten entry in your credit report, so, in fact, you have the right to get mistakes corrected and if a company has put incorrect and damaging information on your credit record, that can be libellous. The Information Commission says:

“There is a right to compensation under Section 13 of the Data protection Act 1998, if an individual can show he or she has suffered damage as a result of what someone in control of information has done with it.”

The Information Commissioner produces a leaflet entitled ‘No Credit?’ You can obtain a free copy from the Information Commissioner’s website

So what factors influence an applicant’s credit score?

There are various factors, which determine credit scores, some of which are probably not fully disclosed by the credit reference agencies, but some of the main ones include the following:

- Payment history – a record of late or missed payments will give a lower score.
- Outstanding debt – If the applicant currently owes a lot the score will be lowered, particularly if they are near their total credit limit.
- Accounts in use – The existence of too many open accounts can lower a score, whether the accounts are being used or not.
- Length of credit history – the longer the better. This can be a problem for someone with no history of using credit or holding credit cards etc.
- The amount of credit used – compared to the credit available.
- Amount and frequency of derogatory credit information – such as county court judgements, bankruptcies, charge-offs, and collections.
- New and changed accounts – opening multiple new accounts in a short period of time or constantly changing banks will give a lower score.
- Searches made – whenever someone else gets a credit report, for example, a lender, landlord, or insurer, the search is recorded on your credit report. A large number of recent searches may lower your score.
- Moving house – the more you move around in a short space of time the bigger the adverse effect it will have on the score
- Living abroad – when you are abroad you are effectively out of the system, so not credit information is accruing.

Regularly checking your own credit report can be a wise precaution so that you can:

- Be fully informed of the most up-to-date information in your personal credit history
- Correct any inaccuracies; to make sure that your credit data is always a true picture of your credit record.
- Be aware of who is making credit checks on you or if anyone is applying for credit in your name. Identity theft is an increasing problem, and for this reason alone monitoring your credit record is very worthwhile.

What would be a “good” credit score?

There are several types of credit scores available and different agencies use slightly different systems. However, is each case the higher the score, the better.

Each credit check agency will decide what credit score range it considers to be a good credit risk. However, the actual credit score is only one component of the information evaluated.

Improving the Score:

With credit card and loan offers piling through letterboxes everywhere, it’s never been easier to run-up debt. If you have been less than exemplary in your personal financial management you could find yourself blacklisted for credit, and have a real problem when it comes to securing a loan or a tenancy, so is there a reliable way to clean-up your act?

The short answer is yes, but it will inevitably take you some time if you want to repair your credit rating – be wary of companies promising to instantly wipe out a bad credit record, it just cannot be done.

The first thing a lender, insurer or landlord does when first considering you for a credit card, a loan, insurance or a tenancy is to check your credit report. A file on your credit details will be held by Britain’s two credit reference agencies – see below for details of these agencies.

If you find your applications are being turned down, don’t go from one lender to the next hoping to be accepted. Every time a lender checks with a credit reference agency it will be recorded on your file, leading to a lower score.

To lenders these ‘footprints’ can indicate that you may be over-extending yourself; that you are being refused by other lenders and forced to look elsewhere, or that there may be fraud involved.

There may be very good reasons for your credit score problems. If you have had late or missed payments, or you have defaulted on loan payments or County Court Judgements (CCJs), these details will be recorded on your credit record file for six years (unless you pay off a CCJ within the first month).

It’s been estimated that around 80% of credit records contain errors. This therefore gives you a chance to correct them before you apply for a loan, insurance or a tenancy.

Cancel excess numbers of credit cards or those you don’t use anymore. Pay off any outstanding accounts, and check your file for any listed account numbers that are not yours. Check your record of loan balances and late payments for accuracy. You may need to provide a good explanation of these to lenders.

To improve your credit score, and start to build a good record, from now on pay all of your bills on time and reduce the amount of credit you have outstanding.

Credit repair companies can improve your credit rating for you, but they can’t do it overnight and they charge anything from £50 to £200. There is nothing that these companies do which you cannot easily do for yourself.

The starting point is to get a copy of your credit record files from the credit reference agencies. This information may tell you a different story and give you a cause for your low score, which you had not considered before.

For example, your personal record may be affected by the debts of a relative or former spouse who is, or was, living in the same property as yourself. This is because your address is a key element in your credit record and in cases like this it is possible to have a Notice of Disassociation added to your file.

The Notice of Disassociation will effectively filter the other person’s information from your credit file. It’s also possible to add a Notice of Correction to your file. This is used where there is a piece of information that is basically correct but where it could benefit from being put into context. Examples of this might be a credit default from the past when you were made redundant, you got divorced or you had an extended period of time off work through illness.

If none of these issues apply to you, or you have taken steps to resolve debt problems but are still being refused credit, ask the credit reference agencies and the lenders why? It might be that the credit scoring procedures used by a particular lender is very strict. The good news here is that taking out some form of credit and then dutifully meeting the repayments on time can quite quickly build a good credit status.

If a lender or landlord turns down your credit or tenancy application, they should tell you the main reason why your application failed to qualify you. They are not obliged, however, to disclose the full information they have obtained, and they certainly are not under any obligation to show you the report – in fact they will be told not to do so by the credit agency.

Banks use a system known as “Behavioural Scoring”, or what they call predictive scoring, in addition to credit scoring on their existing customers. Behavioural scoring is basically an assessment of the way that a customer manages their own bank accounts, based on the longer-term pattern of activity seen passing though their accounts. This has been shown to by a highly statistically consistent way of identifying acceptable credit risks to the bank.

Landlords can use a less sophisticated form of behavioural scoring by requesting sight of 3 recent months’ current account statements from their prospective tenants. Careful scrutiny of these can be very revealing as to the tenant’s financial life-style, and commitments in terms of income and outgoings over a period of time.

In addition, unlike a couple of utility bills, it’s very unlikely that an identity fraudster could access 3 months’ of someone else’s currents account bank statements in order to obtain a tenancy in someone else’s name – not unheard of these days!

Credit Score Healing Tips!

Scores will automatically improve, as one’s overall credit picture gets better. That means building-up a pattern over time of paying your bills on time and using credit conservatively.

- Pay your bills on time – late payments will definitely have a serious impact on your credit score.
- When you have missed payments, and we can all do this accidentally sometimes, get up-to-date and stay up-to-date. The more you pay your bills on time, the better your credit score.
- Try to actually pay-off debt rather than move it around.
- Re-establish your credit history if you have had previous problems. Starting new accounts and paying them off on time will raise your score in the long run.
- Request and check your own Credit Reports. Doing this will not affect your score, as long as it’s done through a credit reference agency or an organisation authorised to provide Credit Reports to consumers – these are now available on-line.
- By all means have credit cards but manage them responsibly. In fact, having credit cards and instalment loans, provided you make regular payments – will raise your credit score.
- Only apply for new credit accounts when you definitely need them.
- If you are having trouble making ends meet you should contact your creditors or see a legitimate credit counsellor to help get back on-track and start to rebuild a good credit management record.

How can I get my credit file information?
For a small fee you can obtain your credit files from the two main UK agencies:

Experian Ltd www.uk.experian.com/consumer 0870 241 6212 Consumer Service Help CentreExperian LtdPO BOX 8000

Equifax PLC www.equifax.co.uk 0870 010 0583 Credit File Advice CentrePO BOX 3001GlasgowG81 2DT

CallCredit Limited www.callcreditcheck.com – Customer Care, Callcredit check, PO Box 734, Leeds, LS1 9GX

Article Copyright LandlordZONE and TenantVERIFY – first published May 2005, updated August 2009

As you assure yourself that you have dotted all the “I’s� and crossed every singe last “T� for the completion of the lease on a new office, the solicitor calls and asks nonchalantly “Can you send over the Lease Plan?� the deafening 3 second silence on the your end of the phone has long given away the clue, that you don’t think you have one!

The Land Registration Act 2002, which came into force on 13 October 2003, has many implications for commercial landlords and businesses occupying properties under commercial leases.

One of the major changes are after 13 October 2003, all new leases with terms over 7 years or existing leases sold or assigned with 7 years left to run must now be registered with Land Registry. Not only will the property acquire its own leasehold title number but it will be noted on the Landlord’s freehold title. This will bring many more High Street shops, cafes, restaurants, industrial units and offices onto the Register.

As part of the registration a compliant Lease Plan of the lease demise must be submitted. In order to be compliant the plans must be drawn to a metric scale (normally 1:100 or 1:200), have a scale measurement bar, have the scale noted on the plan, a 1:1250 scale location map (for urban areas) full address including post code and a north point. The internal layout the office – for example internal offices etc – are not necessary, however indicative locations of comm. Areas and adjacent stair lobbies should be provided for orientation.

So that wavy walled 30 timed photocopy of the original 1962 hand sketch with a finger thick felt pen line obscuring all detail; will have to be resigned to the big drawing board in the sky.

So the race is on to get a new lease plan before the whistle is blown, and you score an own goal.

Article supplied by Ed James – Plan-London Limited

www.leaseplans.co.uk