The Landlord_July222.indd

The
LandLord
ISSUE 5
JULY 2014
Continuing changes within the
Private Rented Sector (PRS) to
make it a more ‘mature’ market
I
n a ‘mature’ lettings market,
everyone should be fully aware
of their rights and responsibilities and there should be a way of
ensuring those responsibilities are
met. In essence, that means all
rental accommodation being safe
and of a decent standard; tenants
having and understanding all the
information they need; the rights
of both tenants and landlords
being properly protected and there
being means of ensuring landlords
and agents are fit to handle the
letting of property. Although there
has already been much improvement in all these areas, there is
still work to do.
Last year’s cross-party report on the
PRS in England made recommendations that more needed to be done to
raise standards of both properties and
their management and highlighted a
widespread lack of awareness of rights
and responsibilities among both tenants and landlords. It raised concerns
over the lack of regulation of agents
and the level of fees they charged,
which resulted in the subsequent
reforms requiring agents to publish
details of all fees and to sign up to an
Ombudsman before the end of 2014.
As a landlord, you will be only too
aware of how many changes have
already been made to PRS legislation
over recent years. While much of
it has broadly been good news for
Image taken from the wall mural in our recently refurbished
Reeds Rains Woodseats Branch
raising standards, it has resulted in
increased costs and administration for
both you and us and there has been
some concern among agents and landlords over the wisdom and efficacy of
new laws. Possibly the biggest issue
for us all is that at the same time as
proposals for new legislation continue
to pour in, existing regulations are
subject to further changes and there
is little or no enforcement of agents
and landlords who don’t meet them.
As we are members of ARLA, we work
with you to ensure your property is
legally and safely let and work with
the industry to represent issues of
non-compliance from other agents
and landlords to local authorities and
government.
A good example of recent changes
is the tenancy deposit protection
legislation, which since 2007 has
required deposits to be protected
from the start of a tenancy and the
tenant to be issued with the ‘prescribed information’, i.e. details of
the relevant scheme. Tenancies that
began before April 2007 were exempt
and it was also the assumption that
when a fixed-term tenancy became
a periodic tenancy at the end of the
initial period (running on simply
from each rent payment date to the
next, usually month to month), it was
simply a continuation of the original
agreement.
However, the rulings in two recent
court cases (Superstrike Ltd vs.
Rodrigues and Gardner vs. McCusker)
decided that when a tenancy becomes
periodic, a new tenancy is created. If
the deposit had not been protected
in the first case and the ‘prescribed
information’ had not been re-issued to
the tenant in the second, the eviction
processes that were underway in each
were declared invalid.
The implication for landlords and
agents is that in order to ensure
everything is in place in case eviction
becomes necessary, deposits for any
tenancy that have become periodic
since April 2007, should now be
protected and details of the relevant
Tenancy Deposit Scheme (TDS) must
be re-issued to every tenant at the
point their tenancy extends beyond
the initial fixed term. Although this
requires retrospective administration,
the good news is this is exactly the
kind of thing we take care of on your
behalf – especially if managing your
property – so whatever happens
legislation wise, we make sure it is
implemented on our behalf.
Hot on the heels of these rulings
follows the recently passed legislation
regarding immigration checks. From
October this year, landlords and
agents will be required to check the
lawful immigration status of tenants
before letting to them, to prevent
those with no legal right to live in the
UK from accessing the PRS. This is
undoubtedly a good idea, but it does
add another layer to the referencing
process and time, money and cost to
the work we carry out for you. While
some agents and landlords may decide
to pass this on to the tenants, Reeds
Rains has made the decision to absorb
the additional cost on your behalf as
part of our management service.
Yet further legislation currently being
considered by DCLG is a ‘retaliatory
eviction’ law, which would prevent
agents and landlords evicting tenants
for complaining about their accommodation. It would block using Section
21 to evict tenants if the property
contained health and safety threats.
Although it would be yet another
piece of legislation, it should not
affect any properties we manage on
your behalf, as we already adhere to
all the health and safety regulations.
Hopefully, therefore, this will primarily serve as another ‘stick’ authorities
can use to make life harder for rogue
landlords.
What makes keeping up with legislation particularly difficult is that, in
addition to new UK-wide legislation,
landlords and agents also have to keep
up with housing laws affecting their
own countries and regions, as well as
specific local authority regulations.
Scotland has probably made the
most changes and has the greatest
differences in letting legislation to
the rest of the UK. Since April 2006,
all private landlords have had to
register with their local council and
be deemed a ‘fit and proper’ person to
rent property. They are not allowed
to charge tenants any fees and must
supply them with a standard Tenant
Information Pack that gives information about the tenancy, the property
(including all certificates), the landlord and the rights and responsibilities
of both parties. Landlords must also
ensure their properties meet the Repairing Standard – a level of condition
that must be maintained throughout
the tenancy. In addition, the Scottish Government has just received a
final report it commissioned from a
Review Group, looking into reforming
tenancy agreements in the PRS to
make them longer as standard and
therefore providing more security for
both tenants and landlords.
Following the introduction of
tenancy deposit schemes last year,
Northern Ireland also introduced
mandatory registration for private
landlords in February of this year.
And in Wales, the National Assembly
is currently considering the introduction of mandatory licensing for
landlords and agents. Cardiff Council
already operates a voluntary landlord
accreditation scheme on behalf of the
country’s 22 local authorities; this
new legislation would put Wales up
there with Scotland and Northern
Ireland in terms of clear national
regulation of those who are letting
properties.
While there is no national requirement yet for landlords to be registered
or licensed in England, voluntary
accreditation has just been given a
boost in the capital with the launch of
the London Rental Standard in May.
The scheme is offered via various
organisations, including the Association of Residential Letting Agents, of
which we are a member. If we manage
your property, rest assured we will
complete the course and sign up to
the code of practice on your behalf, so
all the properties we offer will be able
to display the ‘London Badge’ of quality. This is particularly helpful if you
are living outside of London yourself
but have rental properties there.
In terms of other legislation in
England, it is certainly landlords of
Houses with Multiple Occupancy
(HMO) who have the most rules
to abide by, as requirements and
regulations for licensing and planning
permission (for change of use) can
vary wildly from council to council.
That makes it especially difficult
for landlords whose portfolios span
a number of areas and is just one of
the reasons why we as a nationwide
agent can be a helpful resource. Tight
regulation is good and necessary for a
sector of the lettings market that has,
historically, been open to the most
abuse by rogue landlords, preying on
those who can least afford a decent
standard of living. However, most
HMO landlords we speak to agree
that there needs to be simplification
and clarification of the rules if they
are to be expected to keep on the
right side of the law.
Hannah Gretton, Reeds Rains
Area Lettings Manager
“We understand it is important to make
sure there are rules and regulations to protect both tenants and landlords during the
lettings property and, as our market matures, these will change. The issues is there
is no ‘ formal route’ for legislation changes,
so you might see some in the media, others
may not be mentioned particularly at a
local level. So, as an individual landlord
it is difficult to make time and have access
to the resources to keep up with all the new
rules and regulations. One route though is
by working with us because as an ARLA
agent, we always ensure we are up to date
with anything affecting letting to tenants
and the business of lettings. As far as
possible, we will absorb small increases in
cost, such as immigration checks, and we
will always let you know about anything
that affects you directly.”
RR Let us help you.
If you would like to discuss your
Buy to Let property with a local
Reeds Rains Lettings Manager call
0845 450 5507* or email
[email protected]
Energy-efficiency measures
are good news for landlords
Image taken from the wall mural in our recently refurbished Reeds Rains Acomb Branch.
According to Government research,
the PRS has the highest proportion
of the least energy-efficient homes,
with 5.8% being G rated, compared
to 3.4% of those that are owneroccupied. As a measure to tackle
this, the Energy Act 2011 provides
for minimum EPC ratings legislation
to come into effect by April 2018.
It allows for all rental properties to
achieve a rating of ‘E’ or above in
order to be legally let, so if you have
not already taken steps to improve
the energy efficiency of your portfolio, now is the time to start.
The Green Deal is a means by which
you could have improvements made to
your rental property to make it more
energy efficient, without having to pay
for any of the work yourself. Providing
an assessor is happy that the property
qualifies for funding, the Green Deal
provider pays for the work (usually
wall or roof insulation) to be carried
out and then they are repaid over time
by whoever is benefiting from the
improved energy efficiency, through
monthly instalments attached to the
fuel bills. As a landlord, therefore,
your tenants will be paying back the
loan. Good news for you - your property has been improved at no cost to
you; good news for your tenants – their
bills will be lower, even including the
loan repayment. That’s thanks to the
‘Golden Rule’ of the Green Deal, which
dictates that the combined cost of the
energy bill and the repayment must
be lower than the amount that would
have been due, had the improvements
not been made.
As the repayments must be made each
month, if the property is untenanted,
the responsibility for paying the fuel
bill will fall to you. As such, in order
to proceed with Green Deal measures,
both the landlord and tenant must
agree. However, from 2016, under the
Energy Act 2011, you as a landlord
will not be able to refuse reasonable
requests from tenants to install Green
Deal measures, so it makes sense for
you to look at applying now. Tenants
will be more likely to choose an
energy-efficient property where their
bills will be lower, and with a greater
demand, you could be able to raise
your rents – more good news!
As well as the Green Deal, there is
the Energy Companies Obligation
(ECO), which is a grant, funded by
energy suppliers that may be available
to you for cavity or solid wall insulation if you have an older property.
And, if you visit energysavingtrust.
org.uk, you will be able to see details
of other loan schemes and financial
incentives available in your region
for improvements to insulation and
heating systems and for renewable
energy measures.
Of course, we are always happy
to advise you on what measures
we believe it would be beneficial
for you to consider, so visit your
local branch any time, Call 0845
450 0865* or email Landlords@
ReedsRains.co.uk if you’d like some
help understanding your options.
How the Mortgage Market
Review (MMR)may impact
buy to let
T
he MMR was a comprehensive review of
the mortgage market,
carried out between
2009 and 2012, in response to
the devastating consequences
of the high-risk borrowing and
lending that contributed to the
global credit crunch. The review
proposed a variety of reforms to
ensure those who could afford
it still had access to mortgage
finance, while poor practices
were not allowed to continue.
Its new rules came into force
at the end of April this year.
As the buy to let market is not
currently regulated, it does not fall
under the Financial Conduct Authority and therefore is currently not
directly affected by the outcome of
the MMR. However, because of the
much tighter checks on affordability
for primary residence mortgages
that have come into effect, there
is some concern that people may
instead apply for buy to let mortgages
for homes they intend to live in
themselves. That risk, together with
a feeling from many within the
mortgage industry that checks on
buy to let loan applications and the
requirements for lending – currently
that the rental income covers mortgage interest payments by at least
125% - are not tight enough, may put
buy to let mortgages next on the list
for review.
Image taken from the wall mural in our recently refurbished Reeds Rains Haxby Branch.
At the same time as this possibility
is looming on the horizon, there is
also a widespread feeling that the
base rate could rise from the current
0.5% to as high as 3%** over the
next three years. A steady increase
in interest rates is likely to begin
sooner rather than later, in order
to avoid any sudden hikes, so there
will undoubtedly be a rush of people
trying to secure good fixed-rate and
discounted deals now, while rates
are low. And we know with the huge
number of enquiries we are receiving, many landlords are looking to
expand their portfolios this year. Add
all those factors to the additional
administration created by the MMR
and the result is that mortgage
advisors and brokers have a very busy
time ahead.
RR So, if you are considering refinancing your investment properties,
now might be a good time to make
enquiries.Contact your local Reeds
Rains branch, call 0845 450 0865*
or email Landlords@ReedsRains.
co.uk and we will be happy to
arrange a no-obligation appointment
to discuss the mortgage options
available to you.
**Source: http://www.telegraph.co.uk/finance/
bank-of-england/10691297/Interest-ratescould-rise-sixfold-in-three-years.html.
An Administration Fee of £499
will be payable when you sign the
Professional Fee Agreement upon
mortgage application.
YOUR PROPERTY MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS
ON YOUR MORTGAGE
Legal News
Government introduces
new ‘How to rent’ guide
I
n response to some of the
issues raised by last year’s
DCLG-commissioned report
on the private rented sector, the
Government is shortly to launch
a new ‘how to rent’ guide for tenants. Laid out in checklist form,
it is a very user-friendly, eight
page document that goes through
each stage in the rental process
from the tenant’s perspective. It
clearly states what tenants should
expect from landlords, agents
and properties and prompts them
to ask the right questions at the
right time.
This is a great guide, which covers
not only the property search and
the initial process for signing up to a
tenancy, but also informs tenants of
the key steps to take if they want to
extend or terminate the agreement.
Importantly, it also gives clear pointers
for where to turn if things go wrong.
Essentially, once a tenant has a
copy of the guide, it should greatly
minimise the risk of them falling prey
to industry rogues by clearly stating
what they should expect, it will help
them to recognise unsafe and illegally
let properties and give them a point of
reference if any landlord or agent tries
to mislead them.
This is great news for you, and for
agents like us that do abide by the
legal rules and regulations, as it
means these better-informed tenants
will appreciate how much safer they
are renting through us and this is
Image taken from the wall mural in our recently refurbished Reeds Rains Wallsend Branch.
recognised by the government in
this document as they highlight the
benefits of using an agent such as
ourselves who is self-regulated through
ARLA.
It would be worthwhile for you as a
landlord to also have a copy of this
guide, so that you know what your
tenants are being told. Naturally,
if we manage your let, you can rest
assured we already have processes
and documentation in place to ensure
tenants are clear on their rights and
responsibilities, and we always strive
to have a good line of open communication between us and them.
Once launched, the guide will be
available to download from the GOV.
UK website (link: https://www.gov.uk/
government/publications/how-to-rent)
RR If you would like to discuss
the guide with one of our Lettings
Managers simply pop into your local
branch, call 0845 450 0865* or email
[email protected]
Regional Review
Across the UK, the rules and regulations governing letting a property vary regionally. When changes are reported,
it is not always clear exactly which region(s) they relate to. Whether you have properties in one area or a portfolio
spread across different regions, understanding what rules apply directly to you and your property can be confusing.
To keep you up to date with pending and newly implemented changes, here are the latest ones from aroud the UK.
England
What is happening to rents
and yields in England
Rents in England range from £515 per
month in Yorkshire and Humber through
to £1,117 in London. So far this year, the
highest year on year increase for rents is
in the South West, which are up just over
4% year on year, while in the North East
rents actually fell by 3%.
As well as rent levels varying from area to
area, so do yields. Latest statistics suggest
the North East offers around 7% yield
while the South West offers just under
4%.
On average, yields are falling just now
year on year (for newly invested properties) but this is mainly due to the fact
that property prices are rising, which
is delivering a great return to investors.
The LSL buy to let index suggests the
average landlord in England and Wales
has seen a return of £16,887 in the last
twelve months, with rental income of
£8,057 and capital gain of £8,830.
Wales
Latest on rents and
prices in Wales
In the first two years of its four-year
administration, the Government, working closely with Community Housing
Cymru, has already completed 4,500
affordable homes – 60% of the original
target. By raising its delivery pledge, the
Housing and Regeneration Minister, Carl
Sargeant, has clearly stated his commitment to relieve pressure on housing.
John Keegan, the chair of Community
Housing Cymru, said that in addition
to providing much-needed homes, the
pact would also create employment
and training opportunities within local
communities.
Image taken from the wall mural in our recently refurbished Reeds Rains Deal Branch.
*Calls may be recorded and/or monitored for training and/or data protection purposes
Reeds Rains. Reeds Rains is a trading name of: Reeds Rains Limited whose regulated number is
02568254 and registered office is Ground Floor, Buildmark House, George Cayley Drive, Clifton Moor,
York, YO30 4XE. Reeds Rains Limited is an appointed representative of First Complete Limited, which is
authorised and regulated by the Financial Conduct Authority (FRN: 435779) for mortgage and noninvestment insurance advice.
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Helen Addison Regional Operations
Director for Reeds Rains comments:“From our perspective as a landlords and letting agent, it is good to see more supply coming
onto the market, although we don’t expect this
to impact much on the private rental sector as
the good quality properties we let on your behalf
are still and will continue to be in short supply,
while being much in demand.”
Northern Ireland
Latest on rents and prices
in Northern Ireland
We have seen a 26% rise in the number
of homes sold during the first quarter
of 2014 compared to the same quarter
last year. This is good news for landlord’s as it means more stock is coming
onto the market and for those that do
invest in their portfolio, lettings is also
up by 22%.