Some Key Issues facing Landlords in 2013-14 were discussed with an audience of landlord / investors recently.
Tom Entwistle editor at LandlordZONE® gave a seminar at the Property Investor Show held at the Excel Centre, London 11/12 October 2013.
This is a brief summary of the main points of the talk which was about Key Issues currently facing Buy-to-Let Landlords.
Some current UK Housing Market Statistics:
- In 1999 English households privately renting was 9.9%
- By 2011/12 this was 17.4%
- Predicted to be over 20% in 5 years.
- Private Ownership – down -5%
- Social Renting – down -3%
- Currently 1.4 million buy-to-let loans in place worth £160 billion.
- The total value of UK privately rented housing stock estimated at £800 billion.
- Currently 1.6m People with second homes – buy-to-let and holiday homes.
- Savills estimate UK citizens pay £48 billion per year in private rents and this will rise to £70 billion in 5 years.
- Centre for Economics and Business Research (CEBR) predicts house prices will rise by around 25% over the coming five years.
- London homes could average more than half a million pounds by 2018.
- Buy-to-Let – Gross returns can be up to 12-14% coming down to 4-6% for higher price properties.
- Mortgages – Experienced Landlords can now achieve 85% LTV
- New Landlords 75% LTV
- Example Fees 2.5% with £750 cash back on £70k deal.
- Good tenant demand, high in some areas, less so in areas of high unemployment. Importance of doing research and thoroughly assessing local tenant demand.
The Deposit Protection Rules and Changes
- 6 April 2007 – DPS introduced in England & Wales
- 6 April 2012 rules amended:
- 30 days to protect
- 30 days to serve statutory (s213) notice
- Stress the importance of a good Inventory
- Stress the importance of getting Proof of Service s213 notice
- 14 June 2013 – Superstrike Ltd vs. Marino Rodrigues
- Pre 2007 tenancies
- Post 2007 tenancies
Issues arising from the Superstrike case have serious implications for landlords and agents.
What to do whilst awaiting further clarification if you have tenancies that have gone period sinsce the deposit was protected – three options as advised by the deposit agencies:
- Do nothing – most tenants leave without issues.
- Re-serve notice now.
- Re-serve if problems arise.
Landlords likely to be required to check residency status from next year:
- New Legislation comes into force April 2014
- Landlords / Agents will likely need to check tenants’ residency status and keep copies of documents.
- Valid Documents or a combination of these will be required:
- British Passport
- Birth Certificate
- National Ins Number
- Driving Licence
- Naturalisation Certificate
- Right of Abode Certificate
Landlords and Agents should in any case be insisting on the completion of a comprehensive Tenancy Application Form and doing basic Identity Checks
- Identity Checks:
- Photocopy Documents: driver’s licence or passport photo ID
- Citizen Checks will be available with credit checks and referencing from TenantVERIFY.co.uk:
- Basic Credit Checks
- Comprehensive Checks with Referencing
Energy Performance & Green Deal – the Key Points:
- Energy Bill – brings legal minimum energy efficiency standards.
- From 2016 tenants can demand energy saving improvements.
- From 2018 any house rated F and G —will be banned from renting through a minimum energy efficiency level.
- Landlord or Tenant contacts Green Deal provider for assessment.
- Assessor recommends & approves any improvements needed.
- The Capital outlay initially paid by the Green Deal Provider, then attached as a loan to the electricity bill of the property.
- Whoever pays the utility bills pays back the Green Deal loan.
- Tenant needs Landlords permission and vise versa.
- Landlord pays Green Deal Charge during void periods.
- Total of Green Deal Charge + utility bills, must be lower than if the Green Deal had not been taken out – the Golden Rule.
- All new tenants must acknowledge and agree to pay the Green Deal charge.
Student Housing – changes to the marketplace:
- 1.4 million full-time students in the UK and only 150,000 who stay at home.
- Fees have not dampened demand.
- Universities must guarantee student accommodation to first-year students totalling around 600,000.
- Universities themselves are only able to accommodate just about half.
- Corporate landlords like Unite house around 180,000
- 100,000 undergraduates scrabbling for housing, many in squalid bed sits too far from their campus.
- Corporates are providing well located high standard – newly built blocks, clean, modern and well maintained, with all the modern faculties.
- Corporates target highly regarded Universities – London, Manchester, Bristol, Leeds, Birmigham, Aberdeen and Glasgow.
- Wake-up call to many smaller student landlords.
The Changing High Street:
- Some towns currently have over one-third of shops vacant.
- Retailing is going through a major structural change:
- Out of Town retailing – supermarkets
- Internet on-line sales – rapid growth
- Parking and Business Rates – massive impact on retailers
- Big retailers will reduce estates by around one-quarter to one-third over 5 years – concentrating on major centres only.
- Shift to more leisure but many towns will shrink.
- Offices will be affected by mobile working and IT communications – less space required particularly out of major centres and in the provinces.
- Increasing demand for big warehouse sheds in hub locations – parcel deliveries.
- Implications for small commercial landlords:
- Shorter tenancies
- Void costs high:
- Unoccupied Business Rates
- High Insurance Costs
- Utilities Costs
- Tenant demand is absolutely vital
- Development potential – as economy picks up – commercial to residential conversions.
Politics, Renting and Rent Control?
Evidence of growing resentment / political backlash against Buy-to-Let as landlords seen as making easy money at the expense of the general public and particularly first time buyers.
The Government has recently announced a new Tenants’ Charter:
- Model agreement – longer tenancies, without changing existing legal framework for the rental market.
- Government to provide an accessible guide for tenants
- Longer tenancies – with break clauses – will give families greater certainty and security.
- Greater transparency about lettings agents’ fees, helping to stop unfair charges.
- New compulsory redress schemes for lettings agents.
- £1 billion Build to Rent Fund, £10 billion of government-backed guarantees for institutional investment.
- Rent review clauses, index linked to inflation.
- A Labour Government has indicated, and will almost certainly bring in some form of Rent Control.
- They will also introduce compulsory registration for landlords and letting agents.
- They will consider Indexational Rent Increases.
This last point is surprising as generally this would increase rental incomes for most landlords and would be welcomed. It’s a regular practice that many landlords don’t increase rents when they have good tenants in place to encourage them to stay. Market rents over recent years have lagged inflation rises by some margin in most areas.
Documents mentioned in the text can be downloaded free from:
By Tom Entwistle,
If you have any questions about any of the issues here, post your question to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.
©LandlordZONE All Rights Reserved – never rely totally on these general guidelines which apply primarily to England and Wales. They are not definitive statements of the law. Before taking action or not, always do your own research and/or seek professional advice with the full facts of your case and all documents to hand.©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law; always seek professional advice. Legislation changes, so check dates on these articles. If you have questions go to the LandlordZONE® Forums