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 offs� 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’s 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 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 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.

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 6 month’s 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 6 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

Article Copyright LandlordZONE and TenantVERIFY - published May 2005

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

Introduction:

The government’s Home Information Pack (the rebranded ‘Sellers Pack’) is to become compulsory in 2007, with a limited trial during 2006.
Against a backdrop of delay and disagreement between government and housing market professionals, plus a lack of public awareness for the proposed initiative, some question whether it will ever be put into practice.
The aims of the initiative are universally recognised and welcomed. No right minded person could object to house buyers making a better informed choice, provided by a quicker more user friendly system.
However opponents continue to maintain that rather than streamlining the house buying and selling process, the Home Information Pack will merely add to the stress, cost and complication of an already tortuous system.
Those in favour see it as the urgently needed solution to a longstanding, and much resented problem.

The story so far:

In response to universal and well publicised concern about delays and unfair practices in the residential property market, the government responded by researching the methods used elsewhere, to try and improve the house buying and selling process in England and Wales.
Their mission was to ‘make the home buying and selling process more transparent, more certain, consumer friendly and faster.’
Their solution was to oblige sellers to produce a pack of information and documents, prior to marketing a property – a solution used successfully in the USA, Australia and some parts of Europe.
The first limited trial in Bristol in 1999, received a mixed response, and prompted a polarisation of opinion on whether this approach would fix the problem or add to it. That debate has rumbled on for a number of years.
The amended legislation was finally made law in The Housing Act of 2004, with the Home Information Pack scheduled to be introduced in 2007.
Given repeated delays, residual opposition, practical problems with its universal introduction, some people still question whether it will ever happen. The Conservatives have even pledged to abolish it altogether.

The Problems with the present system:

The original Sellers Pack idea was the government’s response to the widely recognised problems associated with buying and selling residential property in England & Wales. These included:
§ Excessive delay in the process. The process of property acquisition typically takes around 11 weeks, and is dependent on the correct and timely input of a number of agencies - searches, surveys, mortgage provision, conveyancing - into the process in order for things to run smoothly.
§ Unexpected breakdown of sale transactions at a late stage, often as the result of a failure in a buying ‘chain’, or an unsatisfactory valuation or survey report.
§ Prolonged uncertainty. Buyers and sellers can withdraw or seek to renegotiate terms at any time during this long and vulnerable period when the property is effectively sold, but the contract is not binding because legal formalities are not yet complete.
§ The expense of abortive fees when the transaction breaks down, plus the stress, inconvenience and disruption on family, personal or working life when this occurs.

How would a HIP work?:

By getting the vendor to provide a lot more information about the property, plus most of the required legal paperwork at an early stage in the process, it should in theory cut delay, help purchasers reach a firm decision and generally streamline the buying and selling procedure.

The pack has to include:

• draft sale contract
• evidence of title
• a questionnaire about the condition and works history of the property
• copies of any planning, listed building and building regulations consents and approvals;
• any guarantees or warranties
• replies to local searches
• a new type of survey called a home condition report

The Cost:

The government office responsible for overseeing this new legislation – the Office of the Deputy Prime Minister (ODPM) – estimates the cost at £635, but claim that this work would need to be done anyway, so this approach is not adding cost, merely shifting it to an earlier stage of the process.
Opponents say the cost will be nearer £1,000, and that there is a hidden cost in keeping the information up to date, particularly if a house does not sell quickly and items like searches and surveys need to be repeated.
Vendors can charge a ‘reasonable‘ sum for a copy of their pack, to cover costs and the certification of copy documents, but the market has yet to establish what that might be.
The up front cost has been cited as a deterrent by members of the public, and there has been general affordability concerns for poorer areas, where house values are low.
Interestingly the legislation allows the seller the right to refuse to hand over a pack if they have reasonable grounds to suspect that the ‘purchaser’ has neither the intention nor means to proceed with the deal..!

Will HIPs solve the problem?

Before forming a view, you need to re-examine where the problems arise in the present system, and assess whether the new system will deal with them effectively. This does not necessarily mean a perfect solution, but at least an improvement to a level that the public and the market would find worthwhile.
Reviewing the problems with the present system described earlier, we see a mixed picture. Some issues are squarely addressed, other problems are endemic in the system and will remain unaffected by this legislation, and in some areas the new methods may introduce different problems of their own:

Delay:

The slowness of solicitors relying on paper documents passing backward and forward through the post is usually blamed for the delay in conveyancing.
Failure in timely provision of any one of the necessary components of this paper chase - searches, mortgage offers, surveys, valuations, sellers property questionnaires can bring it grinding to a halt. By getting much of this documentation prepared in advance HIP makes a good case for speeding up the process.
However just as it can be argued that costs are just being brought forward, rather than added, is the same true of delays?
Estate agents are concerned that they can not lawfully begin to market a property until the pack is in place, which could take three or four weeks. This means once a decision to sell is made, the vendor faces a frustrating delay before the property can be put up for sale.

Transaction breakdown:

Having more information available at the outset can only be a good thing. It would enable prospective purchasers to make an informed decision before making an offer, but it is unlikely to avoid all of the ‘nasty surprises’ which can crop up later in the process.
Long buying chains will always be vulnerable to collapse, in the absence of any binding legal commitment. Peoples’ lives are subject to unforeseen changes at home, at work and in their personal and financial circumstances.
The longer the process takes, the more likely such an ‘event’ is likely to occur, and it only needs one person in the chain to change their mind for it to collapse.

Prolonged Uncertainty:

Under Scottish law the written offer to buy, resolution of queries and conditions, and acceptance of the offer from the sellers solicitor usually makes the deal binding on both parties within about a fortnight. That degree of certainty does not exist under English Law.
During the initial trials the Sellers Pack managed to cut the time between offer and exchange of contracts by about two weeks, to an average of around 8-9 weeks, which is a significant improvement but, still longer than the 6-7 weeks average in most other countries. This period of uncertainty would still allow an unscrupulous buyer or seller to withdraw or renegotiate terms in order to squeeze the maximum out of the deal.

Cost:

There is no doubt that the present system wastes time and money in failed transactions and abortive fees, but cost is often a question of perception rather than figures.
Surveys show consumer resistance to stumping money up front in order to sell their house. If it smoothes out the process and makes it more reliable it will be perceived as cost effective, and should in any event deter frivolous test marketing.
Much depends on whether buyers trust the Home Condition Report paid for by the seller (estimated cost around £300) or feel obliged to commission their own survey.

Surveys and Valuations:

Adverse surveys and valuations often account for breakdown of a deal, so including a Home Condition Report in the pack will be beneficial in providing information early on, but poses other problems:
- Since the scope of the Home Condition Report falls short of a full structural survey, how far will the purchaser trust it?
- If the HCR is not intended to provide a valuation either, it is likely that some purchasers will continue to pay to have their own survey/valuation done, thus diminishing the cost and time saving arguments?
- It remains to be seen whether the various training and accreditation bodies will succeed in providing enough qualified HCR inspectors by 2007. Difficulties remain too in getting Professional Indemnity Insurance for the inspectors, particularly since there may be a liability to both buyer and seller for the accuracy of the information.
- The government is commissioning a computerised on-line database for all the Home Condition Reports. The process has hardly begun and their track record of implementing reliable, large scale IT systems to time is not encouraging.

Conclusion

You can not legislate for human nature As it stands the HIP will reduce but not eliminate the length of time when gazumping and renegotiation can take place.
It will probably reduce the time between offer and exchange for the majority of transactions.
Purchasers will no doubt welcome the additional information available, and feel more empowered to make a right decision.
Whether the cost and effort involved is perceived as worthwhile by the seller, remains to be seen. Much depends on how the market responds and the ease speed and cost at which packs can be assembled by the various providers who will emerge as the system gets going.
After a difficult journey on to the statute books, the government is cautiously planning for a ‘dry run’ in late 2006 to test the system and iron out any remaining problems.
Supporters regard this as a sensible, gradual introduction of measures which will have a major impact on what is recognised as an individual’s most expensive and crucial purchase – their home.
For opponents it underlines the controversy and uncertainty, which has accompanied this initiative from the outset.
What is beyond doubt is that everyone is genuinely hoping for a buying and selling procedure that is as the legislation intends ‘ more transparent, more certain, consumer friendly and faster.’
It seems we will have to wait another couple of years to know for certain whether The Housing Act 2004 will deliver its promise.

© Mark Pearson

About the Author:
Mark Pearson is a director of Housedata Ltd which provides an Interactive LogBook and Maintenance Manager from their website myhousedata.co.uk
MyHouseData’s interactive services and e-tools let owners create a complete service history of their property to simplify maintenance and to maximise asset and resale values.
The required property information can be provided as a ‘plug in’ to the proposed Home Information Pack.

Landlords are particulalry vulnerable!

Through recent media reports most people are now aware of the problems of identity theft and fraud perpetrated by criminals who scour our waste bins for personal details on carelessly discarded bills and other documents.
In fact the problem goes beyond this, and landlords are particularly vulnerable – to find out why and what you can do about it, read on.
Personal details can be obtained without resorting to midnight searches through bins: sophisticated fraudsters can pick up this information from the Internet or insiders do it from banks, firms and organisations of all types.
For example, if you are a company director your personal information is available on the Companies House website for a small search fee. One recent case, involving massive credit card fraud, resulted from obtaining details in this way.
People are now asked for personal details for all sorts of reasons, including registering for services on-line. One survey organisation found that people were willing to part-with the most intimate personal details including DOB, mother’s maiden name, telephone, e-mail, address etc simply for the promise of free theatre tickets.
Another vulnerablility is the time when you are doing viewings, either on lettings or on property sales. Often owners or landlords are showing complete strangers around the property. Apart from the personal security risks, the viewer has potential access to all sorts of personal belongings and documents, often left lying around, and also to complete information on the house security arrangements.
In fact, as the law currently stands, identity theft per-se is not a crime: it’s only when this “theft� is acted upon, when the information is used to perpetrate fraud that it becomes criminal.

So, why are landlords vulnerable to this new and insidious activity?

Well, they are vulnerable on two counts: (1) tenants who come with a false identity, and (2) tenants who steal the landlord’s or previous tenant’s identities.
Tenants who come with false identities are obliviously intent on avoiding rent payment and will probably evaporate into the either at some point, having run-up horrendous rent arrears and will perhaps have damaged the property to boot?
The irony is, the law will protect any resident regardless of their identity and landlords will be unable to obtain possession against a recalcitrant tenant quickly – in fact it can take months to get an eviction if the tenant chooses to stay put.
Tenants, who steal identities, either that of the landlord, or those of previous tenants, are even more of a problem. It’s often easy for tenants to do this as mail is delivered to the address long after previous residents have left, and in my experience, even when the Post Office has been instructed to re-direct.
If the property has previously been the landlord’s own residence, which is very common, then the landlord is vulnerable, as are any previous tenants.
A recent case highlights this: The landlady, being out of the country yachting instructing for a year, rented out her own home. Although the agents did credit checks, the tenant came along with a false identity, and the checks showed up OK for the identity the tenant had.
Foolishly, the landlady had left all her personal documents locked away in an attic room, including the deeds to her house. The tenant proceeded to sell her property. Fortunately for her, one sale fell through and the second was not completed before the fraud came to light.
Basically, all the identity fraudster need do to take out a loan, a mortgage or run up huge credit card debts in your name is obtain two utility bills. The problem is, you only become aware of the crime much later when the credit card or loan companies track you down with demands for payment, or threaten legal action.
At the end of the day this type of fraud should not cost you a penny, unless you have been really negligent. However, in the mean time you may have to pay out money to defend yourself, you will need to prove that you are the victim of identity fraud, which can takes hours and hours of work on your part, not to mention the stress of it all.
In addition, if the courts and debt collectors are involved you may end up with a CCJ (County Court Judgement) against you, which will adversely affect your credit rating.
If you do become a victim you will need to gather all the information and proof you can including consulting the lender and a credit reference agency before reporting the crime to the police, who will give you the all-important crime reference number.
This type of crime is new and it is growing at an alarming rate: between 1999 and 2002 the number of cases jumped by nearly 400%. Statistically, therefore, the chances of being caught out are increasing.
The UK’s Fraud Prevention Service CIFAS, which is a not-for-profit financial services membership association, solely dedicated to the prevention of financial crime, originally estimated that in 2004, 20,000 deceased impersonation frauds were perpetrated. They concluded that in the last 4 years these amounted to around 51,000 cases, all of which would cause great distress, both to the deceased relatives and the victims of fraud.
In fact through ongoing research CIFAS now believe their figures seriously underestimate the magnitude of this crime in the UK and that the 2004 figure is nearer 70,000 cases with the four-year total nearer 180,000.

How can landlords protect themselves?

1) Check all your bank and credit card statements as soon as they arrive – if you spot any unusual entries or payments that have not arrived you need to investigate.
2) Carefully shred or tear-up important documents before discarding them.
3) Store your important documents safely – old statements, chequebooks, credit cards, passports, licences, vehicle documents, property deeds etc are all valuable to a thief – hide securely or store them under lock and key.
4) Have a secure system of storing your passwords and usernames.
5) Don’t keep chequebooks, credit cards and passwords all together in the same place.
6) Never give out personal details unless you are sure they are to a secure process.
7) If you move house have your mail re-directed and check with the new occupants regularly for mail that gets through the net.
It’s particularly important for landlords who rent out their own home: make sure that your tenants have been thoroughly checked – see below.
9) You can also check your credit reference reports every 6 months to make sure no one is applying for loans in your name.
10) Another option is to register with CIFAS on the Protective Registration Scheme – see http://www.cifas.org.uk/protective_registration.asp

Tenant Checks

It’s very important to avoid these problems in the first place by making sure that you never rent out your properties to criminals – a proper tenant screening process is the only answer. You must be thorough in the way you carry out identity, credit checks and references.
Credit checks on their own are not sufficient, though they are an important part of the process: a basic check will verify financial stability, but it will not necessarily verify identity. A comprehensive check goes further by taking up references. It would be unlikely that a comprehensive check would not uncover identity fraud, but in theory it’s just still possible.
The starting point for the whole process is the Tenant’s Application Form. A good application form is as important as the tenancy agreement itself.
The application form gives a sound basis to the relationship between the landlord and tenant: it provides all the personal and financial details needed to carry out further checks. It gives the landlord (or his agent) permission to carry out the checks, and should the tenant subsequently abscond, it gives vital skip tracing information. In addition, and a very important point for landlords, should the applicant make any false statements, the document provides evidence for eviction on Ground 17.
However, the application form cannot of itself guarantee identity: this involves additional proof. National Insurance numbers, passports, drivers licences can all be forged or stolen.
One very simple but very effective method is to request sight of 6 moths’ bank statements. An identity thief may be able to obtain two utility bills, but it’s very unlikely they would be able to obtain 6 months’ banks statements from anyone.
Secondly, the sight of 6 months’ bank statements gives you an excellent insight into the tenant’s financial standing a lifestyle: remember, no tenant should be paying more that one-third of earnings in rent.

Tenant Checks – the checklist – see the LandlordZONE article Tenant Screening for a full rundown.

1) Have your prospective tenant complete a comprehensive application form.
2) Follow-up to confirm residences and identities by checking documents and following-up references.
3) Obtain at least on copy of a document with a legible photograph or copy of one – a good photocopy of a passport or photo-driver’s licence should suffice.
4) Carry out either a basic or a comprehensive Tenant Check

Useful Links:

UK Government Crime Reduction Web Site

Australian Government Identity Theft Kit in .pdf format

© Tom Entwistle 2005 - all rights rserved